Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Which All-in-one, One-ticket Portfolio Is right for you?

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By Dale Roberts, CuttheCrapInvesting

Special to the Financial Independence Hub

In February 2018 Vanguard Canada changed the investment game in Canada with the launch of complete Balanced Portfolios that you can purchase by entering one ticker symbol. For example, once logged into your discount brokerage account you would enter the symbol VBAL, and press buy to get a complete globally diversified Balanced Portfolio. The Portfolio is 60% Canadian, US and International stocks with 40% of those shock absorbers known as bonds.

Vanguard offers One-ticket Portfolios at five different risk levels.  With an MER of .22% these portfolios are a game changer. (In the pie charts below, Orange shows equities and blue fixed income percentages). 

 

iShares has also had One-ticket solutions available for several years. The asset allocation was ‘weird’ and the fees were not that low. considering the low fees on the underlying ETF assets. In response to Vanguard, iShares recently took the scrub brush to the funds, cleaned up the asset allocations and then cut the fees. In fact they undercut Vanguard just slightly with an MER of .20%. Here’s the link to the iShares product page; this will take you to XBAL, their Balanced Portfolio.

And then last week along comes one of the big banks with their own One-ticket offering. Here’s my review at the Hub: BMO keeps it simple with its One-ticket Portfolio Solutions.

 

 

The one-ticket solutions are the most cost-effective managed portfolios available in Canada. This should be the final dagger in the heart of the high fee mutual fund industry.

Which One-ticket provider is best?

Let’s call it a draw. The portfolios are equally great. They include the basic and sensible asset allocation building blocks of Canadian, US and International stocks supported by a bond component. All the One-ticket providers use Canadian and foreign bonds to manage the risks.

How to select the right portfolio

Nothing is more important than investing within our risk tolerance level. We could argue it is the most important ‘part of it all.’ The Portfolios do not come with an owner’s manual for when and how to use them. Matching the appropriate portfolio to your risk tolerance level, time horizon and objective is key.

We have to invest within our risk tolerance level; bad things happen when we invest outside of our comfort level – usually permanent losses. We must be comfortable with the percentage and dollar value that the portfolio could decline.

Are you comfortable with a portfolio that could decline by 5% in a major correction, 10%, 20%, 30%, 40% or 50%?

Remember those bonds work like shock absorbers to soften the blow and smooth out the ride during periods when the stock markets tank.  And tank they can; Canadian and US and International markets have declined by some 50% or more twice in the last 20 years. Continue Reading…

How credit cards can help your 2019 budget, not hurt it

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By Hyder Owainati, RateHub.ca

Special to the Financial Independence Hub

Whether your financial resolution for 2019 is to dial back your spending, build up savings or better manage your debts, odds are your credit card – and how you use it – crossed your mind a few times as you were formulating your money goals for the new year. And while knee-jerk thinking leads many of us to jump to the conclusion that credit cards can only hurt our budgeting goals, it’s not necessarily the case.

Below are some key ways credit cards can help you reach your 2019 money resolutions (not hurt them).

Use your credit card to put your spending habits under the microscope

One of the many benefits of a credit card is that all your past purchases can be easily tracked either on paper statements or on your card issuer’s app (in the case of the latter, you can often sort purchases by category). By investing some time into looking at how you spent your money last year, you can get a big picture view of your worst purchasing habits and take action to avoid repeating the same mistakes.

For example, if you find that you’re paying subscription fees for services you rarely take advantage of, it’s time to cancel them and start adopting a more strategic approach to what you sign up for. If your daily latte purchases add up to an exorbitant amount of money every month, you may want to start brewing coffee at home. And if your holiday and birthday purchases led you to carry a large balance from one month to the next, you may want to rethink your expensive gift-giving habits.

Maximize your rewards with a credit card that aligns with your spending habits

By using a credit card that offers bonus rewards on the purchases you make the most often, you can rack up some significant savings. On the other hand, if you carry a card that doesn’t align with your spending habits, you could be needlessly leaving money on the table.

Do you spend big on gas? Then you’ll want to consider a card that offers bonus rewards at the pump (some of the best gas credit cards in Canada offer as much as 4% in cash back). Are you among the many Canadians who eat out at restaurants more than twice a week? With a rewards credit card catered for dining out, you can earn as much as 5% in travel points for every dollar you spend at restaurants (we’ve calculated that can add up to $180 in points over the course of a year; all on just restaurants).

To find the best credit card in Canada for you, it’s best to compare your option across multiple financial institutions and not confine your choices to a single bank.

Use a balance transfer to tackle your past credit card debts

If you’ve racked up significant credit card debt over the past year and your goal for 2019 is to eliminate your interest payments once and for all, a balance transfer credit card can go a long way in helping you chip away at your debts faster. Continue Reading…

Franklin Templeton Canada unveils suite of low-cost passive Regional and Country ETFs

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On the heels of BMO’s entry into the low-cost asset allocation ETF space (see Hub blog here), one of the world’s largest active money managers has unveiled a suite of low-cost passively managed regional and country ETFs for the Canadian market.

Franklin Templeton Investments Canada today announced the expansion of its Franklin LibertyShares ETF offerings with its first suite of passive ETFs. (Franklin LibertyShares originally entered Canada in 2017 with four actively managed funds branded as Franklin LibertyShares).

The new passive funds gives investors exposure to a specific region or country at rock-bottom fees (below 10 basis points). It says (and I agree) that the management fees for these new Canada, United States, Japan and Europe (excluding U.K.) passive ETFs are amongst the lowest in the industry, ranging between 5 to 9 bps.

The company says these include the first Japan passive ETF and Europe (excluding U.K.) passive ETF available on a Canadian exchange. The ETFs are market-cap weighted.

In a press release, Franklin Templeton Investments Canada president and CEO Duane Green said: “With market-moving events like trade tensions and Brexit, investors and their advisors as well as institutional investors are looking to precisely act upon specific country and regional market views … These new passive ETFs provide Canadian investors with individual country and regional exposure options … at a very low cost.”

Here are the new ETFs and their ticker symbols:

Franklin FTSE Canada All Cap Index ETF (FLCD) invests primarily in equity securities of Canadian issuers, seeking to replicate the performance of FTSE Canada All Cap Domestic Index. The management fee is 5 bps.

Franklin FTSE U.S. Index ETF (FLAM) invests primarily in equity securities of mid- and large-capitalization U.S. issuers, seeking to replicate the performance of FTSE USA Index. Management fee is 7 bps.

Franklin FTSE Japan Index ETF(FLJA) invests directly or indirectly, primarily in equity securities of mid- and large-capitalization Japanese issuers, seeking to replicate the performance of FTSE Japan Index. Fee 9 bps.

Franklin FTSE Europe ex U.K. IndexETF(FLUR) invests primarily in equity securities of mid- and large-capitalization issuers in developed markets in Europe excluding the United Kingdom, seeking to replicate the performance of FTSE Developed Europe ex U.K. Index. Fee 9 bps. Continue Reading…

How to make the most of your HELOC

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By Sean Cooper

Special to the Financial Independence Hub

A HELOC, short for “home equity line of credit,” is a revolving line of credit secured by your home’s equity. HELOCs have a reputation for being a convenient, flexible and low-cost way of accessing credit. A HELOC can be a great way to borrow money cheaply (it sure beats using your credit card!), as long as you do it responsibly.

Using your HELOC responsibly means using it for something that is likely to increase your net worth and having a plan to pay back the money you borrow. (It can be tempting to make interest-only payments, but you’ll literally find yourself no further ahead.) To address this, most lenders have recently introduced stricter qualification rules for HELOCs. You’re required to pass the mortgage stress test (2% + your HELOC rate), in addition to some lenders making you qualify based on your HELOC limit rather than your current outstanding balance.

The amount that you can borrow by way of a HELOC has also decreased over the years. With a HELOC today, you can access up to 65% of your home’s appraised value. Note that your mortgage balance and HELOC together can’t be more than 80% of your home’s appraised value.

Now that you have a better understanding of HELOCs, let’s take a look at a couple ways to make the most of your HELOC.

Home Renovations

A popular use of HELOCs is home renovations. But before undertaking a major home renovation, it’s important to ask yourself why you’re doing the renovation. Continue Reading…

BMO keeps it simple with its One-ticket Asset Allocation ETF portfolios

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By Dale Roberts

Special to the Financial Independence Hub

Last week we witnessed another entry into the Canadian Asset Allocation One Ticket Portfolio Solutions.

Welcome BMO.

On Friday February 15th BMO launched three asset allocation portfolios by way of the Conservative ZCON, the Balanced ZBAL and the Growth ZGRO.

Here is the overview from the Fact Sheets:

Wonderfully simple or plain vanilla?

Take your pick. These are certainly plain vanilla, they’re not even Lemon Raspberry White Chocolate. But they’re still wonderful.

I am certainly surprised that BMO Global Asset Management kept the portfolios so clean and simple. As you may remember from my review of the BMO SmartFolio. the Robo Portfolios are actively managed. That is to say there is active asset allocation with respect to the core and smart beta ETFs. From my BMO SmartFolio review …

The portfolios will be rebalanced every 2 to 6 months. And back to that human touch, the management team with also make adjustments to that asset mix based on market conditions. They may be more active in periods of market turmoil compared to the current market conditions where we are mostly cruising to the upside for Canadian, US and International stocks. Continue Reading…