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.

Fraudsters more active than ever but less than half of us take protective measures

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Image www.antifraudcentre-centreantifraude.ca/

Yes, it’s March, also dubbed Fraud Prevention Month. To mark it, a TD survey has been released that finds fraudsters are getting more persistent as the cost of living keeps soaring.

While 62% of Canadians agree they are being targeted now more than ever, a whopping 46% haven’t taken any measures to educate themselves or take protective measures in the past year.

Among the findings:

  • 47% believe the rising cost of living and other financial hardships will expose them to more scams
  • 78% don’t have much confidence in their ability to identify fraud or scams
  • 54% feel stressed or anxious about financial fraud
  • 31% are too embarrassed to tell anyone if they were the victim of a fraud or scam
  • 66% of Gen Z and 44% of Millennials admit they wouldn’t tell someone if they were swindled

The full press release is here.

“As Canadians report being targeted by a record number of financial fraud attempts, many can benefit from using the tools and resources available to protect themselves and their loved ones,” says Mohamed Manji, Vice President of Canadian Fraud Management at TD in the release, “It’s very important to exercise caution, especially at a time when fraudsters may take advantage of the economic challenges many Canadians are currently facing. In addition to the robust security measures TD has in place for its customers, the best defence against financial fraud is being aware and knowing how to spot it.”

Both TD and the Canadian Anti-Fraud Centre offer a comprehensive library of articles discussing the latest trends in scams and measures Canadians can take to enhance their awareness and avoid falling victim to fraudsters.

Targeting mostly via e-mail or telephone 

The survey found 72% of Canadians reported being targeted by email/text message fraud, up 14 percentage points from last year, while 66% were targeted over the phone. Oddly, the poll finds Fraudsters seem to be pivoting away from social media, with only 26% targeted this way, 10 percentage points less than 2022.

Those polled were most concerned about identity theft (52%), title fraud (23%) and fake emergencies (20%).

Factors likely to increase vulnerability to fraud include age (43%),  loneliness or isolation (35%), moving recently to Canada (34%) and financial hardship or job loss (32%).

“We’re seeing more fraudsters preying on customers through the ‘grandparent’ or ’emergency’ scam,” adds Manji. “This cruel crime is often successful because it exploits someone’s desire to care for their loved ones. If you get a call from somebody claiming to be a family member or friend in immediate need of funds, hang up the phone and call them back using a number you have for them.”

TD says that with 31% saying they’d be too embarrassed to tell anyone if they were a fraud or scam victim, it’s clear there’s some stigma in talking about this type of crime. If someone believes they’ve fallen victim to a scam, they should immediately report it to their financial institution, local police department, credit bureaus (Equifax and TransUnion) and the Canadian Anti-Fraud Centre.

How can Canadians protect themselves?

TD recommends the following tips and advice: Continue Reading…

Sector ETFs for Defensive Plays

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By Mirza Shakir, Associate Portfolio Manager, BMO ETFs

(Sponsor Content)

What are Sector ETFs?

Sector ETFs allow targeted exposure to sectors or industries like financials, materials, or information technology – domestic, regional, or global. The sectors are usually classified according to the Global Industry Classification Standard (GICS), but other classifications can also be used. While sector ETFs could be active funds, most track an index, offering transparency, liquidity, and low fees.

There are eleven broad GICS sectors that can be invested in with sector ETFs.

  • Energy
  • Materials
  • Industrials
  • Consumer Discretionary
  • Utilities
  • Real Estate
  • Communication Services
  • Financials
  • Health Care
  • Consumer Staples
  • Information Technology

There are two common approaches in constructing a sector portfolio: market capitalization weighted and equal weighted. As the names suggest, the former approach weights securities in the portfolio by market capitalization while the latter weights them equally.

At BMO ETFs, our suite of sector ETFs covers equal-weighted and market-weighted strategies across all sectors, locally and globally. We opt for equal-weighted strategies for sectors that have the potential to get concentrated in a few large names with the market-capitalization approach, ensuring effective diversification and mitigating individual company risk.

 

Source: BMO GAM, BMO ETF Roadmap February 2023 (Visit ETF Centre – CA EN INVESTORS (bmogam.com)

Annualized Distribution Yield: The most recent regular distribution, or expected distribution, (excluding additional year end distributions) annualized for frequency, divided by current NAV.

Risk is defined as the uncertainty of return and the potential for capital loss in your investments.

Why Invest in Sector ETFs?

Sector ETFs can offer differentiated return and risk profiles for investors, not only from broad market portfolios but also from other sectors. Additionally, investing in a sector ETF allows access to a broad range of companies that have businesses that operate in similar or related industries, which can be more diversified than investing in a single stock. The investor does not have to place individual bets on single companies, which helps limit company-specific risks.

The table shown at the top of this blog, and shown to the right in miniature, shows the performance of all sectors in the U.S. from 2011 to 2022. Notably, the best and worst performing sectors change every year, leaving an opportunity for market timing to generate high returns. However, timing the markets can be extremely difficult. A more effective strategy can be sector rotation, which involves overweighting or underweighting sectors relative to the stage of the business cycle.

Playing Defense – Sector Rotation Strategies

The business or economic cycle refers to a cycle of expansion and contraction that economies undergo, accompanied by similar upswings and downswings in economic output and employment. Continue Reading…

Why Healthcare could lead this market cycle

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Chief Investment Officer explains why this massive sector has the right mix of styles and innovation to show leadership as markets recover

 

Image Harvest ETFs/Shutterstock

By Paul MacDonald, CFA, Harvest ETFs

(Sponsor Content)

Market cycles are often defined by their leaders. While many sectors and areas of the market can provide returns, the tone and tempo of market narratives are often set by the companies, styles and sectors that are broadly considered the ‘leaders.’

Take the past roughly 15 years as an example. The leadership story on markets was almost completely defined by technology. Tech leaders were synonymous with growth, and that growth was synonymous with leadership during a period of mostly uninterrupted bull market runs.

The bear market we experienced in 2022 hit the reset button on leadership. Not necessarily by removing tech as the key growth sector — it still shows plenty of attractive growth traits — but by resetting some of the fundamental dynamics in the market.

The end of near-zero interest rates has changed the liquidity picture on markets. Volatility, as measured by the VIX, has been structurally higher since the onset of the pandemic, and we are likely already in a period of slow economic growth: if not a recession. Rather than the pure-growth traits investors sought for leadership, in the near to medium term we see potential for leadership in areas that balance growth prospects and innovation with stability and consistency.

That sector is healthcare.

3 tailwinds means Healthcare can lead

The US healthcare sector is, in the eyes of many investors, a sleeping giant. Looking at just the 20 leading companies held in the Harvest Healthcare Leaders Income ETF (HHL:TSX) we see a combined market capitalization of $4.86 trillion, more than 150% of the total market cap of the S&P TSX Composite. These are huge companies in a huge sector, which covers business lines as diverse as pharmaceuticals, healthcare services, med-tech, biotech, and healthcare equipment.

The healthcare sector overall benefits from three structural long-term tailwinds. The first is the aging of the developed world. As the world’s richest countries get older, they are spending more on healthcare. In the US, for example, individuals aged 19-44 spend an average of $4,856 [US$] on healthcare, according to the National Health Statistics Group. That number rises to $10,212 in the 45-64 age bracket, and rises again to $19,098 in the 65+ age bracket.

The developed world is getting older. By 2050 28.5% of North Americans and 35% of Europeans are expected to be over the age of 60, according to the UN. As those places age, their older populations will spend more on healthcare. That demand is largely expected to be stable for the simple fact that people are less likely to cut expenditures on life-saving medications than they are on something more discretionary. Healthcare is therefore seen as a superior good.

The second tailwind is the economic growth of the developing world. Taking China and India as prime examples, the WHO has found that as those countries’ GDP has grown, their healthcare expenditure has grown at a faster rate. These huge markets are already being captured by some of the large-cap US healthcare leaders held in HHL. Continue Reading…

How to Balance Spending Now & Saving for the Future

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From opening two different savings accounts to giving your money a job, here are 12 answers to the question, “Give your best tip for how to balance the need to save and invest for the future with the desire to enjoy my life and spend money on things that are important to you?” 

  • Open Two Different Savings Accounts
  • Consider Your Housing Costs
  • Focus on The Three Aspects of Great Personal Finances
  • Use Financial Aggregators to Monitor Spending
  • Spend Money On Your Passions; Avoid Pointless Purchases
  • Invest in Things That Will Last
  • Understand Your Cash Flow
  • Consider the 50-50 Rule
  • Create and Follow a Budget
  • Use Fixed Percentages for Saving /Investing
  • Schedule a ‘Spending Period’ in Your Life
  • Give Your Money a Job So It Has a Purpose

Open two different Savings Accounts

Most people have a checking account and a savings account. If you want to save for the future, open up a second savings account and put your long-term savings in that pot. Find the best interest opportunities you can find for that account and leave that money alone to the best of your ability.

For the money that you want to use in the shorter term (shopping, traveling, buying gifts), manage that money in a separate savings account. Your checking account should cover all of your expenses while your primary savings account should be your “fun-spending” money.

The third account should be your long-term savings and that should be the money that you take to your financial advisor for the best long-term investment opportunities. Let that build up for a while and then try to make smart investments with it. — Brittany Dolin, Co-founder, Pocketbook Agency

Consider your Housing Costs

If you’re struggling to save and invest for the future while also enjoying life, consider your housing costs. Housing is one of the biggest monthly expenses, so if you’re living in a home that’s too big for you, or you’re paying more than you can afford for it, you may want to consider downsizing.

Consider your needs and wants when choosing a home. Do you really need a five-bedroom home if you’re a family of two? Can you live somewhere with fewer amenities if it means you can save money on your monthly housing costs? Homeownership is an investment in yourself and your future, so it’s important to find a balance between spending on your housing and investing in the future. — Matthew Ramirez, CEO, Rephrasely

Focus on the three Aspects of Great Personal Finances

I’ve learned from my mentors that great personal finances can be broken down into three areas: Budgeting Expenses, Creating Income, and Developing Cashflow-Producing Assets.

With any money-related goal, identifying which area(s) to focus on is key. For example, getting out of debt requires stricter budgeting and increasing income. Meanwhile, retirement has to do with areas 1 and 3. This also makes it simple: budget a percentage of your income to save and invest based on your long-term goals.

Then determine your priorities. Perhaps you need to be strict with some other living expenses to be able to spend money on what’s important to you and set savings and investment goals for larger purchases while you also work to increase your income. — Eric Chow, Chief Consultant, Mashman Ventures

Use Financial Aggregators to Monitor Spending

The balance between saving and investing for the future, while also enjoying life and spending money on what matters to you, is a difficult one to achieve.

One uncommon way to reach this balance is by using financial aggregators. Financial aggregators are tools that allow you to connect all your accounts, such as investments and bank accounts, into one place in order to get a better look at where your hard-earned money is going. This makes it easier for you to budget wisely and allocate money towards satisfying both savings goals, as well as needs or wants for immediate enjoyment.

With this knowledge in hand, you’ll be more aware of how much flexibility you can have with your monthly expenses since both needs are being fulfilled simultaneously. — Carly Hill, Operations Manager, VirtualHolidayParty.com

Spend Money on your Passions; Avoid Pointless Purchases

The best way to save money and enjoy life is to spend money on your passions and cut back on everything else. For example, you might grab a Starbucks drink before work every day. But does this really add value to your life? You can make the exact same coffee at home for a fraction of the price. This is just one example, but most people are spending thousands of dollars a year on unimportant things.

Once you’ve cut expenses out of your life that don’t provide value, spend this extra money on your passions. Let’s say you’re a big fan of motorbiking. You can use this money to buy a sport bike and go to your local racetrack every weekend. Or, if you love hiking, buy quality hiking gear and hike with friends and family. This strategy allows you to cut back on unimportant expenses, save money, and spend more on things that bring happiness. — Scott Lieberman, Owner, Touchdown Money

Invest in Things that will Last

A great way to balance the need to save and invest for your future while still enjoying life is mindful spending. This means considering each purchase you make, big or small, and evaluating if it will add long-term value and benefit you; an uncommon example of this would be investing in a massage package.

Instead of splurging on something that won’t provide sustainable value, such as multiple nights out with friends, consider treating yourself to regular professional massages — which have medical benefits from managing pain to reducing stress — that promote mental health and well-being. Practicing mindful spending ensures money is not wasted frivolously but also allows for some indulgences now that can later prove beneficial. — Grace He, People and Culture Director, teambuilding.com

Understand your Cash Flow

Understanding your household cash flow is among the most important aspects of securing your financial future. In order to have more money to spend or save now, you must be acutely aware of your spending habits. Continue Reading…

How to address your Financial Anxieties without breaking the Bank

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Image source: Pixabay.com

By Beau Peters

Special to Financial Independence Hub

Money management is arguably one of the most stressful things that most of us deal with on a regular basis. It never fails; just as soon as you feel like you’re doing well financially, something comes up — unexpected home repairs, vehicle maintenance, emergency medical bills, holiday gift purchases. Financial worries can sit in the back of your mind and weigh on you day in and day out.

For many, financial stresses are a concern, but not a debilitating one. However, some people develop financial anxiety — a condition where worry, fear, and unease about finances causes those suffering from it to behave differently. Behavior changes can show up in different ways such as extreme frugalness, avoiding finances, excessive overspending, or even physical changes such as high blood pressure.

Fortunately, if you are someone who suffers from financial anxiety, there are steps you can take to help address it and get your life back. The first one is finding some help, the next is gaining control. As you work through the process of dealing with your financial anxiety, you will inevitably learn a lot about yourself and how to manage your money the way you want to.

Finding Help

The root cause of financial anxiety can come from a number of different places. Maybe you have an extreme fear of being in debt because you grew up watching your parents struggle to make ends meet without sinking deeper and deeper into financial ruin. Or perhaps you were never really taught about personal finance management and now everything finance seems daunting. Or maybe you’ve just given up all hope of financial stability and choose not to address the financial concerns you know you should.

Either way, there is help out there and you are not alone. Talking with professionals about financial issues is a great place to start. Numerous different types of therapists can help you identify the root of your financial anxiety and work through the issues surrounding that cause. Likewise, financial advisors can be a great resource for helping you to understand your finances and get them back on track.

Of course, it might give you anxiety just to think about paying for a therapist to help you through your financial stresses.

Don’t worry! There are still options for you. The first might be to start by talking to a trusted friend that you believe manages their money well. Another option is to dive into the multitudes of cheap or free resources that are available online. These include affordable financial help guides or podcasts that dive into all sorts of topics, from how to build a budget you can stick to all the way to how to best invest your money.

Making a Plan

If getting help is the first step, developing a realistic plan is the second step. You might be thinking great, another budget that is bound to fail, but this isn’t necessarily the case. A workable plan can come in a variety of different forms. The right plan for you to address your financial anxiety might be different than what another person needs to feel financially stable.

For example, maybe the right plan for you involves building greater financial literacy by learning some of the terminology and tools available. Perhaps your plan is to read one financial news article a day. Or maybe your plan is to build up a rainy day fund that will ease your concerns about going into debt. Or to focus more on building more meaningful relationships and focus less on having the fanciest home goods.

All of this isn’t to say that a budget isn’t sometimes a great tool. In fact, budgets can be one of the most powerful tools for getting yourself out of debt or achieving a financial goal. The crux is creating a realistic budget that you can actually live with. Cutting out all of your excess expenditures might help you save money, but sooner or later you’ll crack. Smaller changes that you can really stick to are much more valuable over the long run.

Taking Control

The final step is to enact the plan and adjust as needed to make sure you’re doing something that is really making a positive difference. Take time once a month to evaluate where you’re at with your financial anxiety. Are you making progress? Are you achieving your financial and financial mental health goals? Continue Reading…