Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Building the All-Stock Retirement portfolio

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By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

How do you build a suitable retirement portfolio, made of stocks? I gave that a go recently on Seeking Alpha. That may lead to a greater debate about ‘can you really build a suitable retirement stock portfolio?’ I’d say that yes you can, but we have to cover off all of the bases (economic conditions). And we have to have a portfolio that takes a defensive stance. Also, the Canadian investor might be in a very fortunate position thanks to defensive wide-moat stocks that pay generous dividends. They can work as bond replacements. We’re building the retirement stock portfolio.

I will give you the juicy bits, but if you are able to access Seeking Alpha here is the original retirement post on Seeking Alpha.

The concept of the retirement all-stock portfolio is to take an all-weather portfolio approach. But instead of using bonds, cash, gold and commodities, we’re going to put stocks in the right place. And we’re going to use the appropriate amount of stocks to cover off the risks.

A good starting point for the all-weather portfolio is the venerable Permanent Portfolio. That model includes only one asset for each economic quadrant.

Stocks. Bonds. Cash. Gold.

Here is an outline of a study from Man Institute that details the types of stocks and sectors that worked in various economic conditions. Keep in mind that REITs have worked for inflation and stagflation from the 1970s. I’ve given REITs a pass for inflation.

Defense wins championships

At its core, the retirement stock portfolio is quite defensive. Certain types of stocks will do the job of bonds. They will help in times of bear markets and recessions. They can also deliver ample income: much more than bonds these days.

The Canadian retirement stock portfolio will take full advantage of the wide moat stocks.

I’ll cut to the chase. Here are the assets to cover off the economic quadrants:

Defensive bond substitute stocks – 60%

Utilities / Pipelines / Telecom / Consumer Staples / Healthcare / Canadian banks

Growth assets – 20%

Consumer discretionary, retailers, technology, healthcare, financials, industrials and energy stocks

Inflation protectors – 20%

REITs 10%

Oil and gas stocks 10%

Not listed in this inflation-protection section is consumer staples, healthcare, utilities and pipeline stocks. Those stocks can do double duty. They work during times of market stress (corrections/recessions) and they can often deliver modest inflation protection as well.

Maybe consider gold and commodities?

While you may opt for a stock/cash portfolio, it may be wise to consider gold and commodities, even if in very modest amounts.

Nothing is as reliable and explosive for inflation as commodities. The most optimal balanced portfolios do include gold.

A 5% allocation to each of gold and commodities may go a long way to protecting your wealth.

An inflation bucket might then look like:

  • Gold 5%
  • Commodities 5%
  • Energy stocks 5%
  • REITs 5%

A cash wedge is not a bad idea

Cash helps your cause during stock market declines, stagflation and deflation. Mark Seed at My Own Advisor plans to use a stock and cash approach for retirement funding.

Given all of the above considerations, a retiree might go off the stock-only-script modestly with 5% weighting to each: gold, commodities and cash. It’s quite likely that the 15% allocation will come in very handy one day. Continue Reading…

Time to go on a Financial Media Diet

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By Steve Lowrie, CFA

Special to the Financial Independence Hub

In my recent mid-year letter to clients, I decided we’d best just call a spade a spade, so I began as follows:

“Let’s not sugarcoat this: 2022 has challenged investors on nearly every financial front imaginable so far this year.”

Stock and bond markets plummeting in tandem, the war in the Ukraine, rises in interest rates, threats of a looming recession … You’re probably already well aware of the volume of news wearing us down. As I wrote to my clients:

“the financial press has gone on a feeding frenzy in response, serving up heaping helpings of negativity upon negativity.”

Everyone loves a Perma-Bear

Whether by traditional channels or social media streams, amplifying extreme news is in large part what the popular financial press does.

They’re not entirely to blame; we consumers tend to gobble it up with a spoon. That’s thanks to a behavioural bias known as loss aversion, which causes the average investor to dislike losing money approximately twice as much as they enjoy gaining it. Our “fight or flight” instincts basically prime us remain on constant high-alert when it comes to protecting our life’s savings.

Media outlets know that, and routinely round up a stable of talking heads to scratch that behavioural itch. Their “regulars” even earn catchy nicknames:

Perma-bear

Back in 2012, economist David Rosenberg put together a presentation called 51 Signs the Economy Is a Total Disaster. (What, only 51?) We know that reality begged to differ. He tried again in 2019, when he declared: “We’re going into a recession … I think it will be this coming year.” It didn’t happen.

Dr. Doom

Whenever the press needs a fresh Armageddon forecast, they know they can call on “Dr. Doom” economist Nouriel Roubini. It doesn’t seem to matter that he’s been mostly wrong far more often than not. As recently as early July, Roubini was predicting a 50% freefall in the stock market. So far, not so much (thankfully).

Recession Man

As reported in ‘Recession Man’: Burry’s Tweets Resonate With Traders Worried About A Downturn, hedge fund manager Michael Burry built his fame from correctly calling the 2007 U.S. subprime mortgage crash. Lately, he’s been posting cryptic tweets to his nearly 1 million followers that “reflect increasing fears of an economic downturn.” As academic Peter Atwater explains of Burry’s popularity:

“The tweets that get shared and liked the most are the ones that fit with how we feel the most … Twitter is an enormous mirror.”

If you look closer, you might spot a card hiding up these soothsayers’ sleeves: with a large, random group of “experts” loudly predicting doom and gloom nearly all the time, basic statistics informs us: a few of them are going to be right every so often, with seemingly uncanny accuracy. Their fortuitous timing makes them look super smart, which earns them even more fame. The cycle continues.

Going on a Financial Media Diet

On many fronts, times are indeed disheartening, and we’re as worn out as you are by the weight of the world. That said, there are already way too many outlets cramming worst-case scenarios down our throats and crushing investment resolve. To offset a bitter pill overdose, following are a few more nutritious news sources to reinforce why we remain confident that capital markets will continue to prevail over time, and that long-term investors should just stick to their plan.

Stock Markets Grow

The following chart is one of our favorites, as it shows at a glance that which the bad news bears routinely disregard: Stock markets have gone up nicely, and far more frequently than they’ve gone down. We have no reason to believe current trends are going to alter this uplifting, nearly century-long reality.¹ Continue Reading…

Why the highest-yielding investment funds might not be the best for ETF investors

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The investment funds claiming the highest yields aren’t always the best for every investor

By David Kitai,  Harvest ETFs

(Sponsor Content)

A look at the “Top Dividend” stock list on the TMX website will show an investor a selection of the highest yielding investment funds and stocks available in Canada. That list features some astronomically high numbers on investment funds: yields upwards of 20%. An income-seeking investor might look at those numbers and rush to buy, believing that with a 20%+ yield, their income needs are about to be met.

As attractive as the highest-yielding investments might appear, there are a wide range of other factors for investors to consider when shopping for an income paying investment fund. Investors may want to consider the crucial details of how, when and why that yield is paid as income: as well as their own risk tolerances and investment goals. This article will outline how an investor can assess those factors when deciding what income investment fund is right for them.

Looking ‘under the hood’ of the highest-yielding investment funds

If you see a big yield sticker on an investment fund in excess of 20%, you may want to look more closely at the details of its income payments.

Because income from investment funds is not always solely derived from dividends, the income characteristics will be listed under the term “distributions.” Information like the distribution frequency and the distribution history will tell a prospective investor a great deal about a particular investment fund’s high yield.

Investment funds will pay their distributions monthly, quarterly, or annually. By looking at the distribution frequency of an investment fund, investors can assess whether an investment fund meets their particular cashflow needs.

A useful way to assess the track record of an investment fund is by looking at the distribution history page published on its website. This will show how much income was paid on each distribution. Some funds have very consistent distributions history, while others fluctuate frequently over time. The distributions history can be a useful way to assess the reliability of the income paid by an investment fund.

Assessing these characteristics can be a useful first step in deciding whether an income investment is right for you. But investors should also consider why the yield number next to an ETF is so high.

Is the high-yield number temporary?

The yield numbers next to investment funds on a resource like the TMX “Top Dividend” list reflect the most recent distribution paid by an investment fund or stock. In the case of investment funds, that distribution could have been a one-off ‘special distribution.’

A special distribution could be the result of a wide range of factors. For example, one of the fund’s holdings could have paid a significant dividend that is being passed on to unitholders. Special distributions are often accompanied by a press release. Continue Reading…

Age Tech: a Coming of Age Story?

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By Mark Venning, ChangeRangers.com

Special to the Financial Independence Hub

Is Age Tech a Coming of Age story?

Well you might think so, given all of sudden it seems, how far but quickly we’ve come, to where we’re at now, this point in 2022. While on the one hand Age Tech is a coming of age story, in the world at large it is either unheard of, or if it is heard of in some circles, it is either misunderstood or too confusing in its jumble of jargon for everyday people to grasp. Even some in this emerging industry question whether Age Tech is the best term to use. So what’s the story?

Perhaps we should start at the beginning with once upon a time. Simply the story goes, in the 1970s some engineers, industrial designers and gerontologists were curious and asked a question about how technology could join up with the field of aging studies and, as noted in the 2009 publication Defining Gerontechnology for R&D Purposes: they “recognized the need for a conceptual framework.”

Along came the 1980s, the marriage of gerontology and technology: Gerontechnology. Originator of that term in 1988, Jan A.M. Graafmans was part of a research team in Eindhoven University of Technology, “that started an effort to develop a program of research and education in gerontechnology aiming at further integration of engineering sciences with those disciplines already involved in aging studies.” Read his The History and Incubation of Gerontechnology.

As an inter-disciplinary, academic and research field, Gerontechnology established itself in 1997 forming the International Society for Gerontechnology (ISG). Speaking of jargon, at the best of times Gerontechnology is a mouthful to say let alone to understand fast. On the ISG website it is described as “designing technology and environment for independent living and social participation of older persons in good health, comfort and safety.”

Fast forward. My journey with technology and aging began in 2013 when Stanford Centre on Longevity kicked off its Longevity Design Challenge competition. In 2015 I followed Canada’s newly formed technology and aging network AGE-WELL. To appreciate the development of Gerontechnology, I highly recommend the 24 collected papers compiled by editor, Sunkyo Kwon – Gerontechnology: Research. Practice and Principles in the field of Technology and Aging. [cover on the left]

But even then all this did not quite make a coming of age story. Until now. Roughly since 2020, Age Tech has become the fast term that has at least made for an easier conversation starter. The real secret in explaining what it means is the ability to link up the Age Tech talk to the human needs it services. All you need are three examples everyday people can identify with, such as health and home care, mobility and transportation & social connection.

Avoiding the risk of overwhelming you here, to prove that there is a real coming of age marketplace for Age Tech, there are several new resources that can help you quickly do your own research; and no doubt some of you may have experienced some of the products available, even if their brand recognition is low.

Recently published (2022) is the book by Keren Etkin – The AgeTech Revolution. If you want to be bedazzled before you read the book, on Etkin’s website The Gerontechnologist you will find a very busy Age Tech Market Map filled with brand logos under various categories and sub-categories from health and wellness to tech-enabled home care.

Early in March at last AGE-WELL with help from the Centre for Technology Adoption for Aging in the North (CTAAN) published Canada’s Agetech Startup Map (seen at the top of this blog). Actually if you click on the logos on the PDF link you will find the websites for all the brand names featured. On the CTAAN web page for Age Tech you will find links to products listed under six clear topic headings, some more products not listed on the Agetech Startup Map.

If you think this is all hype and are not yet convinced that Age Tech has arrived at its coming of age, then you soon should be convinced after you check out some of what I’ve highlighted here. Try some of this out as a conversation starter next time you meet up with friends to test market awareness as it were. And because I can’t resist I’ll leave you with one more.

Poking around as I do, to see what’s covered on Age Tech in other parts of the world, I found a snappy article What is Age Tech? by Andreea Toma, dated 2020 from a UK based marketing agency Creative Quills (love that name.) Toma’s quill keeps it simple: “AgeTech is an emerging group of technologies which seeks to improve the lives of older adults.”

Mark Venning is a writer, speaker, researcher and advisor on the business, technology, health & social aspects of ageing and longevity which include changing concepts in a longevity society for Age Inclusive Communities. He is an Associate Member of the International Federation on Ageing.

This blog originally appeared on March 15, 2022 and is republished here with his permission. 

App-based banking: the ‘new normal’ for Canadians

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By Vineet Malhotra

Special to the Financial Independence Hub

It has often been said that necessity is the mother of all invention, and if there’s anything the world has faced over the past few years, it was a lot of necessity. Whether it was how we exercised or worked from home, the pandemic forced the world to reimagine old habits and reconsider our ways of doing, well, everything.

Banking was not exempt from this re-evaluation, as evidenced by a recent survey by the Canadian Banking Association (CBA) which found that 65% of Canadians used app-based banking in the past year, up from 56% in 2018, and 44% in 2016. These numbers represent a massive shift in less than five years.

With limited banking options throughout the pandemic, consumers further embraced online and app-based bank platforms: not only did they experience the benefits, but they were also forced to redefine what services they thought were possible through an app. It was delivering the unexpected and hearing our clients say, ‘I didn’t know I could do that online!’ that helped push and motivate our team at Simplii Financial to offer more.

Through the pandemic, consumers saw firsthand just how much banking technology has evolved and experienced how easy it was to do things online like sending money abroad with Simplii’s Global Money Transfer or applying for a mortgage. They quickly came to realize that online banking was not just for simple money transfers, or deposits, but rather for more sophisticated financial transactions as well, all right at their fingertips.

Why the surge in app-based banking specifically?

The two main reasons for the rise in app-based banking come down to convenience and time.  The desire and the need for convenience have taken over our lives: more than ever we expect we can do things from wherever we are, whenever we want.  Whether it’s depositing a cheque, transferring money, or making bill payments, many Canadians now understand that an app makes all those tasks easier and faster. Even more complex services are starting to move into the digital space – like mortgage applications which can now be completed digitally, or by phone.

Who is driving the surge of app-based banking?

App-based banking now comes second only to digital banking in use and we expect it to grow. According to the CBA, the surge is largely due to Gen Z and Millennials. Nearly half of Gen Z (46 percent) and well over one-in-three Millennials (37 percent) are using app-based banking as their primary banking method. Continue Reading…