General

A rare haven: Fine Wine In a volatile market

Posted By Financial Independence Hub | August 10, 2022

By Atul Tiwari

Special to the Financial Independence Hub

So far, the fine wine market remains one of the few bastions of stability in an increasingly volatile investment environment. The Liv-ex 1000, the broadest measure of the global fine wine market, has returned 25.45% this year (as of 30 June).

These gains stand in stark contrast to most of the financial markets, where selloffs have hit a wide range of industry sectors, asset classes and geographies. The initial shock from the war in Ukraine has led to surging commodity and food prices, triggering the highest inflation in decades in several major economies including Canada which now stands at 8.1%.

LONG TERM RETURNS

Fine wine boasts a track record of strong growth that has resulted in positive real returns over the long-term.

Index	Month	YTD	12-month	5-year	10-year	5 year volatility*
Liv-ex 1000	0.76%	11.12%	25.45%	50.26%	92.14%	1.12%
S&P 500	-8.39%	-20.58%	-11.92%	56.20%	177.90%	4.89%
FTSE 100	-5.76%	-2.92%	1.87%	-1.96%	28.69%	3.92%
Nasdaq	-9.00%	-29.51%	-20.96%	103.72%	339.79%	5.72%
MSCI AC Asia Pacific	-6.78%	-18.18%	-24.02%	2.21%	34.80%	4.19%
Gold in ($/oz)	-1.64%	0.58%	-0.37%	42.38%	12.00%	3.72%
Bitcoin	-37.32%	-56.89%	-43.11%	703.30%	297311.94%	25.18%
Bloomberg Commodity	-10.88%	18.03%	23.81%	41.70%	-13.57%	4.39%

Source: Investing.com, Liv-ex as of June 30, 2022. Past performance is not indicative of future returns. *Volatility = 5 year standard deviation of monthly returns.

Stable

Fine wine’s year-to-date relative strength does not come as a surprise. During previous periods of volatility, such as the COVID-19 outbreak, fine wine prices experienced shorter and less severe downturns compared to equities and faster bounce backs compared to other haven assets, such as bonds.

Figure 2 – Weathering the storm

Fine wine’s relative performance during market downturns

Source: Liv-ex, investing.com. Past performance is not a guarantee of future returns.

This track record may be contributing to fine wine’s recent performance as more buyers, whether collectors or investors, realise fine wine’s ability to form a stable store of value.

Additionally, low fine wine supply levels are also supporting prices. Low harvest yields in 2021 and 2022 have dented production levels for leading fine wine regions, including Bordeaux, Burgundy, Champagne and California, creating fierce competition for top wines. Continue Reading…

Buying Stocks without a Broker: Here’s how to pick the best investments on your own

Posted By Pat McKeough | August 9, 2022

A growing number of Investors like buying Stocks without a Broker because they’re able to avoid possible Conflicts of Interest and Save on Broker Fees. However, it’s especially important to know what to Buy if you’re not using a Broker

Many investors assume their broker is honest and has their best interests at heart; if this proves to be untrue, they will shop for better stock trading advice from a new broker. Of course, many investors decide on buying stocks without a broker. That can be a successful strategy if you choose the best options for your investment temperament—using our Successful Investor approach.

Buying stocks without a broker: Why it might be a smart move for some investors

As any good stock broker or experienced investor can tell you, bad brokers are all too common. By “bad brokers,” we mean those who put their own interests above that of their clients. Keep in mind, however, that most bad brokers do this in a perfectly legal fashion, by catering to their clients’ whims and weaknesses.

Here are three main practices that bad stock brokers often practice:

Aiming for stability rather than growth
Double dipping
Stressing low-risk, low-return, high-fee structured products in client accounts

Additionally, you may have noticed that your broker sometimes uses unfamiliar words and phrases to describe investment concepts. Some of this stock broker jargon is simply shorthand that brokers use among themselves, to refer to familiar situations without having to go into any detail on the underlying concept. However, the concepts that these “broker-ese” words and phrases represent also serve to further the goals of the brokerage business.

If you find yourself thinking in broker-ese, you’ll naturally make assumptions that are in tune with the goals of your broker. They may be out of tune with yours.

Here’s one example: from time to time, your broker may advise you to sell a particular stock you own because it represents “dead money.” This doesn’t mean there’s anything wrong with the stock, or the company. Instead, your broker simply thinks the stock may only go sideways for a period of months or longer, producing no capital gains for you. So they naturally feel you should sell it and buy something with better short-term capital-gains potential. Continue Reading…

Looking to start Investing? 5 tips for Beginners

Posted By Financial Independence Hub | August 8, 2022

By Charles Qi, CFA

Special to the Financial Independence Hub

Many of us are familiar with the benefits of investing. Whether you’re looking to save for retirement, earn money in the stock market, or achieve some other financial goal, investing — when done well — can help you build your financial future. But if you’re not professionally trained in the stock market, starting out can be daunting.

Whatever the reason someone has for dipping their toes in the investing waters, starting out can be daunting. There’s a lot of math involved, tricky rules, and an entire lexicon of investing terms to remember. Those who are not scared away may be wondering where to start.

Despite these fears and uncertainties, though, leaping off the investing cliff can help build a foundation toward financial freedom. Here are five tips for new investors looking to get started in the stock market.

1. Set an Investment Budget

It can help to make investment contributions part of a normal household budget. By setting aside a predetermined amount of funds to funnel into investment accounts each month or pay period, one can rest assured that their accounts are being regularly funded, even as the market rises and falls. A good investment goal is typically between 10% to 15% of your income. If one is enrolled in an employer sponsored retirement plan, their match counts towards that percentage goal.

2. Start Investing as Early as Possible

Finances can be tight when someone is just beginning to invest, even with a job that pays their bills. However, once you’re able to allocate a portion of your monthly income to investing in the stock market, it’s beneficial to start investing as soon as possible.

The earlier one begins to invest, the longer they can allow compound interest to accumulate. Compound interest is how your investments grow. For example, if you have an account that pays 1% interest per year and you deposit $1,000 into that account, you would earn $10 on that money in one year. Average rates of return can fluctuate year by year, so make sure that you check out the rate of return on any stock or money market account you may be interested in.

3. Learn Basic Investing Terminology

While those just beginning to invest don’t need to know everything off the bat, there are a few terms they will need to familiarize themselves with to help them make smart investment decisions. For example, what is a money market account, anyway? How about an IRA? Continue Reading…

An Income Strategy for Adjusting to Uncertain Markets

Posted By Financial Independence Hub | August 5, 2022

By Franklin Templeton Canada

(Sponsor Content)

Canadians face a lot of headwinds in this volatile investing year, including high inflation, rising interest rates, slower economic activity and geopolitical shocks. In this turbulent environment, an actively managed income strategy can help steer the way through uncertainty. Volatile markets call for a strategy that can adjust client portfolios in a timely, tactical way as market conditions shift.

Active investment management can play a key role in offering a compelling risk-reward option for investors who are looking for income, growth and overall portfolio diversification. The strategy that underlies the Franklin U.S. Monthly Income Fund is an example of an approach to seeks to give investors stability amid volatility.

“The fund has a portfolio that can make adjustments in a timely manner on your behalf,” said Rob Rocoff, Vice President, Regional Sales with Franklin Templeton Canada in Toronto. “It’s a fund that uses a flexible, balanced strategy that is capital structure agnostic and has a track record in the U.S. of over 70 years of being able to tactically adjust to volatile market conditions.”

The Franklin U.S. Monthly Income strategy aims to generate income by investing in stocks, bonds and hybrid securities, such as equity-linked notes (hybrid securities have characteristics of both stocks and bonds). The strategy’s flexible asset allocation allows it to adjust across different market cycles, including moments of high pressure, to find the most attractive investment opportunities.

The Franklin U.S. Monthly Income strategy looks throughout the capital structure for securities that offer attractive income and long-term growth potential. Top-down insights inform the investment team’s view on asset allocation, while the security selection process is driven by rigorous bottom-up fundamental research. The team focuses on investment opportunities where their fundamental views may differ from the market consensus, especially with investments in large companies.

Seeking Yield from multiple sources

As a result, the fund’s portfolio includes equities (common or preferred stocks), fixed income assets (e.g., investment grade bonds, Treasuries) or hybrids (e.g., equity-linked notes and convertibles). This mix seeks yield from multiple sources and allows for dynamic asset allocation, depending on market conditions. Continue Reading…

How to take advantage of rising interest rates

Posted By Financial Independence Hub | August 4, 2022

By Bob Lai, Tawcan

Special to the Findependence Hub

Lately, the talk of the town seems to be rising interest rates. In April, the Bank of Canada raised the benchmark interest rate by a whopping 0.5% to 1%, making it the biggest rate hike since 2000. Given the high inflation rate, it is almost a given that these rate hikes will continue throughout 2022 and beyond. [On July 13, 2022, the BOC hiked a further 1%: editor.]

But before you freak out, let’s step back and look at the big picture. At 1%, the benchmark interest rate is still relatively low compared to the past interest rates.

I still remember years ago before the financial crisis, being able to get GIC rates at around 5%. And some people may remember +10% interest rates in the 80s or early 90s. Back then, interest rates were much much higher than measly below 1% rates we’ve been seeing the last decade.