Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

How to invest for retirement when time is no longer your friend

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By Mark Seed, myownadvisor

Special to the Financial Independence Hub

 

Save early, save often.

Time in the market is your friend.

Get started, stay invested.

Let’s face it: easy to say, hard to do.

How to invest for retirement when time is no longer your friend?

Read on in today’s post, including answering a reader email on this very subject.

Time in the market 

Cutting to the chase: time in the market, as opposed to timing the market, works because it does not involve short-term predictions or any guesswork at all. This strategy proves that time and patience in the market is better than a quick sale. For example, when a person has a stock or ETF for many years, the power of compounding simply tells us that investment growth will do all the heavy lifting for us. Patient investors will gain larger profits by allowing their investments to grow over time.

“The wonderful magic of compounding returns that is reflected in the long-term productivity of American business, then, is translated into equally wonderful returns in the stock market. But those returns are overwhelmed by the powerful tyranny of compounding the costs of investing. For those who choose to play the game, the odds in favor of the successful achievement of superior returns are terrible. Simply playing the game consigns the average investor to a woeful shortfall to the returns generated by the stock market over the long term.” – John Bogle, founder of Vanguard Group.

John said things better than I did. Most investors should consider investing as a multi-year long-term endeavour.

The secret sauce therefore is spending time in the market – staying invested – and not diving in and out.

I’ve seen this play out myself, in real time, with my dividend investing journey. See the chart below. Sure, I’ve added new money over the years but going forward, my portfolio will continue to grow and is likely to double every 10 years or so even if I don’t add another five cents.

My Own Advisor Dividend Income Update

Further reading: read more about my progressive dividend income journey here.

Waiting for growth can be painful. Or maybe life throws a curveball at you and you simply can’t invest as much as you’d like. Life happens.

I’ve been on record to say if you haven’t saved a cent by age 50, for any retirement at all, you might be kissing any middle-class retirement lifestyle away. With inflation running higher, that might be more true than ever.

But it is never too late to right the ship. It’s never too late to learn something new. It’s never too late to get started with investing: you can invest for retirement when time is no longer your friend.

How to invest for retirement when time is no longer your friend – reader question

Here is the reader question, adaptedly slightly for the site for today’s post:

Hi Mark,

I appreciate all that you do. I recently sold a property and I’m starting all over.

I’m newly self-employed. I have a new rental apartment, but starting from scratch. I’m 55 and have an empty TFSA. I would like to max it out with investments that will act as my long-term account. I don’t need to touch that money for probably 15 years. I hope to put any savings, about $77,000 in there next year.

I’ll also be putting another $150,000-$200,000 into my new business. Day trading? Kidding.

Back to my biggest question – most articles and advice I’ve read about is focused on long-term investing that caters to a younger person whose age allows them to exploit compound interest – I know you write about that too. Because I’m not in that category, I thought I’d reach out and see what you can help with. What is possible? 

Please accept my request or send me any articles on your site that address investing for someone older, with limited funds like myself for the TFSA. 

Thanks so much for your time and consideration.

Thanks for your email and readership.

Well, a few thoughts and I’ll put them in order of what I would consider myself, based on my personal lessons learned as your food for thought.

How not to invest for retirement when time is no longer your friend

I’ll cover how much wealth you can still generate with your TFSA in a bit, but I think it’s important for me to call out that based on market history, because equity markets can be volatile in the short term but rather predictable over the long-term (they rise), an investor who stays invested is probably going to win the race.

Case in point.

Did you predict this massive fall, and rise, in our pandemic-era?

If you’re being totally honest with yourself, I doubt it. I know I didn’t see this comeback coming but I’m sure glad it happened ….

The Cash Wedge

So, whether you invest in stocks, bonds, real estate or more speculative plays like Bitcoin, you should know that you’re mainly rewarded with returns for your exposure to just one thing: risk.

Risk, on the whole, is difficult to define and measure, especially at the personal level but essentially it comes in two main flavours: short-term and long-term.

Short-term risk might be easier to relate to. Stocks, bonds, and other assets can lose money in the short-term. See above!

But investing history consistently tells us for any short-term headaches, by staying invested, “this too shall pass.”This means that an investor who stays in the market (and does not trade) generally speaking has a much higher probability of long-term success than one who tries to pick the perfect time to get in and out.

Further reading: I used to sabotage my portfolio. Don’t repeat my mistakes!

How not to invest for retirement when time is no longer your friend

Another concept I want to bring up is the fact that at any age, there is one major piranha you need to avoid for successful, more predictable wealth-building: the investment industry itself.

Did I just call out all the entire wealth industry? Only some to a point! Continue Reading…

9 ways Entrepreneurs finance their Startups

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As an entrepreneur, how have you financed your startup?

To help finance your next startup, we asked business professionals and leaders this question for their insights. From crowdfunding to savings from a full-time job, there are several ways to fund a startup.

Here are 9 ways entrepreneurs finance their startups:

  • Look into Commerce Authority Programs
  • Partner with Others
  • Finance with Commercial Bridge Loans
  • Connect with Local Non-Profits and Support Networks
  • Raise from Crowdfunding
  • Apply for Small Business Grants
  • Pitch to Potential Investors
  • Ask for Support from Family and Friends
  • Save Your Full-Time Salary

Look into Commerce Authority Programs

I’ve bootstrapped the financing of our company for 10 years, but programs from a local commerce authority can certainly help support and fund new initiatives. For example, the Arizona Commerce Authority offers programs such as the Small Business Capital Investment Incentive Program, where the ACA may certify up to $2.5M [US$] in tax credits each fiscal year, or the Rapid Employment Job Training Grant, a reimbursement for training and development expenses. Look into the programs at your local commerce authority, as many small businesses and startups may discover funding and grant incentives designed just for them. — Brett Farmiloe, Markitors

Partner with Others

Financing your business with partners to fund your growth in exchange for special access to your product, staff, distribution rights, ultimate sale, or some combination of those items using strategic partner financing is the best strategy to finance your startup. I’ve noticed that this option is often neglected. Strategic investments are similar to venture capitalism in that it is typically a stock sale (rather than a loan), yet it can also be royalty-based, in which the partner receives a portion of every sale, in my opinion. Partner financing is a great option because the firm you partner with is likely to be a huge corporation, and it may even be in a similar industry or one that has a stake in your company. — Carey Wilbur, Charter Capital

Finance with Commercial Bridge Loans

We like to overcome the obstacle of financing small businesses by bringing innovative solutions to the table. One such solution is our commercial bridge loans, which are flexible short-term financing options for commercial real estate properties. This might be a great option for fast growing businesses as they continue to grow and scale their operations.

As loan experts, we commit to truly helping clients as advisors. If you’re just starting a business, consider consulting a lending expert. Make sure your needs are heard and that you are provided with affordable options to choose from. — Allan J. Switalski, AVANA Capital

Connect with local Non-Profits and Support Networks

In addition to bootstrapping, local not-for-profit organizations and networks that support female entrepreneurs are some great ways to fund your startup. You can find funding and investors through these kinds of organizations like we did when we found Beam. One of the other great things about organizations like Beam is that you will become part of a network you can lean on for support and can also find mentorship from business professionals in your area. This mentorship can make a huge difference in helping you grow your business. Also, there’s a lot of grants out there that support female-founded businesses which require a little extra upfront research and work but another great avenue to fund the business.

— Sara Shah, Journ

Raise from Crowdfunding

Crowdfunding may be an alternative if you have a hot idea and are good at social media. When crowdfunding platforms like Kickstarter and Indiegogo were launched, there were a lot of enterprises that had significant success raising funds through their reach.

What’s the disadvantage? Because many businesses seek funding through crowdfunding, you must build a lot of buzz in order to cut through the total signal noise. Unfortunately, it’s also easy to overextend yourself and irritate backers, which can lead to a lot of resentment before your firm even gets off the ground. — Veronica Miller, VPNOverview

Apply for Small Business Grants

I usually advise startups to consult small business grant administrators to fund your startups. Especially, when your new company is a pioneer and investing in innovative technologies and techniques, more funding opportunities arise.  What’s more, small businesses founded by women, minorities, or veterans are often eligible for grants from the Small Business Administration (SBA) and other organizations that promote entrepreneurship. If you fall into one of these categories, you should contact your local SBA branch or chamber of commerce to see if there is any local grant money available. — Spiros Skolarikis, Comidor

Pitch to potential Investors

We joined an accelerator program that connected us to investors. In turn, they take a share in the company in exchange for capital. The ownership-to-capital ratios are variable and are usually determined by a company’s valuation. I believe this is a wonderful option for companies who don’t have physical collateral to serve as a lien on a bank’s loan. However, it is only a good fit when there is a proven high growth potential as well as a competitive advantage of some sort, such as a patent or a captive consumer. Another advantage of working with investors is that they may give you a wealth of information, industry connections, and a clear path for your company. — Guy Katabi, Lightkey

Ask for support from Family and Friends

Borrowing money from friends and family is a traditional method of starting a business. While it may be more difficult to persuade investors or banks of the excellence of your idea, your family and friends will typically trust in your ambition.

They might be more willing to contribute to the funding of your company. If you do seek loans from friends and family, make sure that each of you has appropriate legal guidance, especially if the money is taken as a loan. However, what about the disadvantages? Borrowing money is an easy way to alienate friends and ruin family relationships. If you decide to go this route, go with caution. — Edward Mellett, Wikijob

Save your full-time Salary

I financed my startup with the salary from my full-time job. I was fortunate to have a good paying job as a software engineer, which enabled me to fuel my startup while it was just a side hustle. I’ve never been a big spender, and I live modestly:  this low-cost lifestyle left me with enough money to feed my business while getting it off the ground. I have since quit my job and operate my small business with the money it generates. –– Andy Kolodgie, Cash Home Buyers Georgia

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ESG and evaluating Risk in Fixed Income

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Franklin Templeton/Getty Images

By Ahmed Farooq, CFP, CIMA, Franklin Templeton Canada

(Sponsor Content)

ESG (environmental, governance and social) has become a hot topic in investment circles.

Sustainable investing is a key consideration for most asset managers nowadays, reflecting changing attitudes among investors.

Responsible or sustainable investing was once a very niche part of the market, but now accounts for US$35.3 trillion worldwide, according to recent data from The Global Sustainable Investment Alliance (GSIA).

This rise of ESG is most closely associated with equities, but this approach to investing can also be applied in the fixed income space too. Being able to minimize downside risk is a key objective for fixed income investors, and this certainly aligns with the characteristics of ESG investing.

Green Bonds evidence of ESG’s growing significance

ESG’s growing significance was displayed further earlier this year when the federal government’s 2021 budget included a plan to issue $5 billion in green bonds to support environmental infrastructure development in Canada.

Speaking at the recent Exchange Traded Forum, Brandywine Global Investment Specialist Katie Klingensmith discussed the firm’s investment philosophy and how ESG has become an important element of its strategies in recent years.

One of the specialist investment managers brought under the Franklin Templeton umbrella after its acquisition of Legg Mason in 2020, Brandywine Global has US$67 billion in assets under management globally.1

Of that total AUM, US$53 billion is in fixed income, where the investment team combines a global macro perspective with a disciplined value approach to select suitable holdings for the Brandywine  funds.

A signatory of the UN-supported Principles for Responsible Investment (PRI) since 2016, approximately 99% of the firm’s assets under management now feature ESG integration.

Brandywine has built its own proprietary ESG portfolio management dashboard as a result, and will publish its first Annual Stewardship Report in 2021. Continue Reading…

Going Stag

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By John De Goey, CFP, CIM

Special to the Financial Independence Hub

Talk of stagflation is all the rage.  Sort of.  Most of the articles I read about the subject focus primarily, if not exclusively on inflation.

Where’s the ‘stag’ part?  The word ‘stagflation’ is a handy portmanteau that came about in the 1970s when, for the first time in modern history, we experienced stagnant economic growth coupled with high and persistent inflation.  Those two circumstances were thought to be mutually exclusive.  In fact, they represent the worse of both worlds.  Normally, if the economy is stagnant, there’s no inflation.  Alternatively, if there’s inflation, it was always assumed that it was because the economy was overheating and growing too quickly.

In the second half of 2021, it seems everyone is piling on the stagflation narrative.  Nouriel Roubini of NYU was talking about the circumstances being right for stagflation more than a year ago already, but it was only around the middle of 2021 that a narrative like his began to gain traction.

Lynchpin is Inflation

The lynchpin of the story is inflation.  Everyone has a view on whether it is transitory or not, even as no one can really deny that we’ve already experienced more inflation for longer in the past 7 or 8 months than in any period in modern history.  I’m more worried about stagnant growth, yet far fewer people seem inclined to openly share that concern. Continue Reading…

Long term trends drive global sports and gaming industry

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(Sponsor Content)

The global sports industry is worth between US$400 to $500 billion a year and in the five years leading up to the pandemic in 2020 had been growing at an annual rate of 14%, according to NewZoo.

The industry is far more than professional teams in hockey, football, baseball and basketball. These North American favourites are dwarfed by soccer which is the world’s most popular games.

When it comes to pro teams, in addition to game tickets, fans buy branded merchandise and play in fantasy leagues. The teams earn more TV revenues as they advance in playoffs. But sports business is more than that. It also involves online gaming, gaming software developers and internet sports gambling. These last areas are large and rapidly growing. While the United States is the world’s largest sports market, China and other parts of Asia are emerging as leaders in eGaming and iGambling.

Harvest Portfolios Groups Ltd. has launched the Harvest Digital Sports & Entertainment Index ETF (TSX:HSPN) to take advantage of the attractive dynamics of this sector.

In the interview below, Harvest CEO Michael Kovacs discusses the ETF, the sector’s outlook and how the ETF aligns with the Harvest philosophy of creating value through ownership of the best global businesses.

Financial Independence Hub [The Hub henceforth]: Why did you launch the Harvest Digital Sports & Entertainment Index ETF?

Michael Kovacs [MK henceforth]: Sports entertainment is a global industry with great growth characteristics. It is regaining a foothold after more than a year of empty stadiums and lost revenues. At the same time, there have been bright spots, including new forms of sports entertainment such as online gaming and internet gambling where the pandemic has been a catalyst.

At Harvest, we seek to identify trends like this. Sports is one that continues to grow globally and also offers reopening opportunities as the pandemic issues decline.

The Hub: How is the ETF designed?

MK: It is passively managed ETF with 40 global stocks that follows the Solactive Sports & Entertainment Index. The companies are publicly traded, mostly in North America, with some in Europe. The ETF is diversified across five areas of the sporting world, with different weightings for each area. It is rebalanced quarterly.

The Hub: What is the strategy?

MK: As mentioned, the ETF is diversified to capture all segments of the industry. Professional sports organizations make up five of the 40 holdings, or 12.5%. There are a number that either trade under their own name or as part of companies that own them. The English soccer team Manchester United Plc is one example. It is one of the game’s strongest brands. It is listed in New York and has a market capitalization of about US$2.7 billion. Another example is Liberty Media-Liberty Formula One. which trades on Nasdaq. It owns the Formula 1 racing and has a market cap of US $18 billion. Madison Square Gardens Sports Corp.  is another. It owns the New York Rangers of the NHL and the NBA’s New York Knicks. It has a market cap of US $4.5 billion. These are examples of some of the great sporting franchises out there.

The Hub: Are event and ticket companies and sports equipment and apparel companies another component?

MK: Yes, they are. Together they are about 38% of the ETF. Ticketing makes up five holdings or 12.5%. There are a lot of companies that people would recognize. Live Nation Entertainment Inc. owns the familiar ticketing company, Ticketmaster. Live Nation is a global company that manages ticket sales and resales and also owns and operates entertainment venues and manages careers. In fact, they own and operate several of the premier venues that many Canadians have attended concerts and events.

Sports equipment and apparel is another 10 holdings or 25% of the ETF. Again, many of the companies are household names. Nike Inc. is a global leader in the manufacture and marketing of athletic shoes, branded clothes and equipment. It also sells baseball bats and balls, tennis rackets and golf clubs. Nike’s annual revenues are more than US $18 billion.Adidas which is the second largest global sports apparel company after Nike, owns Reebok and part of the German soccer club Bayern München. Cross ownership like this gives these companies incredible brand power.   Continue Reading…