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).

Kornel Szrejber’s Podcast interview with me and PWL’s Ben Felix about the 2021 MoneySense ETF All-Stars

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An interesting analysis of the annual MoneySense ETF All-stars feature is now available on a one-hour podcast interview hosted by BuildWealthCanada.ca’s Kornel Szrejber, with myself and PWL Capital’s Ben Felix. Click on this highlighted text for the full session: The Best ETFs in Canada for 2021.

Initially, the interview is audio-only, available through iTunes and the usual podcast services. Later there will be a version that also shows video.

The full 2021 edition of the ETF all-stars can be found here at the MoneySense site, and the Hub’s summary here. The feature appeared early in April.

There are various links to the ETFs, including the ticker symbols (most of them trading on the TSX).

Kornel Szrejber

After kind introductions of both me and Ben Felix, both of us then added a few more details about our careers before Kornel started the formal interview. He did so by asking about the general philosophy behind the All-Stars and the mechanics of how we got eight ETF experts to agree on designating roughly 50 ETFs (from a universe of near a thousand) as ETF All-Stars.

The philosophy underlying the All-stars

As I explain in the MoneySense overview, the feature – now in its 8th year – aims to help individual investors (with or without the assistance of advisors) whittle down the overwhelming choice of ETFs now on the market. The goal has never been to whipsaw investors with change for the sake of change, but rather we strive to pick “buy and hold” broadly diversified low-cost ETFs that can be held over the years and ideally the decades.

Except for the individual “Desert Island Picks” (see below), generally the idea has been to avoid flavor-of-the-month theme funds or regional equity ETFs too narrowly focused on single countries (apart from Canada and the US). As a result, we try to keep the list to a manageable number that don’t necessarily change with every passing year. Of course, once in a while there is a “game-changer” that requires a revamp: the Asset Allocation ETFs from Vanguard Canada and subsequently its major competitors being the best example.

We also assume our readers are probably not day traders but looking for low-cost manageable portfolios that might be tweaked annually but likely won’t welcome a total revamp of their investments every year. We assume some are DIY investors buying them from discount brokerages, some have full-service advisors (including shops like PWL Capital), and some are hybrid investors who largely invest on their own but like to validate their approach through perhaps a fee-only advisor.

How the panel “votes” 

As for the mechanics of choosing the ETFs, as I tell Kornel, the eight expert panelists simply debate by email or Slack and “vote” on a spreadsheet. We have four teams of two each and once each team agrees, we try and find a consensus among the four teams. So 5 out of 8 votes would carry the day: I myself don’t vote unless there is a 4-4 tie and the tie needs to be broken.

After the introductory chat, there is a brief interlude where Kornel describes his own personal transition to financial independence and semi-retirement, and addresses his own personal ETF picks, and why he holds his emergency cash with EQ Bank (as does our family). Continue Reading…

63% neglected Retirement saving during Covid; study sees urgent need for Workplace pensions

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Over the course of the Covid pandemic the past year, almost two thirds of Canadians (63%) did not put aside anything for retirement, up from 58% last year, according to a study being released today.

That’s according to the third annual Canadian Retirement Survey from Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data.

Not surprisingly, the survey also found a widespread belief that better access to workplace pensions is needed to avoid a retirement crisis.

The findings, based on an April 2021 survey of 2,500 Canadians, affirm there is a high level of anxiety about ability to save for retirement. Half (48%) said they are “very concerned” about not having enough money in retirement. That was more than the concern for one’s own physical health (44%), mental health (40%), debt load (31%) and job security (26%).  Only the daily cost of living was a greater concern than Retirement.

Steven McCormick, hoopp.com

“After more than a year of COVID-19, Canadians remain steadfast in their personal and societal concerns around retirement security,” said Steven McCormick, SVP, Plan Operations, HOOPP in a press release [pictured on right]. “As day-to-day financial pressures mount for some and ease for others, Canadians across the board are acutely aware of the importance, and challenge, of saving for retirement.”

While 46% of Canadians said they saved more money during COVID than they otherwise would have, more than half (52%) set aside nothing for retirement during the past year. Of those who said they saved less than usual, 72% saved nothing for retirement.

McCormick added: “HOOPP is proud to do its part by providing retirement security to healthcare workers, many of whom fall into groups that often don’t have access to pensions, such as women, part-time workers and younger Canadians. For our membership, the impacts of this pandemic will continue to be felt even after we emerge from the immediate crisis; but they can take some comfort in knowing their pension is secure.”

Covid disproportionately hurt finances of younger low-income groups

The COVID-19 pandemic harmed the finances of half of Canadians (52%) and did so disproportionately amongst younger and lower-income groups. Those aged 44 and younger are twice as likely to have had their finances greatly harmed (24%) than those 60+ (11%). Likewise, those earning less than $50,000 are twice as likely to have had their finances greatly harmed (25%) than those earning $100,000+ (12%). Continue Reading…

What are Cryptocurrency Loans and how do you get one?

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By Hristina Nikolovska

Special to the Financial Independence Hub

If you urgently need some extra money, a personal loan is the most viable option. There are various kinds of loans like mortgages, credit cards, or personal loans. Usually, you’d head over to banks or credit unions to get the funds. However, there’s another way to get a personal loan you probably haven’t considered. This article will explain what you need to know about crypto loans.

What are Crypto Loans? 

Cryptocurrency has evolved and entered multiple markets. That’s why you also have the option of getting a cryptocurrency loan, just like you would get one from a bank. However, there are some differences. 

Cryptocurrency is decentralized, meaning you don’t need an intermediary to deal with your financial transactions. The same applies to a crypto loan. There still is a platform you should register on, but you won’t be borrowing funds from it. Instead, you’ll borrow funds from other cryptocurrency owners. You also won’t need any credit checks. 

How do you borrow Crypto?

One thing you should know is that you’re required to over-collateralize a crypto loan to be eligible for it. This proves you have enough financial power to get the loan, and it protects both sides. 

Usually, you’ll collateralize your loan with some other cryptocurrency. Once you pay off your loan, you’ll get your cryptocurrency back. If you’re worried about the high volatility of cryptocurrencies, some platforms allow you to collateralize your loans with cars, real estate, or other off-chain assets. 

The cryptocurrency loan process is quick, and you’ll receive your money almost immediately. The first thing you need to do is verify your identity. Identity verification or know your customer (KYC) is there to protect the platforms and lenders from frauds, money laundering, terrorist financing, and similar acts. 

This identity verification is fast. Typically, you need to take a photo of one of your official documents and send it in for a scan together with your data. After this step, you’re required to deposit collateral. Depositing is as fast as the blockchain. 

Since this form of lending doesn’t require any assessment of your credit score, it’s a great choice if you don’t have any financial history, bank account, or you’re self-employed. It also allows you to switch between crypto assets and make your funds liquid without triggering a taxable event. 

What are the safest Crypto Lending Platforms? 

There are many crypto lending platforms out there that differ in fees, interest rates, withdrawal terms, and other aspects. 

The most famous platform is Binance. Loan duration lasts from 7 to 90 days. Daily interest rates are 0.0244%, while annual interest rates are 8.90%. Binance offers two types of lending, fixed deposits and flexible deposits, where the fixed one locks your funds, and the flexible one lets you withdraw funds whenever you want.  Continue Reading…

Accepting Market Returns

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A few readers have expressed concern about their recent investment performance. In most cases, these investors are holding a sensible, low cost, globally diversified portfolio of index funds ranging from conservative (40% stocks, 60% bonds) to balanced (60% stocks, 40% bonds). One reader said:

“Psychologically, it’s tough to put money in when returns have been so low.”

When you invest in a passive portfolio that tracks broad market indexes you can expect to earn market returns minus a small fee. This is far and away the best and most reliable way to invest for the long term.

But sometimes market returns can be disappointing in the short term. Investors might be experiencing that right now. In fact, if you’ve recently moved away from actively managed funds or stock picking to embrace a portfolio of passive index funds, you might be wondering if that was a wise decision.

Market returns have been dismal this year compared to returns from the previous two years. But context matters. FP Canada’s projection and assumption guidelines suggest future expected returns of approximately 4.78% per year for a global balanced portfolio.

Meanwhile, an actual global balanced portfolio represented by Vanguard’s VBAL and iShares’ XBAL returned about 15% in 2019 and 10.5% in 2020. Even a global conservative (40/60) portfolio returned about 12% in 2019 and 10% in 2020. This is highly unusual.

Investment roads not taken, but no regrets

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By Michael J. Wiener

Special to the Financial Independence Hub

I’ve let some very lucrative opportunities slip through my fingers over the years.  I won’t call them regrets as I’ll explain later, but I could have ended up with a lot more money than I have now.  Here I describe the top three potential paydays that got away from me.

Bitcoin

I spent my career as a cryptographer, so it’s not too surprising that I took an interest in the workings of bitcoin when it first appeared.  I learned how it worked and appreciated the clever way it was designed to mimic mining for gold without the need for a central authority.  For a while, that’s as far as my interest went.

Later, some enthusiasts formed a group to work on mining bitcoins, and they wanted me to join.  I was tempted, but decided that I had other things to do with my time.  Given the way I tend to get obsessed with technical projects, if I had joined in those early days, I could have mined thousands of bitcoins.

When bitcoin prices were manipulated upward to spark the mania we’ve witnessed, I would have sold my bitcoins off a little at a time to avoid having too much of my net worth tied up in a volatile currency of questionable real value.  It’s possible that I could have ended up with around CDN$50 million after taxes.  But I’ll never know for certain what might have been because I didn’t join the group.

Apple Stock

I bought 3000 shares of Apple stock in October 2000.  They were only $20.54 each.  A little less than three years later, I sold them for a loss of about US$3000.  Since then, Apple shares have split 2 for 1, 7 for 1, and recently 4 for 1.  If I had held onto this stock, I’d have 168,000 shares now.  As I write this, these shares trade at $126.85, for a total of US21.3 million. Continue Reading…