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).

Why choosing the right Finance App is so important

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By Emily Roberts

For the Financial Independence Hub

So many areas of our lives were impacted by the Coronavirus pandemic that it’s easier to pick one that wasn’t massively altered by locking down, staying at home and avoiding touching strange surfaces at all costs. It should come as no surprise that there has been a massive increase in the use of personal finance apps in 2020, with 59% of people in the UK using a mobile banking app.

But picking the right finance app for you will depend on what you need it for. Are you in desperate need of some guidance for managing debt repayments? Or are you looking for the perfect platform to manage your investment portfolio? Or are you simply looking for something that will help you keep track of your day to day spending?

Staying on top of your invoices

Any freelancer will tell you that getting the work is only part of the battle; the biggest challenge is getting paid. If you run your own business or you’re set up as your own limited company, you need a finance app that helps you stay on top of your invoices, manage your budgeting and accounting, and help calculate your tax returns. Software like FreeAgent, Coconut, Paymo or Fyle all offer different kinds of banking and finance support for freelancers and self-employed people so you can keep track of work going out and money coming in.

Easy access to your investment portfolio

If you have an investment portfolio set up, you’re going to want to be able to access it at all times to see how well your money is working for you, and to check if any urgent changes need to be made. Some investment apps are set up to help you get started, others are aimed more at the veteran investor who knows exactly what they’re looking for. Continue Reading…

Cautiously Pessimistic

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By John De Goey, CFP, CIM

Special to the Financial Independence Hub

If I had a nickel for every time I heard someone say they were ‘cautiously optimistic’ about one thing or another, I’d be wealthy.  This got me to thinking – why do I never hear anyone say they’re ‘cautiously pessimistic’ when invited to prognosticate about the not so distant future?

Seeing as the future is unknowable by definition… and seeing as there’s a strong consensus that caution is an appropriate stance to take when looking forward, why is there near uniformity that this caution should be tempered by optimism?  Where are the cautious pessimists?  For that matter, where are the reckless people (optimists and pessimists alike)?

The financial services industry is prone to Bullshift – where the glass is always half full and the industry will try to convince you of much no matter what the facts are and no matter how dire the circumstances may be.  Think back.  When was the last time you heard an analyst predict a year over year market decline?

Optimistic Realist?

My point here is that I don’t want to be a downer.  Rather, I want to be a realist.  Heck, some people have even called me an optimistic realist.  At any rate, it seems to me that pessimism isn’t particularly well thought of in my line of work.  Continue Reading…

The Evolution of ESG

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Franklin Templeton/iStock

By Preyesh Patel (ESG Analyst, Franklin Templeton Investment Management Limited)

(Sponsor Content)

Environmental, social and governance (ESG) investing has been around in different forms for over three decades now but has really become a key focus for the industry over the past five years. Previously, this kind of investing was considered somewhat niche and exclusionary in approach, focusing on “values” regarding tobacco, weapons and companies working with repressive regimes. Nowadays, acceptance of fiduciary duty, climate change and human rights is a common requirement among investors of all stripes. The flow of capital into ESG also makes it the fastest-growing type of investing across the global marketplace right now.

Pension Planning

The change in attitudes towards ESG was reflected in November when CEOs of Canada’s eight leading pension plan investment managers issued a joint statement on the subject. AIMCo, BCI, Caisse de dépôt et placement du Québec, CPP Investments, HOOPP, OMERS, Ontario Teachers’ Pension Plan and PSP Investments — representing approximately $1.6 trillion in assets under management between them — called for economic growth that was both sustainable and inclusive.

This kind of growth can only be achieved through stronger ESG disclosure standards for companies, they said, allowing investors to better assess their risk exposures. Stronger standards will mean standardization of how data is collected on issues such as diversity & inclusion, human capital and climate change. To achieve this, the pension plan leaders called for the adoption of the Sustainability Accounting Standards Board (SASB) standards, as well as the Task Force on Climate-related Financial Disclosures (TCFD) framework.

Responding to the statement, Tiff Macklem, Governor of the Bank of Canada, expressed how making ESG a priority was the right approach on many different levels.

“A strong commitment to environmental sustainability, diversity and inclusion and good governance principles will not only make our economy and financial system more resilient, it’s also the right thing to do. Leadership from Canada’s financial sector is essential as we focus on building an enduring and more equal economic recovery from the pandemic.”

Finding industry-wide consistency on how to measure ESG performance remains a challenge. The Corporate Reporting Initiative is another example of the various attempts to standardize ESG reporting, but there is still work to be done to ensure that these three letters represent much more than a branding tool.

For us at Franklin Templeton, it means seeking out material ESG insights and incorporating them into our decision-making process in a manner that best fits our investment philosophy.

For example, in its most recent update, the Templeton Global Macro (TGM) team outlined how it applied ESG criteria to its investment processes, focusing on: integration; forward-looking data points; projected “tails,” which signal major ESG shifts; a long time horizon; as well as engagement with policy makers.

Pandemic Impact

For investment teams like TGM, the past 12 months have only increased the need for sound ESG policies. Even before COVID-19, analysis by TGM revealed a decline in the number of countries that showed improving ESG momentum: the pandemic has only worsened this trend. Continue Reading…

The price we pay for investment certainty

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Lowrie Financial/Unsplash: Mark Duffel

By Steve Lowrie, CFA

Special to the Financial Independence Hub

Whether it’s pandemic infections or U.S. presidential elections, investors have been enduring at least the usual, if not higher levels of market uncertainty lately.  As the daily news plays out, I’ve been fielding at least the usual level of questions about how to manage the related market risks.

Two sides to risks and returns

In recent posts, such as going defensive in uncertain times and the vital importance of rebalancing, I’ve reminded readers why investors seeking long-term returns must hunker down during uncertain times and let near-term market volatility have its way as part of their well-planned portfolio.  Because:

Higher investment risk (including market uncertainty) = higher expected returns

I believe most investors intuitively understand this.  And yet, the question keeps coming.  It might help if we think about the same thing, in reverse:

Lower investment risk (including market uncertainty) = lower expected returns

The price of uncertainty

In other words, viewing the same point from a different angle shows us we pay a price either way for the two reasons we invest to begin with:

  1. Accumulating Wealth: If you’re still building lifetime wealth, you may be best served by taking on more market risks and pursuing higher expected returns.  The price you pay for investing more aggressively is being more uncertain whether you’ll achieve your ambitious goals.  As long as you stay put and have time on your side, odds are you will ultimately prevail.  But there is no free lunch in investing, so you never know for sure.
  2. Preserving Wealth: If you’re at or near your lifetime financial goals, you may be best off avoiding market risks and the wider range of uncertain outcomes they create.  Here, you pay a different price.  In exchange for having more certainty about your investment outcomes, you must expect lower returns, and slower portfolio growth.

Lifelong planning

By the way, whether you’re accumulating or preserving wealth isn’t necessarily based just on your age.  It also depends on your goals.  For example, even if you’re in your 20s or 30s, with decades before you retire, you still might focus on preserving some of your wealth to purchase a house within a few years.  Conversely, even if you’re retired, you still might have wealth accumulation goals if you wish to leave a substantial legacy or charitable bequest. Continue Reading…

Four effective ways to make your business more efficient and profitable

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By Sia Hasan

Special to the Financial Independence Hub

A phrase you’ll hear over and over again when you run a business is “time is money.” And, for the most part, it’s true. Especially when you have workers paid by the hour, it’s tough not to see their time as a reflection of your business’s value. Most modern offices have lots of wasted time that could easily be trimmed to save everyone a headache, and save you money. These tips will give you some good ways to start saving time.

1.) Software and Automation

Managing a team of people can be tough on your own. Requests for breaks, time off, and sick days add up over time, and you can wind up with a lot of money thrown out the window. Relying on pen and paper systems will frequently become a headache and errors are inevitable. Investing in good management software will save time in more ways than one.

If you’re supervising a team and want a good way to manage their time clocks, a time card calculator is a great tool to have. You can track their productivity as well as their reported hours, giving you a better idea of how their time has actually been spent on a certain task. Automation is also a necessity in modern business, as certain tasks just can’t be done as well by a human as by a machine. Give the monotonous tasks to your software and watch as you gain time back.

 2.) Minimize Distractions

A lot of wasted time during the workday comes down to unnecessary distractions. While it’s good for employees to bond over a conversation in the break room and feel comfortable stopping by each other’s desks for a chat, it’s best to keep these interactions at a reasonable minimum. Encourage employees to take their lunch breaks together to cut down on the need for conversations throughout the work day.

But time can be wasted by work-related interactions, as well. Most meetings can be summarized easily by a mass email, and chat software can easily interrupt an employee’s train of thought, so consider replacing longer meetings with a shorter daily one. Allow employees to turn off their notifications, encouraging them to check their email during specific times, and allow them to have plenty of time for focused and productive work.

3.) Go easy on multitasking

Some individuals truly are great at multitasking, but the truth is, many of us are challenging ourselves to a task we’re not up to. Productivity doesn’t come down to the number of things you’ve worked on in a day, but the volume of work you’ve completed. Allow yourself to prioritize a certain task and work on it until it’s complete. Continue Reading…