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).

Should I change my investments during an election?

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LowrieFinancial.com
By Steve Lowrie, CFA
Special to the Financial Independence Hub
Back during the Clinton/Trump U.S. presidential election four years ago, I ended up fielding a lot of questions from investors of all political bents. Many investors wondered whether they should adjust their portfolio in response to the change of the guards. At the time, I had this to say: 
  • Post pubBack during the Clinton/Trump U.S. presidential election four years ago, I ended up fielding a lot of questions from investors of all political bents. Many investors wondered whether they should adjust their portfolio in response to the change of the guards. At the time, I had this to say: 

“If you want to skip reading my more detailed explanation, the answer is: No. Even when political news is strongly felt, there will likely never be a good time to shift your investments — neither in reaction nor as a defence. First, no matter how certain one or another outcome may seem, how the market is going to respond to the news remains essentially unknown. Second, by the time you’ve heard the news, it’s already priced into the market anyway.”

Fast-forward to 2020. To say the least, a few things have changed!  But my advice remains the same: From one election to the next, other factors have exhibited a far greater impact on investment returns than which person or party holds the U.S. presidency. Whether leadership is more or less conservative, largely efficient markets have usually figured out a way to shift and grow, either way.

As we can see in this interactive chart from Dimensional Fund Advisors, these results are well-documented. They also make a lot of sense, given something called “stage-one and stage-two thinking.”

Thinking in Stages

Stage-one and stage-two thinking are terms popularized by economist Thomas Sowell in his book, “Applied Economics: Thinking Beyond Stage One.” Basically, before acting on an event’s initial (stage one) anticipated results, it’s best to engage in stage-two thinking, by first asking a very simple question:

“And then what will happen?”

By asking this question again and again, you can more objectively consider what Sowell refers to as the “long-run repercussions to decisions and policies.”

Who will next occupy the various seats of power around the globe, and what might the results be? Stage-two thinking helps us see past the usual proliferation of stage-one predictions that call for anything from financial ruin to unprecedented prosperity.

As financial author Larry Swedroe describes in a US News & World Report interview, “Stage one thinking occurs when something bad happens, you catastrophize and assume things will continue to get worse … Stage two thinking can help you move beyond catastrophizing … [so you can] consider why everything may not be as bad as it seems. Think about previous similar circumstances to disprove your catastrophic fears.”

Timeles lessons in terminal uncertainty

In the 2020 U.S. presidential race, we’re seeing prime examples of both dire and exuberant financial forecasts, presumably premised on who wins the election. The truth is, nobody has a clue what all the combined market-moving forces have in store for us in the near term, because nobody can know the answer to Sowell’s convoluted market-moving question: And then what will happen? Continue Reading…

11 tips successful investors use to find TSX Blue-chip stocks

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TSINetwork.ca

TSX blue-chip stocks are well-established companies with attractive business prospects on the Toronto Stock Exchange, like Bank of Montreal (TSE: BMO), RioCan Real Estate Investment Trust (TSX: REI.UN), and Enbridge (TSE: ENB).

Well-established firms have the asset size and the financial clout — including solid balance sheets and strong earnings and cash flow — to weather market downturns or changing industry conditions.

The best TSX blue-chip stocks have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in ever-changing marketplaces. Blue-chip investments should always be prominent, if not dominant firms, in their industry.

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Because of this, blue-chip companies can give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

We feel most investors should hold the bulk of their investment portfolios in TSX blue-chip stock investments. All these stocks should offer good “value”: that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Ideally, they should also have above average-growth prospects, compared to alternative investments.

11 tips for picking the best TSX blue chip stocks:

1.) Review the company’s finances going back 5 to 10 years. The types of blue-chip investments we recommend have a history of profits going back for at least that long. Companies that make money regularly are safer than chronic or even occasional money losers. Continue Reading…

Canadian Financial Summit 2020 is now online

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The four-day Canadian Financial Summit 2020 edition kicks off at 8 pm EST (5 pm PST) tonight (Oct. 14): an all-virtual event featuring 30 personal finance speakers and financial bloggers. You can get tickets and catch up here. Tickets are free via the website.

After kicking off with a webcast tonight, the online event runs till this Saturday, October 17.

Kornel Szrejber

The summit’s host is Kornel Szrejber, who runs the finance and investing podcast The Build Wealth Canada Show.  Szrejber [pictured right] says on the site that he became one of Canada’s youngest retirees at age 32 (“before I got bored and took on the Podcast and Summit as passion projects,”) following a career in the financial planning and investing industry.

The event will also feature the experiences of two others who are among Canada’s youngest retirees, Kristy Shen and Bryce Leung, who will pass on their wisdom about how they reached retirement at so tender an age.

Scheduled speakers include Rob Carrick of the Globe & Mail, former Toronto Star financial columnist and consumer advocate Ellen Roseman, and Financial Post columnist Peter Hodson.

There are also several names that should be familiar to regular Hub readers: BoomerandEcho’s Robb Engen, MyOwnAdvisor’s Mark Seed and certified financial planner Ed Rempel. (The Hub often republishes their blogs.)

You can see some of the other speakers below, including Tom Drake, Kyle Prevost and other well known bloggers and personal finance gurus.

 

Continue Reading…

6 ways to save money by upgrading your Place of Business

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Photo: Pexels-Pixabay

By Sia Hasan

Special to the Financial Independence Hub

No one likes the sting of putting out money for building repairs, but if your initial investment could save you hundreds, maybe thousands of dollars, it’s well-worth the momentary pain. These same upgrades will also help you avoid costly damage that would end up making a bad situation even worse. If you’re the owner of a business or company, here are six commercial upgrades that could keep you in the green.

Get into hot water

Most people try to stay out of hot water, but the fact is that everyone needs it and it can get expensive if your heater isn’t efficient. When your hot water tank is old, rusty or leaking, don’t try to squeak by for another year. For example, if you live in California, contacting a water heater company in Granada Hills and changing out that old tank, or selecting a newer “tankless” system, will start saving you money right away. Once you’ve got a new tank in, always remember to keep the water temperature just hot enough and never on the highest setting, and you’ll see the difference in your bill.

Change out your bulbs

Changing out your company’s lighting is the easiest tip you probably never thought of. In a place of business, lights are in use all day, every day, so why not save every penny you can? Switching your regular incandescent bulbs to energy-saving LED bulbs will use 75% less energy. They also last 25 times longer than regular bulbs! In a building where the lights are on all day and possibly all night, switching to LEDs will save you significant money.

Weatherize the Building

Just like you save energy at home, you should do the same at your workplace and weatherization is just the ticket. For example, you know that drafty area everyone complains about? That’s hard-earned money going right out the window. Before you lose any more, now’s the time to seal up or replace those loose fitting windows and doors, making the building attractive as well as efficient. If your office gets extremely cold during chilly days, consider brand new insulation or adding to what you already have.

Take advantage of the Sun

More and more businesses are deciding to harness the energy of the sun to help with costs. Using solar power can greatly reduce your electric bill, but is most compatible with larger establishments that have the space to install an adequate size system. Continue Reading…

Strategies for Self-Managed Portfolios

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By Del Chatterson

Special to the Financial Independence Hub

First the disclaimer: I am not an expert. Certainly not a certified financial planner or financial advisor. But I have managed my own portfolio for more than thirty years and I’m willing to share the strategies that worked for me and might work for you.

Like the Random Ramblings of Uncle Ralph in my book of advice for entrepreneurs, Don’t Do It the Hard Way [shown on the left], I strongly believe in the value of learning by sharing stories and ideas with my fellow adventurers in life, business and investing. Based on my experience in successfully growing an investment portfolio over several decades, these are my suggestions for your consideration.

Start with educating yourself. Learn from the experts. Read Warren Buffett’s bible, the Intelligent Investor by Benjamin Graham, to understand the basic principles of investment analysis and value investing. (The technical details may be beyond your understanding and are probably more than you need or want to know.) Look at current recommendations and valuation assessments of competent financial analysts to understand their processes and the factors that most affect future prospects for any business. You’ll discover that while there may be consensus, there is never unanimity. Learn to evaluate businesses against the criteria used to identify the top performers in Built to Last and Good to Great by James Collins and Jerry Porras. You will gain confidence and learn to trust your own analysis and instincts to select investments in businesses that you also understand, like and respect. Would you buy from this company? Would you like to work for this company?

Start to build your self-managed portfolio with an online direct-investing resource. You may choose to gradually transition from your current advisor or financial planner as you gain confidence, before deciding whether or not the results justify their fees for portfolio management services. You may decide not to interfere with their good management and avoid taking on the responsibility of managing your own portfolio.

Although I’ve been satisfied with my own portfolio management, I’ve still left some of the family portfolio with an investment advisor. I don’t want all the financial responsibility and it continues to give me a convenient comparative benchmark and resource for evaluating my own portfolio management. But if you’re confident in your knowledge and analysis and in your ability to remain calm, cautious and patient through the inevitable crises and extended downturns, then you’re ready to take charge and do it yourself for some of your investment portfolio.

At this point, the decision depends on your confidence, interest and ability to achieve better performance at lower cost. Although, the rationale for assuming management of a self-directed portfolio can range from loving the challenge and the learning experience to the thrill of taking risks and enjoying the entertainment spectacle of volatile and irrational markets.

If you do decide to start building and managing your own portfolio, it is essential to give yourself some key ground rules related to risk and return, just as you would give your risk tolerance profile and return expectations to your financial planner. Control your impulses with restraining limits on the amount of individual investments and the criteria for risk-reducing diversification. My two overriding guidelines: never more than ten percent of the portfolio in any one investment and never less than fifteen distinctly different investments. Continue Reading…