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).

The case for caution with cryptocurrencies

Vanguard Group

Special to the Financial Independence Hub

Republished with permission of Vanguard Canada

The tremendous surge in the price of cryptocurrencies has attracted the attention of many investors, who may be considering the digital currency as a potential substitute for traditional asset classes in diversified portfolios. But Roger Aliaga-Díaz, chief economist for the Americas and head of portfolio construction at Vanguard, cautioned against speculating in cryptocurrencies, which are largely unregulated and accompanied by considerable risks.

“Cryptocurrency prices depend mostly on speculation about their adoption and use,” Mr. Aliaga-Díaz said. “And that speculation creates volatility that, ironically, undermines their potential use as either a currency or asset class in an investment strategy.”

What is a cryptocurrency?

A cryptocurrency is a digital or virtual means of exchange. There are more than 6,700 cryptocurrencies today; among the better known are Bitcoin, Dogecoin, Ethereum, XRP, Tether, and Litecoin.

Unlike traditional currencies, virtual currencies currently operate without central authorities or banks, and they are not backed by any government. Cryptocurrencies are stored in “digital wallets” on a holder’s computer or phone, or in the cloud. The wallet serves as a virtual bank account that enables holders to pay for goods and services or simply store the currency in hopes of an increase in value.

Cryptocurrencies defy neat categorization. They are not a traditional currency, commodity, or asset class, though they share characteristics of each.

There are several reasons why cryptocurrencies are not a traditional currency. Although some merchants have begun to allow cryptocurrency payments, they are generally not accepted as a medium of payment. Cryptocurrencies also are not used as a unit of account because prices, trade invoicing, and contracts are not quoted in digital currency units. Finally, cryptocurrencies’ ability to serve as a store of value—a safe instrument to preserve the value of people’s financial wealth—is severely limited by their notorious volatility.

“The fact that cryptocurrencies are not issued by a central bank is actually the very reason why they can’t achieve the quality of other well-accepted currencies,” Mr. Aliaga-Díaz explained. “The role of a central bank is precisely to preserve the value of the currency by keeping inflation under control. That’s why prices are more predictable under Federal Reserve management of the U.S. dollar money supply.”

Cryptocurrencies share some characteristics of commodities. For example, they can be bought and sold in cash markets or via derivatives. But Mr. Aliaga-Díaz said they are not commodities because they are not physical raw materials.

No substitute for stock and bonds

Some wonder whether cryptocurrencies can be used in strategic portfolios as substitutes for stocks and bonds. “But unlike traditional asset classes, cryptocurrencies lack intrinsic economic value and generate no cash flows, such as interest payments or dividends, which can explain their prices,” Mr. Aliaga-Díaz said.

Mr. Aliaga-Díaz pointed out that as with currencies and spot commodities, such as gold, there is no risk premium expected with cryptocurrencies as compensation for bearing the risk of their price movements. “Because cryptos represent uncompensated risk to the portfolio, they are not a good substitute for stocks and bonds in a long-term portfolio,” he said.

Some investors may be willing to bet on sustained crypto price increases based on the belief that crypto demand will always outpace its supply. And though there might be some valid reasons around projected demand and usage to make a compelling case for a persistent supply shortage that can sustain increasing prices, Mr. Aliaga-Díaz noted, the supply of cryptos has exploded over time, and there is no reason to believe that supply can’t keep up with demand.

“The biggest risk for all investors would be to assume that demand growth will continue just because their prices have recently gone up,” he said. “That’s speculation, not investment.”

Other risks to keep in mind

Despite all the recent attention devoted to cryptocurrencies, Mr. Aliaga-Diaz cautioned that there are a number of additional risks associated with digital currencies, including: Continue Reading…

Purpose cleared to launch world’s first Ether ETF

Are Bitcoin and Retirement compatible?

By Emily Roberts

For the Financial Independence Hub

Retirement is for winding down, while Bitcoin is ramping up. It might seem like the two things do not have much in common, but on closer inspection, there is definitely room for some crossover.

Recently, CNN reported that Bitcoin was going mainstream, with one of the reasons being popular innovators like Elon Musk making substantial investments. More people are taking part now, using Bitcoin to its fullest potential. When it comes to retirement, it can certainly enrich that stage of life a great deal.

Here some reasons as to why Bitcoin and retirement could well be a perfect match.

A Sense of Freedom

Retirement is for enjoying a sense of freedom, taking your life in whichever direction that suits you when you are free of obligations. Coincidentally, Bitcoin presides over a similar ethos.

In an article by Forbes titled ‘How Bitcoin Fits In A Retirement Portfolio’, they insightfully note that “If you could invest with hindsight, you’d go back in time, put 100% of your money in crypto and hold tight to the roller coaster […] over a long stretch it has, unlike lottery tickets, delivered a positive return, and most of the time goes its own way, oblivious to the stock market.” No doubt many people of retirement age look back on numerous points in their life and wonder: what if?

As Bitcoin is trending up, a decent investment today can turn into a small fortune after a few years. Remember, Bitcoin was under US$5000 last year and is currently priced at US$55000. If a retiree had bought 1 BTC last year, his investment had increased tenfold. Price swings like this have become quite common, just imagine what the value of Bitcoin could be after a decade. All one had to do is buy Bitcoin and hold it. Continue Reading…

The best Canadian Blockchain ETFs

By Mathieu Litalien

Special to the Financial Independence Hub

The interest in Blockchain has surged in recent months as Bitcoin goes on a record run. Naturally, the two are inherently linked but one common mistake investors make is to assume one equals the other.

Unfortunately, it is a mistake made by many and one that could not be further from the truth. Blockchain is not Bitcoin, and Bitcoin is not Blockchain.

Without going into great technical detail, Blockchain is the technology that underpins the Bitcoin cryptocurrency. Blockchain powers Bitcoin and while it was initially created for Bitcoin, they are not one and the same.

Decentralization

Blockchain is a decentralized database or a ledger that is distributed across many computers. Hence, why it is referred to as decentralized. Arguably, it is what makes Blockchain’s technology so revolutionary and why the use cases expand far beyond that of cryptocurrencies.

Many believe that Blockchain’s decentralization will revolutionize the way companies do business. For one, it is largely considered to be safe as there is no single point of attack for which to target. Secondly, Bitcoin has made the use case for making digital transactions much easier (and secure). Finally, given its nature blockchain leads to greater transparency, increased accuracy and ultimately, can lead to significant cost reductions.

The potential use cases for Blockchain are too many to list but include things such as executing contracts, maintain records and auditing. Today, organizations worldwide are investigating how they can utilize and adopt Blockchain technology.

How can investors benefit?

Exchange Traded Fund (ETF) investing, is one of the simplest ways of gaining exposure to a broad base of assets. Canadian ETFs cover markets, sectors, industries and in some cases, get down to specific niche industries. Blockchain is one such niche industry and in Canada, there are two solid options for investors.

Harvest’s Blockchain Technologies ETF (TSX:HBLK)

It is worth noting that there have been a few failed attempts at Blockchain ETFs in the past and today, Harvest’s Blockchain Technologies ETF is one of the only one’s left standing. The fund aims to track the performance of the Harvest Blockchain Technologies Index. HBLK (TSX:HBLK) invests in equity securities of issuers exposed, directly or indirectly, to the development and implementation of blockchain and distributed ledger technologies.

he fund is now two years old having first launched in December of 2018. A $10,000 investment in HBLK would be worth $13,699 as of end of November. Worth noting that the fund was underwater until it made a big comeback this past June.

TSX:HBLK Dividend Adjusted Return

HBLK ETF

This chart provided by StockRover. Check out Stockrover Here!

Holdings include a mix of well-established large caps and stand-alone emerging blockchain companies. As of end of November, emerging and large cap companies accounted for 55% and 44% of the fund. It carries a high 0.65% Management Expense Ratio (MER) fee and is eligible for most account types.

As of writing, the company is trading at $15.00 per share, a 9.4% premium to its net asset value (NAV) of $13.70 per share. It is a smaller ETF, with holdings of approximately $10.5 million and as such, is prone to greater volatility.

The ETF appears to be well diversified with no holding accounting for more than 6% of the fund. Combined, the Top 10 account for approximately 50% of assets. Among the notable names, there are upstarts and hypergrowth stocks such as DocuSign and Square which are complemented by large players such as Intel and Oracle.

Horizon’s Big Data and Hardware ETF (TSX:HBGD)

Although it is not explicitly stated in its name, Horizon’s Big Data and Hardware ETF (TSX:HBGD) is a blockchain focused fund. The fund seeks to replicate the performance of the Solactive Blockchain Technology & Hardware Index which tracks companies focusing on blockchain innovation and development, and companies providing hardware and hardware-related services used in blockchain applications.

Horizon’s ETF has a reasonable MER of 0.55% and at today’s price of $48.70 trades at a steep 20.15% premium to its NAV of $40.53. The fund was launched in June of 2018 and a $10,000 investment in HBGD at the time of inception would be worth $17,487 as of end of November. Much like HBLK, most of those gains have come over the past six months.

TSX:HBGD Dividend Adjusted Return

HBGD ETF

 

Somewhat surprisingly, the fund also pays a modest annual distribution of $0.3701 per share (0.76% yield). Distributions are rare for ETFs that track technology and growth stocks. Horizon’s ETF is made up of approximately 50% mid-to-large cap stocks, while 23% of holdings are microcap stocks. Once again, this is a small fund with only $7.1M in assets and is a higher-risk investment.

This is accentuated by the makeup of the company’s holdings.

 

The company’s Top 10 holdings are vastly different than that of HBLK. For starters, none of the Top 10 overlap. Although the Top 10 also account for approximately 50% of fund holdings, two companies – Hive Blockchain (TSX:HIVE) and Riot Blockchain (NASDAQ: RIOT) – account for ~30% of holdings. This means that the fund is more reliant on those two companies to drive performance.

Furthermore, half of the top 10 holdings trade on exchanges outside of North America and approximately 31% of total holdings operate in Asia. This makes it the more globally diversified fund of the two.

HBLK vs HBGD

Interestingly, both ETFs offer something different and can be held together without worry of much overlap. Harvest’s fund is likely to be less volatile given its exposure to some of the larger and more traditional tech companies. Continue Reading…

12 Stress Management tips for Business owners

 

What is your strategy for managing the stress of running a small business?

To help you find new strategies for managing the stress that comes with running your small business, we asked small business owners and entrepreneurs this question for their best advice. From taking time to enjoy nature to setting boundaries, there are several different ways you can manage your stress.

Here are twelve strategies to managing stress while running a small business:

  • Remember Your Why
  • Regular Trips Out In Nature
  • Think About All The Impact You’re Making
  • Spend Time With Your Pets
  • Take Longer Breaks When You Need Them
  • Schedule Self Care
  • Personal Retreat Sessions
  • Give Autonomy To Your Team
  • Mindset Routines
  • Blocking Time
  • Setting Boundaries
  • Use The Pomodoro Technique

Remember your Why

When times get hectic, like they often do, it’s important to have your why statement clearly defined and visible to see at all times. Usually, when I’m feeling stressed, it’s because I am too caught up in the weeds and working “in” the business. By regularly scheduling time to work “on” the business, I start by remembering our why statement which brings my focus back to the big picture. This helps me get pumped and feeling way less stressed. — Jenn Christie, Markitors.com

Regular trips out in Nature

Here at Cruise America, we believe in working hard and playing hard. That is why the majority of our executives take advantage of our RV fleet and take regular trips out in nature. We find that this time out of the office reminds us of why we started this company years ago and the amazing experiences we provide for our customers. That’s what makes every day in the office well worth it! — Randall Smalley, Cruise America

Think about all the Impact you’re making

It is so easy to get caught up in the stress of running a small business and losing sight of why you first launched your company in the first place! Whenever I feel overwhelmed, I just think about all the good my company has done for cities and their communities over the last 37 years and it makes it all worth it. — Blake Murphey, American Pipeline Solutions

Spend time with your Pets

The best part of working remotely is that I get to spend all day with my dog! Whenever I start to feel stressed or overwhelmed, I love taking him on a walk or playing fetch with him on the beach. It is a great way for me to step away from my desk, get a healthy dose of Vitamin D, and of course spend some time with my fur baby. –– Carol Bramson, Side by Side

Take longer Breaks when you need them

Many people stress at work. They do overtime and compensate by accumulating extra holidays and taking spare time off. But by doing so, there’s also the impending fear of stress from having to go back to work. I make the most of every day at work, with myself, and with colleagues. I take longer lunch breaks when I want to—an extra hour to go to the lake or stroll around the city. And if you find yourself dozing off, ask colleagues to get a coffee outside of the office—or if you’re still lucky enough to get some sunshine—go for a gelato run collectively! Nobody ever says no to ice cream. — Hung Nguyen, Smallpdf

Schedule Self Care

Schedule self-care and breaks into your daily schedule. When you map out each week in your digital calendar or physical planner, schedule self-care, family time, and exercise first. These are your non-negotiables. Then schedule everything else work-related around these non-negotiables. Your self-care is unique to you! It may vary from a scheduled meditation time to daily walks, to 30 minutes reading a fiction book. But if you don’t plan for it, work will chip away at life, leaving you little in the way of work-life balance. — Reese Spykerman, Design by Reese

Personal Retreat sessions

Personal retreat sessions are a wonderful strategy to help manage the stress of running a small business. Retreat sessions create plenty of downtime and space for reflection, which is exactly what small business owners need to move naturally towards solutions that can solve stress-inducing issues. Continue Reading…