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 price we pay for investment certainty

Posted By |
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

Posted By |

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…

Good timing for a Travel & Leisure Index ETF?

Posted By |

Talk about nice timing!

Just as the first Covid vaccines are coming into widespread use, Harvest Portfolios Group Inc. has filed a preliminary prospectus for what it says will be Canada’s first Travel & Leisure Index ETF.

Travel and leisure stocks have of course been among the most hard-hit during the Covid-19 pandemic and are among the sectors that have started to move up as optimism over Covid vaccines and economic recovery builds.

When in January it begins trading on the TSX as TRVL, the Harvest Travel & Leisure Index ETF will provide investors with access to some of the most prominent Travel & Leisure companies in the world, says Michael Kovacs, President & CEO, Harvest Portfolios Group Inc.: “The ETF provides a low cost portfolio that will benefit from a rebound in international travel as the global economy recovers, as well as a demographic trend that was well established prior to the recent Industry shut downs.”

The ETF is based on the Solactive Travel & Leisure Index, which invests in large-cap issuers that own or operate travel-related businesses and are listed on regulated North American exchanges.

Clean Energy ETF also in the works

Harvest has also filed a preliminary prospectus for what it says will be “one of” Canada’s first clean energy ETFs: Harvest Clean Energy ETF (ticker HCLN). Kovacs says this is aagrowing space, an area that is “getting the proper political and societal attention it needs as more Canadians look to environmental factors when investing. There are large sources of Government and Private capital flowing into this space at unprecedented levels which we see continuing to grow into the future. With the changes going on in Energy generation, the future is definitely Clean.”

HCLN will invest in large-cap issuers engaged in clean energy related businesses listed on regulated stock exchanges in North America, Developed Asia or certain European countries. The preliminary prospectus has been filed with securities commissions in all Canadian provinces and territories, copies of which are available on SEDAR (www.sedar.com).

The ETFs’ Management Expense Ratios (MERs) have not yet been divulged but are expected to be in the range of .04, a company spokesperson said. That’s in line with its other passively managed index ETFs, and less than its actively managed ones.

Founded in 2009, Harvest is a Canadian Investment Fund Manager managing more than $1 billion in assets for Canadian investors.

6 tips for building Wealth in your 30s

Posted By |

 

It pays to invest early and often.

Starting to invest earlier in life ensures that your money will compound and grow over time.

By the time you reach your thirties, investing tends to become a serious consideration. People in their thirties may have families, their first mortgage, and a blossoming career that enables investing to take place.

So what’s the best investment strategy for someone in their 30s looking to build wealth?

We asked financial planners, thirty-somethings, and other professionals for their best investment strategies and tips.

Here’s what they had to offer about building wealth in your thirties:

Invest in your own companies

I’m a 36-year-old business owner and dad of 3. As I drive my minivan around town, I often think about the best way to build wealth in my mid-thirties. I’ve looked to max out retirement plan contributions for the last decade and set defined contributions to investing in mutual funds and stocks. But, I don’t believe any of that stuff is the best way to build wealth. The place I’ve landed is to invest in yourself, your ideas, and your own companies for the biggest investment. That way, you create real assets where you have a direct impact on the outcome. If you lose the investment, you just lose money. But you still win because you’ve invested in yourself, and the long-term payoff on “you” is one of the most rewarding returns in life. — Brett Farmiloe, Markitors

Start early on Real Estate

Real Estate continues to be an excellent way to build wealth. Especially in a state like Arizona, where we currently have a housing shortage and a large influx of people wanting to live here, owning real estate should be a key part of building wealth long term. — Rod Cullum, Cullum Homes

Invest in things you understand

Keep it simple by spending less than you earn; with the money that you retain, you can start building a safety fund of 3-6 months of spending. By doing so, you won’t need to sell investments or go into credit card debt if an emergency comes up. In regards to investments, ensure you are choosing investments with low fees and that you have a clear grasp on what you are investing in. Fully understanding what your investment entails will prevent you from getting emotionally attached to your investments. — Keith Piscitello, S2 Wealth Planning

Pay off your Debt

The best way to build wealth for a 35-year old is to start by paying off all of your debt as soon as you can. Pay off your credit cards, student loans, car loans, and maybe your home loan. Continue Reading…

Organize your Small Business finances with these 6 steps

Posted By |

By Gary Bordeaux

Special to the Financial Independence Hub

Owning a business comes with a great deal of freedom, but also with substantial financial responsibility. No matter what business you are in, making a profit is job one. The key to successful money management is organization. These six steps can help.

1.) Schedule

Set aside a block of time each day for minor operations such as scanning paper documents or entering figures into accounting software. One day each week, take an hour to monitor expenses, calculate profits and review the accounting.

2.) Separate

When you first start out, it may seem silly to keep personal funds separate from business funds. After all, you may be dealing with small amounts and infrequent activity. However, if you plan to grow the business, there will come a time when you need to know what belongs to the business and what belongs to you. It is cleaner and simpler to separate finances from the start, rather than trying to untangle your commingled funds later. Your business should have its own bank account and credit card as soon as it has a name, structure and business license.

3.) Prepare

If you have employees, you need to set aside money for several types of payroll deductions including federal income tax, Medicare and Social Security. Your state or province may require income tax and other employee taxes as well. A paystub generator can  help you and your employees keep current on state and federal requirements. Accuracy is paramount.

Avoid a surprise tax bill by setting aside a percentage of the company’s earnings from the start. Consult with a tax professional to get an annual or quarterly estimate, then reserve an appropriate amount of money each month.

This works with more than just taxes. You can prepare for any quarterly or annual expense if you know it is coming. Suppose you face an annual regulatory fee of $10,000. Simply set aside $833 each month, then when the bill comes due you can pay with ease. Even better, automate the process by having your financial institution sweep the $833 from the debit account to savings on the same day each month.

4.) Track

You need a good filing system, either paper or digital. A functional system allows you to retrieve information easily and quickly. It should be simple and intuitive, yet flexible enough to grow with your business. General categories may include: Continue Reading…