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 rise of the Side Hustle: 4 gig ideas for supplementing your income

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By Katie Dunsworth-Reiach

Special to the Financial Independence Hub

 For many of us, the cost of calling cities like Toronto and Vancouver home has made a side hustle a true necessity. This is something I embraced after I purchased a home in Vancouver, and quickly felt the weight of a new mortgage and shrinking savings account take effect.  Creating an extra income source seemed like a great idea, but the concept of working a second job or picking up a weekend shift also seemed to defeat the purpose of city living.  How can you enjoy the best a city has to offer when you have to work around the clock just to afford it?

Enter the sharing economy.  From Uber to Airbnb there’s a growing list of stand-out ways to leverage existing assets and skills to make a second income.  I began dabbling with the idea when I first started hearing about the sharing economy.  I liked the simplicity of signing up and being able to run my side hustle off my phone. The main appeal was that I could set my own hours, rates, and accept or decline the offers that appealed to me. It also exposed me to new people and interests and sometimes barely felt like work.  Making extra income actually became a passion.

Five years later, I have multiple side hustles on the go and have been able to increase my savings by more than $20,000 a year: something that has allowed me to pay down my mortgage faster and make room for more travel and retirement investments.

With a simple sign-up, and sometimes a quick background check, most reputable sites will have access to a network of clients, and you can start earning income within a few weeks or less.

My favorite ways side hustle gigs have come from:

1.) Rover.com

Dog walking to dog sitting, this pet care app has uncovered the massive need for loving pet care.  Rover gives pet parents and non-pet parents alike the chance to be temporary pet parents, all while earning a little extra cash. Touted as the AirBnB of pet care, Rover matches pet owners with pet sitters and walkers in their area via the app. Sitters create a profile and set their own rate and service offerings, from walking to overnight boarding. Pet parents can pick their ideal sitter and leave reviews post-pet care. Extra income and a play date with a dog is a match made in heaven for many. Considering sixty-five percent of Canadian households own at least one pet and Canada’s pet care industry is worth roughly $7 billion, Rover solves the problems of the pet care demand.

2.) Poshmark

Popular social commerce platform, Poshmark, has 50 million users and recently entered Canada, allowing people to easily sell new and gently used clothing, accessories and home goods. Continue Reading…

Is the political heat melting your investment cool?

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By Steve Lowrie, CFA

Special to the Financial Independence Hub

I’ve said it before.  So has American financial commentator Barry Ritholtz.  Regardless of your political bent, it’s a bad idea to hitch your investment decisions to whoever is, is not, or is about to be in political power at any given time.

Given the upcoming Canadian election and all the related political storm and fury of late, it’s not impossible that we could end up with a minority government in the next election, with the NDP or Greens having the balance of power.  As a side note, residents of British Columbia have been dealing with this scenario for the past couple of years.  That said, this outcome is just speculation, and this post is not about how you and I may feel about that situation.

This is about the choices we make as investors.  As I said in 2016, and I’ll repeat here:

“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 defense.  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.”

I’ve now been a financial advisor long enough that I’ve heard this refrain many times over: “If ‘X’ is elected I’m moving out of Canada!” Over the years and through multiple conversations, “X” has represented candidates from across the political spectrum.

Ironically, a similar refrain is often heard in the U.S.: “If ‘Y’ is elected, I’m moving to Canada!”Which is why Dimensional Fund Advisors provided us with a telling graphic to illustrate how impotent political parties actually have been at helping or hindering capital markets. Continue Reading…

FP: Navigating ETF Overload through Robo advisors and one-decision asset allocation ETFs

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FP/Getty Images

My latest Financial Post column has just been published: online and in the Wednesday paper (page FP4): Click on the highlighted headline for the full column: Spoiled for Choice: How investors can navigate the New World of ETF Overload.

While Canadian ETF assets are still about a tenth those of mutual funds, a similar 10-fold disparity in the costs of Exchange Trade Funds versus Canada’s notoriously high mutual fund Management Expense Ratios (MERs) has the ETF industry rapidly playing catch up to the entrenched mutual fund industry.

As one of the ETF experts quoted notes (Dale Roberts, a regular Hub contributor and the blogger behind CutthecrapInvesting), ETF sales have already caught up with mutual funds. And while the early ETF growth was fuelled by Do it Yourself investors buying their own investments (including ETFs) at discount brokerages (with or without the help of fee-based advisors) the next stage of growth is being fuelled by the drive to simplicity and convenience.

Robo advisors came first, with several Canadian operations launching in 2004 or soon thereafter. True, the Robos are slightly more costly than a pure DIY ETF strategy implemented at a discounter, but the extra 0.5% charge (in most cases) is arguably well worth it in terms of hand-holding, asset allocation and automatic rebalancing.

Which is the bigger game changer?

As of 2018, though, investors have been able to get the best of both worlds with the one-decision asset allocation ETFs pioneered by Vanguard Canada, and soon imitated by BMO, iShares and Horizons. Continue Reading…

Adam Smith wins again, as Hedge Fund returns disappoint

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Adam Smith: the Father of Economics

By Noah Solomon

Special to the Financial Independence Hub

It has been 243 years since Adam Smith, “The Father of Economics” wrote An Inquiry into the Nature and Causes of the Wealth of Nations. In this magnus opus, Smith introduced the concept of the “invisible hand,” which can be described as an unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically.

The erosion of Hedge Fund returns

At Outcome, one of our favourite sayings is “In the end, Adam Smith always wins.” Whereas the timing of this triumph is uncertain, victory is nonetheless assured. It is not a question of if, but merely one of when.

Smith’s invisible hand has indeed been at work in the hedge fund industry. At the beginning of 2000, there were relatively few hedge funds, and the global hedge fund industry had roughly $300 billion under management. Between 2000 and 2007, the HFRX Global Hedge Fund Index produced annualized returns of 9.75%. Even during the “tech wreck” of 2001-2, when the MSCI All Country World Index of stocks fell 33.1%, hedge funds rose an impressive 13.8%.

As if following Smith’s playbook, this stellar performance attracted a massive influx of assets from investors and prompted the launch of countless new funds. The resulting increase in competition and “crowding” has had a predictable impact on results. From the beginning of 2008 through the end of last August, the HFRX Index declined at an annualized rate of -0.5% and has fallen 5.7% on a cumulative basis. Moreover, hedge funds failed to diversify investors during the financial crisis of 2008, when the HFRX Index plummeted 23.2%.

As always, Adam Smith wins.

Performance & Fees: Fundamentally disconnected

Despite the severe decline in average hedge fund performance, there has not been a proportionate decline in the high fees that they charge investors. Continue Reading…

4 benefits of working with a financial adviser

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By Danielle Klassen (Sponsor Content)

Do I hire a financial adviser or should I try building out a financial plan myself?

With the rise of apps and low-cost, online investment products, it can feel easier than ever to take a DIY approach to everything from budgeting, to saving, and investing.

But it becomes more challenging when you want to get beyond the basics. For example, how do I know if I’m saving enough? How can I work towards multiple investing goals at one time? Where can I shave down my expenses? When can I retire? How much should I save for my children’s education?

That’s where a financial adviser comes in. Their job is to see the big picture and help you reach your goals.

Financial advisers provide a slew of benefits that apply to all Canadians, regardless of their net worth. In fact, the stakes can be higher if you’re not rolling in the dough.

WealthBar clients get unlimited access to professional, commission-free advice. Here are the top four advantages of working with a financial adviser:

Get a personalized plan that makes sense for you

The internet is a wonderful resource but it is nearly impossible to find advice that is specific to your situation.

Financial advisers will help you build a personalized plan that accounts for various long and short-term goals. Let’s say your dream is to retire with enough money to travel for four months a year. A financial adviser will help you translate this dream into a financial goal, and will help you build a plan to make it a reality — from budgeting, to saving, and investing — while still accounting for the less romantic aspects of your financial needs.

As your life evolves, your plans will change. For example, maybe you thought you wanted to retire in fifteen years, but now you want to do it in ten years. A financial adviser will help you adjust accordingly, while providing a guiding light on the best way to reach your goals.

Save more money

Half of Canadians say they’ve lost sleep due to financial worries. And the things that keep them up at night? Struggling to save money for short and long-term goals, the increasing cost of living, and unexpected expenses.

The financial planning support that advisers provide can help you become a far better saver. Having a written plan that you review with your adviser on a regular basis (let’s say, yearly) will keep you accountable to your goals. Continue Reading…

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