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).

A short blueprint for starting an e-Commerce business

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By Nelly Murad

Special to the Financial Independence Hub

E-commerce businesses are rapidly thriving. In fact, the 2019 statistics according to US Census Bureau News reveal that: “Over the past ten years, the percentage of retail sales in the U.S. that have come from e-commerce has increased by nearly 300%, from 3.3% to 9.7%.” Moreover, the sales coming from ecommerce sites are predicted to increase around 78% by 2020

For the past decade, the number of people worldwide who patronized e-commerce has increased tremendously. Following the latest survey, 21.8% of the population worldwide now shopped online. And in 2021 retail e-commerce sales worldwide are expected to reach US$4.8 trillion.

These stats show that more people now prefer to transact online than going to a traditional store. And it’s no wonder, owing to the fact that e-commerce has transformed the way we shop: in the most convenient and innovative way. So, if you are not well adept about the specifics of running an ecommerce business or you are not even sure what it is, then keep reading.

Basically, the term e-commerce is the purchasing and selling of goods, which includes the transfer of money and the data needed to complete the operation with the use of an electronic device and the internet. It is simply an activity where business transactions — the buying and selling of goods and services —  occur over the internet.

Currently, there are five recognized e-commerce business models:

  • Business to consumer (B2C)
  • Business to business (B2B)
  • Consumer to business (C2B)
  • Consumer to consumer (C2C)
  • Government / Public Administration Ecommerce

Unique features of e-commerce

The most popular characteristics of e-commerce are: its ability to establish relationships, ability to exchange information, pre and post-sales support, among others. Interestingly, according to UKessays, ecommerce has seven unique features. These are:

  • The ability to transact anywhere at anytime. For example, the ability to order goods online, pay bills or deposit money, which in ecommerce, eliminates the need to go to a physical store.
  • Global reach. It permits commercial transaction easily performed across other countries, which is less tedious and inexpensive.
  • Universal standards. The internet has adopted universally accepted standards on how information is presented in order to level the playing field for businesses, specifically about obtaining information on market entry cost and the price of the item.
  • It refers to the amount of content found on the website such as written content and links that contribute in advertising and branding of merchant’s products, and are useful to enhance customers’ experience.
  • Interactivity. It affords businesses and customers to communicate. Ecommerce businesses have the ability to connect to their customers on an emotional level coupled with their effort to establish trust and confidence.
  • Information Density. It refers to the amount and quality of information found in an ecommerce website like text, pictures and videos.
  • Personalization. Merchants can easily change their products and services according to user preferences. The ability to customize marketing content to cater specific user needs is also possible. Continue Reading…

VBAL vs. Mawer Balanced Fund for One-stop investing

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Investors could have done a lot worse over the past 30 years than investing in the Mawer Balanced Fund. Mawer, which epitomizes the art of boring investing, has been nothing short of consistently brilliant: with annual returns of 8.5 per cent since the fund’s inception in 1988.

Investment giant Vanguard doesn’t have the same longevity or track record here in Canada, but its launch of the Vanguard Balanced ETF portfolio (VBAL) gives investors another one-stop investing option.

This post will go under the hood and compare VBAL to the Mawer Balanced Fund for investors looking for a one-stop investing solution for the next two to three decades.

About Vanguard

Vanguard is legendary in the United States and is largely credited for pioneering low-cost index investing. It came to Canada in December, 2011 and now offers nearly 40 ETFs and four mutual funds to Canadian investors with a total of $17 billion in assets under management (Dec 2018).

VBAL was introduced by Vanguard Canada in January, 2018 as part of a new suite of asset allocation ETFs (including VGRO and later VEQT). These funds have proven popular among Canadian investors and have collectively gathered more than $1 billion in assets.

Before their introduction, investors did not have access to a one-stop ETF solution. Instead, they’d have to build multi-ETF portfolios to get exposure to Canadian, U.S., and International equities, plus another ETF or two for fixed income.

Vanguard turned that around with what I’ve called a game-changing investing solution. VBAL represents the classic 60/40 portfolio.

Vanguard Balanced ETF (VBAL)

VBAL is a fund of funds. That means its underlying holdings are made up of other Vanguard funds. So rather than seeing a bunch of individual stocks and bonds in VBAL’s holdings, you’ll instead see these seven products:

  • Vanguard US Total Market Index ETF
  • Vanguard Canadian Aggregate Bond Index ETF
  • Vanguard FTSE Canada All Cap Index ETF
  • Vanguard FTSE Developed All Cap ex North America Index ETF
  • Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
  • Vanguard US Aggregate Bond Index ETF CAD-hedged
  • Vanguard FTSE Emerging Markets All Cap Index ETF

The fund’s mandate is to maintain a long-term strategic asset allocation of equity (approximately 60%) and fixed income (approximately 40%) securities. It’s as diversified, globally, as you can get: with a whopping 12,318 stocks and 15,412 bonds wrapped up inside this one-stop balanced ETF.

VBAL Holdings

VBAL has net assets of $675 million (June 30, 2019). Its distribution or dividend yield is 2.58 per cent (dividends paid quarterly). Its management expense ratio or MER is 0.25 per cent.

Investors can purchase VBAL through a discount brokerage account and it is an eligible investment inside an RRSP, RRIF, RESP, TFSA, DPSP, RDSP, or non-registered account.

VBAL’s performance data only goes back to its inception date of January 24, 2018. It has returned 4.05 per cent annualized since that time, and 10.44 per cent year-to-date (July 30, 2019).

Justin Bender, a portfolio manager at PWL Capital, has simulated the returns as if the fund did exist for the past 20 years and found the following annualized returns (as of June 30, 2019):

  • 1-year return – 5.09%
  • 3-year return – 7.22%
  • 5-year return – 6.62%
  • 10-year return – 7.95%
  • 20-year return – 5.34%

You can read more about VBAL and its fact sheet and prospectus here.

About Mawer

If Vanguard is legendary for pioneering low cost investing, Mawer has achieved cult-like status among active investors for an incredible track record of outperforming its benchmarks. Mawer was founded in 1974. It’s a privately owned, independent investment firm, managing over $55 billion in assets. Mawer has locations in Toronto, Calgary, and Singapore.

While its philosophy is ‘be boring,’ Mawer’s performance is anything but. Of its 13 mutual funds, eight have beaten their benchmark index since inception: including the Mawer Balanced Fund, which trounced its benchmark over the last decade (9.9 per cent to 7.8 per cent). Continue Reading…

3 ways to start Real Estate investing and build Passive Income

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By Catherine Way

Special to the Financial Independence Hub

Real estate investing has never been easier. With the surge of house-flipping success stories flooding social media, no wonder more people are looking to invest.

With more ways to start real estate investing, starting is the hardest step many face.

Building passive income is a necessity for any successful real estate investor, but owning and managing rentals with no experience can end badly for some.

Luckily there are a few easy ways to start investing to try out which investment style is best for you.

If you don’t know where to start for your first investment, read on!

Airbnb rentals

“Many investors are using the convenience of this app to start building their passive income. Airbnb is a great tool to have short term tenants, and to learn the basics of being a good landlord. With the app doing all the work to find tenants for you, as long as you are in a rea that sees travels, you can start making passive income with little to no investment. In fact some investors are creating only Airbnb rentals spaces because of the demand and profit from it.” – Loren Howard, Prime Plus Mortgages: Hard Money Lender Arizona.

Airbnb is a great app for first-time investors wanting to make passive income. In fact, there are many resource articles online on how to build an Airbnb business. Most people rent out spare rooms or guest houses to Airbnb guests to stay in, and operates like a mini-hotel service.

For those yearning to be real estate investors who do not have whole homes dedicated to investments, this is a great way to start building up your passive income to pursue other projects, or just learn the basics of taking care of tenants.

Airbnb is all over the world and their popularity is still on the rise. The app makes it simple to find tenants for properties, whether short or long term, and it only requires having a good space to start hosting. That means spare rooms or guest houses can begin to make you money, with little to no investment on your end. Continue Reading…

Leveraging life insurance: a smart financial planning strategy

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By Michael Pilz

Special to the Financial Independence Hub

Life insurance policies can represent a significant, untapped source of capital. While life insurance is often strictly thought of as a death benefit, many permanent policies also have a cash component. This cash component can be leveraged to secure a line of credit that can be used for a variety of purposes, such as a means of supplementing retirement income or to access upfront capital quickly, perhaps to take advantage of an investment opportunity.

An insurance policy that has cash value should be on the table as an option for those who either need or want to access cash by using some of the assets built up over their lifetime. Thinking of insurance differently – and communicating how it can be used to create a living benefit – can open up a world of possibilities.

Rethinking Whole Life Insurance

Insurance policies are great investment vehicles for those who have an immediate need for death benefit coverage, and would also like to park and protect capital in a tax-sheltered vehicle during their working years. But what happens when those who are older, a sizeable chunk of cash has accumulated over the years, and there’s a better use for this cash now instead of passing it on to beneficiaries down the road? And what if they want to leverage the cash value of their policy while also leaving their policy intact?

The Equitable Bank Cash Surrender Value (CSV) Line of Credit enables borrowers to convert the value of their insurance policy into cash. It is a non-amortizing loan product secured against the cash surrender value of a whole life insurance policy. Unlike a traditional loan or line of credit, the interest from the CSV Line of Credit capitalizes and is typically repaid through insurance proceeds at the time of policy redemption. However, a borrower can also opt to make ongoing payments or to repay the entire loan at any time without incurring a penalty.

Does a CSV Line of Credit make sense?

Leveraging a life insurance policy’s cash value can help fulfill a variety of different needs or wants.

Many can benefit from tapping into the cash value that has built up within their policy during their working years to supplement retirement income later in life. High-income earners who run out of RRSP and TFSA contribution room and have excess cash may find their insurance policy especially valuable for this purpose. Think of it as killing two birds with one stone: during prime working years, a whole life insurance policy meets an immediate death benefit need while serving as a mechanism for building up a nest egg that can be leveraged in the future when there’s a need for cash. Continue Reading…

 How to improve the financial wellness of the Canadian workforce 

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By Jean-Philippe Provost, Mercer Canada 

Special to the Financial Independence Hub

For Canadians, wealth management and financial decisions can represent an endless source of stress: whether putting money aside for an important purchase, paying off debt, or saving for retirement. Increasingly, this stress is interfering with workplace health and productivity. 

A company’s most productive asset is their people: when employees are unhealthy, financially or physically, the organization as a whole suffers. Helping employees feel confident about wealth management matters and guiding them towards financial wellness is not just a nice to have: it is a need to have. A healthy workforce means a healthy company: and a healthy bottom line. 

The impacts of financial stress on the workforce 

At Mercer, we have spent years studying the workplace trends, the evolving realities and the challenges faced by workers in Canada. Our most recent research into Canadians’ financial wellness found that if employers help employees achieve financial wellness, they too will reap the rewards, in terms of increased productivity, reduced absenteeism and improved morale. 

For example, our study showed that financial and physical health are tightly intertwined. With only 39% of employees with a low level of financial wellness reporting being in excellent or very good health (compared to 81% at the highest level), it is easy to see how this impacts entire organizations. 

Additionally, employees who don’t feel financially confident also often spend much of their time worrying, including while at work and are also less likely to pay attention to the features of their workplace benefits and the importance of their employee compensation package. 

Employers can and should help their employees successfully manage the steps towards achieving financial confidence. Providing easy-to-access resources to help to their workforce secure retirement savings and manage investments can lead to greater employee satisfaction. It can also strengthen their employee value proposition and help to attract and retain talents. 

Reducing employees’ financial stresses 

The most effective resources should be flexible enough to help all levels of employees meet their financial goals and milestones throughout their careers. Continue Reading…