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).

Millennials value property more than looks when it comes to dating: HSBC study

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HSBC.com

It seems Canada’s soaring real estate market has started to affect Millennial dating patterns. According to a survey coming out today from HSBC Bank Canada 61% of Millennials feel anxious about buying a property, so much so that shared financial (39%) or property (33%) goals are considered more important than looks when daters are considering a potential future partner.

HSBC adds that this obsession with shared property has a downside for Canadian millennials: “They are far more likely to say they had stayed in a bad relationship due to property (16%) than Canadians on average (6%).” Sounds like a possible basis for a new Millennial situation comedy!

All this is contained in Beyond the Bricks, an HSBC-sponsored annual global survey of almost 12,000 adults in ten countries, including 1,077 in Canada.

HSBC says that getting on the property ladder can be both exciting and stressful for Canadian millennial once they’ve found their perfect partner.  Most (62.8%) Canadian millennials said financial considerations drove their last house move, and the top two reasons for the move were getting more house for their money (25.5%) or a lower cost of living (23.4%). And the biggest source of tension was accepting money from parents for the purchase (in 14% of cases.) Continue Reading…

3 easy ways to build an Investment Portfolio on the cheap

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I ditched my financial advisor about a decade ago and started investing on my own. I was fed up with paying high fees for underperforming mutual funds. Dividend-paying stocks were growing in popularity so I decided to take the plunge and build my own portfolio of blue-chip companies.

Several years later I realized my folly; it’s hard to pick winning stocks. It’s even more difficult to consistently pick winners and avoid losers over the long term. Overwhelmingly, the academic research showed that passive investing using mutual funds or exchange-traded funds (ETFs) has a much better chance of outperforming active investing that focuses on stock picking and market timing.

I bought into the research, sold my dividend stocks, and set up my new investment portfolio using two low-cost, broadly diversified ETFs.

Today investors have many more choices available to build an investment portfolio on the cheap. I’ll show you three ways to lower your investment costs, diversify your portfolio, and reduce the time you spend worrying about investing.

1). Use a robo-advisor

A traditional financial advisor or wealth manager might cost an investor between 1.5 to 2.5 per cent in management fees each year. Then along came robo-advisors to disrupt the portfolio management model and drive down costs to less than 1 per cent.

A robo-advisor helps you build a portfolio based on your risk tolerance, experience, and time horizon. Once your model portfolio is built all you have to do is make regular contributions and the robo-advisor will allocate your cash into the appropriate investments.

The robo-advisor takes care of rebalancing your money whenever the portfolio drifts away from its original allocation (due to market movements or from your own contributions).

Competition is heating up in the robo-advisor space with the likes of Wealthsimple, Nest Wealth, Justwealth, ModernAdvisor, Questwealth, and WealthBar all vying for your investment dollars. BMO SmartFolio has been around for a while and more recently RBC launched its own robo-platform with RBC InvestEase.

2.) Invest in index funds

An index fund tracks a stock or bond market and aims to deliver market returns minus a very small fee. All of the big banks offer index funds, typically at half the cost (or lower) than their traditional equity or bond mutual funds.

One popular set of index funds is TD’s e-Series funds. These funds can only be purchased online but they offer tremendous savings over their actively managed mutual fund cousins. Investors can find e-funds for Canadian equities, Canadian bonds, as well as U.S. equities and International equities all for fees of about 0.50 per cent or less.

Another solid set of index funds comes from Tangerine’s Investment Funds. These are one-fund solutions that come in five flavours; with the traditional 60 per cent equities, 40 per cent bonds balanced portfolio being its most popular. The expense ratio on Tangerine’s funds comes in at 1.07 per cent: higher than TD’s e-Series funds, but still a bargain compared to the industry average. Continue Reading…

No surprise: the best retirement investments are the same as for everyone else

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We recommend that you base your investing for retirement on a sound financial plan relying on the best retirement investments.

One thing investors of all ages fear is not having a good financial plan in place so they have enough retirement income to live on once they’ve stopped working. Looking for the best retirement investments, addressing this concern is usually a high priority for many of our Successful Investor Portfolio Management clients.

Four key factors to consider when investing for retirement

  1. How much you expect to save prior to retirement;
  2. The return you expect on your savings;
  3. How much of that return you’ll have left after taxes;
  4. How much retirement income you’ll need once you’ve left the workforce.

Our portfolio diversification approach gives you strong potential for long-term gains  

If you diversify as we advise, you improve your chances of making money over long periods, no matter what happens in the market.

For example, manufacturing stocks may suffer if raw-material prices rise, but in that case your Resources stocks will gain. Rising wages can put pressure on manufacturers, but your Consumer stocks should do better as workers spend more.

If borrowers can’t pay back their loans, your Finance stocks will suffer. But high default rates usually lead to lower interest rates, which push up the value of your Utilities stocks.

As part of their portfolio diversification strategy, most investors should have investments in most, if not all, of these five sectors. The proper proportions for you depend on your temperament and circumstances.

For example, conservative or income-seeking investors may want to emphasize utilities and Canadian banks in their portfolio diversification, because of these stocks’ high and generally secure dividends.

More aggressive investors might want to increase their portfolio weightings in Resources or Manufacturing stocks. For example, more aggressive investors could consider holding as much as, say, 25% to 30% of their portfolios in Resources.

However, you’ll want to spread your Resource holdings out among oil and gas, metals and other Resources stocks for diversification and exposure to a number of areas.

Stick with conservative estimates to account for unforeseen setbacks

As for the return you expect from investing for retirement, it’s best to aim low. If you invest in bonds, assume you will earn the current yield; don’t assume you can make money trading in bonds.

Over long periods, the total return on a well-diversified portfolio of high-quality stocks runs to as much as 10%, or around 7.5% after inflation. Aim lower in your retirement planning — 5% a year, say — to allow for unforeseeable problems and setbacks.

Above all, it’s important to remember that while finances are important, the happiest retirees are those who stay busy. You can do that with travel, golf or sailing. But volunteering, or working part-time at something you enjoy, can work just as well. Continue Reading…

How Property Investment can help you reach Findependence (Financial Independence)

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By Rebecca Lee

Special to the Financial Independence Hub

Financial Freedom is a way for anyone to escape the grind of the 9-5 work life to live the life they desire without relying on anyone else for money. Almost all of us trade our time for money to pay our bills, eat, travel and live in general. Without trading our time, it would be impossible to pay for the things we need and want. Many of us are stuck doing this until we have just enough to retire late in life.

Those who find financial freedom, AKA Findependence, do so by acquiring assets that generate wealth on their own. As the saying goes, “don’t work for your money, make it work for you.” One of the most popular types of these assets is real estate. Here’s how you can achieve financial freedom through real estate investment.

Have a strategy

Financial freedom, what it is and how to achieve it is different for everyone. Everybody has their own needs and wants and will require a different amount of cash flow to live on. Therefore, you must have a personalised strategy based on your income, savings and liabilities.

Without a plan, you won’t know what opportunities to take advantage of and what ones to pass up on. A strategy that’s designed for you will help take the emotions out of your decisions, avoid making mistakes and minimise risk.

Get the mindset

Wealth creation and investing requires a certain mindset to be successful. A lot of people are selling “Get rich quick” schemes but unless you get super lucky, this is not a realistic approach. Real estate in particular is a long-term investment game.

Real estate investors understand that their wealth will grow not overnight, but over years of gradual growth. Understanding this and knowing yourself enough to be able to commit to such a long-term plan is key to reaching financial independence. Investing in real estate isn’t as simple as buying property and waiting for its value to grow. Continue Reading…

Small Business: 5 tips to help protect your customers’ data and keep their trust

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Photo Credit: Unsplash

By Gloria Martinez

Special to the Financial Independence Hub

When it comes to running a business, trust is key. If a customer cannot trust your company with the information they provide, they will eventually stop coming back, and your reputation will suffer.

Data protection is one of the most essential qualities of any successful company, whether it’s a small online clothing boutique or a Fortune 500 company. Though keeping data safe can be challenging in a time where cyber crime is rampant, there are practices you can implement in your business that will decrease the likelihood of an attack. If you’re a small business owner, these 5 tips will help you protect your customers’ data while ultimately benefiting your profits:

1.) Understand your obligations

While keeping your customers’ data safe is a key element of building and maintaining your company’s success, there’s another important reason you should prioritize it: you could be legally obligated to do so. Take the NYDFS Cybersecurity Regulation, for instance, to which many companies in New York must adhere. One of the requirements of the regulation is that certain businesses operate with an infrastructure that protects customers from cyber security threats. If you’re not sure whether or not your state has regulations like this, this article may provide you with more information.

2.) Use encryption

A lot of cyber attacks happen through emails. This is because a company’s email account is a prime target for hackers, and you need to make sure that any emails that are exchanged between your company and another party (including promotional ads) are protected from these attacks. That’s where encryption comes in. Using a modern email encryption service should work seamlessly into your email platform, and will help keep the business information contained in your emails (including customer data) from getting to anyone but the intended recipient.

3.) Develop a security policy

While software is indispensable in the battle against cyber crime, your efforts can’t stop there. Your business also needs a data security policy in place, whether you have one employee or 1,500. It’s critical that employees become familiar with the policy, as well as the roles played by all people and systems involved. Also, ensure that each employee completes any necessary training with software and/or security professionals. That way, everyone will understand how to adequately handle company data. Continue Reading…