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).

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…

Challenging conventional investment wisdom

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By Noah Solomon

Special to the Financial Independence Hub

Many investment professionals tell their clients:

  • That markets tend to rise over the long-term.
  • To “hang in there” and “sit tight” during bear markets because they will eventually recover their losses.

While we agree with the first assertion, we wholeheartedly disagree that investors should sit idly through bear markets based on the notion that they will eventually live to see a better day. Rather, we strongly believe that a dynamic approach that adjusts to changing markets can provide superior long-term results.

The table below illustrates this by showing what happens to $1M invested in two different portfolios:

Portfolio A Portfolio B
Year 1 -30% -5%
Year 2 +30% +5%
Year 3 -30% -5%
Year 4 +30% +5%
Sum of returns 0% 0%
Value at end of year 4 $828,100 $995,006

 

Since the returns over four years add up to 0% for both portfolios, many people assume that the final value of each portfolio at the end of year 4 should be $1 million. However, as the last line in the table indicates, this is far from true.

Portfolio A, which is more volatile, declines in value by $171,900, while portfolio B, which is less volatile, suffers a decline of only $4,994.

The observation that two portfolios can have the same sum of returns over 4 years yet have significantly different values at the end of the period can be explained by the mechanics of compounding. After experiencing a 30% loss, a $1 million portfolio is worth only $700,000. Unfortunately, a subsequent 30% gain will only bring the value of the portfolio back to $910,000, which is still $90,000 less that its starting value. However, when a $1 million portfolio experiences a 5% loss, its value is $950,000, and a subsequent gain of 5% will bring its value up to $997,500, which is only $2,500 less than its starting point. Continue Reading…

An Investor’s playbook for Bitcoin’s resurgence

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By Mauricio Di Bartolomeo

Special to the Financial Independence Hub

Bitcoin’s price has more than doubled over the last four months: from approximately USD $3,400 in February to a current price of USD $10,700 at the time of writing. While it is unreasonable to attribute the recent price increase to any particular news or headline, there are growing narratives and investment thesis that support making an investment in Bitcoin as a digital and apolitical store of value.

As some of us in the industry have come to expect, the runup in price has unsurprisingly led to renewed media coverage which, in turn, leads to thousands of new people looking to learn about Bitcoin and a desire to participate in the market.

For those currently invested in Bitcoin, or those interested in getting involved, here are five tips on navigating the “Bitcoin craze” with ease:

1.) Know where to buy your Bitcoin

When making your first Bitcoin purchase, make sure you use a trusted and compliant exchange. Avoid using exchanges registered in foreign jurisdictions or exchanges that don’t comply with your local jurisdiction. Bitcoin prices can differ between exchanges, they can also have different fee structures. Exchanges like Bull Bitcoin provide simple and fast platforms to buy Bitcoin. They are a non-custodial exchange so you will need to have your own wallet or a savings account to send the bitcoins to once you make the purchase. The next tip will guide you on how to get one.

2.) Know how to store your Bitcoin

In the past, some exchanges have been the target of hack and theft due to the need to keep Bitcoin ‘online’ for trading purposes.  After purchasing your Bitcoin, make sure you know how to keep it safe. You can use a hardware device such as a Ledger or Trezor that you can manage yourself: be sure to read the instructions carefully when setting up your device. If you want a simpler approach to keeping your bitcoin safe, you can use a third party custodian like BitGo that keeps your bitcoin safe through insured custody, or deposit your bitcoins in a savings account to earn interest. More on that below.

3.) Do more with your Bitcoin

The best way to make more out of your Bitcoin is to use a Bitcoin Savings account that pays interest on your Bitcoin deposits. Earning interest helps you grow your bitcoin position:  which can appreciate in dollar terms over time. There are only a few compliant companies worldwide offering this type of service: when searching for options, look for the compliant companies offering these services in your jurisdiction. Continue Reading…