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).

Vanguard All Equity ETF (VEQT): my new One-Ticket investing solution

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Vanguard changed the self-directed investing game in Canada with the launch of its new suite of asset allocation ETFs. Now investors can get an ultra low cost, globally diversified portfolio of equities and bonds with just one product.

The funds first came in three flavours – VCNS, VBAL, and VGRO – each with a different target asset allocation for the conservative, balanced, and growth-minded investor.

Shortly after came the sweetener, at least for me, when Vanguard introduced an all-equity version called VEQT.

Asset allocation ETFs take away the biggest pain point for DIY investors by removing the need to periodically re-balance when adding new money or whenever markets veer off course. Simply buy units of a single ETF and hold, and/or add new money as needed. Vanguard’s professional managers take care of the rest so you can enjoy a mostly hands-off investing experience.

What is VEQT?

The Vanguard All Equity ETF Portfolio trades under the ticker symbol VEQT. It’s one of five asset allocation ETFs offered by Vanguard. Just like the name suggests, VEQT’s asset allocation is made up of 100 per cent equities. VEQT is a “fund of funds,” meaning it’s a wrapper that contains four other Vanguard ETFs. Here’s what’s under the hood:

  • Vanguard US Total Market Index ETF 39.8%
  • Vanguard FTSE Canada All Cap Index ETF 29.8%
  • Vanguard FTSE Developed All Cap ex North America Index ETF 23.0%
  • Vanguard FTSE Emerging Markets All Cap Index ETF 7.4%

While investors are often cautioned not to put all their eggs in one basket, in this case with just one ETF your investment portfolio would have exposure to more than 12,200 stocks from around the globe. It doesn’t get much more diversified than that.

Sector weightings for VEQT include:

  • Financials 26.3%
  • Industrials 13.5%
  • Technology 12.1%
  • Consumer Services 10.5%
  • Oil & Gas 9.5%
  • Consumer Goods 9.0%
  • Health Care 7.6%
  • Basic Materials 6.0%
  • Utilities 3.0%
  • Telecommunications 2.5%

Finally, VEQT (like all of Vanguard’s asset allocation ETFs) comes with a management fee of 0.22 per cent. The total management expense ratio (MER) will be known at a later date but it is expected to be 0.25 per cent.

VEQT | My New One-Ticket Investing Solution

It was January 2015 when I sold all of my dividend stocks and switched to an index investing strategy. At the time I went with a two-ETF solution comprised of Vanguard’s FTSE Canada All Cap Index ETF (VCN), and Vanguard’s FTSE Global All Cap ex Canada Index ETF (VXC). This was a variation on the three-fund model portfolio popularized on the Canadian Couch Potato blog (the third fund being Canadian bonds: VAB).

The simple two-fund portfolio worked out great for me, growing by a total of 41.43 per cent in the three years from January 2015 to January 2018. Last year was more challenging and the two-fund portfolio lost 4.25 per cent after a weak fourth quarter sunk the stock markets.

I wasn’t looking to make a change but back in February 2019 Vanguard launched VEQT: adding the 100 per cent equity allocation ETF to its product mix. I was intrigued enough and so on March 4th of this year I wrote about potentially adding VEQT to my portfolio in an effort to reduce my home country bias. Continue Reading…

”Lucky 5” ways to prepare for a post-Divorce financial future

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By Meggie Nahatakyan

Special to the Financial Independence Hub

Divorce is not the end of the world. Well, not for you. Being newly divorced signals the beginning of a brand new life and the opportunity for you to redesign and fine tune your life, now as a single person, living under your own terms: the way you want it.

Studies show that many newly divorced women are often left off facing worse financial issues right after divorce. Many are struggling to cope with the demands of being able to provide for themselves and their families, single parenthood, and suffering low self-esteem as well as feeling emotionally battered.

Take stock of your life

Instead of focusing on all the negativity a divorce brings, it is crucial that you take stock of your entire life and place yourself in a positive frame of mind by being grateful for all the great things in your life: like your career, health, family, children, friends, and other support systems you have. After that, make a firm decision to make today the very ‘first’ day of a brand new and better life, looking forward to the future and achieve your fullest potentials in a way that fortifies your core values and beliefs.

Take your time

Take the time out of your usual routine and set your mind free. Relax. Think about how you want your life to look 3 to 5 years from now and what you really need in your life. What if you no longer have to work? What will financial freedom, abundance, wealth, and stability really mean to you?

To bounce back from your past broken relationship and face the future with confidence, you need to be financially stable. You can do this by starting a business that you can juggle while working at home and tending to the kids.

Here are 5 business ideas you can start post-divorce to start empowering yourself:

1.) Start Freelancing

There are websites like People Per Hour or Fiverr that allow you to sell your services for a price. If you are a good writer, bookkeeper, transcriber, or you have specific skill sets that can be outsourced, you can always telecommute and work online. The positive side of freelancing is the work time flexibility; you can work in the given timeframe but the exact hours of work will be up to you.

2.) Start a YouTube Channel

With videos booming these days, people are glued to YouTube and social media. There’s no denying that the future is video. Why not start your own YouTube video channel? Are you a good cook? Start a cooking channel. Are you an expert home DIY hobbyist? Then, let the world know through your very own video channel. There are no limits to what you can do so as long as your channel offers interesting and useful content, you are sure to get viewers and subscribers. Join the bandwagon! Continue Reading…

How Behavioural Economics can help Advisors and Investors meet their goals

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By Bernard Letendre 

Special to the Financial Independence Hub

Emotions play a very big part in how we live our lives and have an impact on the decisions we make every day:  including how and when we each choose to invest for our future.

As financial markets move up and down, investors’ emotions follow suit. Emotions and behavioural biases play a role in people’s investment decisions, and often, emotionally-driven investing can leave them with poor returns in the long run. Add a volatile market to the mix and it can make it even harder to reach important investment goals.

Financial advisors know that staying invested during market downturns makes sense. While this recommendation is typically passed on to clients, panic sets in and some clients insist on selling to avoid a loss, despite sound logic and statistics. We all need to be taking a closer look at people’s behaviours and biases and finding ways to counteract them, for the benefit of our investors.

A new Behavioural Economics program for Canadian advisors

With that in mind, Manulife Investment Management wants to help change the investment game for our clients. Through a new partnership with BEworks, a behavioural consulting firm and research institute,we launched a Canadian Behavioural Economics (BE) program to help advisors understand and manage human emotions in volatile markets. The program will be rolled out to advisors over the course of this year with more to come in 2020.

With the help of Dr. David R. Lewis at BEworks, our advisors have access to:

• Scientific-led research and actionable tools to help them and their clients understand the biases in investment decision making Continue Reading…

ETFs or mutual funds: Making the best choice for your financial future

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By Clayton Brown

(Sponsor Content)

You’re probably familiar with mutual funds. Most people have encountered them at some point: either through their banks and financial advisors, or their friends complaining about the fees.

ETFs are a newer investment, which people tend to associate with lower fees and broad diversification.

“So, what is the difference between a mutual fund and an ETF?”

Mutual funds are bundles of stocks and bonds that are managed for you by a bank or investment firm. Traditionally, they’re taking a hands-on approach to try to beat the market.

With actively managed mutual funds, you have managers who are trading a lot to take advantage of opportunities. However, this active trading comes at a cost, which usually translates into higher fees.

Most ETFs, or Exchange-Traded Funds, tend to take a different approach. They were primarily set up to track an index of investments (eg. The S&P 500 is an index of 500 publicly-listed US stocks and an ETF could track it. But you could have track indexes of tech stocks, energy investments, real estate investments, etc).

With most ETFs, portfolio managers are trying to reproduce the holdings and performance of an index. They give investors diversified exposure to an index at a low cost.

With those kinds of funds, managers don’t need to rebalance as often. That could mean lower costs for them. In turn, they can charge lower fees for the client.

“Which one is a better financial fit for me?”

Based on the above description, you might be wondering, “Why should I take a hands-off approach and match indexes, when I can take a hands-on approach and try to beat them?” Continue Reading…

Norway: Divestment Trailblazer (Take Note, Canadians overweight energy sector)

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Oil drilling platform in Norway (Deposit Photos)

By Jeff Weniger, CFA, WisdomTree Investments

Special to the Financial Independence Hub

We gasped a few weeks back when DWS Group launched an environmental, social and governance (ESG) ETF that raised nearly US$1 billion from a Finnish insurance company.

Two doors down, the US$1 trillion Norwegian sovereign wealth fund made its own announcement: it has enough North Sea oil exposure, so it’s slashing its energy portfolio. The Scandinavians aren’t talking; they’re acting.

Norway’s oil wealth comes from “upstream” extraction, so that’s the focus of the divestiture campaign. It’s not a wholesale energy liquidation just yet. Integrated oils like Chevron are still fair game because they have downstream refining and can thus offer diversification. Nevertheless, Norway is sending a clear message.

The trailblazing fund is a force to be reckoned with, controlling 1% of global listed equities. When it bobs, you weave.

There are two takes here: the idealistic one and the realistic one.

1.) Idealistic: A progressive northern European country is leading the way on a megatrend, just as it did with state-provided health care, parental workplace benefits and gender roles (and if we stretch to the Netherlands, drug decriminalization and bicycling).

2.) Realistic: A society whose fortunes are levered to the oil price is diversifying concentration risk under the guise of ESG.

Take note, Canada.

This nation is the portrait of cognitive dissonance. Justin Trudeau was supposed to be this era’s incarnation of the Summer of Love, with a warm Canadian kiss on the Paris Agreement for greenhouse emissions. Puzzling, then, the prospect of a Trans Mountain pipeline expansion.

Meanwhile, having Big Oil reach Big Tobacco pariah status can happen faster than you can google “University Divestment 1980s Apartheid.” I’ll give you the Coles Notes: apartheid died once institutional investors started cutting ties.

If you don’t think Canadian oil interests are petrified of the New Left’s answer to Trump — e.g., American congresswoman Alexandria Ocasio-Cortez — visit Suncor’s website. You wouldn’t know it was in the oil sands business, because you can’t get past all the sustainability, climate change and photos of sunshine. That’s when it dawns on you: this is like Altria urging smoking cessation. Catch even a fraction of the so-called Green New Deal and one-fifth of the S&P/TSX 60 is in a real pickle.

As Oslo goes, so goes Ottawa? Norway’s sector trap is particularly acute, so it forges the path (figure 1). Canadian asset allocators, get your compass: Norway is drawing the map.

Figure 1: Index Energy Weight

Jeff Weniger, CFA serves as Asset Allocation Strategist at WisdomTree. Jeff has a background in fundamental, economic and behavioral analysis for strategic and tactical asset allocation. Prior to joining WisdomTree, he was Director, Senior Strategist with BMO from 2006 to 2017, serving on the Asset Allocation Committee and co-managing the firm’s ETF model portfolios. Jeff has a B.S. in Finance from the University of Florida and an MBA from Notre Dame. He is a CFA charter holder and an active member of the CFA Society of Chicago and the CFA Institute since 2006. He has appeared in various financial publications such as Barron’s and the Wall Street Journal and makes regular appearances on Canada’s Business News Network (BNN) and Wharton Business Radio.

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