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).
Are you looking for a smart and easy way to achieve financial independence?
Investing in a franchise may be the perfect solution. Franchises offer an established system with great potential for success and are a great way to get into the world of business ownership.
With the proper support, a franchise can help you reach your financial goals and provide a secure future for you and your family. This blog post will discuss why investing in a franchise is a great way to achieve financial independence.
The Benefits of Investing in a Franchise
Investing in a franchise is a smart way to achieve financial independence because it has many benefits. Firstly, you will have a low-risk, high-reward investment. Franchisors provide an established business model that has been proven to work. You also have access to resources and support from the franchisor, including training, marketing, and ongoing assistance. Building a resilient business with a proven track record increases your chances of success. Finding franchise opportunities is relatively easy, as many franchisors are actively looking for new investors.
● Low-Risk, High-Reward Investment
Investing in a franchise is a low-risk, high-reward investment opportunity. Franchisees benefit from a proven business model, an established customer base, and ongoing support from the franchisor. The initial investment required to start a franchise may seem high, but the risk is significantly lower compared to starting a business from scratch.
● Established Business Model
The established business model is one of the biggest advantages of investing in a franchise. This means the franchise has already figured out what works and what doesn’t, saving you the time, money, and effort required to establish a business from scratch. Franchisors have honed their processes and systems to create a winning formula that franchisees can easily replicate. This saves you time and effort and ensures that you start your business on a solid foundation with a proven track record of success.
● Access to Resources and Support
Investing in a franchise comes with the unique advantage of accessing a network of resources and support. Franchisors provide extensive training and support to ensure franchisees have the necessary knowledge and skills to run their businesses effectively. Continue Reading…
A book discovery service called Shepherd.com has just published a multi-book review by me about my recommendations for some of the best all-time books on Financial Independence and Retirement. You can find the full review by clicking here. Shepherd.com is a year old; an alternative to older services like Goodreads, it helps readers and authors share and discover books in various genres.
Picking just five books is of course a tricky exercise and having seen this published late in July, I soon thought of several other books I might have included as well or instead, notably David Chilton’s classic The Wealthy Barber. But it’s safe to say that with more than 2 million copies sold, that would not exactly be a ground-breaking new recommendation.
Chilton of course created a monster with the genre of the financial novel: a hybrid that combines a story and characters with an overlay of enduring financial insights and strategies for achieving financial freedom. He has spawned many imitators, such as Robert Gignac’s Rich is a State of Mind and my own Findependence Day, which is also flagged in the Shepherd reviews.
For this exercise, however, I opted to go with straight non-fiction financial books. My thinking was what books influenced me in my own journey to Semi-Retirement and Financial Independence, or the so-called FIRE movement, for Financial Independence Retire Early.
Here are the 5 books I did pick: go to the original link to get my analysis and reasons for each pick. Below I offer just a line each but each explanation is closer to 400 words so be sure to click on the original Shepherd link to get the full take on each. The five titles below each include hypertext to the Shepherd book store where you can order directly.
Probably first for most other proponents of the FIRE (Financial Independence Retire Early) movement is this classic, subtitled Transforming Your Relationship with Money and Achieving Financial Independence.
The late Jack Bogle, founder of Vanguard Group, published this excellent book in 2009. To me, the title speaks for itself. The sooner you realize you have “enough,” the sooner you can quit the rat race.
Edmonton-based author Ernie Zelinski is probably best known for this self-published international bestseller and several others, all on the theme of escaping from full-time employment as soon as possible.
This book by the famed Finance professor and a certified financial planner caters to anxious would-be retirees who do not have the luxury of having an inflation-indexed, guaranteed-for-life Defined Benefit pension plan offered by an employer.
The phrase “Work Optional” describes the state of being financially independent enough that you don’t have to work for money anymore, but nevertheless choose to for reasons like having a purpose, or structure. As the subtitle suggests, it’s about retiring early without having to be a miserly penny pincher.
One of the biggest trends in the market, thus far in 2023, has been the flurry of inflows ($AUM) into money market and short-term fixed income. We have seen a “great migration to cash” as investors are literally being paid, handsomely, to park cash on the sidelines. We are now 6 months through the year and flows into the short end do not seem to be slowing down. Thus far YTD, we have seen $5.7bln flow into money market and ultra short-term fixed income ETFs, accounting for over 50% of all flows into fixed income ETFs in 2023 (Source: NBCFM ETF).
Money Market and Ultra Short-Term Fixed Income: after years of being a forgotten segment of the market, how and why are they the leading asset gatherer?
With the accelerated path of rising rates, we have seen in the short end of the yield curve; (the overnight rate) the yield curve inverted. An inversion of the yield curve is caused when shorter-term rates rise faster than longer-term rates. Generally, this is something that occurs but reverses quite quickly.
Not this time. We are currently in a period of a prolonged yield curve inversion, which could be a leading indicator of economic weakness to come. This inversion is exactly what these money market and ultra short-term fixed income investors are looking to cash in on. Lock in higher shorter-term rates and take advantage of the inverted yield curve.
For too long, investors were forced to move outside of investment grade bonds and further out the yield curve to achieve their yield and return expectations. The market has shifted that paradigm on its head and allowed investors to truly get paid to wait on the sidelines in cash.
Current Canadian Yield Curve
Source: Bloomberg, June 30, 2023
The short end appears to be the sweet spot for many investors, in terms of risk and reward.
Risk: by targeting the short end of the curve, investors will be minimizing their interest rate sensitivity (Duration exposure) and will generally be buying bonds that will be maturing in less than 1 year. Buying investment grade bonds, issued by high quality issuers, this close to maturity provides investors with downside protection as all these bonds will mature at par.[1]
Reward: Achieve a higher yield to maturity than further out the curve. Allowing investors to earn higher yields for lower interest rate sensitivity risk. The current market isn’t paying investors to lend money for longer periods. The front end provides an extremely attractive proposition for investors.
Today’s market is uniquely positioned and many market participants expect volatility to be on the horizon and as higher interest rates make their way through the economy, potentially causing growth to slowdown. Money market and short-term fixed income are well positioned for this environment, as investors can weather the potential volatility in the market while still meeting income and return needs. Continue Reading…
Canadians asking how to invest in AI may want to consider an ETF holding large-cap tech stocks with diversified exposure to the rise of artificial intelligence
Deposit Photos
By David Wysocki
(Sponsor Content)
The rise of AI has sparked a huge wave of investor interest. Generative AI tools like Chat GPT have many Canadians asking how they can invest in AI, or wondering if they’ve missed the wave of excitement around this new technology.
We believe that this latest wave of excitement around AI is only the first stage of investor interest in what could become a technological mainstay for years or even decades to come. There could be hiccups and corrections in this area of the market in the short-term, but in the long-term we believe in the investment prospects of AI technology.
The question remains, though, where can Canadian investors go to find AI exposure for their investment portfolios? We believe that Canadians looking to invest in AI could consider the prospects of a large-cap technology ETF.
What is AI and how do companies make money from it?
AI stands for Artificial Intelligence and AI technologies are essentially machines that can perform cognitive functions we normally associate with a human mind. These are functions like critical analysis, prediction, and the creation of original works. AI tools are all around us and have been integrated into technologies for almost three decades, whether in gaming, online shopping, or social media.
In 2023 much of the focus around AI has been on one specific subset: generative AI. Generative AI is a form of AI focused on the creation of original works. Generative AI tools can write text or code, create images, even generate audio and video.
The business applications of AI in general, and generative AI in particular, are wide. First and foremost, generative AI can help businesses operate more efficiently. Many repetitive process tasks such as writing technical guides, analyzing legal text, conducting background research or even generating graphics can be done with an AI tool.
AI, however, cannot replace human workers entirely. In their current state AI technologies can add efficiency and scale to certain tasks, but they are not replacing human workers — especially highly skilled workers — en masse.
Companies in the tech sector developing AI software, as well as hardware tools that support AI, are seeing immediate business impacts as their AI tools are now in demand from a wide range of industries. So far, large-cap tech companies have been leaders in this AI race.
Why large-cap tech companies are AI leaders
The rallying value of technology stocks in 2023 so far has been driven largely by large-cap tech companies. In a still-uncertain macro environment, investors have flocked to large-cap tech for the combination of market share, business fundamentals, and exposure to innovation that these companies bring.
One of the innovation trends that has peaked investors’ interest is the rise of AI, specifically generative AI: tools like Chat GPT or Dall-E that can generate an original image or piece of text. What has made this AI investment trend interesting, however, is that it has largely focused on large-cap companies.
Historically, when a new technology comes into investors’ focus, large-cap companies capture some positive growth trends, but the biggest gainers in the short-term are usually smaller-cap tech companies tied directly to the new tech. In the case of generative AI, there has been a paradigm shift. Large-cap companies like Google, Meta, and Microsoft have been so quick to roll out and announce new AI tools that they’ve been some of the primary beneficiaries.
Put simply, large-cap companies have established leadership in the AI space. But, there’s another key reason why large-cap companies, especially combined in an ETF package, can be attractive for Canadians looking to invest in AI: diversification.
How diversified exposure can benefit an AI investor
It takes more than software to build a market-leading AI. The end output of a generative AI tool is built on incredibly complex algorithms, software platforms, cloud infrastructure, and — crucially — hardware like semiconductors.
Semiconductors are the fuel behind the rise of AI, as investors recently experienced through Nvidia’s stock boom. That spike followed forecasts from Nvidia of demand for its semiconductors from other large-cap tech companies building AI tools and platforms.
The rise of AI has had similar impacts on a range of different tech subsectors. It has impacted areas like tech devices, software, and hardware in different ways. Investors seeking exposure to AI can gain breadth of exposure through an ETF holding large-cap stocks from many tech subsectors.
The Harvest Tech Achievers Growth & Income ETF (HTA:TSX) works on the underlying investment thesis of investing in large-cap companies across the tech sector to gain diversification. HTA is designed to capture a range of growth opportunities in the technology sector, and the rise of generative AI has been a test case for the ETF’s long-term objective. Its varied exposure to large-cap companies in semiconductors, software, social media, and even IT services has allowed it to capture a wide range of positivity from investor interest in AI. Continue Reading…
Today, let’s look at how to use your personal time horizons to successfully separate today’s spending from tomorrow’s future wealth.
Spending and Investing over Time
One of the reasons we advocate for holding a diversified investment portfolio is because your investment horizons are diverse as well:
For immediate spending, you’ll need cash reserves, which almost don’t count as investments.
To preserve what you’ve already got and smooth out the ride, we turn to medium-term holdings such as bonds.
For your long-term spending plans, nothing beats the overall staying power of owning a slice of the corporate pie, typically in the form of stocks, stock funds, or similar equity stakes in markets around the world.
On that last point, global equity markets are relatively dependable in one sense: by delivering on the success of collective human enterprise, they’ve delivered strong, inflation-busting returns in the long run. But these same markets are also quite chaotic in the near-term, with big, unpredictable price swings along the way. This means not all your dollars belong in this arena to begin with: only the ones you’re prepared to invest in for a good, long while. In other words:
Your cash reserves are for spending sooner than later. Your long-term investments are there for your future self, rather than as an ATM-like source for immediate spending.
Market-Timing vs. Financial Planning
How do you determine how long is “long-term” for your investments? Unfortunately, many investors use market-timing instead of personalized financial planning to decide when it’s time to move their money in and out of various positions. They pile into the action when markets surge and flee as they plummet. This is a timeless timing tragedy that foils the ability to preserve, if not grow, wealth over time.
Instead, use your own goals and investment timeframes to decide how much of your wealth to invest in pursuit of higher expected returns, as well as how much to shelter against the uncertainty.
For upcoming spending needs, your money may be best kept in cash or similar humdrum holdings. That way, it’s there when you need it. The catch is, cash and cash-like reserves aren’t expected to keep pace with inflation over time, which means your spending power gradually shrinks. So …
For spending that’s still years away, you’ll want to own positions that are expected to generate new wealth, rather than just maintain a status quo. That’s where the wonder of global enterprise comes in — aka, stocks. The catch here is, you must commit to keeping your future money patiently invested and ride out the downturns along the way.
Estimating your Time Horizon
Even if you’re committed to financial planning, it’s surprisingly common to underestimate how much time you’ve actually got to invest. For a couple retiring at age 65, there is a 50% chance one of you will live past age 90, which means your retirement timeline could be 25–30 years, or more. Extend it even further if you’d also like to leave a substantial financial legacy. Continue Reading…
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