Tag Archives: investing

History lessons for managing Market Mishaps: 10 things you can do

Posted By Financial Independence Hub | July 6, 2021

By Steve Lowrie, CFA

Special to the Financial Independence Hub

If there’s a consolation prize for growing older, it’s that we get to learn an increasing number of history lessons first-hand. Take, for example, my past post on lessons from the 2008–2009 bear market: “What Should I Do – or NOT Do – During the Next Bear Market?” One suggestion I made for when the next bear came along (now here), was to revisit the article and review the lessons history has to offer us … if only we will heed them.

Good idea. The circumstances precipitating each event may vary, but the abiding lessons remain relevant every time. Continuing the theme, today’s post combines a two-part series revisiting 10 points on how to navigate down markets and economic crises.

Since most of us prefer action to idleness, we’ll first cover the following five actions you can take to help. In part 2, right below Part 1 here on the Hub, we’ll cover five things not to do in troubled financial times.

#1: Simplify

It’s hard to remain calm in turbulent times, when everything seems to be happening at once. To help, try embracing simplicity, in your life and your financial plans. That’s not always so easy! Here are two pieces to assist:

Why Simplicity Beats Complexity

Simple Investing Isn’t Easy

#2: Trust the evidence to avoid “the big mistake.”

Every investor yearns to buy low and sell high. But many end up doing just the opposite in a crisis, assuming, “this time, it’s different.” Here’s a post on using evidence-based history to avoid making this big (if common) mistake:

How Evidence Based Investing Saves Long-Term Wealth by Avoiding the Big Mistake

#3: Control the controllable

When the world around us seems especially chaotic, it can feel as if we have no say over anything. There are some greater forces we must leave to fate, but disciplined portfolio management needn’t be one of them, as described in this important January 2019 post:

The Best Year-End Commentary Almost Never Published

#4: Rebalance back to plan

Among the most important “controllables” is sticking to your personalized investment mix by rebalancing your portfolio back to plan during down markets. Because this typically calls for selling excess bonds and buying low-priced stocks, rebalancing can feel scary and counterintuitive at the time. Here’s a piece on why it’s still a sensible thing to do:

Rebalancing in Down Markets: Scary, But Important

#5: Maintain an adequate lifestyle reserve

So, this last one was much better completed in advance. Still, it’s worth using the current crisis to see how you feel about past efforts: Are your current lifestyle reserves enough for now? If the answer is no, make a note to revisit this piece in the future … for next time. Continue Reading…

Whose Bias is it, anyway?

Posted By Financial Independence Hub | June 30, 2021

One of the great benefits of living in a free society is that people can have legitimate differences of opinion about the meaning of information and best courses of action. In this space and, more recently, on social media, I have taken to pointing out the small army of credible sources who concur with my viewpoint that markets are frothy and likely headed for a significant tumble. Not surprisingly, there are plenty of folks who think things look rosy and that there are no significant storm clouds on the horizon at all. Obviously, we can’t both be right.

What I find interesting is that I have critics who allege that I am guilty of confirmation bias, a behavioural economics term that suggests people only seek out evidence that supports their pre-existing viewpoint. While I certainly acknowledge that that might be possible, I find it interesting that the people making the accusation don’t recognize that the same allegation could be levied against them just as easily. Both sides of the ongoing debate about what might be in store on the capital markets horizon could be accused of looking primarily, perhaps even exclusively, at information that supports their preferred narrative. How exactly does one prove that one’s thinking has been fulsome and comprehensive? Continue Reading…

8 Small Business investing options

Posted By Financial Independence Hub | June 1, 2021

What is one investment option that a small business should consider? Why?

To help your small business take on different investment options, we asked financial experts and small business leaders this question for their best investment ideas. From consulting a tax expert to getting into stocks and shares, there are several smart investment tips that may help your small business.

Here are eight investment options that small businesses should consider:

Learn About Objectives & Preferences
Consult an International Tax Expert
Invest in Your People
Help Fund Your Home Base
Find Companies That Improve Lives
Build Wealth with Index Funds
Think About Retirement Early
Get into Stocks and Shares

Learn About Objectives & Preferences

As any sound advisor will say, the best investment options for a small business truly are based on a personal situation. Some small businesses want more flexibility and control with their savings. Others are looking for less risk and fees. Before looking at investment options, small business owners should learn about their objectives and preferences. Then, they can see how investment options like life insurance or annuities can improve their financial position by safely growing their money while protecting it from tax and market risks. —Chris Abrams, Marcan Insurance

Consult an International Tax Expert

Investment options depend on a small business owner’s situation. Small business owners located overseas must understand that tax laws can differ considerably from country to country and impact their assets, financial accounts, and investments. That’s why consulting with an international tax attorney on issues like cross-border tax structuring, and compliance needs to be a part of the process. Investments aren’t just about the return; they’re also about the tax ramifications and savings by making the right choices. — Jason Kovan, International Tax Attorney

Invest in your People

Some of the most successful businesses tend to have a people-first mentality. An investment in people, whether that is putting in the time to make your customers happy or providing the resources necessary for happier employees, is an investment in your business’ success. If your customers are happy, they will recommend your business to their family and friends. If your employees are happy, they will be more willing to invest their time and efforts into the company’s goals and vision for the long term. — Brianna Vaughan, LendThrive

Help fund your Home Base

Invest in municipal bonds to help fund and develop your home base where most of your customers are located. These types of bonds offer a way to build interest while preserving your capital. They also have some tax benefits. Many municipal bonds are exempt from federal income tax as well as state and local taxes. — Rronniba Pemberton, Markitors

Find companies that Improve Lives

Investing in tech companies and products like ours helps to advance the industry and improve our daily lives. Predictive text and real-time spelling correction capabilities help to open doors for more opportunities not only for your business, but also your customers and employees who struggle with text. It also helps to improve overall productivity to maximize daily efforts. Continue Reading…

SPACs, NFTs and another Tech-inspired Silly Season

Posted By Financial Independence Hub | March 23, 2021

By Steve Lowrie, CFA

Special to the Financial Independence Hub

Is it just our imagination or has there been an uptick lately in exciting “new” trading tactics for seizing riches from exotic new markets?

After a year of sitting at home, an excitable generation of do-it-yourself traders has replaced traditional leisure-time activities with online pursuits: including aggressive, Tweet-worthy trading for fun and profit.

The result? Waves of volatile financial feeding frenzies and overnight sensations, egged on by a brood of freshly hatched social media stars and a spate of flashy new trading platforms with captivating names like Robinhood.

All this might seem new and different, if I hadn’t already seen such eerily similar circumstances so often before, with so many unhappy endings. I suppose that puts me in the same curmudgeonly camp as 97-year-old billionaire Charlie Munger (Warren Buffett’s long-time Berkshire Hathaway partner). He pulled no punches in this recent interview about Robinhood:

“[Some] may call it investing,” he said, “but that’s all bulls**t. It’s really just wild speculation, like casino gambling or racetrack betting. There’s a long history of destructive capitalism, these trading orgies whooped up by the people who profit from them.”

Speaking of Warren Buffett, a recent Financial Post article asked the question: “What would Warren Buffett make of this stock market silly season?” The answer was that he already has weighed in on the matter many times before, including one of my favourite “Buffettisms”:

“The stock market is a device for transferring money from the impatient to the patient.”

Impatience in Action

But maybe this time is different after all? Let’s take a closer look. The current wave of “get rich quick” mentality launched in January 2021, when a Reddit-driven rally abruptly sent the prices of several unloved stocks like GameStop through the roof.

More recently, special purpose acquisition companies (SPACs) have captured a lot of attention. “When SPAC-Man Chamath Palihapitiya Speaks, Reddit and Wall Street Listen,” observed a recent Wall Street Journal column. “Amateur traders hang on [Palihapitiya’s] every word for clues about his next target: and for the insults he hurls at the high-finance elite.”

Non-fungible tokens (NFTs) have also been taking the trading world by storm. If you think of an NFT as being like a collectible — say, an autographed baseball card — but in digital format, you’re getting close to envisioning its worth. Similar to playing cards, people are collecting these pieces of code, typically exchanging them in cryptocurrency such as bitcoin.

How much can an NFT be worth if the collectible attached to it is in high demand? However much the market decides. In this recent extreme case, “NFT Mania” garnered $69 million for a piece of digital artwork.

Innovations vs. Investments

At least on paper, some have amassed rapid fortunes by trading into these sorts of innovations to catch a wave of risk-laden opportunity. But will these brave speculators manage to convert their good fortune into lasting wealth once today’s trends fizzle or fly? Continue Reading…

Making the most of the money you already have

Posted By Financial Independence Hub | March 16, 2021

By Jim McKinley

Special to the Financial Independence Hub

It does not matter if you have $1,000 or $100,000 in your account: you probably want to make the most of the cash you have. But how, exactly, is this accomplished?

There are many strategies. The Financial Independence Hub details some of the easiest and most effective below.

Get Help

If money management is your weakest link, look for an accountant or financial consultant to help you get a better grip on your financial future. You can find experienced financial professionals through different online job boards and platforms.

Manage your Debt

There is nothing wrong with having a house or car payment. These are debts that most people expect to take on. However, credit-card debt is something that eats away at your bank account more than you might imagine. According to Business Insider, average credit card interest rates in 2020 are more than 15 per cent. And these only compound, meaning that you pay interest on interest accrued each month as your balance continues to rise. Look at it this way: For every $100 you are in debt each month, you pay an extra $15. To keep more of your money, eliminate debt as soon as possible. Pay down your lowest balances first and then add that payment each month to your high-balance cards.

Check your Bank Accounts

When it comes to bank accounts, there are two primary types of accounts you might think about: chequing and savings. What you may not realize is that each of these has different subcategories, and some pay higher interest rates than others, and you may only be getting a small interest payment each month. Consider switching to a money market, which has a higher interest rate. Continue Reading…