Tag Archives: investing

Stock Market Anxiety leads to Bad Investing Decisions. Here’s what to do instead

Ignore stock market anxiety and negative stock predictions and instead focus your investing strategy on diversification and portfolio balance

Image by Pexels/Markus Spiske

The current state of the world is generating stock market anxiety, as it often does. My guess is that the Israel-Hamas war is just getting started and will last a long time. I also suspect that Russian dictator Vladimir Putin had something to do with getting it started, and will do what he can to keep it going. After all, when it comes to running his country, Putin takes a grasping-at-straws approach.

Putin may think that bringing the longstanding Mideast conflict back into the headlines is going to improve his chances of conquering Ukraine and bringing the Soviet Union back from the dead.

He thinks taking a long shot is better than no shot at all. Who knows? He might get lucky.

Early on in his war on Ukraine, Putin seemed to think that Chinese dictator Xi Jinping was going to take pity on him and his country, and offer free money and/or weapons to shore up Russia’s Ukraine invasion. Instead, Xi insists on staying out of the war, while paying discount prices for Russian oil. He takes special care not to let his country get caught up in the economic sanctions that the U.S. and NATO countries and allies are directing against the Russians.

It’s not that Putin is stupid. If a war between Israel and Hamas turns out to be a big drain on the U.S. budget, the U.S. might have less money available to arm Ukraine.

Up till lately, however, Israel has had little to say about Russia’s treatment of Ukraine. Israel may soon take a more active role in helping Ukraine defend itself.

Any war is a terrible thing, and this one is no different. The stock market seems to be creeping upward. Maybe it knows something that Putin hasn’t figured out.

Meanwhile, if your stock portfolio makes sense to you, we advise against selling due to Mideast fears.

Stock market anxiety recedes with investment quality, diversification and portfolio balance

You’ll find that many of your worries concern things that are unlikely to happen; that are already largely discounted in current stock prices; and that probably won’t matter as much as you feared they would.

You get a much better return on time spent if you devote less of it to worrying about high-risk investments, and more of it to an investing strategy. Create a strategy that is built upon analyzing the quality and diversification of your investments, and the structure and balance of your portfolio.

There’s another advantage as well. A calm investor is much less likely to react in haste and make sudden decisions that could prove to be damaging in the long run. Continue Reading…

Building Financial Harmony: Strategies for a Positive Money Mindset

By Jim McKinley

Special to Financial Independence Hub

Our relationship with money often shapes many aspects of our lives, influencing decisions and perspectives. Developing a healthier connection with finances can lead to greater peace of mind and a stronger sense of control. By exploring thoughtful strategies, individuals can create a balanced approach that fosters both stability and growth.

Align Finances with Personal Values

Developing a personalized financial plan begins with identifying your core values and long-term aspirations. This process ensures that your financial decisions are purpose-driven and aligned with what matters most to you, whether it’s achieving financial independence, supporting family, or pursuing personal passions. Start by assessing your current financial situation, including income, expenses, and debts, and then outline specific, measurable goals that reflect your priorities.

Practice Mindful Spending

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Incorporating mindfulness into your financial habits can transform how you manage money. By consciously evaluating each purchase, you can determine if it aligns with your core values and long-term goals, reducing impulsive buying.

This practice fosters better financial decisions, increased savings, and improved financial security. Understanding the emotional cues that lead to unnecessary expenses allows you to address them effectively, minimizing the risk of falling into debt.

Mindfulness empowers you to make deliberate and informed financial choices, paving the way for a more stable and sustainable financial future.

Manage your Finances with Budget Templates

Mastering the art of budgeting is a crucial step in managing your finances. Creating a budget provides a clear picture of your income and expenses, helping you make informed decisions and avoid overspending. By sticking to a budget, you can save for future goals and reduce financial stress. To simplify this process, consider using budget templates, which offer a variety of styles to fit your circumstances. These templates are customizable, allowing you to tailor them to your unique financial situation and manage your finances more effectively—learn more about the benefits of using a budget template.

Embrace Zero-based Budgeting

Zero-based budgeting is a strategic approach that assigns a purpose to every dollar you earn, ensuring your spending aligns with your financial aspirations. By planning where each dollar goes—whether for essentials like housing and groceries or for savings and debt reduction—you can take charge of your financial destiny. This method is particularly advantageous for those with steady income, but it can be adapted for individuals with variable earnings by making monthly adjustments. Continue Reading…

Saving vs. Investing: Understanding the best approach for Findependence

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By Devin Partida

Special to Financial Independence Hub

Achieving Findependence [aka Financial Independence] requires a balanced strategy combining short-term stability and long-term growth.

Saving and investing both play crucial roles in this journey, serving different financial goals and timelines.

Explore how you can navigate these strategies to optimize your financial portfolio.

 

 

The Role of Saving: Security and Liquidity

Savings are the foundation of Findependence. An accessible savings account provides a safety net for emergencies, such as medical expenses or job loss. Experts recommend maintaining at least three to six months of living expenses in a high-yield savings account or money market fund for quick access.

Here are some key advantages of saving:

  • Risk-free growth: In addition to offering modest interest, savings accounts protect your principal from market fluctuations.
  • Short-term goals: Savings are ideal for upcoming expenses like vacations, home repairs or a new car.
  • Liquidity: Saving provides liquidity during unexpected situations. Certain saving vehicles — like 529 plans — also allow for tax-free growth and withdrawals for qualified expenses.
  • No market risk: Unlike investments, savings are not exposed to fluctuations, making them a reliable choice for safeguarding funds.
  • Psychological benefits: Having a financial safety net reduces stress and fosters confidence in your ability to handle unexpected events.
  • Flexibility: Savings provide liquidity without penalties, making it easy to pivot funds as priorities change.

However, relying solely on saving limits wealth-building potential due to inflation, which can erode the purchasing power of idle cash over time.

The Role of Investing: Growth and Wealth Accumulation

Investing is essential for long-term financial growth, particularly for goals like retirement or major life milestones. By allocating funds to stocks, bonds or mutual funds, you can potentially achieve higher returns that outpace inflation.

Here’s how investing can benefit you:

  • Compound returns: Investments grow exponentially over time due to reinvested earnings.
  • Inflation protection: Historically, investments in the stock market have delivered higher returns than inflation.
  • Wealth generation: Investing enables you to build significant assets over decades.
  • Diversification opportunities: Investments allow you to spread risk across various asset classes, industries and geographies.
  • Passive income generation: Certain investments — like dividend-paying stocks or rental properties — create ongoing income streams.
  • Long-term tax benefits: Investment accounts like individual retirement accounts (IRAs) or tax-free savings accounts (TFSAs) offer tax advantages that amplify growth over decades.

Investing does involve risks, including market volatility and potential losses. It requires a clear understanding of your risk tolerance and financial goals.

Savings and Investments: Finding the right balance

A well-balanced approach integrates saving and investing to address immediate needs and future aspirations. Here are steps to consider:

  • Assess your financial situation: Calculate your emergency savings and allocate sufficient funds to cover unexpected expenses.
  • Define your goals: Short-term goals may require savings, while long-term aspirations like retirement demand an investment strategy.
  • Evaluate risk tolerance: Younger individuals with longer timelines can generally afford higher-risk investments, while those nearing retirement may prefer conservative options.
  • Diversify your portfolio: A mix of savings and investments minimizes risk while capitalizing on growth opportunities.

Practical Tips for Success in Saving and Investing

Finding the perfect balance between saving and investing can seem daunting, but taking specific action steps can make the process manageable and effective. Here are additional practical tips to enhance your financial strategy: Continue Reading…

Financial industry’s forecasting is a mug’s game, especially under Trump

By John De Goey, CFP, CIM

Special to Financial Independence Hub

Around the middle of December, advisory firms and the people who work for them start putting out their retrospectives regarding the year that is just about to end and / or offer their forecast for the new year. I have long argued that forecasting is a mugs game. To the extent that I have grudgingly participated in the exercise previously, I have found it to be humbling. As such, I want to stress that what follows is not so much a forecast as it is a concern for what may – and I stress MAY – come to pass in light of what we already know about the incoming administration south of the border.

To begin, the President-elect is a criminal. He has literally been convicted of 34 felonies. This is in addition to two impeachments, various infidelities, an attempted insurrection, and the stealing of highly classified state secrets. We now have a good sense of what his cabinet will look like: assuming most of his forthcoming nominees are ultimately appointed. This is a man who is quite willing to appoint incompetent sycophants who will help him expand his ongoing criminal activity at the expense of more traditional character traits like relevant education, experience, and character. The notion of traditional public service seems to be foreign to many would-be cabinet appointees.

Will Trump manufacture a Recession?

Early in December, I was in Southern California and spoke with the founder of an AI company in Silicon Valley. He told me there is a theory making the rounds that Donald Trump intends to do something highly unconventional in his longstanding pursuit personal self-interest. The executive told me that a number of thought leaders are of the opinion that Trump intends to deliberately manufacture a recession immediately upon taking office.

Their view is that, given the experiences of both the global financial crisis and the COVID crisis, it has become apparent that when the economy is severely threatened and bailouts are required, billionaires and plutocrats end up doing very well. Meanwhile, ordinary middle-class people and those even lower on the social spectrum fall further behind.

In the aftermath of the election on November 5th, American capital markets responded favorably based on the presumption that lower taxes and less regulation would be highly stimulative and favourable for the economy. This view held sway even though the President-elect campaigned on a platform of indiscriminately-high tariffs, mass deportations, and a draconian cutting of government services via the department of government efficiency (DOGE).

There are some who fear that the promise to rein in the debt will be used as an excuse to cut back on government programs that ordinary Americans rely on. As it stands, approximately three quarters of all U.S. annual expenditures are fixed in law and allocated toward entitlements such as Medicare, Medicaid, and Social Security, as well as interest on the national debt.

Cutting US$2 trillion from the budget is simply impossible without encroaching on at least some of these programs. Stated differently, even if Trump were to cut all other programs (including the CIA in the SEC) to zero, the savings would still be less than the $2 trillion a year he pledged to cut. He will, of course, blame Joe Biden for “the mess he inherited” either way.

No fiscal Conservatives left in America

Meanwhile, the evidence shows that for over half a century, the U.S. accumulated debt has been growing under both major parties. It seems there are no fiscal conservatives left in America. Again, I stress, this is not a forecast, but rather a recounting of a narrative that several thoughtful people who live south of the border believe to be plausible. If you think wealth inequality and income inequality are a problem now, you could be in for a rude awakening if anything close to this narrative comes to pass.

As many people know, I have long been a proponent of efficient capital markets. Any person who espouses this view believes that prices reflect all available information to the point where it is impractical to think that mispricings are sufficiently large and identifiable so as to allow people to engage in trading that would allow that person to make material profit. The American stock market clearly does not subscribe to the narrative I’ve just outlined. Of course, consensus opinions can be wrong. In this instance, perhaps more than any other in my lifetime, I actively want the consensus to be correct. Continue Reading…

Great things you can do with your TFSA

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By Mark Seed, myownadvisor

Special to Financial Independence Hub

A Tax Free Savings Account (TFSA) is far more versatile and powerful than you might think.

Now that we’re into the start of a new year (Happy New Year!) here are some great things you can do with your TFSA.

TFSA Backgrounder

The TFSA was first introduced in the 2008 federal budget.

It became available to Canadians for the 2009 calendar year – as of January 1, 2009. Launched part-way through The Great Recession (where markets collapsed significantly during 2008 triggered by a financial crisis), the account was designed as a savings account (hence the name) to encourage Canadians to save more money.

But the “savings” word in the name is very misleading, no?

Correct. 

Since account introduction in 2009, adult Canadians have had a tremendous opportunity to save and grow their wealth tax-free like never before.

While this account is similar to a Registered Retirement Savings Plan (RRSP) there are some notable differences.

As with an RRSP, the TFSA is intended to help Canadians save money and plan for future expenses. The contributions you make to this tax-free account are with after-tax dollars and withdrawals are tax-free. Consider it like an RRSP account in reverse.

For savvy investors who open and use a self-directed TFSA for their investments, these investors can realize significant gains within this account. This means one of the best things about the TFSA is that there is no tax on investment income, including capital gains!

How good is that?!

Let me tell you … here is summary of many great account benefits:

  1. Capital gains and other investment income earned inside the account are not taxed.
  2. Withdrawals from the account are tax-free.
  3. Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, like future Old Age Security (OAS) income.
  4. Anything you withdraw can be re-contributed in a following year, in addition to that year’s contribution limit.
  5. While you cannot contribute directly as you could with an RRSP, you can give your spouse or common law partner money to put into their TFSA. Do it without any income attribution!
  6. TFSA assets could be transferable to the TFSA of a spouse or common-law partner upon death. More details below for you.
  7. The annual contribution limit is indexed to inflation in $500 increments, that happened in recent years …. and more!

I’ve got my preference for which account I focus on for wealth-building purposes (related to the RRSP vs. TFSA debate, including what account I would suggest you max out your contributions to first) but let’s compare each first:

RRSP

TFSA

A tax-deferral plan. A tax-free plan.
Contributions can be made with “before-tax” dollars as part of an employer-sponsored plan or “after-tax” dollars when a contribution is made with a financial institution. Contributions are made with “after-tax” dollars.

 

Contributions are tax deductible; you will get a refund roughly equal to the amount of multiplying your contribution by your tax rate. Contributions are not tax deductible; there is no refund to be had.
If you don’t contribute your maximum allowable amount in any given year you can carry forward contribution room, up to your limit.
If you make a withdrawal, contribution room is lost. If you make a withdrawal, amounts withdrawn create an equal amount of contribution room you can re-contribute the following year.
Because contributions weren’t taxed when they were made (you got a refund), contributions and investment earnings inside the plan are taxable upon withdrawal.  They are treated as income and taxed at your current tax rate. Because contributions were taxed (there was no refund), contributions and investing earnings inside the account are tax exempt upon withdrawal.
Since withdrawals are treated as income, withdrawals could reduce retirement government benefits. Withdrawals are not considered taxable income.  So, government income-tested benefits and tax credits such as the GST Credit, Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) aren’t affected by withdrawals.
You can’t contribute to an RRSP after age of 71. Accounts must be collapsed in the 71st year. You can contribute to a TFSA after age of 71.
The Summary:  part of your RRSP is borrowed money (i.e., you owe the government taxation.) The Summary:  all of your TFSA is your money.

Based on my personal investment plan, I feel the TFSA ultimately trumps the RRSP as a retirement vehicle to focus on first at any income level even though I contribute to both every year. All the money in the TFSA is mine to keep, grow and manage with no taxation withdrawal consequences.

Since inception, here are the annual and cumulative limits assuming no withdrawals over that period were made:

TFSA contribution limit 2009 to 2025:

Year TFSA Annual Limit TFSA Cumulative Limit
2009 $5,000 $5,000
2010 $5,000 $10,000
2011 $5,000 $15,000
2012 $5,000 $20,000
2013 $5,500 $25,500
2014 $5,500 $31,000
2015 $10,000 $41,000
2016 $5,500 $46,500
2017 $5,500 $52,000
2018 $5,500 $57,500
2019 $6,000 $63,500
2020 $6,000 $69,500
2021 $6,000 $75,500
2022 $6,000 $81,500
2023 $6,500 $88,000
2024 $7,000 $95,000
2025 $7,000 $102,000
Based on the recent bull run in recent years, I know some individuals that have over $200,000 in their TFSAs.

I also know some couples who have their combined TFSA assets worth more than $400,000 in value.

Pretty impressive tax-free money!!

Q&A with Mark – What has worked for me/us over the years?

Well, we’ve bought various assets, namely Canadian stocks and ETFs over the years.

To date, we have avoided any TFSA withdrawals. Instead, like I referenced above, we use our TFSAs for owning equities and wealth-building purposes.

Q&A with Mark – What types of investments can you own inside the TFSA?

Thankfully lots!

Similar to the assets you can hold within a Registered Retirement Savings Plan (RRSP), the TFSA can also be used to help Canadians build significant wealth beyond just holding cash savings. You can own a number of different types of investments inside the TFSA: Continue Reading…