Tag Archives: risk

“Scary” Investment moves to avoid

Shocked scared woman with financial market chart graphic going down on grey office wall background. Poor economy concept. Face expression, emotion, reaction

By Fraser Willson 

 Special to the Financial Independence Hub

 

If you have young children or grandchildren, you know what’s really important. Yes, it’s Halloween time again, which means you’ll see plenty of witches and vampires scurrying around. You’ll no doubt find these characters more amusing than frightening, but you don’t have to look far to find things that are a bit more alarming — such as these scary investment moves:

Paying too much attention to the headlines

Some headlines may seem unnerving, but don’t abandon your investment strategy just because the news of the day appears grim.

Chasing “hot” investments

You can get “hot” investment tips from the talking heads on television, your next-door neighbour or just about anybody. But even if the tip was accurate at one point, by the time you get to a “hot” investment, it may already be cooling down. And, even more importantly, it simply may not be appropriate for your individual risk tolerance and goals.

Ignoring different types of investment risk

Most investors are aware of the risk of losing principal when investing in stocks. But if you shun stocks totally in favour of perceived “risk-free” investments, you’d be making a mistake because all investments carry some type of risk. For example, with fixed-income investments, including GICs and bonds, one risk you may encounter is inflation risk — the risk that your investment will provide you with returns that won’t even keep up with inflation and will, therefore, result in a loss of purchasing power over time.

Another risk you can incur is interest-rate risk — the risk that new bonds will be issued at higher rates, driving down the price of your bonds. Bonds also carry the risk of default, though you can reduce this risk by sticking with bonds that receive the highest ratings from independent rating agencies.

Failing to diversify

If you only own one type of investment, and a market downturn affects that particular asset class, your portfolio could take a big hit. But by spreading your dollars among an array of vehicles, such as stocks, bonds and government securities, you can reduce the effects of volatility on your holdings. (Keep in mind, though, that diversification cannot guarantee profits or protect against loss.)

Focusing on the short term

If you concentrate too much on short-term results, you may react to a piece of bad news, or to a period of extreme price volatility, by making investment moves that are counterproductive to your goals. Furthermore, if you’re constantly seeking to instantaneously turn around losses, you’ll likely rack up fees, commissions and possibly taxes. Avoid all these hassles by keeping your eyes on the future and sticking to a long-term, personalized strategy.

You can’t always make the perfect investment choices. But by steering clear of the “scary” moves described above, you can work toward your long-term goals and hopefully avoid some of the more fearsome results.

0ec7e0fFraser Willson is a financial advisor and insurance agent for Edward Jones Investments. He works closely with families and businesses, helping them achieve their investment objectives in an organized and disciplined manner.

 

 

Why you should forget about buying Canadian marijuana stocks

 

Canadian marijuana stocks offer some speculative appeal — but here’s why we think you should avoid them

AMSTERDAM - AUGUST 26: Candy and cookies with marijuana for sale in the coffeeshop on August 26, 2014 in Amsterdam.

As you probably know, several U.S. states have decriminalized or legalized marijuana use and have begun authorizing legal production and sale of the plant. In Canada, marijuana has been legal for medical use for some time, and we are occasionally asked about Canadian marijuana stocks.

This change in the law is bound to lead to a shift in current and future marijuana production, from the underground economy to the legal economy, where it can be regulated, taxed and invested in. Tax revenues are already starting to roll in, but we haven’t found any Canadian marijuana stocks worthy of investment. So far, most of what we’ve seen are stock promotions.

We advise staying out of stock promotions of Canadian marijuana stocks businesses or anything else. They attract the wrong kind of people. Stock promotion is a take-the-money-and-run type of business. Most successful entrepreneurs value their reputations, and want to build a profitable, sustainable business that can pay off for investors. So they generally go into some other line of work, and stay out of stock promotion.

These days, it’s faster and easier than ever to launch a stock promotion, thanks to the Internet. One recent “penny pot” stock scam almost seems like an MBA-style case study on how to launch one of these frauds online.

We won’t name the penny stock company that is the subject of the promotion campaign, since it claims it’s not involved in the fraud. Let’s just refer to it as “Pot o’ Gold,” or POG for short.

The POG spam emails we’ve seen use the following techniques:

Continue Reading…

A walk along Risk Road, Part 2: Investing in a Slow-Growth world

MAWER_Jim Hall 4x6 Formal blue bg
Mawer’s CIO, Jim Hall

By Cameron Webster, CFA
Institutional Portfolio Manager, Mawer Investment Management Ltd.

Special to the Financial Independence Hub

A few weeks ago in Part 1 of this series, we ran an interview featuring Mawer’s chief investment officer, Jim Hall (pictured, left) about current interest-rate trends and deflation.

This is the follow-up interview, where we look in more depth at the problem of investing in a low-growth world.

As noted earlier, we at  Mawer spend a great deal of time asking and answering the question: So What? A company’s share price is down 6%…so what? A central bank moved interest rates up…so what? Google re-named itself Alphabet…so what?

It’s not always an easy question to answer and often leads us to ask even more questions in an effort to develop key investment insights. “So what?” is one of the questions that can lead us to investment action (or inaction) in our process of building well-diversified, resilient portfolios.

MAWER_Cameron-Webster-4x6-Formal-blue-bg
Cameron Webster

Cameron Webster: Jim, last time we discussed how Mawer’s quarterly risk review ranks macro risks on both probability of occurrence and degree of severity. Remind us why this is part of the investment process.

Jim Hall: It is not enough to just look at potential risks. We need to ask ourselves is it something we need to do something about? Is this something upon which we need to act? Is it important? That’s the value in evaluating these risks on both probability of occurrence and severity of consequence. Continue Reading…

Q&A with Mawer’s Jim Hall: Deflation and rising interest rates

MAWER_Cameron-Webster-4x6-Formal-blue-bg
Cameron Webster

By Cameron Webster, CFA
Institutional Portfolio Manager, Mawer Investment Management Ltd.

Special to the Financial Independence Hub

At Mawer, we spend a great deal of time asking and answering the question: So What? A company’s share price is down 6% … so what? A central bank moved interest rates up … so what?” Google re-named itself Alphabet … so what?”

It is not always an easy question to answer and often leads us to ask even more questions in an effort to develop key investment insights.

“So what?” is one of the questions that can lead us to investment action (or inaction) in our process of building well-diversified, resilient portfolios. In an effort to pass on our “so what” learnings, I interviewed our Chief Investment Officer, Jim Hall, with specific questions pertaining to his views on risks in the current environment.

Cameron Webster: Jim, Mawer conducts a quarterly risk review, rating macro risks on both probability of occurrence and degree of severity. I see a few with 9/10 on probability but lower severity and a few with the opposite profile, high severity, lower probability. Help us understand the way Mawer is viewing some of the broader risks at the top of the list right now.

MAWER_Jim Hall 4x6 Formal blue bg
Jim Hall

Jim Hall: It is not enough to just look at the rankings. We need to ask ourselves is it something we need to do something about? Is this something upon which we need to act? Is it a biggie? Is it important? That’s the value in evaluating these risks on both probability of occurrence and severity of consequence.

Continue Reading…

Should couples talk about money this Valentines weekend?

Shape of heart from hundred dollars at red backgroundBy Josh Miszk, Invisor

Special to the Financial Independence Hub

Almost half of married couples say their investing styles differ from that of their spouses, and about one-quarter of couples fight over money, according to a BMO survey.

While your romantic Valentine’s Day dinner may not be the best time to discuss finances, most of us agree that these discussions really do need to happen between couples. Here are a few tips that will help contribute to a sound financial future for couples.

 Keep it open and honest

 It’s important for couples to be on the same page when it comes to goal planning and how you intend to achieve these goals together. Adopt the “yours, mine and ours” approach and make your finances visible to your spouse so that you both will be in a better place to plan together for the future. For example, some advisors offer a consolidated household online view of their portfolio, which provides easy access to investment accounts for each spouse. Not only does that allow you to have a more holistic view of your position, but having it all in front of you at once can make it much simpler to digest.

 Talk about your goals

Smiling couple reading menu and choosing meal
Surely they’re not reading Findependence Day for this special night out?

Finances may not seem like fun dinner conversation, but talking about your goals can be. Start the conversation with questions like “what are your top goals/dreams?” or “where do you see yourself/us in 10-20 years”? The more you have that conversation, the better you can visualize what your goals are, and the easier they are to quantify.

Once you have identified your goals, start talking about how you will achieve them. It’ll make those goals seem less like a dream and more like a reality. Taking the first steps towards achieving those goals is one of the most rewarding feelings you can get. Continue Reading…