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Hedging in the Retirement Risk Zone

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Bull Vs Bear stock market conceptMy latest MoneySense blog reveals some of my personal strategies for dealing with the bear market: How I’m preparing for Retirement in a bear market.

There may be a few ideas for anyone who, like myself, is in the “Retirement Risk Zone.” That’s the five years prior to and five years following your projected retirement date. If it’s 65, the traditional age, then the Risk Zone is between age 60 and 70. Based on the Hub’s demographic user patterns, a lot of people are in that category (although we actually have lots of millennial and Gen X traffic too on both sides of the border).

Towards the end of the blog, I talk about portfolio hedging. I have to credit my fee-for-service financial advisor for most of these concepts. He didn’t want to be named for the MoneySense blog but he is listed in the Hub’s “Guidance” section elsewhere in this site.

It took me awhile to accept that hedging — that is, using options or selling short certain ETFs representing the major indices — is as much a risk reduction strategy as it is a “risky” strategy.

Hedging means trading off some upside for downside protection

The best way I can describe it is that you’re willing to give up some upside in return for protecting the downside. Continue Reading…

FWB TV video: Can we expect lower returns in the future?

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Screen Shot 2016-01-18 at 2.07.41 PMThe latest FWB TV video is now up now here and at FWBSecurities.com, titled Can we expect lower returns in the future?.

As usual, it will also be housed at Findependence.TV.

The preamble to the 3.5-minute video observes that If you have invested for any length of time, you will have heard the expression “Past results are not an indication of future performance.” The best minds in the investment industry not only agree with that but some feel that in the coming years we should prepare ourselves for lower returns than we are used to.

The corollary to this is that If the markets are indeed prepared to not be as generous, then keeping fees as low as possible has never been more important. We need to keep as much of the overall return as possible. Continue Reading…

BMO’s much rumoured robo-adviser service officially launches

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Cute RobotAs the Hub predicted in October — BMO will be first big bank to enter robo-adviser space — the Bank of Montreal has officially launched a robo-adviser serviced called SmartFolio. According to Canadian Press, a trail run began on December 7th and it is now available to all investors as of Monday of this week.

CP notes that BMO is indeed the first of the big five banks to wade into the robo-adviser space, which shouldn’t come as a surprise, since it had led the banks with its own line of BMO ETFs.  Toronto Dominion Bank is also expected to enter the market shortly.

Focus on Millennials

Continue Reading…

It’s Blue Monday, and we’re ashamed of credit-card debt, study finds

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Sponsored Blog

Borrowell Blue Monday InfographicThe holidays are over, the weather is cold and dreary and credit-card bills are rolling in—it’s no wonder the third Monday in January is considered the most depressing day of the year, known as Blue Monday.

We know that Canadians carry a lot of credit-card debt, but beyond the numbers we wanted to understand how Canadians feel about their debt. So the team at Borrowell commissioned a survey of 1,500 Canadians to understand our emotions around credit-card debt.

To see Borrowell’s Blue Monday video, click on the red/white button in the centre of the video image above.

Shame can affect our relationships

It turns out Canadians feel a lot of shame around carrying debt, and it’s not only affecting how we feel and what we can do, but our personal relationships as well, as the infographic to the left shows.

Like many issues, shame can prevent us from seeking solutions. Feeling shame may be a factor in explaining why so many Canadians carry expensive credit-card debt – even those who have good credit and could get a lower interest rate somewhere else!

Take control of your finances

Although Blue Monday is supposed to be depressing, let’s not just wallow in self-pity with a tub of ice cream. Take control of your finances, take a step in the right direction and if you’re carrying a balance on your credit card, look into a lower-interest loan to pay it off.

For more information on Blue Monday, including more on the survey, check out www.borrowell.com/bluemonday.

 

Falling Loonie strategies

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The Canadian dollar or loonie is under pressure amid weak oil prices and a strengthening U.S. currency. Today, the loonie dropped to 78.39 cents for a U.S dollar the lowest in a many years.By Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

“Investors who have US cash and/or US portfolios are advised to revisit their currency strategies.”

Canada’s Loonie has been falling to under 70 Cents against the US Dollar.
Recall it climbed from near 86 cents in mid-2009 to over parity.

Many market forces, such as currencies, are well beyond investor control.
Currency adds yet another potential hazard or reward to portfolios.

Of course, currencies are extremely hard to predict. They can also move very quickly in either direction.

Treat currency as an asset class

Treat currency as an investment with longer time horizons. Those with US cash and/or US portfolio may consider the merits, if any, of converting to Canadian Dollars.

It is important to get a handle on the Canadian tax cost of the US cash/portfolio before taking any action. It may also make good sense, depending on account values, to convert on more than one occasion.

Other considerations: Continue Reading…