TORONTO — Canadians are increasingly embracing do-it-yourself (DIY) investing, and younger investors appear to be more eager than others to go it alone.
According to research firm Investor Economics, Canadians opened more than 2.3 million new self-directed investment accounts in 2020, up from 846,000 in 2019.
However, the appetite for professional financial advice breaks sharply along generational lines. A May 2021 report from global comparison site Finder.com found that one-third of millennials said they planned to stop working with their financial adviser or were seriously contemplating it, compared with 21 per cent of generation X and 11 per cent of baby boomers.
Some financial experts are concerned that in the age of meme stocks, cryptocurrencies and the current bull market, young people may be overlooking the value of advice and urge DIY investors to exercise caution.
Jason Pereira, partner at Toronto-based Woodgate Financial, explained that since many young people are priced out of buying real estate in major cities, there’s a level of despondency that’s led to risky investments.
“A lot of [DIYers] feel stuck because they can’t do the next thing to get ahead, so they’re buying lottery tickets [in the form of investments],” Pereira said.
“DIY can be fine. Absolutely,” he added, explaining that there are people in the DIY community reading the right blogs or getting the right advice and doing something akin to what a good financial adviser has done for them. However, he doesn’t think that’s the norm.
“I don’t see anyone talking about buying Vanguard’s balanced portfolio, for example, and letting it ride. It’s all GameStop and crypto and Tesla options and whatever the next fast buck is. There is no contemplation around sustainability or around security or around risk tolerance.”
Galen Nuttall, certified financial planner at Freedom 55 Financial in Belleville, Ont., said putting money away in the first place is one of the toughest aspects of investing.
“If DIY investing is helping millennials take that first step to save money, then that part is positive,” he said.
“But how they invest once they are saving gets a bit more tricky,” he added, noting that young people who benefit the least from DIY are those who are confused about where to start and don’t have the desire to figure it all out or are struggling to figure it all out.
For example, one area that DIY investors may overlook is which investments should go in which accounts, such as a TFSA, RRSP or non-registered accounts, Nuttall said.
“I’ve seen DIY investors have investments inside of a registered account that would eventually cause taxation problems that most people would be completely unaware of,” he said.
Some DIYers are unaware that some foreign investments will incur a withholding tax, even inside of a registered account, so they won’t reap the full benefit, he added.
Millie Gormely, a certified financial planner at IG Wealth Management in Thunder Bay, Ont., worries about increased interest in DIY among younger adults because the majority of millennials haven’t lived through a recession as an investor.
“People don’t realize what it’s like when the TSX drops 200 points in a day, and then does it again the next day, and then it does it again the next day and it does it for four months straight, which is pretty much what happened in 2008,” she said.
“A lot of people bailed and got out of the market. They sold their investments when they were down and they learned to regret it because they ended up shooting themselves in the foot long-term.”
While millennials did witness the 2008 financial crisis, either in their adolescence or while entering their early adult years, Gormely pointed out that there’s a difference between observing what happened to your parents and experiencing it for yourself.
“It’s not that I think people shouldn’t invest on their own, but I do worry that not everybody who’s investing on their own is going to be able to stick with it when times are terrible as well as when times are good,” she said.
“In 2008, I spent a lot of time talking people off the ledge, so to speak. Those people were grateful they had someone to run things past and talk things through with.”
Pereira said part of the investment industry’s lack of traction with younger generations is a result of its decision to focus the conversation primarily around fees and returns, instead of explaining the value of advice. “There’s this belief that financial advice has to do with nothing more than investing,” he said.
“If we were smart about it and forward-thinking enough, we would’ve appealed to [millennials] when they were young with digital solutions and with conversations about how we’re going to evolve our services over time and how this is the point where your parents needed me, et cetera. Instead, all we’ve done is let them believe that financial advice is basically akin to gambling.”
For young people who feel priced out of advisory services because they don’t have enough investable assets to meet an adviser’s minimum requirements, Pereira said there are some options.
“There are fee-only planners out there and some have subscriber-based pricing where it’s a Netflix-style monthly price. The reality is just because you don’t have a lot of money in investment dollars, doesn’t mean you can’t get qualified advice.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
