Kudos to the digital broker Questrade for getting the jump on its competitors in offering a First Home Savings Account, the new and best way to save for a home down payment.
FHSAs combine the best elements of tax-free savings accounts and registered retirement savings plans in that investment gains and withdrawals are not taxed, and you get a tax deduction for contributions. Let’s take a look at a cheap and simple FHSA investing strategy you could put into effect at Questrade, or any other broker.
Questrade has zero commissions for buying exchange-traded funds, so we’ll use those as a portfolio building block. Normal commissions apply when selling, but you’ll be doing a lot more buying than selling in the years you own an FHSA.
To minimize the work involved, asset allocation ETFS will be used for the FHSA portfolio. These ETFs are pre-fab portfolios tuned to different levels of risk tolerance. There are conservative, balanced, growth and all-stock versions, each with a different mix of underlying fund holding bonds and stocks from Canada, the United States and other parts of the world. You don’t need anything else in your FHSA than one well chosen asset allocation ETF.
Go with the risk level that suits you when choosing an asset allocation ETF. For many people, a growth fund weighted 80 per cent stocks and 20 per cent bonds will make sense initially. Investors more comfortable with stock market risk could go with an all-equity fund.
FHSAs can remain open for as long as 15 years, or until the end of the year you turn 71. If you don’t buy a house at some point, you can transfer your FHSA into your RRSP tax-free or withdraw the money and pay tax.
Assuming you buy a house, you’ll want to tamp down some of the risk in your FHSA at some point. If you plan to keep the FHSA for 15 years, you could think about lowering the risk level around Year 12.
If you decide suddenly to start looking for a home, then de-risk your FHSA immediately. One way to do this would be to sell your aggressive asset allocation fund holdings and put the money into high interest savings account ETFs or mutual funds, or cashable guaranteed investment certificates.
Someone who is seriously looking to buy a home wants an FHSA that is both liquid and safe. You don’t want to be worrying about what the stock market is doing on the day you make an offer to buy a first home.
— Rob Carrick, personal finance columnist
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Stocks to ponder
Constellation Software Inc. (CSU-T) Its share price has surged to record highs after shaking off a lull in 2022, and David Berman says there’s at least one good reason to stick with this rally: The company is picking off acquisitions at a brisk pace.
Prime Mining Corp. (PRYM-X) This exploration company has seen its share price jump 42 per cent year-to-date and the average one-year target price implies the share price may nearly double over the next year. Jennifer Dowty looks at the investment case.
The Rundown
Want to know how to profit from AI? Here’s what ChatGPT advises
How we can profit from the dizzying new branch of science known as artificial intelligence? What better way to find out than to go right to the source. Gordon Pape asked the question to ChatGPT. The reply he received in less than a minute was impressive – and scary.
Looking to catch some smaller stocks with big dividends? Try the Perch portfolio
Norman Rothery’s “Perch Portfolio” screens for smaller-sized stocks in Canada that pay dividends and looks for low price-to-earnings ratios. Since 1999, it has more than doubled the annualized returns of the S&P/TSX Composite Index. He discusses the portfolio here and provides updates on this and other dividend and value portfolios here.
Being smart can take a while to pay off as an investor
Does it require unusual intelligence to succeed as an investor? Not really. All the evidence suggests the opposite may be closer to the truth. As Ian McGugan explains, true intelligence lies in managing your expectations – particularly when it comes to understanding what investing research can and can’t do for you.
Short seller bets against Canadian banks are nothing to worry about
The recent failure of three U.S. regional banks and the merger of Credit Suisse with UBS Group has heightened worries about the global financial system. What about Canadian banks – is the contagion going to spread to them? One way to assess the risk is to look at short-selling activity in bank stocks. And despite some headline-grabbing media reports last week about TD Bank, short sellers have not significantly ramped up their bets against any of the major banks when looked at from a wider perspective, as Larry MacDonald reports.
The 5-per-cent GIC is fading into the sunset – with one exception
We hit a sad milestone in GIC investing in early April – 5-per-cent returns were no longer widely available on terms of two through five years from alternative banks. Yet, they are still available for those clever enough to find them, as Rob Carrick reports.
‘Powell’s curve’ plunges to new lows, flashing US recession warning
The Federal Reserve’s preferred bond market signal of an upcoming recession has plunged to fresh lows, bolstering the case for those who believe the central bank will soon need to cut rates in order to revive economic activity.
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Ask Globe Investor
Question: In a recent article, there were references to meme stocks. I don’t have a clue what that term means. What is a meme stock? – Jane R.
Answer: A meme stock is one that becomes popular with retail investors through social media. They become the topic of on-line discussion groups, who sometimes use their collective buying power to purchase shares in a company to drive up the price. The results can be astounding. On Jan. 27, 2020, shares in GameStop (GME-N) reached a high of US$86.88, up 134 per cent from the day before. The company wasn’t worth anything like that, either from a financial or business perspective. Needless to say, the inflated price didn’t last long. Investors took profits and the shares plunged. By year-end, they were down to US$4.82.
We still see periodic social media activity around GameStop and other meme stocks. GME traded as high as US$49.85 in 2022. As I write, it’s at US$23.98. I don’t recommend GME or any other meme stock but some young investors love playing them, as if they were video games. The U.S. Securities and Exchange Commission has investigated but took no action, beyond issuing a report.
–Gordon Pape (Send questions to gordonpape@hotmail.com and write Globe Question in the subject line)
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.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
