Over the past six weeks, our clients have come to us with a wide array of emotions and questions. They’ve ranged from great concern to unabashed enthusiasm, and everything in between. On the upbeat calls, one question initially caught me off guard —
“What do you think of me borrowing money and investing in bank stocks?”
I was surprised because usually this strategy comes up when markets have been good, and lenders are begging us to borrow money. Obviously, our current circumstance is quite different. Markets are down and have been hyper-volatile, partially due to the use of debt. Margin calls have caused forced selling which in turn has exaggerated price declines.
Look in the mirror
Nonetheless, I’m delighted by this contrarian thinking. After all, money is cheap and stocks are down, so the economics of borrowing to invest make sense. In the case of banks, the Big Five now have an average yield of over six per cent.
Even so, I don’t spend much time discussing the math when responding to these queries. My focus is on the behavioural challenges that go along with markets and leverage. Market gyrations like we had last month are difficult to navigate at the best of times, let alone when your market value has dipped below the loan value.
Investing with borrowed money can lead to disastrous results if you flinch when markets are down. Since this happens every two to three years, leverage is only for experienced investors who have successfully survived a bear market before.
Due diligence
It’s encouraging that the borrowing question is coming up at a time of upheaval and decisions are being based on the prospect of better future returns as opposed to great past returns. But the timing doesn’t make it a slam dunk. You still need to methodically go through a series of steps to determine if you’re ready to run your own hedge fund.
First, maximize the return from your existing portfolio.
This means dialling up your equity content, which will increase the return potential and importantly, serve as a trial run for your leveraged strategy. If you can’t stomach the volatility that goes with an all-equity portfolio, then borrowing to invest is not for you.
Assume modest returns and higher interest rates.
Make sure the strategy works even if stocks are slow to recover and the prime rate goes up. When debt is involved, you need a cushion.
Assess the stability of the loan, not just the investments.
Remember, your interests aren’t aligned with those of the bank. You’re trying to buy low and sell high, but when stocks are down, your banker is more likely to be pressuring you to sell, not buy. Banks will do whatever it takes to get their money back, whether it suits your timing or not.
In for the long haul
Make a five-year commitment.
This strategy must fit in with an overall financial plan that takes into account your future cash needs (i.e. renovations; college tuition; travel) and RRSP/TFSA contributions. You can’t count on the debt capacity you’re using to invest being available for other purposes for the next few years at least.
Diversify.
It’s psychologically and aesthetically pleasing when dividends cover the interest payments, but this should be a secondary consideration. Diversification is job one, which means not limiting yourself to high-dividend stocks in a few industries (i.e. banks, REITs and telcos) that operate in one economic region (Canada).
Buckle in
. We did some modelling a few years ago that compared an unlevered, all-stock portfolio to a balanced portfolio that was bought using borrowed funds. We went through a myriad of scenarios and kept coming up with the same conclusion. The returns and volatility of the two strategies were similar. A conservative portfolio that’s levered behaves much like a pure stock portfolio. In other words, you’re going to feel every little market wiggle, even if you’re invested in the bluest of blue-chip stocks.
Long-term investors should be taking advantage of lower stock prices, but using debt to do it is an aggressive strategy. It’s only suitable for investors who plan carefully, are already fully invested, and who know how they’ll react when the math isn’t working.
Tom Bradley is
chair and chief investment officer
at Steadyhand Investment Funds, a company that offers individual investors low-fee investment funds and clear-cut advice. He can be reached at
tbradley@steadyhand.com
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
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.
