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If we waited for an ideal time to start a lifetime of investing, few of us would ever get into the stock market at all.
The March crash was a great time, in retrospect. But a lot of investors held back because they worried about worse losses ahead as the pandemic spread globally. Stocks have powered back from their lows with a vengeance, which brings a new set of complications. If the economic recovery from the pandemic disappoints, stocks could fall again.
We have two vastly different sets of market conditions in March and August, but a common sense of caution about whether it’s a good time to start investing. I offer this up as context for a recent question from a reader in Toronto: “My 27-year-old has never invested and is asking is this a good time to start? She is thinking of using a robo-adviser and has about $50,000 to invest. What would you suggest about timing and robo investment?”
First off, thumbs up to the idea of using a robo-adviser. It’s a cost-effective way for investing newcomers to instantly start building a well-diversified portfolio of exchange-traded funds with a risk level tied to their personal needs.
Is now a good time to start investing through a robo-adviser or any other channel? Any time is a good time, if you handle it right.
This reader’s daughter should consider a plan to have a preset amount transferred electronically to the robo account and invested every time she gets paid. As for the $50,000, she should give some thought to a staggered approach. Maybe invest $10,000 right now and an additional $5,000 each month for the next eight months. This would be in addition to those regular contributions from her paycheque.
Invest the entire $50,000 now and she runs the risk of getting hit by a nasty market pullback that shears off 20 per cent or 30 per cent of her investment in short order. Hold off on investing the $50,000 until after a crash and she runs the risk of missing the rally that follows all market downturns. It’s asking a lot for an investing rookie to put $50,000 into a stock market that seems to be falling off a cliff.
— Rob Carrick
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Stocks to ponder
The Rundown
Stay patient if the pandemic’s get-rich-quick phase has you feeling left out
Who knew five months ago that the pandemic would be such a money-making opportunity? Stocks are flying, the housing market is surging, gold has popped and bitcoin’s on a tear. Did you miss the memo about pivoting from financial self-preservation to aggressive speculation? Feeling left out because you played it safe while others were daring?, writes Rob Carrick (for Globe subs)
How can Wall Street be so healthy when Main Street isn’t?
The stock market is not the economy. Rarely has that adage been as clear as it is now. An amazing, months-long rally means the S&P 500 is roughly back to where it was before the coronavirus slammed the U.S., even though millions of workers are still getting unemployment benefits and businesses continue to shutter across the country. The Associated Press reports (for Globe subs)
Trading in securities could jeopardize your CERB benefits
As CERB benefits end, the Canada Revenue Agency’s review of Canadians who received the benefit will move into high gear. There are some recipients who may mistakenly think they’re entitled to CERB, but the taxman might disagree and ask for repayment. I’m talking about frequent traders in securities, including day traders. Tim Cestnick explains (for Globe subs)
Others (for subscribers)
Insiders continue their contrarian buying at Corus Entertainment
The week’s most oversold and overbought stocks on the TSX
Friday’s analyst upgrades and downgrades
Friday’s Insider Report: CEO invests nearly $1-million in this beaten-down stock
Thursday’s analyst upgrades and downgrades
Ten U.S.-listed technology companies with solid earnings growth
Nine global equity ETFs to augment your portfolio and reduce home-country bias
Investors in Belarus face ‘dictator dilemma’, Putin may hold the key
Others (for everyone)
Biden victory? Disputed election? Wall Street prices in November outcomes
Impasse! World market themes for the week ahead
Commodity traders face rising finance costs as big banks pull out
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Ask Globe Investor
Question: I would like to get some technology exposure for my portfolio. What do you recommend?
Answer: Unless you have a deep understanding of the technology space, I would not recommend buying individual tech stocks. A low-cost exchange-traded fund that provides diversified exposure is a better bet because it will help to control your risk. I’ll discuss a few worthy candidates among the dozens available.
The iShares Core S&P U.S. Growth ETF (IUSG) isn’t specifically a technology fund, but nearly 40 per cent of its weighting is in tech stocks such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Facebook Inc. (FB) and Alphabet Inc. (GOOG). You’ll also find plenty of non-tech growth stalwarts such as Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG), which increases diversification and may enhance stability. IUSG’s management expense ratio is a rock-bottom 0.04 per cent and the fund pays a modest dividend yield of about 1.4 per cent.
For a pure-play tech fund, consider the Vanguard Information Technology ETF (VGT), which has an MER of 0.1 per cent. If you’re investing in IUSG, VGT or any of the dozens of other U.S.-listed growth or technology ETFs, keep in mind that you’ll need to buy them in U.S. dollars. This exposes you to currency conversion costs and exchange-rate volatility. If you want to eliminate or at least minimize such currency impacts, consider a Canadian-listed ETF such as the BMO Nasdaq 100 Equity Hedged to CAD Index ETF (ZQQ), which has about half of its assets in technology stocks and charges an MER of 0.39 per cent.
— John Heinzl
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Compiled by Globe Investor Staff
