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)
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
