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Robert G. Allen, author of several best-selling personal finance books once asked, “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”
Using a savings account and an emergency fund for short-term expenses is important, but investing for retirement and the future is arguably just as crucial. While it may feel pointless to start investing if you don’t have much money, it can still be incredibly worthwhile. Think of it this way: few, if any, start investing with a large sum of money. For many, growing your wealth happens over years and years and is a slow and steady process.
By starting slow, even with a small amount of cash, you can begin to establish the habit of investing regularly, which will hopefully lead to a large nest egg in the future.
Select details why you should start investing today, even if you don’t have a large amount of money to start with.
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Why you should start investing today
Investing can be an intimidating word and concept for many reasons. There are a large amount of terms, tax implications, planning and investments to understand — along with knowing there will be market fluctuations making your net worth go up and down. But by understanding the mere basics, you can begin to grow your wealth quickly.
Corbin Blackwell CFP, senior financial planner at wealth management app Betterment, told Select that, “Investing is one of the best ways to grow your long-term wealth and reach major goals for things like retirement, buying a home and college funds.”
He also said that beginning the investing journey is often the most difficult part, as growth will be limited at first. He added that, “Tools available today, like digital investment advisors, make it easier than ever to get started.”
And by getting started today, you have the best asset that any investor can have on their side: time.
By letting your money sit in the market longer, you allow for compound interest to take over — which is when your interest and gains stack on top of one another. Blackwell gives an excellent example of the power of compound interest:
“Let’s say you invested just $100 today and saw a 5% annual return – thanks to the power of compound interest, if you don’t touch your investment, in 30 years you’d have $430.”
That’s an ok return, but imagine if you invested $100 monthly for 30 years into a common index fund. An index fund is a fund that has a group of companies within it, and tracks the performance of the entire group. These groups can range in focus including the size of each company, the respective industries, location of the companies, type of investment and more. One of the most popular indices, the S&P 500, consists of the 500 largest companies in the United States, making it a relatively safe investment because of its exposure to hundreds of companies and dozens of industries.
Many consider this a ‘boring investment,’ but the results the index has produced are nothing to balk at.
The average yearly return of the S&P 500 over the last 30 years is 10.7%, but even at a conservative return of 8%, you would have over $146,000 if you invest $100 a month for 30 years. The impressive part is that your total contributions would be $36,000, which means your money would have quadrupled in value in 30 years (note that past performance does not guarantee future success).
In short, the more money and more time you have in the market, the more likely you are to grow your investment funds.
S&P 500 Index performance during the Covid-19 pandemic
How to begin investing
If growing your net worth is your goal, you can get started in just a few minutes. Here are a few things to consider:
Build a budget that works for you
Starting to invest with a small amount of money isn’t an issue. However, it’s important to know how much you can afford to invest, as you don’t want to harm your personal finances in the process. Blackwell urged, “as long as you aren’t using money [to invest] that you need to cover day to day expenses such as food, rent and high interest debt payments, I recommend you start investing.”
A budget gives you a way to see where your money is going each month, where you can possibly cut back and how much you can invest each month. You can set up a budget for yourself using a budgeting app, a spreadsheet or even a simple pen and paper. I use Personal Capital to manage my budget because I’m able to track my expenses and monitor the performance of my investments in one convenient app.
Regardless of which budgeting method works best for you, it’s important to have an established budget to understand how much you can invest each month without cutting into the money allocated towards your monthly essentials.
Select an investing “bucket” and investments
There are many different buckets you can fill with money, such as a Roth IRA, HSA, 529 or taxable brokerage account. Each of these accounts serve a different purpose and have different tax implications, so be sure to select one that makes sense for you. For example, a Roth IRA is great if you plan on being in a higher tax bracket when you retire — you’ll contribute after-tax income but all gains are tax-free after 59 and a half years old.
Once you select the type of account you want to invest within, you then must decide what type of investment to put your money into. This is the puzzling part for many, as there are an abundance of options, from ETFs to viral meme stocks to index funds and many more in-between.
For long term investors, index funds are a great solution as they have low fees, are low maintenance, provide wide exposure and many provide stable returns. In fact, John Bogle, the founder of Vanguard, summarizes the effectiveness of index funds in one analogy: “Don’t look for the needle in the haystack. Just buy the haystack.”
Regardless of which investment you choose, it’s important to evaluate your risk-tolerance and understand what you’re investing in. Be sure to do your own research, and potentially connect with an accredited financial advisor to discuss the best options.
Automate your investing
Once you determine how much you can and want to invest each month, it’s important to turn on auto-investing.
This is where money is taken out of your checking account each month and automatically deposited into your choice of investments. Choosing this option is important because it takes the leg work away from needing to invest each month. Additionally, studies show that we are built for ‘present bias‘ — which is the idea that the farther away something is, the less important it is. Essentially, it’s much easier to spend now, rather than save for later. Automating transfers from your checking account or paycheck into an investment account will help ensure you don’t spend money that you were planning on investing.
By automating your investments, you will be passively growing your nest egg and getting yourself closer to reaching your financial goals.
You may also want to consider a robo-advisor like Betterment or Wealthfront. Robo-advisors work by gathering information from you on your financial situation and investing goals to suggest investments that fit your needs and risk tolerance. After supplying this information, the robo-advisor will build you a portfolio based on your answers through computer algorithms and advanced software, with little to no work on your end. Plus, it will rebalance your investments over time based on your goals and changes in the market.
Best brokerages to get started
To begin investing, you’ll need to select a brokerage account provider. These brokerages serve as the intermediary between you and the seller of the stock or security you want to purchase.
When deciding on the best brokerage for you, be sure to consider these factors:
- Fees: These can range from minimum deposits, stock trade fees, mutual fund trade fees and more. Be sure to select a no- or low-fee brokerage.
- Ease of use: Each brokerage has a different website and mobile app. While this is much more subjective, it’s advantageous to use a brokerage with a web interface and experience you understand and enjoy.
- Promotions: From time to time, brokerages will offer bonuses to new users. For example, I recently signed up for a Fidelity brokerage account and earned a $100 bonus after depositing $50.
Below are a few of our favorite online brokerages:
Information about Fidelity accounts has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
$0 for stocks, ETFs, options and some mutual funds
Stocks, bonds, fractional shares, ETFs, mutual funds, options
$0 commission on stocks, options and ETFs
Includes stocks, bonds, mutual funds, ETFs, options, Forex, and futures
Information about the Vanguard accounts has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
Stocks, bonds, ETFs, mutual funds, options, CDs
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Bitcoin investors dig in for long haul in ‘staggering’ shift
As bitcoin heads into 2022, a growing cohort of long-term investors is doubling down on its stashes of the cryptocurrency, hoping a December dip was merely a festive blip.
Some industry watchers point to the underlying stability of such long-term investments as potentially promising indicators for the capricious cryptocurrency.
Since last July, for example, the amount of bitcoin held in digital wallets with no outflows for more than five months has been steadily increasing, according to digital currency brokerage Genesis Trading.
In addition, the amount of the bitcoin held in “illiquid” wallets – which spend less than quarter of their inflows – is also rising, meaning fewer coin are being actively traded, it added, citing wallet data across several exchanges.
“The number of bitcoins that haven’t moved in over a year has been climbing since July,” said Noelle Acheson, head of market insights at Genesis Trading. “That’s pretty staggering.”
Many investors were nonetheless sent diving for cover in December when the world’s most popular cryptocurrency sunk almost 20%, roughly the same as the second-biggest coin ether, with risk appetite hit by inflation fears and a quicker pace of interest rate hikes from the U.S. Federal Reserve.
While bitcoin and ether both posted gains last week – up 2.9% to $43,107 and up 6.3% to $3,350, respectively – they are still some way off their 2021 highs of $69,000 and $4,868
Many cryptocurrency experts caution that no one has been known to reliably predict bitcoin’s characteristically wild price swings. In 2017, for example, it went from about $1,000 to around $20,000. In early 2020, it sunk below $4,000 at one point before beginning a dizzying rise.
Yet advocates of bitcoin and other coins say the increasing acceptance of cryptocurrencies in mainstream financial and investing in recent years has shored up the sector.
Cryptocurrency research firm Delphi Digital said their research showed a similar shift towards bitcoin being held for longer period by investors, which it said “illustrates a transference from shorter-term ‘weak hands’ to long-term ‘strong hands’.”
Crypto data platform Coinglass’s bitcoin Fear & Greed index, has wavered between 10 and 29 since the start of the year, which could be an indicator of a possible market bottom and buying opportunities, according to Will Hamilton, head of trading & research at Trovio Capital Management.
“Previous market bottoms in July 2021 and March 2020 correlated with Fear and Greed scores of 19 and 10 respectively,” he added.
For the uninitiated, 0 indicates “extreme fear” and 100 is “extreme greed”
MUSK AND DOGE
There were, meanwhile, more headlines for cryptocurrencies last week.
Meme-based dogecoin stole the spotlight after Tesla CEO Elon Musk tweeted that the company would accept it as payment for select merchandise.
The tweet sent dogecoin up nearly 12%.
“If more people are looking to buy Tesla merchandise with dogecoin then there’s more demand,” Acheson said, adding that this move could improve fundamental factors for dogecoin.
Cryptocurrency Solana was another altcoin in focus, with Bank of America analysts saying the Solana blockchain could pull market share away from ethereum and “could become the Visa of the digital asset ecosystem”.
Elsewhere, bitcoin miners bounced back from mining crackdowns in China and the recent unrest in Kazakhstan, one of the world’s primary centres for bitcoin mining.
Bitcoin’s mean “hash rate” a measure of the power of the bitcoin computing network, touched an all time high of over 215 million terahashes per second on Thursday, according to blockchain data provider Glassnode.
(Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Vidya Ranganathan and Pravin Char) (more…)
The Daily — Canada's international transactions in securities, November 2021 – Statistique Canada
Foreign investors acquired $30.1 billion of Canadian securities in November, the largest investment since April 2020. At the same time, Canadian investors increased their holdings of foreign securities by $17.5 billion, led by purchases of US shares.
As a result, international transactions in securities generated a net inflow of funds of $12.6 billion in the Canadian economy in November.
The largest foreign investment in Canadian securities since April 2020
Foreign acquisitions of Canadian securities totalled $30.1 billion in November, the largest investment since April 2020, during the first wave of the COVID-19 pandemic in Canada. In November, foreign investment targeted federal government debt securities, and to a lesser extent, private corporate debt securities. A foreign divestment in Canadian equities moderated the overall acquisition activity in the month.
Foreign investors added $31.4 billion of debt securities to their portfolios in November, up from a $20.4 billion investment in October. This activity mainly reflected purchases of federal government debt securities, both bonds ($8.6 billion) and money market instruments ($6.5 billion). In addition, investors added $9.8 billion of private corporate debt securities to their holdings in November, a seventh consecutive monthly investment, for a total of $87.6 billion. In November, Canadian long-term interest rates rose to the highest level since February 2019. Meanwhile, the Canadian dollar depreciated against the US dollar.
Non-resident investors reduced their overall exposure to the Canadian equity market by $1.3 billion in November, after three consecutive months of investment. The reduction reflected retirements of Canadian portfolio shares resulting from cross-border merger and acquisition activities. Foreign purchases of Canadian shares on the secondary market, led by shares of chartered banks, moderated the overall reduction in the month. Canadian share prices, as measured by the Standard and Poor’s/TSX composite index, were down by 1.8% in November after reaching a record-high level in October.
Canadian investment in foreign securities rebounds
Canadian acquisitions of foreign securities reached $17.5 billion in November, up from a $5.4 billion investment in October and similar to the average investment observed in August and September. The investment activity in November was led by acquisitions of US shares.
Canadian investors added $7.4 billion of US shares to their holdings in November, following an investment of $652 million in October. The activity in November focused on shares of large capitalization technology firms and investment fund shares tracking broad market indices. US stock prices, as measured by the Standard and Poor’s 500 composite index, were down by 0.8% in November. In addition, Canadian investors purchased $4.0 billion of non-US foreign shares, after a divestment of $2.5 billion in October. November’s investment mainly targeted British companies’ shares.
Meanwhile, Canadian investors added $6.1 billion of foreign debt securities to their portfolios, mainly in US dollar-denominated instruments. This activity represented the 10th straight month of investment in foreign debt securities for a total of $47.4 billion. Investment in November mainly focused on US corporate bonds ($2.8 billion) and US government bonds ($1.6 billion). In November, Canadian long-term interest rates exceeded their US counterpart with the largest value increase since August 2011.
Note to readers
The data series on international transactions in securities covers portfolio transactions in equity and investment fund shares, bonds and money market instruments for both Canadian and foreign issues. This activity excludes transactions in equity and debt instruments between affiliated enterprises, which are classified as foreign direct investment in international accounts.
Equity and investment fund shares include common and preferred equities, as well as units or shares of investment funds. For the sake of brevity, the terms “shares” and “equity and investment fund shares” have the same meaning.
Debt securities include bonds and money market instruments.
Bonds have an original term to maturity of more than one year.
Money market instruments have an original term to maturity of one year or less.
Government of Canada paper includes Treasury bills and US-dollar Canada bills.
All values in this release are net transactions unless otherwise stated.
Data on Canada’s international transactions in securities for December 2021 will be released on February 17, 2022.
The data visualization product “Securities statistics,” part of the series Statistics Canada – Data Visualization Products (), is available online. 71-607-X
The Canada and the World Statistics Hub () is available online. This product illustrates the nature and extent of Canada’s economic and financial relationship with the world using interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel between Canada and a number of countries, including the United States, the United Kingdom, Mexico, China and Japan. 13-609-X
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; email@example.com) or Media Relations (firstname.lastname@example.org).
Singapore REITs Double Their Overseas Investment to $12 Billion – BNN
(Bloomberg) — Singapore’s property managers are accelerating their push abroad as a slow reopening and diminishing returns at home force them to look for growth opportunities elsewhere.
Foreign acquisitions by real estate investment trusts in the city-state jumped to an all-time high of 61 last year, data compiled by Bloomberg show. The total value of such deals also more than doubled from 2020 to $12.3 billion.
Property managers in Singapore — which boasts the most REITs in Asia outside of Japan — have long shown global ambitions, with overseas investments picking up during the pandemic. But a limited reopening coupled with the anticipated omicron surge is adding impetus to this drive, even as investor concerns over a slowing recovery grow.
“Singapore’s commercial REITs may continue to rely on overseas M&A to achieve income growth in 2022, especially if omicron brings more uncertainty on further easing of social and traveling curbs to boost retail and office leasing demand in the country,” said Bloomberg Intelligence analyst Patrick Wong.
A $3.1 billion merger of Mapletree Commercial Trust with Mapletree North Asia Commercial Trust proposed last month is the latest in a series of moves that have seen managers long comfortable with a domestic presence favor a more global footprint. Also in December, another REIT targeting retail outlets in the city-state, CapitaLand Integrated Commercial Trust, made a foray into its second overseas market with office acquisitions in Australia.
Investors like the stability a local focus can offer, Sharon Lim, the chief executive officer of the manager of Mapletree Commercial to told reporters last month, but her trust needs to be better placed to take on new opportunities overseas and achieve “meaningful long-term expansion.” Lim’s REIT, which she described as the “last of the Mohicans” with only Singapore-centric assets will see its domestic holdings shrink to 51% within the new merged entity.
Overseas diversification may alienate some investors, however, with Mapletree Commercial’s shares having declined more than 8% since the merger was announced. “Investors whose mandate demands only Singapore exposure may look at other counters,” said Krishna Guha, a senior analyst at Jefferies Financial Group Inc, adding that execution and foreign exchange risks may rise.
Still, while the CEO of Singapore’s tourism board Keith Tan has warned that a full recovery in visitor numbers is unlikely until 2025, a reopening dividend might yet emerge. Officials in the financial center have affirmed their determination to live with the virus and keep its borders open, while easing some restrictions, including allowing some workers back into offices.
Singapore’s latest property investment manager Capitaland Investment Ltd. — a spinoff of one of the country’s largest developers — said it will remain committed to local investments despite a growing foreign portfolio.
Singapore will continue to be a “core market” and is attracting strong interest from wealthy individuals, including a growing number of family offices, said CEO Lee Chee Koon in an emailed response to questions about its plans. “But given the physical growth constraints, the relative size of our Singapore business within our portfolio will become smaller over time, as we expand and deepen our interests in overseas markets.”
Investors have validated this strategy so far, with Capitaland Investment emerging as the second-best performer on the benchmark Straits Times Index since its trading debut in September last year, having advanced by over 21%.
The overseas growth fervor is unlikely to dim. A limited pool of good quality assets as well as increasing competition from global funds have also pushed yields lower, said Vijay Natarajan, a real estate analyst at RHB Research Institute. Capitaland’s Lee also expects stronger Asian-based competition to emerge over time.
Instead, deep liquidity pools in overseas markets like the U.K., U.S. and Australia, as well as more alluring freehold and longer lease terms will maintain the draw of markets abroad, said Natarajan. “We expect this trend of overseas acquisitions to continue.”
Footnotes to second chart:
- Chart displays % of foreign AUM of top eight REITs by market capitalization
- Excluded names are Capitaland Integrated Commercial Trust, created through a merger in 2020, while Mapletree Commercial Trust and Frasers Logistics & Commercial Trust are pure geographical plays
- Mapletree REITs’ financial years end in March (E.g. For FY 2020: March 2021 rather than Dec. 2020)
©2022 Bloomberg L.P.
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