Connect with us

Investment

How to create a DIY investing strategy – MoneySense

Published

 on


Keeping your risk tolerance in mind can help you steer clear of riskier strategies, like buying “on margin” (with borrowed money) or trading options, where you can lose more than your initial investment. Designed to amplify potential returns, these strategies also magnify risk.

3. Consider your investing time horizon

When planning your investment strategy, consider your age and life circumstances. Younger investors are often comfortable taking on more risk because they have plenty of time to recover from market downturns without losses affecting their assets, like real estate or retirement savings. As people get closer to retiring, they often shift their portfolio towards more conservative investments—for example, fewer stocks and more bonds. If you need help with determining your asset allocation, consider consulting a financial planner.

No matter your stage of life, if you decide to pursue higher-risk investments—such as cryptocurrencies or shares in startup companies—it’s smart to limit your exposure to an amount you can afford to lose.

4. Find credible investment research

Many people are getting investing ideas from Facebook, Instagram, TikTok and other social media platforms. Often, however, online investing information is superficial, incorrect, misleading or biased—meaning that investors still need to do their research.

Where should you look for investing guidance? In the past, only the most affluent Canadians had access to high-quality investment research. Now, however, affordable help is at hand, regardless of the size of your portfolio.

One example is Motley Fool Stock Advisor Canada. Motley Fool is a private financial and investing advice company, and Stock Advisor Canada is one of its premium members-only services. More than 70,000 members visit the site for investment ideas, independent analysis and educational materials.

Stock Advisor Canada does the research for you, so you can consider the pros and cons of each stock. “Starter Stocks” are Motley Fool’s foundational picks, which may be suitable for the core of your portfolio. “Best Buys Now” are timely trading opportunities chosen from a universe of more than 150 stocks.

New members can join for an introductory price of $99 (after the first year, the fee is $299). Each month, you’ll receive two fresh investment ideas, one Canadian and one American. You’ll get access to an extensive library of research—including reports, videos and podcasts—and a members-only forum where investors discuss ideas, ask questions and gather market intelligence. It’s like social media for investors, but without the scammers.

Adblock test (Why?)



Source link

Continue Reading

Investment

Why the sustainable investment Craze is flawed – Livemint

Published

 on


ESG funds, as they are known, promise to invest in companies with better environmental, social and governance attributes, to save the planet, improve worker conditions or, in the case of the US Vegan Climate ETF, prevent animals from being eaten.

Money has poured into ESG funds as noisy lobby groups push pension funds, university endowments and some central banks to shift their investments. The United Nations-supported Principles for Responsible Investment says signatories have $121 trillion of assets under management; even assuming lots of double-counting, that is most of the world’s managed money.

Over the next few weeks, Streetwise will explore the explosion of ESG investing and why I think it is mostly—but not completely—a waste of time. I will also offer up some solutions and discuss how to use your money to make a difference, while understanding the inevitable trade-offs.

ESG supporters can point to what look like successes: Their pressure has encouraged many companies to sell off dirty power plants, mines and, in the case of Anglo-Australian miner BHP, its oil business. It has even forced board changes at Exxon Mobil.

Sadly, selling off assets or shares by itself does nothing to save the planet, because someone else bought them. Just as much oil and coal is dug up and burned as before, under different ownership. And there are plenty of people out there to buy the assets, because never before in history has there been so much private capital operating without the public reporting requirements brought by stock markets.

Rich people who want to make the world greener could make a difference, by buying and closing dirty businesses even when they are profitable. So far, though, this hasn’t happened in any significant way. The pitch from Wall Street fund managers is the exact opposite—that by going green investors can change the world and make more money, not less.

“A lot of [clients] only really get enthusiastic if they get comfortable that they are not sacrificing return,” says Valentijn van Nieuwenhuijzen, chief investment officer at fund manager NN IP, which is being bought by Goldman Sachs.

Someone has to take a loss somewhere if fossil fuels are going to be left in the ground rather than extracted and sold. ESG investors’ hope is that the losses will fall on other people. The problem is that less environmentally-minded investors buying those shares, oil wells or power plants are absolutely not going to shut them down unless they stop being profitable.

It might make sense for an investor or company to sell out of fossil fuels early if they think the retreat from coal and oil is inevitable—indeed, that was the pitch by the activist who took on Exxon—but that is simply to invest according to a political prediction, not a way to fight climate change.

Some of the biggest sources of fossil fuels are immune to shareholder pressure anyway. Much of the world’s oil is pumped by government-controlled companies, led by Saudi Arabia and Russia. Exxon can be forced to change its approach, but the global supply of oil is still determined by OPEC, as President Biden’s appeal to the cartel to pump more to keep fuel prices down has demonstrated.

There are three big pro-ESG arguments, which sound reasonable, but have major flaws.

First, if companies treat the environment, workers, suppliers and customers better, it will be better for business. This could work where companies have missed something to boost profits, such as add solar panels on a sunny roof or create a better employee retention program. Early ESG activists plucked the low-hanging fruit here, but management has become painfully aware of changing customer and employee expectations, so there is less opportunity ahead.

Adding costs to reduce a company’s carbon footprint, or paying staff more, should only help the stock price if it also raises revenue or reduces other costs, by say generating more loyalty from carbon-conscious consumers, lowering staff turnover or improving relations with regulators.

Otherwise profits can only be maintained by passing the higher costs through into higher prices, and—unless the firm has monopoly power—eventually customers who don’t care will go elsewhere. The alternative is to reduce profits, but ESG investors are almost universally against this.

The second ESG point is that by shunning stocks or bonds of dirty companies, and embracing those of clean companies, it will direct capital away from bad things and toward good ones. After all, a lower stock price or higher borrowing cost in the bond market should make it less attractive for dirty companies to expand, and vice versa for clean companies.

In practice, there has been a very weak link between the cost of capital and overall corporate investment for at least a couple of decades. Small changes in the cost of capital pale in comparison to the risk and return projections of a new project.

That is not to say there is no link. Tesla, with extremely expensive shares, has repeatedly taken advantage of its ability to issue new stock to invest in factories and research. The high prices earlier this year for clean-energy stocks might encourage similar corporate investment. The flip side of course is that buying wildly overpriced shares isn’t a good way to make money, as losses of a third or more from this year’s peaks for clean-energy stocks shows. Shifting the cost of capital just might help save the planet, but after the short-term shift in valuations is over, it should lead to underperformance.

The third claim from some ESG investors is that they are just trying to make money, and that involves shunning firms that are taking unpriced risks with the environment, workers or customers. Since they call themselves “sustainable” or use “ESG integration,” funds doing this look very like the rest of the ESG industry. The selection principle of the most popular ESG indexes, for instance, those from MSCI, involves identifying only risks that are financially material.

I would say, sure. If you think the government is going to, say, raise fuel taxes, don’t buy manufacturers of gas-guzzlers. If you think the government will impose more restrictions on coal plants, then coal generation will be an even less attractive investment.

Equally, if you think customers will be willing to pay more for brands that cut their carbon use, by all means bet on their shares. Just don’t fool yourself that you are making much difference to the world with your investment decision. Red-blooded capitalists chase these profits just as much as any green-minded investor. There is no need to try to persuade capitalists to have a conscience; they will do what you want if you make it profitable via customer demands or government intervention (or, if we are lucky, new technology).

There is one way that ESG investing does, sort of, work. Shareholders can push companies to stop lobbying governments in favor of fossil fuels. Conceivably this might help push customers and governments to do the things that would really make a difference.

My big concern about ESG investing is that it distracts everyone from the work that really needs to be done. Rather than vainly try to direct the flow of money to the right causes, it is simpler and far more effective to tax or regulate the things we as a society agree are bad and subsidize the things we think are good. The wonder of capitalism is that the money will then flow by itself.

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint.
Download
our App Now!!

Adblock test (Why?)



Source link

Continue Reading

Investment

Actress Jaime King on her investment in Allara, a chronic care platform for women – Fortune

Published

 on


Why I Invested: Actress Jaime King on her investment in Allara, a chronic care platform for women | Fortune

You need to enable JavaScript to view this site.

Adblock test (Why?)



Source link

Continue Reading

Investment

Pandemic darlings face the boot as investors eye return to normal life

Published

 on

Stay-at-home market darling Netflix slumped on Friday, joining a broad decline in shares of other pandemic favourites this week as investors priced in expectations for a return to normal life with more countries gradually relaxing COVID restrictions.

The selloff, which began after Netflix and Peloton posted disappointing quarterly earnings, spread to the wider stay-at-home sector as analysts judged the new Omicron coronavirus variant will not deliver the same economic headwinds seen in the first phase of the pandemic in 2020.

“This a confirmation that the economy is gradually moving towards some sort of normalisation,” said Andrea Cicione, head of strategy at TS Lombard.

France will ease work-from-home rules from early February and allow nightclubs to reopen two weeks later, while Britain’s business minister said people should get back to the office to benefit from in-person collaboration.

“With a return to the office and travel lanes opening, darlings of the WFH (work from home) thematic are reflecting the growing reality that the world is moving slowly but with certainty towards a new normalcy,” said Justin Tang, head of Asian research at United First Partners in Singapore.

Netflix tumbled nearly 25% after it forecast new subscriber growth in the first quarter would be less than half of analysts’ predictions.

The stock, a component of the elite FAANG group, was on track for its worst day in nearly nine-and-a-half years following rare rating downgrades from Wall Street analysts.

“It is hard to have confidence that Netflix will return to the historical +26.5 million net subscriber add run rate post the 2022 slowdown,” MoffettNathanson analyst Michael Nathanson said.

“The decay rate on streaming content is incredibly rapid. ‘Squid Game?’ That’s so last quarter. ‘The Witcher?’ Done on New Year’s Eve!”

Exercise bike maker Peloton lost nearly a quarter of its value on Thursday, leading at least nine brokerages to cut their price target on the stock.

The selloff erased nearly $2.5 billion from its market value after its CEO said the company was reviewing the size of its workforce and “resetting” production levels, though it denied the company was temporarily halting production.

Peloton’s shares were up nearly 5% on Friday morning, bouncing back somewhat from a 23.9% drop on Thursday, its biggest one-day percentage decline since Nov. 5.

HOME DELIVERY

Both companies were part of a group, along with others such as Zoom and Docusign whose shares soared in 2020, and in some cases 2021 as well, as people around the world were forced to stay at home in the face of the coronavirus.

However, thanks to vaccine rollouts and the spread of the less severe Omicron strain of COVID-19, life is returning to normal in many countries, leaving companies like Netflix and Peloton struggling to sustain high sales figures.

According to data from S3 Partners, short-sellers doubled their profits by betting against Peloton in 2021, the third best returning U.S. short.

Direxion’s Work from Home ETF has fallen more than 9% in first three weeks of the year, compared to a 6% drop in the fall of the broader U.S. stock market. Blackrock‘s virtual work and life multisector ETF has weakened more than 8% this year.

In Europe, lockdown winners are also going through a rough patch as rising bond yields pressurise growth and tech stocks.

Online British supermarket group Ocado, Germany’s meal-kit delivery firm HelloFresh and food delivery company Delivery Hero which emerged as European stay-at-home champions in the early days of the pandemic have underperformed the pan-European STOXX 600 so far in 2022.

(Reporting by Alun John and Julien Ponthus; Additional reporting by Nivedita Balu, Anisha Sircar and Chuck Mikolajczak; Editing by Saikat Chatterjee, Alison Williams and Saumyadeb Chakrabarty)

Continue Reading

Trending