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How to make sense of contradictory investment advice – MoneySense

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Q. Several investment sources are giving advice that seems contradictory. On the one hand, it is often preached that the key to smart investing is having a long-term view. That is, buy and hold good-quality stocks for long periods of time (10-plus years). It is argued this kind of passive approach, in the end, has better returns than an active approach.

Yet, on the other hand, I have read other articles that argue that one of the biggest mistakes individual investors make is holding onto their losers (when fear sets in) and not selling them soon enough. So, which is it?
Nat

A. I have worked with thousands of clients during my career as a Certified Financial Planner. A key observation I can share is that there is no one-fits-all approach to financial planning, and the same applies to investing. There simply is not just one right way to invest your money. The right approach will differ from person to person, and even potentially from one person’s investment account to another of their accounts, depending on time horizon, taxation and other factors.

The good thing about the Internet and social media is that there is access to so much information on whatever you want to learn about. But that can be a bad thing as well. I come across endless opinions about the right time to start your government pensions, whether to contribute to your RRSP or TFSA, and the best ways to invest your money. I rarely read opinions that are outright wrong or right—just better or worse depending on someone’s situation.

Keep in mind that some of the content you read, Nat, is from people who may be great journalists but may not be that well versed on money. Other content may be from casual bloggers or from sources that are biased or have conflicts of interest. And yet, other content may be unsuitable for you but great for someone else. All can help you form your own opinions about what is best for you, but it can be a lot to sort through sometimes.

Your comment about smart investing being about a long-term view is generally true. I would say it is more important to determine the appropriate term and timeline. Saving for an imminent home down payment requires a different strategy than investing for retirement many years in the future. Matching your risk tolerance to your asset allocation between bonds and stocks (and other risk assets) is very important to avoid being forced to sell, or panicking and selling when stocks fall. Inappropriate asset allocation can turn a temporary loss into a permanent one.

Your comment about buying good-quality stocks is also generally true. One problem is knowing how to best identify good-quality stocks before you buy them. Lehman Brothers was a good-quality U.S. financial stock prior to the financial crisis—when it went bankrupt. General Electric—a longtime U.S. bellwether—has fallen about 25% over the past 10 years as the S&P 500 has roughly tripled. It is easier to identify good-quality stocks in retrospect than in advance, especially for amateur investors who self-validate their prowess.

I would also argue that diversification is much more important than the selection of individual securities, Nat. Canadian investors love their banks, and if someone bought the current largest constituent in the S&P/TSX Capped Financial Index—Royal Bank—10 years ago, their capital appreciation over the past decade would be about 100% excluding dividends. That may be a great absolute return, but was it a good relative one?

The current largest constituent in the S&P 500 Information Technology Index—Microsoft—has appreciated by about 450% over the same period. This, too, ignores dividends. The U.S. dollar has also risen relative to the Canadian dollar by about 30% over the past 10 years.

Diversification by sector and geography is an important part of portfolio management. Academics have clashed about whether asset allocation accounts for 40% (Ibbotson and Kaplan 2000) or 90% (Brinson, Hood, Beebower 1991) of performance. Regardless, the key is that investing is not as simple as picking good stocks alone, as most would agree that the selection of securities is only a part of successful investing.

Good stocks may also be difficult to identify ahead of time. If 100% of investors were convinced the shares of a certain stock were going to go up, beat the market, and be a great investment, everyone would buy those shares. The stock price would rise due to supply and demand on the open market. And that alone could make the investment a bad one for the next investor to buy because the price would be too high and the future return therefore too low. Nortel Networks in the 1990s was a great example of this. At one point, it represented about one-third of the Toronto Stock Exchange because everyone believed it was a good-quality stock with nowhere to go but up.

Practically speaking, stock prices reflect the collective opinions of buyers and sellers. You buy a stock because you think it is going to go up, but the seller of that stock likely sold because they feel there is a better investment opportunity elsewhere.

I do agree that a passive approach is probably better generally than active. Passive can take two different forms, though. You can have a passive, actively managed stock portfolio with low turnover, or a truly passive portfolio built using exchange-traded funds (ETFs) that buy and hold the market.

Low turnover is probably better than high turnover for a stock picker, as frequent trading can increase fees, and anytime you pay fees, you’re reducing your net return. I prefer passive investing using ETFs for do-it-yourself investors over buying individual stocks because I find there is less margin for error with individual stocks.

Most mutual funds have underperformed their benchmarks over the long term, suggesting passive ETF investing may be better than active mutual funds, especially in Canada where fund fees are high for retail investors. In fact, 91% of Canadian equity mutual funds underperformed the TSX and 97% of U.S. equity funds underperformed the S&P 500 over the five years ending December 31, 2018, according to the S&P Dow Jones SPIVA Canada Scorecard.

As for the biggest mistake being not selling losers soon enough when fear sets in, how do you know ahead of time which stocks will be losers? One of the great stock pickers of our time, Warren Buffett, once urged investors to “be fearful when others are greedy and greedy when others are fearful.”

Stocks are volatile, and go up and down. Some stocks fall while others rise, and that is a benefit of proper diversification. If you only sell your so-called losers while holding or buying your so-called winners, you may be selling low and buying high. I would argue that buying low (when stocks are on sale) and selling high is a better investment strategy.

The key to successful investing is to have a strategy and stick to it. Your strategy may be very different from your neighbour’s strategy and that is okay. Rules-based investing, where you establish a strategy and stick to it, can keep you from making emotional mistakes. But thinking you can buy a few “good” stocks, sell them when they go down before they go down too much, and have good, long-term, relative returns may not be the best recipe for investing success.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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More cash, less buzz for 2020 investment bank interns – The Journal Pioneer

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By Elizabeth Howcroft

LONDON (Reuters) – Buzzing trading floors, classrooms and networking drinks have been replaced by online projects, ‘hackathons’ and fitness sessions for the class of 2020 investment banking interns.

Goldman Sachs , Morgan Stanley , Barclays , JP Morgan , UBS , RBC and Citi have all held internships virtually this year as they adapt to the restrictions imposed by the coronavirus pandemic.

Schmoozing with executives and fellow interns has been via virtual coffees and quizzes, while Goldman Sachs laid on Zoom networking lunches, hackathons and fitness and cooking classes.

“We couldn’t have big parties or anything like that but we did work with a music start-up – there was a battle of the bands competition where the interns could vote,” Helena Sharpe, JP Morgan’s head of campus recruiting for EMEA, said.

Although many of the highly sought after schemes were cut to 5 weeks from the usual 8 or 10, most interns lucky enough to secure a place still received full pay while working from home.

Investment bank interns in London are usually paid around 10,000 pounds ($13,034) for a 10-week programme, financial careers website efinancialcareers.co.uk estimates.

Such internships offer the potential to kick start lucrative banking careers, but have come under scrutiny in the past for the long hours some students work in their effort to impress.

“Some of them probably still work relatively long days because they want to make a good impression and do the best they can on their projects,” Sharpe said.

How well virtual internships work-out is being closely watched by banks assessing the long-term future of remote working, particularly for new joiners, with Barclays and RBC considering keeping some elements for future programmes.

Banks have supplied the necessary kit for working from home. Goldman Sachs, which had around 380 interns in Europe, Middle East and Africa (EMEA), even sent electricity generators to those who needed them. “It’s one big experiment, but it feels great and the feedback’s been very positive,” Rob Ager, head of programmatic talent acquisition at Barclays, adding that although “authenticity” could get lost in the virtual world, working from home had created a more collaborative culture.

‘BUZZ AND VIBE’

There are limitations to the work banks can offer this year, with interns at JP Morgan working on case studies and projects rather than on placements within teams, while Morgan Stanley offered business simulations and work-related projects.

At Barclays, there were two weeks of classroom learning, and while some parts involved a real-life teacher others required watching videos on an online portal.

“You can’t really get the full buzz and vibe of the trading floor in a virtual setting, which is a bit disappointing,” an intern at one firm who asked not to be named said.

“I don’t think you get the true feel of work when you’re working from home and for me personally it would be easier to network in person and get to know people more genuinely.”

But working virtually has made interns less competitive with each other and more willing to help, the intern said, adding they were able to call each other to ask questions.

Citi has guaranteed all of its around 200 London interns a graduate job offer for 2021 so long as they meet the minimum requirements, easing the competitive dynamic.

For staff supervising the programmes, the virtual internship is not without challenges.

“I have to describe things over email and stuff or get on Zoom calls and all of these things that are just easier if it’s done live,” an associate at a U.S. investment bank said.

And while it is harder to monitor interns remotely, banks say they do their best to ensure hours are kept in check.

“We do encourage them to have a good work life balance and take regular breaks,” JP Morgan’s Sharpe said.

($1 = 0.7672 pounds)

(Reporting by Elizabeth Howcroft; Additional reporting by Imani Moise in New York; Editing by Rachel Armstrong and Alexander Smith)

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You can invest in this local property for as little as $1 | Urbanized – Daily Hive

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It’s no secret — real estate is not nearly as accessible as it was for our parents and even our grandparents. Especially in Vancouver, the price of ownership is high, and for many millennials, owning property or a piece of real estate is unattainable. 

According to a study done by Generation Squeeze, young Canadians in Vancouver need to save for 27 years in order to have enough money for a proper down payment — that’s more than five times as long as our parents.

The study also noted that even though COVID-19 has tempered the housing market, the housing affordability crisis will still be in full swing when the pandemic is over. Pre-COVID, more than half of the people under 30 living in Canada’s major cities spent 30% to 50% of their monthly paycheques on rent. Not only does this leave very little room to save for things, such as a down payment, but now that the pandemic has hit, this percentage has increased for many. 

This is why addy, a real estate crowdfunding platform, is making investing in real estate more accessible by reducing barriers to entry. And all it takes is $1.

45604 Airport Rd, Chilliwack/addy

So how does addy do it? 

It’s impossible to cut the high costs of the market. Instead, the company’s mission is to redefine what it means to be a homeowner, while providing younger investment seekers with a new avenue into the game. 

First, addy does their due diligence by scoping out the properties with the most potential to provide the highest return on investment (ROI). Once these properties have been identified and approved by the executive team, investment committee, and Board of Directors, they’re broken down into investment units starting at $1. 

On launch day, addy releases the property on their platform, and qualified members have the opportunity to purchase as many shares in the property as they desire. Investors who have bought in on a specific property can make money from rental income in the form of distributions or as a lump sum when the property is finally sold.

45604 Airport Rd, Chilliwack/addy

The first property launched by addy is located in Vancouver’s charming Trout Lake neighbourhood; it was sold out to 305 investors, the lowest investment being $1 and the largest being $95,000. 

This crowdfunding investment model reduces (but doesn’t eliminate) the overall risk, while giving millennials and Gen Zs an opportunity to get some skin in the game at a price point they’re able to afford. It also means investors aren’t responsible for managing tenants and other logistics associated with the property.

If you’re already getting out your pocketbook, addy is launching its next investment opportunity (only available to BC residents over 19 years of age) on August 11, 2020, with a minimum investment of $1 and a maximum investment of $1,500. 

This commercial property is a free-standing building with more than 2,100 sq ft of retail space located in the heart of Chilliwack, BC, on the southwest corner of Airport Road and Yale Road. Currently, the space is occupied by Starbucks and features a drive-thru plus 12 owned parking stalls. 

According to addy, the estimated timeline for return on your investment of this property is approximately five years. Any appreciation will be paid out at the end of the term, and investors can expect annual distributions from any excess cash flow.

If you’re interested in investing in this Chilliwack property or staying up-to-date on addy’s next property announcements, sign up for a free addy account wallet so you’re ready to invest when the right property comes along.

This content was created by Hive Labs in partnership with a sponsor

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More cash, less buzz for 2020 investment bank interns – TheChronicleHerald.ca

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By Elizabeth Howcroft

LONDON (Reuters) – Buzzing trading floors, classrooms and networking drinks have been replaced by online projects, ‘hackathons’ and fitness sessions for the class of 2020 investment banking interns.

Goldman Sachs , Morgan Stanley , Barclays , JP Morgan , UBS , RBC and Citi have all held internships virtually this year as they adapt to the restrictions imposed by the coronavirus pandemic.

Schmoozing with executives and fellow interns has been via virtual coffees and quizzes, while Goldman Sachs laid on Zoom networking lunches, hackathons and fitness and cooking classes.

“We couldn’t have big parties or anything like that but we did work with a music start-up – there was a battle of the bands competition where the interns could vote,” Helena Sharpe, JP Morgan’s head of campus recruiting for EMEA, said.

Although many of the highly sought after schemes were cut to 5 weeks from the usual 8 or 10, most interns lucky enough to secure a place still received full pay while working from home.

Investment bank interns in London are usually paid around 10,000 pounds ($13,034) for a 10-week programme, financial careers website efinancialcareers.co.uk estimates.

Such internships offer the potential to kick start lucrative banking careers, but have come under scrutiny in the past for the long hours some students work in their effort to impress.

“Some of them probably still work relatively long days because they want to make a good impression and do the best they can on their projects,” Sharpe said.

How well virtual internships work-out is being closely watched by banks assessing the long-term future of remote working, particularly for new joiners, with Barclays and RBC considering keeping some elements for future programmes.

Banks have supplied the necessary kit for working from home. Goldman Sachs, which had around 380 interns in Europe, Middle East and Africa (EMEA), even sent electricity generators to those who needed them. “It’s one big experiment, but it feels great and the feedback’s been very positive,” Rob Ager, head of programmatic talent acquisition at Barclays, adding that although “authenticity” could get lost in the virtual world, working from home had created a more collaborative culture.

‘BUZZ AND VIBE’

There are limitations to the work banks can offer this year, with interns at JP Morgan working on case studies and projects rather than on placements within teams, while Morgan Stanley offered business simulations and work-related projects.

At Barclays, there were two weeks of classroom learning, and while some parts involved a real-life teacher others required watching videos on an online portal.

“You can’t really get the full buzz and vibe of the trading floor in a virtual setting, which is a bit disappointing,” an intern at one firm who asked not to be named said.

“I don’t think you get the true feel of work when you’re working from home and for me personally it would be easier to network in person and get to know people more genuinely.”

But working virtually has made interns less competitive with each other and more willing to help, the intern said, adding they were able to call each other to ask questions.

Citi has guaranteed all of its around 200 London interns a graduate job offer for 2021 so long as they meet the minimum requirements, easing the competitive dynamic.

For staff supervising the programmes, the virtual internship is not without challenges.

“I have to describe things over email and stuff or get on Zoom calls and all of these things that are just easier if it’s done live,” an associate at a U.S. investment bank said.

And while it is harder to monitor interns remotely, banks say they do their best to ensure hours are kept in check.

“We do encourage them to have a good work life balance and take regular breaks,” JP Morgan’s Sharpe said.

($1 = 0.7672 pounds)

(Reporting by Elizabeth Howcroft; Additional reporting by Imani Moise in New York; Editing by Rachel Armstrong and Alexander Smith)

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