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I admit it — these are my 5 dumbest investment calls of 2020 – MarketWatch

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Since 2017, I’ve made it a point to end each year on MarketWatch by recapping my predictions and investment advice. And perhaps unsurprisingly, the most amusing part for folks (including myself) is observing at how off-target some of those calls were.

Like any pundit, I’d prefer to think I get more things right than wrong. Like in May, I told folks Tesla’s run was far from over. Shares are up about 300% since then. I also highlighted the growth potential of dynamic small-caps, including Celsius Holdings
CELH,
+10.25%
,
which has soared 500% since my recommendation, and Overstock.com
OSTK,
+5.09%
,
which has jumped almost 300%.

But all Wall Street analysts think they’re pretty hot stuff, so I won’t bore you with supposed proof of my competence. Instead, let’s get right to the good stuff — my five dumbest pieces of advice from the last year.

Doubting the COVID (market) rebound: I was very reluctant to trust the quick snap-back for markets in March and April, particularly given early predictions that the pandemic could suck $1 trillion out of the global economy. But I made the mistake of thinking about the implications for regular folks and small businesses — not the stock market.

The hard reality is that poor people have been hit hardest by the pandemic, but poor people don’t own stocks. Similarly, megacap corporations are just fine even as small stores and restaurants have been forced to close. White-collar employees continued to get their 401(k) match, and structural factors that overweight well-off tech firms in indexes like the S&P 500
SPX,
+0.18%

added to momentum for stocks even as the economy suffered very real damage.

The bottom line is a brutal reality that I often have trouble acknowledging: Wall Street is fundamentally divorced from the real U.S. economy, and it’s perilous for investors to conflate the struggles of regular Americans with the performance of the S&P 500. As depressing as that is to admit, COVID-19 proved once again how true this is. 

Betting against bitcoin: In February, I warned that bitcoin was having a moment but could run out of gas and disappoint supporters yet again in 2020. But the cryptocurrency
BTCUSD,
+0.72%

continued to outperform traditional financial assets in 2020, roughly doubling to $20,000 since my column.

That’s in part because of folks looking for alternative assets out of a fear that a pandemic-driven economic crisis would hit, but also because of continued institutional demand as bitcoin continues to mature and win legitimacy as a viable asset in the admittedly volatile world of crypto.

Giving up on oil stocks: After the stars aligned to briefly drive oil prices negative in early 2020, it seemed a terrible idea to go hunting for bargains in the oil patch. In addition to short-term problems including dropping demand thanks to coronavirus and surging supply thanks to OPEC’s reluctance to cut back production in March, there remains the long-term risks for fossil fuel stock amid global warming concerns.

But a historic 10-million-barrel-per-day cut a month later coupled with normalizing demand propped up oil prices, and oil is back in the high-$40 range — with analysts at Goldman Sachs predicting crude could hit $65 next year. I gave up on oil stocks, however, and among the picks I specifically warned against was Halliburton, which has surged 50% since I advised against the stock in June.

Not giving marijuana stocks room to run: It should not be news to anyone that American perceptions of marijuana have changed greatly in the last few years and that the trend of legalization is destined to continue nationwide. But by October, with all polls pointing to Biden winning and chances of Democratic gains in Congress, I was pretty convinced the market had priced in any 2021 actions to liberalize weed in the U.S.  and that it was time to stop buying the rumor and start selling the news.

Since Oct. 1, however, top stocks like Canopy Growth
CGC,
-1.42%

and broad ETFs like the AdvisorShares Pure Cannabis ETF
YOLO,
+2.91%

have found another gear and powered significantly higher. The ETF is up 50% since then and Canopy Growth is up 80%.

Abandoning bonds: I am in my 40s, so particularly in my tax-deferred accounts I make it a point to avoid bonds and go all-in on stocks. With almost two decades until I can get my cash back from 401(k) and IRA investments, it’s a near certainty the stock market will be much higher by then.

But if like me you’ve written off bonds as an old-school asset that is only good for folks at or near retirement and looking for capital preservation, consider that the iShares 20+ Year Treasury Bond ETF
TLT,
-0.27%

has actually slightly outperformed the S&P 500 this year.

There is certainly room for bonds in any portfolio, presuming you pay attention to the market. I simply wasn’t in 2020, and missed out.

Jeff Reeves is a MarketWatch columnist. He doesn’t own any of the securities mentioned here.

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A new era of low-cost investing has arrived for Gen Z and millennials – The Globe and Mail

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Words they live by in the investment industry: Small accounts get small consideration.

So it follows that the record of investment firms in welcoming young people as customers was pretty terrible until recently. The rise of digital investing – taking orders and sometimes providing advice online or via mobile device – has changed all that for the better by making small accounts more economical to serve.

Suddenly, there are all kinds of ways for young adults to get started as investors while keeping their costs to a minimum. There’s a free stock-trading app, and another app with zero commissions for investing in exchange-traded funds. Several online brokers offer special pricing for young clients that can reduce their costs significantly, and there are also robo-advisers to consider.

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With a six-figure portfolio, paying $5 to $10 to buy stocks or exchange-traded funds is nothing to complain about. But for a young investor with a small portfolio, these costs are prohibitive. Biweekly purchases of a balanced ETF (more on these in a moment) at $9.95 per trade works out to an annualized fee of 1.7 per cent on a $15,000 account. For context, the bonds or bond funds in a portfolio might yield about 1 per cent these days.

Further costs for young investors might include annual administration fees of $100 or more for registered retirement savings plan accounts or $100 in account maintenance fees per year (often charged on a $25 per quarter basis).

Special deals for young investors are available at several online brokers, but they’re not well-publicized and thus easy to miss out on. Some examples:

  • For students, CIBC Investor’s Edge reduces its regular flat $6.95 commission for trading stocks and ETFs to $5.95 and waives the $100 annual fee on registered and non-registered accounts.
  • For investors 30 and younger, National Bank Direct Brokerage provides 10 free trades a year and then lowers its regular price of $9.95 per trade to $4.95; also, account admin fees are waived.
  • For investors aged 18 to 30, Qtrade Investor offers a flat commission of $7.75, down from the usual $8.75, as well as waiving quarterly admin fees.
  • For clients 25 and younger, Scotia iTrade will waive the $100 annual admin fee on RRSPs and the $100 per year maintenance fees on small non-registered accounts.
  • The Kick Start Investment Program at Virtual Brokers allows an investor to buy (or add to) up to five ETFs each and every month, for no commission. Normally, the cost is $50 a year for this service, unless you’re a student or have graduated within the past two years.

Do-it-yourself investing happens to make great sense for young investors. Investment advisers are notoriously uninterested in young clients for the most part, unless they happen to be the kids of rich clients. Also, the needs of young investors may be too small-scale to justify the fees advisers charge.

Bank mutual funds are an easy way to get started investing, and they’re friendly to rookie investors because they can be bought at no cost. On the negative side, bank mutual funds too often combine lacklustre returns and hefty fees.

The ideal product for young investors? Consider the balanced ETF, with fees as low as 0.2 per cent (mutual fund management expense ratios are typically in the 2-per-cent-plus range).

Balanced ETFs hold underlying funds that produce blends of stocks and bonds suitable for conservative, middle-of-the-road and aggressive investors. A twentysomething could easily choose an aggressive approach, with the understanding that there will be rotten years on the way to good long-term results. Long term, by the way, means 10 years or more.

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The Wealthsimple Trade app is a zero-commission way to buy and sell balanced ETFs, as well as other ETFs and stocks. The lack of commission costs invites frequent stock trading that eventually does more damage than good, but a disciplined investor could use it to stuff money into balanced ETFs on a regular basis.

TD GoalAssist, from Toronto-Dominion Bank, is another app for mobile devices that offers a cost-effective way for young people to invest. Pick one of TD’s own balanced ETFs and contribute money whenever you like with no commissions to pay. GoalAssist also lets you set investing goals and track how you’re progressing.

Robo-advisers are another way for young adults to get help in building diversified ETF portfolios. For a fee starting at roughly 0.5 per cent, a robo-adviser will assess your needs with an online questionnaire and then suggest a diversified grouping of ETFs. Investing is a simple matter of electronically transferring money to your robo-adviser, which then contributes it proportionally to the ETFs in your portfolio.

Robo-advisers typically have lower fees for larger accounts, but a young investor still gets a fair deal.

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

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Enforcement Notice – Decision – IIROC Sanctions Montréal Investment Advisor Naghmeh Sabet – Canada NewsWire

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MONTRÉAL, Jan. 22, 2021 /CNW/ – On January 19, 2021, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) accepted a Settlement Agreement, with sanctions, between IIROC staff and Naghmeh Sabet.

Mrs. Sabet admitted that she recommended the purchase and holding of securities that were unsuitable for a client, pursuant to this client’s investment objectives, and that she engaged in personal financial dealings with a client by accepting the offer of a short-term loan by the client for an imminent real estate transaction.

Specifically, Mrs. Sabet admitted to the following violations:

(a) In March and April 2016, the Respondent recommended the purchase and holding of securities that were unsuitable for a client, pursuant to this client’s investment objectives, thus contravening IIROC Dealer Member Rule 1300.1(q);

(b) In December 2015, the Respondent engaged in personal financial dealings with a client by accepting the offer of a short-term loan proposed by the client for an imminent real estate transaction, thus contravening IIROC Dealer Member Rule 43.

Mrs. Sabet agreed to the following penalties:

a) An aggregate fine in the amount of $25,000, as follows:

  • a $10,000 fine for Count 1;
  • a $15,000 fine for Count 2.

b) The obligation to pass the Conduct and Practices Handbook Course exam, within sixty (60) days following acceptance of this Settlement Agreement by the Hearing Panel.

c) Costs in the amount of $2,000 payable to IIROC.

The Settlement Agreement is available at:
http://www.iiroc.ca/documents/2021/7a39019a-2815-4091-b5e9-13b90167e182_en.pdf            

IIROC formally initiated the investigation into Mrs. Sabet’s conduct in August 2017. The alleged contraventions occurred while Mrs. Sabet was a registered representative with the Montréal branch of Scotia Capital Inc., an IIROC-regulated firm. Mrs. Sabet is still employed with Scotia Capital Inc.

Documents related to ongoing IIROC enforcement proceedings – including Reasons and Decisions of Hearing Panels – are posted on the IIROC website as they become available. Click here to search and access all IIROC enforcement documents.

*  *  *

IIROC is the pan-Canadian self-regulatory organization that oversees all investment dealers and their trading activity in Canada’s debt and equity markets. IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while supporting healthy Canadian capital markets. IIROC carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of 175 Canadian investment dealer firms of varying sizes and business models, and their more than 30,000 registered employees. IIROC also sets and enforces market integrity rules regarding trading activity on Canadian debt and equity marketplaces.

IIROC investigates possible misconduct by its member firms and/or individual registrants. It can bring disciplinary proceedings which may result in penalties including fines, suspensions, permanent bars, expulsion from membership, or termination of rights and privileges for individuals and firms.

All information about disciplinary proceedings relating to current and former member firms is available in the Enforcement section of the IIROC website. Background information regarding the qualifications and disciplinary history, if any, of advisors currently employed by IIROC-regulated firms is available free of charge through the IIROC AdvisorReport service. Information on how to make investment dealer, advisor or marketplace-related complaints is available by calling 1 877 442-4322.

SOURCE Investment Industry Regulatory Organization of Canada (IIROC) – General News

For further information: Enforcement Contact: Claudyne Bienvenu, Vice-President, Québec and Atlantic, 514 878-2854, [email protected]; Media Contact: Andrea Zviedris, Manager, Media Relations, 416 943-6906, [email protected]

Related Links

www.iiroc.ca

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European start-ups are attracting record levels of investment – Innovation Origins

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Investments in European start-ups rose to record levels during the final three months of 2020. In the fourth quarter of last year, a total of US$14.3 billion was invested in European start-ups. This was revealed in a report brought out by KPMG.

Seventy percent growth

This figure corresponds to an increase of seventy per cent compared to the last three months of 2019. It also marks the highest quarterly increase in 2020, although the other three have also fared extremely well. Total investment in European start-ups reached US$49 billion last year, that was US$7 billion less in 2019.

However, emerging start-ups and even companies that are already generating a certain amount of turnover are struggling to raise funding.”
Karina Kuperus, KPMG

The figures highlight a number of developments. While investments were up, the number of deals made fell sharply, from around 7,500 in 2019 to just over 6,000 in 2020. “Investors have focused on technology-driven solutions and on start-ups that are highly capable of responding to the changing needs of employees and customers. This means that early-stage start-ups and even companies that are already generating some revenue experience great difficulties in securing funding,” says Karina Kuperus, a partner in KPMG’s Emerging Giants advisory group.

Late-stage start-ups are most in demand

Financiers have been particularly interested in late-stage start-ups that have a proven business model. In a number of sectors, including fintech, logistics technology and educational technology, this has led to consistently higher valuations. In general, technology, healthcare and biotechnology are popular with investors.

There is no shortage of funds. Due to the availability of a lot of ‘unused money’ among investors ( as a result of low interest rates, among other factors), there is a lot of competition. Although this is mainly concentrated on promising start-ups in their later stages. For example, during the last three months of 2020, a number of companies managed to attract more than US$100 million, including Germany’s ATAI Life Sciences (US$125 million).

Investments are also set to increase in 2021

Globally, there has also been an appetite for funding start-ups. KPMG tallies a total of US$300 billion that has been invested in start-ups around the world. That is US$18 billion more than in 2019. The tendency towards a decline in the number of deals also applies beyond Europe’s borders. By the way, the United States accounted for more than half of all global investments last year.

The volume of investments is unlikely to drop in 2021. “The pandemic has also revealed the pressing need to modernise key aspects of the existing healthcare system and to harness new technologies, such as artificial intelligence in the development of new medicines,” Kuperus stated.

More information can be found in the latest version of Venture Pulse, KPMG’s report on their research into global investments in start-ups. 

Atomico, another European tech investment company, also recently came to a similar conclusion.

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