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New chapter for Franklin Templeton – Investment Executive

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This chapter started with the 2020 acquisition of Legg Mason and its specialist investment managers by Franklin Templeton’s parent company. That acquisition gave Franklin Templeton a combined US$1.5 trillion in assets under management globally, as of June 30, 2021.

Most important, the move strengthened Franklin Templeton’s investment capabilities across a wider range of asset classes, and enhanced its expertise in sustainable investing.

In March 2021, the firm established a Stewardship and Sustainability Council. Its members represent the diversity and depth of Franklin Templeton’s approaches, as well as each specialist investment manager. Council members are responsible for identifying how to face universal sustainability challenges.

This framework is reinforced by a Global Sustainability Strategy Team, whose mandate is to drive and embed sustainability across the organization.

“We’re bringing new investment capabilities and sustainability expertise to Canadian investors through different platforms,” says Green.

Franklin Templeton’s specialist investment managers have expertise in different areas:

  • ClearBridge Investments: global equities
  • Brandywine Global: long-term value investing
  • Martin Currie: global active equities
  • Royce Investment Partners: small cap specialist
  • Western Asset: global fixed income
  • Clarion Partners: real estate

Together, these proven managers complement the strengths and experience of Franklin Templeton’s legacy investment teams.

Each of Franklin Templeton’s boutique investment teams is autonomous. Being entrepreneurial and independent lets them practise true investment specialization, while tapping into global resources for analytics, data, distribution and servicing support. The firm believes that these experienced investment managers offer differentiated strategies to help Canadians meet their investment goals.

Franklin Templeton delivers these capabilities in the investment vehicles that Canadians want, including mutual funds, ETFs and separately managed accounts (SMAs). With the ability to customize and offer more bespoke offerings to larger institutional clients.

Green says the firm’s new era is about expanding capabilities, to address the needs and wants of Canadian investors. For advisors, the goal is providing a range of differentiated, quality solutions that will truly make a difference to client portfolios.

Focus on sustainability

A big part of that is offering sustainable solutions. The ethical and business cases behind sustainable investing are clear, along with its growing importance to investors.

There’s an increasing body of evidence that points to sustainability as a theme for continued fund inflows. Morningstar reported that, at the end of the second quarter of 2021, sustainable assets in Canada (excluding fund of funds) hit $26 billion. That reflects a year-over-year growth rate of 130%.1

Some of Franklin Templeton’s boutique investment teams have prioritized investing according to sustainability principles for years.

For example, in 2020, Martin Currie received an A+ from the UN’s Principles for Responsible Investment (PRI) across all three pillars (Strategy and Governance, Listed Equity Incorporation, and Active Ownership), for the fourth consecutive year.2 The PRI is a voluntary framework for companies who commit to integrate ESG factors into their investment analysis and decision-making.

ClearBridge Investments, a leader in sustainable investing for more than 30 years, was recently appointed manager of the Franklin ClearBridge International Growth Fund, and its ETF version, Franklin ClearBridge Sustainable International Growth Active ETF (FCSI). Franklin Templeton clients will benefit from ClearBridge’s proprietary ESG research process, and commitment to driving positive change through long-term engagement with companies.

In looking at companies and funds, ESG performance is being incorporated more and more into investment management processes. These are important considerations for all advisors and investors.

Franklin Templeton says part of successful investing is reinforcing sustainable ESG structures, which create the conditions for issuers to succeed. Investment managers and other shareholders must provide strong engagement and demonstrate active ownership.

ESG indicators can also provide material insights not yet captured by the market. Identifying those insights can allow Franklin Templeton to target investments they believe are best positioned to deliver sustainable returns for their clients.

Franklin Templeton has long had strong ESG capabilities, going back many decades to the practices of Sir John Templeton. Now, a key benefit of the Legg Mason acquisition is access to a global network of credible ESG experts in its new investment teams.These capabilities are being made available to Canadian investors through mutual funds and ETFs.

For example, the Franklin Brandywine Global Income Optimiser Fund has ESG analysis embedded into its investment process. The weakest ESG scoring securities may be limited in exposure, or even excluded, from the portfolio of the mutual fund and its ETF version, FBGO.

The portfolio management team behind Franklin Martin Currie Sustainable Emerging Markets Fund, and its ETF version, FSEM, have also earned acclaim for responsible investing.

Adding these teams’ expertise to Franklin Templeton’s ESG framework is a catalyst in bolstering a firm-wide commitment to be responsible stewards of clients’ assets.

Today, over 93% of the company’s assets under management represent strategies that consider ESG factors in the investment process. Assets with a specific focus on ESG total over US$175 billion.3

 Helping advisors to succeed

This focus is helping advisors to succeed, says Green.

“Sustainability is top of mind for Canadian investors, so we have to be proactive and nimble in anticipating what advisors and their clients need and responding accordingly,” he says.

To further support advisors throughout the pandemic, Franklin Templeton has provided timely information and analysis from its investment experts amid the volatility and uncertainty. The company has invested in technology and created a flexible structure to ensure we are servicing our clients in the way that makes sense for their business.

Another valuable resource is the Franklin Templeton Academy, which offers advisors a wealth of free online modules. Users can review them 24/7, at their own pace, and earn continuing education credits.

The courses cover everything from ESG investing, exchange-traded funds, and hedge funds, to strengthening your personal brand and social media presence. Whatever the topic, the Franklin Templeton Academy helps users to gain knowledge, improve the efficiency of their practices, build their businesses, and, ultimately, be better advisors for their clients.

“We’ve worked hard to become a closer partner to advisors by offering great solutions and service, effective communication and value-add programs,” says Green. “I want financial advisors to give us a fresh look to see what we can do to help their clients and build their businesses.”

Improved ESG capabilities, new sustainable strategies and stronger communications with advisors are all part of the new era for Franklin Templeton Canada. “This is only the beginning,” says Green.


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Don't know how to invest your extra cash? Let a robot do it for you. – USA TODAY

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Stock Market 101: Basic strategies investors use to profit off stocks

Before jumping into the market, here’s what first-time investors should know about stocks, capital gains and mistakes to avoid.

For My Money, USA TODAY

Let’s say you have a pile of cash that you’re ready to invest.

If you’re like me, you probably don’t want to spend all your time with your eyes glued to a screen, actively trading on Robinhood. You want your money to grow, but you don’t want to think about it all the time. Maybe the idea of interacting with an investment professional gives you anxiety, or the fees sound like a lot.

You’re not alone.

A study of 3,000 U.S. adults conducted by Vise, a technology-powered investment management platform built for advisers, that was given exclusively to USA TODAY found that the biggest barrier to working with an adviser is concern about how much it would cost (43%).

Here’s what I did: I skipped the personal investment adviser and got a robot to build my portfolio.

Roboadvisers, digital apps that use algorithms to build investment portfolios​​​​​​, are an increasingly popular vehicle for investing, especially for young adults who want a tool that is uncomplicated and mobile-friendly.

You can download an app and fill out a survey about yourself with questions like your age, income and risk tolerance. Based on those responses, roboadvisers generate a portfolio of stocks and bonds for you to maximize your long term returns.

These investment vehicles can scale dramatically with little marginal cost because the portfolio is generated by algorithms. Since they cut out the human element of investing, they can service millions of customers at once with just a few lines of code.

Many roboadvisers are designed with young investors in mind, specifically millennial and Gen Z clients. 

Gen Zers, born between 1997 and 2012, began entering the workforce shortly before the COVID-19 pandemic hit and when unemployment rates were at historic lows. Jobless rates subsequently skyrocketed and then have leveled off. And those workers are starting to save for retirement at an unprecedented young age, according to Transamerica Center for Retirement Studies, a nonprofit organization.

Similar to millennials, born between 1981 and 1996, these young Americans are saddled with student loans and credit card debt but want to invest for retirement and build up savings.

Study reveals: Student debt is a potentially crippling liability for college grads

“Millennials and Gen Z grew up digitally native, and they expect to be able to manage their money the same way they order stuff from Amazon or call a car on Uber,” says Kate Wauck, chief communications officer at Wealthfront, a roboadvising company. “These young investors don’t want to have to pick up the phone or walk into a stuffy office to manage their money.”

►Millennials quit their jobs to day trade: Here are the risks and rewards

►Gen Z turns to TikTok for financial tips: But regulators warn of investment schemes

Most investors want a financial adviser but don’t trust robos

Despite familiarity with digital tools among young investors, the same study by Vise showed that nearly half of Americans (48%) trust human financial advisers, compared with just 11% of Americans who trust roboadvisers.

Two percent of total respondents and 4% of 18- to 24 year-olds used roboadvisers. Three percent of respondents from 25 to 49, 1% from 50 to 64 and 0% of 65 and older had tried roboadvisers.

By contrast, 41% of people over 65 say they work with a financial adviser, compared with 26% of Gen X, 17% of millennials and 14% of Gen Z.

“People, young or old or anything, trust a human being, especially with their most personal asset, which is money,” explains Samir Vasavada, founder and CEO of Vise and a member of Gen Z himself.

Robo options to consider

Despite low adoption rates, a wide variety of roboadvising options exist depending on your investment goals.

SoFi Invest allows customers to invest with just $5 and charges no management fee, according to The RoboReport from the second quarter of 2021. On average, the roboadvisers in the report charged a 0.35% management fee.

InteractiveAdvisors is another option that provides portfolios for sustainable and socially responsible investments if you care about buying from companies that share your values. Betterment also has some options for ESG (environmental, social and corporate governance) investing, including Climate Impact, Social Impact, and Broad Impact.

Betterment is great for first-time investors with its “intuitive dashboard” and “excellent suite of educational tools,” says The RoboReport.

Wealthfront has the best financial planning tools, according to the report, including features to model one’s home purchase and future net worth.

Axos Invest and SigFig have the best annualized performance, according to Nerdwallet data from December 2017 to June 2020. 

Other roboadvisers aim to change the financial landscape for new investors, including women. Ellevest, for instance, is a roboadviserbuilt by women and tailored for female investors.

Roboadvisers: pros & cons

To be sureroboadvisers have their fair share of benefits, as well disadvantages. 

Roboadvisors tend to charge fairly low rates and employ Nobel-prize winning algorithms on your money.  However, unlike traditional financial advisers, roboadvisers aren’t as personalized to your specific goals, says Vasavada. They also don’t have a long track record to prove their success.

So far, roboadvisers have mixed annual returns from 1% to 5%, according to NerdWallet.

“I would give roboadvisers about 25 years before comparing their returns to the traditional method,” says Danetha Doe, financial expert and creator of Money & Mimosas, a financial wellness platform.

Despite uncertainty around roboadvisers, Doe encourages women to invest as early as possible.

“Roboadvisers have made investing accessible to more people. As we move into a more inclusive economy, I am in full support of folks who choose to work with a roboadviser,” Doe says. 

Roboadvisers are heavily regulated and are considered a safe investment vehicle. They must register with the Securities and Exchange Commission and are subject to the same securities laws and regulations as human advisers. Most roboadvisors are also members of the Financial Industry Regulatory Authority, a brokerage watchdog and Wall Street’s self-regulatory arm.

►Gen Z takes on debt to invest in market boom: Here are the risks

►Millennial parents join crypto craze: Should you? Here’s what experts say

Vasavada believes that the future of the personal investment industry lies in a hybrid approach, where technological solutions like roboadvising are paired with human investment advisers.

On one hand, advisers will have to evolve by incorporating technology and tailoring their services to younger investors. On the other hand, roboadvisers are beginning to incorporate more human services to their platforms, Vasavada points out.

For instance, E*TRADE built in a 24/7 online chat on its mobile and web platform, while Merrill Guided Investing added educational resources and financial planning tools.

“I think that the future of the space is still with financial advisers. However, I think there’s a place for roboadvisers. And I think that roboadvisers are here to stay,” Vasavada says.

Ultimately, the key draw of roboadvisers is their convenience. You could set one up on a Sunday just sitting in your bed on your phone, which is precisely what I did.

When conducting research on young investors, Wealthfront found that many of them enjoyed not having to interact with anyone.

“We’ve designed our product so everything can be done right in our app through software,” says Wauch, “Since day one, our clients have told us, ‘We pay you not to talk to me.'”

As a young investor and roboadvising client myself, I couldn’t agree more.

Michelle Shen is a Money & Tech Digital Reporter for USATODAY. You can reach her @michelle_shen10 on Twitter. She uses Wealthfront as a roboadviser.

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Putting Money Where the Stats Are: The Case for Gender-Balanced Investing – International Banker

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By Nada Shousha, Vice-Chair, Egyptian American Enterprise Fund and Adviser, International Finance Corporation, and Amal Enan, Chief Investment Officer, American University in Cairo

We invest in strong management and solid businesses, regardless of gender”—this is common rhetoric of fund managers, whose industry is historically dominated by men. Less than 1 percent of the $70 trillion of global financial assets is managed by minority- or women-owned firms1U.S. Securities and Exchange Commission: Diversity and Inclusion Report.. As allocators of capital, we’ve become numb to reading management reports of publicly listed companies dominated by men; in fact, only 0.01 percent of all IPOs (initial public offerings) in the United States were led by female founders. We also know that it takes a village to get there, and early backers determine where founders end up. So, where are the investors in female founders along their journeys? Is being gender blind leading us to miss out on the larger opportunities?

Creating inclusive markets that solve problems of limited access to healthcare, education, financial and other services hinges on enabling diverse business leaders. Women are not only half of the market and a large part of the labor force, but they are also drivers of household expenditures. Their inability to access markets excludes entire families from better standards of living.

Countless studies have shown the benefits that materialize from gender diversity in building companies that deliver both financial returns and social benefits. Yet, in the venture-capital and private-equity (VC and PE) industries, which provide entrepreneurs with access to funding when public-equity markets and debt may be less viable sources of capital, women remain severely underrepresented as investment decision-makers and as capable investees and recipients of growth funding.

Billions of dollars are invested in growing startups every year; 2 percent of those dollars go to female founders2Fast Company: “Why it’s incredibly rare for companies led and founded by women to IPO,” Leslie Feinzaig, July 16, 2021.. The lack of diversity is even more pronounced in emerging markets and is dismal in the Middle East and North Africa (MENA), where we both work. Venture funding in the region reached record highs, crossing the billion-dollar mark in 20203Magnitt: “MENA HI 2021 Venture Investment Report.. In contrast, female founders receiving funding represented only 6 percent of the total VC and PE funding available in MENA4International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.. This is not just a missed opportunity; it’s a grave market fail.

When talking to women business owners, we often ask why fundraising is a challenge. Looking at their pace of growth, funding remains a critical constraint. The data reveals that the median female-led business receives 65 percent of the funding received by the median male-led business. Female founders tend to receive funding at the earlier stages from accelerators and incubators, then fall out of the arena in later (and larger) funding rounds. Male-led businesses are more likely to receive second-time funding than female-led businesses—17 percent versus 13 percent, respectively.

One often-cited limitation is, sadly, behavioral: “I’m not investor-ready”. Women are significantly more conservative in fundraising and avoid investors until they reach higher milestones in their businesses. Further challenges arise around where to meet with investors—here, culture plays an important role. Since most networking events happen during kids’ bedtime hours or over drinks, women in MENA tend to be excluded from the conversation. Social norms are one reason why women entrepreneurs are less likely to go after growth industries. One MENA female founder openly said on a roadshow, “I’d love to see male founders get asked: ‘Who’s taking care of the kids while you are fundraising?’” During due diligence, the founder of a last-mile delivery company was repeatedly asked, “But isn’t logistics too operations heavy for a woman?”

By and large, the anecdotes are many, and there is limited data to quantify the challenges. A few success stories do exist, placing some of MENA’s female founders in the spotlight, as was the case for the exit of the ecommerce platform Mumzworld or the acquisition of the events-management technology platform Eventtus by a US-based player. Speaking to women business leaders, each has battle scars to show and a common sentiment to share: “It was lonely. We rarely found women investors on the other side of the table.”

The VC and PE industries are still largely homogenous. Men comprise 90 percent and 85 percent of investment committees in both, respectively. That’s where decisions are being made and where the future of what our markets will look like is determined.

A mere 11 percent of senior investment professionals in emerging markets’ private equity and venture capital are women. Representation falls to 8 percent when excluding China and is only 7 percent in MENA. The picture demonstrates a major lag of 17 percent compared to female representation in business leadership within other sectors5Ibid..

Not only are few women found in the leadership of private-equity and venture-capital firms, but few women are in the leadership of the companies in which these firms invest. Just 20 percent of portfolio companies have gender-balanced leadership teams, and almost 70 percent are all male—even though, of the gender-balanced leadership teams in their portfolios, 87 percent have better decision-making, 61 percent show enhanced governance, and 60 percent have greater ability to serve larger, more diverse markets and consumers6Ibid..

Research confirms that the paucity of gender diversity is not good for business and financial returns. A Harvard Business Review study concluded that gender-diverse fund managers deliver an incremental 10 to 20 percent in returns compared to non-gender-diverse peers7Harvard Business Review: Study by Paul Gompers and Silpa Kovvali.. When VC firms increased female-partner hires by 10 percent, they saw 1.5-percent increases in returns for the overall funds and 9.7 percent more profitable exits.8International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.

An International Finance Corporation (IFC) study found that investing in gender-balanced leadership teams yielded 25 percent higher valuations. The median gender-balanced portfolio company was found to have a 64-percent increase in company valuation between two rounds of funding or liquidity events compared to 10 percent for imbalanced teams.

The imbalances in portfolio companies are correlated with the imbalances in investment managers’ leadership teams, since networks play active roles in sourcing investment opportunities and selecting senior management for portfolio companies.

Female partners were found to be twice as likely to invest in startups with one female founder and more than three times more likely to invest in a female CEO9Women in Venture Capital 2020 Report. According to a recent Harvard Business Review article, this is in line with the finding that VCs are much more likely to invest if they share the same gender or race as the founder.Without the equal representation of female investors, female founders will continue to be overlooked.

If the research unequivocally supports gender-balanced ecosystems, this is enough reason to turn the tide. We need to acknowledge that the barriers are real, and they range from closed networks, biases and inadequate commitment to gender diversity from allocators. To be overcome, a concerted effort is required from multiple stakeholders.

When it comes to perceptions on gender diversity, a disconnect exists between limited partners (LPs), who allocate capital to funds, and general partners (GPs), who manage a fund and invest the capital raised. According to the IFC study, 65 percent of LPs regarded the gender diversity of a firm’s investment team as important when committing capital to funds. However, GPs reported that less than 30 percent of their LPs emphasized gender diversity when making investment decisions. If only 25 percent asked about gender diversity during due diligence and even fewer made capital commitments conditional on gender outcomes, the pledge to diversity should be perceived as weak at best.

LPs who set clear gender-diversity goals for their investments and underscore diversity outcomes in due diligence send strong signals to GPs that the organization is committed to diversity. The goals then feed into GPs’ portfolio managers’ diversity targets. Fund managers would require gender-disaggregated data from their portfolio companies and commit to improving capital allocation to gender-balanced leadership teams. Reflecting diversity goals in their investment processes and portfolio management is a major action LPs can take towards closing the gender gap while maintaining or increasing returns.

The data demonstrates a clear correlation between the performance of gender-balanced investment teams and higher returns. Despite their vocal interest in diversifying their investment leadership teams, less than 10 percent of GPs have strategies for achieving it. It’s a perpetual cycle, as hiring is dependent on networks. With fewer women in investment leadership roles, there are fewer partners who can tap into the talent pool of junior and senior women who have paths to partnership. Similarly, subjective evaluation criteria such as “cultural fit” in a male-dominated industry place women at a disadvantage and feed the cycle. Committing to internal diversity targets for hiring and promoting female staff and managers levels the playing field and improves women’s access to the opportunities already available to their male peers.

As the research shows, investing in gender-balanced leadership teams yields higher valuation and returns. Yet, less than 40 percent of surveyed general partners track gender-disaggregated employment data, and only 33 percent actively pursue diverse candidates when sourcing talent for portfolio companies10International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.. Here again, a concerted focus on achieving gender-diversity outcomes is needed through GPs’ diversity tracking; playing an active role in making the business case for diversity and giving feedback on strategies will go a long way in achieving gender balance.

Accountability toward these actions allows LPs and GPs to make headway in closing the gender gap, generating employment opportunities and providing access to markets, which ultimately results in higher returns.

If you fish in the same pond, you will catch the same fish. Looking beyond the familiar comfort zone and making determined efforts for gender diversity and inclusion will result in growing opportunities across asset classes, investment strategies and geographies. Gender-balanced investors are empowered to deploy their resources within diverse teams and through innovative solutions, creating inclusive markets and bridging the wealth gap. The research on returns on investment is clear—it is worth the effort.

 

ABOUT THE AUTHORS

Nada Shousha is currently a Director on five regional and international companies’ boards as well as Vice Chair of the Egyptian-American Enterprise Fund. She is also an Advisor to the International Finance Corporation’s program Banking on Women. Until 2016, she was Regional Manager for Egypt, Libya and Yemen in the Middle East and North Africa Department of the IFC.

Amal Enan is the Chief Investment Officer of the American University in Cairo’s Endowment and Managing Director at Global Ventures. Prior to joining Global Ventures, Amal was the Executive Director of the Egyptian-American Enterprise Fund, and prior to that, she was part of a team of economists at the Macro-Fiscal Policy Unit in Egypt’s Ministry of Finance.

References

1 U.S. Securities and Exchange Commission: Diversity and Inclusion Report.
2 Fast Company: “Why it’s incredibly rare for companies led and founded by women to IPO,” Leslie Feinzaig, July 16, 2021.
3 Magnitt: “MENA HI 2021 Venture Investment Report.”
4 International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.
5 Ibid.
6 Ibid.
7 Harvard Business Review: Study by Paul Gompers and Silpa Kovvali.
8 International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.
9 Women in Venture Capital 2020 Report
10 International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.

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These five things need changing in the investment world — including free trades – Financial Post

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Peter Hodson: Investing should be rewarded, while trading should be discouraged

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I have (hopefully) picked up a few tidbits of knowledge after about 40 years in the investment industry. But one of the reasons I love this business is that there is always something new to learn. No one will ever know everything about investing, and no one — and we mean no one — really has any idea what is going to happen in the markets tomorrow.

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This makes a career in investments challenging and entertaining. There is never a dull moment. Still, here are five things I would change if I was in charge to make investing life a little more, well, predictable and fair.

Banish analyst price targets

Goldman Sachs this week cut its target on Twitter Inc. to US$62 and called it a “sell.” Why is this noteworthy? Well, in February, the same broker raised its target on Twitter to US$112 and called it a “buy.” In barely seven months, the target price was reduced by 45 per cent. Investors following Goldman’s logic would have gotten completely whipsawed.

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Is Twitter so bad? Not really: the stock is up 11 per cent this year and 54 per cent in 52 weeks. But I really think target prices do a disservice to investors. Ignoring that most are wrong anyway, they encourage excessive trading and set up a case of FUD: fear, uncertainty and doubt.

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Need more proof? How about this quote from an analyst’s report in 2011 on Amazon.com Inc.: “Despite Amazon’s outstanding fundamentals, its stock is overvalued and over loved.” The report had a US$125 per share target. Sure, it’s been a decade since then — not really that much time in market land — but Amazon today is US$3,446.

Change taxes to reward investing 

Let’s face it, taxes are going to go up in Canada. After all, we have to pay for all this pandemic spending, somehow. Right now, capital gains are taxed at 50 per cent. But it doesn’t matter if you hold a stock for five minutes or five years, your tax rate will be the same. Other countries have different methodologies, with some, such as the United States, having a higher tax rate if investments are held for a shorter time period. This makes sense to us, because investing should be rewarded, while trading should be discouraged.

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If you’re day trading, you’re not really supporting any company. You’re just seeking quick profits. Buying shares in a company and holding them for years is harder, but, ultimately, more rewarding and should be encouraged by policy-makers.

A note to whoever wins the election next week: Tax the speculators and day traders, not the real investors who are beneficial to the country.

Rethink free trading

After sweeping across the U.S. these past few years, free stock trading has arrived in Canada, with several brokerages announcing commission-free trades this year. This sounds good, but it’s not as good as you think. We’re all for lower costs, but free trades really, really encourage excessive trading, which results in more taxes (see above) and lowers the amount of capital available to compound.

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Volatile spikes in certain meme stocks have certainly increased because of zero trading costs. If we were in charge, we might ban free trades, but we might not have to if short-term trading taxes were increased. Essentially, we just want people to invest and not trade. After all, how many day traders do you see on all those world’s richest people lists? Answer: None.

Ban the phrase, ‘That stock is so expensive’

We’re kind of sick of how much we’ve heard this phrase this year. Many people are expecting a correction because stocks are so expensive based on historical metrics. Well, guess what? The buyers today obviously do not think stocks are expensive. They’re not buying with the expectation of losing money.

We chuckled after seeing Grit Capital’s recent thoughts on the Shiller P/E index, a measure of market valuation indicating the market’s valuation is 47 per cent higher than its 20-year average. Its comment sounded ominous, until it added that “following the famous P/E rule over the last 40 years, you would have owned equities for a grand total of 7 months (eye roll).”

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Apply investor rules equally

If you are an accredited investor, you know how much of a pain the paperwork can be to invest in a hedge fund. The government wants investors to be protected, so it only lets rich investors access some products, on the thesis that they can take more risks. That’s all fine and great, and, at least in theory, makes sense. But what about extremely risky products that get regulatory approval and trade on stock exchanges? Nearly anyone can buy those, whether they are experienced, rich, young or whatever.

  1. Facedrive has been involved in many different types of businesses: ride sharing, food delivery and COVID-19 contact tracing, just to name a few.

    Five reasons Facedrive plummeted 91% in six months

  2. Smart investors know that most market crises are short-lived.

    Five lessons the pandemic has taught investors

  3. Follow these and with any luck you will set yourself up for a good retirement.

    Five keys to ensure you have a happy and prosperous retirement

  4. Worry only causes investors to focus too much on one thing, often at the risk of missing the big picture.

    Top five investor worries and 10 ways to solve them

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Sure, brokers still have know-your-client rules, but an investor who calls themselves aggressive can go out and buy double- or triple-leveraged exchange-traded funds (ETFs) all day long. Let’s look at Direxion Daily Junior Gold Miners Index Bear 2X Shares, a leveraged ETF on junior golds. Its three-year annualized return is negative 82.1 per cent. How about the ProShares Ultrashort Bloomberg Natural Gas Index ETF? It’s down 80 per cent this year alone. If I were in charge, I might apply some new restrictions, or at least warning labels, on some of these investments.

Peter Hodson, CFA, is founder and head of Research at 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals. He is also associate portfolio manager for the i2i Long/Short U.S. Equity Fund. (5i Research staff do not own Canadian stocks. i2i Long/Short Fund may own non-Canadian stocks mentioned.)

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