Now seems like a decent time for long-term passive income investors to go above and beyond the rates offered by risk-free assets (in the 4–5% range these days). Indeed, some folks may be asking themselves why bother taking risks when a high-rate, risk-free asset is good enough.
Depending on your personal risk tolerance, it may make sense to stick with risk-free assets. I’m not against owning them as part of a diversified income portfolio. That said, I do think the higher yields offered by certain securities balance out the risks such that the risk/reward may actually be better than that of risk-free assets.
Inflation seems to be getting under control, with the rate falling below 4% in Canada. Though inflation seems to be on a trajectory back to normal levels, it’s worth remembering that high inflation can have the potential to be very sticky. If inflation above 3% sticks around for a while longer, those 4–5%-rate risk-free assets may not be the no-brainer buy they seem to be today, especially if the bull continues going strong!
TFSA investors: Some risks are more than worth taking!
In any case, I do think it’s worth taking the risk for a shot at more reward if you’re willing to put in the homework to ensure the odds are on your side. I’m all about doing better than the market averages. And better than what a risk-free asset can provide at any given instance.
Indeed, over the long term, it’s stocks that tend to outdo most other asset classes. So, if you’re in it for the next few decades, it makes sense to pursue some of the high-yielding opportunities for your TFSA today.
Without further ado, let’s look at one of the most interesting TFSA investment ideas that may be worth keeping on some sort of watchlist going into the summer season:
My TFSA income pick for July 2023: National Bank of Canada
National Bank of Canada (TSX:NA) isn’t the highest-yielding bank, nor is it the cheapest from a trailing price-to-earnings (P/E) standpoint. Further, the stock isn’t even off that much from its all-time highs, as some of its peers in the Big Six are in deep bear market territory (that implies shares off 20% or more from peak levels).
Undoubtedly, shares of National Bank of Canada may not seem like the most obvious TFSA investment idea for those targeting the bank stocks as buys on weakness. That said, I think it’s hard to deny National Bank’s impressive performance amid macro challenges.
The stock is off just 7.5% from its high of $105 and change. I think National Bank deserves consideration over its bigger brothers. In the banking world, bigger is not necessarily better. Arguably, National Bank is in a sweet spot, with a “large enough” $33 billion market cap, as it looks to catch up with its Big Six brothers.
Further, the bank has outperformed its peers over the past year, with 12.2% gains, while its peer group is likely down over the timespan. Laurent Ferreria deserves credit for National Bank’s performance. And as recession finally does hit, I’d look for National Bank to continue to have a lot to prove.
What about valuation?
It’s a worthy member of the Big Six, if not the best member, in my opinion. At 10.5 times trailing price-to-earnings, with a 4.18% dividend yield, NA is a terrific addition to any long-term-focused TFSA that seeks the perfect combo of yield and capital gains potential.
Before you consider National Bank of Canada, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in June 2023… and National Bank of Canada wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 28 percentage points. And right now, they think there are 5 stocks that are better buys.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
