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Should I Move My Investments When They’re Down? – Boomer & Echo



Recent stock and bond market turmoil has many investors thinking about making changes to their portfolios. 

Indeed, mutual fund investors may be wondering whether it’s the right time to switch from their expensive financial advisor to a low-cost portfolio of index funds using a robo advisor or online brokerage. DIY investors may be pondering changes to their investment strategy.

On the one hand, the market downturn presents a great opportunity to capitalize on buying investments “on sale” and can potentially take advantage of crystallizing a capital loss in taxable accounts.

On the other hand, you don’t want to panic-sell your existing investments and take a loss. Also, sitting in cash and waiting for the market to rebound could mean buying back in at a higher price. 

So, should you move your investments, make a change, or stay put until the market rebounds?

Take a Breath

To be clear, investors shouldn’t change their investment strategy based on current market conditions. We know that investment risk means there’s a chance your portfolio can lose value in any given day, week, month, or even year. We also know, historically, that markets have twice as many ‘up’ years as they have ‘down’ years.

What we don’t know is in which order or sequence these events will occur. So that means staying the course and staying invested will give investors the best chance at capturing those up days and achieving a favourable outcome (i.e. making money).

Evaluate Your Portfolio

We also know that investors are emotional and prone to market timing, performance chasing, panic selling, and other bad behaviours that are hard-wired into our brains.

The past decade of strong returns has made us overconfident of our capacity for risk and led many investors to chase speculative returns from cryptocurrency, cannabis, disruptive technology, and other exploding fads. It has led us to invest short-term money that may have been better off in the safety of a GIC or high interest savings account. And, it has fooled us into believing that investment fees don’t matter, as long as the performance is strong.

The first thing investors need to do is take a hard look at their existing investments and determine if they still make sense. In other words, do your investments match your risk tolerance, your time horizon, and provide you with proper diversification? Are you paying an advisor to actively beat the market, and, if so, how did their performance stack up?

If you already have a sensibly constructed portfolio of index funds or ETFs, then it’s probably best to just hang on and weather the storm. That’s right – do nothing!

The rest of this article is aimed at investors who may need to make a portfolio change.

Reframe Your Thinking

Many investors find that a market downturn like we’ve recently experienced is an opportune time to change investment strategies. Maybe your advisor’s promise to ‘protect your downside’ didn’t pan out as your portfolio plunged in value. Perhaps your stock picking prowess wasn’t as good as you’d hoped. Or, you finally realize the old adage that nobody cares more about your money than you do.

Whatever the catalyst, you need to know if now is the right time to make a switch. And, if it is, where to move your money and how to invest it going forward.

First of all, forget the notion of selling low and buying high. Changing investment strategies simply means moving your already invested money into either a more risk-appropriate investment or to one with a higher expected return (due to lower fees or broader diversification).

I went through this myself during the last oil price collapse in 2015. At the time I held 20+ Canadian dividend paying stocks, and the handful that were in the energy sector got hammered and lost 30-50% of their value.

When I made the decision to switch to index investing, I had to sell all of my individual holdings, including the ones that were down in value. Most investors have the mindset to want to hold onto their losing investments until they recover. But I had to reframe it and think of my individual stock holdings as one large portfolio ($100,000 at the time). I was moving that $100,000 from 20 ‘riskier’ Canadian individual stocks to a more diversified two-ETF solution that held many thousands of stocks around the globe.

So, you’ll want to think about your portfolio as a whole lump sum instead of a collection of individual parts. You can move that lump sum to another platform, be it a robo advisor or self-directed discount brokerage. All the while you’re going to remain invested – outside of potentially a day or two when you sell your existing holdings and set up your new portfolio.

DIY vs. Robo: Decide on the Platform

Are you a hands-on investor who wants to take control of your investments and slash your fees to the bone?

Great, you’re a prime candidate to switch to a self-directed online brokerage. In the name of simplicity, I’d recommend one of the following three options:

  1. If you bank at one of Canada’s big banks (like TD or RBC) then just open an account at their discount brokerage arm.
  2. If your banking is scattered around at different places, or you bank at a credit union without a discount brokerage arm, consider opening an account at Questrade.
  3. And, if you’re just starting out and have basic investing needs such contributing regularly to an RRSP, TFSA, or non-registered account, then consider using Wealthsimple Trade.

But, maybe you find the idea of DIY investing is a bit intimidating. In that case you’ll want to consider a robo advisor.

With a robo advisor, you’ll get a hands-off experience where all you need to do is fund the account and contribute regularly. The robo advisor handles the rest, from setting up a portfolio of index ETFs, to automatically monitoring and rebalancing your investments. They can even automate withdrawals for retirees.

Building Your Portfolio

Investors who’ve chosen the robo advisor path need not worry about this section. When you open an account with a robo advisor like Wealthsimple you’ll answer some basic questions around your risk tolerance, experience, and investing time horizon. Based on those answers, you’ll get placed in a diversified portfolio of stock and bond ETFs.

For those who’ve chosen the DIY investing path, the investment choices are much more difficult. There are so many stocks and ETFs to choose from that it’s enough to confuse even the most knowledgable investors.

To make things simple, you should probably stick with a single asset allocation ETF. These all-in-one solutions hold a pre-determined mix of Canadian, US, international and emerging market stocks, plus Canadian, US, and international bonds. They automatically rebalances this mix when markets move up and down, so you don’t have to worry about tinkering with your portfolio.

Related: The Best ETFs and Model Portfolios for Canadians

You should avoid individual stocks as a general rule unless you simply cannot help scratching your stock picking itch, in which case you should limit individual stocks to a small portion (say 5%) of your portfolio.

The same goes for riskier ETFs that invest in specific sectors like oil & gas, cannabis, or biotech, or ones that trade in commodities and futures. And, please, steer clear of any ETF that has “Triple leveraged Bull/Bear” in the title.

It’s tempting to look at stocks or sectors that have been badly beaten up during the latest market turmoil, but these investments can be highly speculative and risky – they should not be the foundation on which your investment strategy is made.

Final Thoughts

The first half of 2022 was one of the worst six-month periods in history for stock and bond investors. Stocks and bonds have since rebounded, but plenty of economic certainty remains. 

Investors may still be feeling angst about their portfolios. The ones who didn’t panic and stayed the course have likely seen their portfolios recover some losses. Passive index investors know they should accept the ups-and-downs of the market and not abandon their strategy as economic or market conditions change.

But the latest crash also may have also exposed the flaws in our portfolios. Our allocation to stocks may have been too high after years of strong returns. Many more have strayed into speculative investments instead of sticking with core broad-based indexes. New investors might have put short-term money (like for a house down payment) into the market expecting a quick profit. Still, others are paying too high of fees for their managed portfolio of investments.

For those investors, now is as good a time as any to re-evaluate your portfolio and consider changing investment strategies.

Just remember that changing approaches does not mean market timing or selling low and buying high. You’re simply moving your already invested money into a potentially more risk-appropriate, lower cost, and globally diversified investment portfolio with a robo advisor or self-directed online brokerage.

Have you moved your investments or changed strategies in 2022? Let me know in the comments.

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EQB sees mortgage growth moderating following 'tough' quarterly report – Financial Post



‘Clearly, homebuyers are sitting on the sidelines a little bit more’

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Challenger bank EQB Inc. is expecting growth in conventional loan originations to moderate over the rest of the year as a real estate slowdown weighs on demand.

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In an interview on Wednesday, chief executive Andrew Moor said Equitable Bank — the company’s schedule I bank — has seen some slowing in activity in terms of new mortgage applications, but that that was to be expected with rapidly rising interest rates.

“Clearly, homebuyers are sitting on the sidelines a little bit more,” Moor said, adding that the bank saw weaker results in Ontario, which makes up more than half of its business, while provinces in the west were stronger.

EQB, formerly Equitable Group Inc., nevertheless maintained its full-year guidance for 2022, expressing confidence in meeting its objectives despite sector volatility.

The bank added that it has taken “risk-managed actions” over the first two quarters, which Moor said include being more cautious in areas further from city centres.

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“We’ve been just trimming back a little bit in our risk appetite in some of those areas,” he said.

EQB said it also continued to proactively adjust its underwriting approach to respond to elevated risks from inflation, the Bank of Canada’s response to inflation and its expectations of changing collateral values.

This is a tough quarter report

Andrew Moor

Although still expecting EQB to deliver on its growth targets, some analysts are taking a cautious stance on the mortgage finance sector as risk remains elevated.

“Several factors represent downside risks that will continue to constrain sector valuations and share price performance near term, such as rising regulatory and policy uncertainty, rapid rise in interest rates, and housing market risk,” said Jaeme Gloyn, an analyst at National Bank of Canada Financial Inc., in a note to clients.

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Gloyn cut his estimated target price to $73 per share from $75, while maintaining an “outperform” rating on the stock.

EQB reported strong performance on quarterly net interest income on Tuesday with an all-time record of 15.6 per cent return on equity for the year-to-date period. Conventional lending growth in its core operations grew 36 per cent, year over year.

However, Equitable said severe capital market volatility led to mark-to-market losses of $8.7 million on its non-interest income investment portfolio, which it said was conceived so Equitable Bank can gain access to early-stage technologies.

  1. The penetration of the Canadian reverse mortgage market is lagging behind other developed economies, a DBRS Morningstar report says.

    Reverse mortgage market has plenty of room to grow, but risks abound

  2. Equitable Group Inc. will hike its quarterly dividend after recording its best-ever quarter on the back of strong loan-origination growth.

    Equitable posts best earnings ever as mortgage business stays strong

  3. EQ Bank, a subsidiary of Equitable Group Inc., in Toronto.

    The ‘stealthy enablers’: Canada’s smaller banks court fintechs as industry dynamics shift

  4. EQ Bank, a subsidiary of Equitable Group Inc, in Toronto.

    Takeover of Concentra furthers Equitable’s ‘challenger bank’ ambitions, CEO says

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Moor said the bank is “very much fintech-enabled” and they’ve invested in some of the leading fintechs in Canada, including Borrowell and Wealthsimple.

“This is a tough quarter report. Despite taking a by-the-book approach to achieve and ultimately deliver strong core earnings growth, our efforts put in Q2 are offset by mark-to-market declines primarily in our strategic investment portfolios due to a downdraft in North American equity markets,” Moor said during Wednesday’s earnings call.

EQB said it expects volatility to continue in the second half of 2022, but this does not reflect the underlying strategic value of these investments.

The bank’s adjusted diluted earnings per share for the three months ended June 30 were $1.75, down from $2.64 a year ago.

For the current quarter, Moor said EQB is prioritizing its introduction of EQ Bank’s payment card, the launch of EQ Bank in Québec and its acquisition of Concentra Bank, which is expected to close later in the year.

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1 Investment You Should Have at Every Age – GOBankingRates



For a number of reasons, your 50s is the time to start really amping up your retirement savings accounts. Although you hopefully opened a 401(k) or IRA in your 20s or 30s, this is the time to maximize your contributions. For starters, you’re likely at your peak earnings level, so you’ll be able to sock more away without it affecting your lifestyle. Second, once you reach age 50, you’re allowed to make “catch-up” contributions to your retirement plans. For 2022, you can contribute an extra $1,000 to your IRAs, for a total of $7,000 in any given year. But if you have a 401(k) plan, you can kick in an extra $6,500, for a total of $27,000 per year. If you earn enough money to be able to do it, this means you can put $270,000 in your 401(k) plan from age 50 to 60, which can provide a huge boost to your retirement nest egg.

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Investment manager convicted over $121 Cayman fund – Reuters




LONDON, Aug 10 (Reuters) – An investment manager of a collapsed 100-million-pound ($121 million) Cayman Islands-based legal financing fund was on Wednesday convicted by a London jury of fraudulent trading, fraud by abuse of position and money laundering.

Timothy Schools, a 61-year-old former lawyer who founded Axiom Legal Financing Fund in 2009 to provide loans to law firms pursuing no-win-no fee lawsuits, siphoned off nearly 20 million pounds of investor money to buy luxury properties and cars, the UK Serious Fraud Office (SFO) said in a statement.

His lawyer, David Hanman of Cobleys Solicitors, said he would not be commenting ahead of his sentencing on Thursday.

The jury at London’s Southwark Crown Court failed to reach a verdict for a second defendant, former independent financial adviser David Kennedy. The SFO has 21 days to decide whether to call a retrial. His lawyer was not immediately available for comment.

A third co-defendant, former lawyer Richard Emmett, was acquitted.

“It’s unbelievably horrible to have your reputation called into question,” Emmett said in a statement. “I now wish to get on with my life and career, which this unfounded prosecution by the SFO has placed on pause.”

The Axiom fund was an unregulated collective investment scheme that secured more than 100 million pounds from around 500 investors, who were told a panel of quality law firms would use their funds to back legal cases with a high chance of success.

But tens of millions of pounds were paid to three law firms that Schools either owned or held an interest in, the SFO said.

He diverted more than 19.6 million pounds ($23.76 million) into offshore bank accounts, buying shares in a ski hotel in France and a 5-million-pound fishing and shooting estate in Britain, it said in the statement.

The lawsuits funded by Axiom, meanwhile, were often lost at court and insurance policies failed to cover losses.

Schools covered up the failures by arranging for the repayments of old loans with new Axiom loans, the SFO said.

($1 = 0.8249 pounds)

Reporting by Kirstin Ridley; Editing by Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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