Investment can be an intimidating journey, especially for people who are only comfortable with savings accounts. But sooner or later, most people realize that the interest rate cannot protect their savings from inflation’s impact, and they need to invest to ensure that their savings are growing at a decent enough pace. However, the risks associated with investments can be too much for most investors just starting out.
One good place for these beginner investors to start is low-cost, broad-market ETFs. The learning curve from “what is an exchange-traded fund (ETF)” to actually selecting and investing in the right ETFs can also be much smaller than it is for stocks.
A TSX ETF
For most Canadian investors, the most comfortable place to start is the main Canadian market — i.e., the TSX. And a low-cost ETF like BMO S&P/TSX Capped Composite Index ETF (TSX:ZCN) is a great first choice. It comes with an incredibly low management expense ratio (MER) of 0.06%, so even if you keep the ETF in your TFSA or RRSP for three or four decades, the overall “cost of income” would be almost negligible.
The ETF doesn’t encompass the entire TSX but rather the 239 largest securities in the country, or roughly 95% of the market. It makes quarterly distributions as well, and together, with the market’s capital appreciation, the ETF is capable of doubling your capital in about eight years (assuming a healthy market). The distributions can help you start a passive-income stream if you invest a sizeable enough sum.
An S&P 500 ETF
The next natural market for Canadian investors is the U.S. stock market. And one of the most common ways to gain exposure to the U.S. market is by following the S&P 500 index by investing in something like Vanguard S&P 500 Index ETF (TSX:VFV). It has been around since Nov. 2012 and has faithfully tracked the underlying index so far. The MER is quite low at 0.09%.
The U.S. market is relatively more aggressive and faster growing than the TSX. Even if we take market crashes like the one in 2020 and recessions into account, the fund might double your money in five or six years. Buying it at a discounted price and holding it for decades can help you grow your retirement nest egg to a decent enough size (assuming you start with enough capital).
A NASDAQ ETF
Another way to gain exposure to the U.S. market, especially the tech side of it, is to invest in NASDAQ. Horizons Nasdaq-100 Index ETF (TSX:HXQ), even though it’s one of the most affordable ones of its kind in Canada, comes with an MER of 0.28%, which is significantly higher than the other two ETFs on this list.
However, the ETF’s return potential is just as aggressive. Even with the current 25% decline, the fund has grown over 114% in the last five years. The recent slump is due to the tech sector decline in North America, and it’s a great opportunity to buy this usually high-flying ETF at a discounted price.
Foolish takeaway
The three ETFs can be the perfect starting point for most Canadian investors. In fact, many investors prefer to park the bulk of their capital in these or similar ETFs for steady growth in the long run. The two U.S. ETFs are not a good match from an income perspective, but they can grow your capital at a much faster rate than the TSX one.
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.
