The new year is the season of planning for goals and for many of us, it is crucial to have money be there to meet those goals. Investing is the fuel that can get those funds to the right level, and you do not want to run out of gas. The biggest issue I see with investing is in many cases, the money is not tied to a goal.
On the coaching line, we often get calls from individuals who have cash that they want to invest for the long run but are struggling to find the right investment choice. Conversely, we have received questions from people who have 100% of their investments in the stock market but have reached a point where they need those funds and are now facing a loss if they sell that particular day. Here are some things to do at the beginning of the year to make sure you are in the proper investment position:
Be Clear About Your Goal
As you can imagine, one of the most common questions I receive as a financial planner is, “Where should I invest?” Rather than give them what they are asking for, I typically answer that question with the question “What goal are you investing for?” While this sometimes frustrates the person I’m talking to, answering that question will likely get them closer to their answer rather than me tossing out some stock or ETF.
Investing becomes easier to manage if you are clear about the goal. One framework to help you get clear about your goal is to make them Specific, Measurable, Assignable, Realistic and Time-related also known as SMART. You can find more information on the SMART concept here.
Time Your Investments to Your Goal
The biggest factor in matching the right investment with the right goal is time frame. If you need funds sooner rather than later, you will likely want to stick with more conservative options like savings accounts and short-term bonds. If your goal is 10 years or more away, the stock market has historically rewarded those who took on risk for the long term. (Your mileage may vary.)
If you want to design your own portfolio, you can use a risk tolerance profile to help determine the right investment mix for your situation. If you prefer to be more hands-off, target date funds are designed to help you invest for retirement in a manner that is reasonable and will get more conservative as your goal approaches. You can simply pick the one with the year closest to your expected retirement date, put everything into that one fund since they’re each fully diversified to be a one stop shop, and set it and forget it. It doesn’t get much easier than that.
Monitor Your Investments and Your Goal
Once you have determined the proper investment mix and tools, the next step is to regularly monitor them. This should be the easy part, but this is where many people get off track. For instance, if you keep changing your investment goal from saving for college to paying off debt, it will not bode well for your investments switching from long-term to short term. If your investment goal is constantly changing, make sure your financial foundation is sound. A robust emergency fund can protect you from having to dip into your long-term investments.
Once you have decided on using a particular strategy, you may want to stick with it until you have taken the time to get comfortable with another one. Be particularly cautious if you hear about a hot investment and you see that this investment has outperformed the strategy you determined you are comfortable with. This can lead to chasing returns, which can lead to underperformance, stress, and possibly taxes generated by moving from investment to investment.
This doesn’t mean you should never make changes to your investments. For example, rebalancing your portfolio quarterly or annually can help you maintain your desired level of risk since you’ll sell investments while they’re relatively high in price and purchase more of those that are relatively cheap. For example, if your target is 60% of your portfolio in stocks based on your time frame and risk tolerance, and you now have 70% in stocks after a good run in the stock market, you’re taking on more risk even if it doesn’t feel like it. By reducing your stock allocation back to 60%, you’re taking some of those gains off the table. When the stock market eventually declines, you can use that money in bonds and/or cash to buy stocks while they’re down and bring your stock allocation back up to the 60% target.
A new year is an exciting time to dream about the future. Your investments can be a key part of that. By carefully planning and monitoring your portfolio, you are more likely to make those dreams a reality.
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.
