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Steel resolve: A hands-off approach to investment gains – The Globe and Mail

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In Ian McEwan’s recent novel, Machines Like Me, the main character buys an advanced robot that winds up competing with him for the affections of his girlfriend while also making a quick fortune by investing in the stock market. Yikes!

While the speed of the robot’s investment success may be unrealistic, there can be no doubt that an investor able to minimize human cognitive weaknesses will outperform over time.

Three related cognitive handicaps that we, as homo sapiens, all share are: difficulty in thinking in terms of probabilities, a tendency to focus on potential losses to the exclusion of possible gains and an overconfidence in our ability to predict the future.

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Successful investing, like machine learning, is based on thinking in terms of probabilities – an activity that is not intuitive for us. Instead, we tend to think in binary, all-or-nothing terms.

In order to estimate the probability of a future outcome, you require a statistically significant sample of data. When investing, this means, at a minimum, examining the relevant facts over a long time period. Typically, we don’t do that. An oft-asked question is, “What did the stock market do today?”

Also, we allow the fear of a loss to trump the likelihood of a gain. This short-term loss aversion was helpful at earlier stages of our evolution, when loss often meant serious injury or death.

The problem is that biological evolution happens extremely slowly. Our minds are hardwired for life in a state of nature, whereas we now live in far different circumstances. In today’s world, we should understand that if someone offers us a coin toss for which a correct call would win us $100 and an incorrect call would cost us $50 (half as much), we should take the bet. Most people will not.

When someone says, “I’d rather be safe than sorry,” it strikes most of us as prudent. If we still lived on the savannah among lions, it would be. However, when it comes to investing capital over the long run, it is typically those who have chosen the perceived safety of cash or bonds who are ultimately sorry – or would be if they compared their return to that of the broad stock market.

Another of our human weaknesses is a stunning overconfidence in our ability to predict the future better than others. As the great Canadian-born economist J.K. Galbraith said, “There are two kinds of forecasters: those who don’t know and those who don’t know that they don’t know.” Most of us fall into the latter category.

When it comes to investing, this overconfidence causes otherwise intelligent people to think they can “time the market,” an activity that is guaranteed to lower your long-term return.

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How do you avoid these cognitive weaknesses? Well, if you are a tax-paying individual and wish to do your own investing, here is a simple, but not necessarily easy, approach.

Set aside, in short-term cash equivalents such as GICs, a buffer account to cover your expenses for one to two years. Invest the balance of your capital in an ultralow-fee global stock index fund or ETF, one that represents all global markets, including the emerging economies.

And then leave your investments alone! As Warren Buffett has wisely said about investing, “Inactivity strikes us as intelligent behaviour.”

A combination of real economic growth, inflation and dividend payments will ensure that you will – over time receive a safe and highly satisfactory return from global stocks. Inactivity is likely to improve your before-tax return and is extremely likely to improve your after-tax return.

However, not touching your investments will be difficult for most people.

It may assist you in staying the course to remember that the price assigned by the stock market to a group of companies will fluctuate around the growing economic value of those companies. The market price is also far more prone to short-term volatility than the economic value. So, more often than not, if the market price falls, your future percentage gain has increased.

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This simple approach may not beat an advanced robot, but over time it should outperform most human investors.

Biff Matthews is chairman, and Doug McCutcheon is president, of Longview Asset Management Ltd., a Toronto-based investment management firm.

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Halal investing gives Muslims opportunity to make money in line with religious values – BNN

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TORONTO — Ahmed Najar only started investing two years ago after discovering a way to do so that aligns with his Muslim values.

The 36-year-old lab researcher turned to Halal investing that screens out forbidden investments such as pork, alcohol, tobacco, weapons, adult entertainment and the biggest no-no of all: debt, bonds or interest.

Najar says the main driver for his investment decisions is religious.

“I cannot do the other way, it’s just impossible. Even if there is money to be made I cannot make it that way,” he said from Vancouver.

The money he invests must do no harm and be beneficial for society. Usaries are forbidden because the Qur’an says Muslims aren’t allowed to profit from lending money, so earning interest from an individual or bank is prohibited.

Socially responsible investing, including those based on religious beliefs, is a growing trend in Canada with assets under management surging to $3.2 trillion last year, up from $2.1 trillion in 2017, according to the Canadian Responsible Investment Trends Report.

The rise of ESG investing

Paul Harris, partner and portfolio manager at Harris Douglas Asset Management, talks about the challenges ahead for companies and money managers as climate change and ESG investing move to the forefront of the investment world.

Responsible investing represents nearly 62 per cent of Canada’s investment industry, up from 50.6 per cent two years ago.

Investing based on religious values remains a small but growing subsection of this trend.

Like all investing, those who make decisions based on their faith should educate themselves and find a trusted financial adviser, said Najar.

That’s especially crucial for Halal investing because most financial advisers are not familiar with the detailed web of options and restrictions, said Jesse Reitberger, co-founder of Canadian Islamic Wealth, who guides Najar’s moves.

Reitberger has focused on helping the Muslim community to adhere to financial tenets of the Qur’an since converting to Islam in 2014.

He said many Muslims have sat on the sidelines or invested and just plead ignorance.

“They just keep their money either sitting in a chequing account or under their mattress at home,” he said from Winnipeg.

For many Muslims, especially older generations, that’s meant saving cash to make purchases of real estate, cars or gold.

Canada’s Muslim population exceeds one million and is expected to become the second-largest religion by 2030.

Finding investments that are Islamic compliant can be a challenge because Canada is an interest-based economy, said Reitberger.

The Dow Jones Islamic Index and S&P/TSX 60 Shariah contain several funds that hold permissible investments.

Other faiths have taken similar steps to investing, albeit without any prohibition on debt.

The Mennonite Savings and Credit Union was formed 56 years ago to allow members to “see mutual aid put into faithful practice.”

It created a family of socially responsible funds to help investors bridge the gap between their principles and the way they invest their money.

Renamed Kindred Credit Union in 2016 to broaden its reach, about 70 per cent of its 25,000 members have a faith-based affiliation.

“People have taken a really big interest in this simply because it allows them to align all aspects of their lives to reflect their beliefs including their finances,” said Tim Fox, director of wealth and investments.

Screens are put in place to exclude investments in alcohol, tobacco, cannabis, gambling, military and weapons, along with those that have negative impacts on human rights, employees and animal welfare.

“Those screens continue to evolve as a social awareness evolves. As a community, as a society we decide what is important and what we’re willing to invest in and not invest in.”

Kitchener, Ont.-based Meritas Financial was created early on because there were very few options available, added Kindred CEO Ian Thomas.

“Over the last two decades, with acceleration over the last 10 years, all of a sudden values or socially responsible investing or responsible investing has really come to the forefront and the outcome has become more mainstream.”

Other financial institutions that provide faith-inspired options include Khalsa Credit Union. It helps British Columbia’s Sikh community while Edmonton’s Christian Credit Union applies “Christian values to financial services.”

Companies such as Wealthsimple and Manzil have sprung up in recent years to fill in gaps for the Muslim community.

Online investment firm Wealthsimple said it is preparing to launch its Shariah-compliant ETF as early as next month to replace its current offering of 50 stocks.

It will contain more than 150 stocks and increased diversification.

“One of the problems that Shariah investors have is you end up screening out entire industries from how they can invest,” chief investment officer Ben Reeves said in an interview.

He said Shariah-compliant funds can generate similar returns to regular investment vehicles, noting that Its current offering launched in 2017 has returned about six per cent annually.

Mohamad Sawwaf, co-founder and CEO of Toronto-based Islamic finance company Manzil, created its own diversified portfolio offering — Manzil Halal Portfolios — in partnership with CI Direct Investing, the roboadviser arm of CI Financial Inc.

The portfolio includes alternatives to fixed income like Islamic mortgages that are based on real and hard assets, while Wahed Invest’s ETF invests in Shariah compliant stocks.

“This is a very underserved community and this is about financial inclusion because they’re currently excluded within the Canadian marketplace,” he said.

Sawwaf said market research has indicated that more than 70 per cent of Muslim Canadians would adopt Halal investing if products are available.

That’s particularly true of younger Muslims who are more interested in investing than older generations.

Restrictions on fixed income end up helping investors to do well, added Sameer Azam, investment adviser at RBC Wealth Management.

“A lot of the criteria pushes you to companies with lower leverage so at the end of the day we see a lot of quality in our clients portfolio,” he said.
 

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Halal investing gives Muslims opportunity to make money in line with religious values – OrilliaMatters

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TORONTO — Ahmed Najar only started investing two years ago after discovering a way to do so that aligns with his Muslim values.

The 36-year-old lab researcher turned to Halal investing that screens out forbidden investments such as pork, alcohol, tobacco, weapons, adult entertainment and the biggest no-no of all: debt, bonds or interest.

Najar says the main driver for his investment decisions is religious.

“I cannot do the other way, it’s just impossible. Even if there is money to be made I cannot make it that way,” he said from Vancouver.

The money he invests must do no harm and be beneficial for society. Usaries are forbidden because the Qur’an says Muslims aren’t allowed to profit from lending money, so earning interest from an individual or bank is prohibited.

Socially responsible investing, including those based on religious beliefs, is a growing trend in Canada with assets under management surging to $3.2 trillion last year, up from $2.1 trillion in 2017, according to the Canadian Responsible Investment Trends Report.

Responsible investing represents nearly 62 per cent of Canada’s investment industry, up from 50.6 per cent two years ago.

Investing based on religious values remains a small but growing subsection of this trend.

Like all investing, those who make decisions based on their faith should educate themselves and find a trusted financial adviser, said Najar.

That’s especially crucial for Halal investing because most financial advisers are not familiar with the detailed web of options and restrictions, said Jesse Reitberger, co-founder of Canadian Islamic Wealth, who guides Najar’s moves.

Reitberger has focused on helping the Muslim community to adhere to financial tenets of the Qur’an since converting to Islam in 2014.

He said many Muslims have sat on the sidelines or invested and just plead ignorance.

“They just keep their money either sitting in a chequing account or under their mattress at home,” he said from Winnipeg.

For many Muslims, especially older generations, that’s meant saving cash to make purchases of real estate, cars or gold.

Canada’s Muslim population exceeds one million and is expected to become the second-largest religion by 2030.

Finding investments that are Islamic compliant can be a challenge because Canada is an interest-based economy, said Reitberger.

The Dow Jones Islamic Index and S&P/TSX 60 Shariah contain several funds that hold permissible investments.

Other faiths have taken similar steps to investing, albeit without any prohibition on debt.

The Mennonite Savings and Credit Union was formed 56 years ago to allow members to “see mutual aid put into faithful practice.” 

It created a family of socially responsible funds to help investors bridge the gap between their principles and the way they invest their money. 

Renamed Kindred Credit Union in 2016 to broaden its reach, about 70 per cent of its 25,000 members have a faith-based affiliation.

“People have taken a really big interest in this simply because it allows them to align all aspects of their lives to reflect their beliefs including their finances,” said Tim Fox, director of wealth and investments.

Screens are put in place to exclude investments in alcohol, tobacco, cannabis, gambling, military and weapons, along with those that have negative impacts on human rights, employees and animal welfare.

“Those screens continue to evolve as a social awareness evolves. As a community, as a society we decide what is important and what we’re willing to invest in and not invest in.”

Kitchener, Ont.-based Meritas Financial was created early on because there were very few options available, added Kindred CEO Ian Thomas.

“Over the last two decades, with acceleration over the last 10 years, all of a sudden values or socially responsible investing or responsible investing has really come to the forefront and the outcome has become more mainstream.”

Other financial institutions that provide faith-inspired options include Khalsa Credit Union. It helps British Columbia’s Sikh community while Edmonton’s Christian Credit Union applies “Christian values to financial services.”

Companies such as Wealthsimple and Manzil have sprung up in recent years to fill in gaps for the Muslim community.

Online investment firm Wealthsimple said it is preparing to launch its Shariah-compliant ETF as early as next month to replace its current offering of 50 stocks.

It will contain more than 150 stocks and increased diversification.

“One of the problems that Shariah investors have is you end up screening out entire industries from how they can invest,” chief investment officer Ben Reeves said in an interview.

He said Shariah-compliant funds can generate similar returns to regular investment vehicles, noting that Its current offering launched in 2017 has returned about six per cent annually.

Mohamad Sawwaf, co-founder and CEO of Toronto-based Islamic finance company Manzil, created its own diversified portfolio offering — Manzil Halal Portfolios — in partnership with CI Direct Investing, the roboadviser arm of CI Financial Inc.

The portfolio includes alternatives to fixed income like Islamic mortgages that are based on real and hard assets, while Wahed Invest’s ETF invests in Shariah compliant stocks.

“This is a very underserved community and this is about financial inclusion because they’re currently excluded within the Canadian marketplace,” he said.

Sawwaf said market research has indicated that more than 70 per cent of Muslim Canadians would adopt Halal investing if products are available. 

That’s particularly true of younger Muslims who are more interested in investing than older generations.

Restrictions on fixed income end up helping investors to do well, added Sameer Azam, investment adviser at RBC Wealth Management.

“A lot of the criteria pushes you to companies with lower leverage so at the end of the day we see a lot of quality in our clients portfolio,” he said.

This report by The Canadian Press was first published Jan. 21, 2021.

Ross Marowits, The Canadian Press

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Pandemic is driving a govtech investment boom, says new report – Cities Today

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The govtech sector is seeing new levels of development, deployment and investment as the pandemic forces governments at all levels to accelerate their digital transformation. This is the conclusion of a new report from insights and advisory firm StateUp.

The StateUp 21 research, based on analysis of 450 global govtech startups in StateUp’s proprietary Nebula database, finds that venture capitalists (VCs) that have historically been reticent to invest in the sector due to concerns about a slow return on investment are now recognising its importance to a post-pandemic society.

Tanya Filer, Founder and Director, StateUp, and Lead Researcher on Digital Government at the University of Cambridge, told Cities Today: “Govtech may also be benefitting from a broader shift in investors’ perspectives towards ‘impact’ investing.” She said there are signs that VCs are more frequently seeking investment opportunities in companies that can do some material good in the world.

Resilience

The report reveals that leading govtech startups have secured at least £500 million (US$686 million) in investment over the last year. This includes mobility solutions provider Via which secured US$200 million in March, transportation robotics MIT-spinout Superpedestrian (US$60 million in December) and AI insights company Zencity (US$13.5 million in August).

Much more money is predicted to be invested into the sector in 2021, with national and local governments doubling down on digitalisation and resilience.

Filer said: “Resilience-building in a post-pandemic world is the driving force behind new investment into govtech, a relatively young sector that is growing rapidly.

“Although traditionally govtech has been seen as a long-term investment, 2020 has shifted the landscape dramatically, with investors showing a burgeoning interest in technologies to support both public sector efficiency and accountability, and a green recovery. What was once a sector showing low reward over a period of years or decades is now a promising sector that is of growing interest to investors, entrepreneurs and government alike.”

In the US, the Biden-Harris administration has pledged to invest over US$10 billion into federal technology programmes, and the UK government has appointed three senior Digital, Data and Technology (DDaT) leaders to boost capacity in digital government over the next few years.

Raising capital for govtech during the pandemic. Image: StateUp 21

City benefits

Cities globally have outlined the importance of data, infrastructure and resilience measures for their COVID recovery and look set to particularly benefit from the surge in innovation and investment. Urban and local tech companies make up 28 percent of startups in the Nebula database, representing its largest subsector.

Other key sectors include administrative tech (23 percent), procurement (16 percent) and digital engagement/civic engagement (14 percent).

The report finds that smaller companies also view cities as typically having less bureaucracy than central government.

Further, infrastructure and the built environment is tipped as the top govtech ‘subsector to watch’. It currently accounts for ten percent of startups recorded in Nebula, and includes companies developing and managing built assets and infrastructure. France, for example, has set aside €30 billion  (US$36.4 billion) to make buildings energy-efficient, revamp transport networks and shift away from fossil fuels, and 30 percent of the European Union’s €750 billion (US$910 billion) recovery fund is dedicated to ‘green’ projects.

Startups

The report also includes detailed profiles of what StateUp sees as the 21 most promising startups within the govtech sector. These include CitizenLab, Commonplace, Remix, Trafi and Zencity.

StateUp created Nebula to address the issue of govtech companies being lost among the more general category of technology. Companies are selected for inclusion in the database based on detailed submissions covering the problems they address, case studies, revenue and revenue growth, business model, strategy, clients and investors.  Startups can self-nominate for the next edition.

Image: Sasinparaksa | Dreamstime.com

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