All in all, 2019 was a pretty strong year for the economy.
Job growth was brisk, with both inflation and interest rates low. Economic growth was decent as recessionary fears have abated. Consumers remain confident, highlighted by solid holiday sales.
But this doesn’t mean everyone is prospering. Here are some money and finance trends to watch for in the coming year:
Continuing debt overhang
Now 10 years into the economic recovery, plenty of Americans are only treading water. Pay raises have been spotty, and many people continue to live paycheck to paycheck. Too many households still lack emergency funds, let alone long-term investments.
Some 82% of people who participated in a survey released this month by Fidelity Investments said they’re in a similar or better financial position compared to last year. Yet in the same poll, respondents revealed continuing anxiety about making ends meet and keeping debts under control.
Dealing with unexpected expenses was the top concern among respondents heading into the new year. Another was keeping a lid on debts. The top three New Year’s resolutions cited by respondents are to save more, pay down debt and spend less.
Many individuals still aren’t prepared to meet unforeseen money pressures.
“A large portion of the people I talk to in a given year find that their financial troubles come in steps that cause significant hardship: medical debt, a job loss, a major car repair, a family emergency,” said Jonathan Walker, executive director of the debt-focused Elevate Center for the New Middle Class in Fort Worth, Texas.
Yet many people just keep adding debt until the hurdles eventually become too high, with unexpected challenges finally pushing them over the edge, he said.
Retirement help coming
Plenty of Americans are unprepared for retirement. Reasons include not saving enough, making premature withdrawals and not having access to 401(k) plans through work.
That could start to change now that the SECURE Act, with broad bipartisan support, was passed by the House of Representatives and the Senate this month as part of a federal spending bill.
Among other things, the legislation would expand access to retirement-savings programs for part-time workers and people employed by small businesses, by providing employer incentives and making it easier for small businesses to band together to create 401(k) plans and benefit from economies of scale.
In addition, it would make annuities available in workplace 401(k) plans, providing investors with a way to lock in guaranteed income for life.
The legislation also would tweak Individual Retirement Accounts. Seniors with traditional IRAs who don’t need to spend their money immediately could delay required minimum distributions until age 72, up from 70½ currently. Also, older workers could continue to sock away money into IRAs. Currently, contributions must stop after age 70½.
The IRA changes reflect “the reality that people are living longer today,” said Paul Schott Stevens, president and CEO of the Investment Company Institute.
Good investment results still likely
It might be hard for the stock market to repeat a year like 2019, with the Dow Jones Industrial Average and other barometers up more than 25% through mid-December. But solid economic growth, low interest rates and other factors create a backdrop where the market’s positive momentum could persist.
“The remarkable longevity of the (economic) expansion and a continuation of low inflation and unemployment are all significant positives,” said J.P. Morgan’s markets insight team in a December forecast.
A possible slowdown ahead in economic growth, and rising wages, could put pressure on corporate profits, which could hamper stock prices, the forecast added. So could the threat of higher taxes, more trade tensions and a bloated federal budget deficit expected to top $1 trillion in the current fiscal year.
But while J.P. Morgan sees risks rising, it still expects the stock market to “grind higher” in 2020.
Incidentally, years when presidential elections are held tend to be favorable for stocks, and 2020 falls into that category. The broad market as represented by the Standard & Poor’s 500 has advanced in 19 of the past 23 presidential-election years, dating to the 1920s.
The country might be sharply divided when it comes to politics, but elections also tend to bring a lot of excitement and even optimism.
Rhetoric but little action on taxes
It’s unlikely that we’ll see passage of a major federal tax bill in the coming year — not with a deeply divided Congress in an election year. But Americans will be hearing a lot more about tax proposals as the campaign swings into high gear.
Most proposed changes are coming from Democratic presidential contenders. These include calls to raise tax rates for the highest-earning Americans, expand the earned income tax credit, boost the amount of personal income subject to Social Security taxes (from a current cap at $132,900) and jack up tax rates on dividends and capital gains.
Most radical are the proposals to tax the wealthiest Americans on their net worth, as advanced by Democratic presidential candidates Bernie Sanders, Elizabeth Warren and others.
To help people keep track of these ideas, the Tax Foundation has compiled a tax-plan summary for the leading presidential contenders here or at taxfoundation.org.
Could these proposals become law after the election? it would be a stretch for the most extreme changes, but you never know.
Most respondents in a December survey by the Pew Research Center said they felt today’s economy has mainly benefited the wealthy. A majority of respondents cited poor people, those lacking college degrees, the elderly, young adults and the middle class as groups now being hurt.
Broader help from employers
Workers — especially those at larger corporations — probably can look forward to more benefits and perks in the coming year beyond just paychecks, vacation/sick days, health insurance and perhaps a 401(k) savings plan.
Financial and health wellness programs continue to gain appeal, said Fidelity Investments in a recent review of workplace benefits. These include programs to help with mental and substance abuse as well as deal with student loans, budgeting and other financial pressures.
In part, these efforts address productivity and absenteeism: If companies can help their employees deal with personal problems, they could develop into more reliable and productive workers.
Fidelity also sees a trend toward greater social responsibility in the workplace including more company subsidies for charitable giving and volunteering, with more flexible work schedules and work spaces.
As for older workers, Fidelity expects to see more companies assist their employees and recent retirees in making retirement-plan withdrawals.
Until now, the focus has been in helping workers accumulate savings in 401(k)-type programs. Now, more employers apparently feel responsible for helping them pull out assets in a smart, efficient manner.
Is BCE (TSE:BCE) A Risky Investment? – Simply Wall St
Legendary fund manager Li Lu (who Charlie Munger backed) once said, ‘The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.’ It’s only natural to consider a company’s balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that BCE Inc. (TSE:BCE) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is BCE’s Net Debt?
The image below, which you can click on for greater detail, shows that BCE had debt of CA$24.4b at the end of March 2021, a reduction from CA$29.7b over a year. However, because it has a cash reserve of CA$2.61b, its net debt is less, at about CA$21.8b.
How Healthy Is BCE’s Balance Sheet?
The latest balance sheet data shows that BCE had liabilities of CA$9.53b due within a year, and liabilities of CA$32.4b falling due after that. Offsetting these obligations, it had cash of CA$2.61b as well as receivables valued at CA$3.81b due within 12 months. So it has liabilities totalling CA$35.5b more than its cash and near-term receivables, combined.
This deficit is considerable relative to its very significant market capitalization of CA$56.1b, so it does suggest shareholders should keep an eye on BCE’s use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution.
In order to size up a company’s debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
BCE’s debt is 2.7 times its EBITDA, and its EBIT cover its interest expense 4.7 times over. Taken together this implies that, while we wouldn’t want to see debt levels rise, we think it can handle its current leverage. Sadly, BCE’s EBIT actually dropped 9.1% in the last year. If earnings continue on that decline then managing that debt will be difficult like delivering hot soup on a unicycle. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if BCE can strengthen its balance sheet over time. So if you’re focused on the future you can check out this free report showing analyst profit forecasts.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Over the most recent three years, BCE recorded free cash flow worth 69% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.
BCE’s EBIT growth rate and level of total liabilities definitely weigh on it, in our esteem. But the good news is it seems to be able to convert EBIT to free cash flow with ease. Looking at all the angles mentioned above, it does seem to us that BCE is a somewhat risky investment as a result of its debt. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet – far from it. For example BCE has 4 warning signs (and 1 which is significant) we think you should know about.
When all is said and done, sometimes its easier to focus on companies that don’t even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
When trading stocks or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
Is investing in crowdfunded real estate a wise choice? – CBC.ca
This column is an opinion by Mark Ting, a partner with Foundation Wealth who helps clients reach their financial goals. He can be heard every Thursday at 4:50 p.m. on CBC radio as On the Coast’s guide to personal finance. This column is part of CBC’s Opinion section. For more information about this section, please read our FAQ.
The high cost of real estate is often cited as the main barrier to entry into Vancouver’s housing market. As a result, some determined Canadians have turned to crowdfunding.
In North America, there are several real estate crowdfunding companies that divide investable properties into fractional shares. I recently bought a fractional share of a rental development in Mission, B.C. This project’s crowdfund goal was $500,000 consisting of 500,000 shares at a dollar each.
In total, about 1,000 people invested an average of nearly $500 to raise the half million. It is a longer-term holding with the developer building 105 units which include 11 affordable rental units over the next two years, then renting them out for three years before selling the units and dividing the profits among the investors.
The reason I got involved in the Mission rental property crowdfund was two-fold. First, I agree with the crowdfund procurement team’s assessment about Mission — it has great capital appreciation and rental income potential — and second, I’m using this investment as a learning experience for my children.
A learning experience
For every ‘A’ my kids earn at school on their report cards, I give them $100. This year they decided to invest their earnings in real estate via crowdfunding. We chose the Mission project as it is local, which means we can visit the development, monitor its progress and experience, albeit in a small way, the sense of pride that often accompanies home ownership.
On behalf of my children, I invested $500 in the crowdfund which projects an annual return of 14 per cent. In dollar terms, if achieved, our investment would double in about five years. Yielding $500 in five years isn’t going to dramatically change my life, however, for my kids it’s likely to be much more impactful. My hope is that they continue to invest the money they earn for good grades into more projects, essentially building a small pipeline of investments with different risk profiles that pay out at different times. My goal for them is to form good financial habits which, if accomplished, is worth several times more than the potential $500 profit created by this investment.
When doing due diligence on crowdfunding, pay attention to the fees. Many offerings, in my opinion, overcharge or take an excessive cut of the profits. Before I invested, I compared the fee structures of various crowdfunding companies and ultimately went with a company that didn’t charge fees but instead were compensated via a subscription model.
To participate in the Mission development, I had to first pay $25 for an annual subscription. Something to consider if you are only planning on making a small investment. For example, it doesn’t make financial sense to pay a $25 annual subscription fee if you only plan to invest $100 into a project. Aim to invest at least a couple hundred dollars —ideally a couple thousand dollars, into various projects throughout the year.
Other factors to consider:
The crowdfunding company’s management team experience and track record.
The minimum investment amount which can be range from $1 to more than $250,000.
The expected returns of the investment versus the risk of the project.
The time horizon of the project which usually ranges from two to five years and more.
Overall, I feel that real estate crowdfunding can be a viable tool for those who want to invest in real estate but are restricted due to a lack of money or credit. Small investments in multiple projects add up over time. That makes it appealing for young people who want to get in the habit of investing — which now can be done in real estate for as little as the cost of a daily cup of coffee.
Breaking Down The Barriers Preventing Millions From Investing In Companies That Do Good – Forbes
In the age of sustainability impact investing and ESG (Environmental, Social, and Governance), the non-financial factors that investors apply to identify material risks and growth opportunities, have become buzz terms. But not for everyone. According to research from new investment fund manager DUGUUD, this industry jargon leaves many people mystified and this is holding them back from investing in businesses that help the environment and society.
The survey of 3,000 adults found that just 10% were aware of the term impact investing and could explain it, yet when it was explained to them 60% agreed that it could create positive change in the environment and society. And three times more people agreed than disagreed that if they had funds to invest, they would want to invest in this area.
“It’s time for the whole financial services industry to ditch terms like impact investing and ESG and to start talking in a language everyone can understand,” says DUGUUD’s CEO and serial entrepreneur David Scrivens.
DUGUUD, the trading name of Amberside Capital, is an FCA-regulated fund manager launched this month, with a focus on climate change, increasing biodiversity, improving public health, reducing inequality, and improving education. It was born out of a need to create a platform that allows the general public to invest in companies that make a genuine and positive difference to the world.
“It is difficult and costly to create a fund that’s open to the public, and it takes a lot of marketing spend to reach them,” says Scrivens. “Most fund managers get institutional investors, such as pension funds, to meet the minimum investment level required to launch a fund, but this route is often to the exclusion of the general public.”
The research also revealed a significant level of cynicism, with 58% of respondents of the opinion that most businesses claiming to be doing good are actually spending more time and money marketing their environmental and societal intentions than on taking tangible actions. Two-thirds (67%) also agreed that there are now so many businesses claiming to run their business in a way that is better for the environment and society that they find it difficult to trust the real impact of most of their claims.
“It is extremely difficult to prove environmental and social change, and comparing organizations is also tricky,” says Scrivens. “There is no easy solution to this without government intervention to create tools for measuring impact.”
However, he insists that DUGUUD will not allow the companies it invests in to focus on just the one area of good they may be doing, but will hold them to account for all aspects of their business. They will also show investors tangible examples of what companies are doing, for example, how the company has moved to greener energy, not just by paying an electricity supplier to certify that they are getting green energy when it just comes through the grid, but by building additional green energy generation.
The team has already invested in several projects, including £17 million in Sterling Suffolk, which produces tomatoes in what has been dubbed ‘Europe’s cleverest greenhouse’. The semi-closed hydroponic glasshouse is considered 25% more energy efficient than a traditional one and allows for greater carbon absorption, and potentially creates better-tasting crops.
Wildanet is a Cornwall-based fiber company aiming to bring much-needed high-speed internet to rural communities in the region to improve digital inclusion. DUGUUD has raised the company around £50 million to help them achieve this goal.
Other investments include Virti, which trains medical staff remotely using virtual reality, and which has been incredibly valuable during the pandemic, and Ateria Health, which has developed a way to improve gut bacteria in humans that could help with common issues such as irritable bowel syndrome.
Another key finding of the research was that 67% of adults who were asked about investing would expect independent financial advisors (IFAs) to understand this area and supply options as part of the funds they discuss with customers, while 59% would also expect any pension provider to consider these kinds of investments in how they manage, invest and report on the pension fund.
This highlights the role that IFAs and pension firms have to play in creating more clarity for their clients around investing for positive change. “We believe that all professionals should be helping to spread the word about investing to make an improvement for society, and we aim to work with as many of them as possible,” says Scrivens.
Looking ahead, the plan is to create a fund that draws on the investment team’s infrastructure experience to make larger environmental and social projects come to fruition, and to launch a science-based fund focused on investment in technologies that can make a huge difference to the planet or society, but preferably both.
Scrivens adds: “We are also considering whether to offer a small part of our own company for individuals to invest in so that people can join us on our journey to make a real positive difference and help more companies that do good get the investment they need.”
Jordan to vaccinate children aged 12 years and older against COVID-19 – WNWN-FM
COVID spread continues to slow in Waterloo Region – TheRecord.com
Rumbling meteor lights up Norway, a bit possibly landing near Oslo – Euronews
Silver investment demand jumped 12% in 2019
Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
Iran anticipates renewed protests amid social media shutdown
Tech17 hours ago
This Week in Apps: Clubhouse opens up, Twitter talks bitcoin, Snap sees record quarter – Yahoo News Canada
Media19 hours ago
Kirby Dach crashes Colton's first media session – FortSaskOnline.com
Tech22 hours ago
August PlayStation Plus Games Leaked By Sony – TechRaptor
Sports18 hours ago
Tokyo 2020: Canada wins first medal after swimming to silver in women's 4×100 freestyle relay – CP24 Toronto's Breaking News
Art23 hours ago
Oak Bay sets aside $27,000 for Indigenous art at muncipal hall – Saanich News
Sports21 hours ago
The Edmonton Oilers select big German defender Luca Munzenberger at #90 overall – Edmonton Journal
Investment19 hours ago
A classic investing read for summer (psst … it’s free) – The Globe and Mail
Sports16 hours ago
Canada earns first medal in Tokyo with silver in women’s 4×100 freestyle swimming – Sportsnet.ca