It’s atypical for someone his age, but this 27-year-old tech support worker we’ll call Duke is confident he doesn’t need financial advice when it comes to spending or budgeting.
Duke, who earns $66,000 per year in Toronto, has been meticulously laying out his budget since he started working part-time in 2015. He divides his monthly take-home salary of $3,700 by 4.5 to give him a weekly budget of about $822. Each transaction he makes is placed into a spreadsheet where it’s dated and filtered into a category such as food and entertainment. A final column shows what percentage of his weekly budget was spent.
He’s never spent more than he’s earned, he said. In fact, he’s usually left with $1,000 at the end of the month to pump into his chequing accounts, which total $108,000.
“I don’t feel a financial adviser would be able to tell me anything I don’t already know,” said Duke of his spending.
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He knows that, despite his budgeting, he could benefit from cutting down his food bill, which totalled $742 in the month Spent looked at his expenses. The bulk of that budget goes to groceries. Duke spent $286.66 over three trips to No Frills, $95.92 at Costco, $25.35 in two trips to Loblaw’s, $8.77 at Fortinos and an additional $100 at a local Chinese grocery store.
As far as the rest of his spending, he said he can’t make any other concessions. He only uses his car for transport — no ride sharing or public transit expenses appear in his monthly spending — and he spends just above $400 on insurance, gas and parking. His entertainment budget is light and so are his bills — $1,000 for rent, $42 for his cellphone and $15 for a gym membership.
Where he could stand to benefit from professional advice is not in regards with how to manage his funds, but how to invest them.
Duke does not have any money in a tax-free savings account and the only space being taken in his RRSP is from a work pension plan. When he first started investing in 2017, he placed $10,000 into a non-registered account and invested in a suite of mutual funds.
Over a year, he quickly grew frustrated with the high management fees he was paying and the heavy losses he was taking.
“I had no faith this person behind the counter could do a better job than me if I just got a little bit more of a background on what to invest in,” he said.
So he waited a few months before breaking even again and pulled his money from mutual funds, redirecting $3,000 into four index funds where he gave Canadian equities, U.S. equities, international equities and Canadian bonds an equal weighting of 25 per cent each.
Duke has had more success with this portfolio, but he wants more. He’s eyeing higher returns and is willing to put $100,000 of his money to work to generate them. He’s willing to take on risk, but at the same time, he wants his portfolio to be hedged against potential danger. Spent asked Frank Ortencio, portfolio manager of Raymond James’ Ortencio & Associates Wealth Management Group to help guide him.
Ortencio describes himself as an asset allocator — not a stock picker. He builds his portfolios by using ETFs to give him exposure to certain geographic regions and sectors.
Duke is still young and doesn’t have a pressing need to use his money over the next five years. He should be looking to take on more risk, Ortencio said.
“If he can live with the volatility he can increase his equity allocation to 90 per cent equities and 10 per cent bonds,” Ortencio said.
The first steps in Ortencio’s plan are to have Duke max out his contributions for both his RRSP and his TFSA. That would mean pumping $20,000 and $63,500 into the respective accounts. The remaining $17,500 would be placed into his non-registered account, joining the $3,000 already in there for a total of $20,000.
As for how he’d invest it, Ortencio said Duke can get all the bond exposure he’d need by investing 10 per cent of his portfolio into a single global bond ETF that would be held in either his RRSP or TFSA.
Duke would then begin slicing up the weightings in his equity portfolio by geographic region. Ortencio knows some investors might balk at the suggestion, but he wouldn’t recommend Duke place more than 12 to 15 per cent of his equity portfolio into Canada. He suggested the iShares MSCI Canadian Minimum Volatility ETF, which has dividend-based bank, utility and pipeline stocks among its top holdings.
“Canada is only about four per cent of the world market,” said Ortencio, who explained that Duke could much more easily diversify his portfolio if he avoids home bias.
Sixty per cent of Duke’s portfolio would then be weighted to global stocks, Ortencio said. Duke could either look for one global ETF that excludes Canada from its holdings or one fund that holds U.S. stocks and another that focuses on international firms. Again, he recommended two low-volatility products in the iShares Core MSCI All Country World Index Ex Canada ETF and the Power Shares S&P 500 Low Volatility ETF.
It’s in the remaining portion of Duke’s portfolio that he’ll take on more risk and expose himself to volatility, Ortencio said. Ten per cent can go to small and mid-cap stock ETFs, another 10 can go to REIT and technology ETFs and the final five per cent would be attributed to emerging markets. Within this section of the portfolio, Duke can also buy individual stocks — he voiced some interest in names like Tesla Inc. and Beyond Meat Inc. — but Ortencio wouldn’t recommend investing more than 10 per cent in one name.
“And 10 to 20 stocks would be too many,” he added.
Duke can keep some of his index funds in his non-registered account, as long as he adjusts their weightings. He can then use a Systematic Investment Plan, which allows investors to make automatic purchases and contribute $700 on a monthly basis going forward.
The important thing for Duke to remember, Ortencio said, is that while this portfolio might fall short of the max growth on the table during a raging bull market, it’ll also better insulate him in a sell-off like the one investors saw in March.
“This portfolio because it has a heavier tilt toward equity … the best-performing market, let’s say it’s up 10 per cent, his returns should be in the seven to eight per cent range,” Ortencio said. “But when the markets are down 10 per cent, because of the diversification, he may participate only on 70 per cent of the downside.”
Ortencio’s portfolio is an appealing one for Duke, who is happy with the opportunity to make more returns than he has in his time as an investor while also ensuring he retains some safety.
“This is definitely something I want to get up and running,” Duke said.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
