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What’s your investment risk tolerance during a pandemic? – GuelphToday

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When it comes to protecting your mental and physical health during a pandemic, it’s important to play it safe. 

Can you say the same about your financial health?

The market fallout caused by the COVID-19 pandemic was swift and concerning to investors.  At the start of the pandemic, U.S. markets experienced the fastest 30 per cent stock decline ever. Many investors who thought their portfolios were safe started to worry as investments dropped in value. While remaining cautiously optimistic that 2021 will bring a stable and sustained recovery, market volatility is always present. This can create a need for investors to asses their risk tolerance with their advisor on a regular basis.  

“Warren Buffet once said that when the tide goes out we see who’s wearing shorts,” said Darren Devine, President of Devine and Associates Financial Services Inc. “What that means is that investors’ emotions come to the surface. Investors feel great when the markets are on the rise. When the markets go down as they did during COVID, we can see what their actual risk tolerance is.”  

Devine says the sudden and rapid recovery helped ease investors’ fears when the markets dropped in March. Investors often push beyond what their true risk tolerance is during periods of solid economic growth. Unfortunately, that tolerance can quickly vanish if portfolios loose a large percent of their value.  

“In a V-shaped recovery, if you’re back to par, it’s a good time to review your investments,” suggests Devine. “See how your investments performed and whether they stayed in line with the amount of risk you can withstand”.

While not everyone’s investments are connected to the market, those that do were down a significant amount of capital. Seeing a portfolio valued at $200,000 quickly drop to $140,000 is upsetting to any investor. Devine says determining your risk tolerance comes down to your age and timeframe for contributing to your investment portfolio.

“An investment strategy that’s good for a younger person may not be good for an older person,” said Devine. “For a 25-year-old who may have a high-risk investment portfolio, this isn’t a time to panic. You’re likely buying units at a discount as a result of the downturn in the market. On the other hand, if you’re 62, retiring at age 65, now may be the time to ask questions. If a market correction occurs, does a high risk portfolio make sense at this stage of your life?” 

No matter how your investments faired during COVID, Devine says it’s important to find out your true risk tolerance. This helps you prepare for any future market unpredictability.

“Not always do we get the benefit of a sharp recovery so quickly,” he said. “Being back to a period of positive growth in six months is rare. There’s no script here, no playbook. It’s not a static equation. Next time it drops it may take five years to come back. Take the time now to assess your risk and adjust your portfolio accordingly.” 

To get an assessment of your investments, contact Devine & Associates Financial Services Inc. at 519-780-1730.
 

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FCA tackles flurry of investment scams – Investment Executive

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The report indicated that the FCA received more than 24,000 reports of unauthorized activity during the 10-month period, up from 20,300 in all of 2019.

The regulator also opened 1,542 supervisory cases involving suspected scams or risky investments.

“New cases have remained high throughout the year,” the FCA said, with peaks in February, June and July.

The regulator also rejected applications for authorization from 343 firms or individuals during the 10-month period, amid concerns about possible investor harm. That represented about 10% of the applications received during the period.

The incidence of financial scams being promoted through online has also been a key focus for the regulator.

“We think online platform operators, like Google, should bear clear legal liability for the financial promotions advertised on their platforms,” the FCA said, adding that it’s considering extending rules regarding financial promotions to these kinds of companies. It’s also considering whether it needs any new powers over those firms.

“This work is relevant not just to the promotion of higher risk investments but to our work to address online harms — including scams — more generally,” the report said.

“The UK has one of the world’s leading financial services industries, offering consumers access to a wide range of investment products. In some areas however, the consumer investment market is not working as well as it should and too often consumers are offered unsuitable products or advice,” said Sheldon Mills, executive director, consumers and competition at the FCA, in a release.

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Upbeat entrepreneurs signal improved investment intentions for 2021: Survey – CTV News

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MONTREAL —
A growing number of Canadian entrepreneurs say they plan to invest more in 2021 than they did last year as the vaccine rollout, improving cash flow and a quick rebound in some sectors buoys optimism for the year ahead.

The findings of the Business Development Bank of Canada’s quarterly survey of 1,000 entrepreneurs released in a new report today are the most upbeat since the pandemic began.

Pierre Cleroux, chief economist of the Montreal-based bank, says the more positive results bode well for the country’s economic recovery.

He says investment intentions are improving, with technology emerging as the biggest focus of spending.

The bank’s survey found that the key reasons for investing in technology included improving processes to reduce costs, boosting a company’s online presence and investing in remote working.

Cleroux says while many entrepreneurs were wary about allowing employees to work from home before the pandemic, he says the last 10 months have shown it can benefit a business.

“The pandemic has changed the game,” he said. “It changed the perception of working from home.”

Cleroux said remote work can improve productivity, increase worker motivation and spur innovation.

“It can also reduce costs,” he said, noting that 18 per cent of business owners surveyed by the bank said they plan to reduce their office space.

Despite an increase in COVID-19 cases across much of the country, Cleroux said the optimism uncovered by the survey is unlikely to change.

Businesses understand that once restrictions are lifted, the economy will rebound much faster than with other recessions, he said.

“This optimism we’re seeing will likely survive the second wave of the virus because we all believe the vaccine is going to improve drastically the situation of the economy,” Cleroux said.

Still, while business confidence has improved for the first time since the pandemic began, the study found that investment intentions compared to previous years are still relatively weak.

Across Canada, business investment intentions for the next 12 months are down three per cent compared with last winter, for example, but have improved significantly from last spring’s rock bottom decrease of 32 per cent, according to the bank’s report.

Investment intentions is the difference between negative and positive business sentiment.

Of note are the investment intentions of small- and medium-sized enterprises in Atlantic Canada and Quebec, which at one per cent and four per cent, respectively, are the only positive results on investment intentions in the survey.

Meanwhile, investment intentions in B.C. are down three per cent, Ontario came in at four per cent lower, while the Prairie provinces were the lowest at a 13 per cent decline.

The online survey of business owners was completed between Dec. 3 and Dec. 18, 2020. The poll measures the confidence of entrepreneurs in the economy, business and hiring outlooks, as well as investment plans over the next 12 months.

According to the polling industry’s generally accepted standards, online surveys cannot be assigned a margin of error because they do not randomly sample the population.

This report by The Canadian Press was first published Jan. 18, 2021

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Crypto Is Everywhere, But Should You Invest? – Forbes

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Ten years ago, most people would have laughed if you said you hold part of your investment portfolio in cryptocurrency — a type of virtual currency that is secured through various cryptographic and computer-generated means. But these days, you might be seen as behind on the times if you don’t currently invest, or if you have never traded a single Bitcoin, Ethereum, or Litecoin in your life.

Like it or not, cryptocurrency is practically everywhere these days and no longer just for day traders and nerds. In fact, many traditional businesses are integrating cryptocurrency into their platforms in some form, or using it as a means to launch other types of products.

Cryptocurrency Continues Gaining Steam

Case in point: In October of 2020, PayPal launched a new service that made it possible for their account holders to buy, sell, or hold cryptocurrency, or to use it to buy stuff at 26 million different merchants.

According to the payment platform, mainstream use of cryptocurrencies has largely been “hindered by their limited utility as an instrument of exchange due to volatility, cost and speed to transact.” 

However, they believe their platform could provide a means to make cryptocurrency more useful as a payment method. 

“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly,” said Dan Schulman, president and CEO of PayPal in a press release.

Edmund McCormack, founder of crypto investment platform DChained, says this move on behalf of Paypal

PYPL
was expected but also needed to usher cryptocurrency into the mainstream.

“This decision directly addresses three of the most common objections that cryptocurrency has faced in the last 10 years, including practicality for day-to-day purchases, a clearly defined and easy to use marketplace, and legitimacy,” he says.

McCormack also points to the payment platform Square

SQ
, which reportedly invested $50 million into Bitcoin in October of last year. 

At the moment, you can choose from a nice selection of cryptocurrency savings accounts. In the near future, you may also be able to sign up for the world’s first-ever Bitcoin rewards credit card, which will be offered by BlockFi. The BlockFi Bitcoin Rewards Credit Card will work like traditional rewards credit cards, except that you’ll earn 1.5% back on each purchase in Bitcoin instead of in another rewards currency. Currently, this card is on a waitlist. 

What does all of this mean? As more and more businesses and platforms find ways to utilize cryptocurrency — or let their customers use it — it will become even more mainstream than it already is. But, should you invest in cryptocurrency? 

The answer depends on who you ask.

Why You Should Consider Investing In Crypto

According to Claire Lovell, Associate Director of Product Management at Gemini (a cryptocurrency investment platform), Bitcoin reaching all-time highs and legacy financial institutions adopting cryptocurrency means that digital currencies have finally become an important part of finance and FinTech. 

In terms of advantages, Lovell says cryptocurrency gives consumers greater choice, independence, and opportunity in their finances. Further, cryptocurrency’s decentralized, open-source nature helps “eliminate the weak points of the modern banking system by bringing access directly to consumers,” she says. This makes it easier to buy, sell, store, and trade the best performing assets of the last decade. 

Not only that, but Drew Hamilton, CEO of Rubix.io (a cryptocurrency platform) says cryptocurrency is in its infancy. This means that, if you invest now, you could be getting in on the ground floor “even though the prices seem high.” 

After all, some experts have suggested that Bitcoin could be worth as much as $100,000 one day. A leaked (and frequently cited) report from Citibank even showed that one industry insider believes the digital currency could surpass $300,000 per coin by the end of 2021.

Attorney Len Garza, Esq. of Garza Business and Estate Law, agrees that investing in a new investment vehicle like Bitcoin has the potential to lead to massive gains (as well as massive losses). Further, cryptocurrency is easily one of the most liquid investment assets since trading platforms have been established across the globe.

The Case Against Cryptocurrency

But, not everyone thinks investing in cryptocurrency is a good idea — at least not for the average investor. 

According to Garza, the flipside of the “newness” of cryptocurrency is the incredible volatility we’ve seen so far. Simply put, investing in cryptocurrency isn’t for the faint of heart.

For example, one Litecoin would have set you back more than $300 at the end of 2017 ($306.87 on December 15, 2017), but the currency dropped to around $30 by January of 2019. At the time of this writing, one Litcoin is worth $140.96. 

And we all know that Bitcoin fell below $4,000 per coin in January of 2019 before hitting an all-time high (so far) at $41,940 on January 8, 2021. While it’s always fun to win, that’s a wild ride many people would never want to be on.

Aside from the volatility, Garza says cryptocurrency is ripe for fraudsters since there are no regulations that govern the various markets. 

“Buyer beware,” he says. 

Finally, hacking is a big threat if you’re a crypto investor. Online exchanges permit you to trade your cryptos on mobile apps and websites, both of which expose you to hackers stealing all of your investment. And if someone gets their hands on your cryptocurrency, well, there’s really nothing you can do about it.

Ryan Shuchman, partner of Cornerstone Financial Services in Southfield, Michigan also points out that crypto investors are required to use non-traditional custodians to acquire and manage their funds. Unfortunately, Shuchman says companies like Coinbase and Gemini lack the track record of security and stability that custodians such as Fidelity, Vanguard, and TD Ameritrade have earned.

For these reasons and others, Robert R. Johnson, PhD, CFA, CAIA and Professor of Finance at Heider College of Business, Creighton University, says that Bitcoin and other cryptocurrencies are “the purview of speculators.” No one should consider buying Bitcoin or any other cryptocurrency as an investment, he says.

Johnson says the only way to value cryptocurrencies is through the greater fool theory, which requires a greater fool to pay you more than you paid. 

But, he says you don’t have to listen to him. Instead, Johnson says to listen to Berkshire Hathaway

BRK.B
Vice Chairman Charlie Munger who is famous for sharing his thoughts on investing in cryptocurrency:

“It’s like somebody else is trading turds and you decide you can’t be left out.”

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