When is the right time to start investing? Plus, the importance of patience and a growing disconnect between markets and the economy - The Globe and Mail | Canada News Media
When is the right time to start investing? Plus, the importance of patience and a growing disconnect between markets and the economy – The Globe and Mail
If we waited for an ideal time to start a lifetime of investing, few of us would ever get into the stock market at all.
The March crash was a great time, in retrospect. But a lot of investors held back because they worried about worse losses ahead as the pandemic spread globally. Stocks have powered back from their lows with a vengeance, which brings a new set of complications. If the economic recovery from the pandemic disappoints, stocks could fall again.
We have two vastly different sets of market conditions in March and August, but a common sense of caution about whether it’s a good time to start investing. I offer this up as context for a recent question from a reader in Toronto: “My 27-year-old has never invested and is asking is this a good time to start? She is thinking of using a robo-adviser and has about $50,000 to invest. What would you suggest about timing and robo investment?”
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First off, thumbs up to the idea of using a robo-adviser. It’s a cost-effective way for investing newcomers to instantly start building a well-diversified portfolio of exchange-traded funds with a risk level tied to their personal needs.
Is now a good time to start investing through a robo-adviser or any other channel? Any time is a good time, if you handle it right.
This reader’s daughter should consider a plan to have a preset amount transferred electronically to the robo account and invested every time she gets paid. As for the $50,000, she should give some thought to a staggered approach. Maybe invest $10,000 right now and an additional $5,000 each month for the next eight months. This would be in addition to those regular contributions from her paycheque.
Invest the entire $50,000 now and she runs the risk of getting hit by a nasty market pullback that shears off 20 per cent or 30 per cent of her investment in short order. Hold off on investing the $50,000 until after a crash and she runs the risk of missing the rally that follows all market downturns. It’s asking a lot for an investing rookie to put $50,000 into a stock market that seems to be falling off a cliff.
— Rob Carrick
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Stocks to ponder
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The Rundown
Stay patient if the pandemic’s get-rich-quick phase has you feeling left out
Who knew five months ago that the pandemic would be such a money-making opportunity? Stocks are flying, the housing market is surging, gold has popped and bitcoin’s on a tear. Did you miss the memo about pivoting from financial self-preservation to aggressive speculation? Feeling left out because you played it safe while others were daring?, writes Rob Carrick (for Globe subs)
How can Wall Street be so healthy when Main Street isn’t?
The stock market is not the economy. Rarely has that adage been as clear as it is now. An amazing, months-long rally means the S&P 500 is roughly back to where it was before the coronavirus slammed the U.S., even though millions of workers are still getting unemployment benefits and businesses continue to shutter across the country. The Associated Press reports (for Globe subs)
Trading in securities could jeopardize your CERB benefits
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As CERB benefits end, the Canada Revenue Agency’s review of Canadians who received the benefit will move into high gear. There are some recipients who may mistakenly think they’re entitled to CERB, but the taxman might disagree and ask for repayment. I’m talking about frequent traders in securities, including day traders. Tim Cestnick explains (for Globe subs)
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Ask Globe Investor
Question: I would like to get some technology exposure for my portfolio. What do you recommend?
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Answer: Unless you have a deep understanding of the technology space, I would not recommend buying individual tech stocks. A low-cost exchange-traded fund that provides diversified exposure is a better bet because it will help to control your risk. I’ll discuss a few worthy candidates among the dozens available.
The iShares Core S&P U.S. Growth ETF (IUSG) isn’t specifically a technology fund, but nearly 40 per cent of its weighting is in tech stocks such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Facebook Inc. (FB) and Alphabet Inc. (GOOG). You’ll also find plenty of non-tech growth stalwarts such as Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG), which increases diversification and may enhance stability. IUSG’s management expense ratio is a rock-bottom 0.04 per cent and the fund pays a modest dividend yield of about 1.4 per cent.
For a pure-play tech fund, consider the Vanguard Information Technology ETF (VGT), which has an MER of 0.1 per cent. If you’re investing in IUSG, VGT or any of the dozens of other U.S.-listed growth or technology ETFs, keep in mind that you’ll need to buy them in U.S. dollars. This exposes you to currency conversion costs and exchange-rate volatility. If you want to eliminate or at least minimize such currency impacts, consider a Canadian-listed ETF such as the BMO Nasdaq 100 Equity Hedged to CAD Index ETF (ZQQ), which has about half of its assets in technology stocks and charges an MER of 0.39 per cent.
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.
