Question from a Globe and Mail reader: “My husband and I have very different risk tolerances when it comes to investing. His family lost a lot of money in the 2008 financial crisis and as a result, he is very conservative with his investing approach. He has almost $100,000 invested in a high interest savings account which I don’t think is an efficient strategy. Whenever I bring up the topic of investing, we fight. Do you have any tips on how to approach the subject with him?”
Answer from Darryl Brown, an independent investment consultant and founder of You&Yours Financial in Toronto: Your husband sounds a lot like my partner. Though for different reasons, she, like your husband, doesn’t tolerate financial risk well at all. Even though I am a professional investment consultant, this wasn’t an easy gap for us to bridge. Money in relationships is never straightforward. And, like all things in relationships, there is no “right” way to do things.
The decision to invest is a combination of two things: ability – do you have the money – and willingness to actually do it. Willingness to invest always trumps ability, in my opinion. A person who is not willing to accept the risk that their money will fluctuate over time, should not be pressured into doing so. Too often, it leads to unsuccessful outcomes (i.e. panic selling when the markets go down).
In my previous post, I talked about the importance of creating an Investment Policy Statement (IPS) as the key to successful investing. For anyone investing their money, it is an incredibly important process to go through, even if you’ve been investing for years.
Creating an IPS as a couple takes a lot of consensus across objectives, timelines, risk, liquidity and more. Additionally, as with your husband, people can be significantly affected by both direct and observed experiences. For every person you hear boasting about their returns or successful investment strategy, there are 100 people who are too ashamed to share their cautionary tale.
So, how do you successfully approach investing with your significant other?
Like, really listen. Take a walk through the respective experiences that affect how you feel about money in general. Think of it like financial therapy. Really dig into how you both feel and why. These can be challenging conversations, but they often reveal that a person’s attitude about money has very little to do with money.
Second, ask “Why?”
Lost in the day-to-day market commentary, which overwhelms most people, is the “why” we invest in the first place. If your basics are covered, meaning you have a good financial plan in place and an emergency fund, investing is the best way to meet your financial objectives. I think this is a simple sentiment but is often overlooked when folks get wrapped up in the jargon, highs and lows of investing and it can take on a nervous emotional energy.
Successful investing is not solely about making money. It’s about figuring out the life you want to live and what you need to get there. I encourage my clients to invest with intention. Intention means understanding why you are investing in the first place. Communicating and aligning on your goals sounds pretty basic but you’d be surprised how many couples don’t take the time and operate on assumptions.
We all visualize that beach we want to retire on but going beyond the daydream to actually planning how you’ll get there really matters. Committing it to paper helps immensely. From there, investing simply becomes the mechanism by which you’ll achieve those goals, and the ebb and flow of the market and stock predictions become less central to success. When you look at investing as a way to live the life you want, it takes on a much more empowered energy. Suddenly the trees become a forest.
I don’t believe in a one-size-fits-all approach. A successful investment strategy should be reflective of the individual(s) investing. If you commit to the above steps together, I’m certain you and your husband will open an important dialogue about investing and find solutions that feel comfortable for you both.
Darryl Brown is an independent investment consultant and founder of You&Yours Financial in Toronto.
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Boston Beer founder Jim Koch defends hard seltzer investment after disappointing earnings report – CNBC
Boston Beer Company co-founder Jim Koch defended its heavy investment in hard seltzer Thursday as shares fell after weak guidance and a per-share earnings miss.
“Sometimes growth, it’s not cheap, particularly in something capital-intensive like beer,” Koch said on “Closing Bell.“
Hard seltzer, in particular, demands significant investment because “it’s the biggest thing that’s come into the beer business since light beer,” Koch said.
Shares of Boston Beer Company slid 7.6% to $396 Thursday following its after-the-bell earnings report a day earlier. It posted earnings of $1.12 per share for the fourth quarter while analysts had forecast earnings of $1.47 per share.
It also reported full-year EPS guidance of $10.70 to $11.70. Wall Street consensus had been $11.72.
Boston Beer CEO David Burwick said on the earnings call that margins will continue to suffer as it increases capacity to meet demand around hard seltzer.
“We expect this program to run for two to three years and begin showing margin improvement by the first half of 2021,” he said, according to a transcript from The Motley Fool.
The Samuel Adams brewer said it saw triple-digit growth around its hard seltzer brand, Truly, which helped deliver quarterly revenue of $301.3 million. It represents a 33.8% increase compared with the prior year.
Despite Thursday’s slide, Boston Beer’s stock remains up 47% in the past 12 months as the hard seltzer category exploded.
“Let’s not get distracted by what happens today or tomorrow,” Koch said in defense of the company’s strategy. “Let’s make sure we’re building for the future.”
And that’s a future in which Truly plays a critical role, said Koch, who launched the Boston Beer Company in his kitchen in 1984.
“We really don’t know how far is up” for hard seltzer, Koch said.
So far, Koch said, the fresh competition from Bud Light Seltzer has not hurt Truly’s popularity among consumers.
“We were actually very pleased with the entrance of Bud Light Seltzer,” he said. “Since Bud Light Seltzer’s been introduced, we’re the only hard seltzer that actually gained market share.”
Koch said hard seltzer’s growth has far exceeded what Boston Beer expected when it launched Truly about four years ago. It’s appealing to a wider range of consumers than they thought, Koch said.
“It kind of presses all the buttons. Great taste. Not much compromise. Health and wellness cues,” Koch said. “We think that the category can double again in 2020.”
Intel is a good investment and a bad trade, this investor says – Cantech Letter
US semiconductor name Intel (Intel Stock Quote, Chart, News NASDAQ:INTC) has had a great run over the past few months but is there more upside to come?
Likely in the long term, says Scotia Wealth’s Andrew Pyle, but for short term traders you might want to look elsewhere.
“The tech sector has been on fire, with the NASDAQ hitting another record high [on Tuesday]. I still like Intel right now,” says Pyle, portfolio manager for Scotia Wealth Management, who spoke to BNN Bloomberg on Wednesday.
After staying range-bound for a good year and a half, Intel broke out last fall to post a 25 per cent return for 2019, while so far in 2020 the stock is already up ten per cent and is now hanging around $66-$67 in recent weeks. (All figures in US dollars.)
“We seem to be having a bit of an issue in getting the stock up to the $70 range,” says Pyle. “We’re seeing a bit of consolidation right now which is a little bit different from what we’ve seen from some of the other high-fliers in the tech sector,” he said. “Having said that, I still think the fundamentals for Intel are good for a long-term play.”
“If we’re looking at five years out or more I think these levels are probably still attractive. For a short-term trade, I’d probably say we’re a little bit pricey right now,” Pyle said.
Intel’s share price got a nice boost near the end of January on the company’s fourth quarter earnings which surprised analysts with better-than-expected top and bottom line results.
Intel’s revenue climbed eight per cent year-over-year to $20.21 billion whereas analysts were calling for $19.23 billion, while earnings came in at $1.52 per share excluding certain items compared to the Street’s estimate at $1.25 per share.
The company saw just two per cent growth in its Client Computing segment but posted a whopping 19 per cent increase in its Data Center Group which manufactures chips for computer servers, with the rise being attributed to more business in cloud computing, especially by the big names in the field, the so-called hyperscale companies such as Amazon, Microsoft, Alibaba and Baidu.
Looking ahead, Intel management has called for 2020 revenue of $73.5 billion compared to 2019’s $72.0 billion.
“In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” said Bob Swan, Intel CEO, in the fourth quarter press release. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns.”
Intel is facing rising competition across many of its businesses from Advanced Micro Devices, among others, which has been gaining market share from Intel. AMD’s share price rose 148 per cent last year and has kept up the pace so far in 2020 by climbing 27 per cent so far.
Swensen reaffirms climate change as a guiding factor in investment policy – Yale News
David Swensen, Yale University’s chief investment officer, this week underscored the importance of environmental sustainability in the university’s investment choices.
In a Feb. 20 letter to the university community, Swensen offered an update on Yale’s approach to incorporating the risks of climate change in investment decisions. The letter follows another letter Swensen wrote to the Yale community in 2016 offering a first progress report on an effort the Investments Office began in 2014 to give climate-change-related guidance to Yale’s external investment managers, who collectively manage nearly all of the endowment portfolio.
“Climate change,” Swensen writes in his latest letter, “poses a grave threat to human existence and society must transition to cleaner energy sources. This is a formidable task that requires swift and dramatic action on a global scale. The solution involves a combination of government policy, technological innovation and changes in individual behavior.”
Swensen writes that Yale’s greatest impact in fighting climate change will come through its research, scholarship and education, and notes that the university has committed to reducing its own carbon footprint. Yale President Peter Salovey has led an acceleration of these efforts: Provost Scott Strobel has been charged with convening relevant faculty leadership around a university-wide push for planetary solutions, and a committee charged with finding a way to get the campus to net-zero carbon emissions is due to issue a report soon. Meanwhile, Yale continues to be nearly unique in imposing a carbon charge on all of its buildings.
Yale was one of the first institutions to address formally the ethical responsibilities of institutional investors. In 1969, a small group of Yale faculty and graduate students conducted a seminar exploring the ethical, economic, and legal implications of institutional investments; this led to the publication in 1972 of “The Ethical Investor: Universities and Corporate Responsibility,” which established criteria and procedures by which a university could respond to requests from members of its community to consider factors in addition to economic return when making investment decisions and exercising rights as a shareholder. When in that year the Yale Corporation adopted the book’s guidelines, Yale became, according to The New York Times, “the first major university to resolve this issue by abandoning the role of passive institutional investor.” Swensen has been integral to this approach since his arrival at Yale in 1985.
Within the resulting procedural framework, the board of trustees’ Corporation Committee on Investor Responsibility (CCIR) is advised and supported by the Advisory Committee on Investor Responsibility (ACIR), which is composed of faculty, students, staff, and alumni. In 2014, the CCIR considered the request from some students for divestment from the fossil-fuel industry. The CCIR decided against divestment, largely on the grounds that assigning blame to the supply side of the carbon problem would distract from the fundamental, and shared, problem of demand.
In response to President Salovey’s challenge to find a way to address climate change issues in Yale’s investments, the Investments Office conceived and executed a plan that would guide the endowment toward increasingly green investments. Beginning in 2014, the university has asked all investment managers to incorporate the full costs of carbon emissions in investment decisions. As Swensen notes in the current letter and in his 2016 letter, the university asks its investment managers to avoid investing in companies that disregard the social and financial costs of climate change and that fail to take economically sensible steps to reduce greenhouse gas emissions.
Yale further asks investment managers to assess the greenhouse gas footprint of prospective investments, as well as the costs to expected returns of climate change consequences and of possible future policies aimed at reducing greenhouse gases.
“Yale’s investment approach to climate change contributes to the broader societal goal of transitioning to clean energy,” Swensen writes.
In keeping with this approach, Yale has in recent years, through its investment managers, jettisoned holdings in thermal coal companies and oil sands producers, because they are inconsistent with the university’s investment principles, he reports.
“The remaining thermal coal private investments are on their way out of the portfolio,” Swensen writes. Yale’s investment in thermal coal and oil sands has dropped from 0.24% of the endowment’s market value in 2014 to about 0.02% today, according to the letter.
The letter provides examples of successful steps taken by Yale’s investment managers to improve the environmental sustainability of investments for which they are responsible.
“For many managers, Yale is often one of the more significant investment partners, placing the university in a strong position to influence a manager to incorporate the risks of climate change into investment decisions,” Swensen writes.
Ultimately, he writes, the result of Yale’s approach is that “investments with large greenhouse gas footprints are disadvantaged relative to investments with small greenhouse gas footprints. When taking into account the full costs of climate change, investment capital flows towards less carbon-intensive businesses and away from more carbon-intensive businesses.”
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