Exchange-traded funds, or ETFs, can be a good way to diversify your portfolio and can be cost-effective.
“ETFs are generally less costly and easier to access for investors,” said Ben Johnson, Morningstar’s director of global exchange-traded fund research. “They offer investors access to a whole host of investment strategies, from total market indexes to actively managed portfolios of stocks linked to the metaverse, with low fees, superior tax efficiency, and often much smaller investment minimums—typically as low as the price of a single share.”
Here’s what industry experts have to say about how to make ETFs sound investment values.
Johnson notes it’s important to know and respect what the “ET” in ETF stands for. “ETFs trade like stocks, and investors should practice good hygiene when it comes to trading them to avoid running up a big trading cost bill,” he said.
Specifically, Johnson explained that investors should consider using limit orders when buying and selling ETFs.
“This will help to ensure that they get the price they ask for (if not better) and prevent them from transacting at a price they might not like,” he said.
ETFs are fully transparent, said Tom Lydon, vice chairman with VettaFi.
“They frequently update their holdings, so investors know exactly what they are getting themselves into,” he said.
Also, Lydon explained that ETFs are more tax efficient than traditional open-end funds. Due to structural differences, said Lydon, ETFs do not incur a capital gains tax like how mutual funds would, but still come with a capital gains tax upon the sale of the ETF by an investor.
According to Lydon, ETFs may be seen as an improved version of their mutual fund cousins, providing the benefits of mutual funds and then some.
“Some of the key selling points of ETFs beyond traditional open-end funds may include things like lower expense ratios, flexible intraday trading, transparent nature and improved tax efficiency for taxable accounts,” Lydon said.
Finally, unlike mutual funds that are bought and sold once per day after the market closes, ETFs trade all day long.
“If you are familiar with trading individual company stocks on a brokerage platform, then picking up an ETF should be a similar experience,” continued Lydon.
Furthermore, he said more knowledgeable investors may also utilize various trade orders for executing ETF trades, including limit orders and stop-limit orders, along with short selling, to better manage their investment experience.
Short Term vs Long Term Investments: Gauging the saving spectrum – Economic Times
Quick wealth creation is what financial markets consider; however, investing as a practice is a long-term process. While an investor’s capital can be invested in the short-term and long-term, both forms of investment have their merits and demerits.
Typically, short-term investments involve less risk than long-term investments. Long-term investments give the investor’s money a substantial period to grow and recover from major dips in the market.
Having clear and crisp financial goals can help the investor decide whether to choose short or long-term investments and which vehicles within those categories aim towards personalized investment gains.
Before choosing any investment strategy, the investor ideally needs to do proper research on which asset types suits their need.
What is suitable for one investor might not be in sync with another’s financial objectives, so one must consider their overall goals along with the risks one is willing to take.
Short-term investments have a validity period typically up to three years – high liquidity instruments, generally involving lesser market risks.
Also, these temporary investments are mostly used for parking excess funds for a short period. Short-term investments are highly liquid and hence are used by investors to meet expected near-future expenses.
Less risky in nature, these short-term investment products have a short tenure and give predictable returns as compared to long-term investments be it –
● Treasury bills which can be redeemed within 91 days and is a high liquidity instrument.
● Gilt Funds which invest only in government securities and owing to zero credit risk, are safe investment funds.
● Ultra-short-term debt funds wherein the maturity period ranges between three to six months and provides comparatively higher returns.
● Low duration debt funds whose maturity period ranges between six and 12 months, these funds invest in debt and money market instruments.
● Money market funds that invest in money market instruments and have a redemption period of up to one year.
● Bank fixed deposits that can be renewed on maturity and their tenure can range from 14 days to 10 years. Also, liquidity can be a concern here as some banks don’t allow premature withdrawals.
● Company fixed deposits can have a tenure of more than one year
● Post office time deposits have tenures ranging from one to five years and similarly Recurring deposits can open an RD for a duration as low as six months. Sweep-in-Fixed Deposits as against low returns on savings accounts, these offer comparatively higher returns, with a minimum tenure of around 12 months.
On the other hand, long-term investments are investments that can offer high returns after several years, typically five years or more – involving more market risks.
Be it via stocks, ETFs, mutual funds, etc. Investments in stocks earn quite high returns if patience is kept high (Of course, this cannot be guaranteed but you should assess your risk-taking capacity before thinking of investing in stocks).
Having a deeper understanding of the market movements so that the investor makes wiser financial decisions and when to sell the stocks, investing in stocks and securities requires a trusted financial partner, who can provide hassle-free features to open an online Demat and Trading Account.
Another long-term investment avenue for receiving higher returns is Equity Mutual Funds where the investor gets to pick from small, mid-cap, and large-cap equity mutual funds for the long term to achieve greater financial goals.
Ultimately, the short-term investment gives levy to the investor to achieve their financial goals within a short span and with lower risk (depending on which asset you pick), if the investor has a greater risk appetite, and wants higher returns, they can select a long-term investment avenue.
To further simplify, if the investor wants to preserve their capital and is happy with moderate returns then they may choose short-term investments but, with the expectation of a higher return, the investor may invest in long-term investment avenues.
(The author is Senior Vice President, at mastertrust)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Hong Kong Investment Bank’s 2,325% Surge Baffles Local Investors – BNN
(Bloomberg) — Another little-known Hong Kong-based financial services firm is mystifying investors with a dramatic price surge following its US listing.
Magic Empire Global Ltd., which provides underwriting and advisory services and has helped just one company go public since 2020, surged 2,325% in its debut session Friday in New York to a market capitalization larger than football club Manchester United Plc. Magic Empire is the seventh firm this year from Hong Kong or China to experience similarly surprising moves.
“This price level has clearly shown it is not sustainable,” said Ken Shih, head of wealth management in Greater China at Saxo Capital Markets HK Ltd., adding that without knowing who is doing the buying, it is hard to be definitive. “At this point, downside risk for investors clearly outweighs upside.”
Last week, Hong Kong financial services provider AMTD Digital Inc. briefly became bigger than Goldman Sachs Group Inc. after a 14,000% gain in less than a month. The moves are particularly notable at a time of otherwise muted IPO activity and with Chinese companies Alibaba Group Holding Ltd. and JD.com Inc. threatened with delisting if they fail to comply with American auditing standards.
Magic Empire reported revenue of $2.2 million in 2021, a 17% drop from a year earlier. The company’s operating entity, Giraffe Capital Ltd., completed just one IPO in 2020 and none last year “due to COVID-19 and volatile outlook of the Hong Kong capital market,” according to the prospectus. Friday’s price surge brought Magic Empire’s market capitalization to $1.9 billion.
“The wild swings are likely due to the concentrated ownership, which certainly raises red flags,” said Kakei Lam, fund investment officer at Metaverse Securities Ltd. “I don’t see a resemblance to the meme-stock mania, given the thin trading volume.”
Magic Empire’s chairman Gilbert Chan Wai-ho and chief executive officer Johnson Chen Sze-hon co-lead Giraffe Capital, which obtained a license to provide corporate finance services in 2017. The firm mostly works on IPOs on GEM, the small-cap exchange, and often engages other small local brokerages as underwriters, including KOALA Securities Ltd., HKMonkey.com and Yellow River Securities Ltd. Chan and Chen own most of Magic Empire, with a combined stake of about 63%. The firm had just nine employees as of December 2021, according to its prospectus.
Hong Kong’s Scandal-Plagued Small-Cap Exchange Left for Dead
About half of the companies Giraffe Capital has taken public jumped on the first day, some by as much as 125%. Seven are now trading 30% to 92% lower than IPO price and another has been delisted.
Magic Empire didn’t respond to an email request for comment and calls to the phone number listed on its website weren’t answered.
In the first half of this year, fundraising in the Hong Kong IPO market dropped 92%. With the tiny companies that make up their customer base under close regulatory watch, small- and mid-sized financial advisory firms like Giraffe Capital have had a particularly tough time.
In 2017 and 2021, the Securities and Futures Commission and the Hong Kong stock exchange issued two rounds of warnings about so-called ramp-and-dump schemes tied to small-cap IPOs. These schemes manipulate very thin trading volume to inflate prices, luring unwary investors before shares collapse.
The SFC declined to comment for this article, but has previously identified four typical features of problematic IPOs:
- Market capitalization barely meets the minimum threshold
- Price-to-earnings (P/E) ratio is very high given the firm’s fundamentals and the valuations of its peers
- Underwriting commissions or other listing expenses are unusually high
- Shareholding is highly concentrated in a limited number of shareholders
Magic Empire’s relatively modest revenue means it qualifies as an “emerging growth company” under American legislation, according to its prospectus. These firms enjoy reduced reporting requirements compared to larger US-listed public companies, with only two years of audited financial statements required and disclosure obligations regarding executive compensation pared back.
(Updates with Kakei Lam’s comments.)
©2022 Bloomberg L.P.
Investment in Alberta's tech sector soars – CBC.ca
Several Calgary-based tech companies are planning to hire more people and expand their office space as hundreds of millions of dollars flow into the sector.
Through the first half of the year, Alberta has attracted nearly $500 million in investment, according to briefed.in.
“We’re growing very, very quickly,” said Nic Beique, the founder of Calgary-based Helcim, which offers online payment services for small businesses across Canada and the United States.
The company recently received $16 million in venture capital funding from investors in Toronto and New York.
“We’ve doubled our business in the past six months alone, so our investors are already quite happy with that progress,” Beique said from the company’s headquarters in Eau Claire.
Beique says the company has grown by 400 per cent in the past year. It’s gone from 80 employees late last year to 145 today. He plans to hire 100 more people by the end of next year.
“My long-term goal is to build an anchor tenant in the Calgary tech scene. So when people think about Calgary, they think about Helcim … the way Shopify was able to do that with Ottawa, where they really kind of put them on the map for tech. I want to do that in Calgary as well.”
According to briefed.in, Alberta’s tech sector recorded $268.6 million in venture funding in the second quarter alone — in the same quarter a year ago, only $16 million was raised.
Hirings, office expansion
Another rising star in the city’s tech scene is Virtual Gurus, which provides companies with virtual assistants to carry out a range of administrative duties for businesses in Canada and the States.
Two years ago, the company had five employees. It now has 40 and plans to double that number by the end of the year, which will require more office space.
“We’re looking at expanding upstairs in order to facilitate that growth,” said Margaret Glover-Campbell, the company’s chief operating officer.
Virtual Gurus, which aims to hire more people from minority groups, including people with disabilities and members of the LGBTQ community, recently received $10 million in funding from several venture funds. The money will be used to help the company grow and launch a new app in the coming months.
New funding sources
Calgary-based startup ZayZoon, which previously relied on individual, private investors, recently raised $25.5 million in funding to help it expand. ZayZoon offers people early access to their earned wages and has partnered with approximately 3,000 businesses in the U.S. The company has 70 employees but plans to hire 15 more by the end of the year.
One of its investors is Alberta government-owned ATB Financial, which is providing a $13-million debt pool for the company to use when clients seek an advance on their earnings.
Tate Hackert, one of the company’s founders, says ATB’s support is a boost for his company and the city.
“It’s just such a great story for Calgary,” he said.
“It just shows that there is more to invest in here than oil and gas, and we’re really looking forward to being part of that success story, right?”
Finding employees a challenge
An ongoing challenge for most tech firms is finding employees to support their expansion plans.
“We’re absolutely hiring as many people as we can. It’s a really tough market in Calgary because we do have so many tech companies here that are trying to hire people,” said Glover-Campbell.
Helcim says it takes a unique approach to hiring and provides greater opportunities for recent graduates of post-secondary schools. It aims to hire young professionals right out of school and provide on-the-job training and mentorship.
“Our focus is on giving these young professionals the ability to start their career at Helcim instead of fighting for senior talent,” said Beique.
He also says recent cooling off in the sector could help level out the demand for talent and help his company attract and retain staff.
Calgary has a lot going for it, Beique says, including an affordable cost of living and a good quality of life. He says 20 per cent of the companies’ recent hires are coming from outside the city.
Bryan Labby is an enterprise reporter with CBC Calgary. If you have a good story idea or tip, you can reach him at email@example.com or on Twitter at @CBCBryan.
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