Why financial literacy matters

investment knowledge

We are currently approaching the end of April, which is Financial Literacy Month in the United States. In Canada, it’s in November. The fact that there is something called Financial Literacy month is telling. It means not enough people know enough about financing to benefit their lives, but at least there appears to be an awareness of the problem.

Addressing the basics

For example, what is the cornerstone of how an economy works? It’s supply and demand, right? Prices are established by the amount of demand for a product in relation to its supply. This is Economics 101, isn’t it. But, for the most part, it isn’t required learning in any course at any level of education, and often isn’t taught until you take elective courses later in high school or in college or university.

This is just one example, but it highlights the challenge we face as a society to learn about one of its most important aspects: finances. So, if we don’t know the basic principles of how prices are established in society, what else aren’t we learning about the realities of the world?

People know there’s a problem

If you look at any survey on the topic, people know they don’t know enough about things like finances, and especially investing. And it hurts people because it means they don’t have as much money as they can have to spend on things like an education, a house, or even a vacation. The less we know about finances, the less opportunities we have in our lives. That’s just a fact.

Indeed, increasing financial and investing literacy in society benefits everyone. As investors, we should want people to know more about how to save and invest. It means that the level of knowledge and information increases so that we can all make better decisions to improve our finances and meet our investment objectives.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Avoid looking at your portfolio

looking at your investment portfolio

Most people have heard of an investing tip. This often involves getting some info on a stock that is considered a “sure bet.” Other tips involve general strategies on how to invest or how to approach the markets. However, as explained by Michael Batnick of Ritholtz Wealth Management during an appearance on CNBC, there’s a very simple tip that most investors can follow that would benefit their portfolio: Don’t look at your portfolio too much. That’s it.

Short-term distractions

But Batnick’s logic is very simple. He says that the more an investor looks at their portfolio, the more likely they are to see losses, which may adversely affect their investment decision-making. And the numbers appear to back up his claims.

If you check your portfolio on a daily basis, there is a 46-percent chance of seeing negative turns. If you only check the portfolio once a month, the likelihood of a negative return goes down to 36 percent, and if you have the “hutzpah,” as Batnick puts it, to look at your portfolio only once a year, the chance of seeing a negative return goes all the way down to 26 percent.

Long-term objectives

Now, as simple as this may all seem, there are two conclusions to draw from this information. First, the amount of times you look at portfolio has nothing to do with how it performs. That should be made clear from the outset. Short-term losses happen, but they even out over the long-term. However, what this information does point out, and is the second conclusion to draw, is that the outlook one has towards an investment portfolio is crucial.

In fact, this is something that we keep stressing on these pages over and over again. Investors should not fall into the trap of listening to the day-to-day panic machine of the public markets. Markets go up. They go down. Regardless of what we do. It’s just a matter of setting long-term investing strategies that meet objectives — and sticking to them. That way, you don’t have to look at your portfolio everyday and worry needlessly.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Looking beyond media narratives

Wall Street Survey

If you’ve read these pages over the last few months, you’d know that one prevailing theme is to take the Trump phenomenon with a grain of salt. There is a lot of hysteria surrounding his entry into politics, and it’s the job of investors to separate the hysteria from the facts. And, according to a survey conducted by RBC Capital Markets, it would appear as though Wall Street has been taking our advice, or something like that.

Wall Street weighs in

Specifically, over 70 percent of investment professionals surveyed by RBC believe Donald Trump will be reelected as President of the United State. As simple a result as that is, what can be gleaned from it is considerable. First, that number, 70 percent, is considerably more than any presidential approval rating you can get your hands on, the highest of which usually has the president at 50 percent approval, if that.

So, what does this gap between investment professionals and lay-people mean? Well, it means that the investing world makes it their business to separate media hysteria from real-world fact. And, according to real-world facts, the investing world has had a much more positive view of Trump’s impact on investing, and the economy, than average people have.

The facts speak for themselves

And, if you look at what’s actually happened in Trump’s over two years in the White House, the investor class has been proven right, hasn’t it? Trump hasn’t made the world burn. He hasn’t destroyed the economy. Heck, he isn’t even guilty of Russian collusion despite undergoing one of the most massive investigations of presidential conduct in the history of humankind.

This doesn’t mean that investing professionals necessarily love Donald Trump. According to the same survey, they believe former Vice President Joe Biden will have the most positive impact on the world of investing among all the possible Democratic Party presidential candidates.

So, when it comes to being a discerning investor, it’s not about being caught up in media popularity contests. Instead, investors should always looks at the facts as impartially as possible. Remember, it’s about getting the best return on your investment dollars. It’s not about getting headlines in the media.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

What makes for successful investors?

traits of successful investors

Perhaps one of the most enduring question in the world of investing is this: What makes for a successful investor? How is it that Warren Buffett can become a billionaire by picking stocks successfully over a period of decades while many others fail to achieve anywhere near that success?

Well, two people have gone to great lengths to answer the question, and provide a specific list of traits that distinguish successful investors from the rest of the pack. Thomas J. Stanley and Sarah Stanley Fallaw have written a book titled The Next Millionaire Next Door: Enduring Strategies for Building Wealth.

A study of 600 millionaires

In fact, according to Hillary Hoffower of Business Insider, the authors of The Next Millionaire Next Door went and studied 600 millionaires in order to determine what made them successful. And the answers are revealing.

According to Hoffower, this list of traits exhibited by successful investors is a rather curious mix. Specifically, although successful investors have a preference for high-risk, they also tend to have a personality for risk. In other words, it’s one thing to want to engage in risk, it’s another thing to have a personality that’s suited for it.

Speaking of personalities, also among the list of traits of successful investors are composure and confidence, which means that successful investors have to contain their zest for risk with discipline and self-assuredness. It’s an overall blueprint for investment success that many find hard to follow, isn’t it.

Know your stuff

However, beyond the first four traits listed above  — high-risk preference, high-risk personality, composure and confidence — the fifth trait of successful investors in fact further differentiates the truly successful investors, the millionaires, from the rest, and that’s knowledge.

Specifically, the most successful investors tend to know their stuff and do their homework. In fact, according to the research in the book, millionaire investors tend to spend about 10.5 hours a month planning for future investments. And it’s this knowledge and expertise in investing that helps successful investors exhibit the other traits of successful investing, such as a penchant for risk, confidence and composure.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Short-term versus long-term analysis

trump brexit and investing

There have been a few themes discussed on these pages that might seem a bit repetitive, or even wrongheaded to some, so it’s nice to see when others in the investing world are saying some of the same things.

Specifically, Tom Bradley, president of Steadyhand Investment Funds, writes in the Financial Post about the need to minimize some of the hype surrounding things like U.S. President Donald Trump, and even Brexit. According to Bradley, they will have minimal impact on long-term investing, and the political shock they have brought to the world of investing should have already been discounted by now.

Avoid hyperventilating

Indeed, this is something discussed on these pages for some time now. People have hyperventilated about Trump ever since he announced his presidential run, and certainly since he won the presidency. This is not in any way an endorsement of Trump, but a reminder that the world, including the world of investing, is much bigger than he is, or any other president.

Instead, Bradley talks about two long-term factors that investors should start taking more seriously instead of watching too much cable news. The first is debt — and he’s talking about all debt; that being accumulated by households and governments. It’s growing, and getting out of hand.

Sustainable trends

The second long-term factor is the growing middle class — around the world. This is something that has been happening in China in recent decades, and is now also occurring in places such as India and other regions of Asia in particular.

What’s fascinating about Bradley’s analysis is that he says both factors — debt and the middle class — have contributed to world economic growth in recent years. However, he says the first, debt, is not sustainable, and there will be a reckoning, sooner or later. You can only keep borrowing money for so long. But, the second factor, the growing middle class, should serve as a counter-balance, since it will continue to happen for the foreseeable future.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Is responsible investing more than a trend?

environment social governance

Trends seem to be a constant factor in the world of investing. There are various reasons for this, but perhaps the most salient is that investing simply reflects real life. And, in real life, people follow trends, whether it’s because something is successful, or it’s fashionable. Either way, they’re a part of life, and a part of investing, and getting a grasp of how they can impact investment decisions is crucial.

For example, one recent trend goes by various names: responsible investing, RI, socially-responsible investing, SRI, ESG (environmental, social and governance), etc. Whatever you want to call it, more people are investing in order to change the world in addition to making money. Can you do both? I guess we’ll see how this trend works out, won’t we.

Fact or fiction?

Is responsible investing (the name we’ll stick to for now) a real phenomenon? Yes. According to a report by Cerulli Associates, according to managers of alternative investments, it’s their clients that are asking for their money to be invested in socially-responsible entities, whether it involves clean energy or working with a government that’s responsible to its citizenry. So, this is not just a trend people are talking about. It’s a trend that’s apparently driven by some real investors.

There are a few things to note about this trend. First, it’s occurring in the alternative investing sector. As with most alternative investments, they are driven by investors’ inability to find what they want in the traditional markets. In the past, this has involved a desire for greater returns. But, now, it’s involving an attachment of certain values to investment decisions.

The impact of a trend

Second, the question must be asked: Does responsible investing square with seeking desirable returns, or does investing that doesn’t come with the official label of responsible investing mean it’s socially-irresponsible investing? These are ethical questions, of course, but time will determine the financial viability of responsible investing. As investors, we must take the bottom line into account.

Finally, regardless of what a person thinks about the merits of responsible investing, it’s a trend that’s actually happening out there. As such, it must be taken seriously and assessed for its real impact on the portfolios of shrewd and discerning investors.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Hedging your bets with investing alternatives

alternative investing hedge funds

There are various reasons why alternative and private investing have grown in popularity in recent years. As we have stressed on these pages before, investors have been looking for greater returns than can be found in traditional public markets, such as stock markets, but also want acceptable levels of risk.

Traditional markets constitute unacceptable rates of returns for some investors for a few reasons. One is regulation, which includes disclosure requirements. In addition, from a macro-economic perspective, we’ve been in an era of low interest rates for some time, which tends to depress returns on traditional investments, and bonds in particular.

A viable alternative

As a result, investors have been increasingly looking to alternatives to the traditional investment markets. In fact, they’ve been looking to what’s often referred to as the alternative market, or the private investment market. In a nutshell, alternative markets consist of investment opportunities that aren’t as regulated as public markets, particularly regarding information disclosure, but, because they require investors and managers to do more of their homework, so to speak, the opportunity for returns can often be greater.

Hedge funds are an excellent example of an alternative investment type. Specifically, hedge funds are a pool of funds usually gathered from a group of large investors. These funds are managed by, you guessed it, the fund manager, usually for a fee. And hedge funds can often have a certain area of focus, such as precious metals, or equity financing.

A shrewd investment approach

The reason they’re usually called hedge funds is that they help protect investors from the volatility of the markets in general, but also from the uncertainty within their own portfolios. In other words, it’s an alternative to traditional forms of investing and, as such, is not subject to the same types of investment trends or pressures.

As with many forms of alternative investing, hedge funds give investors many kinds of freedoms they wouldn’t necessarily experience with other forms of investing. For example, you get to decide who else you invest with, who manages the fund, and whether that fund specializes in an area you’re actually interested in. That’s the attraction of alternatives investments like hedge funds. They put more of the power of investing and decision-making with the investors themselves.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

Why not diversify your diversification?

investment diversification factors

If you’ve had any kind of experience in the world of investing, you would have almost certainly come across the term diversification. You have to diversify your portfolio, everyone says. And there’s certainly some truth to that. However, diversification doesn’t always have to mean what everyone thinks it means, and even what everyone thinks it means isn’t always quite right. Let’s take a closer look.

In fact, portfolio diversification is a relatively simple concept, isn’t it. The idea is to not put all your eggs in one basket. That way, if some eggs get ruined, the others don’t, right? Simple enough. But how that concept has been implemented in practice has been subject to both trends and personal preference.

From the simple to the complex

If you think about it, perhaps the simplest form of diversification is making more than one investment. Even if you think something is a sure thing, nothing is a sure thing. So, in its most basic construct, diversifying means doing more than one thing when it comes to investing.

Over the years, the trends in portfolio diversification have certainly changed. Investing in one form of investment type has been a typical example, such as investing in bonds as well as stocks. Or, if you invest in stocks, don’t just invest in tech companies. Try investing in, say, the energy sector. That way, a negative sector trend in one won’t affect that other, right?

However, since the world of investing has changed in so many ways in recent years, so, too, has what constitutes as diversification. Indeed, an investor can diversify based on any number of factors. You can diversify based on region, or even investment philosophy.

Choose your diversification

In fact, let’s take a quick look at both forms of diversification and how you can use them to diversify even further. For example, let’s say you’re in the practice of diversifying based on region, which makes sense. Different global factors impact regional investments in different ways.

But, you can diversify even further by deciding to also change your investment philosophy, too. So, let’s say that you generally like to invest in good companies, much as Warren Buffet has over his long and notable investment career. Why not change it up and start investing with short-term capital growth in mind?

Indeed, the choices are almost limitless when it comes to the types of diversification strategies you use to ensure the achievement of your investment objectives over the long term.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

The limits of your own expertise

investment expertise

One of the touted advantages of private investing is that you get to invest in things you know. So for example, if your background is in pharmacy, then investing in pharmaceuticals might prove not only advantageous from a knowledge standpoint but from an enjoyment standpoint, too. Believe it or not, investing can and should be fun, if you’re doing it right, of course.

However, investors should always be careful about valuing the kind of knowledge they bring to the table and whether it constitutes investment expertise. Let’s take pharmacy as an example again. Let’s say you’re a great pharmacist. You know pharmacology. But does that mean you know the business of pharmaceuticals? Maybe not. Even so, it does mean you can bring knowledge to an investment situation. Just don’t necessarily over-value it. If there are financial experts in the field of pharmaceuticals that you can use, by all means, do so.

You’re an investor, not a customer

Let’s take another more lighthearted example, this time provided by Nelson Smith in The Motley Fool. He says that his experience with the Tim Hortons food chain shaped his investment decision on the company, and in not so beneficial a manner.

Specifically, Smith says that he didn’t like the Tim Hortons store that opened up in his neighbourhood. The service wasn’t great, and his experience shaped his judgement about the company as a whole. As a result, he didn’t invest in Tim Hortons. And, what happened? Lo and behold, shares in the company rose 85 percent in the last three years, and quarterly dividends have tripled since 2016.

Stay disciplined

As Smith points out, he possessed a knowledge of the company that really was of no use to him financially. Sure, his local shop could use a customer-service overhaul. But, if he had stuck to doing due diligence on the company’s financials, and its potential strictly from an investment standpoint, he would have been much better off — as an investor, and not as a customer.

In fact, Smith’s experience, as well as our pharmaceuticals example, highlight a general axiom when it comes to investing: stay disciplined. Yes, personal knowledge can always be of use when investing. However, don’t over-value what you bring to the table, and make sure it doesn’t cloud your judgement when sticking to sound and shrewd investment decision-making.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

The “bubble” that has yet to burst

housing bubble bursting

Anyone who has followed Canadian economic analysis for the last number of years, especially the housing and construction sector, would certainly be familiar with the term housing bubble. The term refers to an alleged over-pricing in the housing sector that will eventually lead to a “burst” with a precipitous fall in prices.

There’s only been one problem with all this ongoing talk about a housing bubble. It hasn’t happened, and as a recent forum of B.C developers has indicated, it’s still not likely to happen any time soon.

Always focus long-term

First, let’s take a step back and examine Canada’s housing sector and why it matters. Specifically, it matters because economic observers, as well as investors, should never get caught up in short-term prognostication, but also because a long-term outlook is important when making investment decisions.

Back in 2008 was the start of the so-called Great Recession that adversely affected the global economy, including Canada, which entered both a short recession as well as a short correction in the housing market. Since then, the economy has been chugging along quite nicely, thank you very much, but the housing sector has perhaps been doing even better.

Look at the fundamentals

Month after month, and year after year, all the statistics related to the housing and construction sectors have been going up: prices, starts, permits — you name it. These increases have been so consistent and steady that governments at both the federal and provincial level have tried to put a stop to it, in part to prevent that dreaded “housing bubble burst.”

However, as speakers at this year’s Urban Development Institute’s “2019 forecast’ luncheon have indicated, and as reported by the Vancouver Sun, this year might still prove elusive for people waiting to see the bubble burst.

For example, Eric Carlson, founder and CEO of Anthem Properties, believes that various attributes of living in Canada — such as a growing and stable economy, rule of law, and free speech — mean that demand for people coming to Canada will remain high, as will a supply of housing to meet such demand. And, despite some experts at the luncheon acknowledging the prospect of a slowdown, a bursting of the bubble doesn’t appear to be in order any time soon.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.