In the Sunday Reads we look at the dirt cheap Canadian stocks, building an ETF portfolio vs an all-in-one asset allocation ETFs and more. The markets are leaning towards more rate hikes in Canada and south of the border. And when it comes to advisors, most Canadians should choose ditch vs switch. Why not hold investments at 1/10 the cost and learn the investment basics? There’s a whole community of self-directed investors willing to help.
I was back making sense of the markets at MoneySense. Kyle Prevost will be back next week. The topics of the week …
Investing in the EV space, dividend payers are not paying off, everything’s gone K shaped, and is artificial intelligence equal to the invention of electricity?
More hikes
And expect more rate hikes in the U.S. after a stronger than expected jobs report.
Job gains remain robust, wage growth is still going strong, and unemployment continues to hover near historic lows. That means the job market is still fueling demand in the economy, which the Fed has been trying to slow through rate hikes. And Fed officials have made it clear they think the central bank still has more work to do to bring down inflation, which is still running well above the 2% goal.
US employers have now added jobs for 30 consecutive months.
Through the first half of 2023, the economy has added 1.67 million jobs, the 12th largest January to June total on record. Wages inflation remains stuck at 4.4%. Markets are pricing in a 90% chance of a rate hike in the U.S., at the next meeting later this month.
Another hike in Canada this week?
Markets are also expecting another rate hike in Canada this week as the housing market refuses to correct and inflation remains somewhat sticky.
Remember, there is always good news with any scenario. In a high rate environment, savers can be rewarded. EQ bank GIC rates once again on several GICs this past week.
And as Mark Seed retweeted, Canadian stocks are dirt cheap right now …
The all in equity yield in the TSX is 16 per cent. It’s one of the highest in the world.
And here’s the valuation comparison …
Canada is almost a 50% off sale!
Certainly there is more growth in the U.S. market, but the valuation is stretched and driven by the high flying tech and Tesla’s of the market.
From a Globe & Mail piece (Ian McGugan) …
Vanguard estimates that Canadian investors currently devote about 48 per cent of their stock holdings to foreign equities. It argues that 70 per cent would be better.
Maybe so. I’m not so convinced, though, that Canadian investors have to rush to meet that goal.
Given the lush prices on U.S. equities, I’d be inclined to bide my time, until the valuation gap between the markets has narrowed.
That seems a reasonable assessment if one is buying the markets, or if one is plowing money into the most expensive stocks in the U.S.
At stocktrades, RBC or TD Bank? I’m sticking with the combo.
More Sunday Reads
At My Own Advisor Mark offers the mortgage ammortization crisis in Canada. We’ll see if lengthened mortgages are a temporary measure, or if that essentially turns homeowners into longterm renters (from the banks). Are you ever going to own your home if you have a 70-year ammortization?
On Findependence Hub, Justin Bender looks at the all-in-one asset allocation ETFs vs the build your own ETF portfolio models.
You’ll see that there is limited costs savings using Canadian dollar ETFs to build your own. You can find significant savings when you introduce a U.S. dollar ETF for the U.S. markets.
You can buy ETFs for free at Questrade.
Investors can also avoid withholding taxes when they use a U.S. ETF in an RRSP or taxable account.
Of course the main benefit of the all-in-one option is convenent and hands off portfolio management. That said, portfolio rebalancing would not require much time or effort.
Ditch > switch
And ditch is better than switch when it comes to advisors in Canada …
Rob at Passive Canadian Income has updated his portfolio performance for June.
Obviously if the total return underperformance is a long term issue, Rob would be better to buy the markets, or at least embrace a total return strategy. More money buys more income.
Accumulation vs retirement investing.
At Tawcan, Bob is learning and accepting failures.
We have the week in review at Dividend Hawk. I’m with Hawk on receiving Telus and Pepsi dividends this past week.
At Banker on Wheels, how to survive the next market crash.
There’s always a treasure trove of reads, podcasts and videos from Banker.
Cut the crap investing links…
Earn a break on fees by way of many of these partnership links.
CANADA’S TOP-RANKED DISCOUNT BROKERAGE
Cut the Crap Investing readers can earn a break on fees at Questrade by way of that partnership link. At Questrade, you can buy ETFs for free.
I have partnerships with several of the leading Canadian Robo Advisors such as Justwealth, BMO Smartfolio, Nest Wealth and Questwealth from Questrade.
Here’s Canada’s top-performing Robo Advisor, Justwealth.
Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.
CASHFLOWS & PORTFOLIOS
The self-directed investor might consider the service provided by Mark Seed from My Own Advisor. He runs Cashflows & Portfolios where they will provide options for that optimal retirement funding strategy. That service is provided for a very reasonable fee.
If you do head to Cashflow & Portfolios (as do many Cut The Crap Investing readers), be sure to tell them Cut The Crap Investing sent ya.
OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.5% and 3.5%. You’ll find some higher rates on GICs, recently updated and increased to 3-5%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.
OUR CASHBACK CREDIT CARD
We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …
The Tangerine Cash Back Credit Card
Last month we received $45 in cash. Spending is down, yes! Less on gas, less on restaurants, less on groceries – our 2% cashback categories.
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Great reviews, references, and referrals! TYVM!
Thanks Michael. I’m glad you enjoyed the post.