If you’re a regular viewer of BNN, you’ve probably heard terms like bear market and bull market thrown around a dime a dozen. You may be familiar with them, but do you truly understand what they mean? Here are five terms every stock market investor should know.

Bear Market:
A bear market is a market investors tend not to enjoy so much. Investors are pessimistic and lack confidence, as the stock market stays flat or heads downward. A bear market is typically coupled with weak economic growth and low interest rates. When the stock market falls at least 20 percent from its peak within two months, we’re considered to have entered a bear market. The financial crisis of 2008 is a prime example of a bear market. You may be wondering where the term bear market comes from. When a bear is on the offensive, it swipes its claws downward at its prey, which is the direction the markets are heading in a bear market.

Bull Market:
A bull market is a market investors enjoy. Investors are optimistic and full of confidence, as they expect the good times to continue. A bull market is often coupled with strong economic growth. It’s when stock prices are trending upward or are expected to head higher in the years to come. The longest bull market in North American history happened from the early 1980’s until the early 2000’s. You may be wondering where the term bull market comes from. When a bull is on the offensive, it thrusts it horns upward, which is the direction the markets are heading in a bull market.

Value Stocks:
Are you a bargain hunter? Then you’ll probably enjoy investing in value stocks. A value stock is a bargain in the eyes of investors – that’s because the market has undervalued the stock based on its fundamentals, such as dividends, earnings and sales. Value stocks tend to have high dividend yields and low Price/Earnings ratios. As an investor, you hope to buy the investment while it’s undervalued before the price is corrected by the markets. A good place to look for value stocks is on stocks that have recently reached 52-week lows.

Growth Stocks:
Another type of stock you can invest in is growth stocks. As its name suggests, a growth stock is a stock that’s expected to grow at a faster pace compared to the rest of the market. When looking for growth stocks, not only do you want to focus on companies that have grown, but you also want to focus on those with fantastic growth potential for the future.
While many value stocks pay dividends, growth stocks typically don’t, instead choose the reinvest their earnings into the company to help it grow further. Technology companies like Apple are a perfect example of growth stocks (although Apple now pays a dividend). Although growth stocks tend to have a bigger upside, they also come with a bigger risk. For example, if the next Apple product is a dud, it could hurt the stock’s growth, not to mention the stock price.

Income Stocks:
A third type of stock are income stocks. When you’re looking to invest in an income stock, you’re looking for an investment with a dividend yield better than bonds and GICs. Income stocks come in two types: utility stocks and preferred stocks. Both these stocks tend to pay competitive dividends compared to what the rest of the market is offering.

No matter what type of market you’re investing in – bear or bull – Smart Money Invest offers low-cost ETFs for your portfolio. By investing in ETFs, you can spread your risk and ensure you’re properly diversified to help your money grow long-term.

How do you measure financial success?
Many of us like to measure it with our income. While income is one way, your net worth is a much better reflection of how wealthy you are. Sure, getting a pay raise at work is nice, but your net worth is the number you really want to maximize.

To illustrate the difference between income and net worth, since it’s summertime and the Olympics are in full swing, I’ll use the sport of golf. Income is a lot like a single hole in a round of golf. Let’s say on your first hole you get an eagle – fantastic! You’re on top of the world. You get a birdie on your second hole. You’re at the top of the leaderboard. You give yourself a pat on the back.

But golf isn’t about just one or two holes – similar to net worth, it’s about how you do in the long-run (in the case of golf, over 18 holes). Let’s say you bogey 10 of the last 16 holes and find yourself at the bottom of the leaderboard. Too bad, you’re out of contention.

You can have the nicest clubs in the world (make a decent living), but if you don’t use your clubs (money) wisely, you could end up on the losing end (broke). Ok, that’s enough for the golf analogy, but hopefully you get our point.

What’s Your Net Worth and Why It Matters
“Net worth” may sound intimidating, but it’s really not. But before we discuss net worth, it helps to understand what it is. Your net worth is your assets (what you own) minus your liabilities (what you owe). Assets include your chequing account, savings account, investments such as mutual funds, ETFs and GICs, your home and car. Liabilities include your car loans, credit card debt, your mortgage and line of credit.

To calculate your net worth, find the difference between your total assets and total liabilities. Here is the basic net worth formula:
Net Worth = Total Assets less Total Liabilities

Don’t worry, you don’t have to be a math whiz to calculate your net worth. GetSmarterAboutMoney.ca has an online calculator you can use to quickly figure it out.

Where Should Your Net Worth Be?

It all depends on your age. The Globe and Mail wrote an interesting article that includes a table with net worth milestones for the average Canadian. For example, at age 30, the average Canadian only has a net worth of $70,000, but by age 35 it’s over doubled to $165,000. Remember, this is only an average. If you’re below the average, there’s nothing to be ashamed of, as long as you take steps to increase your net worth.

Aim to grow your net worth over time by increasing your assets and decreasing your liabilities. For most people, their most valuable asset is the family home. By paying down your mortgage and eventually paying it off, you’ll get rid of your biggest liability. You don’t want all your money tied up in your home since it’s an illiquid asset. At the same time, aim to grow your investments. Regularly investing in low-cost ETFs is an excellent way to accomplish this.

Ideally your net worth will be a positive number, but that’s not always the case. For example, if you’re a millennial fresh out of university with $20,000 of student debt, your net worth may be negative, but don’t despair. By landing a well-paying full-time job, you can start chipping away at your debt and eventually have a positive net worth.

There are many milestones in relationships
Your first date, meeting the in laws and your one year anniversary, but no milestone is bigger than marriage. Getting hitched is a big step, yet most couples haven’t had the financial “talk” when they walk down the aisle.



Only a third of couples planning to get hitched or enter a common law relationship in the next two years have had serious discussions about their finances, finds a CIBC poll. Meanwhile, 40 percent of couples say they’ve only talked about managing their finances together “briefly.” This despite the fact 99 percent of couples said it’s important to talk about money as a couple. It doesn’t get any better once couples get married. 83 percent of couples have no idea when they’ll have the money talk and that they’ll “play it by ear.”

Couples spend months – even years – planning their wedding day, yet most couples don’t spend any time planning their financial lives together. A lack of financial planning can lead to fighting as a couple and can even end your marriage in a worst case scenario. A BMO poll of couples revealed fighting over money is the top reason for divorce (68 percent), followed by infidelity (60 per cent) and disagreements about family (36 per cent). That’s right, you read that right – fighting over money can be worse than cheating on your spouse in some instances!

One of the major disagreements between couples about money is debt
66 percent of those tying the knot or living common law come into the relationship with some form of debt. Common debt includes credit card, mortgage, personal and student debt. Meanwhile, 46 percent of couples want to save up for a trip or vacation within two years of marriage. That debt can come as a rude awakening and cause couples to delay major milestones together like buying their first home and starting a family.

If you want to better your chances marital bliss, talking about money up front is key. The For Richer or Poorer report makes several suggestions for couples to get on the same financial page.

Don’t avoid talking about money
Once you decide to get married, start planning your financial lives together. There are several ways for couples to manage their finances, including sharing everything (one joint bank account), sharing expenses (a joint bank for paying expenses) and assigning expenses (you decide with your partner which expenses to cover).

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Plan to save
Money is a lot more than expenses. In order to accomplish long-term goals like buying a car or saving for retirement, you’ll need to figure out how much money you’ll want to set aside. You’ll also need to decide how that money is to be invested. If you’re looking for a low-cost investment option, ETFs are worth consider. Smart Money Invest offers a great selection of low-cost ETFs to help your money grow faster.

Know your money personality
Before walking down the aisle, know your partner and your money personalities. There are four main personalities: the super-saver, the cautious spender, the carefree and the avoider. If you’re a super-saver and your partner is the carefree, it can lead to fighting once your finances are combined. That’s why it’s so important to talk up front about money to avoid fighting later on.

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“Gotta catch ‘em all!” The Pokémon craze has once again caught fire. It’s hard not to turn around and see people frantically dashing in the streets to catch Pokémon. After being a mega hit in the late 1990’s, the billion dollar video game franchise has reinvented itself with its first ever Pokémon mobile app.

If you’ve never heard of Pokémon, here’s a brief run down. Your goal is to catch Pokémon – short for pocket monsters. Pokémon are caught with Poké Balls. Pokémon aren’t just to collect – you can train them so that they evolve and gain new moves and abilities. Trainers battle it out to see who’s Pokémon come out ahead.

 

The Roller Coast Ride of Pokémon GO

When Pokémon GO was launched in the U.S., Nintendo’s market capitalization more than doubled to 4.5 trillion yen (US$42.5 billion). Pokémon was hailed as a mega success, helping make Nintendo relevant again. Pokémon GO became the number one downloaded smartphone app. Investors couldn’t get enough of Nintendo, buying up its shares in record numbers. Things were rosy at Nintendo.

Unfortunately for Nintendo and investors, the celebration was short-lived. Nintendo’s stock looks a lot like a roller coaster in July. In fact, last week was the worst week for Nintendo’s stock in 27 years. Nintendo’s shares plummeted 27 percent on news that the launch of a highly anticipated Pokémon GO accessory would be delayed until September.

This isn’t the only reason Nintendo’s stock is down. When Pokémon first came out, it was assumed Nintendo would be raking in the Poké profits. However, it was soon revealed Nintendo isn’t going to directly profit from Pokémon GO. That’s because Nintendo didn’t develop or publish the game. Furthermore, Nintendo only has a share the Pokémon company and Niantic, the masterminds behind Pokémon GO.

That’s not the only concern of Pokémon GO. Monetizing smartphone apps has always been challenging. Pokémon GO is no exception. Pokémon GO is a free app, so Nintendo doesn’t make money from downloads. However, Pokémon GO does have in-app purchases. Players can purchase Poké Coins, which can be exchanged for various in-game power-ups and upgrades. It remains to be seen how successful the in-game purchases will be.

Pokémon GO and Investing

Since this is a personal finance blog, you’re probably wondering what Pokémon GO has to do with investing. Pokémon GO and investing have more in common than you think. A lot of parallels can be drawn between the rise and fall of Nintendo’s stock and the dot-com bubble.

During the height of the dot-com bubble, the Price-to-Earnings ratio for some companies were really out of whack. This should have raised a red flag for investors, but most chose to ignore the warning signs. When it was discovered a lot of dot com companies were just operating out of a garage in Silicon Valley and weren’t actually making money, it led to the dot-com crash

The dot-com bubble and Pokémon GO serves as a valuable lesson for investors. Follow Peter Lynch’s golden rule and invest in only what you know and understand. If more investors had of done their homework and looked at the balance sheet of Nintendo, they would have realized Nintendo wasn’t going to make a mint off of Pokémon GO. Hopefully this serves as a wake-up call for investors that you shouldn’t rush into the next hot stock without truly understanding the fundamentals.

Investing in one stock is very risky. If you’re looking to be well diversified, ETFs are the way to go. We at Smart Money Invest offer personalized portfolios with ridiculously low fees. Our rate of 0.69 percent is amongst the lowest in the country, helping your portfolio grow even faster.

Congratulations! You’ve made the wise decision of buying a home. A home isn’t just a place to live, it can be a good long-term investment. Home-ownership offers many benefits: once your mortgage is paid off, your carrying costs will be a lot lower, you can earn income as a landlord from tenants and your home’s tax-sheltered (provided it’s your principal residence).

While a lot of people would like to be able to call themselves homeowners, what stops them is the down payment. Not to be confused with the deposit, the down payment is the money you have to pay upfront when buying a home. In Canada, you buy a home with a down payment as little as 5 percent for homes under $500K.

It’s becoming increasingly difficult for people to buy homes in expensive real estate markets. In Toronto and Vancouver, the price of a detached home is well over $1 million. While that may seem intimating, the good news is there are still affordable options out there like condos and townhouses to help you get your foot in the door and start building equity.

High-Ratio vs. Low-Ratio Mortgages

When saving toward a down payment, it’s important to know the different between a high- and low-ratio mortgage. A high-ratio mortgage is when you make less than a 20 percent down payment toward the purchase of a home. When your mortgage is high-ratio, you’ll be required to pay CHMC insurance, which protects your lender if you fail to repay your mortgage. Insurance premiums are between 1.6 percent and 3.6 percent of your mortgage. Your CHMC insurance is added on top of your mortgage and can add up to thousands in interest over the life of your mortgage.
If you’re able to make a 20 percent down payment, your mortgage is considered low-ratio. This can help you save a bundle on CHMC insurance, since you won’t have to pay any. I realize it’s probably not realistic to save a 20 percent down payment in Toronto, but if you can save at least a 10 percent down payment, you can save a lot on mortgage insurance.

RRSP Home Buyer’s Plan (HBP)

If you’re a first-time homebuyer, the best way to save toward your down payment is with the RRSP HBP. Using the HBP, you can borrow up to $25,000 – $50,000 with your spouse – from your RRSP toward your down payment. Not only is this money tax-free, repayment is flexible – it’s repaid over 15 years, starting in the second year.

TFSA
If you’re not a property virgin, the TFSA is the second best way to save toward your down payment. In 2016 you could contribute up to $5,500 tax-free to your TFSA. Similar to the RRSP, the TFSA can hold a variety of investment types like GICs, mutual funds and ETFs. Although you don’t receive a tax refund like the RRSP, your money grows tax-free within. (You also don’t have to pay tax when your money is withdrawn.)

At Smart Money Invest, we offer ETFs perfect for long-term savings goals like home ownership. These ETFs can be protected inside your RRSP or TFSA to help your money grow even faster. Before you know it, you’ll be able to call yourself a homeowner.

You’ve probably heard of the term “robo-advising,” but you truly understand its meaning? Robo-advising isn’t your typical arrangement with a financial advisor at the bank. Robo-advisors are virtual operations that operate on the World Wide Web. Through robo-advising you can build a customized investment portfolio with exchanged-traded funds (ETFs) at the fraction of the cost.

What is Robo-Advising?
The name “robo-advisor” is a bit misleading. When you imagine a robo-advisor, you probably picture a computer acting as your investment advisor. That may make some investors nervous putting their financial future in the hands of a robot. It should put you at ease to know that humans are working in the background to create portfolios.

Canadian pay some highest management fees of developed countries. With robo-advising it’s a lot less – you’ll only pay somewhere in the range of 0.6 to .85 percent towards management fees (this includes the costs of advice and ETFS fees). Robo-advising is a good all round solution for investors. Robo-advisors fall somewhere in the middle between DIY (do-it-yourself) investing and using the services of a financial advisor.

With how costly the MERs are on mutual funds, you’d think your portfolio would be automatically rebalanced. Unfortunately, that’s not the case in many instances. This is another area where robo-advising has a leg up on traditional mutual funds. Robo-advisors monitor your portfolio daily so you don’t have to. Your portfolio is automatically rebalanced so your investments aren’t at greater risk if your asset allocation gets out of whack.

With more than $15 billion (U.S.) in assets in the U.S., robo-advising has reshaped the investment landscape south of the border. In Canada, robo-advising is still in its infancy. Fintech (financial technology) firms are looking to capitalize on the momentum stateside and offer the same low-cost investing to Canadians.

Why Robo-Advising Isn’t Just for Millennials
Robo-advising has proven popular with millennials. This shouldn’t come as a surprise. If you ask the typical millennial what they couldn’t do without, their mobile phone is likely to be at the top of the list. The traditional business model of people visiting their bank to buy investments is falling by the wayside thanks in large part to robo-advising.

 

Although millennials may be known for their technological savviness, they’re not the only ones who are fans of robo-advising. Robo-advising is proving popular with middle-aged Canadians in their 40’s and 50’s who are frustrated with paying high fees and in return receiving little facetime with their financial advisor and instead left scratching their head with complicated financial statements. With the big banks getting into robo-advising, look for it to rise in popularity over the coming months and years, as more Canadians look to get better value for the thousands of dollars in investment fees they pay.

At Smart Money Invest, we offer you the best of both worlds. You get ridiculously low fees and a portfolio that automatically rebalances, so you can worry about the important things in life like spending time with loved ones and friends. Get started with robo-advising today and start reaping the benefits.

Should I invest in actively managed or passively managed funds?
This is one of the most important decisions you face as an investor. Low-cost investment options like index funds and exchange traded funds (ETFs) have helped passive investing grow in popularity over the years. On the other end of the investing spectrum are actively managed funds (aka mutual funds).

So which is the way to go? Let’s look at two key areas: performance and fees.

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“Show me the money!” – Jerry Maguire

Performance 

Investing comes down to performance. This infamous quote from the movie Jerry Maguire sums it up pretty well.
A good measure of how an actively managed fund is doing is the benchmark.

So, how do actively managed funds stack up against passively managed funds?
Over the short-run actively managed fund managers had a good year last year. Over half (55 percent) beat the benchmark in 2015, found a study by S&P Dow Jones Indices.
Not bad. But when we look over the long-term, the results skew heavily in favor of index investing.

The facts speak for themselves: the vast majority of fund managers underperform the index.
Less than one in four active fund managers beat the benchmark over the last 10 years, found the same study.

To understand why most fund managers underperform the benchmark, let’s run through a simple example together.
For the most part, the markets consist of the brightest investing minds. For an actively managed fund to outperform its peers, the fund manager has to consistently beat his peers. This is often easier said than done, especially over the long-run.

A fund manager may get lucky and beat the benchmark in the short-run, but over five or 10 years, this proves very challenging. The markets are constantly changing and evolving. For a fund manager to come out ahead over 10 years, he has to continually outperform the benchmark (we haven’t even gotten to fees!). This is a tall order, especially when actively managed funds have fees weighing them down.

Fees

The facts don’t lie: Canadians pay among the highest mutual fund fees in the world. On equity mutual funds, Canadians pay an average management expense ratio (MER) of 2.42 percent, found a study by Morningstar.

I don’t have a problem with paying fees when a mutual fund outperforms the benchmark, but the problem is most don’t. So, this begs the question, are you really getting good value for your fees? In many cases, the answer is, probably not.

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For an actively managed fund to beat the benchmark, it has to beat the return of the benchmark, plus fees. For example, if the MER for ABC mutual fund is 2.5 percent and the benchmark has a stellar year and achieves an 8.5 percent return, that means ABC mutual fund has to get at least a 11 percent return (8.5 percent + 2.5 percent in fees = 11 percent), just to match the benchmark. On top of that, the fund manager has to outperform the benchmark by 2.5 percent continually over the next 10 years and beyond to come out ahead. That’s no easy task!

CRM2 to be a Game Changer

Our relaxed attitude about fees could change with the introduction of the next phase of the Client Relationship Model - Phase 2 (CRM2). As of July 15, 2016, registered firms will need to provide an annual report showing fees in dollars. This will be a real eye-opener for investors. A 2.3 percent MER may not sound high, but when you find you you’re paying, say, $575, in fees a year based on a portfolio of $25,000 for a mutual fund that underperforms the benchmark, you might think twice about investing in actively managed funds.

At Smart Money Invest, we’re all about keeping investment fees to a minimum.

The less fees you come out of your portfolio, the more money that’s working for you. We offer personalized portfolios with ridiculously low fees. Our rate of 0.45% is among the lowest in the country. Check out Smart Money Invest website today and see what you’ve been missing out on.

 

After months of campaigning, the British decided their fate on Thursday, June 23, 2016. The Brexit vote was about whether the UK wanted to remain or leave the EU. The key issues were immigration and the UK keeping its independence. The polls put the Remain side ahead of the Leave side in the historic Brexit vote, but in the end it was the Leave side that prevailed. 51.9 percent voted to leave the EU, while only 48.1 percent voted to remain. The vote’s results has divided the nation, leading to thousands marching in the streets in protest.

 

 

Instability in the Markets

The results of the Brexit vote has led to much economic and political instability. If you’re planning a summer getaway, you might consider visiting the UK. In the aftermath of the Brexit vote, the British Pound fell to a 30 year low, making it cheaper for Canadians travelling to the UK. The Canadian Loonie also suffered, as investors bought up the U.S. greenback in droves. The Brexit results surprised investors, leading to markets plunging across the globe. Although markets have since shown signs of recovery, there’s still much uncertainty that lies in the months and years ahead. This has led to the UK’s credit rating being downgraded.

On the political front, British Prime Minister David Cameron announced his resignation. He will be stepping down in October. This has led to much speculation about who will be the next prime minister and lead the negotiations for the UK to leave the EU. David Cameron has said there’s no hurry for the UK to leave, but the EU has a different opinion. The UK could leave the EU as soon as two years. EU nations would like the UK to invoke Article 50 of the Treaty sooner rather than later to help bring stability back to the EU.

How Canadian Businesses are Affected

The Brexit vote is bad news for Canadian businesses operating in the UK. The UK is an English-speaking hub for Canadian businesses looking to get their foot in the door of the lucrative EU. Although it doesn’t have any immediate implications, if and when the UK leaves the EU, it could mean Canadian businesses will have a tougher time accessing free-trade. This has left many Canadian companies considering leaving the UK for another country in the EU. In the short-term, this will hurt the profits of Canadian companies and lead to more instability back home.

What Should I Do as an Investor?

As an investor, it’s easy to panic after the Brexit vote and sell your investment portfolio, putting it all in cash, but for most that’s not the solution. If you’re invested for the long-term for a goal like retirement, it’s best to stay the course. The market has its ups and downs (we’ll automatically rebalance your portfolio so it stays the course). It’s important to not lose sight of your long-term investment objectives. If anything, the tumble in markets is a buying opportunity for investors. This sale won’t last forever, so take advantage while you can.

 

We are very excited to announce the launch of our newly designed website…. We hope you like it.

It’s time for change — where professional wealth management is not just available to the rich . Smart Money’s wealth management model offers everyone sophisticated online wealth management (some people call us robo-advisors) at very low management fees (0.45% annual rate). We are thrilled to bring our institutional trading experience to individual investors….

Stay tuned, we have a lot coming!