U.S. portfolio manager Adam Grossman discussed the important differences between investing to get rich and investing to maintain wealth in Keeping It. He began by quoting the famous edict of Wall Street Journal columnist Jason Zweig that “Staying rich is the hard part.”
Mr. Grossman noted the risk of excess conservatism for those that are looking to preserve wealth. Despite low inflation rates, the purchasing power of the U.S. dollar has been cut by a third over the past 20 years, and investors with risk-free, bond-only portfolios have often failed to generate enough returns to offset this. Rising inflation pressures only add to this risk.
Harvard University provided an example of liquidity risks to wealth ahead of the financial crisis. The school’s giant endowment fund was loaded with illiquid hedge fund and private equity investments in 2008. The resulting cash crunch forced layoffs and asset sales at exactly the wrong time. “Even if it feels inefficient,” Mr. Grossman writes, wealthy investors should “keep plenty of cash and bonds.”
The author also highlights the importance of budgeting for large future expenditures like tuition for family members, health-related costs and (perhaps most importantly), taxes.
It is tempting for successful investors to adopt a ‘it’s never enough’ mindset and never stop looking for the highest possible portfolio returns. At some point, particularly when potential mortality shortens the investment time horizon, prudence requires a more defensive perspective that nonetheless includes enough growth to maintain standards of living throughout retirement.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Enbridge Inc. (ENB-T) This stock’s yield of about 6.6 per cent is above average for the pipeline sector. Does this mean the dividend isn’t safe? John Heinzl shares his thoughts.
Power Corporation of Canada (POW-T) One of the compelling reasons to bet on the company is the substantial discount between the financial conglomerate’s current share price and the loftier value of its operating companies. As David Berman tells us, this discount has been shrinking, and the trend may have further to go.
The Rundown
Presenting Canada’s cheapest robo-adviser, the best performers and the ones who don’t like Canadian stocks much
Why pay a robo-adviser to manage a portfolio of exchange-traded funds for you when you can buy stocks for free and watch them go higher? The 2021-22 edition of the Globe and Mail Robo-Adviser Guide shows you why. Robo-adviser portfolios have for the most part generated competitive returns over the past one-year and three-year periods, even after their modest fees.
Why Canadian stocks are looking particularly attractive right now
David Rosenberg has been one of the market’s best-known bears for years. So, you may be interested to hear that the economist believes a buying opportunity has arisen in Canadian stocks. Here’s his explanation.
Transitory, or an inflationary apocalypse? How investors can make sense of the debate over surging consumer prices
Inflation is running at its hottest pace in three decades. So is the rhetoric around it. Yet financial markets remain mostly unperturbed. For investors, the conflicting signals add up to a baffling muddle. So what to do? As Ian McGugan explains, a good place to start is by examining both sides of the inflation debate.
Also see: Concerned about inflation? Gordon Pape suggests some options for conservative investors
Why financial planners have an edge with millennials over investment advisers
For a bunch of reasons, millennials don’t seem destined to follow their parents and grandparents in seeking investment help from advisers. The same reasons suggest a different path for young adults – one that focuses more on financial planning than selling and managing investments. Rob Carrick reports.
Dividend growth defeats inflation - here are four ETFs that do the job
TD Securities has issued a report on protecting portfolios against inflation with ETFs, and four dividend growth funds are in the mix. Rob Carrick takes a look.
After Newcrest scoops up Pretium, gold sector turns focus to next deal
With Australia’s Newcrest Mining Ltd. set to acquire Canada’s Pretium Resources Ltd., attention is now turning to which gold miner will be next to get scooped up, even as money managers caution that acquirers are likely to tread warily. Niall McGee looks at some candidates.
Some worry U.S. stocks rally more ‘Fear Of Missing Out’ than fundamentals
A record-setting run in U.S. stocks has made some investors wary as concerns grow over the market’s vulnerability to surging inflation, tighter U.S. Federal Reserve policy and moderating corporate profit growth. But whether investors, who have consistently scooped up stocks on pullbacks this year, will actually turn away from equities remains to be seen, in particular with November and December being historically a strong period for the market. Lewis Krauskopf of Reuters reports.
Disappearing shorts: As stocks soar, skeptics surrender
The skeptics on Wall Street have gone missing. As the stock market has surged to records — unbowed by recession, pandemic or warnings of a dangerous bubble — activity has dwindled to a nearly two-decade low for the traders known as short sellers, who make their money betting stocks will fall. Stan Choe of The Associated Press examines why.
Others (for subscribers)
The most oversold and overbought stocks on the TSX
Monday’s analyst upgrades and downgrades
Monday’s Insider Report: A pair of company presidents land million dollar paydays
Friday’s Insider Report: CEO and COO are buyers of this dividend stock rebounding from its 2021 low
Ask Globe Investor
Question: I recently purchased shares of Newmont Corp. (NGT) in my registered disability savings plan. I bought the shares on the Toronto Stock Exchange but was surprised to see that U.S. withholding tax was deducted from my dividends. Since RDSPs are similar to registered retirement savings plans, why are taxes being withheld?
Answer: Newmont is dual-listed on the TSX and New York Stock Exchange, but the company is based in Denver. For Canadian investors, dividends from U.S. companies are generally subject to a U.S. non-resident withholding tax of 15 per cent.
However, RRSPs – and registered retirement income funds, locked-in retirement accounts and other accounts set up specifically for providing retirement income – are exempt from withholding tax on U.S. dividends. This exemption applies only to U.S. shares or U.S.-listed exchange-traded funds held in such accounts; Canadian-listed ETFs (or mutual funds) that hold U.S. stocks are still subject to withholding tax, regardless of the account type in which they are held.
Moreover, the exemption from U.S. withholding tax does not apply to tax-free savings accounts, registered education savings plans or registered disability savings plans, none of which are recognized as retirement accounts under the Canada-U.S. tax treaty. To avoid the 15-per-cent withholding tax on U.S. dividends, you may wish to hold your U.S. stocks in an RRSP or other registered retirement vehicle.
--John Heinzl
What’s up in the days ahead
Income investors tend to avoid cyclical companies because of their volatility and unpredictable dividends. But there’s one such stock Gordon Pape is recommending right now - and he’ll tell us why.
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Globe Investor Staff