The Russian invasion of Ukraine has rocked financial markets in a way we haven’t seen in a while. Checked your portfolio yet? You may see a lot of what you own losing ground in a way that makes you question yourself.
Here’s a five-point checklist that will help you gauge how well prepared you are for stock market turmoil both now and in the future. Stocks have had a great two-year run since the pandemic crash and a pullback at some point is inevitable.
Got bonds?
Most investors have some exposure to bonds to provide stability at times when stocks fall hard. Bonds have been under pressure from rising interest rates, and this will continue through the year. But when stocks plunge, bonds hold their ground. Also, the potential to lose big money in stocks far exceeds the risk in bonds.
Got Canadian stocks?
Most investors have a lot of exposure to the Canadian stock market, which has its advantages right now. One is a big weighting for energy stocks, which benefit from the rise in oil prices that was triggered by Russia’s actions. Gold prices took off early Thursday – there’s another sector with strong representation in the Canadian market. Financials are the largest sector in our index and they were hit hard in the early going Thursday.
Got dividends?
Markets may go up and down, but the dividend stocks loved by so many Canadian investors keep shovelling out cash to shareholders every quarter. The risk of dividend payments being cut comes from recession or an economic shock. We are not at the point yet as a result of what’s happening in Ukraine.
Got cash?
Households where jobs and income held steady through the pandemic have been able to pile up cash in savings accounts. Adding some of this money to hard-hit stocks and funds is a way of following the key investing rule of buying low. Don’t make a big bet on anything – instead, feed money in gradually when stocks are falling.
Got time?
Your timeline when investing in stocks should be a minimum of five years, and preferable 10 years. Over a decade, you can be confident that even sharp declines for stocks will be more than offset by the good times to come.
ICYMI (In case you missed it) … The Carrick on Money Back to Basics Series
Part One: Now’s the time to revisit the most basic rule of personal finance
Part Two: Would a 20 per cent interest rate get your attention?
Part Three: A month-by-month guide to excuses for not saving money
Part Four: How to ace your mortgage decisions
Part Five: A low-effort, low-risk way to profit from rising rates
Part Six: Budgeting for the never-ending cost of kids
Part Seven: Have you answered the ‘what happens to my family if I die suddenly’ question?
Part Eight: The investing strategy that has your back when stocks go from glory to gory
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Rob’s personal finance reading list
Five ways retirement can crush your spirit
People whose identity is tied up in their work can feel like they’re losing their identity, status and more when they retire. Tips for a smooth transition include up to 18 months of decompression after leaving your job.
Retirement saving for millennials
Encouragement for young adults to start thinking about putting money away for a retirement that could be as much as four decades in the future. Of course, there’s also the small problem of affording a house down payment.
The fake influencers
How to tell if the personal finance influencers a lot of people follow on social media are legit or really just hustlers trying to sell you something.
The cost of divorce
Canada’s divorce rate was about 40 per cent – and then came the stress of the pandemic. Here’s a look at how much it costs to get divorced, including legal fees and more.
Q&A
Q: If I were to purchase a $100,000 guaranteed investment certificate from EQ Bank plus a $100,000 GIC from B2B Bank and a $100,000 GIC from Laurentian Bank, all to be held in my TD Direct Investing taxable account, would I be covered for the total $300,000 amount by Canada Deposit Insurance Corp.? All three banks are CDIC members.
A: I think this question was prompted by one a couple of weeks ago on CDIC coverage. Again, I asked CDIC to provide the answer. Here’s the answer: “If an issuing bank fails, CDIC protects your deposits (including GICs). Since all three GIC issuers are separate member institutions, total CDIC protection related to these GICs is $300k. If all three issuers were to fail simultaneously CDIC reimburses $300,000.”
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
A ranking of Canadian banks, big and small, on their fees and interest rates.
The Money-Free Zone
Suggested reading for Black History Month: They Call Me George: The Untold Story of Black Train Porters and the Birth of Modern Canada, by Cecil Foster. It’s about Black porters working on Canada’s passenger trains and it’s one of the best Canadian history books I’ve read. The author was a Globe and Mail business reporter way back in the day. We crossed paths on a few stories when I was a rookie business reporter for The Canadian Press. By the way, CBC has a new TV series about Black train porters.
Watch this
Erica Alini, the Globe’s new personal finance reporter, talks about her new book with long-time personal finance blogger Kerry Taylor. The book is called Money Like You Mean It: Personal Finance Tactics for the Real World.
In case you missed these Globe personal finance stories:
- It’s a great time to quit a job. So why aren’t more Canadians doing it?
- The Bank of Canada is ready to raise interest rates. How high could they go?
- Travelling in 2022: check the fine print, get insurance and book your car rental early
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick