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What To Do When The Markets Are In Turmoil?

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BY: FAZAAD BACCHUS 

There is an investment cycle that plays out every single time. It starts like this. First, there is optimism, you see your friends are all investing and you hear good things in the market, so you decide to venture out, maybe with a TFSA or RRSP. Then as you see your money grow, excitement steps in and you are encouraged to put more in. You begin to check your statements more regularly and the thrill of investing has gotten in your veins. The next stage is euphoria, you can’t believe you have put this off for so long and you imagine the amount of money you could have made had you started earlier. This is your point of maximum financial risk.

Soon the market tops out and the downward cycle begins. Suddenly there is a fall in stocks and you hear in the news that the markets have fallen 300-500 points and you wonder what this all means in relation to your investments. At this point anxiety steps in, you start thinking about the market more than you want to, but it’s on your mind, you cannot afford to lose your investments. The market drops a little more and you are in denial about what is happening, saying to yourself that it couldn’t be that bad it’s going to stabilize. It doesn’t, and fear steps in, you actually fear that you may lose all your money, so you become desperate and you begin to panic because you are in a state of despair.

Then you make the biggest mistake an investor can make, you sell off your investments at your desperate moment and suffer a great loss. You vow never to get back into the market and that’s the end of your investment spiel.

So, what to do when the markets are in turmoil?

The first thing to remember is that “time in the market overrides timing the market”. There will always be volatility and to predict the market is a fool’s wisdom, no one can. It’s better to stay away from your investments and concentrate on other important things as the news of a falling market can really get to you causing you the emotional upheavals previously mentioned. The secret to investing is “a buy and hold strategy”, meaning that you buy a few good and diverse funds and hold them. They will not perform every year as you would like but over time they will. Think of your portfolio as a “yo-yo” it goes up and it comes down. Now think of you spinning a “yo-yo” while you are walking up a flight of stairs. Yes, it goes up and down but gets higher with every step you make. If you look at the stock exchange you will see that this up and down happens every day by the minute, and while some days are better than some, there has been a significant overall gain over time.

The most recent market crash you may remember was 2008, markets fell 43% and most people who cashed out lost money because the following year markets were up by 48% and five years later it was up by 102%. During periods of market downturn, talk with your financial advisor and let him/her be your sounding board as opposed to the news. Stay invested.

Fazaad writes for the finance column at the Toronto Caribbean Newspaper. As a qualified Financial Advisor, he has completed his Masters in Business Administration, earned the designation of a Financial Services Specialist and Life Underwriter Training Council Fellow. Having worked in the Finance Industry for the last 27 years he is passionate about managing clients investment. He writes to bring a level of awareness to our community and to bring financial help to those who need it.

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Personal Finance

What Is the Best Way to Invest in Your Child’s Education?

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Image Via Pixabay by QuinceCreative

All parents want to give their children a promising future. A good education is key to achieving that goal. However, the cost of education keeps rising. Finding ways to invest in your child’s education can be difficult, so you must start thinking of how to save for your child’s education early. Here are ways to invest in your child’s education:

1. RESPs

Registered Education Savings Plans (RESPs) are a popular way for parents to save for their child’s post-secondary education in Canada. With an RESP, you can contribute per child. The contributions are tax-free while in plan, and the government also contributes 20% on the first $2,500 contributed annually, up to $500 per year and a lifetime of $7,200  into an RESP under the Canada Education Savings Grant (CESG).

RESPs are better than most saving options because they offer grants and the income earned adds value over time. However, there are limitations. For instance, the money in an RESP can only be used for educational purposes. There are penalties for withdrawing money from RESP for non-educational purposes. CST Savings can guide you from the first contribution to graduation. You can check out CST savings reviews to find out more about the plan options available. The money in the RESP can be used to pay for tuition, textbooks, and other educational expenses associated with a post-secondary education.

2. Mutual Funds

Mutual funds are another popular way to save for your child’s education. A mutual fund is a pool of money managed by a professional investment manager. The manager can invest the money in stocks, bonds, and other securities.

You can invest in mutual funds for your child’s education through a TFSA or a non-registered plan. A TFSA allows you to invest up to $6,000 annually. The contributions are tax-free. Income from the investment is also tax-free. A non-registered plan is tax-free. You can invest any amount you want in a non-registered option.

Mutual funds are great for saving for your child’s education. They offer the potential for high returns. However, they also pose a few risks. The investment value fluctuates depending on the assets’ performance.

3. Savings Plans

Savings plans can help you prepare for your child’s education. You can open one and deposit money regularly. The percentage earned on the savings is added to the principal. It increases the overall value of the investment. Savings are low-risk because the principal is guaranteed. However, the amount earned is generally low. This means the returns on the investment may not keep up with the rising cost of education.

4. Real Estate

Real estate investments can help with your child’s education. You can buy a rental property and channel the income to education. You can also buy a property and sell it when the value has increased. Real estate is a lucrative way to save for your child’s education. However, it can be risky. The value of the property fluctuates. There are maintenance costs associated with owning a property.

When investing in your child’s education, start early and be consistent. The earlier you start saving, the more time your money has to grow. Consistency ensures that you reach your savings goals.

Consider your long-term financial goals when choosing an investment option. For instance, if you plan to retire in the near future, don’t invest in a rental property. It requires ongoing management and maintenance, which can be tiring. Seek professional opinion when unsure of your best option.

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Personal Finance

Level up your money, level up your life – three simple financial strategies for wealth creation

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BY KEISHA BAILEY

Many people are very diligent at their work, especially salaried workers, professionals and small business owners. You are busy as a bee in your daily activities and creating a huge WORK AND CAREER success for yourself, but in your personal life, things are the complete opposite. You don’t approach your money to the same extent that you manage your corporate role or your small business. The result is that you feel demotivated as if wealth is an obscure dream that is unattainable. How ever will you get out of the rat race of living paycheck to paycheck?

Being the boss of your finances means taking control of your money and making decisions that are best for you. Repeat after me, “I control money, money doesn’t control me.” It’s time to take charge and make your money work for you.

I know for a lot of people it can be tough to make this transition, so I wanted to share a few simple steps so you can master your finances and finally be able to achieve the financial freedom that you deserve.

Know your money in order to grow your money

In my experienced opinion, the most critical step in taking control of your finances is getting organized. This means creating a budget and tracking your spending, so you know where your money is going. There are many helpful budgeting tools available online, or you can use a simple spreadsheet to track your income and expenses.

When you know where your money is going, it becomes much easier to make informed decisions about how to best spend and save it. If you find that you are spending more than you can afford, cut back on unnecessary expenses and put the extra money towards debt repayment or savings. Or if it’s a major struggle to make ends meet, then you may want to look into a side hustle to generate additional income streams.

Invest like a boss

If you’re new to personal finance then investing can be quite scary. The thought of losing all your money in the stock market sounds way worse than earning a few percentage points, but really, the chances of you losing all your money are slim (if you know what you are doing, but more on that later on), and there are strategies you can use to manage the risks.

Seek professional help

If you’re having trouble getting started or staying on track, seek out professional help from a financial planner or an investing coach. A financial planner can give you personalized advice and help you create a plan that fits your unique situation. Working with a professional can be a great way to get the guidance and support you need to make intelligent financial decisions.

Not only do you need to educate yourself about the broader concepts of personal finance, but you also need to educate yourself about your situation. Having a grasp of the concepts is great, but knowing where you can make improvements is even better.

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Personal Finance

You are your greatest investment; Three simple steps to paying yourself first

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Photo Credit: Tima Miroshnichenko

BY KEISHA BAILEY

Life happens.

I get it.

It’s hard enough to make the bill payments each month, much less to think about the future and trying to make things financially better. Frustration easily sets in because you want to feel more secure about your finances, but at the same time you simply don’t have enough money to invest. I believe that money is possible for everyone and with a few simple steps you can start freeing up cash to be able to invest in your future wealthy self.

If you feel like you never have enough money to invest, realize that the change starts within you. The change begins when you change how you look at money. Once you understand that money is a tool, much like a hammer is used to drive in nails, money is used to achieve the financial goals that you have for yourself.

So how exactly do you unlock the true potential of your money? When you decide to take control of your finances and direct money to its rightful purpose then you unlock the true potential of money.

Have you ever heard of the term pay yourself first? It is important that you find money from your salary to invest in yourself, just as you would pay any other expense, such as your utilities, groceries etc. Once you have cash, you will find a reason to spend, as expenses will always surface, especially now with the spike in prices resulting from inflation.

Here’s my golden rule:

50% of your income is the maximum for NEEDS (bills & utilities)

30% of your income is the maximum for WANTS (splurges and fantasy items)

20% of your income is the minimum to Savings + Investments

Here are some additional tips to support paying yourself first:

  1. Set up an automatic salary deduction to transfer money to an investment account monthly.
  2. Create a monthly budget to ensure you always have some money to invest. If you see where your expenses exceed your income, then that is a red flag and needs urgent attention. To correct this problem, see where expenses can be cut, so that you can find money in your budget for investing. Remember, we do not work to live just for today. There will come a day when you no longer receive a monthly salary, and that is when the investments that you made become even more important, by allowing you to live a quality life.
  3. Just start! These are two very powerful words, even if $100 is all you have to start; it is still a step in the right direction. As the saying goes, something is always better than nothing at all. Additionally, you will be quite surprised at what $100 can become when it is being invested consistently into the right type of investment over time.

I believe in your future wealthy self. I see you accomplishing all your financial goals and being secure in your personal finances.

 

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