How to be indecisive about stocks and still make a buck. Plus, why BCE is a buy
The cost of being on the sidelines as an investor used to mean a near-zero return on your money.
Rising interest rates have changed that. An asset class we call cash alternatives now offers yields of around 2.5 to 3.6 percent. Inflation is 7 percent, so the real returns on these products are negative. But as stocks and bonds plummet this year, even a low single-digit yield looks good.
Cash Alternative Exchange Traded Funds is an option covered in a previous blog post which you can read here: shorturl.at/beFLZ. To recap, these ETFs, which invest their assets in major bank savings accounts, offer returns after fees of up to about 3.6 percent.
There are also high-yield savings funds packaged as mutual funds. The TD Investment Savings Account’s current interest rate of 2.9 percent is fairly typical. You can buy this fund or similar for free from practically all online brokers. Cash alternative ETFs can cost as much as $9.99 to trade, although several brokers at least offer commission-free purchases.
Assets in Cash Alternative ETFs are not regulated by Canada Deposit Insurance Corp. covered, but this protection usually applies to high-yield mutual funds.
Old-fashioned money market funds are another option for holding cash in an investment account, but they’re often less accommodating in terms of their current returns than other products. Yields on popular big bank money market funds currently appear to be in the mid 2% range.
The Steadyhand Savings Fund, also a money market fund, now has a net return of around 3.5 percent with an administrative expense ratio of 0.2 percent, thanks to a temporary fee reduction that is still in place for the time being. Availability of this fund is patchy among digital brokers and Steadyhand requires a minimum initial investment of $10,000, with a minimum of $1,000 for subsequent amounts.
Both money market funds and high-yield savings funds offer a workaround for clients of a trio of online brokers that don’t allow their clients to buy alternative ETFs with cash — BMO InvestorLine, RBC Direct Investing, and TD Direct Investing. Each of these brokers offers their own high yield savings fund as well as money market funds.
The returns on these products are lower, but you shouldn’t have to pay a fee to buy or sell them. If you want to park smaller amounts of cash, not having to pay a commission to buy and sell an alternative ETF could more than offset a lower return.
— Rob Carrick, personal finance columnist
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stocks to think about
Osisko Gold Royalties Ltd. (OR-T) In September, Osisko’s stock price rose nearly 11 percent, making it one of the best-performing stocks in the composite S&P/TSX index. Montreal-based Osisko is a precious metals royalty company that owns a portfolio of over 165 royalty, streams and precious metals acceptances focused on North America. As Jennifer Dowty tells us, the stock features a reliable dividend, diversified cash flow, and gold exposure with no direct production and development costs.
BCE Inc. (BCE-T) The stock, like much of the market, wallowed in misery for most of the past six months. But its dividend yield climbed to over 6 percent last week, making Telekom stock hard to ignore. And as David Berman tells us, a high return for BCE has often been the start of a rally.
The Rundown
Time to get back in? Canadian equities appear to offer decent but not exceptional value
In nominal terms, stock prices in Canada and the US are around 10 percent higher than they were on New Year’s Day 2020, before the plague, inflationary prices and Vladimir Putin rattled the world. Adjusted for inflation, shares are a hair cheaper in real terms than they were before this madness started. But that doesn’t mean investors should start supercharging stocks, as Ian McGugan warns us, because they still aren’t undeniably cheap.
Also Read: Investors See No Peace in US Stocks Until Bond Volatility Eases
Deep value fund manager with an 8% return this year is selling tourmalines and buying US large caps
Money Manager Tim McElvaine and its flagship McElvaine Value Fund have produced an annualized return of 17.8 percent over the past three years, about double the S&P/TSX Composite Index. He tells Brenda Bouw what he’s been buying and selling lately (including exiting his position in Tourmaline Oil, one of this year’s hottest stocks).
It looks like it did in the 1970s again. And that’s good for dividend stocks
Rising inflation and interest rates have made income investors nervous this year. In an environment where bond yields have become attractive and struggling tech stocks look cheap, is there still a compelling reason to stick with dividend stocks? A new study says yes, reports David Berman.
Portfolio advice for a bleak autumn for investors
Whether or not the US is in a technical or other recession, its economy and that of the world at large is in bad shape. This points to a bleak autumn ahead for investors. But it won’t last forever. Stocks tend to react months before an economic shift hits. They start falling well before a recession hits. And they’ll touch the ground long before it ends. While we wait for that day, Gordon Pape has some suggestions on what to focus on in your portfolio.
Also See: Ready to Weather This Market Storm? Ask yourself these six questions
The five-year returns of John Heinzl’s dividend portfolio are in and confirm the investment strategy of dividend growth
Despite a myriad of challenges in recent years — a global pandemic, massive supply chain disruptions, rising interest rates, rising inflation, war — John Heinzl’s dividend-growth model portfolio has delivered solid gains. Here’s his look back at the five-year anniversary portfolio. (See the full portfolio and recent performance here.)
The merger made Ethereum better for the environment — but not so much for investors
Founded in Canada, the largest in cryptocurrency after Bitcoin, the Ethereum network recently underwent an upgrade called “The Merge” that made it much more environmentally friendly. But what’s good for the environment doesn’t seem to be good for investors, Ethan Lou tells us.
Other (for subscribers)
The most oversold and overbought stocks on the TSX
Monday’s analysts are rating up and down
Monday Insider Report: Chairman Invests Over $3 Million in This Oversold REIT With a Projected Return of 68%
Globe consultant
How Target Date Fund Providers Are Changing Asset Allocation Amid Market Volatility
Investors are piling into inflation-linked mutual funds to protect their portfolios
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What’s going on in the coming days
Don’t tell David Rosenberg there is no recession. He’s convinced we’re in one and has some advice on how investors can take advantage of it in the near future.
For Globe Investor’s earnings and business news calendar, click here.
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Compiled by Globe Investor staff