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What’s your investor profile?

What’s my investor profile?

Not your standard Hinge question, but figuring this out will help guide the who, what, where, when and how of your investment strategy. To get a better idea of your investor profile, you should consider the following: 

  • Age and personal situation: In theory, it’s easier to take risks when you’re young and (still) have few responsibilities. Do you have a steady income? Do you have children? What are your upcoming financial goals (buying a home, travelling, buying a car, etc.)? These are all questions that you should think about before investing.
  • Investment horizon: The longer your investment term, the more risks you can afford to take, since they will be smoothed out over time. Retirement will have a much longer investment horizon than going to Mexico next winter.
  • Risk appetite: Are you comfortable with taking risks? How do you feel about the idea of ​​financial loss? Or, would you rather have more security for your investments, even if your returns are potentially lower?
  • Financial knowledge: Do you understand the basics of finance and investing or are you a complete novice? If you’re a complete novice, don’t worry! We have some tools to help you get comfortable with the more common concepts and terms.

Take a few minutes to really answer the above questions. Then we can determine your investor profile: conservative, moderate or aggressive.

I’m rather… careful

You fit the Conservative profile if you value the security of your savings, are risk averse, or have short-term plans.

In this case, you’re better off putting your money in investments that are lower risk, such as savings accounts, bonds or GICs. The downside of investing in these assets is the low rate of return, which currently is even lower than inflation.

The Conservative profile is composed of 100% money market investments, which are short term debt obligations. The goal: to take a very little risk, while focusing on safety.

Note: The Conservative portfolio is recommended for investors who wish to access their savings in the short-term (1 year or less).

I’m rather… moderate

You have a balanced profile if you prefer a happy medium between security and performance. You’re not afraid of risk, but you don’t want to put all your savings on the line.

In this case, a diversified portfolio of  investments will  help to smooth out risk. For example, you can look at investing in a combination of stocks and bonds. Low-cost, well-diversified exchange-traded funds (ETFs), which are a collection of stocks or bonds, can be a good way to balance out your risk. . 

At Moka, our Moderate portfolio offers medium risk-taking and an average return, for a medium-term horizon (buying a car, financing a move, etc.).

Note: A medium-term horizon is generally between 2 and 5 years. 

I’m rather… adventurous

You fit the aggressive profile if you don’t fear the risks of loss and want to maximize your returns over the long-term.

For this type of profile, we recommend investing an important portion of your funds in equities To reduce the volatility of this investment, you can build your portfolio as follows: 70% to 80% stocks, and 20% to 30% bonds. Over the long-term, stocks are one of the most profitable asset classes. By focusing on these, you can maximize your expectation of earnings. But remember, there’s always a risk of loss when you’re investing, no matter what precautions you take.

At Moka, our Aggressive portfolio is made up of 80% equities and 20% bonds. It allows you to achieve higher profitability, while accepting the risk of potential losses.

Note: The Aggressive profile is for those with a long-term investment horizon  that is at least 5 years.

Now that you’ve gone through this exercise, you can better define your investment strategy according to your profile. Keep in mind that both your profile and strategy can change over time as your needs, projects, and financial and personal situation change.

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Meet Jean-Francois Goyette, CFA, Moka’s Portfolio Manager

If someone wants to start investing, what’s the first thing they should know?

It’s never too late to start investing; the best time to start is today. And you don’t have to be rich either! Nowadays, there are plenty of options available (like Moka!) that will help you invest your savings, or help you save to invest for the long term, without prior financial knowledge.

That said, you should still get familiar with things like general terminology, account types, and how to read a statement, in order to make better decisions and understand what’s happening with your money. 

What do you need to get started?

You need an internet connection, a few dollars, a few minutes … and patience!

We always hear about risk. How can a first-time investor manage risk?  

First, you have to ask yourself how risk tolerant (or risk averse) you are. How would you feel if your portfolio lost value, how would you react? Can you afford losing some (or all) of the money you invested? 

Money that will be needed in a short period of time should be invested in conservative investments.

Also, don’t put all your eggs in the same basket, diversify your portfolio, and don’t chase “get rich quick” schemes. Remember, if it’s in the news, the opportunity is probably gone already! 

Professional money managers are broadly unsuccessful trying to time the market. As the saying goes: Time in the market is more important than timing the market. And don’t trust your brother-in-law who’s bragging about making a fortune investing in meme stocks; he’s most probably not mentioning those other times when he lost money! 

How can someone decide how much to invest?

A general best practice with budgeting is to save at least 10-20% of your monthly income, but you should really save as much as you can, keep some amount for an emergency fund, and invest the rest of it. When retirement comes, you’ll thank yourself and appreciate the wonders of compounding returns! 

If you’re not sure if or when you’ll need the money, there are different options that let you withdraw it whenever you need to without penalties, so don’t let it sleep in your chequing account!

What impact does inflation have on investments?

For starters, inflation is the rate at which the price level for goods and services is rising, generally as a result of the value of a currency falling, but also as a result of supply/demand forces. It’s most commonly measured by the Consumer Price Index (CPI). In general, too much inflation will be a drag on the economy.

Inflation can be positive for those holding tangible assets, like real estate or commodities, since it raises the value of those assets. However, higher inflation will harm savers because the purchasing power of the money they have saved will erode over time. As such, securities with fixed, longer-term cash flows like bonds will tend to underperform in a rising inflation environment. On the other hand, it can benefit borrowers, as the value of their debts will shrink over time, on an inflation-adjusted basis.

Stocks are considered to be a good hedge against inflation, as its effects are priced into stock values, although this won’t be true for all sectors of the market. Investors wishing to protect their investments from inflation should also consider other asset classes like gold, commodities, and real estate investment trusts (REITs), that can benefit from rising inflation.

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5 investment myths debunked

We’re here to debunk five of the most common investment myths and—hopefully—make you feel a little more comfortable about investing.

Myth #1: You need to be a stock market expert in order to invest

The stock exchange, which is where stocks, bonds and other financial securities are traded, sold and bought, isn’t well understood by the majority of people. Not to mention the surrounding financial jargon doesn’t exactly make things more clear. With terms like shares, stock market indices and dividends, it’s easy to see why people feel lost. But don’t let the granular details about financial markets intimidate you—investing is actually easy to understand and accessible to everyone.

If you want to brush up on your finance lingo, we recommend this article to help get your bearings. You’ll notice eventually that the same terms are actually used over and over, and that it doesn’t take long to grasp the key concepts. In reality, buying stocks or exchange-traded funds (ETF’s) is easy and accessible to everyone (including those with limited budgets!). 

Myth #2 : Investing is a man’s world

Unfortunately, we’ve heard this before. This is an antiquated stereotype, and the cliché wolf-of-wall-street-representations of investors don’t help. All too often, the depiction of a banker or investor is a man, even though women are just as interested in the idea of investing as their male counterparts.

There is no such thing as a predisposition to invest. An interest in investing is a question of education and culture, not of gender. For this reason, it’s critical to be well informed. What we do know is that women’s investments are on average 1% higher than men’s. The reason is simple: because of their education, women  are often more sensitive to risk, and less quick to make hasty decisions. This type of mindset is actually rewarded when it comes to investing, since investing involves risks of loss of capital.

Myth #3: Investing is for older or retired people

Here’s another investment myth with absolutely no truth to it! Unfortunately, 65% of young people don’t think investing is for them, and 29% of people in this cohort don’t think they have enough money to invest. However, there’s no minimum amount needed to start investing—just one dollar is enough! Whether you are on a limited budget or not, there are several options available to you to help you accumulate money tax-free, such as a tax-free savings account (TFSA).  Many employers are offering a variety of tools that should not be left on the table when it comes to boosting your investment. With the Moka app, you can invest quickly and efficiently with no minimum amount required—all you need is your spare change!

The great thing about investing is that it’s a virtuous circle. Unlike saving, it enables you to obtain a return and to grow your capital. It has to be mentioned that a return isn’t necessarily guaranteed, as there is always some risk involved, but it’s still the best way to generate profits. The earlier you start, the more likely you’ll be able to see your money grow, regardless of the initial bet.

Myth #4 : The funds you invest are inaccessible

When it comes to accessing your money, it depends on the medium you choose. Usually, the funds invested can be withdrawn at any time. However, we recommend that you invest your money with a medium and long-term perspective in order to give it time to grow.

Moreover, studies prove that it’s better to just let your investment grow over time, as opposed to withdrawing your money when there’s a dip in the market. In other words, it’s better to let your money work on its own!

Myth #5 : Investing isn’t worth it if you’re young

Many people will tell you that they’re investing for their retirement, or for their future in general. Those “golden years” may seem far away if you’re only 18 or even 30 years old, but investing at a young age is a great idea.

The earlier you invest, the longer the investment horizon (the total length of time that you have said investment). These long-term investments are generally advantageous because they benefit from increasing profitability thanks to compound interest (the interest that gets periodically added on to interest that has already been accrued). By investing small amounts regularly, you’ll slowly grow your capital. Fifteen dollars here and $30 dollars there might not seem like a lot of money now, but the interest it will generate over many years will surprise you!

So, even if you don’t have any specific projects in mind, don’t hesitate to start investing: in a few years, you’ll probably be glad you started!

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How to invest with a limited budget

Is investing with a limited budget mission impossible?

If you don’t earn the kind of income you need to build savings, or if you’ve lost your job due to the Covid crisis, you might think investing isn’t for you.

Investing, contrary to popular belief, isn’t just for the wealthy. In fact, this is a common misconception we’re keen to address. No matter what your financial goals are, or how limited your budget is, investing your money is still one of the best ways to earn a return in the long run. When it comes to investing, there’s no need to wait until you have a certain amount of money set aside—there’s no better time to start than the present!

Here are a few key tips for investing when you have limited means.

1. Decide on a budget for investments

Many people make the mistake of deciding to invest whatever money they have left at the end of the month (if there is any). With this approach, it’s almost impossible to predict how much money you’ll be able to devote to your investments, and you may not end up investing at all. A better strategy is to take stock of your finances and determine a suitable budget to start investing. This budget can be weekly, monthly, semi-annual, etc. The important thing is that it’s in proportion to your income.

For example, if you have a stable salary, you can set up recurring, automated transfers. This way, a predetermined amount, say, $75 dollars from each paycheck gets invested. Think of it as an essential expense like paying a bill.

If you aren’t employed, but you still receive income (unemployment benefits, etc.), you can use the same approach, but adapt the amount you set aside in proportion to your income. Ultimately, the goal is to be able to invest without cutting back on your essential expenses. Keep in mind that you can start investing with as little as $20 a month.

Speaking of monthly budgets, this brings us to our next tip.

2. Track down any unnecessary expenses

Minor expenses really do add up. From online monthly subscriptions to food delivery, coffee, and the latest trendy smartphone, many expenses are unnecessary  and can cut into your budget for investments. Conducting an audit to identify what you can reduce might be tedious, but it’s critical. Get honest about what you truly don’t need—be it new clothes or eating out—and you’ll be able to figure out how much you can realistically put aside each month. You might only have a few extra dollars to invest, but in the long run, those few dollars make a big difference.

3. Bet on Exchange-Trade Funds (ETFs) 

Buying stocks can be expensive. This is why exchange-traded funds (ETFs) are an easy and affordable way to get started. An ETF is a collection of stocks and/or bonds. You can buy an ETF just as you would stock. However, when you buy stock, you’re investing in one company, such as Tim Hortons or Amazon. When you invest in an ETF, you’re investing in multiple stocks or bonds that follow a specific investment strategy. For example, some ETFs may track a stock index (like the FTSE Canada Index ETF, which invests in the largest Canadian stocks). Or, an ETF may track an index for a particular industry, such as technology or healthcare. By investing in ETFs, you can effortlessly benefit from the performance of all the companies involved. 

4. Be confident in your ability to invest

A final key tip for investing on a small budget is to have confidence in yourself. It’s tempting to give up before trying, especially when resources are limited, and your idea of a successful investor is a professional in a suit who studies the markets every day. Remind yourself that investing is for everyone, and that you can invest as little as a dollar. What matters above all is your long-term investment vision. The longer the term, the more likely your money will grow. 

At the core, investing is all about one thing: letting your money work for you!

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Saving vs. investing: What’s the difference?

Sometimes “saving” and “investing” are used interchangeably, but they’re two completely different concepts. And choosing one or the other can impact your long-term financial situation significantly.

What is saving?

Saving means simply putting aside part of your income. Instead of spending everything  you earn, you set aside a certain amount to use later. There are different ways to save, but the most common is to put your money in a savings account in a bank. There is no risk to save—your money will be there whenever you want to withdraw it!. 

However, it’s important to know that in 2021, the annual inflation rate is around 1.1% on average, but interest rates for savings accounts usually range from 0.75 to 2%. Essentially, this means that the interest you could earn on your savings may not  compensate for ever increasing prices (or inflation!).

If your savings are intended to finance a short-term goal, such as taking a trip or buying a new car, annual inflation doesn’t pose much of a problem. It’s when it comes to long-term saving plans—financing the purchase of a condo, for example—that you might end up losing purchasing power.

What is investing?

To put it simply, investing means acquiring assets (stocks, bonds, property, real estate, etc) that have the potential to increase in value over time. In this case, the point is to get a return on your investment. The money deposited in a savings account earns very little, while a smartinvestment allows you to grow your money much faster. Of course, the amount an investment earns during a specific time period (or yield rate) will vary depending on the type of investment, and there is also a risk that your investment may not see any returns. 

What’s the fundamental difference between the two?

From a strictly economic point of view, saving is simply the money you don’t spend. The money you save is also  liquid, meaning it’s  available immediately. 

Investing, on the other hand, is about using your money to generate a profit. Usually this is done with a long-term plan in mind. 

Saving can be seen as a safety net that can be used to deal with the unexpected expenses that arise in life. If your car might break down or you owe money on your tax return, your savings can help you stay out of debt. A good rule of thumb for emergency savings? Aim to have the equivalent of 3 to 6 months of expenses set aside, so you can cover rent, groceries, utilities and all the other basics even if you suddenly lose your income.

If saving is a safety cushion, investing is the entire couch. Money that’s invested in the medium- and long-term is what generates a profit and can make it possible to improve your quality of life and set you up for retirement. 

Making the choice between saving and investing is a question of your needs and personal preference. Your goals, risk tolerance, age and financial situation, such as whether or not you’re in debt, can help inform your choice. Getting advice from a financial advisor will help you make cents of your situation. What’s certain is that it’s never too early (or too late!) to start investing.

Give me an example!

Take Peter and Chloe: they each have the same profession and earn a salary of $40,000 dollars a year. Every year, Peter and Chloe both save 20% of their salary, or $8,000.. While Peter puts his money in a savings account, Chloe invests her savings.. Peter’s savings account earns 1% per year, while Chloe’s portfolio earns 5%. What happens after 40 years of working? Chloe will (potentially) have accumulated $694,718 in compound interest, while Peter will have only accumulated $75,001.90, even though he is earning the same salary and putting exactly the same amount aside!

It really makes you think, doesn’t it?

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Investing early: Why it’s the smartest thing you can do

Read on as we break down how investing even a small amount early on can lead to far greater rewards than waiting to invest. But the biggest takeaway if you stop reading now? Regardless of your age, there’s literally no better time to start than right now. Not tomorrow. Not next week or month or year. Now (or yesterday if you figure out time travel).

To understand why investing early matters, it helps to understand interest. 

What is interest? 

You invest money by sending it off into cyberspace. But then what? It’s not as mysterious as it seems. That money goes to companies that use your investment to grow their business.

Interest is the money you’re paid for letting those businesses use your money. There are several ways interest is calculated. Simple interest calculates interest only based on the original amount of money that you invested or borrowed, also known as the principal. To calculate simple interest, multiply the interest rate by the principal by the given time period, usually in days or years. This type of interest usually applies to automobile loans or short-term loans.

Let’s say you invest $1,000 in a one-year GIC with a simple interest of 3% per year. The interest you earn after one year would be $30, growing your total investment to $1,030. Let’s say you decide to keep your money invested in the GIC for a total of 5 years, then you would make  $150 in interest over that period.

Here’s where interest gets more interesting…

Introducing compound interest

Compound interest is like an avalanche only far more positive: your money may start small, but as it rolls down the hill (in this case, the hill is time), it becomes bigger and bigger. 

When it comes to your money, you want the biggest hill. And the earlier you start, the bigger your hill.

Unlike simple interest, compound interest is calculated based on your principal and the interest earned from previous periods. In other words, it includes interest on interest. 

Let’s use the same example above except this time you invest $1,000 in a 5-year GIC with a compound interest rate of 3% per year. After the first year, your investment will gain $30 in interest. However, by the fifth year your investment will have gained $159 in interest, making you $9 more than with a simple interest investment.

That $9 may not seem like a huge difference, but the more money you invest (your principal) and the more time you let it sit (your hill), the more opportunity you have to earn interest and for that interest to grow. It can mean the difference of thousands of dollars, or more.

It’s worth remembering that compound interest can also work against you in certain situations, such as when you carry credit card debt, but it’s all upside when it comes to investments. Compound interest and your investments are a match made in heaven.  

Do the math (or let a calculator do it for you)

Unless you liked math growing up, you may be tempted to skip over this. But trust us: you’re going to wanna see how compound interest shakes out.

One of the best ways to visualize the power of compound interest is through the classic checkerboard math problem. Take a checkerboard and place one penny on the first square. Then two on the second. Four on the third, so on and so forth, doubling the amount of pennies on the square each day. How much money would you have by the last square?

It’s more than you may think. By square 64, you’d have: $184,464,625,987,328,000.00. We’re not even sure what the heck that number is.

Now, we’re not suggesting you double your pennies every day. But, you can use a compound interest calculator like the calculator from the Ontario Securities Commission to see how time and consistently saving can exponentially increase your money.

Say you start with a $100 investment and decide to add $10 to your account each month beginning at age 25. And then you wait to use that money until you’re 65 years old. Using a 5% interest rate compounded annually, you’ll have earned $10,629.24. 

If you make these same investments, but start at 35 (so, you have 10 fewer years for your money to grow), you’ll have earned only $4,885.95 in interest. 

Let’s be clear: it is never too late to start investing. Putting aside money for your future is smart, no matter when you start. However, do a little math and you’ll quickly realize that it pays to start as soon as you possibly can.

Increasing the amount you’re contributing to your investments can also have a major impact on your money’s growth. 

If you feel strapped for cash, you may want to dig in a bit deeper. What would it mean to pay $10 less per month on your debt and invest that $10 instead? You’ll have to do a bit more math to see if it makes financial sense for you. It may, especially if you have a loan that has a lower interest rate than the expected average annual returns of wherever you’re investing your money. 

Just think: you owe $1,000 on a loan that has 4% interest. That may mean you owe $40. But if you can invest $1,000 in an investment that has an average of 10% returns? You can make $100. Which covers the cost of interest, plus $60.

And when your avalanche gets moving, it gets moving. You’re going to need an avalanche beacon to locate your principal. “I invested this and it’s now this?” Yup, a little now can go a long way by the time you’re set to tap into that sweet, sweet cash avalanche.

Moka can help you start investing with your spare change. Download the app to get started and Moka will round up your purchases and invest the difference. 

Get ready to watch those pennies add up.

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COVID-19: Is now the time to invest?

We can all agree COVID-19 turned our worlds upside down. From being confined to our homes to many people losing their jobs, it has been a period of uncertainty for many of us. But was it a time to invest?

When we aren’t sure about what’s ahead, it’s tempting to be cautious with our money and avoid risk in these uncertain times. But, the temptation to err on the side of caution and avoid risk can actually hinder rather than help your financial future. Flashback to the beginning of the pandemic when Canadians started stockpiling (remember the great toilet paper rush?). By the end of the year, the average household savings was about 15% – that’s higher than the previous seven years combined. And the result of those combined savings? As much as $100 billion, or about 6% of the country’s GDP! 

So now the question is what should Canadians do with all that savings? It’s tempting to be careful, but as it turns out, if you have money, a crisis is actually a good time to invest.

A crisis is (almost) always followed by a rebound

In a crisis, our natural reaction is panic. Not to go too Freud, but we close ourselves off, avoid risk and seek security. It’s normal. But fear is rarely the best advisor. 

With stock prices tied to major world events and the overall global economy, it’s not surprising that COVID-19 has had a huge impact on markets – for better or for worse, depending on the industry. But when it comes to investing, it’s the long-term that counts. So there’s no point panicking when prices dip or the media (yet again) predicts impending doom. When financial markets go down, it’s generally likely they’ll go back up again within months – or even weeks – especially since there’s often a post-crisis rebound to come. We can already see the markets bouncing back over the past year after the pandemic started. All it takes is a little patience.

That’s why it’s important to keep in mind that prices are just a snapshot of a specific moment in time. Like viral videos that fade into the digital abyss, stock prices tell us nothing about what will happen in the future. 

To put it in a slightly more, well, historical perspective, past crises (like the 1929 stock market crash and the 2008 economic crisis) have almost always been followed by rebounds. Markets are cyclical; after falling, they rise. And the rise can be big. After the 2008 crisis, the American stock market bounced back by more than 320%!

That said, staying calm in a crisis is easier said than done, we know, so if your emotions do tend to overwhelm you, check out this article on behavioural finance and why investors are their own worst enemies.

Now’s the time to think about the future

If the pandemic has proven anything, it’s that we don’t know what’s going to happen (even though, on average, we can expect periods of positive growth to be longer and bigger than periods of negative growth). So safeguarding your future by putting money aside is important. But rather than just saving, it makes more sense (and cents) to invest.

Why? Because unlike savings, investing comes with opportunities for returns. Imagine that you put $100 in a savings account with a 1% interest rate. After a year, you’d have $101, but as prices rise with inflation, suddenly that $101 might actually buy less than your original $100 would have bought. Investing, on the other hand, gives you a potential return (aka “a gain”) that can cover the increase in prices. Yes, there’s always a chance you’ll lose money with investing, but in the long term, it very often means more profit, while savings can reduce your buying power. 

Certain sectors are seeing an upswing

We all know that some industries have been hit harder than others, like the hospitality and cultural sectors. So while it might not be the best time to open a restaurant or launch a theatre company (though some people would disagree), some industries – like digital technology, health and sustainable development – haven’t just been spared, they’re on the rise. Meanwhile, Socially Responsible Investments (SRIs) have proven resistant and performed even better than traditional funds!

What’s the lesson? The economy isn’t all or nothing. When some sectors suffer, others will thrive, meaning a crisis can still be a great time to invest. The most important part of any investment is the purchase price – as prices go down, it’s an opportunity to buy low, with a long-term plan of taking advantage of the market rebounding, all while minimizing risk. 

The investments you make during a crisis will work in your favour … as soon as the market recovers. 

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Ready to start investing? Here’s why ETFs are perfect for you.

Whether you want to retire before 50, take that big trip to Bora Bora (whenever we can do that again), or achieve any other financial goal, you know investing is the not-so-big secret. 

But investing can be overwhelming if you’re just getting started. How do you know what stocks to buy? How do you buy stocks if you only want to invest a little bit at a time? 

If you’re considering investing for the first time, exchange-traded funds (ETFs) are an easy and affordable way to get started. And you don’t have to be an expert investor to make it work for you.


Start investing in ETFs today!

Moka makes it easy to invest in a fully-managed, diversified portfolio of Exchange-Traded Funds or ETFs.


What is an ETF?

First things first: An ETF is a collection of stocks and/or bonds. You can buy an ETF just as you would stock. However, when you buy stock, you’re investing in one company, such as Tim Hortons or Amazon. When you invest in an ETF, you’re investing in multiple stocks or bonds that follow a specific investment strategy.

For example, some ETFs may track a stock index (like the FTSE Canada Index ETF, which tracks the performance of the FTSE Canada Domestic Index and invests in the largest Canadian stocks). Or, an ETF may track an index for a particular industry, such as technology or healthcare. 

An index measures the performance of a group of stocks or bonds. So, a technology index may include Apple, Microsoft, IBM, and others. The ETF attempts to meet or exceed the performance of the index.

Why invest in ETFs vs. stocks?

While you can buy ETFs and individual stocks, there are several upsides to investing your money in ETFs—especially when you’re just starting out. 

Low investment amounts. One of the biggest reasons ETFs are better than stocks for new investors is because they make it easier to start investing with less money. Some stocks cost several hundred dollars for a single share. With an ETF, you can invest smaller amounts and not face tons of commissions and other fees.      

Risk management through diversification. One of the keys to success as an investor is diversification. The basic concept behind diversification is simple: don’t put all your eggs in one basket. With your money spread across several stocks and bonds, there’s less risk involved. 

If you invest in one stock, your investment would lose a lot of value if the stock price plummets. (All your eggs are in one basket, so you’re in trouble if you drop the basket!)       On the other hand, if an asset in an ETF underperforms, other assets can make up the difference. One ETF is many baskets.     

That said, it’s still possible to take risk with ETFs. If you have a higher risk tolerance, you can opt for a portfolio of ETFs that takes a more aggressive investment strategy.           

Simplicity. With ETFs, you don’t have to be an investment pro to succeed (even seasoned investors have a hard time beating the market by picking stock). If you don’t have the time to understand which specific stocks make most sense for you—and who really does?—investing in an ETF is a much easier decision that can pay off in the long term.           

Performance. ETFs generally follow the index they’re tracking. Over time, their returns will be similar to the index. For example, someone who invested in the FTSE Canada Index ETF at inception in November 2011 would have seen an annual compound rate of return of 7.27% by the end of 2020.

In fact, ETFs can outperform stock picking over time. Some stock pickers largely outperform passive, index investing strategies, but in general, over longer periods of time, passive index ETF investment will outperform. This is especially true for non-professional investors: you’re more likely to see better gains in the long term if you go the ETF route over trying to manage your own portfolio!

So, if you don’t have a bajillion dollars to invest in pricey stocks managed by a pro (and who does?), but you still want to make progress toward your financial goals, you’ll want to consider ETFs.

Ready to start investing in ETFs today?

There are lots of ways you can get started. If you’d like to open a fully-managed, diversified investment portfolio, Moka might be the right fit for you.     

Moka portfolios are a mix of four Moka funds:

  • Three funds are entirely ETFs.
  • The fourth fund is designed for people who may need to quickly convert their investment money back to cash. This fund is a mix of ETFs, guaranteed investment certificates (GICs), money market instruments (such as treasury bills), and cash.

The mix of funds in your portfolio will depend on the strategy we select (we’ve got options ranging from conservative to aggressive) to support your goal, financial profile and risk tolerance, and whether or not you’ve selected socially responsible investing.

And with Moka, you don’t need a bag full of cash to get started. Moka will round up your everyday purchases to the nearest dollar and automatically make the investments.

Download Moka to start investing in ETFs today.

Disclaimer: The views expressed in this story do not constitute financial advice.

Categories
Invest smarter Investing TFSAs

Why it pays to invest in a TFSA

TL;DR: If you were to invest consistently for 40 years within a TFSA, you’d end up with 49% more money than if you’d invested the same amount with a non-registered account.*
*Assuming a 5% annual interest rate and marginal tax rate of 32.17%

In 2009, something wonderful was born: The Tax-Free Savings Account (TFSA). Unlike non-registered accounts, you don’t pay any tax on the investment return, even after you withdraw the funds held in your TFSA. 

These tax benefits make TFSAs the smartest way for Canadians to invest, which is why we were thrilled to offer them to our users. We were even more thrilled to see that 35% of users immediately open a TFSA for their goals.


Save & invest in a TFSA

Moka lets you automatically invest in a diversified, tax-free investment portfolio.


Unfortunately, only around 40% of Canadian millennials have a TFSA. That’s more than half of Canadian millennials who are missing out on the opportunity to see a much higher net return on their investments.

We crunched the numbers to demonstrate that a Canadian who invests consistently from the ages of 25 to 65 could end up with nearly 50% more money by investing within a TFSA than with a non-registered account.

What does this mean? Let’s break it down.

Say you begin investing $5,000 a year with a TFSA when you’re 25, and continue putting in the same amount every year until you’re 65. 

After 40 years, your net total TFSA return would be $435,959 (assuming an annual interest rate of 5%*).

However, if you were to have made the exact same investment over the same period of time in a non-registered account, your net total return after 40 years would only be $227,023 (assuming a marginal tax rate of 32.17%*).

You’d end up with 48.36% more money (that’s over $200K more!) with a TFSA than with a non-registered account. 


*Marginal tax rate calculated using the average income of Canadians in this age range, and the average marginal tax rate of all provinces.
*Model assumes that the TFSA program will continue to be offered during the entire period.

You can see the full spreadsheet for the graph here. As the data shows, the valuable tax benefits of a TFSA, plus time and compound interest, make for a lucrative combination. So if you’ve been thinking about opening a TFSA, make today the day. 

Luckily, Moka makes it easy to get started. Just create an account, choose a TFSA for your goal and start saving and investing towards it in the smartest way possible.

For more information on TFSAs, click here.

If you have any questions or would like to talk with a human, simply email one of our dedicated portfolio managers at support@moka.ai

Categories
Save more Taxes

The 5 smartest things you can do with your tax refund

Many of us are scrambling to get our paperwork in order to claim our tax refund as the April 30th tax filing deadline quickly approaches. The good news: The stress and anxiety of tax season is almost over.

More than two-thirds of Canadians will receive a refund of an average of $1,600 (*Cha-ching*) from the government. A number of different factors will determine the exact value of your reimbursement but thanks to free income tax calculator tools, like SimpleTax or TurboTax, you probably already have a good idea of what your tax refund will look like. Whether it’s a couple hundred dollars or in the 4-digit range, the question now becomes, “What do I do with my tax refund”?

Here are the top 5 ways to make the most of your tax refund.

Resist the urge to splurge.

Don’t fall into the trap of treating your tax refund like a winning lottery ticket. Go ahead and treat yourself to a little something like a nice meal out but some itches you should avoid scratching. As finance expert Suze Orman puts it, “Just because you can afford it doesn’t mean you should buy it.” A survey by Finder Canada found that 63% of Canadians make impulsive spending decisions on a yearly basis. A lack of careful decision making can result in buyer’s remorse so when tempted by an item with a hefty price tag, sit on it for a bit to avoid a guilty conscious. After all, your tax refund isn’t going anywhere.

Pay off your debt and pay-back your loans.

The average Canadian has nearly $30,000 in non-mortgage debt. This includes an average credit card balance of over $4,000. Many of us get by paying the minimum monthly payments, but since the average credit card interest rate hovers at 19%, it’s always better to pay sooner than later to avoid the high interest rates stacking up. Not only does debt put a dent in your wallet, debt can also have enormous emotional and psychological burdens. If you have debt, look at what you owe and pay back as much as you can. Prioritize ‘bad debt’ that incurs the highest rate of interest. By using your tax refund to pay off debt as quickly as possible, you’ll be one step closer to becoming debt-free.

Stash your cash in an emergency fund.

It’s easy to overlook the importance of an emergency fund when your finances are going well. With cash in the bank, it’s only natural to remain positive, which is perhaps why only 26% of Canadians have an emergency fund in place, with over a third of millenials having no emergency stash at all to offset unexpected financial difficulties. But the truth is you never know what the future holds. By putting some or all of your tax refund towards an emergency fund, you can be ready to tackle financial emergencies without going into debt.

Hack your life by investing in yourself.

Growing your knowledge and skills may give you a boost in self-confidence, but it can also provide great returns. You’re not only going to become more self-sufficient, but employers will find you more valuable, which means you can confidently negotiate a higher entry salary or ask for a raise. There are many affordable online courses you can take right now to expand your skill set. Not sure what skills will provide the best return on your investment in yourself? Check out this list of in-demand skills.

Save and invest towards a financial goal.

Whether you’re striving to meet a short-term financial goal like buying a new couch or a long-term one like buying a house, chances are that achieving your financial goals equates to saving money. Instead of placing the money from your tax refund under your mattress, start building towards your goals by saving your money into an investment account. By putting your money to work for you in a diversified investment portfolio that aligns with you financial profile, goals and risk tolerance, you’ll benefit from the forces of time and compound interest, and will likely reach your goal faster. Plus, you can reap the tax benefits of a TFSA or RRSP, depending on the type of goal you’re saving towards.

Pay it forward.

Donating to charity is not just a noble cause. It can also affect your bottom line. When you donate to one of Canada’s 86,000 registered charities, you can claim charitable tax credits or deductions with your official donation receipt. So why not do some good with your money from your tax refund, and in the process receive a little kickback from the government?

It can be difficult to decide what to do with your tax refund. When your instincts may be telling you “go spend!”,  reconsider what might be the best option for you given your financial situation and the financials goals you’re aiming for. Want to figure out what’s right for you? Drop us a message in our chat. We’re happy to help!