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Long term growth: Why we’ve updated the Moka investment portfolios

Everyone deserves to live the life they want and we believe Canadians should have easy access to tools that will help them achieve their financial goals. We also know it’s possible to build wealth if you invest early and often; but when it comes to investing, there’s a lot to take into account. From your personal financial situation and goals to your risk tolerance and time horizon, these factors should all be considered when determining which investment strategy is best for you, and revised from time to time to reflect changes in your life. 

Similarly, as financial markets evolve and new investment opportunities become available, these changes can affect your overall investment strategy along with where and how much you invest.  

Today’s financial markets aren’t the same as they were at the start of the COVID-19 pandemic, just like they aren’t the same as they were during the 2008 financial crisis. That’s why our portfolio managers are regularly reviewing our investment models and fund strategies to ensure they best reflect today’s markets.

Based on rigorous research and thoughtful feedback from our users, we’ve made select updates that are intended to provide you with competitive portfolios that can help you achieve your financial goals. 

These updates include new names for all of our investment portfolios and refreshed investment strategies on select portfolios:

New portfolio namesPrevious portfolio names
Cautious Income Conservative
Balanced Income (modified SRI portfolio)Conservative-Moderate
Balanced (modified portfolio)Moderate
Balanced Growth (modified portfolio)Moderate-Agressive
Equity Growth (modified portfolio)Agressive

All our investment portfolios are made up of allocations to one or multiple investment funds. So, depending on your financial goals, risk tolerance and time horizon, the money in your portfolio will be allocated to one or a combination of investment funds that meet your specific needs. 

Moka portfolios are made up of four different investment funds to meet the various needs and goals of our members. In this case, the Moka Money Market Fund and Moka Fixed Income ETF Fund are staying the same while the Moka Equity ETF Fund and Moka SRI Fund will see two main changes that will affect the portfolios indicated above specifically:

1) An increased exposure to US stocks

In an effort to give you access to a broader range of sectors and industries, we’ve increased the funds’ exposure to US stocks by adding exchange-traded funds (ETFs) such as the S&P Total Market Index. By making this change, you could now have a bigger stake in companies like Apple, Alphabet, Microsoft and Tesla.

2) The addition of cryptocurrency

We’ve heard you loud and clear, and with the growing adoption of cryptocurrency as a legitimate investment asset, we decided now was the time to add digital currencies to our funds. The updated funds now include a 5% total allocation split evenly between exchange-traded funds (ETFs) that track Bitcoin and Ethereum. Given the small percentage allocated to cryptocurrency in the fund overall, any downturns are expected to have minimal negative impact on returns—baby steps!

We selected Bitcoin and Ethereum specifically because they’re among the most popular and stable cryptocurrencies available. Though they can be volatile; they have outperformed other asset classes in recent years, with Bitcoin hailed as the best performing asset of the last ten years

Our portfolio managers will continue to review these and other digital currencies to reassess if and how cryptocurrencies and other asset classes can be factored in when creating and refreshing funds for our members. 

What do these changes mean for you?

We’ve always strived to offer a variety of investment portfolios to our members that meet their personal needs and help them achieve their financial goals, so we’re thrilled to offer these updated portfolios.

For members with long term goals and who can tolerate some risk, we have shifted the composition of our highest-risk portfolio (now “Equity Growth”) to 95% equities and 5% cryptocurrency, split evenly between bitcoin and Ethereum.

If we look at the S&P 500’s historical performance as an example, a common benchmark in the investment industry, it’s had an average annual rate of return of 10% since its inception. To put that into perspective, if you were to invest $300 per month in the S&P 500, your investment could be worth just under $1.7 million after 40 years, if past results were to repeat themselves. Of course, there is no guarantee that will be the case. However, this example goes to show you the power of compounding returns!

So what do these changes mean for you? The short answer is: it all depends! 

The portfolio you’re invested in can’t be changed by you directly. If you remember way back to when you first signed up with Moka, we asked you a series of questions that were intended to get a better understanding of your financial goals, risk tolerance, time horizon and overall picture of you as an investor. Based on your answers, your portfolio manager selected an investment portfolio that best suited your financial goals and personal situation. If, for example, you had a short term investment time horizon, as defined by the date you set on your goal, or were less willing to take risk, your investments were likely placed in a less risky portfolio, like the Balanced Income or Cautious Income portfolios.

The good news is that you can update your goals by revisiting the questionnaire in the app at any time—if anything has changed or changes in the future with regards to your personal situation and financial goals, they will likely reflect a change in your portfolio. So if our new updates don’t immediately affect your portfolio, there’s always a chance they will in the future.

To learn more about your current portfolio and investments, click here on your mobile device to open your Investment Policy Statement. If you’d like to revisit your onboarding answers, click here. Any changes you make will be reviewed by a portfolio manager, and may trigger a change in your investment model.

If you have any questions or concerns about these changes, you can always reach out to our portfolio managers at

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How do world events affect my personal finances?

We often hear about “fluctuations” in the stock market. What exactly are these, and what causes them? At a time when geopolitical tensions are plunging us into uncertainty, it’s important to learn how the global markets can impact our personal finances. 

Let’s get into it.

Why do stock markets fluctuate?

Stock prices change daily, depending on supply and demand. The price of a stock, for example, is set in part by demand; therefore, the greater the number of buyers, the more the price is likely to rise.

Overall, markets are very sensitive. They can fluctuate due to internal factors within companies, but also depending on the current economic situation. If overall economic growth is strong and the political situation is stable, stock markets will tend to rise. If, on the other hand, the economic or political situation is unstable, the stock markets will tend to fall. We saw this particular situation occur during the Covid-19 crisis, when the S&P 500 collapsed during the March 2020 lockdown.

In general, several factors have an impact on markets:

The health of a given business sector

When a business sector is healthy, it benefits all companies in the industry, and vice versa. This is what’s happening with American tech companies (Facebook, Amazon, Microsoft, etc.), whose prices are reaching record highs. Conversely, when a sector of activity is struggling (for example, because it’s overtaken by a scandal), the stock prices of the companies in that sector will tend to fall.

The economic context

Economic conditions play a crucial role in stock market prices and in our daily lives. Basically, when the economy is doing well, prices tend to rise. This is called an “uptrend”. Conversely, in times of crisis or recession, the markets tend to fall.

Major world events

Major world events, even outside the stock market, can have a massive impact on prices. Examples of events might include a health crisis, the election of a new leader (on Donald Trump’s election day in 2016, global stock markets first crashed before recovering), a war, a climate event, geopolitical tensions, and so on. Any of these events will have a direct impact on our lives, as we are seeing right now with the rise in fuel and raw material prices which are partly due to the situation in Ukraine. Because of this conflict, the price of wheat has increased by 70% since the beginning of the year! Consequently, we’re seeing soaring prices in certain commodities such as bread.

Will I lose money when the stock market fluctuates (because of a global event, for example)?

Stock markets are volatile by nature, and volatility is the measure of the amplitudes of variations of a financial asset, both upwards and downwards.

So, should we be afraid of volatility?

It really all depends on your sensitivity to risk and your investment horizon. The investment (whatever it is) must be considered in the long term, knowing that time is the enemy of risk. Even if you lose money at a given point of time, these losses tend to be smoothed out eventually. Moreover, nothing is ever set in stone! Say you bought 3 shares at $10. Two weeks later, they might only be worth $8. You might think you have lost money, but in reality, as long as you have not sold your shares, you have neither gained nor lost. If you wait another 2 years, it’s quite possible that the value of each share will reach $15 dollars or more!

Moreover, if your money (or at least part of your money) is placed in savings accounts, cash equivalents and money market funds, and fixed income products – you can control against the risk of the more volatile stock markets. This is for good reason; these are investments with guaranteed capital, and there is therefore no risk of loss except for the loss due to inflation.

On the other hand, price fluctuations can directly influence the price of certain raw materials, or even energy. In this case, the entire population is affected, since these fluctuations are reflected in prices. Fortunately, this doesn’t mean that the situation won’t change in the short or medium term!

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Which investment strategy is better: Passive or active investing?

When creating an investment strategy, it’s important to know how passive investing or active investing could work for you.

Depending on your goals, time horizon, and comfort levels, you may come to favour one over the other. Here are a few important points that could help you figure out if either approach may be right for you.

What’s passive investing?

Passive investing has increased in popularity in recent years as app-based investment platforms have become more available. Passive investing is generally speaking a strategy defined by its minimal buying and selling of stocks or other instruments.

Instead, passive investing can be considered a ‘buy and hold’ strategy with a long term investment horizon. A common form of passive investing involves investing in diversified products like exchange traded funds (ETFs) that track major indices (like the S&P 500 or Nasdaq) over a longer period of time.

As the value of these diverse products increases or falls, so too would that of your holdings. Passive investing allows for a more hands off approach to wealth building, and historically can perform well over many years.

What’s active investing?

Active investing involves the active management of a given portfolio. You could be the one managing the portfolio, or it could be a financial advisor or portfolio manager that you hire to manage your investments on your behalf. It is the job of the active investment “manager” to try and maximize the value of the investments in the portfolio by using highly specialized knowledge and intuition to buy or sell.

Where passive investing is about taking a hands-off approach over a long period of time for generally more moderate returns, active investing is about taking a hands-on approach over shorter periods of time in the hopes of securing some big wins or gains in the value of your portfolio due to timely opportunities and price fluctuations.

Active investing typically involves higher fees than passive investing, in part because you are paying a fee to your investment manager, and because there may be a cost associated with executing trades.

Pros and cons of passive investing

Passive investing has been theorized as a good option for most casual investors because it will typically involve lower fees and less risk. However, passive investing does have a few disadvantages you should consider, too.

  • Low fees. Because of the lower trading volume typically involved in passive investing, and because no dedicated portfolio manager is required, passive investments can cost much less than active investing. PWL pegs the management expense ratio (MER) of passive funds in Canada at just 0.28%. This can make a huge difference in your returns over time.
  • Tax efficiency. Because passive investments may grow more moderately (when compared with active investments), you may avoid larger capital gains taxes.
  • Lower comparative risk. Because passive investments often track well established indexes like the S&P 500, while the value of your investments will certainly fluctuate over time, their diversification tends to limit the volatility compared to individual stocks.
  • Slower growth. Passive investing isn’t about trying to win big in the short term. Instead, this strategy could be conducive to saving for retirement, for example, where over the long term your regular contributions and returns could steadily accrue. However, this means its goal is not to see big gains in short periods of time.
  • Market underperformance. According to some, once costs are taken into account, passive investments that simply track a market index may underperform the market (because they track the market itself).

Passive investing may be a good strategy for you if you plan to invest over a long period of time, if you aren’t chasing big wins in short periods, and if you want to keep your costs low.

If passive investing sounds like it could be right for you, check out the Moka app.

Moka rounds up the spare change from every purchase you make and invests it weekly in diversified portfolios. Plus, you can give your savings an extra push using roundup multipliers, recurring deposits and one-time boosts, all of which will get automatically invested.

Getting signed up is easy—just answer a quick questionnaire and a portfolio manager will pick the perfect portfolio for you. 

Pros and cons of active investing

Active investing can get a bad rap, but it can also still play an important role in the investment strategies of many people.

  • Attempts to outperform the stock market’s average returns. When your investments are actively managed, you or your portfolio manager can trade strategically to try and beat the market. This approach could earn you big returns that are basically unheard of in the world of passive investing. But typically, big returns also come with taking big risks.
  • Investment flexibility. Unlike passive investments, which may track an entire index, your actively managed portfolio can include any number and variety of financial products that might appeal to you. This way, you have more flexibility in terms of the types of investments you make, and your fund manager can look for new and exciting opportunities that might appeal to you.
  • Higher fees. In Canada, the average fee for an actively managed fund is five times greater than that of a passive fund, clocking in at 1.59%. Over time, this can seriously damage your returns.

Let’s look at an example. Say you begin with an initial investment of $50,000 in mutual funds, and you contribute $10,000 annually for the next 30 years. Then, let’s say you’ve got a return of 7% and a fund expense ratio of 1.59%.

It’s just 1.59%. How bad can it be?

At the end of that 30 years, your investments would be worth $1,391,343.17 gross according to this source.

The fees? $396,747.84!

This makes your net gain, less the fees, only $994,595.33.

  • Long term underperformance. According to one study, “over the last five-, 10- and 15-year periods, 84%, 97% and 92%, respectively, of actively managed large-cap funds underperformed their benchmarks.”
  • Greater risk. Because your portfolio manager is actively trying to beat the market, they are also assuming more risk than passive investors.

These risks can be substantial, but this is in keeping with what we know of active investing as a whole: more risks, possible big rewards. In a short period of time, you could win big. But over a long period of time, it is statistically unlikely those big wins would be the norm.

If you want to get more involved with your wealth building journey but don’t want to hire a portfolio manager, you may want to consider taking the self-directed route. By using an app or a website, you can plot and make your own trades.

If this sounds right for you and you’ve done your own research, check out the MogoTrade waitlist. You get instant access to free live-streaming stock prices, can build a watchlist to track your favourite stocks, and can be among the first to trade commission-free when MogoTrade launches later this year. Visit the App or Play store to download MogoTrade today.

Which investment strategy is right for me?

Only you can decide on the right investment strategy for you. It depends on your goals, how comfortable you are with risk, and your time horizon.

There may even be room for both of these types of investments in your financial strategy. You can determine this by doing your own research and speaking with an accredited expert about your goals.

Theoretically speaking, these two strategies could balance each other well. Your passive investments could build up your retirement slowly over time; your actively managed investments could help you stay in sync with your wealth building journey and even earn you a couple extra bucks here and there.

After you’ve talked to a professional and decided on your path, you could consider Moka for your passive investments and MogoTrade for your active trading.

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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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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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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.

Invest smarter Investing

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. 

Invest smarter Investing

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.

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