investment
An investment is an asset or property acquired to generate income or gain appreciation. Appreciation is the increase in the value of an asset over time. It requires the outlay of a resource today, like time, effort, and money, for a greater payoff in the future or for generating a profit.
An investment involves using capital in the present to increase an asset’s value over time.
Investments may include bonds, stocks, real estate, or alternative investments.
Investments can be diversified to reduce risk, though this may reduce the amount of earning potential.
In business contexts, investments are financial; however, consider how some people spend time to make higher incomes in the future (i.e. invest in a college education).
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BANK OF NOVA SCOTIA $59 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $70.8 billion; Price-to-sales ratio: 3.3; Dividend yield: 4.7%; TSINetwork Rating: Above Average; www.scotiabank.com) earned $1.85 billion in its fiscal 2015 third quarter, which ended July 31, 2015, up 2.8% from $1.80 billion a year earlier. Earnings per share rose 3.6%, to $1.45 from $1.40, on fewer shares outstanding.
However, revenue fell 5.6%, to $6.1 billion from $6.5 billion, mainly because the bank sold most of its shares in mutual fund provider CI Financial (Toronto symbol CIX) in 2014.
Earnings at the Canadian banking division (49% of total profits) rose 14.9% on improving loan and deposit growth. The international division (30%) saw its earnings rise 10.5%, thanks to strong loan demand in Latin America and favourable currency exchange rates.
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However, revenue fell 5.6%, to $6.1 billion from $6.5 billion, mainly because the bank sold most of its shares in mutual fund provider CI Financial (Toronto symbol CIX) in 2014.
Earnings at the Canadian banking division (49% of total profits) rose 14.9% on improving loan and deposit growth. The international division (30%) saw its earnings rise 10.5%, thanks to strong loan demand in Latin America and favourable currency exchange rates.
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A large number of stocks fall into a grey area. We wouldn’t advise buying them, but they are “okay to hold,” in our view.
The stock market and presidential elections have a relationship that can be summed up by what is known as the “four year rule.”
Here’s a phenomena you may have noticed: Current economic problems sometimes provide solutions for problems inherited from previous years or decades.
For example, from the late 1990s through the mid-2000s, many employers and economists worried about a coming labour shortage. The baby boomers, who make up a large part of the North American workforce, are nearing retirement age. Specialists were leaving the workforce faster than they can be replaced. Younger people tend to switch jobs more often than older workers. They are also slow to accept entry- or low-level jobs. They are reluctant to go into apprenticeship or industrial-training programs.
Employers and economists worried about the risk of falling productivity and rising wages. After all, employers were likely to bid up wage levels, to attract scarce new workers who would need expensive training. This could provoke severe inflation.
Then the 2007-2009 recession and stock-market slide came along. It solved the problem, at least temporarily. Joblessness rose, as businesses re-structured and made do with fewer workers. Insecurity led many boomers to work longer than they planned. They felt their savings, investments and pensions were inadequate for their retirement needs. They also worried about the financing of the Canada Pension Plan and U.S. Social Security.
After all, soaring numbers of retirees were entitled to income from these plans, due to the retirement of the boomers and extended lifespans from modern medicine. At the same time, growth in the worker/taxpayer population was slowing. This was partly due to a continuing drop in the birth rate—the so-called “birth dearth”. So, fewer working taxpayers would have to support a growing number of pensioners.
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For example, from the late 1990s through the mid-2000s, many employers and economists worried about a coming labour shortage. The baby boomers, who make up a large part of the North American workforce, are nearing retirement age. Specialists were leaving the workforce faster than they can be replaced. Younger people tend to switch jobs more often than older workers. They are also slow to accept entry- or low-level jobs. They are reluctant to go into apprenticeship or industrial-training programs.
Employers and economists worried about the risk of falling productivity and rising wages. After all, employers were likely to bid up wage levels, to attract scarce new workers who would need expensive training. This could provoke severe inflation.
Then the 2007-2009 recession and stock-market slide came along. It solved the problem, at least temporarily. Joblessness rose, as businesses re-structured and made do with fewer workers. Insecurity led many boomers to work longer than they planned. They felt their savings, investments and pensions were inadequate for their retirement needs. They also worried about the financing of the Canada Pension Plan and U.S. Social Security.
After all, soaring numbers of retirees were entitled to income from these plans, due to the retirement of the boomers and extended lifespans from modern medicine. At the same time, growth in the worker/taxpayer population was slowing. This was partly due to a continuing drop in the birth rate—the so-called “birth dearth”. So, fewer working taxpayers would have to support a growing number of pensioners.
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Brokers like theme investing because it gives them an opportunity to recommend new stocks or ETFs to their clients, which may not be beneficial to investors.
Many new ETFs have wide appeal and include a broad range of investment opportunities. They can also come with extra costs that investors should be aware of
ISHARES CANADIAN SHORT-TERM BOND INDEX ETF $28.69 (Toronto symbol XSB; buy or sell through brokers) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a range of investment-grade federal, provincial, municipal and corporate bonds with one- to five-year terms to maturity. The fund holds 430 bonds with an average term to maturity of 2.98 years. The bonds in the index are 64.8% government and 35.2% corporate. The fund’s MER is 0.28%.
The iShares Canadian Short-Term Bond Index Fund yields 2.4%, but this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, meaning the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.
The key figure when looking at the long-term return of this fund is yield to maturity. This yield takes into account the series of capital losses the fund will experience as its above-market-rate bonds mature. The iShares Canadian Short-Term Bond Index ETF’s yield to maturity is around 1.08%—less than the 2.4% yield but still higher than the 0.42% you’d earn by investing in, say, a one-year T-bill.
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The iShares Canadian Short-Term Bond Index Fund yields 2.4%, but this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, meaning the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.
The key figure when looking at the long-term return of this fund is yield to maturity. This yield takes into account the series of capital losses the fund will experience as its above-market-rate bonds mature. The iShares Canadian Short-Term Bond Index ETF’s yield to maturity is around 1.08%—less than the 2.4% yield but still higher than the 0.42% you’d earn by investing in, say, a one-year T-bill.
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ISHARES MSCI CHILE INVESTABLE MARKET INDEX FUND $34.71 (New York symbol ECH; buy or sell through brokers) is an ETF that aims to track the MSCI Chile Investable Market Index, which consists of stocks that mainly trade on the Santiago Stock Exchange.
The fund’s top holdings are Enersis SA (electricity), 10.5%; Empresas Copec SA (conglomerate), 8.6%; Empresa Nacional de Electricidad (electricity), 7.8%; Empresas CMPC (pulp and paper), 6.4%; S.A.C.I. Falabella (retail), 6.3%; Banco Santander Chile (banking), 6.0%; Banco de Chile, 5.0%; Colbun SA (utility), 4.4%; Cencosud SA (retailer), 4.2%; and LATAM Airlines, 3.4%.
The ETF’s industry breakdown consists of Utilities, 30.7%; Financials, 19.3%; Materials, 12.3%; Consumer Staples, 9.4%; Energy, 8.4%; Consumer Discretionary, 7.8%; Industrials, 6.8%; Telecommunications, 2.6%; and Information Technology, 2.0%.
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The fund’s top holdings are Enersis SA (electricity), 10.5%; Empresas Copec SA (conglomerate), 8.6%; Empresa Nacional de Electricidad (electricity), 7.8%; Empresas CMPC (pulp and paper), 6.4%; S.A.C.I. Falabella (retail), 6.3%; Banco Santander Chile (banking), 6.0%; Banco de Chile, 5.0%; Colbun SA (utility), 4.4%; Cencosud SA (retailer), 4.2%; and LATAM Airlines, 3.4%.
The ETF’s industry breakdown consists of Utilities, 30.7%; Financials, 19.3%; Materials, 12.3%; Consumer Staples, 9.4%; Energy, 8.4%; Consumer Discretionary, 7.8%; Industrials, 6.8%; Telecommunications, 2.6%; and Information Technology, 2.0%.
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ISHARES MSCI GERMANY FUND $26.05 (New York symbol EWG; buy or sell through brokers) tracks the stocks in the MSCI Germany Index. This index aims to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable for investment, partly due to limitations on foreign ownership.
The ETF’s top holdings are Bayer (diversified chemicals), 10.1%; Daimler (autos), 7.1%; Siemens (engineering conglomerate), 7.1%; BASF (chemicals), 6.7%; Allianz (insurance), 6.5%; SAP (software), 6.0%; Deutsche Telekom, 4.9%; Deutsche Bank AG, 3.7%; Linde AG (industrial gases), 2.9%; Munich Reinsurance, 2.9%; Volkswagen AG, 2.8%; BMW AG, 2.8%; Fresenius (health care), 2.4%; and Deutsche Post, 2.4%.
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Follow our stock market investment advice and be a worry-free investor.