What wealth advisors are telling their clients in preparation for 2019

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Left to right are John De Goey, David Boyd, Joel Clark and Christopher Dewdney.What wealth advisors are telling their clients in preparation for 2019

Red might be associated with the holiday season, but this year it’s looking a bit less festive to investors.

Stock markets are down, the Canadian dollar has dropped against its U.S. counterpart and Canada’s energy sector continues to struggle, pulling down the S&P/TSX Composite Index with it. Even gold, that safe-haven asset, has taken a hit and isn’t expected to bounce back until at least the middle of 2019, according to J.P. Morgan.

Volatility is causing concern among all investors, including Canada’s wealthier, especially for those nearing retirement. Here’s what four wealth advisors are telling their clients. They also offer a few predictions for 2019 and advice for keeping sane in turbulent times.

John De Goey, portfolio manager, Wellington-Altus Private Wealth Inc., Toronto

‘Portfolios are like a bar of soap,’ John DeGoey says. ‘The more you touch them, the smaller they get.’

Mr. De Goey points out that markets have had a strong run until recently, and that managing investors’ expectations is key.

“Before this, there were a couple of dips of extremely modest consequence, but this is really the first time in almost a decade when people have seen their accounts go down. So I keep telling people, ‘You know, you’re going to have a correction every seven or eight years, and you’re going to have a drawdown every three years. You’ve gone a decade without a correction.’

“I would say the majority of my clients are fine and they get it. They understand that it’s been a good run and that things don’t always go well.

“But there will always be a moderate-sized minority – I’m going to say 15 or 20 per cent of my clients – who are saying, ‘Well, don’t just stand there, do something.’ But good financial advising is about, ‘Don’t just do something, stand there!’ You have to resist the temptation to do something just for the sake of doing it because the evidence shows that the more people tinker with their portfolios, the worse they do.

“Portfolios are like a bar of soap. The more you touch them, the smaller they get.”

David Boyd, vice-president and portfolio manager, Boyd Wealth Management Group (BMO Nesbitt Burns)

Mr. Boyd is reminding clients that a good time to buy is when others are selling.

“People look at the headlines. We’ve seen interest rates rising on the U.S. side. We’ve seen the price of crude oil down. We’ve seen the [trade] issue between the U.S. and China. I’d be naive if I said there aren’t people watching the volatility on the news and asking, ‘What’s going on?’

“Do people see this as a buying opportunity? The notion of ‘buy low and sell high’ is easier said than done. If you hear from your financial advisor who is saying, ‘I understand your accounts are down, but I need you to add some more money,’ people aren’t going to answer the phone.

“But it’s one of those things. Would you rather pay retail or wholesale? If you like to buy things on sale – which is one way to build wealth – then keep sending money because at some point in the cycle, like now, you’re going to get volatility. You can buy stuff a bit cheaper than you could in the summer.”

Joel Clark, chief executive officer and portfolio manager, KJ Harrison Investors, Toronto

If you are prepared for a market downturn, you can make hay with it, Joel Clark says.

Mr. Clark predicts a multiquarter slowdown in 2019, partly because of the popularity of exchange-traded funds (ETFs) and the use of artificial intelligence (AI) in trading software.

“It’s going to be upon us quicker than we anticipated. You can see it in the rest of the world, which is falling apart big time, and the markets are down 25 to 30 per cent. The only ‘best house in the worst neighbourhood’ is the U.S., and it’s only been break-even for the year. So our view is you’re going to have a multiquarter slowdown.”

Two factors at work here will be “this massive trend of exchange-traded funds and quants [quantitative trading that uses computer algorithms], which grew out of the last financial crisis. We’ve never gone into a true bear market with this level of AI and index type of trade. People are so long on indexes they’re not really looking at fundamentals and risk management.

“So you yell, ‘Fire!’ and it’s an instantaneous push-button effect. I worry about the market structure being able to handle a true bear market.

“But if you’re prepared for it, then you get a chance to reload. While everyone’s dying, you’re ready to make hay [by buying distressed investments]. But you’ve got to know your playbook. It’s like a football analogy: The quarterback has got a play for every scenario – and right now the playbook is cash and income [investments such as government bonds, investment grade bonds, utilities and REITs]. It’s the defence.”

Christopher Dewdney, principal, Dewdney & Co., Toronto

We’re definitely due for a haircut, Mr. Dewdney says. But diversification can help control the damage.

“There are all kinds of headwinds south of the border, which is our number one trading partner, and when they sneeze we catch a cold. But in addition to that, you have an unpredictable – and some might say irrational – president. Plus trade wars and terrorist attacks. There is a lot of instability in the market that reflects this.

“Diversification is key right now. I know that sounds like beating a dead horse, but you definitely don’t want to be the guy with all of his eggs in one basket, and then he trips. My clients have faith in the markets and economy. We sleep well at night knowing we are diversified, not just by asset class or sector, but also by geographic location.

“And we know that this too shall pass.”

The Reasons Why You Want To Start Forex Trading

The Reasons Why You Want To Start Forex Trading

The Reasons Why You Want To Start Forex Trading

The forex trading market is the largest market available today and most of the financial liquidity happens in the forex market. For example, the forex market has an average traded value of USD $2,000 billion daily. This amount in US dollars makes this market even larger than the stock market itself. As an investor, you should definitely consider the forex trade market, as it is the one that offers most profitable trading opportunities one in the world. The unique trait about the forex market is that there is no central headquarters or marketplace for currency trading, but it is conducted electronically – all transactions are made through computer networks between investors around the world.

Forex market is open for traders who want to invest and make money all day long, five days a week, and currencies are being traded almost everywhere in the world. There is risk and gain in this kind of market, however, and you can see a good return on investment if you are already well versed with FX trading. Nevertheless, there are multiple reasons why you should invest in currencies trading, so keep reading for more.

#1 The Size Of The Market

As we were discussing earlier, the forex trade market is, at this point, the largest one in the world. This certainly gives investors and traders great chances to make good profit and earn some money while they play this investing game. There is no other market as big as forex right now, so this would be the first reason why you would want to invest in it. If you are also curious about this investment market and you have only looked at it from the margin, it’s time to go in and start playing.

#2 The Accessibility Of The Market

The second reason why you would want to invest in the forex market is the accessibility. This market, unlike any other investment market, is open all day long and it doesn’t require you to wait for institutions to open to be able to trade. Also, you can easily trade currencies from your pajamas any time of the day. This makes Forex a simple to access market, and basic to use by any retail trader. Today, with the internet we have at hand and the constant access to it from everywhere we are, it is even easier to trade on forex market from our own home.

#3 The Equality Of The Market

Being a direct result of its size, the equality of the market is a huge benefit for anyone looking to invest in it. Given the enormous size of this trading market, no institution or individual can affect it by purpose or control it by purpose. Therefore, the market keeps everyone on the same level, as it cannot be manipulated. If you are an investor, this is probably one of the main reasons why you should go ahead and invest in the FX market.

#4 The Leverage Of The Market

The fourth reason why the forex market is a market worthy to invest in is the leverage. Since this market has unique characteristics compared to other markets, the leverage is better for investors. As you do not need a large sum of money to trade a large sum of currency, you get a minimum of 100:1 leverage from the forex brokers today when you make an investment.

#5 The Volatility Of The Market

The forex market is always dynamic, on the move, and very volatile. The market is always making large movements, as large transactions and high liquidity is being in transaction every day. This is a great news for investors who want to play on a dynamic market that can increase their profits with a little bit of risk. For example, volatility for most of the liquid stocks is between 60 and 100, while volatility for currency trading is 500, which is a very attractive feature for people who want to make easy and quick profits.

#6 The Profitability Of The Market

There is a huge amount of potential profit on the forex trading market, which is another unique trait of this particular market. The best thing about the forex trading is that you can make a profit regardless of the direction the market is going in. As opposed to the stock market, the forex market allows you to profit both when the value of your stock is going up or down. In the stock market, you only see a profit if the stock you own sees an increase. The forex trading is a two-way street, so you must be always working in pairs – do not forget that you always have the possibility to make a profit on Forex.

#7 The Transparency Of The Market

This is another huge advantage to consider when entering the forex trading market. To invest in a market with a high level of transparency is a good step forward, and that is why you should consider trading in the forex market. Simply, with this market, what you see is exactly what you get and there will be no surprises. All you have to do is analyze the news, look at the numbers, and read the charts. If you do all that, you will have no surprises with your investments. After a while, if you know what you are doing, you will be able to accurately predict the market direction.

So, these are the main reasons why forex trading market is a good option for any investor, but the decision whether to invest or not always belongs to you. Before you enter the forex world, it is advised that you carefully read all these advantages and compare them to the markets you know. The truth is, there is no other market as beneficial, transparent and profitable as the forex trade market and every investor should, at least, try to exchange currencies. Once you go forex, you will probably want to stay on this market and keep investing.

(as an additional note by us at TransFS, if you are interested in Forex trading, then check out our Forex trading page for more information, and information on some of the best trading paltforms)

3 Top Growth Stocks to Buy Right Now

3 Top Growth Stocks to Buy Right Now

3 Top Growth Stocks to Buy Right Now

Two years ago, Bank of America/Merrill Lynch released its findings of a 90-year analysis comparing growth and value stocks. While the report showed that value stocks have handily outperformed growth stocks on an annual basis (17% versus 12.6%), the tables have turned over the past decade, with the low interest-rate environment providing an extra boost to growth stocks. Given the recent market swoon, certain growth stocks may be ripe for the picking.

With this in mind, we asked three of our fool.com contributors to name one growth stock they believe investors should consider buying right now. Making the list were cancer-focused drug developer Exelixis (NASDAQ:EXEL), software-as-a-service provider to the wellness industry Mindbody (NASDAQ:MB), and payment solutions provider Square (NYSE:SQ).

A 30% compound annual sales growth rate through 2021? Yes, please

Sean Williams (Exelixis): I may pound the table on Exelixis a lot, but I believe I have some pretty good reasons to do so.

In recent months, Exelixis stock has been pressured on the idea that Bristol-Myers Squibb and its immunotherapy combo of Opdivo and Yervoy would eat into the company’s market share in first-line renal cell carcinoma (RCC). It surprised a lot of folks on Wall Street just how well Bristol-Myers’ combo therapy did in first-line RCC.

However, many of these fears have proven overblown — at least so far. In Exelixis’ most recent quarterly report, the company recorded 69% net product sales growth, which was driven almost entirely by Cabometyx. For those who may not recall, Cabometyx was the first drug to deliver the “trifecta” in second-line RCC of a statistically significant improvement in median overall survival, progression-free survival, and objective response rate. Having beaten Bristol-Myers to pharmacy shelves in first-line RCC, it doesn’t appear that Cabometyx will cede much of its market share.

Exelixis’ lead drug is also less than two months away from an expected label expansion into advanced hepatocellular carcinoma (HCC). The HCC market is a bit smaller than RCC, but it nevertheless should give Exelixis an opportunity to grow sales and profitability after Cabometyx easily met its primary endpoint in the phase 3 Celestial trial.

Ultimately, we’re talking about a biotech company capable of a compound annual growth rate of 30% through 2021 that, if its share price were to remain stagnant, would be valued at just 10 times projected 2021 earnings per share. It’s not often that a company can be considered both a growth and value stock, but that’s exactly what investors get with Exelixis.

High growth at a value price

Brian Feroldi (Mindbody): Yoga has become an increasingly popular exercise in America. Meeting the demand has turned into a very big business. The North America Studio Alliance estimated that spending on activities related to yoga grew from $10.3 billion in 2012 to $16.8 billion in 2016. The popularity of the fitness program has caused scores of small studios to pop up everywhere.

A hidden winner in the yoga boom is a software-as-a-service business called Mindbody, which provides its customers with all of the tools that they need to run a successful operation. Tasks such as scheduling, marketing, and payments can all be handled through Mindbody’s platform in a cost-effective manner.

The allure of Mindbody’s offering has already convinced more than 68,000 customers to sign up. That number might sound big, but the company is already looking beyond yoga and has started to target the larger fitness and beauty industries. The company estimates that there are more than 300,000 potential customers in its target markets, so the opportunity ahead is still substantial. What’s more, Mindbody has a history of introducing new tools that convince its existing customers to spend more on the platform.

Mindbody should be able to continue to grow its revenue at a greater than 20% rate for the foreseeable future as it continues to win new customers and roll out new features. Meanwhile, Mindbody’s stock has been heading in reverse in part because of the marketwide sell-off. With shares currently trading more than 40% below their 52-week high, I think right now is a great time to buy this growth stock at a value price.

Reaping rewards from the revolution

Keith Speights (Square): You could focus on the short term. If you do, the departure of Square’s CFO to become CEO of NextDoor might worry you. Square’s lower-than-expected Q4 earnings guidance could be concerning as well. So could the stock’s steep valuation. Even after a significant pullback, Square’s shares still trade at a whopping 94 times expected earnings. But investors should focus on the long term.

We’re in the midst of a financial revolution as society transitions away from cash to digital payments. Square is positioned as a key player in this revolution. Customers love the ease of use of its products and how easy Square is to work with as a company. This makes Square an attractive partner to go to for other products and services. And the company is rapidly adding them to its lineup.

Square thinks that it has tapped less than 3% of the addressable market in the U.S. The company should be able to capture more of this market by selling more products and services to existing customers, moving upmarket to larger customers, and making strategic acquisitions.

Even better, though, the global market is at least six times larger than the U.S. market. This gives Square a tremendous opportunity for growth. With momentum already picking up in Australia, Canada, Japan, and the United Kingdom — and more markets to come — Square looks like a great long-term growth stock.

Brian Feroldi owns shares of Mindbody and Square. Keith Speights owns shares of Square. Sean Williams owns shares of Bank of America and Exelixis. The Motley Fool owns shares of and recommends Exelixis and Square. The Motley Fool has the following options: short January 2019 $80 calls on Square. The Motley Fool recommends Mindbody. The Motley Fool has a disclosure policy.

Mint Exchange Opens Trading for FX Brokers and Institutions

Mint Exchange Opens Trading for FX Brokers and Institutions

Mint Exchange Opens Trading for FX Brokers and Institutions

As cryptocurrency is steadily taking over the online forex trading industry, more and more specifically tailored solutions are being developed. The latest example is an institutional-grade venue built on the widely used Integral FX platform, Mint Exchange.

Mint Exchange officially launched publicly today, Nov. 14, as a cryptocurrency clearinghouse providing access to major exchanges, brokers and market makers through a single gateway. It is meant to offer better liquidity for institutions to trade across cryptocurrency markets, while keeping their capital in the secure environment they are used to. The exchange maintains development, support, and sales offices in Palo Alto, California, London, and New York.

The company behind the new clearinghouse says that many of the top global FX brokers are already trading cryptocurrencies on Mint Exchange. “We’re addressing an enormous unmet need in the growing cryptocurrency market,” comments Harpal Sandhu, Chairman of Mint Exchange and CEO of Integral. “FX brokers, asset managers, and institutions have largely remained on the sidelines of the cryptocurrency market waiting for a trusted partner to deliver a robust, professional-grade exchange. They expect to manage their crypto trading in one secure location. That’s what Mint Exchange offers.”

Exchange Built on the Integral FX Platform

Founded in 1993, Integral is a cloud-based workflow management and trading technology provider for banks, brokers, and asset managers operating in the foreign exchange market. Its services are reportedly used by more than 200 financial institutions, including Bank of America, Citi, UBS, Wells Fargo and more. “Integral processes over $40 billion/day in fiat currency trading, so we’re confident that it can handle our cryptocurrency volumes,” Masato Kikuchi, Managing Director of Mint Exchange, explained why they licensed the platform.

“As more institutional players enter the crypto-asset market, liquidity providers need sophisticated technology and risk management tools to service their needs. Mint Exchange was the first to deliver a complete solution that also includes robust security and custody,” commented Todd Morakis, Co-Founder of JST Systems in Singapore, one of the launch partners of the new venue.

Commodities Trading: Investing, Options and Futures

Commodities Trading: Investing, Options and Futures

Commodities Trading: Investing, Options and Futures

You’ve mastered stocks, the building block of most financial markets. You’ve got a pretty good handle on mutual funds and have even started dipping your toes into ETFs and REITs. Now you’re ready to start making your portfolio a little more sophisticated. For the right investor, commodities might be

You’ve mastered stocks, the building block of most financial markets. You’ve got a pretty good handle on mutual funds and have even started dipping your toes into ETFs and REITs.

Now you’re ready to start making your portfolio a little more sophisticated. For the right investor, commodities might be the next move.

Is Commodity Trading Risky?

Before getting into the details of commodities trading we will discuss the risks.

Commodities are a high-risk, high-reward market that draw investors because of their potential upside. A particularly successful trade can make the investor a lot of money very quickly.

However, a bad trade can cost you. Many commodities contracts have virtually unlimited losses. What’s worse, unlike with stocks, many can result in you actually owing more money than you invested. Read on, but invest with care.

What Are Commodities?

A commodity investment deals with specific, raw goods like wood, pork, soybeans, gold or oil. This is different from stocks and related securities, which deal with corporate performance.

The typical commodities trader deals with futures and options contracts and is involved in buying or selling raw materials for future delivery. A commodities contract specifies:

• The specific commodity being traded;

• The date on which the sale will occur, called the expiration date; and

• The price per unit, called the strike price.

The profit margin on these contracts comes from contracting today to buy or sell products in the future at a better price than they might go for on a future date.

The typical structure of commodities trading is the futures contract. This contract is literally a deal to buy and receive the physical goods or to acquire and sell those goods by the expiration date. If you enter a futures contract for 100 pounds of orange juice, a truck will arrive with cans of fruit juice concentrate unless you sell or close out the position.

Investors buy futures contracts to profit off of them. A trader doesn’t want to receive the actual goods, he or she wants to make money by entering into a valuable contract.

Producers and retailers buy futures contracts to control prices and mitigate risks. Someone who actually uses a given product isn’t trying to leverage the financial market, they’re trying to plan for operational costs or profits.

Long vs. Short Positions

Commodities contracts can involve either selling or buying the materials.

A long position is a contract to buy the materials in question at a future date for an agreed-upon price. In this deal, the other party agrees to acquire and then sell you the commodity in question.

A short position is a contract to sell the product in question at a future date for an agreed-upon price. In this deal, the you agree to acquire and then sell to the other party the commodity in question.

Two Examples:

Sam Investor takes a long position for 10 ounces of gold in six months at $1,000 per ounce. This contract means that Sam agrees to buy 10 ounces of gold in exactly six months for $1,000 per ounce.

Sam wants the value of this contract. If gold sells for $1,100 per ounce at his contract’s expiration date, Sam will have the right to buy 10 ounces of gold for $100 per ounce less than they’re worth. This will make the contract worth $1,000 when Sam closes out his position.

If the price goes down, however, Sam will have to pay its value. If gold sells for $900 per ounce, Sam will now have to buy gold for $100 per ounce more than it’s worth. This contract will cost him $1,000.

Liz Farmer takes a short position for 100 bushels of soybeans in six months at $10 per bushel. This contract means that Liz agrees to sell 100 bushels of soybeans in exactly six months for $10 per bushel.

As a farmer, Liz does this to establish price security. If the price of soybeans drops below $10 per bushel, she has still guaranteed a market for 100 bushels at the price she wants. If the price of soybeans goes above $10 per bushel, she will lose the opportunity for that additional profit because she will still be obligated to sell at $10 per bushel.

Closing Out a Position

Cash Settlement Contracts

While technically a futures contract is one for future delivery of a product, most are contracts between investors. These deals are built around what’s called “cash settlement.”

In a cash settlement contract the parties never actually deliver any assets. Rather, at the expiration date they simply exchange the value of the contract in cash.

Closing Out

In a physical delivery contract, at the expiration date the parties actually show up with a truck full of raw materials.

Many commodities traders participate in the market for exactly this reason. Farmers, such as in our example above, use the futures market to lock in prices for sale of their crops. Retailers will use it to establish predictable prices for goods on the shelf. This is how the futures market was originally developed.

Investors, who do not want to handle physical assets, will typically resolve a physical delivery contract by closing it out. This is when the investor takes an equal but opposite position to their current contract. A long position will cancel out a short position and vice versa, creating a zero-sum liability for the trader.

For example, in our gold trading hypothetical above, Sam Investor holds a long position for 10 ounces of gold in 60 days. If he took a short position for 10 ounces of gold in 60 days at the same price, he would hold an equal but opposite contract. The clearinghouse would consider his position closed out, or “flat,” because the two positions would cancel each other out.

Options vs. Futures

There are two main types of contracts in commodities trading: futures and options.

Futures Contracts

In a futures contract you, the contract holder, have the obligation to either buy or sell the product on the given expiration date for the given price.

For example, a long position on crude oil for 1,000 barrels at $75 per barrel on June 1 means that on June 1, you must buy 1,000 barrels for $75 per barrel.

Options Contracts

In an options contract you, the contract holder, have the right, but not the obligation, to buy or sell the product on the given expiration date for the given price. Further, you may execute the contract at any time before the expiration date.

For example, a long option on crude oil for 1,000 barrels at $75 per barrel on June 1 means that at any time by or before June 1, you may buy 1,000 barrels for $75 per barrel. If you don’t exercise this right by June 1 the contract expires unused.

Because options contracts don’t obligate you to anything, they don’t have the risk that a futures contract does. You can walk away at any time with no further loss.

Most options contracts come with a premium. This is the fee you have to pay upon signing the contract. Futures contracts rarely have premiums, but they typically require that you have a minimum amount of money in your brokerage account to cover potential losses.

Advantages and Disadvantages of Commodities Trading

There are two main advantages to commodities trading. The first is diversification. Often the commodities market will move countercyclically to the stock market. As a result, this position can help buffer a portfolio from downturns.

The second advantage is speculative gains. Simply put, when a commodities contract does well it can perform spectacularly. Investors can make fortunes off of a single trade.

However, and we cannot stress this enough, the opposite is also true. Investors can lose fortunes off of a single trade as well. This is because of the chief risk to futures trading is nearly unlimited, back-end risk. With a futures contract you cannot predict how much money it may cost.

A futures contract is not like a stock purchase, where you can only lose the money you’ve put in. A futures contract actually calls for future performance by you, the investor. This means that if your position ends out of the money (that is, if it ends in a money-losing position) you will actually have to pay on that contract.

And a contract that goes disastrously can end with you owing a lot of money.

This is why retail investors would be well advised to focus on options contracts. While options are more expensive up front than futures contracts due to their premiums, they also come with a tightly capped risk profile: You can never lose more than the cost of the premium. This creates a mechanism for you to invest in commodities while keeping a predictable risk profile.