FOMO & Greed
“Be fearful when others are greedy, and greedy when others are fearful.” – Warren Buffett
As of this writing, the Toronto Stock Exchange (TSX) and the Dow Jones Industrial Average (DJIA) are up more year-to-date (YTD) than they were all of last year, which is an incredible rate of return in a very short period of time. This is mostly attributed to strong corporate earnings and the roll-out of numerous COVID-19 vaccines. It is also due to in part by DIY investors who have moved into the markets in part due to the lack of sports gambling via low or no-fee online trading platforms like Robinhood. Some are looking for a cheap and quick way to make money and are making speculative bets on some very marginal companies, such as GameStop.
The divide between slow and steady investors and get rich quick investors is becoming more apparent than in the past. Scott Galloway, professor of marketing at NYU Stern School of Business likes to discuss the bifurcation of consumers into two broad categories; iOS and Android. Basically, if you pay a premium for products and services you receive (iOS), you’re likely richer than the majority of people, you don’t see as many advertisements and the pandemic has not made you as income insecure. If you receive your services at a considerable discount or for free, ads will permeate your life, job security is less sure and you’ve become the product (Android). People who use services like Robinhood are the product.
Clients at Aura Wealth Management have bought into an iOS experience. We do our best to provide our clients with an experience that is as frictionless as possible. We try to give quick replies to messages, fast administrative support and quarterly reviews to satisfy the needs of busy people as well as the most interested of investors. That said, one of the most important sources of friction is the financial advisor. This is a feature of the process, not a bug. This source of friction is meant to slow down the investment decision making process when greed and enthusiasm takes hold. The fear of missing out (FOMO) is a strong cognitive bias and can be fraught with danger, especially when investing. Always be aware of your inner Homer Simpson.
Refresher on CPP & OAS Benefits
As more clients are closing in on retirement, Canadians should refresh their knowledge of the Canadian Pension Plan (CPP) and Old Age Security (OAS) benefits that they are entitled.
The CPP is as an “earning-related program”, designed to replace between 25% and 33.33% of pre-retirement income up to a maximum of $1,203.75/month or $14,445/year for qualified Canadians. Full CPP benefits are available at age 65 but a reduced benefit can be taken earlier. CPP payments are reduced by 0.6% for each month prior to age 65, to a maximum of 36%. One has to apply for CPP at least four months in advance.
OAS is available to Canadians 65 years old and up and is not earnings-related. You must be a Canadian citizen or resident of Canada, depending on the number of years you’ve lived here. The maximum benefit for OAS is $615.37/month or $7,384.44/year. Your OAS benefit is also subject to a clawback rate (also known as a recovery tax) of 15%. This clawback begins if your income in retirement exceeds $79,845 and is fully gone at $129,075 so proper income planning in retirement is crucial. OAS can be applied for as early as 11 months in advance.
Welcoming new members to the team!
We are very excited to introduce two financial advisors to Aura Wealth Management, Amanda and Dale Krushel. This father and daughter team brings over 45 years of industry experience and bring even more depth to our team.
For a more detailed bio of each of them please go to our website.
This newsletter has been prepared by Stephen Maser & Joe Howorko of Raymond James Ltd. (“RJL”). It expresses the opinions of the writer, and not necessarily those of RJL. Statistics, factual data and other information are from sources believed to be reliable but accuracy cannot be guaranteed. It is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. RJL, its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Raymond James Ltd adheres to.It is intended for distribution only in those jurisdictions where RJL is registered as a dealer in securities. Distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. This newsletter is not intended for nor should it be distributed to any person residing in the USA. Raymond James Limited is a Member Canadian Investor Protection Fund