Behavioural finance and risk tolerance
This week’s column will continue the discussion on behavioural finance. Specifically, how individual investors overestimate their ability to assume risk. Another way of introducing the topic is suggesting human ego interferes with logical decision-making processes. Financial theory suggests investors are rational and they collect and analyze information in an unbiased logical way. Apparently this is […]
Investment strategy: a balancing act of risk taking
Is there a time when an investment advisor should challenge a client’s investing preference? One of the first conversations between an advisor and their client focuses on how the client hopes to invest their money. Central to this conversation are two key issues: investment objective and investment risk. Any investment strategy must incorporate these two, […]
Not all investors are created equally when it comes to risk
Investment risk is a large part of investing. Assessing your risk tolerance requires you to look at your willingness to accept investment risk, and your financial ability to assume it. Government of Canada bonds are low risk and considered one of the safest forms of investment. You lend the government money and they pay you […]
What the Canadian sale of negative-yield bonds means for investors
A major Canadian bank sold an investment that guarantees investors will lose money. That might seem absurd but hold on for a second, it gets more interesting. The bank had investors lining up and could not meet the demand. The Canadian Imperial Bank of Commerce raised almost $1.8 billion by selling bonds that yield minus […]
The housing market: home sweet home or house of cards?
Is real estate a ticking time bomb? Is your house overvalued? The only people who are not afraid of the rapidly escalating house prices in Canada are those who own them and those who line up to pay record-breaking prices. The Canadian dream of homeownership is alive and well. However, many organizations or government bodies […]
Stock market’s volatile reaction to Brexit vote is normal
Investors act differently when they are scared. Most of us don’t like to admit that emotions can control our actions, however, neuroscience tells us a different story. Evidence shows that emotions can play a large role in decision-making and can, at times, lead to choices that are not in our best interests. The recent stock […]
Investment guidelines might harm investors
There are rules and regulations designed to keep investors safe. Sometimes those rules might backfire. Recently I attended a conference designed to provide insight into guiding the type of advice given to clients. I think having strict rules in the investment industry is a good thing. Regulators that are responsible for policing our industry are […]