Knowledge is Power: Why Foreign Stocks, Financial Lessons and Top China Brands Edition

Posted by David Hunkar on 4 July 2016, 10:56 am

Eight lessons investors can draw from Brexit, so far, as the political drama continues (Financial Post)
Commodities are crushing it in 2016: Here’s why (MarketWatch)
Brexit Is a Lehman Moment for European Banks (Bloomberg)
Robots versus workers (OECD Observer)
Top 10 China’s most valuable brands in 2016 (China Daily)
Why You Should Invest Beyond U.S. Stocks (Betterment)
The internet is creating a new class of plutocrats (MoneyWeek)
Six macro charts that long-term investors need to bookmark (FE Trustnet)
Why it could be time to invest in oil companies again and Blue chips at a bargain? Meet the 10 “Dogs of the TSX” (Canadian Business)

Dinosaurs in Oxford University Museum, UK

A Review of S&P/TSX Equal Weight Diversified Banks Index

Posted by David Hunkar on 3 July 2016, 9:09 am

Canadian bank stocks are excellent investment option for long-term investing looking for steady dividend income and price appreciation. Among the top-five banks that dominate the market. most have good exposure to the US market. For instance, Canadian Imperial Bank of Commerce (CM) last week bought Chicago-based PrivateBancorp, Inc. (PVTB) to expand its footprint.

Instead of investing individually in each of the banks, some investors may be wondering if there is an ETF that tracks Canadian banks. Currently there is no ETF trades on the US exchanges that tracks Canadian banks. However there are ETFs trading on the Toronto Stock Exchange.

The S&P/TSX Equal Weight Diversified Banks Index is the equal-weighted version of the S&P/TSX Diversified Banks Index. The index consists of the six major Canadian banks. This index has outperformed the benchmark TSX Composite index over the 5-year and 10-year periods as shown below:

Click to enlarge

S&P/TSX Equal Weight Diversified Banks Index vs. S&P/TSX Composite Index – 5 years:

S&P/TSX Equal Weight Diversified Banks Index vs. S&P/TSX Composite Index – 10 years:

Note: The above charts show only price returns (i.e. excluding dividends).

Source: Google Finance

The S&P/TSX Equal Weight Diversified Banks Index vs. S&P/TSX Composite Index based on Total Returns(TR) is shown below:

Source: S&P Indices

It is not possible to invest in an index directly. So one has to invest via an ETF or mutual fund that mimics a particular index.

Some facts about the S&P/TSX Equal Weight Diversified Banks Index:

Total Number of Constituents: 6
The Constituents are: Bank of Montreal(BMO), Bank of Nova Scotia(BNS),Canadian Imperial Bank Of Commerce(CM), National Bank of Canada NA, Royal Bank of Canada(RY) and Toronto-Dominion Bank (TD). National Bank is not listed on the US exchanges.
Trailing P/E as of May, 2016: 11.75
Dividend Yield: 4.36%

Note: All figures are in Canadian Dollars

Download: Factsheet

How to invest in Canadian banks via an ETF?

The BMO S&P/TSX EW Banks Index ETF(ZEB.TO) is one ETF to gain exposure to Canadian banks. This ETF aims to replicate the performance of the S&P/TSX Equal Weight Diversified Banks Index.

Disclosure: Long BMO, BNS, CM RY, TD

Four Models for Britain’s Future: Chart

Posted by David Hunkar on 2 July 2016, 7:53 am

Interesting article on Brexit and its implications in the latest edition of Bloomberg BusinessWeek. Here is a chart showing the options available for UK:

Click to enlarge

The full article is worth a read..

Source: After Brexit, Here’s What’s Next for Europe, Bloomberg BusinessWeek

FTSE All-Share Index Annual Returns and Intra-year Declines

Posted by David Hunkar on 1 July 2016, 3:37 am

Volatility is normal in equity markets. The dramatic selloff that followed Brexit and the reversal in the past few days is a classic example of this phenomenon.

Even in good years stocks can experience gut-wrenching declines. Ultimately the annual returns or long-term returns matters most than dramatic declines in a short-time. The following table shows the annual returns and the intra-year declines of the FTSE All-Share Index:

Click to enlarge

Source: Why ‘Brexit’ could be a blip in stock market history, Citywire UK

From the article:

The red dots in the chart show the maximum fall in each year since 1986, the bars the annual move in the All-Share index. Despite average falls of nearly 16% at some point the index delivered positive returns in 21 of the past 30 years.

So the key takeaway is investors should not get scared by sharp declines on specific days or even in a short time period. Stocks can swing wildly up and down during the course of a year. Selling out during the panics hoping to buy back is not a wise strategy.Instead of worrying about short-term price movements investors are better off focusing on their long-term goal and the investment return over a year or many years.