Join Fund Library now and get free access to personalized features to help you manage your investments.
It’s time to dip into the mailbox again, to answer readers’ questions on investing and personal finance.
Q – Would you venture an opinion in the growth potential of cyber security with reference to Evolve Cyber Security ETF? – Josh M.
A – Cyber security companies were doing very well until the recent selloff in the tech sector brought them down a few notches. The strong performance should have come as no surprise, given the increasing number of high-profile ransomware attacks we’ve seen in recent years.
One of our recommendations in my Internet Wealth Builder newsletter in this field, Palo Alto Networks Inc. (NSD: PANW), is up 623% since we first advised buying in 2015. But it’s down almost 20% from its all-time high, reached in early February.
The Evolve Cyber Security Index Fund – Hedged (TSX: CYBR) showed a gain of 28.51% for the year to Aug. 30. But most of that came in 2023; the year-to-date advance is 10.99% as the selloff took a big bite out of profits.
Historically, the fund shows huge swings from year to year. It gained 24.64% in 2019, 65.6% in 2020, and 5.71% in 2021, then lost 36.63% in 2022. It rebounded by 43.31% in 2023. So, if you decide to invest here, be prepared to ride out the peaks and valleys. My advice would be to wait until the market settles down before making a commitment.
Q – Do you think it’s worthwhile to keep a utilities allocation given that rates may be coming down at some point, or is it more worthwhile to put the cash somewhere else, such as a growth stock? To be honest, I’m inclined to sell my utilities even at a loss and buy more Nvidia given the growth (I had a small amount, and now it’s not so small). – Martha D.
A – Basically you are asking if it’s a good idea to sell low and buy high. The answer is obviously no.
Utilities struggled when interest rates started to rise, but they still offer good dividends and have upside potential as central banks start to ease. We’re already starting to see that happen: the S&P/TSX Capped Utilities Index is up 7.10% so far in the third quarter (to Aug. 30).
Nvidia is a great stock, but everyone piled in and drove it into bubble territory. As I write, it’s down almost 12% from its all-time high reached on June 20 and still falling. It’s difficult to predict where it will settle, but the p/e ratio is still high at 58.26.
I don’t see much downside in utility stocks right now. As for Nvidia, who knows?
Q – We have been thinking about the upcoming U.S. election, and as much as I try to believe that the majority of Americans are not MAGA crazy, we are worried about the effect of whatever outcome on the stock market.
Our RRIFs are modest, and we moved into a “preserving capital position” a couple of years ago when the market took a dive again. Our funds are managed and right now are about 7% in fixed income, 52% common shares, 37% in an RBC interest savings account (sort of a cash position), and 4% in foreign securities.
We are wondering if we should move to an even more conservative position, perhaps 70% cash and 30% common shares.
Our accounts are managed by a team at RBC, but sometimes I feel that they think all is well and elections and such won’t make a difference. I remember on the eve of the Quebec Referendum way back when a friend suggested we cash out a good portion and park our money until after the vote and then reinvest. We did and felt better having done it.
Is this another one of those times? If Trump gets in, do you think the world will tilt off its axis a bit? – Anne P.
A – If you look back, you’ll find the stock market reacted positively when Trump was first elected. That’s because most of his policies were business friendly, including tax cuts, deregulation, and a green light for energy – “Drill, baby, drill”, as he said in his acceptance speech at the Republican convention.
Some of his plans are still pro-business, such as his promise to extend his tax cuts. But I worry about his insistence he will slap a 10% tariff on all goods imported into the U.S. That will result in higher prices (consumers bear the brunt of tariffs), which could lead to a resurgence of inflation and a new cycle of rate hikes. We know from recent history what impact that has on the stock market.
I don’t expect a huge selloff if he is elected, but there will be nervousness until we have a clearer picture of his policies.
My advice is to do what makes you comfortable. It sounds like you are well off, so if you want to reduce your stock exposure, do so. A good night’s sleep is worth the sacrifice of a few bucks.
If you have a money question you’d like answered, send it to gordonpape@hotmail.com and write Fund Library Question on the subject line. I can’t guarantee a personal response but I’ll answer as many questions as possible in this space.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
Notes and Disclaimer
Content © 2024 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/juststock
Join Fund Library now and get free access to personalized features to help you manage your investments.
Fund Library
