How to invest in a POST-COVID era
There’s no question that life has changed drastically over the past year as we continue to collectively navigate the fallout from the COVID-19 pandemic. From overwhelming feelings of uncertainty to unexpected lifestyle changes, to say the last 12 months have been challenging would be an understatement. Yet for some Canadians, one silver lining to the pandemic has been the increased ability to save money.
Now, with the mass vaccination campaign underway, many of us are finally able to envision a life post-pandemic. Here, the experts at Rothenberg Capital Management share their wealth management expertise as we prepare for the POST-COVID era.
“Many households actually saved money during the pandemic because they didn’t spend on things like dining, transportation, and kids’ activities,” said Robert Rothenberg, CEO of Rothenberg Capital Management. “Travel, recreational activities and cultural events were also curtailed, and this had a big impact on personal savings; people couldn’t spend their money as freely as before, and so the money they didn’t spend, they saved.”
These changes in spending habits resulted in a reported increase in savings in 2020 of roughly $5,800 per Canadian despite unemployment levels reaching record highs. According to the Bank of Canada, the disposable income of the average Canadian rose by an additional $1,800 in 2020.
When it comes to investing those savings, no matter your income, you’re going to have similar investments in your portfolio, just in different quantities; this is the cornerstone of the Rothenberg balanced portfolio philosophy.
“You don’t want to have all your eggs in one basket,” Rothenberg said. “A balanced portfolio with the right combination of stocks, bonds, and alternative investments based on your risk tolerance level, risk capacity, and time horizon is crucial for longterm success. One way to determine your risk tolerance level internally is to go back a year and ask how you felt when COVID started and markets dropped significantly.”
Moving forward, Rothenberg says everyone should consider the following five questions when preparing their finances for the end of COVID.
1. What PRE-COVID expenses will come back when things normalize?
2. What COVID expenses will remain when things normalize?
3. What would a one to two per cent increase in interest rates do to your budget?
4. What would a one to three per cent increase in your marginal tax rate do to your budget?
5. And lastly, can you optimize the performance of your investment holdings by undertaking a review to a focus on companies that will benefit coming out of the pandemic? For individuals with accrued savings, the current climate offers many attractive investing opportunities.
“Look at companies that were hit hard, survived, and will now benefit from people wanting to do things that they previously couldn’t,” Rothenberg said. “So things like shares in airlines, for example, cruise lines, some real estate companies, and so on. We’re already seeing stock price stagnation and drops since January for companies that were extremely popular during the pandemic such as Amazon, Netflix, and Peloton. Air Canada on the other hand is beating the markets.”
Capitalizing on the POSTCOVID era from an investment standpoint largely depends on how Canadian spending habits will shift as parts of the country begin to re-open in the coming months.
“It will be interesting to see how things like food delivery apps, home workout programs, tele-health services, and such will be used POST-COVID, and how their company’s stocks perform as a result,” Rothenberg said. “That said, when it comes to investing, it’s important not to become stuck in our own microcosm; we’re all focused on the situation in our own province for practical purposes. But we’re not bound by geography when it comes to investing.”
Now for example, we see the vaccination campaign rolling out with great success in the United States, meaning their economy will likely begin to pick up more quickly than in Canada. This could mean potentially lucrative investment opportunities, which are available to Canadians through the right investment advisors. While a Canadian firm, Rothenberg Capital Management provides investors with access to purchase US stocks and ETFS.
Whether investing for the future, or saving for the present, Rothenberg emphasizes the importance of Canadians evaluating their budget to make the right financial decisions.
“People will need to make adjustments to their budget to avoid having their family balance sheet implode,” Rothenberg said. “This is especially true for people who have taken on larger expenses or any debt they can’t easily payoff when COVID ends. But regardless of how your family’s financial situation has shifted during the pandemic, evaluating your current needs, goals, and opportunities moving forward can help you exit the pandemic dynamic in a financially stable fashion.”
Consulting with a trusted advisor is the safest and most effective way to formulate an investment plan to take advantage of current opportunities in the market, while subsequently planning for the future. For more information, visit www. Rothenberg.ca or call 514-9340586 (Montreal) or 403-2282378 (Calgary). The branches are open, however an appointment is required due to COVID-19 regulations.
The opinions expressed are based on an analysis from the time of publication and are subject to change. The information contained in this document does not constitute an offer or solicitation to buy or sell any of the securities mentioned, and may not apply to all types of investors. Rothenberg Capital Management is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC)