Hunting for the best brokerage
How to find a brokerage that helps you build the wealth you deserve
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Weekly Market Update 🗒️💡
Insights on the Bond Market
The global sell-off in bonds is a sign that investors have accepted that higher interest rates will be around for longer.
Yields in US and Canadian bond markets hit 16-year highs earlier this month.
This trend comes after central banks suggested that elevated rates would last for some more time.
The Fed also indicated that another hike could be on the way this year, with only 2 expected cuts in 2024.
As a result, investors are justifying a shift in assets and the bubble that has fuelled stocks for so long is now under pressure.
This has caused major players like US banks and foreign investors to leave the bond market causing a nationwide sell-off.
To top it off, investors with long-term bonds with lower interest rates are selling their assets for new bonds with shorter maturities and higher rates.
Because the yield curve is inverted, you now earn more money lending to companies or governments for one year than you would otherwise earn for 30 years.
Combining that with lower volatility, it makes sense to buy new bonds with shorter maturities.
When the bulk of mortgage renewals come due in 2025-2026, people will be refinancing their mortgages at 2 to 2.5x what they’re currently paying.
This could cool off the housing market, combined with a decline in prices.
My take: the housing market will cool off. It’s not a matter of if, but when.
Rates are too high. Disposable income is too low. And the effects haven’t fully priced into the market yet.
If you’re looking to buy a home, I would hold off on that decision for the short term.
Wait and see what happens in the next 2-3 years.
No sense in buying a property only to have it fall drastically in price when demand falls with it.
If you absolutely need a place to live, I’d consider renting for the short term and keeping some cash on the side for a possible home purchase a couple of years down the road when prices start to come down.
Finding the right Broker
Finding the right investment broker/platform is (in my opinion) the most overlooked part of investing.
Beginner investors either don’t know where to start or choose the first broker that comes up on a Google search.
You can retire thousands of dollars richer by choosing the right one.
In some cases, it can also limit your ability to trade your favorite stocks.
If you’re confused about which broker to choose or maybe you have one but aren’t happy with it, I’m going to take you through 6 important things to look out for when finding your match.
Disclaimer: this information will be directed toward Canadian/U.S. investors. However, these principles can apply globally depending on where you live.
If you want more on finding the best broker, as well as how to set up an effective budget, rebalance your portfolio and how to use stock screeners to your advantage, click here.
Let’s dive in.
Diversification Accessibility
Unfortunately, some brokers are extremely restrictive.
In some cases, you can only buy and sell certain stocks that are traded on specific exchanges or buy certain asset classes.
For example, there’s a Canadian platform called Wealthsimple that doesn’t allow you to trade options on Canadian stocks (as of October 2023).
If you’re just starting out on your investing journey, I don’t recommend you get into options just yet.
But you can see how that would be restrictive if you wanted to.
When choosing an investment broker, you want to make sure you’re able to trade:
Individual stocks.
Exchange Traded Funds (ETFs).
Mutual Funds.
Bonds.
Options.
Crypto (bonus).
You also want to make sure you have access to global markets.
If you live in Europe, you want to be able to access the New York Stock Exchange and the NASDAQ.
If you live in North America, you want access to the London Stock Exchange, the Shanghai Stock Exchange, etc.
In the grand scheme of things, geographic diversification isn’t as big of a deal as diversification by asset class.
But it never hurts to have access to markets across the globe.
Low or No Trading Fees
My rookie mistake was using a trading platform that charged me $9.95 for every trade I made.
No matter if it was 1 share, 20 shares, $50 or $5,000.
Every time I hit the buy or sell button, I paid $9.95.
For 2 years I put up with it until I eventually switched over to Questrade and Wealthsimple (two Canadian brokers).
Over the course of those two years, I probably made 15 trades per year (buys and sells), so I lost close to $150 just in fees.
Let’s just say hypothetically I didn’t switch brokers and I continued with this platform for another 30 years until retirement.
15 trades per year at $9.95 for 30 years would cost almost $4,500 in fees.
That’s the equivalent of 2 all-inclusive vacations taken from you and your family.
And that’s why it should be your goal to find a broker that offers extremely low (or no) trading fees.
The more you save in fees, the more money you’ll keep for yourself.
Whether your goal is to build generational wealth and pass it on to your kids or just to sit on a pile of cash at retirement, the extra fees will make a huge difference in the long run.
The Hidden Trap