Beginner TFSA investors should strive to keep things simple. Yes, investing can be pretty complicated at times, especially when we have sector rotations and immense volatility. That’s why I’m a huge advocate of buying what you know and not seeking to take action just because everybody else on TV wants you to respond to a 10% correction in markets.
Remember, discipline and staying the course are key to building wealth over the long run. At the end of the day, it’s all about the next 10, 20, or even 30 years. The last month was nasty for traders and short-term thinkers chasing big gains. For long-term investors, though? A correction was a sign of relief. And while the bottom may or may not be in, I’d argue that Canadians should at least think about putting some money to work if they’ve been sitting on the sidelines, waiting for things to calm before putting money in. In the grander scheme of things, I don’t think the January 2022 correction will be as newsworthy as it is today!
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Valuations get hit with a reset: Time to buy with your TFSA?
Valuations were stretched going into 2022. 2021 and 2020 were some solid years for the broader markets. And a correction, I believe, is healthy. Many bubbles have burst, with some shedding over 70% of their value. With rotation away from high-multiple names and back into cash flow-generative value, I think the market has really broadened out, improving the overall health of the current bull market.
While earnings could have been better this season, they weren’t at all terrible or indicative of a recession. Indeed, Apple’s quarter, which hinted at supply chain relief could pave the way for better-than-expected economic growth over the quarters ahead. Robust growth and elevated inflation gives the Bank of Canada and U.S. Federal Reserve to green light to hike rates. Although the Bank of Canada sat on its hands this month (I think it should have hiked by 25bps), the days of rates at these lows are numbered.
The ESG Leaders ETF could lead the TSX higher!
Enter BMO MSCI Canada ESG Leaders Index ETF (TSX: ESGA), a newcomer on the ETF scene that looks poised to move higher for the rest of 2022.
At first glance, the ESGA seems like just another ESG fund, but it’s so much more. Remember, a fund or ETF is only as good as its constituents! Under the hood, we have some stellar Canadian companies, including Shopify, Canadian banks, and CN Rail, comprising a meaningful chunk of the ETF. Undoubtedly, these firms are some of the best in Canada!
With a 0.17% MER, the ESGA provides better sector diversification than the TSX Index (the TSX doesn’t fairly represent tech!) and what I believe are a higher calibre of firms. For that reason, the ESGA ought to be viewed as a stellar way for young TFSA investors to get into the market waters, even if they’re a tad choppy.
Personally, I think the ESGA is one of the best funds in Canada. It truly is a basket of some of the best firms in Canada.
