When earning any income, three options are available to those who wish to make smart financial decisions: saving, spending or investing their money.
When receiving the Canadian Emergency Response Benefit (CERB) or the Canadian Emergency Student Benefit (CESB), many are left without a financial plan. In qualifying for either of these funds, the federal government provides you with anywhere from $1,250 to $2,000 a month over a four-month period.
Saving
The most conservative option for your money would be to save the money in a low-interest bank account or a Guaranteed Investment Certificate (GIC). Currently, the economy is volatile and investing even in large companies can be dangerous because the future of the market is uncertain.
Additionally, the Canadian Revenue Agency (CRA) has made it known that they could require you to return your CERB/CESB income during tax season if they believe you do not meet the rather vague criteria. Saving money in an account or GIC with high liquidity allows for fast repayment if necessary.
Spending
The second, and probably the most popular option, is spending your money. Many people have no choice but to spend it — to run their household, business, or purchase necessities.
As you spend your income, you are revitalizing the economy. The more money people spend — especially at small businesses — the more quickly our economy will recover from its current recession.
Investing
The final (and riskiest) option is to invest this money, as the stock market continues to be extremely volatile. However, this does not necessarily mean that all investments will suffer.
Many companies are profiting from the current isolation regulations. The majority of these companies are in the technology sector and are listed on the National Association of Securities Dealers Automated Quotations System (NASDAQ) stock exchange.
The majority of technology stocks listed on the NASDAQ are trading at the same price as they were six months ago. The consistency of these stocks is a source of hope and a rewarding investment for many investors.
The success in technology stocks is due to the fact that many people are continuing to use online platforms while confined at home. Businesses such as Amazon, Google and Netflix are continuing to succeed despite the pandemic.
Technology stocks are not the only stocks that have benefited from the recent isolation regulations and subsequent uncertainty.
Gold companies have maintained their value during the crisis. The price of gold has risen approximately 16 per cent since March, at the time of publication. Oftentimes during uncertainty, many people sell their assets and buy gold, as the value of gold is unlikely to change in an adjusting market.
This leaves us with the following question: is it a good idea to invest your CERB/CESB money in companies that have been successful during this pandemic? The easy answer is probably not. Saving your money in a low-interest bank account or GIC is the safest option. Investing right now is uncertain and could lead to painful repercussions.
However, this is not to say that there is no potential for companies to be successful. The question is whether you want to take the risk.
For those who want to dip their toes in the water, here are three Canadian companies that could be successful even if the market takes another significant downturn.
Franco-Nevada is a royalty gold company that beat expectations on their last four earnings reports and doubled in size in the past year.
The price of gold is continuing to increase as many people fear for the economy’s long term prospects. Historically, gold companies have done well when bond yields are low, as they are now.
Open-Text is Canada’s largest software development company that acquired over six billion dollars of assets within the last six years. It also trades at a less expensive rate than other Canadian technology stocks.
When the market crashed, the company was hurt financially —similar to many others. However, it recovered extremely quickly and beat earnings estimates the past two quarters.
Brookfield Asset Management is a company with investments in real estate, infrastructure, renewable power, as well as private equity and credit in the developing economies of Brazil and India.
The company showed tremendous growth in the last five years and has also been buying back shares, lowering the shares outstanding, and thus supporting the stock price. Brookfield Asset Management’s excellent cash flow and respected management makes it a great long-term hold.
So what to do?
Just because there are three ways to make the most of your money, you don’t have to pick only one. I am doing all three. COVID-19 has left me unemployed and is forcing me to spend, which is a sad reality for many.
Spending your money is not a bad option — sometimes it is the only option. I am trying not to spend all of my CERB, but feeling guilty for having to spend money will get you nowhere.
Financial stability during COVID-19 is difficult to guarantee. However, saving my money and only spending what is necessary makes me feel as secure as one can feel during these unprecedented times.
Featured image provided by Sara Mizannojehdehi.
