capital gains

Market Bubbles : Why We Get Caught Up and How to Stay Smart

/ Jesse Ogloff

Ever heard the saying, “What goes up must come down”? That’s exactly what happens in market bubbles. Prices of stocks or other investments skyrocket, everyone rushes to buy, and then—boom—the bubble bursts, and prices crash. The tricky part? People rarely see it coming.

But what is a bubble, and why do they happen? More importantly, how can you protect yourself from getting caught up in one?

The Emotional Side of Investing

When we think about market bubbles, we usually picture stock prices climbing higher and higher. But the real force behind a bubble isn’t just numbers—it’s human emotion.

The biggest culprit? The fear of missing out (FOMO).

When you see your friends, neighbors, or coworkers making big money on an investment, it’s tempting to jump in too. Nobody wants to feel left behind. But this excitement can cause people to ignore warning signs. They stop asking, “Is this a smart investment?” and instead think, “If I don’t buy now, I’ll miss my chance!”

That’s how bubbles start: everyone wants in, demand surges, and prices rise far beyond what the investment is actually worth. But eventually, reality sets in—prices can’t stay high forever. When people finally realize this, they panic and sell, and the bubble pops.

New Trends, Same Mistakes

Most bubbles are fueled by something exciting and new. Whether it’s a new technology, a booming industry, or a “can’t-miss” investment, people get caught up in the hype.

Look at the internet in the late 1990s. Everyone knew it would change the world, and it did. But during the Dot-Com Bubble, investors threw money at any company with “.com” in its name, even if it had no real profits. Eventually, reality hit—many of those companies failed, and stock prices crashed.

The lesson? Just because something is new and exciting doesn’t mean it’s worth any price. Investing wisely means looking past the hype and asking, “Is this actually a good business?”

Big Companies Don’t Stay on Top Forever

Another mistake people make during bubbles is assuming that the biggest companies will always stay successful. History tells a different story.

Take Kodak, Xerox, and Polaroid—once giants in the business world, now barely relevant. Industries change, new competitors emerge, and technology evolves. Betting that today’s winners will always be on top is risky, especially if their stock prices are already extremely high.

If you’re investing in big-name companies, make sure you’re paying attention to their long-term potential—not just their recent success.

What Happens When the Bubble Bursts?

When a bubble pops, prices don’t just dip—they crash. Investors who bought in too late find themselves with big losses. Worse, many lose confidence and sell at the worst possible time.

The best investors stay calm and avoid getting caught up in the madness. Instead of jumping in when prices are high, they keep some cash on hand and wait for opportunities to buy when prices fall. It takes patience, but those who avoid the rush often come out ahead.

How to Avoid the Trap

So, how can you protect yourself from falling into a bubble? Here are some simple rules:

1. Don’t invest just because “everyone else is doing it.” If something feels too good to be true, it probably is.

2. Ask yourself if the investment makes sense. Is it a strong, profitable business, or just popular at the moment?

3. Be patient. Good investments don’t need to be rushed. If a stock has already skyrocketed, it may be too late.

4. Have a long-term plan. Instead of chasing quick profits, focus on building steady wealth over time.

5. Keep some cash available. When the bubble pops, there will be bargains—but only for those who are ready.

The Bottom Line

Bubbles happen because people get caught up in excitement and stop thinking critically. The key to avoiding them is to stay rational and not let emotions take over your investment decisions.

My specialty is to help investors stay focused on smart, long-term strategies instead of chasing the latest market trends. If you’re looking for guidance on building wealth safely and avoiding market traps, contact me at info@financerx.ca.

Are You Living Too Frugally?

/ Jesse Ogloff

Many people assume that financial security is purely about numbers—having a stable income, a well-funded retirement plan, and an emergency cushion. But in reality, financial well-being is just as much about mindset as it is about money.

There are plenty of people who are in a strong financial position but still feel uneasy about spending, constantly worrying that they don’t have enough. They deny themselves experiences, avoid making financial moves that could improve their lives, and operate under an unnecessary sense of scarcity.

If this sounds familiar, the question you need to ask isn’t “Do I have enough?” but rather “Why do I feel like I don’t?”

The Scarcity Mentality: A Barrier to True Financial Freedom

A scarcity mentality is the persistent belief that your resources are limited, even when the numbers suggest otherwise. It creates an underlying fear of financial instability, making it hard to enjoy the money you’ve worked so hard to earn.

This way of thinking can manifest in different ways:

• Over-saving at the expense of enjoying life – Hesitating to take trips, make upgrades, or spend on meaningful experiences, even when it’s affordable.

• Paralysis in financial decisions – Avoiding investment opportunities or wealth-building strategies due to fear of loss.

• Chasing financial trends out of fear of missing out – Feeling pressure to jump into the latest stock, cryptocurrency, or investment trend to “keep up.”

The problem isn’t necessarily financial—it’s psychological. When people get stuck in a scarcity mindset, they often make decisions from a place of fear rather than logic, which can limit their potential and negatively impact their overall well-being.

Where Does This Fear Come From?

A scarcity mentality is often shaped by personal history and environment. Some common influences include:

• Growing up in a household where money was tight – Early financial stress can stick with people for life, even when they’re in a much better situation as adults.

• Life events that created financial uncertainty – Job loss, divorce, economic downturns, or unexpected setbacks can lead to long-term financial anxiety.

• The influence of social comparison – Constant exposure to other people’s wealth (or the illusion of it) can make individuals feel like they’re always behind, even if they’re in a great position.

• Cognitive biases that exaggerate financial risk – The human brain is wired to focus more on potential losses than potential gains, making it easy to fear worst-case scenarios that may never happen.

If left unaddressed, these factors can cause people to hold onto unnecessary financial fear, even when their financial reality is stable and secure.

Breaking Free from an Unnecessary Scarcity Mindset

The first step in shifting out of a scarcity mindset is recognizing it. Ask yourself:

• Are my financial fears based on facts or just feelings?

• Am I holding back from things I can afford due to irrational concerns?

• Have I let past experiences dictate my current financial choices?

If you notice a pattern of fear-driven decision-making, it may be time to challenge those thoughts and make a conscious effort to change your approach.

1. Reframe Your Financial Perspective

Whenever an anxious financial thought arises, step back and ask:

• Is this worry based on real numbers, or just fear?

• If the worst-case scenario did happen, would I truly be unprepared?

• Am I focusing too much on what could go wrong instead of what is likely?

2. Stop Letting Fear Control Your Financial Choices

If your financial plan is solid, give yourself permission to enjoy what you’ve built. Money is a resource meant to provide security and enhance your quality of life—not something to be stockpiled out of fear.

3. Get an Objective Financial Perspective

One of the best ways to combat financial anxiety is to work with a fiduciary professional, like a Certified Financial Planner, who can provide an objective view of your situation. A trusted CFP can help you see where you truly stand, ensuring your decisions align with logic rather than unnecessary fear.

Make Sure You’re Living the Life You Can Actually Afford

If you have the means to enjoy life but are holding yourself back, it may be time to adjust your financial mindset. A good financial plan isn’t just about making sure you’ll never run out of money—it’s also about making sure you use your money wisely to build a fulfilling life.

There’s a difference between responsible planning and living in fear. Make sure you’re not letting an outdated mindset rob you of the life and retirement you can genuinely afford.

For personalized guidance, contact me at info@financerx.ca.

Uncertainty Around Proposed Capital Gains Tax Changes in Canada

/ Jesse Ogloff

Earlier in 2024, the Liberal government proposed significant changes to Canada’s capital gains tax rules. The plan aimed to increase the capital gains inclusion rate from 50% to 66.67% for corporations and trusts and introduce a higher inclusion rate for individuals on annual capital gains exceeding $250,000. The changes were set to take effect starting June 25, 2024.

However, the resignation of Prime Minister Justin Trudeau and the prorogation of Parliament have stalled the legislative process required to implement these changes. As of now, the proposed adjustments have not become law. This legislative pause has created uncertainty for taxpayers, especially those preparing for year-end financial planning.

Initially, the Canada Revenue Agency (CRA) signaled that it would apply the proposed rates to capital gains realized after June 25, 2024. With Parliament effectively reset, any motions related to the tax changes would need to be reintroduced when the House of Commons resumes. In the meantime, tax professionals advise individuals and corporations to prepare for the possibility of increased capital gains taxes, with the potential for refunds should the legislation fail to pass.

Until the government provides further clarification, taxpayers are encouraged to consult their financial advisors to ensure their investment and tax strategies align with both current rules and potential changes.

For personalized guidance on navigating uncertain times, contact me at info@financerx.ca.