My Own Advisor

Well, from a real high to a major low.  Reality hit my Ottawa Senators earlier this week, losing 7-3 to the mighty Pittsburgh Penguins.  At the time of this post, our team is down 3-1 in the best-of-seven game series and the pivotal game # 5 is Friday night.  Last week, I said Ottawa would take the series in seven gruelling games but I must admit, I have my doubts now.  So, while I still believe in our team that belief is admittedly fading because the fire-power from the Pens seems just too much.  If this was the last home game of the season, at least our long-time Ottawa captain Daniel Alfredsson has the last puck he ever played on home ice as souvenir – TV replays showed he got it after the end of game # 4 from the linesman.

White flag ready to wave or not, it’s been a great year for the Senators and they deserve tons of credit gutting it out through an injury-plagued season and growing a young team at the same time.  Regardless of the outcome I’ll be cheering for you boys during game # 5.  You can follow my tweets during the game here.

Here are some recent posts by yours truly followed by some of the best articles I read from the personal finance blogosphere over the last week or so.

April 2013 Dividend Income Update

Canada’s Top Performing Companies 2013

3 Great Ways You Could Have Spent Your Tax Refund

 

Prairie EcoThrifter said not to waste too much money on your garden.  No, that’s what my lawn is for….

In enjoyed this post about solving a debate over bonds, on Michael James on Money.

Mr. Money Moustache said the financial media has it all wrong.  Instead, focus on where you can save money and then invest that money and make it grow.  Some savings tips?  “There is no difference in the speed at which a 2004 Honda Civic and a 2013 Honda Accord will get you to work, but the difference in operating costs will add up to many hundreds of hours of your work over the cars’ lifetimes. Bikes improve your life even while reducing your need to pay for cars. Bringing your own lunch to work provides you with healthier food while allowing you to keep much more of the money earned while working.”

Boomer and Echo said Tax Free Savings Accounts (TFSAs) can make you rich.  They very well might, if you use the account effectively over a long investment period.

The Passive Income Earner listed some top stocks to consider.

Preet Banerjee reminded us to forget the latte-factor for a minute, spending money on booze could be much more painful to your retirement plan.

Thirty Six Months wants to give you $10,000, if you’re a superstar saver.

Big Cajun Man recalled a good ol’ saying from his father, when dealing with telcos.

Dividend Mantra is starting to look at more Canadian bank stocks for his portfolio.

I like what Steadyhand wrote about being a better investor: “1) being realistic, 2) having a long-term plan, 3) committing to a routine, 4) being prepared for extremes, and 5) being a good CEO of your portfolio.”

Rick Ferri said there is a good reason to own bonds:  a bond allocation helps protect a portfolio from its owner.

Outlier Model wondered if Encana was a good choice for the TFSA.  It could be, just be mindful some Canadian companies pay their dividends in USD and the consequences of that.

Dividend Ninja told us what happens to bonds when interest rates rise.

Canadian Budget Binder revealed what are realistic investment returns although I’m not convinced “good long-term investors can probably make 15% a year…”  If I can get between 5-7% real return (after inflation) I’ll be very happy over the next few decades.  In The Random Walk Guide To Investing by the legendary Burton Malkiel:  “It turns out that the longer you hold your stocks, the more you can reduce the risk you assume from investing in common stocks. From 1950 through 2002, common stocks provided investors with an average annual return of a bit more than 10 percent…”  “Even during the worst 25-year period you would have earned a rate of return of almost 8 percent — a quite generous return and one that was larger than the long-run average return from relatively safe bonds. This is why stocks are a wholly appropriate medium for investing in long-term retirement funds.”

The Blunt Bean Counter said finding a great business partner is similar to finding a spouse.

Justin Bender from PWL Capital Inc. shows us keeping bond ETFs in your non-registered account is painful exercise, tax wise.

Dividend Growth Stock Investing wrote about the killer compounding factor offered by reinvesting dividends for decades.

Thanks for reading and sharing this article.

Drawing some inspiration from some other great blogs recently, like Give Me Back My Five Bucks and Million Dollar Journey, I wanted to ask you – what did you do with your tax refund this year?  Did you spend it wisely?

I’m sure I’m no different than you but we’ve got a bunch of priorities around our house in 2013.  Home improvements, paying down mortgage debt, investing for the future and taking some funds to travel and enjoy life are important things to us.  With a busy life and obligations, it’s hard to decide what the priority should be.  Maybe all of these things are worthy candidates?  In no particular order then, here is what I consider some of the best uses for your tax refund this year or any year:

1.      Reinvest in your RRSP

Revisiting a previous post here on my site, if you do not reinvest the tax refund gained from RRSP tax deduction then I believe you are not capitalizing on the true power of this account.  A friend of mine told me recently, he believes RRSPs are misleading to many investors – he is probably right.  While RRSPs are in fact an excellent account for retirement savings, a Registered Retirement Savings Plan could easily be rebranded as a “Registered Reinvestment Savings Plan”.   Meaning, to make the most of this account you should really reinvest the tax deduction as much and as often as you can.  At some point, the tax deduction you get today or what I consider a temporary government loan must be paid back when you withdraw RRSP funds.  Hopefully though, you are withdrawing funds in a lower tax bracket than your contributions of today.  This may or may not be the case for you so you need to use this account wisely.

2.      Invest in your TFSA

Folks who read my blog regularly are probably aware I’m a huge fan of the Tax Free Savings Account (TFSA).  This account is a true gift to Canadians.  You can find out why I adore this account in some previous posts here and here.  My strategy is to use the TFSA to hold Canadian dividend paying stocks that return consistent dividends every month or quarter.  In many cases, the companies I own increase their dividends every year or so:  Bell Canada (BCE) and Fortis (FTS) just to name a few.  My plan over time is to shelter dividends paid as much as possible using TFSAs so in retirement, I can make a few periodic withdrawals from this account to pay for living expenses, tax-free.

3.      Pay down debt

A while back, I offered up a question for readers to consider:  What would you do with $1,000?  In that article, I shared what I’d do with that tidy sum if it found me.  If your tax refund was $1000 (even more or even less) I think a good use for your tax refund is to pay down high interest debt (like credit card debt) or your mortgage.  If you have no consumer debt (good on you) then consider making a lump sum payment on your mortgage.  Paying down your mortgage might be one of the best guaranteed investments you can make – because you and I pay our mortgages with after-tax dollars, so even a cheap mortgage rate of 3% is going to feel closer to a 4.5% return on investment.

Sure, you could definitely build an emergency fund or contribute to your child’s education instead of these options – those are excellent things to do too – but whatever you choose to do with your tax refund, consider spending it wisely delaying at least some gratification today.

In case you are curious, this year we did half-and-half:  half of our tax refund was reinvested in RRSPs and the other half was applied to our mortgage.  As much as I can, I try and eat my own cooking.

What did you do with your tax refund this year?

Thanks for reading and sharing this article.

I was happy to see the latest edition of Canadian Business in my mailbox this week.  Every year, the magazine issues the Investor 500 edition, a comprehensive look at Canada’s 500 largest publicly traded companies.  In this edition of CB, I also found an article listing the top 15 Canadian companies by profit and total revenue:

Although these stocks offer a range of yields, the top-15 by profit would likely be a good starting point for your dividend stock portfolio research.  Some of these Canadian companies have been paying dividends for over 100 years and others, regular and increasing dividends for decades.

Let’s a have quick look at some of the data:

• Royal Bank (RY) – paid dividends since 1870.
• TD (TD) – paid dividends since 1857.
• Bank of Nova Scotia (BNS) – paid dividends since 1832.
• Bank of Montreal (BMO) – paid dividends since 1829.
• Imperial Oil (IMO) – paid dividends for over 100 years and has increased annual dividend for 18 consecutive years.
• CIBC (CM) – paid dividends since 1868.
• Canadian Natural Resources (CNQ) – paid regular quarterly dividend since 2001.
• Canadian National Railway (CNR) – paid regular quarterly dividends since 1996.
• Bell Canada (BCE) – paid regular quarterly dividends since 1983.
• Great-West Lifeco (GWO) – paid regular quarterly dividends since 1990.
• Husky Energy (HSE) – paid regular quarterly dividends since 2001.
• Power Financial (POW) – paid regular quarterly dividends since 1990.

Can you imagine the income you might have received from such companies if you had bought and stay invested in such companies over the years – instead of jumping in and out of the market?

Can you imagine the capital appreciation you would have gained as well?

Investors, if you’re struggling over what Canadian dividend paying stocks to purchase for your portfolio, while pouring over company metrics still makes sense and buyer must always beware, consider owning the Canadian companies that make a bunch of money and have been doing so for a very, very long time.  Just ask do-it-yourself investors like Susan Brunner and Robert Gibb.

What do you think of these companies?  Do you think past performance could be any forecast of future results for these dividend paying stocks?

Thanks for reading and sharing this article.

Last year, my front lawn and parts of my back lawn were decimated by grubs.  It was a hot and very dry summer in Ottawa last year and the lack of rain over a period of many weeks coupled with some extreme heat beat my lawn into submission.  That hot, dry weather also encouraged significant grub growth.  Actually, the grubs didn’t do all the damage last year.  The damage went over the top thanks to some huge crows and a few night critters like racoons that dug up my lawn recklessly to find and eat the grubs as appetizers.  The damage started in July and continued right through to October.  Here is a picture of my front lawn today:

As you can see, there is a recovery process in motion – there are small signs of life.  For today’s post, I thought I’d take a departure from the personal finance and investing stuff and tell you what my recipe is for a healthy lush lawn this year, on a modest budget of course.

1.      Bye Bye Thatch

Thatch is dead and/or dying matted grass that accumulates on top of the soil.  Thatch prevents air, water, and fertilizer from reaching the soil.  This is not good folks.  So, I removed the thatch this spring with a metal rake.  It took me a few hours last weekend and this past weekend, but I raked our 0.5-acre lawn from stem to stern.  After the snow melted this winter, our lawn was brown in colour and very thin.  Every year actually, Ottawa’s harsh winter weather wreaks havoc with our lawns. To promote the recovery process, thatching was a must.  Getting rid of the thatch didn’t cost me a penny, just my time.  At least the weather was good when I did it.

2.      Hello Seed

I’ve read that overseeding is a great way to recover your lawn from winter; it will green up the lawn, thicken the turf and introduce new varieties of grass to existing turf.  Overseeding will also help crowd out weeds and withstand more bugs.  I typically use a hand-held spreader to overseed our lawn, going just above the seed manufacturer’s recommended spreading rates.  Unlike thatching overseeding will cost me money.  I decided to purchase a few bags C-I-L Golfgreen Grass Seed this year.  No, this is not a sponsored post.  I read this particular grass seed contains endophytes which should help my lawn and ward off grubs.  You see, endophytes are fungi that live inside grasses or plants in a symbiotic way.  Endophytes are natural and quite desirable (I’ve learned) in turf grasses.  While living off the host the endophytes will produce alkaloids that are not appealing to many insects; these alkaloids are essentially toxic to armyworms, chinch bugs, cutworms, green aphids and webworms.  Endophytes are basically a biological insecticide.  To date, I’ve purchased three bags of C-I-L seed at about $13 per bag ($39 total).  I’ll probably need a few more bags in a couple of weeks as I continue the overseeding process.

I’ll also need to buy some more good soil to mix the seed with.  To date, I’ve spend about $20 on soil and will likely need to spend at about $20 every month going forward mixing the seed with good organic soil.

3.      Welcome White Clover

With my degree in Biology, I probably should have remembered the benefits of clover in a lawn.  Clover not only greens a lawn, even during dry spells but it’s a natural fertilizer for your lawn by fixing nitrogen.  Using white clover on your lawn, you don’t have to buy any more lawn fertilizer – ever.  While nectar from the flowers clover produces might attract some bees now and then, you can rid yourself of this issue by mowing your lawn at a modest height, cutting the flowers during the blooming season.  The best part about white clover, apparently it is toxic to grubs.  A 500-g bag of white clover costs about $10 at my local hardware store down the road.  That small bag should cover a few hundred square feet.  I’ll probably need many bags this year (maybe another 5 bags ($50)) to encourage clover growth in areas where my lawn is well-established and where I’ve needed to start the lawn almost from stratch.

4.      Just Add Water

Based on seeding instructions, I’ll need to water my lawn liberally for about 7-10 days in a row to promote seed germination.  After that, I should be able to cut back to 2 days per week, eventually 3 days per week in another month.  Seeds cannot germinate unless there is good seed-soil contact, sunlight and lots of water for nourishment.  I’ve read you need to water your lawn enough to get the soil wet to about 4”-6” down or the equivalent of 1″ of rain per week.  It is not frequent watering you need for your lawn (once established) but deep, prolonged watering that will produce and maintain a healthy root system.  We have a well, so we don’t pay city water or sewer fees but I’m very water conscious so I don’t want to water the lawn recklessly.

Over the spring and summer, I’ll repeat the cycle of overseeding, adding clover and thorough watering.  When I need to mow the lawn I’ll keep the clippings on the grass and avoid cutting the grass too short.  I’ve read 3″ is a good height to maintain deep grass roots.

Hopefully…that should do it.

When I add it all up, the supplies to recover my lawn this year will cost me a few hundred bucks.  Not a killer expense but certainly enough money to be spent.  Last year was a disaster for our lawn.  Hopefully this approach on a modest budget will bring it back into top shape.

Got any tips for my lawn this year?

Thanks for reading and sharing this article.

That’s right, I wrote it.  My Ottawa Senators will beat the Pittsburgh Penguins in seven games.  Although they lost game 1 of the series (4-1), I’ve got a great feeling they can rebound in game 2 on Friday night and come home with the split.  Who’s with me?

The “lawn weekend” will be filled with yard work and studying for an HR course I need to write an exam for soon but some relaxation is also in store as well.   Until my next post, enjoy these articles.  Have a great long weekend!

Mr. Money Mustache had a cool post about a lawyer calling it quits and a despondent millionaire.  The lawyer has more money than he can spend and now, realizing this, is quitting his job and selling his McMansion.  The despondent millionaire has been somehow programmed to think he has been financially unsuccessful by his family despite owning two homes and holding a bunch of investments.

Prairie EcoThrifter had some tips to simplify your life.

Garry Marr said too many eggs might be in the housing basket.

Modest Money offered what you might want to know to improve your credit score.

Avoid these mistakes, when starting your investing journey courtesy of Boomer & Echo.

Financial Highway wondered when do you like to splurge?  I don’t splurge very often, but when I do, I splurge on travel, and Dos Equis.  For the most part, stay frugal my friends.

Dan Bortolotti wondered if some potatoes can be socially responsible index investors.

Big Cajun Man scoffed at some bloggers seeking to retire by age 35.  I missed my chance.  The Financial Blogger on the other hand, is wondering if he can still make it.

My University Money offered a few ways your campus bar can become a rockstar.

Rick Ferri said on his blog this week:  “Wise investors do not try to time markets. They create an asset allocation to stocks based on their needs, invest in the asset allocation using index funds, and rebalance occasionally. A low-cost buy, hold and rebalance strategy has the highest probability for meeting future financial goals.”

The Passive Income Earner shared some mortgage strategies.  9 more years to kill mine, so the math says, can’t wait.

Dividend Growth Investor shared the world’s best dividend portfolio.

Dan Mac had a great post about reinvesting dividends.

My friend Steve has a way to shop at Costco sans membership – read more here.

Susan Brunner reviewed Power Financial.

Thanks for reading and sharing this article.