Over the years of running this blog, I have received hundreds of reader questions. I figured I would consolidate those top questions and my answers to them here – on this frequently asked questions page.
I’ll keep this page updated as my portfolio changes and thoughts evolve with time.
Read on, enjoy and let me know if you have more questions!
Frequently Asked Questions:
Mark, just curious how many different types of holdings you have – meaning, some of your ETFs, Canadian and U.S. stocks?
First, I don’t disclose my entire portfolio, values and assets for privacy and security reasons but I can say for a fact I own the following low-cost ETFs:
- iShares XAW. I believe this fund is a great way to invest beyond Canada’s borders. It is a low-cost way to own US, international, and emerging market stocks. For MER = 0.22%, you own > 8,000 stocks! I’ve started to own XAW to remove my Canadian bias.
- Vanguard VTI. I used to own the VYM fund for a decade but the pandemic taught me a valuable lesson in yield vs. growth. I now own VTI for ~ 2% yield and long-term growth. I recall the MER is only 0.03%. I will own VTI in my RRSP to avoid any foreign withholding taxes.
- Invesco QQQ. This fund is a U.S.-listed ETF based on the Nasdaq-100 index; holds the top 100 largest domestic and international non-financial companies (think mostly tech and communications) on that index. Top holdings include at the time of this post are Apple, Microsoft, Nvidia, Adobe and more. Expenses = 0.20% (at the time of this post). I own it for a small tech-growth kicker!
These are not recommendations for purchase. Just what I own and some of my thinking why.
You can many of my stocks on this dedicated page below:
Mark, what are your top stocks or ETFs?
As of fall *2020, here are my biggest stock and ETF holdings at the time of this post:
- *Then: Vanguard High Dividend Yield ETF (VYM); Now: Vanguard Total Stock Market Index Fund (VTI)
- TD Bank (TD)
- Royal Bank (RY)
- Emera (EMA)
- Fortis (FTS).
For stocks, only TD Bank is valued at more than 5% of my overall portfolio – around 5.6%.
I prefer to keep any one stock holding (beyond my ETFs of course) at no more than 5% of my portfolio.
I really enjoy your site and your personal journey. You write about dividend reinvestment plans often and my question is: will you ever stop running those DRIPs and take the cash instead? You could likely be more strategic with your purchases (as cash builds up) as you well know. I mean, how many DRIPs are enough anyhow?
Well, I’m likely going to stop some DRIPs in my taxable account rather soon (I did as of fall 2020) for the following key reasons:
- I’m actually getting tired of calculating my adjusted cost base for the Canadian dividend paying stocks that I own there – such that – I need to know what that is for calculating any future capital gains or losses when I sell any taxable assets. I want to simplify my life. I don’t however have any intention of selling anything right now.
- I would like to start moving more non-registered money to our TFSAs in the coming years to shelter more tax. I wrote about that process and the considerations here – moving stocks or ETFs from your non-registered account to your TFSA.
While I will shut off the DRIP taps in my taxable account (now done) I will however keep all dividends and distributions reinvested inside our TFSAs, RRSPs and my LIRA.
How many DRIPs are enough? That’s a “it depends” answer for me. There is no hard and fast rule. Many investors, including myself, love DRIPs for many reasons that you can read about here.
I’ll keep that DRIPping process “on” inside those tax-free and tax-deferred accounts for the coming years until I really need or want to spend the cash in semi-retirement.
I have enjoyed reading your blog. You have given me some food for thought as I pursue financial independence.
You have written that your portfolio is a blend of index funds and individual stocks. I think I’m inclined to pursue a similar strategy as well. However, I certainly wanted to consider opposing views to be sure my approach is informed. One investment professional who is opposed to owning individual stocks and contends that dividends undermine total returns is Ben Felix of PWL Capital. His YouTube video, “The irrelevance of dividends”, is a case in point.
Are you familiar with Ben Felix or this line of thought? What influences your decision to own individual stocks in light of this argument.
Great question. Here are my answers – three (3) key reasons that Ben or yourself may or may not agree with.
For one, I enjoy seeing dividends “flow” into my account without buying or selling shares. Meaning, the companies I own, generally speaking (given dividend cuts can, do and have happened to me) will reward me to own them. Those companies may also increase those dividends over time. While I have incurred a few dividend cuts this year, and potentially more to come (?), I have had more companies in my portfolio increase their dividends this particular year (25) than cut them, during a pandemic no less.
So, for point one, part of the reason why I’m a dividend investor is I enjoy the psychological thrill of seeing cash come into my account, without doing anything; money I can do anything with. I like the “optionality” of dividends. I don’t have to sell shares nor time the market to generate my cash flow. I don’t incur transaction costs to generate my own dividends by selling shares. In the end though, total returns matters. Always has and does. I will eventually sell some stocks for money I want to spend. Just not now.
Two, in Canada in particular, I don’t see a huge advantage to indexing. Our Canadian market is an oligopoly and like the game Monopoly, there are few players on the board that operate our banking system, our pipelines, our utilities, and our telecommunications and so on. Basically, few players but those players make huge money. I feel it’s easy (somewhat) to pick and choose those companies and hold them for dividends along with capital gains over time. Will this sort of stock-picking by me in Canada fail over time? I have no idea. It could. Yet so far, so good. At the end of the day, this process is helping me meet my goals even though it might not seem perfectly rational to some.
This leads me to point three: the combination of one and two helps me stick to a plan I believe in and consequently, is likely helping my returns. Without excessive trading, without money management fees paid to an advisor or firm, I’ve largely either exceeded or mirrored the returns of my benchmark in Canada: iShares ETF XIU.
In looking at iShares XIU returns recently, over the last 5-years – it has returned about 8.5%.
My Canadian portfolio has returned about 9% based on my selections.
Will that continue? I have no idea. But it should be close. Why?
There are likely to be periods where I underperform XIU. I expect that. But by sticking to a long-term plan I believe in, by minimizing trading fees, by taking some advisor or firm or ETF money management fees in Canada totally out of the equation, I figure I’ll do just fine skimming the Canadian index.
In closing, Ben makes some great points in his videos I don’t dispute. He lives this stuff every day. He’s the expert more than me. He is very bright and deals with money management every day.
But we seem to differ a bit on our philosophies. I’m more of the mindset that good decisions are just fine over time because they actually translate to great decisions by staying the course. You don’t need to be rational all the time because you’re human – I’m not sure anyone can be. Investing or saving or debt management is way more mind over math. Understanding how you work/how you behave will make you a better investor even if it doesn’t seem perfectly rational all the time.
So, in essence, dividends do matter to me because they help me with my plan. Personal finance is personal is a constant refrain on my site for a reason. As long as you are meeting your goals – I truly feel that’s all that matters.
Hope that helps clarify my personal position and again, a great question.
Mark, I’d like to get my money working for me but but I’m wary of the recent run up in values. What are your thoughts on buying in ASAP vs. waiting for a dip or breaking up the buys over a few months? Maybe you could mention this in your weekly email sometime?
Essentially, your question is: is it better to do lump sum investing (invest now) or dollar cost averaging (invest over time)?
Here is my thesis on this.
I prefer to invest money, when I have it, as in now. So, I’m in favour of lump sum investing versus dollar cost averaging (DCA).
First, I have no idea if the stock market is going to go up or down tomorrow, next week, next month or otherwise. But, I do know lump sum investing gets my money working for me as soon as possible.
Second, given markets tend to go up over time, you have a better chance of ending up with more money by investing in equities at once versus in phases over time. Of course, there are absolutely times when stocks go down, significantly, and stay down. Market volatility can occur. The challenge, we don’t know when that will happen. But overall, you’re more likely via chance to be giving up investment gains through dollar-cost averaging instead of lump sum investing.
Three, and maybe my most important point for you, think of DCA as market timing. You are strategically setting up intervals or timing your purchases that may or may not work out when it comes to market pricing.
That said, the DCA approach can make you emotionally feel better since you’re not investing lump sums of money at once. It may seem less risky, therefore feelings that are reducing your stress by potentially reducing the impact of market volatility. This is not wrong whatsoever, it’s just your plan.
I liken these types of decisions like paying off a mortgage – very aggressively. Some people swear by it even though it might not make the best financial/mathematical/logical sense. It doesn’t mean it is flat-out wrong.
Saving, investing and more are much more emotional decisions than we tend to recognize. So, if it makes you “feel better” to go with DCA, then do it. Dollar-cost averaging aims to avoid mistakes of making a lump sum decision that could be poorly timed. Only in hindsight will we all know if that decision is correct!
Love your site Mark! How did you get started in building your dividend portfolio? How did you decide what stocks to own? Thanks!
Thanks again for your kind words.
Actually, I wrote about that in more detail here:
Essentially, I took the following steps when I looked at the Canadian market:
- I looked at the sector and company breakdown of iShares ETF XIC (as a proxy for the broad Canadian market).
- I looked at the top companies in XIC for further research – I looked at dividend growth history, dividend payout and cashflow as key metrics. I wanted to see all of those growing over time.
- Then I made a plan to buy said companies with a conviction as to try and not sell them over time but rather add to them consistently.
That’s pretty much it!
Many readers have asked me over the years – why don’t I just own some Canadian dividend ETFs?
To summarize here are the key reasons why I don’t own Canadian dividend ETFs at this time:
- Some Canadian dividend ETFs have criteria I don’t fully agree with.
- Most Canadian dividend ETFs have a modest fee, I prefer not to pay it.
- I cannot control the stock weightings using a dividend ETF.
Furthermore, Canadian dividend paying stocks remain tax-efficient. With my RRSP full of mostly U.S. assets, I tend to keep Canadian dividend paying stocks in my TFSA and inside my non-registered account for the Canadian dividend tax credit. This means taxation on Canadians dividends are favourable, it is a lower form of tax; lower than employment income and interest income. This lower form of taxation will be even better when I’m not working!
Don’t get me wrong reader, many dividend ETFs are great.
However, I enjoy and I believe in the wealth-building power of my personal dividend portfolio.
Mark, I’m not sure how to get started. Can you expand on what you mean about having a financial plan please?
You bet, I have a very comprehensive post right here:
Do you keep any emergency fund? If so, how much?
The answer is yes and this much!