Welcome to my FAQs page. Thanks for your readership.
Over the years of running this blog, I have received thousands of reader questions. So, I figured I would consolidate those top questions and my answers here – on this frequently asked questions page.
I’ll keep this page updated as my portfolio changes and thoughts evolve with time, including any recent replies to reader questions.
Read on, enjoy and let me know if you have more questions!
Frequently Asked Questions:
I read your Dividends page. When do you think you’ll reach financial independence? We want to be debt-free.
Hopefully around the end of 2024.
Mark, I read your monthly dividend income updates. They are inspiring! I see your income keeps going up. Is that because of a) new purchases, b) trading, c) reinvested dividends and distributions or other reasons?
My answers are:
- A) Our monthly dividend income grows thanks to new strategic purchases during the year.
- B) We don’t trade. We buy and hold as much as we can.
- C) Our monthly dividend income remains on the rise largely because some dividends paid by the companies we own are reinvested every month or quarter, especially inside our TFSAs.
Where I/we have any money after TFSA and after RRSP accounts are maxed out, I might buy some stocks in our taxable accounts from time to time.
In your monthly dividend income updates, why won’t you include your RRSP(s) tally as well or all your income? That would give readers the entire picture!
Great question. I get that one A LOT!
Well, in fact, as of January 2023 we changed our income approach.
I don’t disclose everything and anything on this site due to privacy risks.
How many stocks to you own?
That answer fluctuates from time to time since I exit some positions or decide to add new ones over the years. At last count, I/we own 26 Canadian stocks and 8 U.S. stocks.
Mark, what ETFs do you own and why?
I can share a bit of what I own and why:
- 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.
You can read about my lessons learned in diversification here.
- 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. 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.
For more details:
You can learn about index investing here.
Mark, do you have any rules related to how much you own in any stock or fund?
For any individual stock, I try and keep any one stock to about 5% or so of my overall portfolio value for risk-based purposes. That’s my “5% investing rule”.
I am fine however if my ETF holdings go beyond 5% of my overall portfolio value thanks to the diversification benefits they provide. In fact, I hope they do.
First off thanks for all of the hard work that you do putting this site together. I just recently discovered you when I started looking at how to decrease all of the fees I am currently paying to my advisor and have thoroughly enjoyed all that I have been able to digest up until this point.
I do have one question when it comes to growth of the various stocks you own. If you have a stock that has gone up a considerable amount, do you sell off some, a profit percentage? Do you let your winners run?
I do let my winners run.
Part of my answer is above: see my 5% investing rule. Of course, if some low-cost ETFs I own, go higher in value than than 5% of my portfolio I’m not really worried.
That said, for my stocks, I’m going to let my winners run for the foreseeable future. I feel it’s OK to let the odd winner run beyond 5% as long as you understand what can go up in value, can come crashing down. There is never a need to take immediate profits unless you have a plan to deploy the proceeds somewhere else.
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 that in 2022).
I stopped my DRIPs in my taxable account for these key reasons:
- I got 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 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.
I have no intention of shutting off the DRIP taps in any registered account (e.g., TFSA, RRSP, LIRA). I reinvest all dividends and distributions as much as I can inside those accounts.
You can see many of the stocks I DRIP on this dedicated Dividends page.
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.
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.
- 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.
- 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.
Because I essentially I own the same stocks the XIU fund does as part of its top holdings.
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 far more the expert 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).
- 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.
- 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.
- I 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:
How I build my dividend portfolio (and you can too)!
Essentially, I took the following steps when I looked at the Canadian market:
- I looked at the sector and company breakdown of iShares ETF XIU (as a proxy for the top-60 companies in Canada).
- I then looked at the dividend histories of many companies in XIU. 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?
Great question and I’ve answered this a few times on my site – why I don’t own any 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!
We hold a small emergency fund, so that when $hit hits the fan we have some money. 🙂
Are you spending any dividends or distributions paid right now?
Heck no! See answer above. I am reinvesting all dividends and distributions inside our TFSAs, RRSPs and LIRA right now.
Aren’t you worried that your portfolio is not keeping up with market returns?
Not really. I mean, yes, to a point but the beauty of being an income investor is I enjoy seeing and partaking in the increased income that my portfolio generates. I largely ignore market calamity in the process.
Besides, when I have benchmarked my portfolio over the years.
I’ve done just fine.
Mark, your site has been incredibly inspiring to me. I’m wondering if you’re able to share when you started this dividend income journey how much you were investing each month?
To be honest, I’d have to take a deep dive backwards to figure out all the math related to various contributions.
Although we had a small taxable account 10+ years ago, that has grown quite a bit, most of the gains/returns have been from the following: maxed out TFSA contributions (x2 accounts), every year, without fail.
Mark, I’ve read many of your posts about any retirement drawdown order. Can you summarize which ones are best and maybe why? Thanks so much!
For sure and “it depends”!
Depending on when you plan to retire or semi-retire like I might, the tax consequences involved, and much more, you can probably appreciate the drawdown order could be very different between retirees.
Here are some key portfolio drawdown sequences to consider:
1. NRT = Non-registered (N), RRSPs (R), TFSAs (T)
This can work well if you have a modest taxable account; to help fight longevity risks (allowing tax-deferred money (RRSP) and tax-free investments (TFSA) to grow and compound away). A great consideration for those that wish to defer Canada Pension Plan (CPP) and/or Old Age Security (OAS) benefits until a maximum age.
More reading: When to take your CPP benefit
2. NTR = Non-registered (N), TFSAs (T), RRSPs (R)
This approach works if you have long-term income splitting opportunities; keeping RRSP assets “until the end”; money continues to compound tax-deferred but the downside is you may have OAS clawbacks depending upon your income level.
More reading: RRSP withdrawal strategies before age 71.
3. RNT = RRSPs (R), Non-registered (N), TFSAs (T)
Usually done to minimize taxation given a very healthy portfolio values inside the RRSP in particular. Also, if you have a pension, this order might be your best bet otherwise OAS clawbacks might be a certainty.
4. Blended withdrawals – some blends of NRT, NTR, or RNT – there is nothing to say you can’t do a bit of each depending on your income needs and/or to help smooth out taxes!
I hope that helps!