FAQs

Welcome to my FAQs page. Thanks for your readership.

Over the years of running this blog, I have received thousands of reader questions. Really. 🙂

So, I figured I would consolidate those top questions or at least some major themes from folks and provide my answers on this frequently asked questions page.

I’ll keep this page updated as my portfolio changes and thoughts evolve with time of course.

Read on, enjoy and let me know if you have more questions!

Mark

Frequently Asked Questions:

 

I read your Dividends page. I follow your dividend income updates every month. When do you think you’ll reach financial independence? We want to be debt-free as well! Thanks!

Hopefully around the end of 2024 based on our financial independence plan. We can decide to work on our own terms from there into 2025. 🙂 

As of early 2024, we became mortgage-free as part of our plan. 

Mortgage free!!! Now what???

 

Mark, I also 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?

Great question. My answers are:

A) Yes, I make new purchases now and then. Our monthly dividend income grows thanks to new strategic purchases during the year. I focus on maxing out our TFSAs, first, every year. Then we try to max out our RRSPs after that. That’s pretty much our focus. 

I’ll continue to maximize my TFSA first because…

B) No, I do not trade in and out of stocks or ETFs. We buy and hold as much as we can although I have changed a few stocks and ETFs over the years. So, yes, very true, I’ve sold a few stocks over the years. Most DIY investors do. But as much as possible, I try to buy and hold. 

C) Overall, even without new purchases, our total monthly dividend income remains on the rise because some dividends paid by the companies we own are reinvested every month or quarter AND/OR dividend raises occur as well. I try to let compounding do its thing. 🙂

 

What accounts do your monthly dividend income updates include? Taxable accounts? TFSAs? RRSPs? Other?  

Great question. 

As of January 2023 and moving forward I include taxable income, RRSP income and income from my LIRA in our monthly dividend income updates.

I don’t include TFSA income since it’s not part of our early/semi-retirement drawdown plan although we will absolutely spend that money eventually. We also have other investments but I don’t include those either. 

You can read more about that in our Financial Independence Update. 🙂

Here is the income journey specific to those accounts (taxables, RRSPs, LIRA) including a target for what might be possible in 2024:

Weekend Reading - Dividends and Gains Edition

 

Mark, what ETFs do you own and why?

I can share a bit:

  • iShares XAW. I believe this fund is a great way to invest beyond Canada’s borders. I’ve owned XAW since 2016.

You can read about my lessons learned in diversification here.

I also have a post about the best all-in-one stocks to consider owning:

The Best All-in-One Exchange Traded Funds

  • Invesco QQQ. This fund is a U.S.-listed ETF based on the Nasdaq-100 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:

Dividends

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 sure.

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”. No one stock has ever been worth more than 10% of our entire portfolio. 

That said, based on a recent reader question in 2023, I do let a few winners run per se…approaching 5% or just a bit more at times. 

I certainly won’t have my portfolio looking like this asset allocation below although maybe I should? Ha. See Warren Buffett’s portfolio and top holdings below.

At most, I would get concerned if any one stock was over 10% of my total portfolio value and consider rebalancing by selling some profits in any winner over 10%. 

I am fine however if my ETF holdings (like XAW or QQQ) go beyond 5% of my overall portfolio value thanks to the diversification benefits they provide over time. They probably both will in the coming years. 

Reference: Warren Buffett’s portfolio:

Weekend Reading – Does diversification really matter?

 

Mark,

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. 

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. 

 

Hi Mark!

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.)

Here is what I do when it comes to dividend reinvestment plans (DRIPs):

1. Non-registered accounts / taxable accounts = DRIPs turned OFF. I got tired of calculating my adjusted cost base for the Canadian dividend paying stocks that I own there. I want to simplify my life! Because my adjusted cost base (ACB) is somewhat frozen in time now, I can and will start moving more non-registered money to our TFSAs in the coming years to shelter more tax; easier to track when no ACBs occur to constantly update.

I wrote about that process and the considerations here – moving stocks or ETFs from your non-registered account to your TFSA.

2. RRSPs = DRIPs turned OFF. I’m working building up my cash wedge for semi-retirement. This work started in 2023 and will continue into 2024. This way, I won’t even need to sell any stocks or ETFs inside our RRSPs for the first year or so during retirement if I don’t want to. You can read about the merits of a cash wedge here:

The Cash Wedge – Managing market volatility

3. TFSAs = DRIPs ON. This is the only key investment account that DRIPs are “on” and remain active, reason being, we don’t intend to withdraw from our TFSA assets until a few decades from now. 

 

Hi Mark,

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 quite frequently 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.

Thank you!

Great question.

Here are my answers, three (3) key reasons that Ben or yourself may or may not agree with.

1. I enjoy seeing dividends “flow” into my account without needing to buy or sell shares to cover expenses. 

2. Second, related to one, part of the reason why I’m a dividend investor is I like the “optionality” of dividends. I don’t have to sell shares nor time the market to generate my required cashflow. I don’t incur transaction costs to generate my income. I don’t pay money to a money manager for my investing approach. Paying a portfolio manager could cost you thousands of dollars per year. In Canada in particular, I don’t see a huge advantage to indexing although that’s a great way to invest and you also don’t need a portfolio manager for indexing.

Why bother??

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. Will this sort of stock-picking by me in Canada fail over time?? I suppose anything could fail.

Yet so far and so good as hybrid investor (owning a mix of stocks and ETFs).

3. Finally, point three, the combination of 1. and 2. is an income plan to stick to and that consequently helps my overall returns. Without excessive trading, without money management fees paid to a money manager I’ve largely either exceeded or mirrored the returns of my benchmark in Canada: iShares ETF XIU over the years. 

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. There will also be periods whereby I outperform the index. I expect that too. 

By sticking to my plan, by minimizing trading fees, by taking some advisor or firm out of the equation, I figure I’ll do just fine skimming the Canadian index and keeping more of my own money.

 

Mark, are you against financial advisors or portfolio managers?

Nope. Not at all. Just that as My Own Advisor I am biased in that I believe more investors in their asset accumulation years should be their own money manager and keep more money for themselves. If you need a portfolio manager, to help you with your investing approach, that’s OK just as long as they are providing value for money. 

Many financial advisors will tout indexing as the best way to invest, for most. That might be true. If so, you don’t need a financial advisor or money manager to invest this way?

With index investing, you get what you don’t pay for. You (usually) pay much less to buy and hold an index fund than any active fund and you’ll get higher returns almost always because of that.

 

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).

Why?

  1. 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.
  2. 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.
  3. 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.

Check out this post for more details:

Dollar-cost averaging versus lump-sum investing

 

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:

  1. I looked at the sector and company breakdown of iShares ETF XIU (as a proxy for the top-60 companies in Canada).
  2. 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.
  3. Then I made a plan to buy said companies with as much conviction as possible and keeping buying them over time.

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 but I can with my own portfolio. 

Furthermore, Canadian dividend paying stocks remain tax-efficient. 

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?

Great question. 

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! 🙂

I/we will only spend the dividends once full-time work slows down.

 

Aren’t you worried that your portfolio is not keeping up with market returns?

Not really.

What I care about as I get older is the meaningful cashflow my portfolio can deliver. 

 

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 started with a small taxable account 10+ years ago, that account has grown quite a bit. 

For the most part, the largest part of our gains/returns have been from the following:

  1. maxed out TFSA contributions (x2 accounts), every year, without fail – while staying invested. 
  2. maxed out RRSP contributions (x2 accounts) as well – and staying invested. 

 

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 order can work well for the following:

  • To allow tax-deferred money (RRSP) to grow if you have a sizeable taxable account. 
  • To allow tax-free investments (TFSA) to grow until later in life. 
  • 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 well if you have long-term income splitting opportunities in your taxable account(s) but have very little RRSP assets, maybe because you have a workplace pension.

More reading: RRSP withdrawal strategies before age 71.

3. RNT = RRSPs (R), Non-registered (N), TFSAs (T)

This drawdown order is usually pursued to help smooth out taxation over time, to start reducing the value of your healthy/large RRSP/RRIF balance. If you don’t withdraw from your RRSP/RRIF over many decades then OAS clawbacks could be an issue for you.  

There is also nothing to suggest you can’t do a bit of each, a blended approach of NRT, NTR, or RNT. It all depends on your income sources and desire to minimize taxation.

I hope that helps!

 

Mark, when do you buy your stocks or ETFs? 

Another great question. 

I try and buy our favourite stocks and low-cost ETFs when I have the money to do so. More specifically, when it comes to stock prices, I try to purchase some out-of-favour companies at or near 52-week lows. 

When it comes to our low-cost ETFs, like XAW, I simply buy more units when I have the money available. Time in the market has been my friend and I believe that will continue to be the case. 🙂

 

More to come friends, ask away!