Weekend Reading – Absolute performance, best dividend stocks, Bitcoin lost and more!
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Very much appreciated!
This is my latest Weekend Reading edition, highlighting some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Just in case you missed last week’s edition you can find it below!
This week, I posted this new TurboTax Canada giveaway:
Even if you don’t win, my partnership gets you $15% off TurboTax products.
Read the post, enter the giveaway for free and start enjoying TurboTax for free as well – use my link to ensure you get 15% off at the checkout.
Enjoy these articles and see you here next week. I’ll share my latest dividend income update (like this one) then!
A refreshing take from Nick Maggiulli (COO for Ritholtz Wealth Management LLC in the U.S.) about being honest when it comes to his own investment performance. From Nick:
“My portfolio allocation has varied over time. I’ve traded in and out of gold more than once, I’ve altered the size of my bond allocation, and, in recent years, I’ve purchased art and Bitcoin as well. While investing is clean in theory, it can be messy in practice.”
In his post, as a respected wealth manager, Nick confessed he has underperformed the S&P 500 in his own portfolio. But that’s not the point.
The point is: you don’t need to beat the market to realize your financial goals.
You need a good plan that includes one you can stick with over time. That’s because our behaviour will undoubtedly get in the way. Yet a good savings rate, a disciplined approach to investing, will help you realize your goals over time – even if you don’t clobber the market.
I’ve been saying something like this for years on my site:
The only thing that really matters is your plan. That plan should deliver the requisite income (and growth) you need and desire.
Keep that in mind the next time you hear anyone discuss “beating the market” or index invest at all costs.
Going further, Nick’s post pushed me to reflect upon my own portfolio performance over the last 10 years.
Our returns have been about 8% inside the taxable account, 7.5% inside the TFSAs, and closer to 9% in our RRSPs (mostly U.S. assets in the latter). If we are to earn the same thing over the next decade (7.5%-9%) I will be thrilled to be honest. I will be able to retire from full-time work easily.
Great questions to reflect on, when it comes to money management, from Melissa at Our Life Financial.
I think my favourite from her list is the one that reflects on risk – what might happen if we lost one (or more) jobs. We’ve had an emergency fund for years and that provides some comfort. Thankfully, we also have disability coverage via work benefits.
In terms life insurance, we just went through our own term life vs. whole life insurance decision-making process. Check that out here, what we bought, why and how much. Yes, you can be over-insured but not having enough can be financially devastating.
A newer blogger, Jeff from Financial Pupil wrote an extremely comprehensive guide for students striving to navigate their personal finances in 2021. In his bio, Jeff mentioned he is a competitive golfer – once ranked 10th best junior in Canada. I would have to play my very best to match his scores I bet!
BTW – I’ve been working on this pump drill with a glove at home over the winter. You? 🙂
Some epic and lengthy content this week from Tawcan when he shared a long list of Best Canadian Dividend Stocks from the dividend investor community.
Not surprisingly maybe, some popular names also in the low-vol space floated to the top of his list:
“Alimentation Couche-Tard, TD, Fortis, Canadian National Railway are the favourites due to their strong revenues, wide moat, and solid dividend increase history.”
I did like Bob’s closing thesis as well – investors who may not be comfortable with owning any individual stocks might be very well served owning an all-in-one ETF for instant diversification and the potential for long-term appreciation.
A fine roundup of women in the personal finance community courtesy of Kari from Money In Your Tea. These women certainly make the personal finance blogosphere a far better place with these great business owners, leaders and content creators.
The folks at How To Save Money shared their top picks for the best credit cards in Canada. Their pick for the best credit card in Canada – for cash back – remains in my wallet. You can find that one on my Deals page actually where I earn over $600 cash back every year!
Outstanding interview from the Rational Reminder duo with Dr. William Bernstein. I always look forward to buying more stocks or ETFs when the market corrects – but it takes time to train your investing brain and it’s not always easy.
The Retirement Manifesto is scaling back. Good on him after running the blog for so many years.
I can relate! Well done Fritz.
Fine work on Family Money Saver – highlighting there is already $140 billion lost in Bitcoin – that is likely never going to be found.
This comes after the guys on FI Garage discussed what the heck is Bitcoin anyhow.
“If your risk tolerance is high enough, that leaves 10% to 20% for a more adventurous “explore” allocation that could go into more speculative alternatives.”, writes Jonathan Chevreau.
Learn more about how to master core and explore in Jon’s latest article with Dale Roberts and other fine contributors at MoneySense here.
Reader question of the week (adapted slightly for the site!)
Love your site and posts. I am curious to know your feelings on the fairly new product from Vanguard called VRIF. It looks appealing on the surface to maintain a 4% return without eroding your initial investment. If a person didn’t want to worry about rebalancing etc., but wanted to have a reliable return on investment, I mean would VRIF be an option? What about a dividend ETF?
Great questions and thanks for your kind words.
VRIF seems like an interesting product for sure, but the concept is not new. Monthly income funds have been available for decades. In fact, I wrote about the concept here many years ago.
I argued a decade ago that investors might be better off with a small basket of equity and bond ETFs in retirement, not only to rebalance their portfolio as needed but to save on major fees charged by some expensive mutual fund products on the market!
When it comes to monthly income ETFs, I’ve liked ZMI for some time, a fund of BMO funds that generates about 4% yield rather consistently.
My understanding is VRIF is targeting the magical 4% distribution rate but that doesn’t mean it will always deliver. Equity returns as part of VRIF will largely dictate that I think.
One thing to consider with VRIF or any income fund, is if you’re a retiree with a RRIF (Registered Retirement Income Fund) you will need to sell units given RRIF minimum withdrawal rates exceed 4% for any RRIF after age 65. See table below.
Source: MD Management; does not include RRIF withdrawals changes related to pandemic; they are lower. For 2020 only, the RRIF minimum originally calculated has been reduced by 25 per cent.
Therefore, based on that, it would seem to make sense this VRIF product could have a decent home in a taxable account whereby you are not forced to sell units unlike a RRIF schedule would dictate to you. Something to consider as part of asset location?
I think Justin Bender touched on this as well in this video since it focused on VRIF entirely!
To answer your questions – a reliable return in retirement is not really guaranteed in my book unless you have a pension or an annuity.
One way you can generate a decent, predictable income stream however, is by establishing a modestly-sized portfolio; keeping your withdrawal rate within a modest range; likely balancing some risk within it (a mix of stocks and bonds or cash); devising a plan to sell assets periodically to meet your income needs. Keep some cash on the side just in case.
On the subject of reliable income streams in retirement, you might be very interested in this recent case study on Cashflows & Portfolios: this investor is worried about a different type of risk in retirement – OAS clawbacks and therefore when to take CPP.
Certainly based on my learnings from others (since I’m not in retirement yet), a 3%-4% withdrawal rate is likely more than safe whether you are using VRIF or any other low-cost, balanced fund. But risk tolerance is very challenging to navigate. I hope to write more articles about that over time since it’s something I need to navigate myself…
Sure, a dividend ETF is also another way to accomplish your income stream goal but that also comes with some risks since not all stocks nor are all dividends derived from said stocks – always guaranteed.
That’s my plan since this transition will personally help me financially and psychologically: I won’t eat too much (if any) capital in the early retirement years and I will also remain engaged in some work to keep my mind and body active.
I guess to wrap my thoughts about VRIF or any other fund product, I think as part of any retirement planning you really need to figure out what your spending plan is first (with some buffer) and then go from there into product selection to meet that income stream need. Plans should always come before products in my book.
I hope that response helps a bit!
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