Weekend Reading – Another lost decade on the way?
Welcome to some new Weekend Reading: my another lost decade on the way edition.
You can check out other recent editions and past popular articles below:
Here are some interesting financial predictions for 2022 – including some doom and gloom ahead!
As the RRSP contribution date comes near, these are some RRSP facts you need to remember this year and beyond!
This millennial has accummulated $1.5 million in net worth, in his mid-30s. See how he got there including investing in some exotic assets!
I recently highlighted 5 stocks I want to buy in 2022. Some readers disagree with my picks – read on!
Have a great weekend and see you around the site. I’ll be here to answer commets all weekend!
Another lost decade on the way?
Interesting read from Dimensional this week to remind us that stock markets can go sideways, for long periods of time, and potentially another such period is on the way.
Case in point: the so-called “lost decade” from January 2000 through December 2009 resulted in disappointing returns for many investors, even those that profess indexing is best above all else.
The S&P 500, had averaged more than 10% annualized returns before 2000, delivered far less-than-average returns from the start of the decade to the end. Annualized returns for the S&P 500 during that market period were −0.95%.
Seeing this graph, and the early stock market volatility in 2022 has made me wonder if another such decade is now upon us. Of course, we’ll only know in hindsight but I’ve already prepared my portfolio for such a period.
You guessed it, via dividend paying stocks.
In the last five weeks alone, I’ve been the beneficiary of the following dividend raises:
Now, I don’t expect juicy raises like 18% or 19% to happen very often, but it is comforting to know when Mr. Market is having some fun with other investors I tend to sleep very well at night knowing a good portion of my portfolio will continue to make more money over time.
And, whether the market is sideways for a few days, a few months or potentially a few years, you and I should be reminded that the “long game” that is investing will eventually reward the patient, the disciplined and the persistent saver and investor.
“The worst 30-year rolling return in the S&P 500? +559% – which equates to an annualized total return of 6.5%. And this occurred in a period that included the Great Depression and World War II. The lesson: by increasing your holding period to decades instead of days, you can actually reduce your risk of a bad outcome.”
Reference: Are you investing or merely speculating from CompoundAdvisors.
This is why we all need to learn to live with stocks.
More Weekend Reading
I’ve updated my Beat the TSX (BTSX) page to share some of the best Canadian stocks to own in any given year. This approach has absolutely clobbered the TSX index over long investing periods. The BTSX stocks are not recommendations for purchase of course but I do happen to own almost all of them in my portfolio – for inflation-fighting income and growth.
How are you going to invest to fight higher inflation?
The fine folks at MoneySense highlighted whether (ha) an all-weather portfolio might be good for you?
Since it is RRSP-season, Jon Chevreau warned there is a perfect storm of challenges brewing this RRSP-season.
From one of my favourite blogs – you can’t overstate the power in saying “no” or “no, not right now”. This is great advice and a major reminder for any company or personal pursuits!
“The difference between average results and exceptional ones is what you avoid. Saying no to mediocre opportunities is easy. Saying no to good opportunities is hard.”
Dale Roberts wondered when will U.S. stocks become attractive?
Like I wrote about above, I think markets can stay flat or deliver minimal returns for an extended period of time – watch out for that.
I enjoyed listening to Andrew Hallam on the Build Wealth Canada podcast, discussing how to live off your investment portfolio. I will be posting my interview with Andrew on this very site, very soon, so stay tuned!
Here are two of Andrew’s main suggestions for portfolio drawdown solutions:
1. He doesn’t mind the “4% rule” since the biggest risk is “dying with too much money” using this rule.
I agree to a point, I think the 4% rule is still a decent rule of thumb but only a starting point for any retirement drawdown planning. You can die with too much money!
I far prefer any Variable Percentage Withdrawal (VPW) strategy over the 4% rule – that Andrew also discussed.
2. To draw down your portfolio, consider the guardrail approach and avoiding “inflation adjusted raises” just for the sake of it. Leverage a variable approach throughout retirement in line with the following life-concepts:
- Spending is variable, like life, it is not linear.
- Spend a bit more money in “good years”.
- Spend a bit less money in “bad years”.
- Avoid chasing a financial “enough” number for the sake of reaching a financial number, but instead, consider chasing a more balanced life filled with happiness, engagement, purpose and income – certainly having money gives you choices in life.
Again, I’ll have my interview ready with Andrew to go on this site soon!
All About The Dividends remains all about his dividends in this income update.
Outstanding income stream by Melissa over at Our Life Financial. She earned: “$3,254.89 in dividend income this month.” Nice!
Over at Cashflows & Portfolios, we wrote about some top tax tips for retirees based on our work with clients. A reminder you can hire me or my partner on that site for a low-cost retirement projection report – at a price far lower than pretty much any advisor would charge you!
Need a good tax book? We all do to navigate tax-season!
Thanks to my friend The Grumpy Accountant all My Own Advisor readers receive a massive discount with no expiration off his book.
Just include the promo code “MOA” when you purchase the full PDF e-book from Neal’s site.
In doing so, you’ll get a whopping 30% discount!
Some FREE stuff!
A reminder I have some free calculators, tools and much more on this standing Helpful Sites page.
You can always read up on my stocks that pay juicy dividends here.
I’ll probably release my latest dividend income update next week, so until then…
Some of the best low-cost ETFs to own for growth can be found here.
I keep adding to dozens of case studies on my Retirement page here.
Check out this one:
Save, Invest, Prosper!
As always, check out my Deals page.
Have a great weekend!
Thanks Mark for the link to my ‘waiting for U.S. markets to become attractive’ post. U.S. market got more expensive not cheap this past week, ha. No problem there when you already have your allocation.
But that links to your lost decade theme. U.S. stocks are overvalued today, almost to the same degree as the lost decade era.
I’ve seen this movie before, I was in this movie before. I know the ending, ha. I just don’t know how long the movie is.
Powell might do his job, fight inflation and create a recession, but I would not bet on it. He serves the markets and the rich.
This will be an interesting year.
I don’t see Powell or anyone else doing the right thing because they would have done the right thing by now if they did 🙂 Things were totally out of whack pre-pandemic. Even a high-schooler educated in some basic economics could figure that out. Ah well, these things are out of my control and I’ll continue to focus on what I can: my savings rate, my existing plan, and my health.
Always interesting to watch what people do and more importantly don’t do 🙂
Good plan. Focus on what you can control, and keep the long game in mind!
Agree. My thesis too for some time now.
Still thinking over a bit more “reblancing”.
Like you said Mark who knows if we’re going to have a lost decade or not but dividend growth stocks is the way to go , I love getting paid to wait and getting raises yearly boy I could never imagine getting an 18% or 25% raise in the case of BMO from my employer 🙂 barely a 4.5% 🙂
as for BTSX I think it could serve as a good guideline of course you don’t have to have all of them and I personally have 8 out of 10 of them and I love it.
Yes, hard to know right Gus but best to be prepared for one 🙂
Yes, I don’t own all 10 every year, more like 7-8 or sometimes 9. I tend to buy those stocks and don’t sell them!
Totally agree with the dividend strategy. I remember well when so much was talked about the lost decade. And always wondered what they were talking about. My dividends were coming in and my average total return in that decade was 8.5% annually. That is why I don’t buy ETF’s. In every recession you have sectors that really do badly. Why participate in that? When you hold good companies that pay dividends they usually also weather recessions better.
Very true, and equities as a total could get whacked over the coming decade. That said, nearly 10% of my portfolio is in an U.S. total stock market index fund and I’m fine with that for some growth long-term. I’m not worried about the next 5-10 years, more focused on the portfolio and income to be generated for the coming deacdes.
Anything on your buy list for 2022?
I don’t have a buy list anymore. The portfolio is still growing without buying anything and taking out all dividends. Now that we can’t spend all the dividends anymore, may look at withdrawing larger amounts from RRIF’s and paying more taxes now rather than later. Boring but very satisfied how our investing journey has turned out.
Ha. Nice. re: “The portfolio is still growing without buying anything and taking out all dividends. Now that we can’t spend all the dividends anymore, may look at withdrawing larger amounts from RRIF’s and paying more taxes now rather than later.”
Good problem to have in retirement 🙂 I hope I can join you.
Yep, dividends and distributions can keep the cash flow steady through bad times, when retirees need it.
18%. Ya GICs and CSBs were doing that back in the day. I remember my dad having a strip bond paying ~18. It was bought at a heck of a discount.
Wild, 18% bonds…I recall that growing up when very young, high-rates in early 80s. Not a big time investor then. Ha.
Ya, I started investing in ’82. Can’t believe I didn’t get some of that bond action then, but I stayed with expensive equity mutual funds. LOL
Wow. 8% would be a dream for me already, never imagined 18%.
No wonder traditionally retirees can have 60% of their portfolio in bonds.
Mark, cashflow and Portfolios will enlarge the font on mobile device if I set font size to be bigger but this site will not. Difficult to read with my old eyes. Could you check the configuration to make the font size enlarged?
Back to lost decade, same here as you. Dividends income is my tool to survive it.
Options actually can help too. If a stock is flat, you can sell covered calls to generate extra income. But you might get lower return if the stocks called away. I am not saying anybody should do this, just more tools to consider.
I think different investment ways/products as a toolbox. The more tools there, the more options for different situations.
Humm, thanks May. Try now? I can enlarge but don’t want to make it too big? Thinking 14-16pt. font would be better to your point though so thanks for raising that 🙂
Yes, that’s a good analogy – nice to have some investing tools in the toolbox!
Thanks. Much bettet now. You know you can customize text scaling for your brower. This site, the font will not change no matter what text scaling I set. So there must be somewhere in your configuration the font always be 100% although the text scaling for my brower is 150%.
Will keep playing around. Hopefully better? Thanks again May 🙂
On your home page, the text will be scaled for the content, but not the title. So the title will look very small comparing to the text underneath. LOL. But once clicked into the article, it doesn’t scale any more. I still think it’s just some configuration flag.
By the way, I use an android cell phone and open your site on Chrome.
Humm, will play around. The text is bigger for everything now at 16 px. font and spaced out. Will leave for now but see what I can do over time! 🙂
To give credit to where credit is due, no Ray Dalio was not the first to come out with the term “all weather portfolio”. That accolade goes to Gerald Perritt. In a 1990 article in the Los Angeles Times, which you can easily find by doing a web search, Gerald displayed the performance results of his “all weather portfolio” running from the 70’s through the 80’s.
Been investing long enough to remember Harry Browne’s “Permanent Portfolio”. I thought about it at times, but 25% allocation to gold, no thanks. I started investing in the early 80’s where all sorts of writer’s were saying to buy precious metals, Swiss Francs etc. I had my first episode of being a contrarian and acquired a Canadian 1 year GIC instead paying 18%. Meanwhile gold started it’s long term collapse.
Yes, very true…he (Ray) popularized the concept just like Scott Burns did for Couch Potato investing.
I can’t imagine a GIC paying 18% ever again. Ha.