Weekend Reading – Are we headed for a recession edition

Weekend Reading – Are we headed for a recession edition

Welcome to a new Weekend Reading post: the are we headed for a recession edition…

You can check out other recent posts below:

Recently, I wrote if there was ever a reason to own some BTSX stocks of late, this was it:

And, I launched another book giveaway when I reviewed The Rule of 30.

The Rule of 30 – Review

Are we headed for a recession?

Yup, maybe! In some articles I read on the state of the U.S. economy:

• The odds of the U.S. falling into a recession are about 50/50.
• Triggering any U.S. recession could be the combination of higher than normal gas prices, a Federal Reserve bent on controlling inflation (with higher interest rates), and slower economic growth.

But we have seen this drill before:

Note: an example of oil prices/spikes and recession timelines. The future may vary or repeat!

At home, with inflation nearing a 40-year high, our Bank of Canada finally acted this week. They raised rates by a full 100 basis points (1%).

That’s good, but that’s also going to mean a few things for you if you have a fat variable mortgage to deal with.

The good news is, rates remain historically quite low – our BoC is just catching up after years of inaction.

I’ve been trying to design our portfolio around inflationary hedges for years now and I will continue to do so.

FYI – this is how I’ve been combating inflation including some ideas for you!

Inflation is just one more reason why it’s important to have a well-diversified portfolio. 

As I enjoy travel and time away from the daily grind, I figure if your investments are spread out across different asset classes, geographies and sectors I think you (and I) can weather any near-term inflationary storm. You should consider value stocks, dividend paying stocks, REITs and more to help you fight inflation. You should likely avoid keeping too much cash on the sidelines since current bank/savings rates of return are not likely to keep up – although some cash is always good to keep!

I’m now enjoying some of that cash set aside some time ago on a trip to Scotland, with very little fear for how I’m going to pay for this trip since all savings were set aside months ago.

Glasgow Cathedral, Scotland.

This is the second time I’ve visited Scotland, the last time was in 2015.

I hope to share more fun pics via my Twitter feed soon.

Have a great weekend and enjoy these reads!

Mark

Weekend Reading…

It’s always great to try and make some sense of the markets, thanks MoneySense!

Here is another lesson in compounding power below.

Check out this behaviour/discipline, from a janitor, who amassed an $8 million dollar portfolio.

Thanks to Dividend Growth Investor for the story.

The secret sauce to financial success is simple but not easy:

• • Stay frugal = live within your means.
  • Invest savings at a high rate of return for a long period of time.
  • Invest in companies with durable competitive advantages.
  • Stay invested for decades, without selling.
  • Keep reinvesting those (juicy) dividends along the way.

 

It was a real pleasure to talk to the FIRE We Go! team of Gean and Kristine recently – here is our chat and bloopers!

Let me know what topics you want me/us to cover in another episode!

Reader question of the week (adapted slightly for the site):

Mark, I struggle with all the noise and advice related to taxable investing, how income is taxed. Can you summarize for me? Thanks so much!

Thanks for your question! Here you go!

 

Type of distribution	Description	Tax Treatment
Interest	Interest is earned on investments such as GICs and bonds.	Fully taxable at the same marginal tax rate as ordinary income, like employment income.  So, consider using TFSAs and RRSPs if you want to defer or shelter interest income from taxation.
Canadian dividends	Income when you invest in shares of Canadian public corporations that pay dividends.	Preferential tax treatment for individuals through dividend tax credits as either eligible or non-eligible dividends. Check out my post on the Canadian Dividend Tax Credit (DTC) here. So, consider owning Canadian dividend paying stocks in a taxable account, after your TFSAs or RRSPs are maxed out of course.
Capital gains	Realized when an investment is sold for more than the adjusted cost based (ACB) of the investment.	Preferential tax treatment as only 50% of a capital gain is taxable. So, consider investing for capital gains in a taxable account, after your TFSAs or RRSPs are maxed out of course.

Thinking of geo-arbitrage (i.e., saving money by moving to a lower-cost-of-living city or area or country)? Well, Dave from Accidental FIRE has the data from the U.S.

Last but certainly not least, join me online later this month in a live Q&A!

Join me above in a few weeks (during a day off work of course!) to chat and engage. 

I look forward to sharing much of what I write about on this site with you and others!

Again, have a great weekend!

Mark