Weekend Reading – Become Your Own Advisor edition
Welcome to my latest Weekend Reading edition – sharing some of the best finds from the personal finance and investing blogosphere to help you save, invest, and prosper!
Well, so much to share this week, so let’s get into it!!
Podcasts and My Own Advisor guest appearances
Needless to say, when it rains it pours! I’ve been on no less than three podcasts this month. It was a nice tour!
Incredible work by Jessica Moorhouse, 12 seasons of More Money Podcast podcasting work, almost 300 episodes and over 1.8 million downloads to date and growing!
So, when Jessica asked me to be on her podcast recently, it was a given. We discussed why you can become Your Own Advisor as I highlighted my investing journey with her, my trigger to start this blog, my success stories (and money fails), and my goals for semi-retirement.
Check out my guest appearance with Jessica here, and ask either of us any questions, anytime, about what we discussed.
In case you missed other podcasts, with yours truly, check out the following:
- I was on the Explore FI Canada podcast recently discussing various early retirement and FIRE drawdown strategies – including ones I’m going to consider.
- It was a real pleasure to be on The MapleMoney Show recently with Tom Drake. We discussed the lack of transparency in the FIRE movement, our support to any aspiring entrepreneurs that want to leave the 9-5 race as part of any (FIWOOT) Financial Independence, Work On Own Terms movement, and I discussed why I will likely remain 100% equities for the foreseeable future.
The common theme in all these recent podcasts – it’s your money and your life. Nobody cares more about your financial future than you do!
Image – with thanks to Carl Richards and Behavior Gap.
On the DIY front, this is how I built my dividend portfolio – and how you can too!
Other Weekend Reads
Bob’s grocery shopping recommendations align with mine, although I’ll be more blunt than he is, he was too kind in his post!
- Make a list, use the Flipp app to review weekly offers.
- Limit locations and running around. Pick a few stores and go.
- Stick to the list.
- Buy your groceries and live your life.
As a follow-up to one of my recent Weekend Reading editions – this totally out of control real estate edition – Millennial Revolution wondered if governments should meddle with the rental market. Thoughts?
Good on Matt Poyner, essentially slamming segregated funds. Matt wrote:
“Segregated funds are wonderful products – for the companies that sell them, not investors. The sales pitch is undeniably tempting, but if you scratch the surface, the same old rottenness that we’ve seen over and over again from the insurance and investment industries comes oozing out.”
Henry Mah shared some of the best Buffett-isms.
Financial Independence – Retirement
As part of my ongoing commitment to share some financial independence, early retirement or retirement articles from the blogosphere, here are some links!
Really interesting stuff from both Rob Carrick (from Globe and Mail national fame) and Dale Roberts (Cut The Crap Investing) – highlighting the launch of the Purpose Investments Longevity Pension Fund.
What is it?
In a nutshell, it’s mutual fund designed like a pension plan for folks that don’t have one. As per the CEO of Purpose Investments Inc., Som Seif, it targets 6.15% payout. From the Globe article:
“You put in $100,000, you get $6,150 a year,” Mr. Seif said. Income is generated by a portfolio of Purpose’s exchange-traded fund products in a rough mix of 45 per cent stocks, 40 per cent bonds and 15 per cent alternative investments such as commodities and gold. Financial instruments called derivatives will be used in the portfolio. Investors will also get some of their own money back through a return of capital.”
This fund may be desirable for investors/retirees who:
- Want one-income-fund/a potential all-in-one retirement income solution.
- Are not going to trade.
- Want some assurance with some retirement income. A BIG “if” though – read on.
Some quick facts to be mindful of, and more answers to questions will be coming over time from the authors who highlighted this fund via Purpose:
- 6.15% payments are not guaranteed, they are a target.
- Money management fees I read about start at 0.71%.
- If you want to redeem your holdings, unlike an annuity, you can. You get back what you put in minus any monthly income you were paid.
- If/when you die, as an investor in the fund, your estate gets your initial contribution minus the total amount of income payments. Mind you, the investment gains generated by your investments over the years stay in the fund and are used to top up monthly payments to others. Basically, mortality credits.
- While payments may increase, by ~ 3% annually at age 83 or 84, as some investors in the fund that die prematurely will leave assets in the fund. In Dale’s post, from Som Seif:
“It is based on what they call Longevity Risk Pooling. The difference between the required return on the fund (net 3.5%) and the income paid to investors (6.15%+) is because when people buy, they get their income, but as some people redeem/pass away earlier, they leave behind in the pool their returns on their invested capital (ie they get their unpaid capital out upon death or redemption). These returns left behind reduce the total return required to provide the income stream for all investors.”
Interesting stuff for sure but I would be worried about a few things personally:
- How much return of capital can be expected? Am I just getting my own money back? Some quick math tells me handing over $100,000 to someone else, will allow them to pay me 6.15% for about 16 years. I could do that myself and pay no money management fee.
- There seem to be some total return and tax complexities involved, especially when it comes to the Registered Retirement Income Fund (RRIF). Since these products are designed for retirees in their 60s and 70s, and RRIF minimum withdrawals creep up and go over 5% starting at age 70, I would be concerned the Longevity Fund may not generate enough target returns in a bear market or even it decent markets, to keep up with RRIF minimums. I wonder about the tax implications of holding this fund in a taxable account as well.
Again, interesting product….
Here is the link from Rob Carrick – Globe and Mail.
Here is the link from Dale Roberts – Cut The Crap Investing.
On Cashflows & Portfolios we covered why the Canada Pension Plan (CPP) remains an important part for your retirement income.
Investing news! Kudos BMO!
A big shoutout and kudos to one of my premier partners on my site – Bank of Montreal (BMO). They are now offering commission-free investing for more than 80 Exchange Traded Funds (ETFs), via their self-directed BMO InvestorLine clients based on certain eligibility requirements. The ETFs cover a broad range of asset classes, geographies, management styles and popular themes from Canada’s largest ETF providers, including BMO, iShares and Vanguard.
In the press release I read:
“The Canadian ETF industry continues to expand and diversify as providers innovate in response to investor demand,” said Silvio Stroescu, Head, InvestorLine, BMO Financial Group. “These no commission fee ETFs have been carefully selected from the largest three Canadian ETF providers, enabling self-directed investors to build well-diversified portfolios which aligns with our mission to empower and inspire Canadians to invest smart.”
BMO has been a leader in the ETF space for about a decade – it’s great to see this move. The list of eligible ETFs to trade commission-free will be periodically reviewed and may be adjusted as the ETF landscape evolves.
I enjoyed this Tom Drake podcast, on The MapleMoney Show, about real estate investing. He had Eric Chang as his guest. Eric owns a portfolio of rental properties in Southern Alberta and took time to discuss how real estate investing can lead to financial independence but also how to stress-test a rental property before you buy it – to see if it is right for you.
Congrats to Fred at Dividendes & FNB with his stellar dividend income portfolio. His income machine is rolling.
Helpful Sites and Retirement essays and case studies to learn from!
Don’t forget about my dedicated Helpful Sites page that includes FREE retirement and withdraw calculators on demand for your use!
There are also dozens of Retirement stories and essays you can learn from here.
Save, Invest, Prosper!
As always, check out my Deals page for promo codes and discounts only found here!
- Use my personal BMO promo code to get cash back when you open investment accounts with BMO like your RRSP, TFSA, taxable account and more!
- With LegalWills.ca my personal promo code saves you 15% off any services – that never expires.
- With 5i Research, take a no obligation FREE trial for your ETF and stock research.
- I have a new partnership with EQ Bank. Get some of the best savings rates in Canada with EQ Bank.
On Cashflows & Portfolios, my partner and I can run your retirement draw down projections for your tax efficient retirement. Contact us for details!
Reader question of the week (adapted slightly for the site)
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.
Still so much to learn.
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?
Or alternatively do you just let that stock be?
Do you have any thoughts or insights on this issue? I apologize if this has been covered somewhere before.
Thanks very much.
Love the questions from readers. Keep them coming!
A reminder you can find some popular, frequently asked questions on my dedicated FAQs page. I try and update that page often and I’ll include my reply to this one.
My goal is to keep any one stock to about 5% or so valued of my overall portfolio. Of course, if some low-cost ETFs I own, go higher in value than that, I’m not really worried. I figure if Warren Buffett mentioned in an older annual letter to Berkshire shareholders, this general estate planning approach, the following asset mix that’s good enough for me!
“My advice to the trustee couldn’t be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”
So, if my Vanguard and iShares BlackRock ETF holdings grow much higher than 5% of my portfolio, and they likely will, I’m not concerned. I will be happy.
Now the stocks…
I have a few stocks approaching 6% of my overall portfolio value, BlackRock (BLK) is one of them. That said, I’m going to let my winners run for the foreseeable future. Sure, if BLK goes bonkers and gets to 15% of my portfolio value, I might sell off some just in case it bottoms out. However, I believe for any individual stock, it’s OK to let the odd winner run 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 personally don’t right now.
Thoughts from readers and other investors: do you let some winners run?
Have a great, safe weekend!
I have about 24 in my portfolio. Only one is over 6%. My strategy is to use my dividends to either buy whatever stock is the smallest percentage of the portfolio, OR whichever seems to be in a dip when I’m buying. I’m only a couple years into this journey, but so far I’m satisfied that this strategy is working for me.
Great stuff Ross. No doubt in a few decades, assuming you continue to be diligent with your holdings (some watching/monitoring is required), no doubt you will be very successful.
Way to go with the podcasts Mark. Haven’t heard a couple of them…yet!
I’m sure the Longevity fund will bring out other products that offer more choices for Canadian retirees. That’s good.
I’m interested in looking under the hood with it but the devil is always in the details, and there are lots of considerations if its a real fit for each individual. I think the appeal may be more with those not interested in diy and who are concerned with longevity risk. But they need to accept the “no guarantee” part of this fund. Ian McGuigan had a good Globe column Saturday Jun 5.
Great stuff, missed that one and just read it. Good point by Ian:
“In addition, it should not be the primary investment for anyone whose main goal is to leave behind a large bequest. This is because the terminal value of your investment in the fund declines rapidly once you start collecting payouts in the “decumulation” stage of life. For somewhat similar reasons, the fund is also a poor choice for retirees who think they might change their minds about staying invested.”
“How likely is a cut? Not very, Purpose insists. It needs to achieve only a 3.5-per-cent to 3.75-per-cent annual return on the fund’s portfolio of stocks, bonds and alternative investments to maintain distributions. (The plan has apparently passed muster by actuaries, but Purpose has not immediately agreed to a request to share the actuarial review.)”
This is where my comment about the RRIF mins. comes in.
At age 70, 5% RRIF min. withdrawal begins. You are targeting 6.15%. If returns are terrible, i.e., 3.5-3.75% then I think you’re in trouble with this fund, while paying 0.71% MER and you have back-end fees if you want “get out”. The idea of making this fund pension-like is great but I have to wonder about the behavioural stomachs of those seeking this product. There could be a decent amount of RoC on it during some investing periods but who knows! Watch this space as they say…
I’ve got almost 20 years until I’m 65. This is not for me 🙂
Thanks for the kind words about the podcasts!! They are fun.
Good points Mark.
For investors having detail on the modelling and the specifics of how it is actually managed is critical. So far none. ROC should be expected for investors. Anyone thinking they’ll have none even in their own equivalent “balanced portfolio” throughout retirement at those type of payout % levels is stretching IMHO. The RRIF mins could be an issue for those not having other registered to withdraw on any mandated shortage.
Ha, you never seem to age. I get it with people in accumulation stage (especially those with the goal of living off dividends only) viewpoints of this kind of product. I think that can be a totally different mindset than someone fully retired and experiencing the puzzle of deccumulation. Different priorities and goals then. Same with longevity viewpoints since generally life expectancy tables increase as we get older, and there’s probably little point considering at that individually until someone is closer to retirement/decision time. Overall we’re living longer.
Great comments RBull. It will be interesting to see how AUM increases with this fund over time, what clients buy it.
Yes it will be something to watch. That and what other competitive products arrive on the scene.
I’m also interested in reading a detailed prospectus to answer lots of questions, if it actually arrives. If not take up may be more limited.
Yes, details are good 🙂
I recently commented on a popular YouTuber’s dividend investment channel that anyone can deposit $10,000 in the bank, withdraw $150 / month and call that an 18% dividend (100% return of capital). I don’t know anyone who would consider this a good return. I have become more and more wary of return of capital, with maybe the exception of some REITs. Still, any dividend with return of capital should be properly evaluated with other options with a view towards total return. Income is one thing, losing your capital is another.
Thanks for another great read this weekend.
Great stuff James and of course you are correct. I too, have become more aware of RoC over time and as such try to avoid investing in products that give me back my own money. Doesn’t make too much sense.
REITs are an exception since by design, they return a large portion of their income to shareholders via distributions – so effectively rent from others to you and me as landlords.
How are you investing these days? Income, growth, REITs, stocks, etc? It’s been quite the year or so for investing James!
All the best,
Today, I currently own 17 positions with weightings ranging from 0.46% to 17.33%. I have a lot of work yet to do to balance the portfolio! I’m finding it hard to part with winners when I have the confidence that they will continue to run. 72% of my positions are with dividend paying stocks with a current total yield of 5.79%. My yield was quite a bit higher a few months ago, but I bought a lot of stock during COVID when prices were depressed. The “easy” gains have been made as my portfolio grows at a much more modest rate in the past few weeks.
Also my position is significantly leveraged (about 28%) but the interest is 100% tax deductible, and I’ve incorporated the Smith Maneuver as part of that leverage. With about 6 years to retirement my objective is to shift to 100% blue chip (mostly) dividend payors (by loosely following the BTSX strategy) with a couple of REITs added to the mix. I will have significant capital gains to manage as part of this shift, so lately I’ve been trying to focus on the best strategies for that eventuality.
I really appreciate the engagement on this site and I am an avid follower.
17 – that’s good! I’ve got about 27 CDN stocks overall and a few U.S. stocks but that said I will probably get it down to about 20 or so for semi-retirement, since I will gravitate to a more balanced blend of stocks and ETFs in about 3-4 years from now.
James, you are another reader that seems to be comfortable with leverage. That’s good! As long as it is manageable. For our semi-retirement plans (we’ll still work part-time in our 50s) I figure the ability to “live off dividends” and use part-time income to fund our daily expenses should be good enough. Later on CPP, OAS will kick in to provide a decent income stream but we’re not counting on it for any early retirement income per se.
Any particular stocks on your watchlist? I hope to add more AQN and CNR in particular this year.
Thanks for the kind words about the site 🙂
I think I already have the names that one would expect: BCE, BMO, BNS, CM, ENB, MFC, POW, PPL. They’re rounded out with AQN (just opened a position) and CPX. I also have a little DFN on a “trial”. I sold some ENB to give ENS a try. It’s worked out okay and I like the monthly dividend, but I monitor it closely.
My REITs are BTB_UN and SRU_UN. I mostly bought into these with the intention of selling them once they returned to pre-COVID levels – especially BTB, but I’m open to holding them longer. If I sell them I would likely replace or diversify into other REITs
My speculative growth stocks are GDNP and QIPT. Both on the Venture and both “in the green” for me as I’ve held them both for a long time (they were red for quite a while). I have one other that I should just sell, but going to wait another couple of months (famous last words!!).
To answer your question directly – is there anything on my watch list? – I’ve always looked at Granite REIT, Fortis, Canadian Utilities, and also broadening my bank holdings to include TD and RY. That, and getting more into my AQN position. My main reluctance on pulling the trigger is that these moves will reduce my average yield, and therefore my recurring monthly income – it would feel like a step backwards. Also, about 65% of the total portfolio is in an unregistered account, so I have to be mindful about realizing gains.
One last comment on the leverage – so long as I’m getting a dividend higher than the borrowing interest, and I can write off the interest I’m fine with it – at least until we retire. Admittedly it was an easy decision to leverage to buy my main holdings between May ’20 and January ’19 but now the “easy money” has been made 🙂
Your comment made me laugh, all the “usual suspects” for many dividend investors 🙂
Own BCE, BMO, BNS, CM, ENB, MFC, POW….own AQN and buying more.
Own TD, RY, ENB, etc. and CPX. Love CPX!
I like CAR.UN, SRU.UN and SMU.UN for REITs although I also own RioCan…slowly coming back!
Nothing wrong with small speculative plays – I use a 5% rule myself (don’t own any one stock or so more than 5% of portfolio value).
Also a big fan of CU, EMA, FTS for CDN utilities. Very bond-like with some slow growth. I’m OK with that for my semi-retirement in 3-4 years, fingers crossed.
Well done on leverage James, you seem very prudent and smart with it!
Thanks for the reminder; I missed that Mo Money episode. Listening now!
Thanks Loonie! Let me know your feedback. 🙂 Thanks for all the support on the Twitter machine as well. Very much appreciated and try and visit your site back as much as I can!
You’re too kind Mark! Thank you.
Mark you’re on a roll with all these podcast appearances and thanks for the mention!
I don’t think the Longevity Fund makes any sense for us. From what I can see looks like it’s a modified annuity.
I hear ya Bob. All the best!
Thank you, Mark for including me! And that is really impressive to have 3 podcast interviews in a month. Learn new things from each.
I missed one of them so have to catch up.
Re “Longevity Pension Fund”. I honestly don’t think this is a good investment. As you mentioned it works based on the hope of having people die prematurely and I survive them! What is the chance I survive beyond 83-84? Probably less than 5%. I don’t believe the fund can deliver any better than a dividend ETF or REIT ETF. I compare it with Group RESPs where they tell people “You will get so much money as other plan holders will take their funds before kids get to school age so all the interest will stay in the group and distribute”. I think time will tell if the fund can really deliver.
Regarding your Crypto advice on Jessica’s podcast. I am so much bullish on Cryptocurrency and Blockchain but yes I agree. Even 5% is too high. I am not going anything above 2% in my own portfolio. It is so much fun and exciting. Plus, honestly, Crypto tokens are the new “Stock Tickers”. Many of them offer a product / solution like Decentralized Financing, Borrowing and Lending. Or some offer domains run on the Blockchain, or file storage (Cloud Storage) on Blockchain, and many more. I think the problem is the valuation. We don’t really know the valuation of these Cryptos. There is no real P/E to rely on yet so yes the valuation is based on speculations and offer / ask not a real value. And of course so many of these 1000s of Cryptos will not be here in couple years.
I was a pleasure to be on all 3 podcasts. Each host/hosts have their own audience and something to offer Canadians.
Glad you listened and thanks for sharing on social media 🙂
The Longevity Fund is not for me, definitely not right now. Folks can build their own dividends or income stream but I can appreciate some investors don’t know how nor care to.
I’m a big fan of the 5% rule per se. That is, 5% in any one stock, 5% in any speculative investment, etc. but little more.
I’m not one of these people that say never invest in this or that. Who knows what the future holds??
I have little doubt that something else than Cryptos will be leading the charge many years from now. My crystal ball is always very cloudy!
Have a great weekend and again, thanks for the social support.