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.
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!
- 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!