Weekend Reading – Best dividend ETF, withholding taxes, Slow FI, giveaways, resolutions and more #moneystuff
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Earlier this week…
I answered the question: When do you think it’s a good time to invest, Mark?
And I launched a multi-month giveaway where you can win FREE TurboTax software to help you with your tax needs.
As part of that giveaway, even if you don’t win the free software codes and want to get started on your taxes now, don’t forget just by being a fan of this site you can take advantage of my 15% discount on TurboTax Canada software until April 30, 2020. Awesome right?
To help kick-start your 2020 savings, Oaken Financial is giving away a GIC with an opening value of $500 to one lucky winner! How to participate? Simply fill out all required information on this link (takes 1 minute).
Legal terms and conditions so you know!
Oaken’s contest is open to legal residents of Canada (excluding Quebec) who are over the age of majority in their province/territory at the time of registration. Starts January 13, 2020, 12:01 a.m. ET and ends on January 31, 2020 at 11:59 p.m. ET. Prizes available to be won: 1 x Oaken Financial GIC with an opening value of $500. Enter and good luck!
I won’t be starting my tax return just yet but I hope to start putting things together, getting organized, in a few weeks.
All the best for your weekend and enjoy these articles!
My friend the Dividend Growth Investor shared what he feels are the best dividend ETFs to own in your asset accumulation years. Hard to argue with this, from his post:
“In conclusion, I believe that ETF’s on the S&P 500 index or the Total Market Index can be good ETF’s for busy dividend investors in the accumulation phase. Unfortunately, their current yields are pretty low around 2% as we speak.
Some investors believe that they can take that 2% dividend yield, and then sell 1% – 2% of their stock holdings every year. I do not recommend having to sell shares to fund retirement. Selling shares can increase the risk of running out of money in retirement, due to sequence of return risk. If you have to sell when prices are low during the next bear market, you may have to sell a lot more shares, and increase your chance of running out of shares to sell. As your number of shares declines, you are increasingly betting that a rising tide will bail you out. While stocks usually go up over long periods of time, they have also gone nowhere for extended periods of time too. If you have to sell shares while prices are low, you are depleting your asset base. This is speculative behavior, and not how an investor should operate.
For retired dividend investors, who are not interested in selecting their own investments, I believe that two good choices today include the Schwab Strategic Dividend Equity ETF (SCHD) and the Vanguard High Dividend Yield ETF (VYM). Both yield close to 3% today, or have at least reached those yields fairly recently. They are decently diversified, and have long histories of real money performance. The retired investor could swap their plain vanilla index fund for one that is focused on current income. This is easily done in a retirement account. However, it will be more difficult and costly to implement in a taxable account, because such a transaction could trigger costly capital gains. Hence, if you are interested in investing in funds,be advised that a retirement account is the best account type for such investments.”
This was well worth the time to learn more about foreign withholding taxes, even if Justin Bender seems a bit obsessed over them! I liked Justin’s summary on what to hold where:
- Use Canadian-listed low-cost ETFs like VUN, XUU, ZSP or others for your TFSA if you want foreign exposure. I provided a list here of other considerations for how to diversify your Tax Free Savings Account (TFSA).
- Over time, use U.S.-listed low-cost ETFs like VTI, ITOT or others in your Registered Retirement Savings Plan (RRSP) once you have enough assets saved up.
Kari from Money In Your Tea was kind enough to put my goals atop of her winter roundup of personal finance goals list as inspiration to others. After reading this list, I was very impressed how others are approaching their dreams and ambitions. I hope they nail it.
Enjoy your journey. Life is previous. Whether you call it “Slow FI” (a more gradual path to financial independence) or not it really doesn’t matter. These words were a good reminder for all via The Fioneers on Tawcan’s site recently:
“I’ve come to understand that the purpose of financial freedom is not to retire early. It’s to live a life you love that provides you with meaning and purpose. When you have a life you love, there’s little reason to sprint toward early retirement.”
Smile & Conquer has re-framed her 2020 goals as more of a bucket list to be successful.
GenYMoney shared her great, motivating, long-term goals: “My goal is $35,000 in dividend passive income by age 40, so in about 4 years, and a $1,000,000 investment portfolio (or liquid net worth).”
Her post made me think about how I might share our news when we reach that big $1 M investment portfolio milestone ourselves. What should I tell the world? How?
I’m really not the personality to broadcast this stuff endlessly so I can get on CNBC or other yet it is a very significant financial milestone for us. With the stock market continuing to climb, even slightly higher this year, it is pretty much inevitable we will get there in a few months. Readers, what say you?
Dale Roberts wrote about the lost decade for U.S. stocks.
MoneySense answered the question: should you consider an RRSP loan? Personally, unless you have no consumer debt (i.e., no credit card debt, no car payments or any other loans beyond your mortgage) I wouldn’t even bother. I mean, how much debt do you really want to take on?
Thanks to her Twitter feed, I found this article. Phia from Freedom 101 decided ditching the mortgage was one of the best decisions they ever made. Well done!
How To Save Money compared the airline loyalty programs. A solid read.
By now you know you can contribute another $6,000 to your financial future self via the Tax Free Savings Account (TFSA).
To get help, check out my Deals page where you can get cash back when you invest with Bank of Montreal, you can get a $50,000 ETF portfolio managed fee-free for a year with ModernAdvisor and, you can save big with one of Canada’s low-cost investment leaders: Questrade.
Remember, there are some easy, simple, all-in-one funds for your TFSA right here!
Reader question of the week (adapted for site):
I don’t know if you respond to ‘cold call’ emails but just in case …am I correct in thinking (remembering?) that you are not a big fan of bond funds and bond ETFs? Why?
I have enjoyed your blog for a while, but mostly via links from elsewhere, but I’m now a full-time subscriber!
Thanks for your answer, would love to hear it.
Great question. Yes, I did own bonds including bond ETFs many years ago but I have since changed my thinking to be more aggressive with my portfolio via owning dividend paying stocks for income and growth, and owning low-cost ETFs for additional equity diversification.
Now, the biggest reason I no longer own any bonds or bond ETFs is because beyond our desired > $1 M investment portfolio (which we’re getting very close to!!!!) I have a small workplace pension and so does my wife. So, that’s future fixed-income I/we can rely on. Very bond-like! So, because I consider my pension a BIG bond then I see no reason why I need to hold bonds at this time.
The other reason I avoid bonds right now? My investment timeline is measured in decades. So, I know I should get the best long-term returns from equities over bonds. Your mileage and risk tolerance may vary.