Weekend Reading – Books on #FIRE, cheap stocks, RRSPs are worth it, change is hard, and more #moneystuff
Hey Everyone,
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.
In a recent post, I shared this new, major financial milestone in our lives. Simply awesome we’re only another year or so away from earning $2,000 per month in tax-free (thanks TFSA!) and tax-efficient dividend income…for life. A reminder this dividend income does not include any RRSP withdrawals. Those withdrawals will eventually occur, just not right now. I hope to share many more posts about how I intend to use dividend income and withdrawals from various accounts (such as our RRSPs) to effectively pay for most of my living expenses, for life. This should allow us to work as we please.
With “RRSP season” well underway, with more and more people saying “RRSPs don’t matter” and/or “RRSPs are a tax grab” it certainly makes me reflect and reply that many Canadians simply don’t understand the wealth building power behind this investment account – if used wisely.
Alas, I wrote this post to help clarify things: RRSPs facts you must remember this tax year and beyond!
In only a few instances, could one legitimately argue “RRSPs don’t matter” to them.
RRSPs matter to us
I know for us…they absolutely matter since the money working inside our RRSP accounts has been compounding away for years. That money will help us fund more great vacation experiences like this:
My view from Belize villa this morning, San Pedro, Ambergris Caye.
Have a great weekend and I look forward to your comments on the site, about Belize, travel, RRSPs, dividend paying stocks or really anything else! Wish me luck since I’m swimming with sharks today!!!
Mark
Weekend Reads
Great stuff here from Collaborative Fund: History is only interesting because nothing is inevitable. Morgan’s thesis is: “…you can’t help but wonder what we are confident in today that will look foolish in the future.”
Passionate about financial independence and early retirement? ExploreFI Canada listed their top books on this subject. “These books are on FIRE!”
Many of these books are great. I’ve read most of them. Then again, one could argue because change is ultimately about behaviour maybe you don’t need any more money advice. Thoughts?
Even after a recent, healthy dividend raise, Mat Litalien says Manulife offers value now (it’s cheap), growth and more dividends in the future.
Speaking of dividends, RBC increased their dividend today by 3%. Great to see a raise when you’re on vacation in the sun!
Rob Carrick has some thoughts on how to avoid financial stress.
Matthew Freeman highlighted yet another dividend increase to this millennial’s growing income stream. Well done!
“RRSP season”
Yes, you know how I feel about RRSPs in general so here are a few other posts that can help you optimize the benefits of this account beyond my new article this week.
What to learn about the nuts of bolts about RRSP investing – read on in my 101 post!
Want to know the best ETFs to build a fat RRSP? Find them and own them here.
Before you automatically convert your RRSP assets to a RRIF, consider this.
Dale Roberts wrote about using your TFSA and RRSP to play retirement portfolio catch-up!
Giveaways and Deals!
Don’t forget as part of my Weekend Reading you can enter to win FREE TurboTax software to help you with your tax needs.
Even if you don’t win the free software codes and you 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?
(2020 deal over)
Save, invest in low-cost products, and prosper!
Use my Deals page where I can save you money, as in hundreds of dollars with Bank of Montreal, Questrade, or you can have $50,000 managed free for a year with ModernAdvisor.
Reader question of the week (adapted for site)
Hi Mark,
In a recent weekend reading the following quote caught my eye: “The only time you should be worried about a correction is if you need the money within the next five years and haven’t made an appropriate plan to access the cash.”
What did you mean by that?
I am 68 years old and my portfolio has done quite well during the last year. I feel however there is going to be a major market correction (cause unknown at this point) and would like to put a plan in place to access the recent growth (still within my RRSP). I have raised this with my financial advisor who says to stay invested (modest growth profile) however I don’t feel I have a plan in place that addresses my needs in the next 1-5 years.
Thoughts?
Overall I am happy with my financial advisor’s advice but feel that changes are needed.
Good on you to take more ownership over your money. To clarify, that quote was from Boomer & Echo’s site, check out the link above, but I do happen to agree with him with a few clarifications on my end/my perspective:
- I think any money you absolutely need/absolutely depend on in the next 1-2 years should likely be in cash or some form of fixed income. Cash could be while you’re saving for a house when younger (i.e., you really need that down payment) or cash that is potentially set aside during retirement. I say this for the latter because who knows what the future holds and I think any combination of a basic emergency fund + cash on hand to combat at least a 12-month major market calamity or other should be readily accessible. Cash should be there when you need it or least expect to need it. I just think that’s smart planning.
- We hope to keep one years worth of cash as we enter semi-retirement in the coming years. This cash will act as our emergency fund/cash wedge. Check out the post but the graphic below is our current thinking. Creating some form of “bucket approach” for your retirement income stream might work well for you.
- Any money you might need in years 3-5 should likely be maintained in some form of fixed income and/or in the form of assets that should deliver dependable income. I believe the worst thing you can likely do in any potential market meltdown is sell lots of equities. You need to stay invested. So, that means you need to consider a blend of bonds and stocks (equities) that you don’t panic sell when things get rough. Rather, use of mix of bonds and stocks to stick to a withdrawal plan that mitigates portfolio ruin in retirement.
- Lastly, if you are worried about a major market correction in terms of what to invest in, it could be a sign your risk appetite is not as high as you think. If you’re worried about a 10% or even a 20% market decline in your stocks; you believe you’ll ask your advisor to sell some equity funds or other, then you probably need more bonds in your portfolio to cushion those risks.
I hope this offers some context to that statement, why I liked it, and how you can tailor your portfolio to mitigate stock market risk.
Readers, I have your other questions in my inbox and I hope to get to them in the coming weeks!
Happy investing,
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
That’s awesome that your tfsa will give $2k/month in dividends! I have to admit being slightly envious. The lure of rrsp investing keeps us putting our money there. With a high marginal tax rate for Mr. Tea, it makes logical sense though.
Well, non-reg. + x2 TFSAs are approaching $2k per month. Should hit that mark in late 2021 I think.
Nothing wrong with the lure of the RRSP Kari. Great account and we have our RRSPs largely maxed out as well (just need to work on my wife’s RRSP really…)
If Mr. Tea makes good coin, max it out as you well know.
Keep your eyes peeled for some of that ambergris the place is named for. If you find a big chunk you could retire immediately.
I swam for some yesterday but didn’t find it Beth. Will look again today!
Gotta like those banks for their consistent dividend increases!
By the way, that’s a killer view Mark!
Thanks very much. Follow Twitter, I’ll post more fun stuff today 🙂
question about Reits: what do you currently own now? and do you prefer these in your RSP or TFSA account? I am looking to add some to my registered accounts, but do not want to own a REIT ETF.
Congrats on your milestone, very inspirational Mark.
Sue
Hey Sue,
I own a number of REITs now. You can see some of my holdings here:
https://www.myownadvisor.ca/dividends/
I keep most of my REITs inside the TFSA. That page will tell you why.
That’s just what I do of course. Your mileage may vary!
Enjoy the trip! My dad spent a few months in Belize in the 70s and still talks about how much he loved it!
Cheers.
Very nice here Jordan. I highly recommend it for you and your wife at some point!
I have been following your website for several years and i don’t recall you recommending preferred shares. I have been buying BCE.PR, Series Y for several months now. These shares were once issued at a par value of $25 and now have a market value in the mid $15 range. They are recommended by the Money Reporter as low risk. They are straight or fixed preferred, and cumulative, pay $.08 monthly and have a yield of approximately 6.25%. They have already taken a big capital loss of around $9 per share so there is room for some capital growth (and of course capital loss). What is your opinion of these shares as an investment?
You’re right Barry. Not a HUGE preferreds guy myself but I did do this post with another investor about it.
https://www.myownadvisor.ca/preferred-shares-is-this-the-new-replacement-for-fixed-income/
I guess I just feel you’re not getting the upside as much and you also have bond-risk. That said, they can be good fixed-income vehicles for retirement and I won’t rule them out myself in the coming decade as I enter semi-retirement.
Let me know your thoughts after reading this post. I think your comments about BCE align to my risk I mentioned.
On the contrary, compare BCE common stock to BCE.PR over the last 10-years, including the BCE dividend increases and let me know your thoughts 🙂
Mark
I read through the comments on preferred shares. All are from 2017 but still informative. I hold BCE.PR, Series Y in both registered and non-registered accounts. I do not know if you read The Money Reporter by MPL Communications? It is an Investment Paper whose motto is for “Investors whose interest is making more interest”. It is pricey after the first year but very conservative. I own a lot of BCE common shares but I am now 80 (a retired teacher) and have owned mostly blue chip common shares for over 30 years, I am now looking for more safety and, of course, income. GIC’s and bonds pay around 2-3 % and BCE.PR.Y have a yield of over 6% based on the current market price of about $15.50. They were issued years ago with a par value of $25 so other people took a capital loss of up to $10. I feel BCE.PR.Y meet these goals for my age. For my son who is half my age, I keep him 100% in common stock.To me, a preferred share is like having a fixed income paying over 6% plus the benefits of the dividend tax credit. And, you can get a BCE DRIP if your BCE.PR.Y dividend is now around $65. I guess I wrote to you to see if I was doing something wrong and wasn’t aware of it because I see only the advantages of investing in BCE.PR.Y at my age.
Yes, older post but still relevant – thanks 🙂
Age 80 and retired teacher – you are set!
I think if you’re looking for more safety and therefore asset preservation with some income, then preferreds make sense. Likely (although I cannot say for sure for you) a combination of common stocks + preferreds + GICs (GIC ladder?) + 1+ year in cash should be just fine for you.
I certainly see no disadvantages of investing in preferreds as long as you know about the limited upside (vs. common stock like BCE) and their bond-portion risk.
I know a few retirees you read this site a bit younger than you invest in common stocks + low-cost ETFs + have 20% or more in bonds + cash. They seem to be managing just fine with that balance.
Telus announced a 2 for 1 stock split to raise 1.5 billion dollars. With the new 5G network coming up, telcos have a lot of spending ahead of them. Is this stock split to raise money a good thing for existing shareholders?
I think so Rn, overall, but they are striving to raise some cash and a stock split is one way to do it. Cheaper stock to buy for investors.
Long-term, not worried and I think Telus and 5G and the demand for the internet is only going to accelerate. I own hundreds of shares of Telus for that reason nicely DRIPping away!
Mark, investing in equities — we are all swimming with sharks every day! Buy and hold blue chip, dividend paying stocks of companies we use every day is all the shark cage protection you need.
Good one 🙂
I have 30+ dividend paying stocks from CDN and U.S. With you there!
https://www.myownadvisor.ca/dividends/
“I am 68 years old and my portfolio has done quite well during the last year. I feel however there is going to be a major market correction (cause unknown at this point) and would like to put a plan in place to access the recent growth (still within my RRSP)”.
Anytime one measures their returns to market returns or capital growth there will always be a concern about a possible market correction. That’s the nature of the game.
I’ve always suggested one concentrate on the Income their portfolio can generate and should the income meet or exceed their expense needs, than market returns or changes to the value of their capital will have little meaning. Market corrections offer the opportunity to increase ones income, not lower it just because the value of their holding drop.
I’m with you Cannew. I love seeing the income from my portfolio grow.
Grew more today with RBC dividend increase. Money making more money on vacation no less!
All the best. Will interview you and giveaway book soon on the site. You’re on my to-do list.