Weekend Reading – Building wealth and getting semi-retirement ready, financial facelifts gone wild, and more #moneystuff

Weekend Reading – Building wealth and getting semi-retirement ready, financial facelifts gone wild, and more #moneystuff

Hey Readers!

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.

You can find the last edition (…just in case you missed it!?) right below:

Weekend Reading – How to invest in your TFSA, passive income updates, top stocks to own this year and more!

Earlier this week, I wrote this article with CPP and OAS financial expert Doug Runchey. A thank you to Doug once again for his time on my site: unpacking survivorship benefits when it comes to CPP and OAS.

In that article, you can also find a host of links about when to take CPP and OAS, should you defer these government benefits and if so, why, and much more.

I’ve also got those articles listed on my dedicated Retirement page with a dozen+ essays and stories of early retirees who have “been there, done that” to learn from. 

In terms of weekend chores, there is work to do around the condo and some last-minute holiday shopping before things get really wild in the coming weeks – to avoid any store-hopping in the coming weeks with the pandemic going on. 

I hope you stay well and stay safe during these times even with vaccines on the horizon. It’s still time to be very cautious and we’re a long ways from being out of the viral woods yet!!

I’ll be back next week with at least one new article you’ll read reference to below, and maybe more so stay tuned!

Thanks again for your readership – approaching 5,000 dedicated subscribers and over 750,000 pageviews year to date!

Have a great weekend!

Mark

Weekend Reads

Quite the Financial Facelift article in The Globe and Mail recently. I’ve shared the link but will write more about it below since I know some of you don’t pay to get behind the Globe paywall like I do!

The article features Stella, a do-it-yourself investor who has a tidy sum of “dividend-paying Canadian corporations to take advantage of the dividend tax credit…$860,000 portfolio heavily weighted in Canadian financials, utilities and telecom stocks.”

Stella is concerned about her portfolio of predominantly Canadian dividend stocks, and would like “better asset allocation”.  Very fair. This is however despite the dividend income delivered from her portfolio, a whopping $43,200 per year.

Where things get a bit interesting is in the firm financial advice and the comments from Globe readers.

First up, the planner in the article advises Stella to basically destroy the existing portfolio and convert it to a cookie-cutter indexed portfolio. The planner also advises to hold enough cash for three years of needs. He advises this to “reduce her portfolio’s overall volatility, allowing her to sleep a little easier knowing that she can cover her expenses and either reinvest or reallocate the dividends that she receives,” the planner says. “In addition, she will not be susceptible to changes in dividend payout rates, which are out of her control.”

Without sharing too much from any Globe comments section, this planner is largely ripped by the commenters for a host of reasons. Here are some examples including other advisors. All screenshots courtesy of article:

Regardless of the comments, I feel the article is missing an important point: Stella has met her goals. Instead of blowing up the portfolio with a cookie-cutter indexing approach (i.e., some cash, “35 per cent Canadian equities and 35 per cent global equities” and so on) there could be a way to keep what she has built and migrate her investing approach over time to feel and be more diversified.

That paragraph also brings me to these two points:

1. Depending upon your own tolerance for investing risk, few people need three-years of expenses held just in cash. While holding cash is very important (read on – how much cash should you keep?) you could argue that holding that much cash, where interest rates are now, is more risky than most equity products thanks to rock-bottom interest rates.
2. I’ve always mentioned on this site DIY stock investing always has risks. For example, dividend cuts can and do happen from time to time. I’ve hit a few snags myself this year. This makes the use of broadly indexed funds a winner long-term since you’ll hold all growth stocks that pay no dividends, dividend growers (and dividend cutters) in a large basket. But to suggest any cookie-cutter approach to investing is misleading. Maybe the editing team was short on time…

I’ll have MUCH more to say about point #2 when I share what goes into a financial plan on my site next week – with input from a Certified Financial Planner.

In the meantime, you can see my quick takes on what your financial plan should cover here.

What should my financial plan cover?

A BIG thanks to Kornel at Build Wealth Canada, Canada’s top personal finance podcast. If you didn’t get a chance to check out the Canadian Financial Summit this year, and my presentation with Kornel – you can do here and below.

We had a great discussion (and went overtime!) on how I’m striving to structure my portfolio for semi-retirement instead of striving for some massive portfolio number that implies never working again.

As you might already know, I believe in Financial Independence and not full-on Retire Early.

Here is one article on that very subject.

Dividend Growth Investor reviewed a dividend healthcare stalwart to consider for your portfolio.

Last but not least, wow, quite the makeover at Million Dollar Journey. I am impressed by the layout – so check it out. I continue to look forward to the articles from this site from Cut the Crap Investing writer Dale Roberts and Kyle Prevost, my favourite new expat teacher in Qatar! 

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

Hi Mark, 

Did you see that RioCan REIT (a stock that you own I think from your Dividends page here) cut their dividend by 33%? What are you going to do with that stock?

Thanks!

Great question and yes, I did see that. 

What am I going to do? Nothing. 🙂

I own a few hundred shares of REI.UN, yes, but I don’t intend to sell any of them. Instead, I’ll continue to DRIP (reinvest distributions paid by this company) for the foreseeable future. I figure retail will eventually come back in some shape or form and RioCan will figure out how to thrive. That may take a few years though. 

Besides, this stock is only worth <1% of my overall portfolio. I own dozens of Canadian stocks as part of my get wealthy eventually strategy. Dividends can and do get cut. Dividends can and do increase as well. So, for RioCan, while the loss of some dividend/distribution income stings a bit for sure I don’t think it’s worth sweating the small stuff over.

More REIT distributions are likely to come. When you find out about them, feel free to ask me another question!

You can find some recent, popular FAQs on this new page here. 

Happy investing!

Mark