Weekend Reading – COVID-19 and cancelling travel plans, financially secure and more #moneystuff

Weekend Reading – COVID-19 and cancelling travel plans, financially secure 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.

Wow, what a difference a few weeks makes.

Three weeks ago, my wife and I boarded a plane to Belize with minimal fears about COVID-19. Three weeks later and back home now, there is talk of work stoppages, major economic downturns and significant domestic and international travel disruptions.

Things could get interesting for sure…

Do you have any upcoming travel plans? Have you cancelled them? Has work cancelled them for you?

View from our Belize villa in the morning.

Tax Season

With “RRSP Season” out of the way per se, although every month is RRSP season for me since I contribute to my account monthly, tax season is upon us.

Have you completed your tax return yet? If not, boy, do I have some deals for you!

First, if you’re looking for a massive tax refund every year that’s not really smart let alone ideal. It means you gave your government an interest free loan.

Back to the deal, make sure you take advantage of the following to help you with your tax preparation needs. In a few days, I will announce winners of my giveaway!

Even if you don’t win, just for being a fan of My Own Advisor I can offer you the following 15% off discount to every single reader until April 30, 2020.

I will draw three (3) lucky Canadian resident names at random and that’s it – that’s how you can win!

Good luck and thanks for your readership!

Stock Market Calamity

How are you holding up?

Me, I’m doing just fine. Haven’t sold a thing. Just saving money now. Boring I know but read on.

I will invest a few thousand bucks later this spring in my basket of dividend paying stocks. 

Until then, some perspective.

Last month:

For the last decade +:

Unless we get close to 2009 levels, I’m not really worried. 

I’m open and happy to hear your perspectives otherwise though. Maybe I’m not seeing something as clearly as I should!

Have a great weekend and stay safe. Wash your hands – often. It’s a good idea with or without COVID-19 around. 

Mark

Weekend Reads

Thanks to Tom from Dividends Diversify for this detailed post about dividend investing made easy. Have a read and let me know if you have any questions about these low-cost ETF options to provide income and growth for your portfolio. 

Smile and Conquer didn’t have her travel plans cancelled. She highlighted her trip to Amsterdam and Portugal recently. Haven’t been to the former myself but I have been to Portugal and really enjoyed it. We were there a few years ago. She wrote: 

“Lisbon has an endless list of things to do and see, so I’ll share my favourites. You have to eat at the Time Out Market. It’s an indoor market filled with food vendors, really good food vendors.” Totally agree. Wish there was a Time Out Market in Ottawa. 

Retirement Manifesto wrote about taking the long way home and not rushing into any retirement. 

“It reminds me of what’s important in life, and it doesn’t really matter if I get home 2 minutes later, or that my truck’s a bit dusty. It’s worth it to slow down and enjoy the views I get when taking the long way home.” 

On Bitches Get Riches, a reader asked if they can become financially secure by age 30. Amongst plenty of great advice (including the usual amount of expected foul language for extra emphasis) they said the following:

“If you can avoid it, don’t buy a fucking car. They’re money pits. If you absolutely need one, buy used. Otherwise, public transit is your friend. Look at those long bus and train rides as the perfect time for uninterrupted studying. You don’t want to make eye contact with your fellow public transit commuters anyway. That way lies madness.”

Hard to disagree!

No swearing in this post. John Heinzl had another smart take on Real Estate Investment Trusts (REITs) – if you want to own (lots of) real estate then owning publicly traded REITs are hard to beat.

We have a plan to keep ~10-15% of our entire portfolio in REITs actually. They’ve been great for increasing cash flow over time.

Rob from Passive Canadian Income shared his latest income update. Well done!

I have to get to my February update. Spoiler alert, my income went up by a few hundred bucks for the year, in just one month. Here is my other report for a benchmark; now planned to easily surpass $20,000 in dividend income from a few key accounts this year. 

This is why you need to stay invested with or without COVID-19. 

Awesome tips from one of my favourite blogs (Million Dollar Journey) about the considerations in any retirement draw down plan.

1. Develop a plan for your 4% withdrawal rate but more essentially, figure out what you’ll spend in retirement to determine your enough number.
2. “Remember that factoring in taxation and government benefits should NOT tempt you to get away from your target asset allocation.” Taxation and inflation are portfolio killers!
3. “Spend dividends in your non-registered portfolio first!”  Actually, I probably won’t. I will likely wind-down my RRSP first, live off dividends in my non-registered account and leave my TFSA “until the end”.
4. Develop a plan around which government benefits you want to preserve. Yes, smart. 
5. After age 55, defined benefit pension income can be split between spouses, and after 65, that expands to include RRIF income as well. I will do that with my pension but not likely until age 60 or so. There is no point when I have a DB pension and DC pension in our financial future. Might as well draw down RRSPs first, keep pensions until later and defer investment risk to pensions. Yay or nay?
6. Smooth income for OAS and CPP. Will do! I wrote about when to take those CPP benefits here. 
7. I will consider never retiring in the traditional sense. Rather, I am striving for financial independence in a few years. This will keep my body and mind active, and, deliver some side-income as well.
8. “As more and more retirees of all ages enter into retirement with larger TFSA portfolios, how you handle the draw down of this account specifically is going to become vitally important due to the fact that money taken out of a TFSA is NOT taxable income.” I will likely not touch my TFSA until my 70s. See above comment “until the end”. It’s churning out about $5,000 per year now and that should double or triple in the coming decades. Might as well spend my tax-deferred money first before tax-free. 

Big fan of Shane Parrish’s site. Check out his latest with another interview and more mental models here. 

Reader question of the week (adapted for site)

Hey Mark,

You got any opinion on VGG (the U.S. Dividend Appreciation Index ETF)? Looks like I can hold it in my RRSP as a Canadian ETF or do I need a whack of U.S. money to buy it?

Also, thoughts on XDIV (iShares Core MSCI Canadian Quality Dividend Index ETF)? I know you have created your own Canadian dividend ETF (link here in how you said building your Canadian stock holdings was easy per se), but what do you think of the ETF holdings? Too many financials in that ETF?

Thanks so much!

Awesome to hear from readers.

I hope you are enjoying my answers to the reader question of week segment. Let me know!?

OK, about VGG, yes, you are correct about where to own it (RRSP) but it is a Canadian ETF that holds U.S. assets as you predicted. 

Read on from the site:

“Vanguard U.S. Dividend Appreciation Index ETF seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a U.S. equity index that measures the investment return of common stocks of U.S. companies that have a record of increasing dividends over time.  Currently, this Vanguard ETF seeks to track the NASDAQ US Dividend Achievers Select Index (or any successor thereto). It invests directly or indirectly primarily in stocks of U.S. companies.”

So, it invests primarily in the U.S.-domiciled Vanguard Dividend Appreciation ETF or VIG.

Actually, my post this week profiled VIG.

Overall, I think VIG is a great fund and therefore so is VGG as the Canadian-listed equivalent. You should get solid growth over time with this fund, just don’t expect good yield/current income from it. 

In terms of XDIV, I don’t own this fund either but it is designed to hold “Canadian stocks with above-average dividend yields and steady or increasing dividends.” You know as a reader I love my dividends!!

Here are the top XDIV holdings:

The top-10 holdings almost own 80% of the fund. That’s right, 80%. You can see why I’ve decided to unbundle my Canadian ETF and own most (not all) of the companies above directly and stop paying any money management fees to do so. 

That said, if you are weary of owning your own stocks, no problem, for the fee structure and bundling effect that XDIV provides, I think it’s just fine to own for yield (4%) given the skinny MER (0.11%)! Income investors could do far, far worse. I will consider adding XDIV to my list of top income ETFs to own.

You can find my top ETF investing articles and what to own where here.

Happy investing!

Mark