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.
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.
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.
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.
- Develop a plan for your 4% withdrawal rate but more essentially, figure out what you’ll spend in retirement to determine your enough number.
- “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!
- “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”.
- Develop a plan around which government benefits you want to preserve. Yes, smart.
- 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?
- Smooth income for OAS and CPP. Will do! I wrote about when to take those CPP benefits here.
- 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.
- “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)
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.
Good luck with your purchase plan.
The only drawback is that the Loonie is getting hammered this morning. If Crude continues to fall – the Loonie will fall with it. Makes buying US stox a bit more expensive. But, in the long run, you should be able to recoup the currency loss.
Was about to buy this am, but I was spooked by the trading halt.
Might wait a few weeks before I nibble at my shopping list. I am all cash at present. As they say, cash is also a position.
Ya, still in savings mode really Wayne. I might buy CNR when I have more cash inside my RRSP. Otherwise, want to save more for MSFT, ITOT ETF, or MDT I think. That’s my short-list.
Thanks for sharing the weekend reads, Mark! I may take advantage of your Turbo Tax offer btw :). I haven’t sold a thing either. I noticed you said you would not be worried unless 2009 levels are reached. Would that type of market change how you manage your portfolio?
Go for it. You should get 15% off my friend.
Ya, I mean, if the market goes to those levels (or lower) then maybe I change my approach, such as stopping to reinvest dividends, hoard some cash, etc. I really can’t say what I’d do then because those levels are certainly much lower than where they are today.
That said, I’m just saving cash now for another RRSP purchase in a few months and whatever that market price is, it will be what it will be. I usually only invest when I have a few thousand bucks to invest. I’m focusing on owning more U.S. assets over time so I have my eye on $MSFT, $MDT in particular, and potentially $ITOT for total return. $BLK has my attention under $400 per share if it goes there. Might only be able to afford 10 shares though!
COVID-19: Were you one of the lucky ones who managed to buy some toilet tissue before all the major stores ran out? There really is a herd mentality out there.
I did. re: toilet paper.
We always keep a few weeks worth of that, soap, laundry soap, cleaning supplies, etc. in the condo anyhow. You never know!
I just landed in Manila on the way to Osaka. 50/50 split so far people wearing masks- everyone was wiping down surfaces, but most people seemed relaxed. Sounds like touristy places in Kyoto and Osaka are empty. Will be keeping an eye on the markets the whole time, already put in some buy orders 🙂 🙂
Stay safe Geoff!
Hi Mark. Sounds like Belize was a great trip. Our daughter’s summer term in Italy was cancelled by the university. Mr. Tea and I were planning a 10-day trip while she was there, but no longer. Maybe next summer for both her and us. Meanwhile, Mr. Tea’s company came out with an updated travel advisory for employees. Looks like he’s still going to Banff in a few weeks, unless the conference is cancelled. For my work, we have a 2-day conference in Kingston every August, and that’s still going forward at this time. As for investing, I had new money to invest, which I did Thursday. It dropped in value on Friday, but so what. I won’t retire for another 8-10 years, so it’ll go up long before then.
Good to hear from you. I could see most non-essential conferences and workshops and travel being cancelled soon. If this stuff hits the hospitals and senior homes, etc. it could get very bad.
I won’t retire fully for decades but it would be nice to work part-time in the coming five years. Not sure if it was a career-limiting move to tell my boss that but I wanted to be honest 🙂
Hi Mark. Well, we are scheduled for a Transatlantic and Norway cruise April 15th and to tell you the truth I’m scared shitless!!!! Sorry for the curse word but it seemed to fit our situation. We have cancellation insurance but I’m not sure we’re covered for this mess. Anyway Celebrity has been keeping us informed every couple of days so I feel a little better. We’ll see what transpires as we get closer to the due date. As far as the markets go this stuff happens and there is nothing to do but wait for the speculators to have their fun. Have a great weekend. ?
Well, you can’t put your life on hold Gary!
Hard to say what the travel industry will do with all this stuff. I’m sure they do not want to shut down completely.
Good stuff on Celebrity.
Nothing we can do about the markets. What will be is what will be!
OK I’m going to blow my trumpet here but I worked at it. I’m 67 and LOVE market dives. It means I can eventually pick up more dividend growth stocks as PEs compress and dividend yields rise, just as in 08/09 when I loaded up. And things will have to get a lot cheaper before I buy anything with my 18% cash stash. I own zero bonds and live off the growing income. I don’t have a pension or a RRSP as I lived overseas for most of my life … big deal. I’ve maximized my TFSA with rising income assets with complicated distributions like BIP.UN. – now getting more income than the contribution amount every year so I just plow the $12,500 (total) right back in. At tax time it’s dead easy to file and the provincial and federal dividend income credits are astonishing and keep my taxes ultra low. Not collecting OAS until 70 but I don’t really need it and they’ll claw a lot of it back anyway. As I say to everyone – go for the income not the capital gain. You just have to be patient and have the right mindset. Keep cool under fire.
It’s not rocket science. CN Rail, Fortis, Cdn Utilities, Trans Canada, Royal bank, TD bank, Emera, Brookfield Infrastructure in Canada. JnJ, 3M, Abbott Labs in US. There you are 11 stocks and I didn’t charge you a thing. Just pay your 0 – $10 to buy and hold … at the right price.
As for travelling – in 2002 in the midst of a credit crisis and currency collapse in Argentina with CDN media showing pictures of bank windows getting smashed and supermarkets getting raided by gangs I went to that country. Sure the people were suffering but I had an amazing time. I pretty much dress down and just had carry on for the airline. Didn’t hang around in Bs.As. too long although my hotel was US$6 a night including breakfast. I could get a steak dinner for $2 including wine. Instead I headed for the Andes and some serious hiking. Everyone I met in the mountains were kind and gracious. Never experienced any animosity because I was a loaded tourist. And speaking of which I hardly met any … I wonder why.
Trumpet away Barry.
re: “I’ve maximized my TFSA with rising income assets with complicated distributions like BIP.UN. – now getting more income than the contribution amount every year so I just plow the $12,500 (total) right back in.”
Very nice :0
If you don’t have to take CPP until age 70, I think that is very smart. You are shifting the risk and if you can do it, that’s very good. Not many people have the financial means to do that. They usually take it as soon as they can at age 60.
“go for the income not the capital gain” – we sound similar. Since starting this blog I’ve been focused on rising income vs. gains. As such, I too own banks, pipelines, utilities and infrastructure companies like CNR and BIP.
I have no intention of selling anything including a small amount of SU that is getting absolutely hammered.
I own JNJ and PG and a few other stocks in the U.S. I have my eye on $MSFT and $MDT this year.
We enjoyed Argentina when we were there a few years ago, about a decade back. The Andes are certainly a sight.
Hi Barry. Love your selection of 11 stocks. i am only into cdn stocks and I own 7 out of the 8 cdn stocks that mentioned. Awesome choice of stocks you have there.
Hi Mark, I look forward to your weekend update, it’s now part of my Saturday morning reading 🙂
Thank you for the TurboTax discount! I filed last weekend and already received a refund. This was our first return as retirees, so the income splitting suggestions in TurboTax is fantastic.
Have a wonderful weekend!
Awesome to hear!
I have to finish my taxes soon! About halfway through with TurboTax and hoping I can finish it off within the next week or so. Just got some statements (T5) on Friday actually. Just confirming there are no more to come my way.
Thanks for your readership.
I like you Mark am not too worried about that market currently. We use a set it and forget it strategy. Because we are not intending on drawing down that money anytime soon there is no point in being concerned with it now. Markets will go down and markets will go up. That being said it is a bit of an ego hit when our net worth drops ha ha.
Not sure whats going to happen over COVID-19 but we are doing our best to be prepared and to prevent the spread. Washing your hands is key.
Ya, hard to know what might or might not happen in the markets. I just telling myself to stay invested. Nothing else I can do with macro-trends….
COVID-19 could get nasty. Not sure how this is going to play out. Just trying to eat well and exercise and stay healthy.
Income splitting is awesome. We split pension and RRIF now (under age 65). You don’t have to wait until 65 to split RRIF if you use spousal accounts. Just take a bit from each account. Those with pensions might consider getting RRSP money out first. If you wait you will likely be pushed into higher tax bracket. You can also split CPP if you are both taking it. Income splitting helps us to get our average tax rate down to about 5%. Pension splitting also means you can both get the $2000 tax credit. Take the least tax efficient money first: pension, rrif, then non registered and TFSA last. Tax plan using software throughout the year. Don’t wait until tax season.
Unfortunately, no, you cannot split CPP or OAS: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/pension-income-splitting/eligible-pension-income.html
Rob you are correct. I should have said it’s a form of pension sharing. Has same effect as part of my cpp is applied to my wife as income. Pension splitting occurs when you file taxes, pension sharing occurs each month.
Good stuff Gruff.
Thanks Robb for that link, looks like Gruff clarified on his end as well.
Great point about incoming splitting. I suspect we’ll split our workplace pensions at some point Gruff. Just not sure when.
I do know we intend to draw down our RRSP in our 50s while working part-time. We probably won’t draw on our workplace pensions until age 60 or so, at least my DB plan. That’s almost 15 years away. I got some time to figure it out 🙂
Buying anything lately?