Weekend Reading – Dividend ETFs, drawing down a portfolio, not paying off a mortgage 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.
I got around to posting this article this past week:
I don’t invest in any Canadian dividend ETFs. Instead, I’ve decided to build my own DIY ETF – a collection of Canadian dividend paying stocks in my own quantities across various accounts. Stocks, very similar in fact, to the top holdings in XIU:
This approach is, I believe, working well. Year to date the portfolio is up over 17%. Over the last five years the portfolio is up 8% annualized. Since inception, almost 10 years since I started this approach, my Canadian stock portfolio is up just over 9%.
Although I’ve built my own DIY Canadian stock portfolio I’ve decided to own more low-cost U.S. ETFs over time within my RRSP – for diversification and exposure beyond Canada’s borders. You can find what I own and what I believe are some of the best low-cost ETFs, dividend ETFs or broad market ETFs in general on this page here.
Thanks for all the entries to this giveaway – Your Ever Growing Income. I just emailed the winner and I hope to get the book in the mail to her soon!
Best wishes for the weekend and see you here next week!
This article says based on a recent survey, 48% of Canadians are just $200 away from insolvency. I find that number very hard to believe, far too high, especially given the survey was conducted for an insolvency firm.
I enjoyed reading Million Dollar Journey’s plan to draw down his portfolio – to fund his early retirement. He’s thinking along the same lines I am – “living off dividends” to a degree while spending his RRSP assets before spending the TFSA (tax-free) assets. He would do well to defer his Canada Pension Plan (CPP) and/or Old Age Security (OAS) until at least age 65 to enjoy these higher fixed income payments, which are also indexed for inflation.
You can read about when to take CPP or OAS in these articles below:
Facts about OAS and when to take OAS.
For MDJ, not that he needs any help with his personal finances whatsoever (!), here is an article about a couple seeking to withdraw $800,000 from their portfolio, in a tax-efficient order, as part of an early retirement plan (age 52).
Well put Nick Maggiulli, from Of Dollars and Data about one of the biggest problems with financial advice – it is not relevant to anyone but you! He emphasizes his point citing the experiences of a very successful U.S. blogger who earned a ridiculously high salary in his 20s to become a millionaire (in net worth) by age 30. To quote Nick about how realistic that is:
“Unfortunately, the sad truth is that most Americans will NEVER be able to do this. They will never earn enough money to invest and get rich. Remember that 54% of U.S. households don’t own any stocks and 69% of working Americans save 10% of their income or less (with 21% of working Americans saving nothing at all).”
Robb Engen says it’s not that important to pay off his mortgage – right away. He and his wife only have so much money to go around, and have decided to prioritize his money this way:
- “TFSA – contribute $1,000/month
- RRSP – max out our available contribution room
- RESP – max out contributions for our two kids
- Travel – Visit Scotland/Ireland this summer. Vancouver in October. Maui in February”
We can relate. Although we’re paying down our mortgage with small, extra bi-weekly payments, we have prioritized our savings for investment purposes this way: max out x2 TFSA accounts every year ($12,000), strive to max out x2 RRSP accounts in the coming year or so (>$20,000), and enjoy life by taking an international trip. Life is not always about looking ahead – you really need to live in the present. You can read up about our 2019 financial goals here.
How do you prioritize your money?
Save, Invest, Prosper!
Thanks to my passion for personal finance and investing, some great companies want to offer deals. As always, never an obligation…
Make sure you look at the top of my Deals page to take advantage of any new promo codes since you can get hundreds if not thousands in cash back when you invest!
Happy investing and see you in the comments section!
I really liked that article by Nick Maggiulli. Tells it like it is. Like many we struggled as young adults trying to earn a few dollars or going to school and living in dumps with nothing, and finally figuring out what to do. Once we got established into good (but stressful & challenging) careers after several more years it was the same for us – we each made enough that saving a good amount wasn’t hard (naturally frugal) before meeting / getting married, and afterwards we were really able to upgrade our lifestyle, savings rates. Many don’t have this or haven’t created this; depending on how you look at it. Some will argue its much harder or not possible to do this today.
We prioritized debt repayment and dispensed with it in a relatively short time, paying cash on difference for home upgrades. Times were different. Rates were 9.5-12% on the 3 mortgages I’ve had. Easy decision.
The 48% thing…??? Probably a combination of too many people spending too much on discretionary vs income (not being careful or financially saavy), and too many people simply having very low income and/or a high cost of living (housing) where they are. The solutions are easy to identify but harder to implement. I had that myself but I fixed it.
Ya, we’ve decided to prioritize investing over debt-payments. Only time will tell to see if that was the right decision to semi-retire in our 50s.
Agreed, financial solutions are easy on paper but very, very difficult to put into behavioural, consistent, practice. Just like behaviours at work – very challenging to change – if never for some.
Prioritizing – situation dependent is best approach. You’re doing.
Only time will tell for us as well. No guarantees! I’m pretty confident it will stay the right decision, and also be the right one for you.
Yes difficult on putting into practice. I’m even speaking more broadly on changing job, moving if needed, upgrading education etc if income is the issue. For some though as simple as prioritizing financial prudence, education and attention. Behavioural, very poor habits harder fix. Harsh I know but sometimes you just can’t fix stupid either, if people won’t learn.
Indeed. Saying you want to learn and actually applying it are night and day. I see it at work all the time.
48% of Canadians $200 away from insolvency.
Well its 48% of 2,070 and is that representative of 33Million Canadians?
“This isn’t simply a matter of people living beyond their means. The reality is that too many households simply cannot make ends meet, however hard they try,” Bazian said.
Again I think I’d like to see more details about the above statement, than just assume they are doing everything they can to meet ends meet.
When we were young there were lots of times we lived on next to nothing and wondered how to make ends meet. However, we didn’t look to EI or sit around and complain. My wife got a job and I took a second job helping out a plumber. Eventually thing go better. Yes there are some who do need help, but for most there are always options, they just have to make the effort or take action.
It’s an insane stat really to extrapolate that but that’s what some studies do!
Love Rob’s article. Save first and pay debt second (or fifth). I’ll go so far as to say if you can create enough cash flow you never need pay off the mortgage. It just becomes another bill to pay. Retire early with enough cash flow to cover mortgage OR work another 8-10 years to kill debt. For me that choice was easy. I also leveraged my house to create more cash flow – not for everyone of course. I love that Rob set priorities and has a plan. Stagnant wage growth and finite financial resources were facts I lived with most of my working career. We also had to set priorities as the kids were growing. The trade off was solid pension and job security which was fine with me.
Having a solid pension and job security – is a gift I think. I mean, it’s a choice to a point to take such a job in the first place but definitely future cash flow (i.e, from pension) allows one to make different financial decisions/choices. Hope all is well!
The Problem With Most Financial Advice…Yup, that article speaks volumes. I read some of the financial blogs Mark links to and I find myself so skeptical of the “information”. Most of it is unrealistic or embellished for the purposes of getting hits. Yes, I’m a cynic when it comes to folks hawking financial blogs and I readily admit it. I’m probably just grumpy because I can’t get out in the fields yet. The only thing keeping me from going over the edge is that we started this year’s yard trimmings diversion this week. Feels good to get out and do something productive.
Weather here isn’t much better Lloyd and sadly there are many people east and west of Ottawa really struggling with floods.
I can’t imagine being Doug Ford and having no reasoning about climate change. Folks keep saying “it’s coming” but smarter people well know it’s already here.
Hope you soon get your wish to hit the fields!
I’ve been trimming and cutting myself (never ends on my property); and finished negotiating a deal to sell a couple of timberland properties (125 acres) for my mom. The biggest one may go later this fall.
Indeed re floods Mark. Hearing a lot about in this region too. Nothing close to me though.
Ya, sorry, that was kinda petty.
Nah, all good, I know what you meant. Quite the weekend here in Ottawa with flooding and more rain to come…..