Welcome to another Weekend Reading edition, where I share some of my favourite personal finance and investing articles from the week that was. In case you missed it, here was my overdue post about our dividend income journey and I got a chance to chat with Andrew Graham, CEO of Borrowell.
Enjoy your weekend everyone and take care.
Thanks to Dividend Growth Investor for posting my article: why I use dividend growth investing. There was some inspiration when I read this comment to my article: “My wife and I are on target to hit $80,000 in dividend income this year and with our principal residence paid off years ago, and rental properties which are free and clear, we sleep well at night. Lots of changes happening where I work and if I do become a casualty as our employers “realigns” its resources, I don’t really care if I am downsized.” Great place to be in…
Our Big Fat Wallet said condos are not a great investment.
When it comes to Canadian bank stocks, Michael James on Money doesn’t believe they are safe stocks.
Sure Dividend had a great early retirement essay here.
Andrew Hallam reminds us time in the market beats market timing. So, he suggests if you have money to invest, just do it!
The Dividend Guy (Mike McNeil) was featured by friend Larry MacDonald in this Globe Me and My Money article.
Krystal Yee remains out of the Vancouver housing market – and for good reason.
Here are some model portfolios to consider from Boomer & Echo.
Million Dollar Journey updated the net worth profile of a reader, Karl, the real estate agent.
Big Cajun Man discussed some fees and penalties that have disappeared.
John Heinzl reminded us financial experts who honestly admit “I don’t know” (where the market is going) wouldn’t get any headlines.
Preet Banerjee has a new video out about investing timelines and rates of return. Depending upon your investing timeline, savings rate, and your return expectations, this math will be a reality check for some – go watch.
Thanks for the mention Mark. It’s a bit ironic for me to say condos aren’t a great investment because I own one but it’s true – in my opinion you’d be much better off with a single detached home purely from an investment perspective. Have a good weekend!
Much depends on why one buys a home or condo. If strictly for an investment a single is best, but being 74 we moved into a condo to downsize, make leaving the home easier when traveling, much easier to maintain and their are many others in our age group making it more sociable.
We used to own a condo as well. The rising condo fees every year eventually scared me off (after 4 years). I’m not sure how much our single family detached home has appreciated in the last 5 years but I’m not too worried, our home first and foremost is a place to live and be comfortable. I will however count on my investment portfolio to make long-term capital gains.
The video is great. It demonstrates very well that you need to start to invest now, not tomorrow!
The best time to plant a tree was yesterday right? 🙂
Great list of articles Mark. Have been out sick this week so a bit behind on the reading. Will read the articles that you’ve listed.
Have a great weekend!
Thanks Tawcan. Take care!
Dividend Guy comment: “He believes in having a dividend portfolio only if it is doing better than the simple approach of buying and holding an index fund or exchange-traded fund. He thus compares his portfolio annually against select dividend ETFs and has found the dividend portfolio to be the better performer over the past four years since the benchmarking exercise began.”
“…the dividend portfolio to be the better performer over the past four years…”
Four years? Seriously?
That’s like newlyweds saying since they’ve been married for 4 years they’re still going to be married in 60 years.
(Current stats say half of them will be wrong.)
Smart guy. My portfolio has returned about 7%. XDV ETF (dividend ETF) has returned about 5% over the same period. I win, so far 🙂
11 Model Portfolio from Boomer & Echo. Their final comments are:
“Often our readers are looking for ideas to help design their investment portfolios. As you can see from the 11 model portfolios highlighted above, no one-size fits all.
In addition to your age, risk tolerance, size of portfolio, and time horizon, there are still a number of factors to consider before designing your personal investment portfolio.
That includes having the skill, desire, and temperament to manage your own portfolio instead of hiring a financial advisor or robo-advisor to build and manage one for you.
The best approach is to find a simple investing solution that works for you and stick with it for the long term.”
Seems like good advice, but why does it only apply to buying Funds or ETF’s? Apply the same rules to Individual stocks and save on fees and you don’t have to hold a bunch of stocks you probably wouldn’t want to buy. Picking an ETF portfolio may be just as difficult as a DG portfolio?
I see buying and holding individual stocks has similar risks as buying and holding an ETF, you still need to know when to invest; what behavioural mistakes to avoid. Ultimately the best portfolio is one that a) meets your investing goals with b) the least amount of risk or c) tax headaches.
I’m personally not entirely sold on indexing because with all the “good stocks” you get the “poor stocks” as well. I prefer buying and holding industry leaders and indexing everything else for that reason – I believe the stocks that have been paying dividends for generations will likely keep doing so.
@Michael: Safe Stocks? ” I don’t believe that there is such thing as a safe stock,”
To believe that no stock is safe and that owing all stocks (using etf’s) make any of them safe, just doesn’t make sense to me. Stay out of stocks if you don’t believe they are safe.
I prefer to change the question to: Is this a good time to buy Bank stocks? Maybe or maybe not. Stocks become safe when you’ve owned them for a number of years and the value of your holdings has risen to the point that you have a Margin of Safety. In other words if your investment in a stock has an average cost of $35 and the current market price is $70 you have a $35 margin of safety. The market price would have to drop by 50% before one would have a loss on the stock (not counting dividends received over the years).
@cannew: I’m sorry that you don’t understand diversification or the concept of a margin of safety. Good luck.
@Michael: I don’t and never did fully understand Diversification. There are various opinions and no consensus:
Investopedia Staff: http://www.investopedia.com/ask/answers/05/optimalportfoliosize.asp
For investors in the U.S., where stocks move around on their own more (are less correlated to the overall market) than elsewhere, the number is about 20 to 30 stocks.
http://www.investopedia.com/articles/stocks/11/illusion-of-diversification.asp Myth of 30,
A properly diversified portfolio should include a meaningful allocation to multiple asset styles and classes. Not just industry diversification. Otherwise you risk missing out on significant market opportunities. By using ETFs and institutional passive mutual funds, you can capture meaningful exposure to the entire global market portfolio with as few as 12 securities and a relatively low total portfolio cost. It’s tax efficient, easy to understand, monitor, manage and it makes good common sense.
“The academics disagree over how many separate stocks are required to secure the benefits of diversification, but most professionally managed equity portfolios have at least 30 or so individual securities in them,”
William J. Bernstein:
http://www.efficientfrontier.com/ef/900/15st.htm The 15-Stock Diversification Myth by
The risk falls sharply as the portfolio increases in number from just one stock, but by the time it has reached about 20 to 30 stocks most of the reduction in risk that can be attained has already been achieved.
Too many stocks spoil the portfolio
Janet Novack, Forbes Staff
Most of all, keep in mind that you can’t diversify your way out of a bear market.
I like the last statement and that’s what I found when I thought diversification was the key to investing. I changed from diversification to concentration (in solid DG stocks).
(Is that your cat editing your blog? Or just watching cat vids on YouTube like the rest of us? 😉 )
Our dear cat has passed away and it was my way of paying tribute to her, watching/reading our tablet, as part of Weekend Reading updates. Yes, she did watch bird videos and cat videos as well 🙂 We miss her dearly.
I agree that condos are rarely a good investment. In general it’s tricky to figure out if a real estate investment has done well. There are so many costs, and taxes can complicate things. Thanks for the mention.
I find like a portfolio, the best real estate investment is always revealed in hindsight. For the most part, while the condo should appreciate in value and hopefully it doesn’t cost too much in the process….a condo can be a home and a place to live. You have to live somewhere 🙂 The quickly rising condo fees are what we didn’t like we owned a condo.
re: “Andrew Hallam reminds us time in the market beats market timing.”
I’ve claimed that Time is the only real risk-free asset available to every one of us. Combine Time with the only free-lunch “asset” available to every one of us — Diversification — and your probability of financial success increases greatly.
I would agree. Time in the market or investing or in life in general, is the ultimate gift.
Thanks for the inclusion this week, and my guess is a lot of those fees will simply morph into different named fees. Enjoy the sunny weekend ahead.
Don’t forget it is Mother’s Day on Sunday folks! ?
Already have the lunch plans booked 🙂 Enjoy!
Thanks for writing an awesome guest post Mark. It is inspiring that some earn $80k in annual dividend income. In the US, if all your income is from dividends, you won’t pay any federal taxes on up to $95k of income
Crazy amount really when I think about it. Good on them. They have done very, very well.
I suposedly that I could reinvest our little money pot to get $80k a year in dividend income, but that would mean buying into a lot of rather risky companies.
As keeps being said, you should invest in a way that you are comfortable with. We are much happier with about 4% return from a mix of quality dividend stocks and medium term bonds.
I think so Richard – “invest in a way that you are comfortable with.” What is one person’s comfort level is another’s fear factor. There is a great deal of evidence with the comments on various posts, on this site, that no two investors are the same. Yet many of those same investors have reached financial freedom (albeit via different paths).
Unless my approach is broken I will continue to invest in a number of companies that pay dividends and index invest everything else. Thanks for your comment.
Great reading list! Thanks for including my retirement article in the mix.