Weekend Reading – Finding value stocks, affordable housing is gone, is $1 million enough and more!
I hope you had a great week!
Welcome…to another Weekend Reading edition, highlighting some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Just in case you missed last week’s edition you can find here: about financial independence, some of the best tech ETFs to own for growth, a case study about finding financial compromise and, I answer a reader question about my mix of individual stocks and ETFs.
For some additional tax filing support please ensure you check out this monster post: tax tips every Canadian should know about this year.
What’s up this weekend?
Not much. Spring has sprung in Ottawa although it’s going to be cool. I have plans to get the mountain bike ready for a ride, walk to get our groceries, and maybe (probably) do some much needed stretching for the upcoming golf season.
Whatever your plans are, enjoy, stay well and don’t forget to share this post and site with others.
Sharing is caring! 🙂
All the best,
My friends and partners at 5i Research highlighted how to find value stocks – with a twist. They also reminded us when it comes to dividend paying stocks: “We included dividends not as a way to exclude growth-oriented investors, but more as a way to find companies that have reached a certain level of maturity and stability.”
A great quote from one of my favourite sites about mental models and better decision making:
“Most people never pick up the phone. Most people never call and ask. And that’s what separates sometimes the people who do things from those who just dream about them. You gotta act. You gotta be willing to fail. You gotta be willing to crash and burn. With people on the phone or starting a company, if you’re afraid you’ll fail, you won’t get very far.” — Steve Jobs
Rob Carrick wrote affordable housing is not coming back. I would have to agree. Even here in Ottawa, prices have absolutely skyrocketed. Our 2-bed, 2-bath top-floor condo might be up over $200,000 since we purchased it a few years back.
“It’s time to get real about young adults and ownership of detached homes in big cities. The housing boom that makes ownership so attractive to this demographic has priced a lot of them out of markets like Vancouver and Toronto. There’s no going back to the days when houses in these cities were a place to live as opposed to an investment, and you chose between suburbs and city based on yard size and the number of bedrooms and bathrooms.”
I liked when Alexandra Macqueen highlighted some smoke alarms in a recent FIRE-y (Financial Independence, Retire Early) plan.
While the advisor Alexandra helped profile in this article is correct, the advisor mentioned Oliver in this FIRE-y couple is “…foregoing nearly $2 million of future earnings” by retiring early, one struggle I do have with such statements is future earnings do not equate to after-tax living. These are two very different things.
Also, as always with any retirement plan, it depends on what you spend in retirement that determines your “enough number”.
Well, that’s what I think anyhow…
So back to the case study, assuming Oliver and Cecilia in this case study can bank the $800,000 proceeds from the sale of their home, combine that with their $260,000 in their RRSPs and TFSAs, I think they might be able to spend $35,000 to $40,000 per year without fail assuming no future debt.
Like the advisor mentioned in the case study, what would worry me is if their spending needs change, if their health status changes, or just as importantly, how they may behave to ride out any bearish stock market – any one of those could derail their plans. We’ve seen very recently how panicked many investors behave when the environment around us changes.
Then, over time, things recover. We just don’t know when…sometimes very unexpectedly and quickly when it comes to stocks.
So, to help us behave, a cash wedge might be considered. I would not however put up to “$225,000 – in risk-free, laddered GICs” as suggested by the advisor (not Alexandra Macqueen). As a young couple, that’s a huge opportunity cost over equities.
Here’s my initial take on a cash wedge for retirement or semi-retirement.
More recently, this is my own plan about how much cash to hold in semi-retirement along with my personal bucket approach.
We plan to start aggressively working on building up that cash fund, next year, as those semi-retirement dreams get much closer. Until then, we have these 2021 financial goals.
At the end of the day, $800,000 or for a nice round, fun, aspirational number $1 million invested (without any debt) is still a tremendous amount of money saved and likely “enough” for many people to retire on in their 50s and 60s assuming they have some government benefits waiting for them. This also assumes they have modest spending needs, they stay out of debt, you own your home or have modest rental needs, retirees keep some cash handy when $hit happens, and finally they can ratchet spending up or down at will or when necessary.
Thoughts folks? Is $1 million invested still enough to retire on?
Check out my dedicated Retirement page to ensure you learn what’s worked well from many successful retirees. Learn how they invest, what risks they consider and much more. You can read great content like this one:
Or this one…
This couple in their 50s will have less than $1 million invested. How much can they spend each year without fail??
Regarding my plan, a reminder about this article:
You can always find a current list of what I own, regarding dividend paying stocks, on this Dividends page.
Here are things to consider when you’re retired, or bored, or retired and bored by Reverse the Crush.
On Cashflows & Portfolios, we discussed a very important topic even before you consider investing: savings by the age – are you even saving enough???
Dale Roberts was back striving to make sense of the markets on MoneySense.
Dividend Growth Investor highlighted 6 stocks rewarding shareholders.
GenY Money wrote a smart article here comparing ex-Canada ETFs: VXC vs. XAW.
I personally own XAW but I don’t think you can go wrong with either! I own XAW now thanks to some of these lessons learned in diversification.
Reader question of the week (adapted slightly for the site):
I’m a longtime reader and appreciate all the hard work you put in to improving financial literacy.
I am just wondering if you approach investing in your non-registered account any differently due to taxes? I realize that we pay taxes on dividends every year vs. capital gains which are only paid once we sell. I think I am comfortable as a dividend investor and would find it difficult to invest in high growth/low yield stocks just to avoid or minimize taxes.
Thanks and keep up the great work!
Have you been reading my mind of late??