Weekend Reading – Fired Vanguard – hello stocks, how to build a fat RRSP, buy or lease a car and more #moneystuff

Weekend Reading – Fired Vanguard – hello stocks, how to build a fat RRSP, buy or lease a car 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 posted my latest dividend income this week – approaching a new milestone inside our TFSAs and non-registered account.

I hope you enjoy these articles that I checked out, or was identified in, and you have a great weekend.

See you on the site!

Mark

Rob Carrick answered a reader question about whether it is better to buy or lease a car.  I think the answer is, it depends.  Can you write off part of those expenses?  How much will you even drive the car?  What kind of car are you leasing?  The list goes on.  Personally, I don’t like dealing with the fine print and scheming car dealerships for a lease – so in recent years we’ve decided to pay cash for our 2-4 year-old used cars outright.

Rob’s summary:  “The top choice of frugal-minded car owners: Buy lightly used cars, preferably with cash, to minimize the impact of depreciation, and then hang onto them as long as you can.”

This couple thought #vanlife (quitting your job and living in a van) was the ultimate financial freedom reality.  Then they realized it was cheaper to fly around the U.S. and stay in Airbnbs.

Preet Banerjee, all around good guy (and financial guru), says essentially have a plan and have a spending limit in mind to save both time and money at the grocery store.

CrossBorderFI wrote about ditching/firing their Vanguard funds (despite what all the financial experts typically suggest) and instead, they are considering owning just the top market-cap companies for income and growth.  Here is what they wrote:

As of 1 July 2019, we have purchased the top 25 companies on the list of 185, allotted in size approximately following the same proportions as the VCN index fund.”

What do you make of their move?  I think, while seemingly bold, it’s smart – there are many friendly dividend histories in the top-25 stocks of Canada’s big Exchange Traded Funds (ETFs) like VCN or VCE or XIC or XIU.  Thoughts?

Rob Carrick was very kind to include my article in the Globe and Mail this week about getting started with investing – “Ideal intro for millennial and Gen Z investors.”

You can find more support to getting started with investing, how millennials can get wealthy eventually; how you can open your discount brokerage account; how you can get started with investing using dividend paying stocks on this page here.

Robb Engen has demonstrated solid progress in his mid-year net worth update.

Roadmap2Retire – who likes craft beer almost as much as I do – shared this Q2 passive income update.

It’s been a few months since I’ve blogged about our goals for 2019, so I’ll probably post an update on this soon.

I also want to write an update about how things have transpired in our new condo since we’ve moved – an outcome from our housing dilemma series.  I’ll share some expenses that have hit us, some things that surprised me about downsizing and more.  Stay tuned for a future post (or two) on that!

Million Dollar Journey wrote about building a fat RRSP starting in your 30s, 40s, and 50s.

Here are my 7 tips to build a fat, wealthy, RRSP nest egg.

Reader question and email this week (information adapted slightly below):

Hi Mark,

I am a new subscriber, love your website, easy to follow and very practical advice on investing.  Some questions for you:

  1. I usually invest in an ETF that tracks the S&P 500 (an ETF offered by BMO InvestorLine that allows you to buy into the S&P using a Canadian-listed ETF), would you recommend only investing in the S&P 500 or would you recommend diversifying into other ETFs, such as a consumer or utility specific ETF given the volatility?
  2. How do you zoom-in per se to focus on a short list of individual stocks to invest? There are a bazillion stocks to choose from.  Also, I favour U.S stocks given that they seem to perform better than Canadian stocks.  So, how do you buy U.S. stocks with your Canadian money?

Thank you for any thoughts you can share on this!

More great, detailed questions.  Keep them coming folks!

Regarding question and point #1, I think investing in the S&P 500 is a great idea.  Great access to the U.S. market and you have therefore chosen to diversify away from Canada’s borders – which I’ve grown to appreciate more over time.

I can’t recommend any ETFs for you specifically, but I do have some low-cost favourites on this ETFs page here.

If you own an ETF that tracks the S&P 500, whether that is in U.S. dollars or Canadian dollars, you already own a number of consumer stocks, utility stocks, technology stocks and many more stocks in various sectors.  As such, I don’t think it makes too much sense to load up on an S&P 500 ETF and then pile on a few sector ETFs as well.  That’s just me though!

See below an example of the sector allocation from a BMO ETF (ZSP) that invests in the U.S. market in Canadian dollars – not sure if you own this one or not!?

BMO ZSP

Image courtesy of BMO.

Regarding questions and point #2, I’ve decided (rightly or wrongly to others!) to unbundle my broad-market Canadian ETF (e.g., VCN, VCE, ZCN, XIC, XIU, etc.) and own the same top-Canadian stocks the same big ETFs own.  I wrote about this approach in these posts:

Have you considered to unbundle your Canadian ETF for income?

Canadian dividend paying stock selection made easy.

Now, does owning some Canadian telcos, utilities; a few low-dividend yielders but higher-dividend growers, and some financials (i.e., the “TULF” stocks) make up a good portfolio?  Probably not.  Even though Canada’s market operates as an oligopoly, it’s probably not wise just to invest in Canada alone.  I recall we represent 3-4% of the world market.  So, my wife and I have decided to invest in U.S. dividend paying stocks and U.S. ETFs to complement our Canadian stocks holdings for income and growth.

You can read up about how we invest in dividend paying stocks and more here.

I also wrote about my approach to exchange Canadian money to U.S. money to buy more U.S. dividend paying stocks and U.S.-listed ETFs for my portfolio over time here:

This is how I get my U.S. dollars from Canadian dividend paying stocks.

This is how I built my Canadian dividend portfolio (and how you can too).

I hope that provides some insights!

Save and invest better this summer!

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BMO InvestorLine - January 2019

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23 Responses to "Weekend Reading – Fired Vanguard – hello stocks, how to build a fat RRSP, buy or lease a car and more #moneystuff"

  1. Cars, yes, buy used one a couple of years old or so. I agree with you and Rob C and have bought more than a couple of cars that way for decades now.

    Re CrossborderFI, I think their situation is very unique. Most Canadians don’t have the same issues. Buying top TSX stocks could work for some but most indexers just aren’t going to want to roll up their sleeves; research and manage that much, even though some of us see it as simple. Smart for some but potentially a disaster for others.

    Fat, wealthy RRSP nest egg is certainly a good thing.

    Craft beer…I like it too but for a lot of years make my own-enjoyable hobby and saves some dough. This has been my supplier for the last 16 years or so and has saved me a good part of a used car during that time.
    http://www.magnottabrewery.com/

    Have a great weekend.

    Reply
    1. I would agree their (Re CrossborderFI) is very unique but it does cause you to pause and think for sure – that’s good when it comes to anything.

      I intend to have some craft beer today pre-game for REDBLACKS! Should be a great day for it.

      All the best,
      Mark

      Reply
      1. I intend on having a few brews later this afternoon and into the evening. A treat for completing my longest run in many years just a few minutes ago- 19k. 14 years of trying to heal and finally a new type of physio seems to be working. My competitive half this fall may just happen!
        Enjoy the game and the brews!

        Congratulations once again on the great progress with your investing journey.

        Reply
        1. Wow. I don’t think I could run 5k consecutively but I could bike 25km in an afternoon – no problem. Good on you. Running that much absolutely deserves a cold one or two!

          Thanks for the kind words. I’m stay boring when it comes to investing. Seems to work out well.

          Reply
          1. Thanks. Still hurting some now but should be ok after more physio today.

            Makes me think of volatile markets- lots of ups and downs and where things settle who knows.

            Today a milestone anniversary for us!

  2. Slow and steady, and then it takes a life of its own. We started many years ago, I tracked the yearly dividend growth, in the beginning it was the change per year I watched. Once you crack the 7 figure nest egg, the fun is tracking the monthly increases. The capital amount swings, sure, but that ever increasing income, month over month is what has helped keep us on track.

    Congrats Mark on keeping the income growth trend going.

    David

    Reply
    1. Thanks for the kind words David. We’re slowly getting thee. You hear the noise of JNJ and many other companies now and then but I’ve learned unless they stop paying a dividend, unless they cut their dividend, unless they fail to start increasing their dividend – it’s all just noise and I should tune it out.

      Agree?

      If anything, I should try and buy more of these companies? Agree as well?

      We’re creeping slowly to the 7-figure portfolio mark and it’s awesome to see. I hope we will get there in another ~ 5 years or so and time it just right with all debt (condo mortgage) being paid off too. What a nice age-50 birthday gift for me 🙂 ?

      Cheers,
      Mark

      Reply
      1. We stick with dividend paying companies that increase their dividends yearly, like the 10/10 rule as a guide. That said we do own a number of ETFs ie, VFV.

        Diversification. Can’t highlight that enough. Speaking of enough, the retirement calculators as interesting as they are, think most people if they lived within their means, saved and created various income streams. The calculators become moot.

        David

        Reply
        1. Very well said David. I would agree: save a bit first, keep costs low, stay invested and spend the rest and live your life 🙂 Thanks for your comment.

          Reply
  3. Re: CrossBorderFI wrote about ditching/firing their Vanguard funds
    “As of 1 July 2019, we have purchased the top 25 companies on the list of 185, allotted in size approximately following the same proportions as the VCN index fund.”
    What do you make of their move?”

    While I also think it was brilliant and smart I would have equally weighted my purchases instead of cap weighting them. Also, because I’m a DGI and income focused in retirement, I would have only purchased the dividend growers within the 25, ie; only buy those listed on the Canadian Dividend All-Star List.

    Reply
    1. Ya, I like their call but I’m biased since it’s largely what we do. When I look at the ETF XIU, between my wife and I, we own 9 out of 10 top-10 stocks and 12 other stocks in that list that the fund owns.

      Pretty impressive list of stocks for Canada – Canadian Dividend All-Star List:
      https://www.dividendgrowthinvestingandretirement.com/canadian-dividend-all-star-list/

      We own a number of these that have raised dividends for >10 years. I put some of my favourites in bold:

      TSE:CU Canadian Utilities $36.46 47
      TSE:FTS Fortis Inc $52.06 45
      TSE:TIH Toromont Industries Ltd $62.60 29
      TSE:CWB Canadian Western Bank $29.37 27
      TSE:ACO.X Atco Ltd., Cl.I, $44.12 25
      TSE:TRI Thomson Reuters $87.80 25
      TSE:EMP.A Empire Company Ltd $33.56 24
      TSE:IMO Imperial Oil $37.25 24
      TSE:MRU Metro Inc $49.56 24
      TSE:CNR Canadian National Railway $122.13 23
      TSE:ENB Enbridge Inc $47.61 23
      TSE:SAP Saputo Inc. $39.34 19
      TSE:CNQ Canadian Natural Resources $36.12 18
      TSE:TRP Transcanada Corp. $66.04 18
      TSE:CCL.B CCL Industries Inc $66.08 17
      TSE:FTT Finning International $23.26 17
      TSE:TCL.A Transcontinental Inc $14.60 17
      TSE:PLZ.UN Plaza Retail REIT $4.20 16
      TSE:RBA Ritchie Bros Auct $44.81 16
      TSE:SU Suncor Energy Inc $42.08 16
      TSE:CCA Cogeco Cable Inc $103.09 15
      TSE:T Telus Corporation $48.80 15
      TSE:CGO Cogeco Inc $90.02 14
      TSE:IFC Intact Financial $126.30 14
      TSE:SJ Stella-Jones Inc. $46.87 14
      TSE:ADW.A Andrew Peller Ltd $14.01 13
      TSE:XTC Exco Technologies Ltd $8.01 13
      TSE:BYD.UN Boyd Group Income Fund $174.79 12
      TSE:EMA Emera Incorporated $53.95 12
      ENGH Enghouse Systems Limited $34.51 12
      TSE:BIP.UN Brookfield Infrastructure Partners LP $56.31 11
      TSE:CAE CAE Inc $36.37 11 Trend
      TSE:FNV Franco-Nevada Corp $111.79 11
      TSE:LB Laurentian Bank Of Canada $45.19 11
      TSE:TCS Tecsys Inc. $12.90 11

      Reply
      1. 10 years of dividend increases is a good filter. Not many stocks that reach the Canadian aristocrat status make it to the 10 year.

        I am also partial to higher dividend growth (greater than 8% if possible) which usually leads to higher stock prices.

        Reply
        1. I think so DE. Otherwise, 5-years or less is too immature and some companies cut that grade that long-term probably wouldn’t. Think old Yellow Pages!

          All the best,
          Mark

          Reply
  4. Re CrossborderFI and ditching the Vanguard ETFs…It could work buying the top 25, but you’d have to do a comparative volatility analysis amongst other things. How would doing this affect upside as well as downside capture? And you’re committing to following and monitoring the stocks on an individual basis at that point. Is it really worthwhile in order to eliminate the minimal / very reasonable costs of the Vanguard funds in order to buy/sell/monitor/rebalance 25 different stocks? What is the incremental gain from doing this? I’m guessing it wouldn’t be much.

    Reply
    1. It does seem like a lot of work Jeff but I see some merit in what they’ve done for Canada’s very poorly diversified market. If folks are not willing to go through some efforts like that, might as well just own VCN, VCE, XIC, ZCN, XIU or a related Canadian ETF and be done with it 🙂

      Reply
  5. I disagree about the grocery shopping. Having a plan and a set list means you are not taking advantage of specials you happen to see. For instance last year I saw pork tenderloin for $5 a kilo, so stocked up the freezer. You need to have recipes in your head to take advantage of what is particularly fresh that visit, so you can get the items that go with it.

    Reply
    1. Yes and no Barbara – having a plan can mean using apps like Flipp to ensure you are getting the best deals.

      With a condo now we don’t stock up/cannot stock up too much on food but we can walk to get groceries or get quick, cheap meals on demand.

      If you have a freezer though, I can fully see your point and be smart about it!

      Reply
  6. Oh my that article #vanlife was absolutely hilarious! I think it should’ve been titled headline readers don’t read articles. It was about an older middle-age couple who bought a 30-year-old van and tried sleeping in it and discovered they hated it.

    The comments in the article were quite good but to answer the question there’s a whole lifestyle of people who live full-time in vans and RVs and also they love it. That’s the dream for my wife and I and three and 7 months. Our plan is to spend 2 to 3 years traveling throughout Canada and the US.

    Mark I would think that since you posted that article that you and the wife are considering doing this eh?

    Reply
    1. Well, it was a thought but only a passing thought. I could probably do #vanlife for a few weeks but after that – no way. I don’t think my wife could even pull off more than 2 nights in something like that. Actually, I know it 🙂

      We prefer to eventually own the condo (in a few years) and then travel as we please. That seems much better than trying to live below the poverty line on purpose.

      Reply

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