Weekend Reading – Giveaway reminders, best ETFs for 2019, best hotel rewards programs and more #moneystuff
Hey folks!
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.
Busy week away from the blog for me, but I did manage to post this impressive financial journey update from Million Dollar Journey. He has already realized his million dollar net worth goal, before age 40, and now he’s on the fast track to financial independence within the next few years.
TurboTax Giveaway Reminder!
Thanks to TurboTax Canada, I just received my 2018 tax refund – to the penny. The software did all the heavy lifting for me. It can do the same for you – check out TurboTax where you can!
Have a great weekend and see you here next week when I’ll have new articles to share.
Mark
A big thanks to Jordan who highlighted my blog as one of the best in Canada to follow. Thanks very much and looking forward to having you on the site for an investor profile soon!
A MoneySense panel released some of their top picks for low-cost ETF investing. Overall, I like their selections, not dissimilar to the funds I’ve had on this page for a few years here:
ETFs!
For investors that don’t want to invest in dividend paying stocks like I do (totally fine, there are risks) I encourage you to read up and learn about low-cost ETFs for your portfolio including those on my ETFs page so you can pay less, get better long-term returns, and be more tax efficient. You probably only need 2-3 funds to own a diverse portfolio of stocks that could see you deliver about 7-8% returns over decades of investing with very little monitoring. That’s damn good since it means your money should double every 10 years.
The MoneySense panel also shared some interesting desert island picks! (Image from article)
That begs a question: readers – what one fund or stock would you tend to own forever? For me, I think it would be one of these new all-in-one funds here (VEQT). With VEQT, you own > 12,000 stocks! I would probably own Johnson & Johnson (JNJ) stock forever; I’m close to owning a couple hundred shares accumulated over almost 10 years of investing in JNJ (and I have no intention of selling JNJ anytime soon). It has returned over 100%. You can see other stocks in my buy-and-hold portfolio here.
Robb Engen teamed up with Barry Choi to highlight some hotel rewards programs worth looking into. Around our house, we use Marriott and Hilton programs – we might have a free hotel night/stay for each program now but I’d have to double check. I find it takes forever to accumulate enough points for rewards.
Bond funds or GICs? Ben Felix has some great answers in this 14 min. clip. I agree with his plain language explanations:
- GICs are great for known expenses at known future dates (e.g., I need money exactly one or two-years from today).
- Bond funds, including bond ETFs, are great for longer-term investing horizons; provide great liquidity for portfolio rebalancing, and provide some opportunities for fixed income exposure beyond Canadian borders if you want to do that.
Save, Invest, Prosper!
Thanks to my passion for personal finance and investing, some great companies want to offer deals. As a reader, you might as well take advantage of them although there is never an obligation. Enjoy my Deals page!
Happy Investing!
Mark
30 something couple obviously has little to worry about, unless something changes with their health or employment. Lots of years ahead.
Ben Felix video was interesting. I also thought the GIC laddering option was minimized and even more so was corporate bonds. Currently this is what we have along with cash HISA’s – no bond ETF. Less liquidity than desired for a rebalance if markets tank and very low returns (bonds & recent GIC drops) with this current approach isn’t optimal and I continue to consider all options.
I watched a few more of his videos. I thought most were very good. One point he made several times was in reference to dividend growth investing. He stated several times that when a dividend is paid out, the value of the stock drops by that amount. In *theory* this may be true, but I’ve watched several stocks during a distribution and seldom have I seen a stock react in such an isolated direct manner. For sure my e-series index funds do that, but they are bought/sold on a daily valued basis so that is perfectly logical. Stocks OTOH, are bought/sold without such a calculated valuation and I’ll bet emotions play a larger role in the fluctuation of the stock price than company value does.
I’ve watched that one too and others before. To me he’s very good.
I agree with you on dividends and stock prices.
Agreed…stocks are bought and sold so often investors don’t see the value of the stock, drop, by the amount dividends are paid that quarter. It’s largely invisible but it happens.
That said, I have no intention of changing my strategy Lloyd – my approach is a two-headed, hybrid investing monster! (dividend stocks + low-cost ETFs).
Thanks for your comment.
I’m not changing either (too old to change). I like the dividends, I like a bit of growth, I like the certainty that my GICs with our pensions will sustain us no matter the market. I’m comfortable with what I’ve got and I sleep at night. I like not paying fees as much as possible. Even a .20 of a percent for ETFs is $2000 per year on a million buck equity portfolio. I’d rather the $2K in my pocket. This ain’t saying that my way is the best, it isn’t, but it works for me.
Ya, I love dividends. John Heinzl wrote a few reason recently and I’m surprised there are only 10 🙂
https://www.theglobeandmail.com/investing/education/article-ten-reasons-to-love-dividend-investing/
GICs make great sense to be out of the market and have some fixed income if/when you need it.
Yes, once the portfolio gets larger, 0.2% costs about $2,000 per year and every year on a $1,000,000 portfolio. Not chump change for sure but that is the cost of diversification.
I suspect in the coming years, 25% or more of our portfolio will be invested in low-cost U.S. ETFs.
Assuming we reach our $1M goal, and some of our funds now cost ~ 0.08% MER, then that’s $200 per year in fees (on $250,000 invested). Not bad to own a few hundred stocks really.
Agree with you 100%. I see the stories of folks using ETFs for 100% of their portfolio. Nothing wrong with that but it does add up with a large portfolio. I’m like you, the larger part of my portfolio is in equities with some ETFs. The fees for the ETFs are worth it to not have to be buying individual foreign stocks. It’s a small part of the overall portfolio.
I would almost argue given historical returns at least, you don’t need international equities.
VTI:
https://investor.vanguard.com/etf/profile/performance/vti
10-years = 16% and 7% since 2001.
XEF:
https://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf
5-years only = 6% and 9.2% since inception April 2013.
If you can get 7-8% returns from your portfolio long-term, you’re laughing!
I don’t own any international stocks per se, just U.S. companies that derive their revenues from around the world.
Good comments Mark and Lloyd. Ones I’m on board with.
Fees here are on int & US etfs = about .097% of equity and .062% of overall portfolio. Not insignificant but very reasonable for the diversity I want considering this is ~55%+ of my equity and ~ 35% of overall portfolio. Much of cost is in one “expensive” etf. I also have costs for trades that vary year to year $40-300- usually low end of range.
If I buy a bond etf for about 3% of portfolio costs will rise a small amount accordingly.
I think for those not knowledgable or interested enough to buy stocks and/or want to diversify globally the fees for a few index etfs or an all inclusive one are an incredibly good value. Basically 1/10 or less of a mutual fund, and also a small fraction of a AUM advisor, or even a robo advisor although there are some cheap options especially for a large portfolio.
The only foreign products we have are the Euro e-series and DJIA e-series. The Euro makes up .2% of the total portfolio and the DJIA is 2.9%. I mostly use these as short term parking spots for orphaned cash. They cost nothing to buy or sell as long as time lines are met.
I think my Brookfield products give me global exposure as well but I have no clue as to the breakdown in location.
Brookfield absolutely provides international exposure. As does CNR. And SLF and GWO. The list goes on. The more globalization occurs, the more global even our boring CDN stocks become.
BIP as an example:
“Spanning five countries and four continents, our utilities portfolio benefits from steady, inflation-linked cash flows.”
https://www.brookfield.com/our-businesses/infrastructure
Ben went into a deep dive on that one but I agree with my summary in my post about what he said – GICs = out of the market, fixed income; Bond ETFs = in the market, fixed income. As always, choose wisely…which you do!
Yes, I agree, but I include corporate bonds “in the market- FI” mix. Thanks, but I don’t claim to be choosing wisely. We’re muddling along. lol.
I have some large corp bonds maturing and have to decide very soon where to hide and get some kind of return. Back to bond ETF might be my ticket.
Hardly muddling along. BTW – got a demo for Cascades. Very interesting stuff.
That sounds good. Yes, its interesting.
I have to follow-up. It shows at 3% inflation we die broke around age 90 with spending $90k after tax based on plans to work for another 6-7 years full time. I can’t see how that’s possibly true…but maybe it is….and I’m FAR too conservative for my own good.
Interesting…I’ll keep playing with the trial they gave me and I will see if I do a post with them. Cool tool 🙂
That’s more than encouraging.
And you know that I’m NOT surprised at that number. I’ll bet when the time comes it will be better. You also know what I’ve said about your plan being way conservative. lol.
Will email you 🙂
Great.
Finally got around to watching the GIC v. Bonds video. Emphasis was placed on the lack of liquidity and inability to capture rising rates for the GIC route. This ignores the possible laddering effect. Laddering wasn’t even mentioned until the summary and then only in passing. I liked the video but felt there is a salesperson’s bias to it.
Disclaimer: I hold no bonds but do have a substantial GIC ladder segment in the RRSPs.
I’ve learned over the years that GICs, including ladders, are really about staying out of the market but keeping fixed income. On the contrary, bond ETFs allow you to be invested in the market, participate in fluctuations, and have fixed income. Like Ben I don’t think there is a right or wrong just what works for the investor – seems a GIC ladder is a smart play for you inside the RRSP.
My point was the two “strikes” this guy has against GICs can be somewhat alleviated with a ladder. I wasn’t knocking bonds or bond funds. They have their purposes in the *financial toolbox*.
Gotcha. Thx for that.
Thanks Mark great post. especially looking forward to watching Ben’s video. Love that topic of GICs vs bonds in the low yield environment.
Thanks for the MoneySense ‘Best’ ETFs mention. That experience was a lot of fun and I learned a bunch. I did not win on any dividend inclusions, or category, ha. I did not even have success with the TSX 60 that offers some slight outperformance over the total market indices. More growth and factor based ‘stuff’ will show in the near future I think. It has to. REITs have a place. And foreign bonds.
Thanks again, I did a Desert Island post on my site. My pick had a Beer related angle. Big juicy Canadian dividends, paying for big juicy IPAs.
Most welcome Dale. I’m a huge fan of XIU myself given the blue-chip dividend bias but many of the CDN, U.S. and International selections are solid.
I think VEQT is ideal for the desert island, or VTI or XIU if I really had to go with a more traditional U.S. or CDN ETF, and there is little wrong with VDY that you picked except I own the top-13 stocks in VDY directly, so >80% of the fund 🙂
I will be interesting to see if any factor-based funds rise to the top over time. I wrote about those on my site with some input from David Barber from First Asset:
https://www.myownadvisor.ca/smart-beta-etfs-for-your-portfolio/
I don’t own any but anyways intrigued by them!
Have a good weekend, stay tuned for my annuities 101 post.
Mark
Thanks, I’ll have a look at your smart beta post. And I’m looking forward to your Annuities 101. I am certainly more open to the concept after reviewing Pensionize Your Nest Egg, plus other readings. Annuities are likely not for me/us, but ya never know. Retirement researcher superstar Wade Pfau states investors would be better off using annuities as their fixed income component. After all they typically pay double or more the going rate of bonds and GICs. Some advisors suggest retirees pensionize a portion of their portfolio.
All said, perhaps annuities should be considered by all retirees. Even to rule out.
Nice post on smart beta. I am a big fan of the developments in that area. They can be put to great use. The research is clear. We can move beyond plain vanilla if we want to shape our equity risk level or risk adjusted returns.
Those will enter the MoneySense Best lists one day, I think. Who doesn’t want better risk adjusted returns? 🙂
Agreed, I could see smart beta funds rising in popularity over time. When, I don’t know! All the best.
Just posted. Alexanadra is very smart on this stuff – and her answers were well thought out.
Annuities are not for me either, especially now as a 40-something, but I’m not ruling them out in my 70s or 80s as I would like to increase fixed-income and not worry about much of anything to make our portfolio bulletproof with some annuities + CPP + OAS + workplace pension.
Hola! From the Garden City…miss me? 😉
Not much to say about this week’s Weekend Reading, just popped by to give an update on another private equity deal gone incredibly fabulous. Basically a Canadian Berkshire, invested 5 years ago…kinda forgot about it…then got a lovely email this week informing me of my +260,000% gain. WHHHAAAAA?!?!? Yes, that is not a typo. A portion of the capital is being retained (w/ a 10% annual dividend) as the company is continuing operations (vs dissolving @target date). The last decade of PE investment has been phenomenal; some losses, but when you have winners this big… Cheque’s in the mail! 😀
Still gotta mow my own lawn, though.
Me again….Nope! Totally wrong! Highly incorrect!
It’s +26,000%…not that other outrageous figure.
I don’t know what I was thinking. Long day in the saddle.
Weekend!
What??? You’re kidding right? Do tell more. How is your training going for the bike ride?
I know for a fact if anything in my portfolio gained 26,000% I would be laughing all the way to the bank and chartering planes anywhere I want 🙂
Yes, it really was/is a 26,000% gain* (I actually double checked it this time!).
Still pales in comparison to the Dodge brothers’ investment in Ford Co. — 55,000% in a matter of a few years.
However, like all good investors, all eggs were not in one basket.
Only ~1% of total portfolio was in the deal so it wasn’t like a “caviar dreams” payout, but got the cheques yesterday and was enough to make the Capitalist in me smile.
Crazy story about this company — wife’s family owned a national chain of a very successful long-standing service business…which this new company bought out. IMO, the company way over-paid for the family business (was closer to a public equity valuation than a PE valuation), but the family got a LOT of money and we still own a wee bit via the holding co.
(Bike training is off the shelf for the time being due to a possible bad ticker. I have what’s known as Hypertensive Reaction to Exercise, which skyrockets the blood pressure during…exercise. Up to 40% of elite level athletes experience this. The cause and/or effects of the condition are still clinically inconclusive. During my last training ride my BP hit 270/90. Three weeks on the couch eating doughnuts does not win a National championship.)
Life is funny.
Whoa…270/90. Well, geez, take good care.
As for the massive gain. Congratulations. Incredible. Now what? 🙂
Thanks for the mention – and hope you have a great weekend! How long until the first beer is cracked?
Had one around 5:30 yesterday! All the best and looking forward to your answers for the blog.