Weekend Reading – Giveaways, why bother with bonds, why invest in international stocks 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 these articles this week:
My review and giveaway about Stock Investing for Canadians. Enter to win! (Don’t go far, more giveaways to come this spring and summer.)
Great to see a few dividend raises over the last week or so: Nutrien (NTR), Bank of Montreal (BMO), and National Bank (NA) all recently hiked their payouts in my portfolio. Stay tuned to this channel for my May dividend income update – coming up soon.
For those that missed my April update, here is that post; we’re approaching $18,600 in dividend income per year from assets that pay dividends in some key investing accounts.
‘Til next week enjoy the weekend, thanks for being fans and I encourage you to share this site with others!
Another smart post by Andrew Hallam recently talked bonds: about why bother to own bonds when they don’t payout squat. From Andrew:
“Consider what happens when stocks fall hard. Bond allocations can help to cushion market falls.”
He reminds about loss aversion – our hard-wired, lizard-brain behaviour we humans find very difficult to shake.
“In his book, Thinking Fast and Slow, Daniel Kahnemann, a Noble Prize winner in Behavioral Economics, says we dislike losses twice as much as we like gains. When our portfolios fall far, it increases the risk that we’ll do something silly.”
I enjoyed that book a great deal, probably one of my favourites I’ve ever read. I highly recommend it.
A fan of this site and very well respected personal finance all-around good guy John Robertson had a thoughtful post about all-in-one ETFs and asset location – namely the costs of such funds long-term in taxable accounts. I agree with John, investing in these all-in-one ETFs in a registered account such as RRSP, TFSA, RESP, etc. have no real tax headaches. Non-registered investing gets a bit more complicated. What John wrote:
“Non-registered: it gets more complicated, as you might expect. When you sell a fund you’ll have to realize the gains (and thus pay tax). Turning over your entire portfolio at once might have some fairly large tax consequences. You can take an alternative approach, like buying a bond fund at some point (perhaps selling a bit of your all-in-one fund) to make a two-fund portfolio later.”
Chrissy from Eat, Sleep, Breathe FI believes any personal finance independence journey is all about the “whys”. She makes some great points about understanding your “whys” when it comes to money goals and I would go even further to say this is extremely important for any facet of your life – including the workplace as it relates to goal setting. The summary: the more your “whys” are clear and understood, the better your chances of success become. Thoughts?
The Dividend Guy is not convinced you need any international dividend stocks. Why? I’ll let him explain:
“The problem I see with emerging markets’ businesses is that they exist and evolve in a volatile environment on all fronts: politic, economic and financial. We have been reading many articles about shadow banking, non-transparent stock markets, and political influence in many of these emerging countries.
While you can make money with some opportunities, this is not an environment that is likely to seduce the dividend growth investor in me. Instead of going deep inside a company’s financial statements, I would rather select an ETF that covers such investments. Investing in US companies and/or ETFs seems to be easier and a more efficient way to get exposure to international markets.”
Should you protect your assets (with more fixed income or cash) as you approach retirement? Probably a good idea but I’m not quite “there” yet in my thinking. I’ve got a few years before semi-retirement can begin but this post did trigger some thinking – if I really need to live off dividends.
Reader question/reply of the week:
I have a question that perhaps you could turn into a blog post unless you’ve already done this.
- Do you need to contribute to an RRSP if you have a Defined Benefit Pension?
- How do you know how much to invest?
- What if you already max out your TFSA?
- Pros and Cons to investing in both RRSP and Defined Pension at the same time
I’m just throwing out some questions above. The reason for my questions – I want to make sure I’m not doing anything silly today that will affect the amount of tax I pay when I retire.
Thanks for your questions! Keep them coming fans!
For what it’s worth, here’s my quick take (and I will consider putting these answers into a more detailed blogpost about RRSPs and pensions in the future):
You don’t need to contribute to an RRSP if you have a defined benefit pension plan at work, but when it comes to my financial plan, I’ve decided that all things considered a tax headache in retirement is a very good problem to have. 🙂
This means I strive to max out my RRSP (even though I contribute to a defined benefit pension at work). I have done this for a few reasons:
1) I don’t what the future holds,
3) I believe in asset diversification since I consider my pension a “big bond”; this way I can hold more equities in my personal portfolio.
In terms of how much I could invest, inside my RRSP by having a defined benefit pension plan, every year I look at my CRA Notice of Assessment (NoA) to know how much RRSP contribution room I have left. I use my NoA as my guide since contributions to my pension reduce any available RRSP contribution room for the upcoming tax year.
What about the TFSA? What about it?! – it’s a killer investment account! There are great things you can do with your TFSA every year – and I max out this account every year without exception.
Lastly, of course, there are pros and cons to having assets inside an RRSP and with a workplace pension plan but I think regardless if you have a workplace pension plan, or not, and most people don’t, striving to save and invest inside a TFSA and RRSP during your peak earning years will provide you with tremendous financial flexibility later in life. A desirable place to be I would think!
Got a question for me? Send it my way!