Weekend Reading – Good advice for stocks, ETFs and stocks working together, too much RRSP 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.
This past week, I posted these articles:
A reminder you can also check out some recent posts that made Rob Carrick’s Carrick On Money column recently. Thanks for the mention Rob!
Have a great weekend and we’ll see here next week with a new dividend income update!
John Heinzl has some good advice if you’re just starting out on your journey with trying to select individual stocks (over low-cost funds):
- Assess how much time you have.
- Assess how tough your stomach might be.
- Assess if you’re a bit of a gambler.
- Finally, assess if you have a long-term investing plan with those stocks in.
“Generally, the larger the portfolio is, and the less trading you do, the more you’ll save by owning individual stocks. But you’ll have to balance the cost savings against the extra work and occasional stress that comes with managing a portfolio of stocks.”
Dale Roberts shared his thoughts on making dividend paying stocks and ETFs work together. The indexing fans absolutely despise his thought but I personally like this approach. For example, you can unbundle the Canadian ETF XIU like I have (for cash flow) and own a bunch of VYM or VTI or VT (low-cost U.S. ETFs that cover U.S. high dividend yield stocks, the U.S. total market, or the global market respectively) for long-term growth. That’s an option but you certainly don’t have to follow that path.
Justin Bender did some great work here to outline the expected/hypothetical returns of some asset allocation Vanguard ETFs. He’s projecting (although who know what the future might actually hold) that the best any of these funds might return in the coming 10-15 years is close to 6% return (without inflation factored in). Image from Justin’s blogpost that has more cool details:
Can you have too much assets inside an RRSP? Million Dollar Journey answers that question. My answer is very short – what a helluva good problem to have in retirement – a tax problem!
Ben Carlson wrote a frank and honest assessment of why some people get into money trouble: it can happen based on no fault of their own. It’s my hope that bloggers or any so-called financial experts see that bigger picture; stop the money-shaming. Nobody is perfect.
Boomer and Echo suggested to forget the Latte Factor – focus on answering $30,000 questions instead of $3 ones to get your personal finances organized.
Tawcan wrote about playing the travel hacking game.
Reader question of the week (adapted for the site):
I’m a new fan. On your site in an article (can’t recall which one now), I think you mentioned you like dividend income ETFs from the U.S., including ETF DGRO. What about IVV?
Also, it seems the U.S. index (namely S&P 500) has historically outperformed the TSX index. So, I know you mentioned that for tax efficiency, buying Canadian stocks or ETFs in a non-registered account might be a wise move, but wouldn’t you be justified given U.S. returns that owning U.S. assets in a non-registered account even with the 15% withholding tax is a good move?
I know you cannot offer advice but thanks so much for your thoughts!
Thanks for your email and questions.
Clearly from your questions, tax efficiency is top of mind. That’s great – but I’ll back up a bit.
I think while tax efficiency is important, I’ve learned over time the tax efficiency tail shouldn’t wave the asset allocation or asset location dog. Meaning, what-you-put-where in your portfolio for tax efficiency is important but it’s probably one of the final building blocks in a complete investing plan.
I would also consider your risk tolerance and asset mix before tax efficiency. What mix of stocks and bonds and cash do you need to meet your financial goals? What products might deliver such goals? What is your risk tolerance when (and it will at some point…) the market drops 10%, 20% or even 30%? How are you going to invest when the market falls or climbs? Once those behavioural and product decisions might be tackled, then you can consider what products go where for portfolio optimization.
In terms of your first question about IVV versus DGRO, I’m a big fan of IVV. I have it as one of my very top ETFs to invest in.
Basically, hold IVV along with a Canadian ETF and an international ETF and you’ve got a very diverse world portfolio!
You might already know, my approach has been to unbundle big Canadian ETFs like XIU, XIC, VCE, VCN, ZCN, etc. and own the same stocks the big ETFs own directly. Will that approach hold up long-term to help me/us meet our $30,000 per year dividend income goal? It’s working so far.
The U.S. market is a different story. I only own a handful of U.S. stocks and I complement those U.S. dividend payers by owning a couple of low-cost U.S. dividend ETFs like VYM and HDV.
In summary, if you’re going for a total return approach for the U.S. market, I think owning U.S. ETFs like IVV or VTI or a few others are outstanding long-term choices. I hope these answers will help your own decision!
Got a question for me? Bring it! I’ll try and answer your investing questions the best I can.
Have a great weekend!
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