Weekend Reading – Good advice for stocks, ETFs and stocks working together, too much RRSP and more #moneystuff

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:

This is how you can manage debt, before debt manages you!

I prefer FIWOOT vs. FIRE.  No idea what that means?  Read on!

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!

Here are the pros and cons of dividend reinvestment plans.

Just starting out your investing journey?  Here is a primer to help you out!

Have a great weekend and we’ll see here next week with a new dividend income update!

Mark

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):

  1. Assess how much time you have.
  2. Assess how tough your stomach might be.
  3. Assess if you’re a bit of a gambler.
  4. 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:

Justin Bender - Vanguard ETF estimates

This is what happens when you don’t look at your portfolio very often.  I recently got a 7.3% raise.

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 Factorfocus 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):

Hi Mark,

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 consider what your financial plan is first – investing is just a sub-set of that. 

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.

I posted a detailed post about tax efficient investing (and the challenges involved) here – check that out!

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.  

You can read more about my investing approach for income and growth here.

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!

Mark

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My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $700,000 now - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

22 Responses to "Weekend Reading – Good advice for stocks, ETFs and stocks working together, too much RRSP and more #moneystuff"

  1. I read Mr Heinzl’s article and I smiled. I spend almost no time analyzing stocks. Some of my holdings were carried over from the days when I had an FA but anything I’ve decided to buy were just chosen from the top holdings of a couple of index funds. I might look at current prices versus 52 week high/low and ex-dividend dates but that’s about it. I’m too lazy and not near financially savvy enough to do an analysis.

    As to the too much in an RRSP…yup, guilty. I find this amusing to an extent as well because when a person should be considering investing for retirement they are far too young to have a clue as to what they will have/need when they reach said retirement. If one were to wait until they were older, they’ve lost the best opportunity (time) to accumulate/grow the assets. If I had to give one piece of advice that would be almost universal to every person….start young. If you have too much when you are old, relax and enjoy. It’s not a problem to have too much.

    Reply
    1. I’ve always thought a large RRSP balance is a great problem to have in retirement. I wish someone would disagree with me on that 🙂

      Well done yourself Lloyd!

      Reply
      1. Ha. I’d like to disagree with you and be my sometimes contrarian self but I can’t on that one!

        I’d be just fine if it was a lot more than it is. I can state for the record paying the taxes on my withdrawals now and living relatively comfortably has been a “great problem”.

        Reply
  2. I see that you’re Staying busy Mark one good topic after another one 🙂
    as for unbundling XIU i took the easy approach in my tfsa and I’m holding XEI since it holds all the Canadian Blue Chip stocks 75 of them in a single shot 🙂 and for a tiny fee of 0.22 which is nothing ( at least in my view) but i just buy every month and dump it in there and i don’t have to worry about it just keep dripping shares monthly 🙂 and in my RRSP i still got VAB VCN XEF and I also hold ZDI just because i like to see those monthly drips in my account 🙂
    i’m not an expert at all but i believe that no matter which way you go individual blue chip stocks or etfs that hold them it’s basically the same , i believe the main thing is to invest monthly no matter how the market opened today and be discipline about it .

    Reply
    1. XEI is a nice income payer for sure. Always guaranteed at least 3-4% yield/income and some growth over time.

      Sounds like a good plan to invest monthly and keep the discipline – that should get most people including you and I to where we want to go.

      All the best Gus!

      Reply
      1. Thanks RBull,
        To be honest i didn’t pay attention to stocks untill maybe the last few years as for real estate started at 19 when i bought my first one now i have the third at 47, my three bedrooms two bath that i just moved in to last month we bought it presale for 538k now it’s worth about 848k in three years it’s amazing really.
        the only thing that i like about stocks more is the liquidity and i think real estate and stocks go hand in hand i simply want to diversify what i own , having all my money in three properties not a wise thing to do .

        Reply
        1. I would agree diverisfying beyond all real estate is a logical and safer thing for you to do. The stock market can be very volatile but over the long term you’ll win the way you’re going.

          Reply
  3. Ah, Old Ottawa East. I had imagined it would be west. I love that area, and that is where I stayed my last visit to Ottawa, almost 3 years ago. It was an airbnb and was very handy because I was visiting my old friend who still lived on Main street. We had dinner and I sat in the same dining room spot as I had the last time I saw him and his wife 25 years earlier. The street was being dug up pretty severely then.

    I always enjoy John Heinzl’s columns, always such sound advice. Regarding the credit card churning….I dunno. It seems stressful to me, keeping track of them all and remembering to cancel at the right time, etc. I have a few cards, a Gold one that provides car rental CDW for no fee; one for zero foreign exchange commission; one US dollar one; one for small value internet purchases only–that was my very first card, so I will always keep it; and the one that my hubby and I share for most purchases. That is quite enough to handle! I like Airmiles because they can be used as cash, but I would never go out of my way to get Aeroplan points. The are pretty useless where I live. And now you don’t even get them on the cheapest airfares from Air Canada.

    Reply
    1. Yes Barbara, 3 years ago, the place was very dug up for sure. Now, nice street, new restaurants popping up and of course, a condo here and there. Very livable area now and with our 2-bed, 2-bath condo in the centre of it – we hope a great long-term place to live!

      Reply
  4. Again, waaay off topic but I finally took action to sell some of our EIF, which we had way too much of, and buy some CM which we had a smaller position in. With the prices today I just couldn’t resist. Hopefully CM announces a dividend increase next week (fingers crossed).

    Reply
    1. I hope so too! If not, no biggie, they’ll announce in early 2020.

      I’ve seen lots of investors not happy with CM or BMO of late. I hold both anyhow. Until they stop paying dividends let alone increasing them, I’m in.

      Reply
      1. My primary purpose was to reduce EIF. As it is it still makes up 5% of the value of the overall portfolios. Still a bit high for such a stock. CM was a stock in that particular portfolio that I felt adding to would not result in too large of a holding. It now stands at 3.9% of overall value. Been watching CM for a bit but with no real funds available (not adding to RRSP) it didn’t really go anywhere. With EIF going ballistic after their increase I felt this might be an opportunity to accomplish both goals. Overall yield really doesn’t change but if CM increase next week…..

        Reply
        1. Gotcha. I hope to buy some WCN inside RRSP in the coming months. Or MDT:US for income and growth. I like U.S. healthcare and want to own more of it.

          We’ll see about the CM increase I guess?

          Reply
          1. Mark, I also want to buy WCN, I don’t have any yet. But I want to buy it in my taxable account. I expect lots of growth from this stock, not that much dividend. So if in taxable account, I pay tax on capital gain. In RRSP, I pay normal tax. To be tax efficient, I think it’s better putting WCN in taxable account?

            Same reason that I am trying to get CNR out of RRSP and put it in taxable account instead.

          2. It would be, re: more tax efficient inside the taxable account you are correct since depending upon your tax bracket/marginal rate, capital gains are a more efficient form of taxation than any dividend tax credit.

    2. Good move and good timing. It’s had quite a run lately.

      Yes CM would normally increase again this fall and its in the doghouse. All banks are struggling some as worries of high debt, low rates, mortgage defaults concern investors.

      Reply

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