Weekend Reading – Gord Downie, when companies lie, loving ETFs and more #money stuff
Welcome to my latest Weekend Reading edition – after a small break due to vacation.
Some sad news this week with the passing of Canadian rock-poet, artist and front-man of The Tragically Hip Gord Downie. A significant loss for us fans, losing a beloved Canadian music icon and culture advocate too soon – so a nice touch I think by a local radio station to do this:
Here was my article this week:
It’s not too late – to invest like a pro this year.
Enjoy the rest of these reads as part of your weekend reading – see you here next week.
Mark
Dividend Growth Investor highlighted the performance of dividend paying stocks over non-payers.
Simply Investing wondered how you might invest when companies lie to you.
Interesting, older article I read (thanks to a reader question to me) about equal weight investing using ETFs. The punchline about this strategy – it may produce returns greater than a traditional cap-weighted investing approach – depending upon the investing period of course. Nothing is guaranteed in the financial future. From the article: “Equal weighting is an active strategy that’s more volatile and expensive, so advisors need to have a good reason to use it.”
On the subject of Exchange Traded Funds – what’s not to love about ETFs?
From the oldie but goodie file, here is why I like ETFs as they relate to index investing. Otherwise I buy and hold stocks for passive income and growth. Not all ETFs are good ones.
I found this new Canadian dividend ETF (XDIV) by BlackRock. People may tout some dividend ETFs as better alternatives to holding individuals stocks – but I don’t follow that crowd blindly. While the management fee for this new ETF is low (0.10%), it only holds 22 Canadian stocks – about 60% financials and 20% energy. Hardly diversified even for Canada. I also think it’s a bit nuts to have an ETF labelled as “medium” risk with 80% of your assets in two sectors.
Thanks for mentioning yours truly as one of Canada’s top investment blogs!
Good on Ken Kivenko – Canadian investor advocate in action – to post this on CanadianFundWatch:
“Studies of actively-managed equity funds have found little evidence that strong past returns predict strong future returns after fees. This is a very important fact. Chasing performance is therefore a fool’s game and not a good reason to select a fund. Fund companies advertise their high-performing funds because they have proven effective at exploiting and encouraging investors’ tendency to chase funds with high past returns. Simply put, investors tend to put their money with fund managers who have succeeded in the PAST, despite the fact that this will not mean that the fund manager will succeed in the future.”
Sean Cooper has some mortgage advice for Canadians: shop around, make lump sum payments, and switch from monthly payments to bi-weekly payments to slay your mortgage debt. I think he forgot a big one – establish a short amortization in the first place.
Who doesn’t love getting a deal?
Don’t forget about my Deals page where you can save hundreds or even thousands of dollars over years with better saving and investing solutions. It’s your money – get more out of it!
Newbie investor?
Here is a link to some FREE saving and investing resources for newbie investors.
New mortgage rules are coming into effect. Soon, lenders will be required to “stress test” all uninsured mortgage loans – those where the buyer makes a down payment of at least 20 per cent of the home’s purchase price – at the greater of the Bank of Canada’s five-year posted rate or 200 basis points (two percentage points) higher than the negotiated contract rate. I think this is a great move.
Thanks for being a fan everyone.
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
What are your favourite international ETFs right now?
Thanks! Vacation was great 🙂
re: Gord
Huge loss for Canadiana, fully completely. One third of Canadian households tuned in to watch The Hip’s final concert on CBC; their cultural impact highlighted by the fact this concert is the only non-hockey event on the “most watched” list!
re: dividend paying stocks over non-payers
Statistical-based bias (esp. when the source is ever-changing). I could come up with a list of investments which beat dividend stocks…doesn’t mean much, really. “With dividend payments, the retirees can focus on the stream of income, and can ignore stock market fluctuations.” Really? I’ll bring up the 2006 ‘Halloween Massacre’ where many Canadian retirees saw their stream of income dividend payments decimated.
re: invest when companies lie to you.
Um…there’s no escaping this fact. This ‘cost of doing business’ is baked into Capitalism. Human behaviour changes when engaged in the incentive-fuelled practice of chasing profit. Might as well accept that there will be a degree of lying within ALL companies (including dividend data) and invest anyway. You wouldn’t even be able to hold cash (aka government) if you didn’t invest in lies.
re: Canadian dividend ETF (XDIV) by BlackRock
Obviously a product created to feed the hunger for dividend investments.
re: Studies of actively-managed equity funds…
And then there’s the practice of combining under-performing funds with winning funds, or even eliminate said funds, to create a false legacy of performance. Even the grandfather of index funds at Vanguard had to be combined with a more profitable fund in order to survive.
re: new mortgage rules
As shown, affordability will drop by ~20%. Bodes well for the wealthy to scoop up even more assets.
In other news…
Can you go a month without a credit card?
http://www.cbc.ca/news/canada/ottawa/big-owe-credit-card-debt-ottawa-1.4313292
As one participant said, “You have to figure out alternatives … when you push yourself a little bit you can find alternative means to do these things. You have to work a little bit harder but it is possible.” Unfortunately, most CC users are just as addicted to the convenience as they are to the debt. Why “work a little bit harder” when you can be lazy?
Woman says broker ‘churns’ her account, rakes in over $250,000
http://www.cbc.ca/news/canada/british-columbia/financial-advisor-earns-quarter-million-in-commissions-1.4328616
“In 2014, the Investment Industry Regulatory Organization of Canada (IIROC) fined Jaques $80,000 for failing to ensure that investments he made for Field were suitable for her, and for failing to co-operate with its investigation. He was also permanently banned from being a registered adviser and ordered to pay $20,000 in costs. To date, Jaques has not paid any of the fines. Unlike in Ontario, P.E.I., Alberta and Quebec, IIROC does not have the power in B.C. to use the courts to collect fines.”
Exactly. Huge incentives for non-fiduciary advisers to engage in illegal practices because there are, quite literally, ZERO material consequences! NONE!
Back to Gord FM…
Gord FM was great this weekend….I don’t recall listening to so much Hip consecutively in the last 20 years…
re: invest when companies lie to you.
This is why you need ‘buyer beware’ – all companies are in business to make money and profit off you.
re: new mortgage rules
This could get interesting and absolutely favour the wealthy.
Can you go a month without a credit card?
http://www.cbc.ca/news/canada/ottawa/big-owe-credit-card-debt-ottawa-1.4313292
I heard this article on my local CBC, they continue to follow a few folks trying this out. I could but choose not to for the very same reason – why work harder when you don’t really have to? The reality is for us, as long as we are meeting our saving goals we pretty much spend what we want thereafter. Pay ourselves first; then spend whatever within that budget. Try not to sweat the small stuff.
Hope you had a good trip Mark, and congrats on the high ranking for Canadian financial blogs. No surprise to me!
Your pro investing article was great. Keep it simple, learn how to invest, follow a good plan, and understand no one will have your interests at heart more than the investor themself.
Thanks very much RBull 🙂 We had a great trip.
Ahh,thanks for the mention. Great list of articles.
I enjoyed the KISS aspect of your pro investing article. I think this would work for a large portion of people out there..
Btw, I hit my crossover point based on forward income…But I will not be one of those retired by 32 types 😉
@DGI: Imagine if the refined or separated Dividend Growth stocks from Dividend paying stocks. Of the 419 dividend paying probably 25% would qualify as DG stocks or 105. I’m sure the difference in performance would be much wider.
@Cannew, well stated! Many so called dividend investors are really yield chasers…those who seek high yield, low growth stocks from the 75% of dividend payers that don’t qualify as dividend growth stocks. It would be interesting to compare the past performance of dividend growth stocks to the rest of the dividend payers. I wonder if any comparison studies like this have been done in Canada?
The past performance of S&P Dividend Aristocrats since 1989 has been remarkable. These are companies from the S&P that have managed to grow dividends for 25 years in a row, or longer. There is variabiity in performance from decade to decade however.. e.g. 1990s were not as good of a time as the 2000s and 2010s..
@Bernie: Connolly Report has been following a select group of Cdn DG stocks which meet his evaluation criteria the past 36 years. There have been a few on his list which did not perform as expected and he’s added and removed some from his list, but overall his core holdings have remained the same and performed extremely well. A key part of his valuation is to show or determine if the stocks are expensive or reasonably priced. Over the long term its been extremely accurate. He does not do comparisons with other stocks or index’s, just the returns and DG of the stocks he follows.
You’re certainly not the only one who reads the Connolly Report and follows Tom’s investing principles – who has done well for doing so. I’ve heard from others who have done the same.