Weekend Reading – How to start investing, protecting your portfolio, juicy dividend income 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.
We’re slowly getting settled into the condo. Some light fixtures are in. Our furniture is now out on the terrace. Some pictures are up on the walls. Still a long ways to go to get organized but over time I know this place will feel like home.
I posted one article this week – a 2,000+ word behemoth about just getting started with investing. Even seasoned investors might enjoy that post since there are many reminders about where you could put your hard-earned savings to improve your long-term investing returns.
Summer is here in Ottawa, the temperature has been turned up, so I intend to go out this weekend and enjoy it a bit while the going is good. GOOOO REDBLACKS tonight!
Have a great weekend,
Mark
Congrats to the four winners of Henry Mah’s book Your Ever Growing Income. Your books have been sent to you by Henry – thanks to everyone who participated in the giveaway!
Other articles
On Financial Independence Hub, there is a strong argument that you should protect your portfolio assets before your actual retirement date. According to Dale Roberts:
“You do not want to guess that a stock market correction is not in the near future. Stock market corrections historically come along with regularity. We are currently in an abnormal period of an extended (mostly) bull market run.”
I think his theory makes sense but again, not all investors are created equal. My plan is to “live off dividends” to a degree. This means I need equities in my portfolio – lots of them. So, my approach entering semi-retirement (in my 50s, some five years from now) is actually to hold a basket of stocks with a modest cash wedge versus any bonds at all.
I believe most retirees would be well-served owning more stocks than bonds in retirement and keeping a modest amount of cash savings just in case…
I included our updated bucket approach in my April 2019 dividend income update where I announced we are now earning over $18,600 per year in dividend income from some key accounts beyond our RRSPs.
Here are those buckets in a table:
Thoughts about my plan to live with more stocks and keep a modest cash wedge otherwise in semi-retirement? What do retirees out there do?
Speaking of dividend income here are some other blogger updates:
Dividend Earner determined his “enough number”, and it’s not trivial. In some emails back and forth with him recently, this includes his workplace pension plan. Based on this BIG number and spending desires, this amount seems more than adequate for a comfortable if not higher-end retirement. Read on to learn more about that below…
Rob is doing well with his dividend income update – for June 2019. I have to get my act together and report mine next week!
Reverse The Crush is seeing the power of his dividend income rise over time.
Dividends or not, even if you start investing later on in life, Million Dollar Journey said you can still enjoy a comfortable retirement.
Here are five cheap living tips courtesy of Canadian Budget Binder.
Reader question and email this week (information adapted slightly for post):
Hi Mark,
I hope your week is going excellently so far. Thank you so very much for answering my (other) questions in more depth. I really appreciate your expertise!
I’m almost ready to make another stock purchase, so that’s pretty exciting. Hopefully I can find a good deal this time.
Do you have any thoughts on how much one should have saved by a certain age?
Thanks so much once again!
Good questions. Actually, I wrote about those subjects a few times on my site.
Here is a post about what some experts believe, you should have saved by the decade. If fact, MoneySense did some math for what constitutes a ‘deluxe’ retirement starting at age 65 – if that’s your end game to retire then.
The ‘deluxe’ MoneySense “enough number” is north of $1 million:
Image courtesy of MoneySense.
MoneySense estimates aside, I think in general you should throw retirement savings factors totally out the window. I say that because we’re all different. You might choose to work part-time in your semi-retirement to supplement your income. You may choose to rent in a lower-cost area or have roommates to keep costs lower. Choices abound and I believe there are many roads to Rome per se.
To summarize, there is no specific savings or investments target you need to have by a certain age at any age. Instead, just get started with saving and investing. Over time, come up with a sound financial plan that meets your money goals and continue to refine from there. Above all, at any age, enjoy the life you’ve been blessed to live.
Happy investing!
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. 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.
Missed commenting on “You should have saved by the decade” Must have been on our way to AZ.
Just reading it and will post a reply on my blog later.
You have a blog Cannew?????? What is it called? How did I miss it? ):
Gary: Not sure I’d call it a Blog, more my opinions on various subjects. I don’t have the depth that Mark does to come up with so many innovative topics. Anyway, he’s my page which I just started: https://risingyieldoninvestments.blogspot.com/
Good for you Cannew. Best wishes with the blog.
Thanks Cannew. I’ve been retired for 13 years so it’s nice to read thoughts from other retirees. All the best.
Sounds good 🙂
Glad to hear that you and your wife are settling in the new place. Really enjoyed reading Dale’s article. Have a great weekend Mark.
Yes, Dale’s article was good. It will be interesting to see how we adapt our portfolio over time. For now, 100% equities.
I read Dale’s article a couple of times and I found myself nodding my head in agreement. For some reason, RESPs came to mind. Having a larger equity position in the early years may be a decent strategy but as one gets closer to the “use date”, it might be an idea to shelter some, if not all, of those funds from a downturn. Obviously not an apples to apples comparison but the thought process is similar.
You’re absolutely correct Lloyd – I was so focused on just contributing every year that it didn’t sink in to me until about two years before my oldest went to university that I should shift some to cash. I did, and everything was fine but I realized how quickly it caught up on me. I’ve shifted my second daughter’s as well. We were in MAW104 which I thought was ideal for RESPs. It’s a 60/40 balanced fund so not as much risk of a drawdown. From a tax planning point of view, if your RESP is large, you also want to withdraw the government contributions and growth but not the capital to have them taxed while the student isn’t working.
I see the merit in Dale’s article but I’m not quite “there yet”. I’m 100% equities for now but to simplify the portfolio over time, I might consider a “GRO” fund or a “BAL” fund. Time will tell!
https://www.myownadvisor.ca/the-best-all-in-one-exchange-traded-funds-etfs/
I’ll be interested to see that too.
I’m in 100% equities (apart from the MAW104 for the kids’ RESPs) and haven’t felt the need for fixed income. I still have my statement from sometime in 2009 when my market value was literally half my book value. I didn’t like it of course but knew markets would eventually recover and simply stayed the course. My account then was worth maybe 15% of what it is now — when markets dipped in January this year I actually lost more nominal value (but less percentage wise) and again didn’t panic or do anything stupid so I’m confident that my risk tolerance can sustain whatever Mr. Market decides to throw at us.
Well done BartBandy…I suspect most investors could learn from you on how to hold on tight, through thick-and-thin when Mr. Market goes bonkers.
I consider my DB pension “a big bond” so I’ve gone 100% equities myself over the last 5 years. Maybe in hindsight a good decision considering the massive bull run we’re on but things will correct, eventually.
What are your equities beyond MAW104? That Mawer fund is a solid one for sure.
I’m in a standard Couch Potato set up right now. VUN (I haven’t tried Norbert’s Gambit yet but probably should to save some withholding tax in my RRSP), XEF+XEC, and some VCN. I have also been using HXT in my taxable account and am well aware that the government is going to be targeting the derivative ETFs so I’m not contributing more now.
I’m back.
Once again congratulations Mark on your new place and getting more settled every day. I am sure you’ll both be very happy there.
Welcome back! Yes, slowly getting settled. Having family over for the first time formally today. Going to be a nice day in Ottawa I think.
Thank you! It was a fantastic trip with incredible scenery. Made another booking for this fall. So much for not going away!
That will be great to show off your new spot!
Sorry about your team losing.
Just finished a good 16k run. Getting warm out there. On the mend.
Heading out now for a great coastal drive on my motorcycle for a few hours and then out in the sea kayaks for the first time this season. Yard work, wash cars then beer in the gazebo enjoying the view!
Have a great day.
Sounds great! I hope to flip you an email soon. All the best…enjoy the playtime after your chores are done.
Great. Look forward to it and same to you.
Mark, when you said Dividend Earner’s number including the pension, does that mean he will have less than $1.77M in his portfolio? Anyway, $80K annual income for a couple is a very comfortable retirement.
Totally agree everyone’s number would be different. I know our magic number: $2.5M. This looks very high. But considering we do not have any pension, we still have two young kids, we want to retire before 60, we live in very expensive metro Vancouver.
Almost two years past since I set that goal. There are three years left to go. But maybe it’s not necessary to hit that target. We will see what would happen. I am seriously considering retiring earlier than I originally planned.
I don’t think there is any reason to have a $2.5 M portfolio in a few years, unless you are a bigger spender. That’s spending $80k+ per year without ever touching the capital. Then you have your house. In Vancouver no less. So, in essence, you’re a multi-millionaire with money that you might not be able to ever spend in 30 years.
All that said May, if that’s your plan, I would say Go For It! I’m happy to see folks accomplish their big dreams.
More realistically, even having $1 M or $1.5 M in your 60s (even without a pension and no debt); you’ll have some CPP and/or OAS; that is very, very good.
🙂
Mark
$80K is not enough for me if I want to retire earlier. I need at least $100K before tax right now. With 4% yield, that’s where that number comes from. But I am OK with touching capital. I don’t need that much after the kids become independent. That’s why I feel $2.5M might not be necessary. Maybe I can touch some of the capital when the kids still in house.
The major factor here is kid is expensive. Two kids are double expensive. I could retire right now if I don’t have two young kids.
Totally understand May. I mean, we don’t have kids, so it’s rather easy for me to say $2.5 M is “enough”. It’s plenty for my wife and I but we’re talking about you….
Yes, after your kids are gone you’ll be flush with cash. I can appreciate kids are not cheap but you wouldn’t trade them for a thing!
Wow May, $2.5Mil. I thought you were the thrifty type? I don’t even have that in our portfolio and we manage to get by. But as I suggest, it’s not the size of the pile but how much income the pile produces.
Yes, I consider myself being the thrifty type. Hopefully my standard of being thrifty is actually correct. We have driven a Honda Civic for more than 18 years, and our other car is 10 years old already and we don’t want to replace it yet. That’s definitely qualified as being thrifty?
You don’t have young kids any more so you definitely don’t need $2.5M. A big part of that $2.5M will be used for the kids’ big expenses like going to university. I was thinking I actually need only $1M in today’s money when I begin to collect CPP and OAS at 71.
As we are not retiring tomorrow I did not have a thorough retirement plan yet. Maybe I already have enough. While both of us still feel we are capable of working a little bit longer, we will try to achieve that goal.
May: by the time you are my age I doubt you’ll (hope you won’t) still have kids. Our kids put themselves through college and university with just some help from us, so I guess someone brought them up correctly (my wife). They always had part-time work and didn’t take out heavy Student Loans. Once they finished they moved out either to be on their own or to move to a different city for work.
Nothing wrong with a lofty goal, too many don’t have one or work towards one.
I am pretty sure you did your part to raise your kids correctly. Working hard, waste no money, save and invest, be an honest and decent man, that’s the best how you raise your kids, as your kids learn from your act.
Hopefully my kids doesn’t require much help from me for their education. But I think I will still be prepared in case they need help. So far at least they spend their allowance very carefully. Not as frugal as us but better than their peers.
May, I get what you’re saying with your circumstances, your goals, and potential retirement timing. I think you’re right on. I prefer to concentrate on cash flow- a fairly steady and growing income from investments from a balanced portfolio, capital as appropriate and/or needed, govt pensions in the future, and in our case a work pension. I am also employing a rising equity glide path and plan to continue this.
I would also say leaving work a bit earlier with a little less if you don’t love your work is the way to go….at least for me, from experience. However I would not have semi retired at age 52 and fully at 55, my wife fully @ 52 if we still weren’t able to generate a healthy cash flow overall from a conservative portfolio and conservative planned withdrawals.
We’re also thrifty but extravagant in some ways- on the things that are more important to us. Why we saved and retired when we did. Being thrifty helps us to get more of what are priorities are – like traveling. We have a 12+ year old car (mint summer toy), a 10 yr old car, a 9 year old car and an 11 year old motorcyle (mint). No plans for replacement but the 9 yr old one may get changed in 2-3 yrs.
Welcome back, RBull, we definitely missed you here.
Wow, you are really fond of cars. Cars are only commuting tools for us. So as long as it can carry us from point A to point B without problems, we really do not care that much. For things we really like, it’s a different story. I certainly know what you mean being extravagant in some ways. We spent a fortune to set up our home theater when we moved as we really enjoy watching movies and tv series.
With the retirement decision, it’s not about my job, there are things I still like about it. It’s just that working full time and raising young kids could be a little bit too much at our age. Sometimes I wonder maybe only one of us continue to work and another one retires and take care of the house hold would be better for everybody. Other times I think maybe it’s better both for us to work a little bit longer and retire at the same time so we could do things together.
Thanks May. I was on the west coast for a few weeks.
It seems you have some decisions to make, but have options. That’s good.
The way we timed ours worked perfectly, but we did not have children to think of.
I liked things about my job but not working was just more appealing. In hindsight it was the right choice to leave when I did.
Re cars, just something I’ve always done since age 16. 2 cars for me, plus other toys etc. An expensive habit.
When you have done as well as you have RBull – you can enjoy some toys!!
Thanks. You’re doing very well yourself!
I think that May is thinking ahead to university expenses for her kids, especially if they go to the USA.
After a life of frugality, mostly due to necessity but when not necessary it was because I was saving for our first house, I am finding it hard to change old habits. We have saved enough now for my husband to retire, but he is not inclined to so so. My goal is not to save any income this year, but not sure I will be successful. Kinda a strange concept, but I dont have many wants. Sending 1900 a month to my son #2, that is his rent for a studio apartment in Toronto!!! He has enough student debt already.
I raised my kids right and am proud that all 3 were A plus students at university. But #2 says he has too much lab work to have an outside job other than teaching and research assistant earnings. The other two were Math majors, which was way less time consuming and neither of them have or had any student debt.
Hi, Barbara, Yes, that is exactly what I am preparing for. If the kids want to go to the USA or UK, the expense will be huge. Even Canada is not cheap any more. Like you said, rent only could be already $1900. I don’t want my kids graduated with lots of student loans.
A very good and admirable goal for sure: “I don’t want my kids graduated with lots of student loans.”
I had student loan debt for about 3 years. It was actually a good financial lesson to have it now that I look back!
By the way, it’s a good problem to have that you spend less than your budget. I guess lots of retirees among this blog’s readers have the same problem. LOL. I am guessing I might have similar problem and that’s why I am seriously considering retiring earlier. Before my kids being independent though, I will continue to be frugal I guess.
More travelling maybe? More luxury flights, hotels and restaurants? I found money burning really fast when we were on the road.
I suppose I am not typical, but I do not like luxury hotels and restaurants. I prefer small, family run hotels and I love eating street food when I travel. I had to stay in fancy hotels when I travelled for work and never liked them. I don’t care for cars, just want reliability. And I don’t really like shopping, my husband does though.
We do like to travel and took our kids to Disneyland twice; one time we flew and the second time we did a one month trip driving. The costs add up feeding 5. If my husband retires I will have plenty of trips planned out.
BTW, relatives from the USA were just visiting us in BC. She told me that she earned US$140,000 at about the age 35, (17 years ago) don’t know what her now ex-husband made. But they couldn’t afford to send their second daughter to the desired university, instead she is at one that “only” costs $30,000 per year. Not sure where the oldest daughter went. As the daughters would have been able to get Canadian citizenship, they should have obtained residency status and gone to somewhere good like Queen’s, which would have cost way less.
The company pension is a defined contribution plan – not the luxury defined pension plan. A defined contribution is money you put in and the company matches. I can move my contribution out (and I have been) but I cannot move the employer contribution until I leave work. All that money is indexed with the funds we have available. My portfolio still does better.
I track 2 numbers. Dividend portfolio + Company plan and once I leave the company, all the company plan will move over to the dividend portfolio and contribute. On the blog, the defined pension plan is excluded and I only focus on the dividend portfolio. But for the overall number, I include both since both will be used.
Initially, I had $60K as a number and I wanted some luxury so it went up. Do note that health and desire to travel changes over the retirement window. You do a lot less later on in life.
Your number is based on servicing all your expenses as a family. I am curious if your mortgage is paid off or not … Mine will be and it’s negligible (and I live in the Vancouver Lower Mainland – bought first place in 2002). The total number for us services day-to-day expenses without a mortgage and no kids to support. Vancouver is no different than many other places with respect to basic needs. I have family across Canada and utility and properly taxes are not expensive by comparison.
Nice to hear from you, Dividend Earner. Our mortgage is paid off already. Right now we have no debt at all.
Yes, my number is based on servicing the expense of entire family while the kids still very young. So essentially it’s your $80K plus expense for two kids. Actually I am not sure $20K for two kids is enough or not, right now their summer camps, after school cares, extracurricular activities easily add up far more than $10K. When we go on vacation, the expense doubles.
Withdrawal from our portfolio will go down once the kids leave the house, go down again once we begin to collect CPP and OAS. That’s why I am aiming for $2.5M, but OK to retire without hitting this target.
@May Well done on the home.
Retiring with 2 young kids is unsual and that makes sense for your number. And yes, sports and other activities add up. I paid for sports at competitive level – I know the feeling.
Hey, Mark! Thanks for putting this post together and including me! I really appreciate it! I totally agree that there is no perfect savings/investment target and that it is different for everyone. The more I blog the more I realize I will probably live off a combination of investing, side hustles, and a part time job down the road. Have a great weekend!
Nothing wrong with multiple income streams – but I’m biased since I hope to have the same in the coming years. A blend of dividend income to live from (see my dividends page for our goal); blog income (very little – not a get rich scheme!!); part-time work and other.
https://www.myownadvisor.ca/dividends/
Once the mortgage dragon is slayed, life will really begin 🙂
All the best and stay in touch,
Mark
Good to hear about your DC pension Dividend Earner. That’s still very valuable.
PIE is great, little sad that he removed comments from his ‘new’ site. Something I really enjoy with your blog. If other readers are like me, the conversation in the comments can be as good or better than the article. There is a lot to glean from the comments section, love the back and forth you have with your regular commentators.
David
I enjoy the dialogue and conversations as well David. It’s a big reason why I enjoy running the site so much. I learn from everyone or at least I try to since perspectives are very valuable.
All the best,
Mark
@David
Yes, I took the comments out and will not have them back. If you want to engage, send me an email. The email is in the about page.
While comments have positive engagement, there can be negatives due to trolls and then there is performance and security on the site too. To be honest, if you really want to socially engage with others like minded, Reddit is much more pertinent for that. You will definitely get different opinions. Often times, blogs like ours, bring people that think like us. All you get is reinforcement of the same thinking. Although some of my readers will tell you that I don’t give simple answers as I want to teach everyone how to fish so I often reply with lots of questions.
Well said about comments DE. There are many people out there that would say things online but never say such things in person. Not great but sadly the world we live in. Thanks for your comment.
@PIE/Dividend Earner
Copy on the trolls and the time required to manage. Yes the echo chamber can be bad, though the encouragement for people to get their finances in order, think to the future, one small step at a time. Never a bad thing. Hearing about others success, is wonderful.
David
Hearing about others’ success is a great thing for sure! Thanks for reading David!
Thanks Mark, great post and thanks for the mention. Yes I think a cash cushion will work. As long as we prepare for market corrections. Dividends have a habit of getting cut as we know in those nasty recessions. GICs even pay more than yer basic core bond ETF these days. I like bonds for that inverse relationship potential.
And I’ll admit dividends to change the mindset and approach. A trap? Ha.
I like that ‘how much’ chart, but as you write we are all snowflakes, all so different. There’s part time work, home value, inheritance, etc. etc. etc.
Dale
Thanks for your comments Dale. Yes, all snowflakes, a good analogy.
No inheritance for me (I’m encouraging my parents to ‘spend it all…’ and enjoy for what they’ve worked for). Home value, gotta live somewhere unless we’re like you and live in Toronto and won the #realestatelottery 🙂
That said, I did bike by a home worth $4 M in Ottawa last night or at least that’s what it’s listed as. Wild.
Enjoy the weekend and I will have a few cold ones for you at my football game tonight.
Mark
Hi Dale: “And I’ll admit dividends to change the mindset and approach. A trap?” In my mind it’s concentrating on Capital appreciation that’s the trap. As your article suggest no one know when or how sever the next correction will be, but there will be one if not many before one retires.
I don’t like to categorize all dividend stocks with quality dividend stocks. There is a difference. During the Fin Crisis there were dividend cuts but not many with the quality companies. MFC comes to mind but I had several others increase theirs during that time and overall our income continued to grow though at a slower rate. Then we added funds to our holdings and our income grew even faster. Certainly our portfolio value dropped, but it only resulted to increased our income potential.
Good point in that all stocks are not created equal. They can’t be. Otherwise, everyone would buy and hold these companies. 🙂
There will be another crisis and there will be dividend cuts coming for some companies. Such is life. I think the key is, you buy and hold and take part in most companies that raise their dividend or worse-case, hold it through thick-and-thin. I have MFC too. A few hundred shares but I’m happy to see their increases coming once again. Dividends almost doubled in 5 years and another raise is coming in 2020.
http://m.manulife.com/Dividend-Rates
Income and cash flow is KING 🙂
Enjoyed your piece Dale.
Agree about snowflakes.