Weekend Reading – Keeping Investing Simple

Weekend Reading – Keeping Investing Simple

Hi Readers!

Welcome to a new Weekend Reading edition, the keeping investing simple edition.

First up, some other reminders and some recent content in case you missed it:

I highlighted some key things you need to know about when it comes to the upcoming and new Tax-Free First Home Savings Account (FHSA).

A big thanks to Jon Chevreau for asking about my take on this account in a recent MoneySense column here:

How retired parents can use the FHSA to help their adult children

Last weekend, I highlighted how much Canadians and Americans generally have saved up for retirement (so you can compare as you wish).

So much retirement income planning can be geared towards couples or partners. So, I helped a reader out. A reader wrote to me and asked me: I’m 45 and single – is it possible to retire at age 55?

Here is that case study in detail.

Weekend Reading – Keeping Investing Simple

Have you ever heard the old adage, Keep It Simple Stupid Silly (KISS)?

This is a more modern, blunt interpretation of a much older philosophy, Occam’s Razor, which states that usually the simplest solution is the correct one. This philosophy goes even much further back… 

This principle goes back at least as far as Aristotle, who wrote “Nature operates in the shortest way possible.” 

We should too, when it comes to saving and investing. 

That maturity comes with awareness, knowledge and experience though.

I know, I’ve been there and done that – and messed up a few times now and then!

Keeping Investing Super Simple (KISS)

One trick you can try, to see if you’re keeping things simple at your house, is to read aloud your investing elevator pitch. If you cannot describe your investing style in the shortest way possible, that is clear and concise, you may not have a good approach (yet). 

I believe your ability to share your investing philosophy, easily and readily, is a good indication that you’re on a good path – one that’s tailored to you. 

Further still, you might find in honing your investing elevator pitch that your investing approach may or may not include the words of who manages your portfolio – it may exclude the need for an expensive financial advisor, someone trying to beat the market or just sharing the merits of indexing unto themselves. For the latter, to be the market with lazy, passive investing, you don’t need a money manager in my opinion. You can simply invest in some low-cost, diversified ETFs – yourself.

There are absolutely some complexities that many fee-only advisors and planners can support investors on. I’m in full agreement with that and always have been. But the hiring and maintenance of a professional money manager these days, given the depth and breath of low-cost ETFs available to any investor within a few clicks is an incredible advantage to every retail investor like you and me.

You don’t have to invest like your neighbour, or me, for that matter.

I’ve mentioned that 1000s of times on this site.

I run this site to share my story, my/our journey, with the good, the not-so-good, and the in-between.

I believe I’m a better investor for taking matters into my own hands, even with some mistakes on the way. 

I suspect you’ll feel the same if you do too…if not already done.

I believe there are three major cost obstacles DIY investors need to be mindful of, and must overcome, to Keep Investing Super Simple (KISS).

1. Structural / institutional costs. These are the commissions and fees associated with the products or services you buy and use from others including your brokerage. Pay those fees routinely at your peril. Keep all structural costs as low as possible for as long as possible. 
2. Tax / taxation costs. This is what our government takes from your wallet, in the form of taxable income and/or investment income. Keep your interest-bearing, dividend-bearing, and capital gains-bearing investments in the right location.
3. Behavioural costs. This is the money you lose based on poor behaviour such as market timing, jumping in and out of stocks or products, and/or chasing the next fad. Plans come before products. Find your “whys”, define your plan, adjust it but also stick to it again and again as you refine it. 

My elevator pitch goes something like this:

I’m a dividend growth investor that also invests in low-cost ETFs for extra diversification. 

I can then go on to share at my dinner party (only if someone asks!! – LOL) how and why I invest in dividend growth stocks, what factors I look for in owning some companies for my portfolio, what benefits this investing approach helps me with, and why low-cost, diversifed ETFs are a bit of my icing on the income growth cake.

Whether you invest in real estate or not, have a plan. 

Should you decide to go with private equity as investing path, have a plan.

Striving to be an entrepreneur, by investing in yourself and your company, have a plan and mind any taxation as a cost obstacle if/when do you decide to invest inside your corporation.

Just want to index invest? Go for it.

At the end of the day, and I say this sincerely friends, I don’t care what you invest in.

I just hope you meet your goals and do it your own way. 

Anyone else saying something else is likely trying to sell you something and/or push their agenda. Proceed with caution. 

If my words don’t help, that’s OK, it’s just how I think about things…

Consider this simple sketch art from Carl Richards who is far more famous than I will be, author of the One-Page Financial Plan and more:

Source: Behavior Gap.

From Carl’s recent newsletter in my inbox:

“Pretend you live in some magic fantasy world where all of your dreams (according to the investment industry) come true, and you actually beat an index every quarter for your whole life. Congratulations!

So here’s my question: You landed in Shangri La, according to the financial industry. You beat the index. But you didn’t meet your goals. Are you happy?

The answer is “No.”

Now let’s flip that scenario on its head. The worst thing in the world happens to you (again, according to the investment industry). You slightly underperform the index every quarter for your whole life. But because of careful financial planning, you meet every one of your financial goals. Let me repeat the question: Are you happy?

And the answer is obviously… “Yes.”

Stop worrying about beating indexes. Focus instead on meeting your goals.”

More Weekend Reading – Keeping Investing Simple…

A reminder after 80,000 published personal finance books, there is no perfect portfolio nor perfect plan. 

Money Basics (on Medium) highlighted their love of Canadian banks, in the backdrop of more U.S banking calamity of late. Getting paid today, with the expectation of future, higher income tomorrow, seems to be where the love is coming from:

“Most Canadian banks are paying out dividends from 4%-6% these days, and are consistently increasing that dividend. For example, National Bank over the last 10 years has increased it’s share price an average of 9.5% per year while increasing it’s dividend an average of 7.8% per year.”

Historically, as readers may know, some Canadian banks along with telcos and energy pipelines typically find their way into Beat the TSX top-10 picks every year. 

Beat the TSX

Nice post by Dale Roberts on going defensive with your portfolio, to play offense over time.

Using defensive sector ETFs for the Canadian retirement portfolio.

Impressive dividend income update from Dividend Hawk including many stocks that simply continue to pay bills month after month and quarter after quarter for him…

“This net passive income of €1,066.42 means that I received a reasonable €38.09 every day or €1.57 per every hour during February, no matter what I did. After two months, these numbers are €43.34 per day and €1.81 per hour.”

Nice FIRE-life update by Chrissy at Eat, Sleep, Breathe FI.

Seems smart to be moving non-reg. assets to the TFSA, over time, if/when you don’t need that income for living expenses of course. I see many retirees doing the same thing. It’s all about smoothing out taxation. 

“Transferring from our non-registered accounts to our TFSAs also helps to decrease our tax liabilities in the future. Since we’re currently in a low tax bracket, we’ll pay less tax on our capital gains now than if we wait until later.

When our RRIF minimums get larger and we start receiving CPP and OAS, it’ll be much harder to minimize taxes. So, we’re taking full advantage of the next 15–20 years to shift our money around tax-efficiently. (Yet another benefit of FIRE! 🔥)”

I’m a fan of Stocktrades.ca and we share similar (although slightly different) investing approaches – which is great IMO. We were on the same wavelength when researching this subject recently: they looked at the average net worth of Canadians by age category. How might you stack up at your age or in your region?

I liked this hedged vs. unhedged ETF explanation if you need to decide on this from Jon Chevreau’s site. 

Related to debt management, Another Loonie exclaimed his investment loans are now costing him $500 each month. Is there a solution?

Interesting site from a reader of mine…around halfway down the article you can toggle the sex and age prompts to see how short, or hpw long, your candle is per se – in theory of course. 

Years You Have Left to Live, Probably | FlowingData

Save, Invest, Prosper!

If curious, check my Deals page – partnerships and discounts to help you make the most out of your money.

Check out my partnerships with:

• Dividend Stocks Rock
• 5i Research
• StockTrades.ca
• LegalWills
• Borrowell 
• and more!

Have a great weekend!

Mark

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.