Weekend Reading – Last minute RRSP season reminders, U.S. dividend kings, best robo-advisors 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.
I was travelling and on vacation in Belize over the last week + so this edition is coming out a little later than expected!
RRSP season reminders
While many articles will continue to tout that “RRSPs are a tax grab” I certainly don’t feel that way.
Here are some reminders why the RRSP is an excellent account to invest in this tax year and beyond!
In only a few instances in your asset accumulation years, such as earning a lower income for prolonged years, could one legitimately argue “RRSPs don’t matter” to them.
Stock market calamity
A few readers have emailed me and commented on Twitter about the recent stock market calamity. Meaning, what to do, their portfolios are down significant percentages, should they cash out some stocks now, etc.
My take: this is normal.
In fact, the market is almost identical to early October 2019 levels. I will prove it below. So, essentially, if you weren’t thinking the sky was totally falling in October 2019 then you shouldn’t believe that now.
Regardless of what the market is or isn’t doing, you really can’t control it anyhow if you want to invest in it.
All you can do is to stay invested based on your asset allocation plan.
If you are thinking of selling some of your assets, namely stocks, fine, but a reminder that your equity risk tolerance is not as high as you think it is and you should be invested in more cash or bonds or fixed income going-forward. You are welcome to change that approach now if you are significantly worried at night.
For our plan in the coming years, here is how much cash we intend to have (and how much cash you should consider keeping) including riding out some challenging times like these.
In summary, this is what I think of the recent market correction to date in terms of how I invest:
What are your reflections of the last few weeks? Worried? Is there more stock market calamity to come?
Weekend Reads
I hope to be back to my regular blogging schedule in the coming days. As I gather more content for my next post, I hope you enjoy this latest Weekend Reading edition. 🙂
Oh yes, do travel to Belize if you have the chance! So much to see and do and enjoy including the lovely morning views from any villa by the sea near the reef!
Rob from Passive Canadian Income has some last minute thoughts on the upcoming RRSP March 2 deadline, including what he did to borrow money for his RRSP purchases. For the most part, I’m not a huge fan of borrowing money to fund your RRSP investments since 1) interest on loans to invest in an RRSP are not tax deductible and 2) I believe if you have other debt (i.e., mortgage, car payments, other) that should killed or well-managed first. That said, Rob seems to be in a smart financial mindset where he diligently plans ahead.
Like Rob already knows, just remember to make the most of the RRSP account you need to manage the RRSP-generated refund very wisely.
Tom from Dividends Diversify shared the impressive dividend history of this U.S. dividend king I’ve owned for over a decade now.
The Money Geek believes you can be a financial slacker and still succeed, to a point.
MoneySense highlighted the best robo-advisors in Canada.
Rob Carrick provides some sensible advice for anyone wanting to achieve financial independence and retire earlier – stock up on stocks and stay invested in them. I’m with you Rob.
Dale Roberts rightly complained that Deferred Sales Charges (DSCs) on some mutual funds are not going away fast enough.
I fully agree. I wrote about trailer fees going away myself albeit kicking and screaming. Please don’t invest in these products!
Giveaways and Deals!
Don’t forget as part of my Weekend Reading you can enter to win FREE TurboTax software to help you with your tax needs.
Even if you don’t win the free software codes and you want to get started on your taxes now, don’t forget just by being a fan of this site you can take advantage of my 15% discount on TurboTax Canada software until April 30, 2020. Awesome right?
RRSP season investing with low-cost ETFs
Already made your RRSP contributions? Great!
Learn about the best low-cost ETFs to invest in inside your RRSP – find them and own them here.
Have a great weekend. 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'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.
Something to consider.
http://www.alphaim.net/power_newsletter.html
Borrowing to invest (leveraging) to contribute to RRSP is not a terrible idea. Agree with you Mark that it all depends on how quickly you can pay loan back but even more important is income security. Don’t leverage if there is a chance you could lose your job. I was in Calgary in the mid 80’s when people were selling their mortgages back to bank next to nothing just to get out of them.
If my HELOC is 4.5% and my house value increases by 2%, cost to borrow is actually 2.5%. My house has a ROI of 4% average over 25 years (Calgary). Yes I know, housing is not an investment and it can go up or down but I consider the equity in my house an asset that can be carefully leveraged.
Might be better to borrow to invest in TFSA or non registered account. That 30%+ tax refund is mighty attractive until you consider what your marginal tax would be at withdraw. I contributed at 30.5% but withdraw is 25%. If it’s not lower than contribution it might just be a wash. I like that you said kill debt or at least well managed. You can manage debt, especially in a low interest rate environment.
Glad you had an awesome holiday.
Ya, I mean, if you can’t make regular RRSP contributions I don’t like the loan idea personally. Just me.
Once I have no mortgage, and if I am still working full-time, then I might do some leveraged investing. Until then I probably won’t do much but never say never.
I think if you’re going to borrow to invest, do it for a non-reg. account so you can have the interest tax deductible.
Holiday was great Gruff!!
I am interested in what others think a good bottom-ish level would be to jump back in?
Because we don’t have much control over my husband’s DC pension plan, I moved it all to the short term income fund part a few months back. The choices are just a Canadian equity fund, a foreign equity fund, bond fund, short-term income fund, cash, in any percentage you pick.
In another year or so we can move it out from their control and have picks that are dividend earners, which I prefer, but he has to retire first!
Getting out of the market is easy, but getting back in where you feel comfortable is harder.
I think ultimately as long as you have that DC pension to provide all necessities of life/expenses, you should be fine. I mean, who knows how long this downturn might last? Could be weeks or months or years.
I know for sure, we’re not going to change anything and in fact, we hope to invest more next month once RRSP contributions go through for 2019 tax year in a few days. Not sure what to buy yet but was thinking about ITOT ETF for my USD $$ RRSP.
As long as you are investing within your risk tolerance (i.e., have some cash for emergencies, GICs, bonds, etc.) then things will be fine long-term. Just my take of course.
Happy investing!
Mark
Mark, I am glad that you enjoyed your vacation.
Myself, I absolutely hated Belize, I would never go there again unless I was paid a huge amount for doing so. For so many reasons. It is quite the shock to go there after being in Guatemala for a month, a country of very hard working, skinny people, who have terrific manners and self-respect, which extends to visitors with great kindness.
If you are actually thinking about an investment there, I would advise against it, but in any case learn a lot more about the country. It is a major drug smuggling route and there is a lot, an awful lot, of shady stuff going on. Read about John McAfee if you don’t know that story. On the other hand, the British influence is a great thing. Many ex-British army living there, who do run things orderly. But so few compared to the rest of the population.
I think Belize has MAJOR growth opportunities Barbara. Could be just me. So much growth could occur there in the coming years. I could be wrong of course.
There are tons of Canadian, U.S. and British retirees there. We talked to a few of them and sure, there are issues, but overall they are very happy with their choice. It will be interesting to see what we do in the coming years when it comes to Belize, Costa Rica or other countries to travel and/or invest in. We are definitely thinking about it and have for many years now.
What’s life without a few risks to take? 🙂
You can travel there, and even retire there, without making a huge investment. Renting allows you to get out when the getting out is necessary. People have been visiting Belize (that I know of) since the 1980s. For awhile it was a growing market, but that changed substantially this century. If you go again, make sure to do the ATM cave tour (use a reputable agency, I used Pacz, ex-British military), it is amazing.
I am happy to not be confined to one place. Right now sitting in a cute 2 bedroom house, listening to the birds sing, about 30 degrees, slight breeze, no humidity. A small city, surrounded by beautiful countryside. That is what I like.
Fair point. I wouldn’t buy a long-term property down there unless I was willing to live there for at least 3+ months. We don’t intend to do that.
I just don’t mean Belize for that reason, I mean anywhere else as well.
A consideration is owning some fractional investment (for a potential rental pool) from the property owner whereby if we didn’t go then it could be rented out. That would be a very small investment for us albeit a risk for sure.
But then again there is risk with cash sitting around and long-term bond risk and real estate risks in general here in Canada.
Ah well. Next time we go we will do more on mainland and ATV cave tour. I would love that. We did a bunch of snorkeling this time and a few beach days which is what we wanted.
I think they key is what you have nailed: find what you like (and enjoy it). Life is short for all of us. Some risks are good. Just not too many.
🙂
Mark
Mark, thanks for being yet another voice of reason during these rocky markets. We’re down about 2% from last month. No biggie. It just puts us back to where we were in November. Even so—a bigger correction wouldn’t bother us anyway. We’re in it for the long haul!
Good to hear from you Chrissy. You’re very busy on the podcasting front!
Yes, big deal. Pullback to early October 2019 based on the chart I posted and unless it goes down to 2010 levels, probably not any big reason to panic. Just trying to save some money to buy some more assets inside my RRSP. TFSA full – no room until 2021!
You’re in a good place if “a bigger correction” wouldn’t bother you. Great to hear!
You really put things in perspective when you highlighted that the current 10% market drop means that we are back to october 2019 level. Nothing to worry about indeed.
I benefitted from the current market crisis this week to sell my cibc and adding more td, ry, telus and cnr. Companies that I think are better.
Thanks for that – perspective is always good for decision-making. Helps the rational side of the mind 🙂
I’m looking at more U.S. assets myself Rn but I think CNR is nicely beaten up and could go even lower. TD just provided a juicy dividend raise. Telus should raise dividends again later this year. RY is just simply solid, a company I would not want to sell personally.
All the best!
Mark
I should mention that Chrissy was totally on the same page and you replied to her so I won’t take her credit 🙂
As I keep saying, invest for your needs and these market fluctuations don’t matter. The RESPs for my 19yo and 17yo didn’t drop at all – because they’re out of equities now. 14-yo’s down 1%. 10-yo’s down 3% but she has 8 years to recover, so not worried at all. I picked the wrong time to switch web hosts or my thoughts would be online on my site already.
Belize sounds amazing. Welcome back to winter.
Ya, Belize was fun.
I use SiteGround for my host Kari. They are great 🙂
Smart that the older your kids are, the more fixed income for their RESPs you have!
Mark,
I am a new subscriber and I find it refreshing to find a Canadian site where we can discuss investments.
Just a few thoughts that I have reflected on after the carnage of last week.
I think that we’ve seen the highs of 2020 for the following reasons.
1. The market was looking for an excuse to sell off. The Coronavirus was the trigger, although that has been news for some time. But the threat of recession has spooked the market. As we all know, the market hates uncertainty. This has been one of the longest bull markets in history. The averages have been stumbling of late (especially the NY A/D line) so the signs were there to suggest a pullback.
2. A great majority of fund traders have never seen a real sell off. Last week they panicked. The trading volume was enormous. It was bad enough to shut down the TSX last Thursday.
3. Look for a double top, as clients who receive their monthly mutual funds statements will want to sell. This will put further downward pressure. ETF’s whose holdings will also decline, will suffer. More selling.
4. The “buy the dip” crowd was crushed last week. For over 10 years the reaction to these episodes of weakness have triggered buying. You get to a point where there is nobody left to buy – the memories of the collapse of 2008 are still fresh in many minds. Many never returned to the market.
5. The Fed has little ammo left to fight a recession, if it actually occurs. Some are suggesting negative interest rates that are now building throughout the world. How will this affect markets?
6. Can you afford to keep your divvie stocks if they collapse 20- 50 %?? It took 10 years for the indexes to return to the pre-crash levels of 2008.
I have been trading since 1985. I have seen it all. I bot the dip in 1987 and benefitted. But, as they say, this time is different.
I could be totally wrong about the market. Nobody knows where it will settle. Which analyst was able to predict negative interest rates? Fortunately, I have been totally flat since mid January when the indexes pulled back. I am on the sidelines for now.
GLTA!!
Good to hear from you Wayne and thanks for being a subscriber!
You raise a number of great points, including newer investors not seeing a 10% drop in a few weeks. It will be interesting to see what they do next 🙂
In terms of “this time is different” do you not see any outcome other than stocks rising again long term?
Cheers 🙂
Mark
Hey Mark, my wife and I were in Belize (Placencia) in January. Loved the snorkeling. The people are so friendly and with the language of the country being english, it’s fun to talk with the locals. It was great living the laid-back and simple life.
As for the nutty week, I agree, just keep it “laid-back and simple”. It may go back up almost as quickly as it fell…if not as quickly, it will go back up…and keep collecting those dividends. Take care.
Great stuff Paul. Sounds like you enjoyed it!?
Belize seems to be on the rise, and will be, for many years to come as a travel destination for many of the factors you mention. I see an economic boom in the making there.
We loved the snorkeling on the reef, phenomenal and swam with sharks. Insane. Never thought I would do that.
Yes, I plan on keep collecting those dividends and buying more low-cost ETFs next month when more cash comes into the account. Rinse and repeat.
Write back when you can on the site. Would like to hear more about Belize.
Cheers,
Mark
Welcome back Mark.
Looks like you had a great time on vacation. Part of our private investment is actually a resort in Belize. I have yet to go, but I’d love to check it out sometime.
Thanks for including me in the round up. I know your not a fan but it will be paid off asap.
cheers Mark
Rob, we should talk – curious about your “private investment” 🙂
Like I wrote Rob, I have FULL confidence in your ability to pay off the RRSP loan. Robb Engen I recall did something similar a few years ago. The key so much is not about borrowing the money, it’s about the ability to pay it back quickly. Folks that cannot pay back debt quickly now, RRSP loan or otherwise, have little chance in paying the RRSP loan back right away. You’re a bit of an exception I believe!
Have a great weekend my friend,
Mark
Thanks Mark for the share. I’ll have to have Ken Kivenko on the site with regularity.
Ontarians should be careful of those DSC funds moving forward, they may be a target. Incredible that Ontario kept them. That must have been some steak and ‘whine’ they fed Doug Ford and friends. Intense lobbying says my friend who was at the table.
Dale
I would think so…re: lobbying. I agree with your DSC take and Ken is one of the guys fighting the good fight.
Mark
Thanks for the mention, Mark! Hope you had a great vacation! Tom
I did thanks Tom! Back to work tomorrow!