Weekend Reading – Market noise, dividend stocks, new TFSA limits and more #moneystuff
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the personal finance and investing blogosphere.
This picture was taken this morning. Ah, here comes winter – whether we want this weather or not!
Earlier this week I took some Cashflow Cookbook recipes to heart to see how some financially healthy eating might improve our portfolio. I was pleasantly surprised when I baked the results: $250,000 more over the next 20 years. That’s a LOT of money/savings.
You still have a chance to win a copy of this book in my giveaway here.
I also wrote about how insane it is to think you need $5 million to retire. I mean, I suppose “it depends” on what you want to spend, your health care situation, other; but for 99.999999% of us you’ll never need that much. I suspect even half that amount in your 50s and 60s and you’re living extremely well. You can check out my Retirement page where I’ve done some calculations for you. There are also retirement essays and stories on that page from successful retirees – so you can compare notes with your plan. Check it out!
Enjoy these articles and see you around the site!
Mark
Tawcan wondered what happens if FIRE (Financial Independence Retire Early) doesn’t work out for him? I think he’ll be just fine! Interesting thought but I know for us, we’re not consumed by this mania amongst some. To be honest, if we really, really wanted to “retire” in our 40s we probably could have – with many sacrifices though. We weren’t (and still are not) ready to make huge financial cutbacks for any FIRE stuff and this post highlighted that.
This former economics professor has gravitated to owning REITs (Real Estate Investment Trusts) and dividend paying stocks to fund his retirement. From the article, the investor: “I believe it is best to pick well-managed companies with low debt, good earnings, solid dividends and upward trends in stock prices. But as one approaches retirement, it would be better to shift more into higher-yielding dividend companies.”
Apparently…67% of workers making over $100,000 per year see themselves quitting their current job – in the next six months. Why? “With an incredibly strong employment market, more professionals than ever are on the lookout for a better future.”
Tom Bradley believes the latest market noise is not normal.
Here are some massive energy Canadian dividend stocks. I own a few of those but not all of them and I don’t intend to own more in the short-term.
We are not producing enough fruits and vegetables to fuel our growing global population. “If we want to move forward to feed the future … and we want to be healthier and we don’t want to increase the amount of land that agriculture uses, we both have to shift to a Harvard Healthy Eating Plate model and we have to shift our protein consumption away from livestock-based to plant-based…”
John Heinzl says the TFSA limit should be $6,000 for 2019.
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Happy investing!
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.
I can’t read the Globe article about REITs and dividend investing. It is available to subscribers only. Perhaps you could give us the Cole’s Notes version?
Ugh, sigh, I have a habit of doing that. Sorry.
Some of his holdings?
“One of my industrial REITs is Summit Industrial Income REIT; one of my apartment REITs is InterRent REIT; and I own the BMO S&P/TSX Equal Weight Banks Index ETF as one of three exchange-traded funds. I also have a small holding in Allied Properties REIT.”
Advice?
“I recommend investors stay with a bank-connected brokerage firm, where one can obtain good advice and read regular research reports. I also read Globe and Mail stock reports, available from its Watchlist feature.
I believe it is best to pick well-managed companies with low debt, good earnings, solid dividends and upward trends in stock prices. But as one approaches retirement, it would be better to shift more into higher-yielding dividend companies.”
There you go Beth!
Thank you Mark. I guess I have already been doing that and I like to think I am getting closer to retirement. The only I don’t have is residential REITs. I would love to hold Killam Apartment REIT and others but they just seem too expensive.
I think we’re going to see prices coming down Beth so you might be in luck 🙂 Killam is a good REIT that has a foothold in the East. I expect it to continue to provide nice 4% yield for decades to come. I hope to get a few hundred shares myself in the coming year if the price goes below $14 or so.
Yes, based here in Halifax, with holdings in Atlantic Can., Ontario and Alberta. Robert Richardson started it but there is now a different Pres. I knew 2 people a little that were connected to it.
They seem to have very focused goal of growing quality property scale, profits/earnings, strict debt limits and raising dividends. All good things to me and a preferable way to be a local landlord but I don’t own any- yet.
Same, not a shareholder of KMP.UN yet.
Here is the same article on a different site:
https://www.barchart.com/story/news/855570/how-this-former-economics-professor-is-using-reits-and-dividend-stocks-to-beat-the-market
Thanks May. I’ll try to remember not to link to my subscription only G&M articles!
Hello Mark !
great picture , I love the snow but i like to keep it on the mountains 🙂 here in Vancouver we’ve been lucky for few years when it comes to snow i guess.
I have a question for you guys and it’s regarding the TFSA , I’ve decided in Jan to finally open one account and i have a lot of contribution room to play with , if i sold one of my properties I’m thinking of maximizing my tfsa and the wife and the rest throw it an unregistered account , but if i decided to keep the property then i’m thinking of contributing say 300-400$ a month to the tfsa and add to it whatever i get from rrsp contribution in tax returns .
i honestly don’t know if i can or should keep those contributions in cash in tfsa then when i have enough money invest it ? or maybe buy some TD e-series and when i have a decent amount go ahead and change them into an etf or a dividend stock ?
one more question when it comes to individual stocks is there a rule or a method of how many shares you should buy like for example enough to at least drip one share per stock ? because with etf it’s easier and e-series are even more easier .
so yeah if you guys can share your expertise i would really appreciate it 🙂
Hey Gus
haha, snow is a reality here too, but hopefully not for a while yet!
Probably is a very good plan to get going on your TFSA’s. Big tax advantages over time.
You’ve pretty much nailed it on starting with something like e-series. Eliminates trade costs on regular contributions, get invested faster. That’s what I’d look at. When you have more assets in the acct / bigger lump sum contributions you can look at individual dividend stocks or ETF. Then I would aim for min amount to drip 1 share+ but importantly plan to keep trade costs lower ie $9.95 trade on minimum $2K buy = 1/2% overall trade cost or buy larger volume to lower cost more. Weigh this against MER on e-series plus convenience, overall diversification plans for overall portfolio. Re 9.95/trade the least I’ll ever buy is 3-4K.
I’m sure others on here will weigh in with their ideas.
G/L
Hello Rbull !!
yeah I love the ease on those e-series specially the fact that you can invest till the last penny unlike etfs or maybe regular stocks where you have to buy them in whole shares.
Thanks for the math 🙂 as to roughly how much money to accumulate before switching from e-series to etf/ stock .
the one and only down side of e-series is the distributions on the canadian and us stocks for some reason you have to wait till the end of the year till you see some cash rolling 🙂
but yeah I’m kind of excited about opening the tfsa account , it’s kind of hard to predict what kind of income you gonna have in retirement when you have 18+ years to go .
Thanks for the help guys .
Hey Gus,
You’re welcome. Others may have a different number but to me that’s where it starts making more sense.
Seems to me you don’t need much help making money and getting ready for retirement with your real estate example.
Agree with purrfect below mawer is another great one to look at. My broker RBCDI doesn’t sell it though.
You’re right you can’t predict income 18 yrs away. What you can predict safely is the earlier you start the better and you can never have too much!
Thanks Rbull,
the real estate i guess was a pure luck because i bought them and i held them and they appreaciated 🙂 ( just like stocks i guess )
my dad always told me that paying rent is like throwing cash in the garbage although i learned later that you can do even better with investing in stocks but i have no regrets at least i invested in something .
Sounds like some good things rubbed off from your dad.
Continued G/L Gus.
Love the mountains Gus!
First of all….great move on the TFSA = tax free savings!
I think regardless if you sell the property, try and contribute to it if you can.
Here is my 101 post about the TFSA:
https://www.myownadvisor.ca/tax-free-investing-tfsas-101/
What is your TFSA for? Another post:
https://www.myownadvisor.ca/great-things-you-can-do-with-your-tfsa-in-2018/
I think when it comes to holding what in your TFSA, think of your goals. Then get the investments or products to match those goals. For example, my goal is to deliver long-term tax free investment income. So I put CDN dividend paying stocks in that account. Your mileage might vary. Maybe your TFSA is just a sizeable emergency fund…I dunno!
For the record, I’m a big fan of TD e-series because of 1) low-costs, 2) diversification with those funds and 3) simplicity. You could do far worse!!!
As for the rule or method….my goal is to DRIP every stock (and ETF) I own and let compounding work for me. My wife and I are fortunate to have ~ 25 stocks and all our ETFs DRIPping at least one share every month or quarter when dividends are paid. That means, every month or quarter, more dividends buy more shares or ETFs units and more shares and ETF units pay out more dividends…rinse and repeat….you get the idea.
I think just starting out, TD e-series products are a very good choice. You can always change your approach and go with lower cost ETFs later on once your strategy is more defined.
Good luck!
Thanks Mark !
yeah like i told RBull those e-series are fantastic and so easy to invest in , as for TFSA goal for me as well for a long term investment I’ve got nothing for the short term unless i get a good deal on a property in the caribbean ( that;s one of my biggest dreams 😉
Thank you guys so much for the help .
Gus, you’ve done well, nothing to thank here 🙂 I think TD e-series are fine products overall and for <50 basis paints (i.e., 0.50% MERs) you’ve got great diversification via 3-4 funds. You can always “graduate” to lower cost ETFs (if you really want) like VCN, VXC, etc. later on.
https://www.tdcanadatrust.com/products-services/investing/mutual-funds/mer-diff.jsp
VCN & VXC
https://www.vanguardcanada.ca/individual/indv/en/product.html
Good luck with the Caribbean dream – sounds lovely!
Also, here is when I started switching myself:
https://www.myownadvisor.ca/when-to-transition-to-owning-etfs-and-stocks/
I recall I made some huge changes to my portfolio in 2010, hard to believe it was 8 years ago; around when I started the blog.
https://www.myownadvisor.ca/six-years-ago-switch-mutual-funds-etfs/
I only buy stocks once a year in the TFSAs early into the new year so two purchases. Everything in my TFSA is DRIPped and orphan cash goes into e-series (DJIA or Euro) when it gets above $100. DW’s is not DRIPped (always meant to get that done but never did) and the cash goes into e-series (again DJIA or Euro) pretty well monthly. I think this year I might redeem some of the e-series to add to the TFSA contribution to make larger buys in the individual stocks. Will see where the prices are closer in. Again, depending on the purpose of the TFSA (long term v. short term), one can adjust as necessary but I’m a big fan of keeping costs reasonable.
Same, we’ll see what January 2019 markets are at. I hope they will be lower personally!
Our TFSAs & my LIF(equity side) are on drips. Joint unregistered and my RRSP is not. Both are used to fund lifestyle, and also to feed TFSA.
I think this year I will be making purchases sometime soon in my RRSP for both our TFSA contributions. Will have to pass through unregistered first and then on to TFSA as they won’t allow registered to registered in kind.
I think we are getting our wish….prices are coming down… Compared to last 8-10 years, things remain cheap in Canada vs. U.S. Every year is a year to make purchases for me!
Yes, they are more reasonable and getting cheaper especially in some sectors.
I know I’m going to receive some push back here but I’d suggest Mawer balanced fund. It has a typical 60/40 asset allocation with a good track record and a mer under 1%. I recommend this to anyone starting out who may be unsure on how to proceed with investing and not certain of their risk tolerance. Scotia itrade offers MAW104 with no buy /sell costs.
Nothing wrong with Mawer products, especially the balanced fund or global balanced fund
https://www.mawer.com/funds/explore-funds/balanced-fund/
https://www.mawer.com/funds/explore-funds/global-balanced-fund/
Be boring…make some $$$ 🙂
Looks like you got more than a little dusting! Jumped up to +15 here today but overall has been much cooler last few weeks. Our snow time will be here soon enough!
Wouldn’t dream of moving cities to earn 10K more back when I was working. Wouldn’t bother even changing companies for that other than a different/better job.
Tawcan has some incredibly low expenses on some things car fuel, electricity, gas, water, home maintenance! He’ll be way more than fine. Well on his way financially, frugal, young, good attitude and with an occupation in demand.
Great post by Tom Bradley.
Yes, 6K TFSA would be my read as well. We’ll soon know.
Tawcan keeps his monthly operational expenses very low. I’m amazed.
“Core expenses per month estimate
House property taxes $350
House maintenance $50
House insurance $100
Utilities $100 – water, electricity, and natural gas
Internet & cellphones $100
Groceries $800 – two growing kids
Healthcare $150 – based on current BC MSP premium.
Household supplies $100
Clothing $100 – mostly for the growing kids. Mrs. T and I buy new clothes very rarely.
Car insurance for 1 vehicle $120
Gas for 1 vehicle $50
Car maintenance $50
Buffer $200
Total: $2,270.”
That’s incredible.
By comparison per month – us in Ottawa (2 adults, 2 cats; no kids)!
House property taxes $400.
House maintenance $500 – not $50 – on average for the past 8 years (new roof, etc.).
House insurance $200 (not $100 like Tawcan).
Utilities $300 (septic maintenance, electricity, and natural gas) – on average, past 8 years.
Internet & cellphones $200 (my cellphone is not paid for at work).
Groceries $500-$750 (no kids).
Healthcare – largely nil since covered by work, we are lucky.
Household supplies $100 – furnace filters, cleaning supplies.
Clothing $100-$200; largely for work.
Car insurance for 2 vehicles $150.
Gas for 2 vehicles $150.
Car maintenance for 2 vehicles $150.
Buffer $200-$400.
Total ~ $4k per month.
That $4k does not yet include our mortgage, saving for condo (2019); TFSA contributions, RRSP contributions, savings for travel, etc. which is close to another $5k per month.
Very frugal, lucky he has no mortgage or rent?, extremely low house maintenance bills, and a good saver!
It’s unbelievable how little Tawcan managed to spend with two young kids. But even for him, I don’t think 1.2M will be enough to retire. Unfortunately my estimate is double of his when kids are still in the house. I can see some cost will go lower after retirement e.g. we don’t commute any more so we don’t spend so much gas and need only one car. But other expense will go higher, e.g. we don’t have extended health insurance any more. No matter how I look at it, I don’t think we can survive on $4K a month, not with the kids.
One risk factor is when you retire after 50, depending on your profession, it might be not very likely you can still find a job with similar pay after a few years out of job.
I think like everything “it depends” May. $1.2 M is pile of money when you factor in CPP x2 and OAS x 2 eventually. Most Canadians would probably give up a small toe for that investment portfolio 🙂
I’m honest shocked at what his family of 4 live off of. I’m at least $1,000 more per month and I have no kids. I also have a mortgage. He’s done very well.
Our spending is expected to go down by $500 per month once we move into the condo in summer 2019. That will be good.
You raise a good point with retirement re: it might be not very likely you can still find a job with similar pay after a few years out of work. True. This is why I’m thinking of becoming a fee-only financial planner at some point. I can likely work at long as I want on my own terms and help folks in the process. We’ll see…I’m thinking about starting my courses this fall.
Agree once both begin to collect CPP & OAS, 1.2M is a pile of money and assuming that’s in today’s money, it would be enough for two of us. My challenge is how to get there as I want to delay CPP and maybe OAS too. According to my current plan, we will also retire while kids still in the house. So we would need more assets than the normal retirees.
I totally see that, re: inflationary factors on $1.2 M (or any money for that matter) and kids. Have you figured out what your desired income needs might be May? Ballpark?
Not only inflationary factors, but also have to live without CPP/OAS for quite a number of years.
I think I can comfortably call ourselves financially independent with 2.5M invested assets if we retire before 60. But I think can manage with 2M too, just have to be more careful with expenses. Who knows what will happen going forward. So I am trying to be more flexible. I am all prepared if I have to take a couple of home stay students to get a little bit extra income.
Most 60-somethings, that I know of (a couple of folks) that have $2-$2.5 M portfolios in their 60s now are living VERY well. New cars, $25K+ vacations every year, etc. Hard to say what CPP or OAS will or won’t be in the future.
Have you considering deferring until age 65 or 70 to max out benefits? Or is that too late when you need the income?
Our kids won’t be out of house yet when we are 60. I guess that’s quite rare? If we don’t have kids, I will not buy our current house and call ourselves FI right now right here. But kids are priceless so no regrets here.
I absolutely want to defer CPP until 70 if I don’t need that income. OAS not quite sure. OAS will have more uncertainty pending policy change I guess. The benefits of deferring OAS is also less.
If I really achieve to retire with $2.5M, I guess I don’t need to worry about needing income from CPP/OAS before 70.
Having kids (or not) is largely the biggest decision and responsibility any person will ever make. No regrets are good!
Yeah, having ~ $2.5 M or so will absolutely be plenty at age 70. I have no doubts about that.
May, based on all you’ve written now and previously it seems you’ve given your goals considerable thought and have a plan B & C for flexibility if needed. That’s good, and being flexible on lifestyle and creative on generating more income give additional assurance you’ll do well. You could spend more heavily in the gogo years and rely more on govt pensions later on.
Without pension, kids until later, nice lifestyle desired your numbers look to me like reasonable targets to aim for.
It appears like you’re well on your way and obviously have good employment income, spending and savings habits to have achieved this so far.
I also prefer to delay CPP later if possible but not likely OAS, since benefit is less and future of it???? Hard to say on either for sure at this point.
Mark, sounds like a good fit for you with the fee planner and helping others. I like the sounds of it too but don’t have the drive to go for it!
Ha, well, we’ll see, re: CFP. Definitely thinking about at least a starter course this winter.
Just had a look at that. The path is a little different than when I completed part 1 of the 4 part course 28 years ago.
No time like the present to get started and see how you like it.
I should have completed mine but I had just gotten a big promotion in crazy job (borderline over my head LOL), was recently married, was only for self interest and the study time for me was relentless. Not an academic. Lots of excuses. LOL
Ya, likely going to register and follow this one.
http://www.cifp.ca/Desktop/English/General/Home.asp
Will start course 1 in a few weeks, probably around early December.
@RBull. You are right on the point. The biggest question is indeed how long we can have our current employment income. With my DH was forced to change job two times in past three years, there is lots of uncertainty there.
Always hope for the best, but prepared for the worst.
@May,
I get it and can relate. It changed our life and retirement significantly by losing our primary earning power, in mid 40’s.
It was a shock but we were flexible, financially solid and weathered it fine. Make hay now as you are.
Good luck to you and your family.
@Mark, that’s what I was looking at.
G/L
I think you’re right on all above.
I had few options when I lost my job even at 45 and had to reinvent myself as an entrepreneur.
Kudos to you, RBull. It’s not easy to begin something new at 45 but obviously you succeeded.
Proved again how important to have the ability to continue to learn new things in one’s entire life.
Thanks May.
I was lucky things turned out ok – not great but good enough to get by, and fortunately my wife was always supportive of whatever I chose to do.
I agree change is the only constant and survival even of a species is all about adapting. Ironically a few years earlier in my career I had won an award for my ability to change/adapt and succeed- “the chameleon award”.
I think often in many things the only thing we can control is our attitude and the way we react to them.
Yes, incredible indeed. We’re closer to yours than Tawcan.