Weekend Reading – Money in your sleep, #FIWOOT, how much real estate and more!
Welcome to my latest Weekend Reading edition that shares some of my favourite articles from the week that was across the personal finance and investing blogosphere.
In case you missed last week’s edition, about juicy dividends flowing into my account, why you should really avoid mutual fund salespeople, learning how to think, the costs of bad DIY planning and more, check that out here!
Enjoy these articles including some of my own and my reader question of the week below!
Take good care,
It was a real pleasure to be on The MapleMoney Show recently with Tom Drake. We discussed the lack of transparency in the FIRE movement, our support to any aspiring entrepreneurs that want to leave the 9-5 race as part of any (FIWOOT) Financial Independence, Work On Own Terms movement, and I discussed a few of my draw down plans/ideas for my portfolio – including why I will likely remain 100% equities for the foreseeable future.
Listen about our Thoughts on FIRE and let me know what comments you have!
While I’m passionate about dividend investing, it’s probably not for everyone. Far from it. Read on if dividend investing is really right for you.
Labour to Leisure is earning more money in his sleep.
My favourite kind of income stream – money in my sleep!!
In fact, I report ours every month and it’s great to know we earn roughly $2.47 per hour of every hour of every day even in my sleep.
Jon Chevreau cited work by esteemed investor and financial guru in this MoneySense post: how much real estate should you have in a balanced portfolio?
His post reminded me of my older article, where I disagreed with David Swensen on asset allocation. I always thought David’s love of REITs was too high at 20%. Over time, he reduced that real estate asset allocation to about 15% I recall, and increased emerging markets.
My target allocation for REITs is about 10% of my invested portfolio given I own a home.
Dividend Growth Investing & Retirement re-issued this post to readers about the number one reason to be a dividend growth investor – it’s a strategy that can help you stick with your plan long-term.
“The #1 reason to be a dividend growth investor is that you can stick with the strategy long-term. That way you are able to take advantage of long-term market returns. Dividend growth investing is better aligned with investor behaviors than other strategies as it is a common-sense strategy that provides natural coping mechanisms for the tough years.”
Congrats to Sam and his dividend income stream – snowballing away indeed!
Congrats to Matthew Freeman with new dividend income highs.
Don’t forget about my dedicated Helpful Sites page that includes FREE retirement and withdraw calculators on demand for your use!
There are also dozens of Retirement stories and essays you can learn from here.
More Weekend Reading…
Reverse the Crush provided tips to dig out of any financial hole. These are key IMO:
- Review your expenses
- Review your debt
- Review your income.
In my line of work, what you don’t measure you can’t manage.
I recognize savings accounts aren’t always sexy – but we continue to keep an emergency fund. $hit happens.
On Cashflows & Portfolios we highlighted the best savings accounts to own in Canada.
Rob Carrick looked at when parents move back in with their kids. We love our family (who reads this blog) but we hope this doesn’t happen!
Invest in high-cost mutual fund fees at your peril. With thanks, to Dale Roberts from Cut The Crap Investing.
ModernAdvisor provided a good market summary for April including things to watch for in the broader Canadian economy.
Weekend Reading reader question of the week (adapted slightly for the site):
I continue to try and answer many reader questions every week including these editions…
In a previous edition, I answered a reader question about support, after this reader unfortunately lost tens of thousands of dollars despite the recent market run-up.
I answered this reader question about covered call ETFs and split corporation investments.
Here is a new one…
You have kindly answered a question for me in the past and I am trying my luck to see if you might have a moment to answer another question. When one has invested the maximum in both a TFSA and RRSP account, what is the next best option in terms of minimizing taxes for an investment? From what I can see, it might be individual stocks that can be DRIP-ped.
I would be grateful for any pointers, including any tax considerations. Thanks so much for your site and all the great work you do on it, it’s an amazing resource.
Jill, it’s great to get these types of emails. Thanks for your readership. I hope you share my site with others!
Well, I have a few posts to check out on that subject:
To answer your question more directly, while Canadian dividend paying stocks are in many cases, eligible for the dividend tax credit, depending on your taxable income they may or may not be the most efficient form of taxation.
The good news is, assuming you have no other income to report, dividend income is VERY tax efficient – more so than capital gains around about $50,000.
You pay little to zero tax!
Now, before you rush out to buy Canadian dividend paying stocks in your taxable account to take advantage of the dividend tax credit, know:
- It would be very rare to earn $50,000 per year in dividend income (and have no other income sources of any kind for tax filing reporting e.g., employment income, pension income, withdrawals from RRSP, etc.)
- To generate $50,000 per year, you would likely need a taxable portfolio in today’s value close to $1 million = big bucks. Something to aspire to though! Ha.
- To benefit from “no tax” you have to be in a lower tax bracket. You can see from the table above that the more $$ you make, including dividends, the more you will be taxed although dividends remain tax-friendly.
The punchline is: the dividend tax credit can provide very low effective tax rates for individuals in the lower marginal tax brackets. Otherwise, investing purely for lots of growth and for capital gains are tax efficient.