Weekend Reading – Mortgage help, rock solid REITs, BMO promo codes, hybrid investing and more!
Hey Everyone,
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.
My last edition about financial facelifts gone wild and how to get semi-retirement ready can be found here!
Lots of stuff to share, so let’s get into it!
Interesting REIT ETF here by CI Funds – I found it courtesy of Dale Roberts from Cut the Crap Investing. This ETF is dominated by residential and industrial real estate companies – the latter likely to rise with more online shopping over time. I’m thinking of buying a few industrial REITs for my 2021 TFSA contribution. Thoughts?
From Dale’s site and article:
“Real estate is known as rock solid – these are hard assets. You collect rent. It is not a good time to run away from the sector. Remember why you own those REITs in the first place. You own it for diversification and for the generous dividend payments. REITs are a wonderful diversifier for those stocks and bonds. It’s another layer for the portfolio.”
Neat new, YouTube channel here started by a reader of this site and a CPA. Danish highlights and compares some popular Canadian dividend ETFs below.
No doubt many popular dividend ETFs own pipeline giant Enbridge (ENB), who raised their dividend this past week to $0.835 per share. That should help my dividend income update – a new edition is coming soon!
In the meantime, here was my last report in case you missed it.
My articles this week:
In your 30s, want to build wealth? Look no further than my investor profile with Maria from Handful of Thoughts for ideas this week. She’s building a real estate empire for her financial independence!
While investing is an important part of any financial plan, it’s just one element of it. You need to focus and get a handle on all elements in a financial plan.
Have a great weekend and enjoy the rest of these articles, including my detailed answer to a reader question!
My latest dividend income update post should be ready soon.
Happy Investing,
Mark
Other reads…
Here are 6 ways to build wealth in your 30s from Jon Chevreau at Financial Independence Hub.
Dividend income coupled with low-cost ETF investing continue to be my path to freedom. Back in 2008, this blogger and investor said goodbye to his financial advisor and has now built a 7-figure portfolio because of it. Well done Dividend Earner!! He recently added more TD Bank and Algonquin Power (AQN) to his portfolio.
Proud partners of this site (see Save, Invest, Prosper! below), 5i Research, recommended you try to invest like the Ontario Teachers’ Pension Plan.
Due to the modest amount of private equity, that might be challenging, but hard to argue with the general asset allocation results:
“OTPP has remained one of Canada’s largest institutional investors with an excellent track record for investment performance reporting an average annual return of 9.7% since its inception in 1990.”
Nice analysis of Fortis (FTS) by Dividend Growth Investor.
I’ve owned Fortis for over a decade myself.
Dale Roberts sought to make sense of the markets this week. I continue to enjoy this weekly MoneySense feature.
How nice was this? LowestRates.ca asked me to contribute to their expert panel on how to maximize a mortgage (i.e., lower your payments) in 2021. Read on about what I said based on my own personal situation.
Reader question of the week (adapted just slightly for the site):
Hi Mark,
I have enjoyed reading your blog. You have given me some food for thought as I pursue financial independence.
You have written that your portfolio is a blend of index funds and individual stocks. I think I’m inclined to pursue a similar strategy as well. However, I certainly wanted to consider opposing views to be sure my approach is informed. One investment professional who is opposed to owning individual stocks and contends that dividends undermine total returns is Ben Felix of PWL Capital. His YouTube video, “The irrelevance of dividends”, is a case in point.
Are you familiar with Ben Felix or this line of thought? What influences your decision to own individual stocks in light of this argument.
Thank you!
Outstanding question and I’m going to add this one to my evolving FAQs page.
What influences your decision to own individual stocks (in light of this argument)?
For today’s answer, I’ll provide three (3) key reasons that Ben or yourself may or may not agree with.
For one, I enjoy seeing dividends “flow” into my account without buying or selling shares. Meaning, the companies I own, generally speaking (given dividend cuts can, do and have happened to me) will reward me to own them. Those companies may also increase those dividends over time. While I have incurred a few dividend cuts this year, and potentially more to come (?), I have had more companies in my portfolio increase their dividends this year (25) than cut them, during a pandemic no less.
So, for point one, part of the reason why I’m a dividend investor is I enjoy the psychological thrill of seeing cash come into my account, without doing anything; money I can do anything with. I like the “optionality” of dividends. I don’t have to sell shares nor time the market to generate my cash flow. I don’t incur transaction costs to generate my own dividends by selling shares. In the end though, total returns matters. Always has and does. I will eventually sell some stocks for money I want to spend. Just not now.
Two, in Canada in particular, I don’t see a huge advantage to indexing. Our Canadian market is an oligopoly and like the game Monopoly, there are few players on the board that operate our banking system, our pipelines, our utilities, and our telecommunications and so on. Basically, few players but those players make huge money. I feel it’s easy (somewhat) to pick and choose those companies and hold them for dividends along with capital gains over time. Will this sort of stock-picking by me in Canada fail over time? I have no idea. It could. Yet so far, so good. At the end of the day, this process is helping me meet my goals even though it might not seem perfectly rational to some.
This leads me to point three: the combination of one and two helps me stick to a plan I believe in and consequently, is likely helping my returns. Without excessive trading, without money management fees paid to an advisor or firm, I’ve largely either exceeded or mirrored the returns of my benchmark in Canada: iShares ETF XIU.
In looking at iShares XIU returns recently, over the last 5-years – it has returned about 8.5%.
My Canadian portfolio has returned about 9% based on my selections.
Will that continue? I have no idea. But it should be close. Why? Because I essentially I own the same stocks the XIU fund does as part of its top holdings.
There are likely to be periods where I underperform XIU. I expect that. But by sticking to a long-term plan I believe in, by minimizing trading fees, by taking some advisor or firm or ETF money management fees in Canada totally out of the equation, I figure I’ll do just fine skimming the Canadian index.
In closing, Ben makes some great points in his videos I don’t dispute. He lives this stuff every day. He’s the expert more than me. But we differ a bit on our philosophies. I’m more of the mindset that good decisions are just fine over time because they actually translate to great decisions by staying the course. You don’t need to be rational all the time because you’re human. Investing or saving or debt management is way more mind over math. Understanding how you work/how you behave will make you a better investor even if it doesn’t seem perfectly rational all the time.
So, in essence, dividends do matter to me because they help me with my plan. Personal finance is personal is a constant refrain on my site for a reason. As long as you are meeting your goals – that’s all that matters.
Hope that helps clarify my personal position and again, a great question.
Save, Invest, Prosper!
Thanks to my passion for personal finance and investing, some great companies want to offer deals. As always, never an obligation…
A reminder that BMO recently re-launched my personal promo code to use when opening investment accounts with them. Get cash back with them! Awesome.
Make sure you look at the top of my Deals page to take advantage of this code since you can get hundreds if not thousands in cash back when you invest with them!
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.
I’ve been investing since the early 80’s, and only invest in what I understand, keeping it all relatively simple now. (A learning experience in itself.)
I invest in an all-in-one global balanced index ETF in the registered accounts. I also invest in individual Canadian dividend growth equities.
It’s slowly starting to dawn on me that Canada is about the only country that didn’t sustain major damage to their dividends through both the financial crisis of 2008 – early 2009 and this pandemic. I owned Canadian, U.S. and international REIT’s at 5% each at the time. I swore never again. In fact after owning global dividend ETF’s through that period I eventually sold them off in 2010 and replaced them with index funds. Ever looked at the U.S. banks lately? They look absolutely awful. Aside from Canada, Australia was the only country where the bank dividends didn’t get cut during the financial crisis. Since then dividend investors in Australia have had multiple cuts in that sector. Dividend investors in both Europe and the UK have had a terrible time going through the financial crisis and now this pandemic. Dividend portfolios have been absolutely massacred over there.
Anyone interested in REIT’s should at least know what happened with the big real estate conglomerates in this country during the late 80’s through the early 90’s. Because of what I personally witnessed and the guy who brought one of the companies down is still in the shadows there, I wouldn’t touch his surviving company with a ten foot barge pole. Everybody else loves it of course. The only publication that has said anything against their questionable accounting has been the Financial Times of London in a few articles earlier this year. Figure that out for yourselves. The rich always find a way to escape to their protected estates while the poor sap investor loses his whole investment. I sometimes wonder why we even have securities commissions in this country. Absolutely useless bunch. Royal Trustco (blue chip company with dividend growth by the way) got sold to Royal Bank while shareholders in that entity got handed a bag of worthless assets.
The only real estate we own now, is our house we bought over twenty years ago when we had turned fifty, (paid off the mortgage ourselves in about three years) and the bricks and mortar real estate that the companies in our portfolio just happen to own while they go about managing their own specialty.
No silver spoon here. No rich parents. No high paying jobs when we were working before retirement. We were lucky to get work pensions though. Did without a car for the first seventeen years of our life together, my wife and I. Used public transit to get to and from work etc.. We both absolutely detest debt in our own life. The movie “The Grapes Of Wrath” had a big effect on me. Last econo-box imported car we purchased in 2012 we just paid cash outright. Just threw any spare cash at the portfolios when we could and built it up slowly, one brick at a time.
No silver spoon here either although my parents had pensions and that has really helped them in their 70s now.
I used to own a bit of Wells Fargo many years ago but ditched it and moved that money into indexed funds as part of my U.S. allocation. That was smart in hindsight…
I think if I invest in more REITs it will be industrial ones going-forward, just a bit, not too much.
Having a paid off home must be very liberating. Well done. I hope to have that feeling myself in the coming years 🙂
Buying anything with your 2021 TFSA room?
Cheers,
Mark
For the TFSA’s we’ll probably add to our ZBAL which we’ve held since late January this year.
Hope whatever you decide to invest into your own TFSA, works out well for you Mark.
I have been making some switches lately. I recently sold out a couple of duds and switched into FTS.TO. I agree FTS is the best of breed Canadian utilities. Before the huge runup of the big 5 Canadian banks on Nov 6th, I had been adding a lot to RY, TD and BNS. Mainly BNS as BNS was yielding past 6%. But now my dividend income is most likely going to continue to flow more into Fortis and Emera.
I’m a big fan of those companies you’ve mentioned. Unless they cut their dividends, I will continue to own them all and DRIP them all.
I also like both FTS and EMA. Recently I found I am already overweight in FTS, and switched the purchase to EMA last minute. Need to follow my investment principle and cannot buy more except the dripped ones.
Big fan of FTS and EMA. Last time I checked, people love electricity!!
Hi mark, 5i research report link isn’t working. it says invalid or expired code.
Can you try it again?
Should be working now – maybe just a “blip” on their side?
Thanks for letting me know.
Hey, Mark, I tried with 2 different email IDs and on chrome and safari. I am still getting the same error. It’s using MOA as the coupon code. JUst thought will let you know.
Thanks. Can you try this please?
https://research-5iresearch.lpages.co/free-trial-5i-research-my-own-advisor/
Let me know what happens.
Cheers!
Mark
Hi Mark,
What Reits are you considering take a look at?
Maybe some industrial ones. SMU.UN (Summit) maybe? Not sure!?
Hey cannew, certainly nothing wrong with capital appreciation as well, that’s for sure. And I also appreciate the dividend growth strategy. Always to each his or her own. For the record I’m more in the cap appreciation camp.
That said, in Canada, the big juicy dividend stocks historically outperform the market. So one can have their cake and eat it too – if history repeats.
Advisors are threatened by Canadian investors who hold the common big dividend payers. Essentially they want you to sell your market-beating, tax efficient (for many) dividend stocks and move you to an environment where you pay fees on every asset. They will move you to a very good, but cookie-cutter index based portfolio.
The best case scenario would be working around and with those great Canadian div payers. But that’s not what they do.
Certainly one can do better with US stocks in the mix (many will also go International as well). And one needs a financial plan. But you can be your own advisor and access planning a la carte.
I am doing a post on this “Don’t let your advisor sell all of your Canadian dividend stocks” and will have Mark chime in with a comment or two as well, on that post.
Dale @ Cut The Crap Investing
I think your so right Dale. “Don’t let your advisor sell all of your Canadian dividend stocks”. Total return is the most important, But if you have great dividend payers they are often also the best performers overall. We have a 100% equity portfolio which is 20% US, and 80% Canadian. BRK.B being the only non dividend stock. Our average annual returns for the last 5 years is 12.29%, 10 Year 13.64, and 20 year 10.91%. That is total return including dividends. This is so far a great income generator for our retirement. Keeping it simple.
DivInvestor, many advisors will tell you that is WAY too much home bias but then again, if you’re getting long-term returns like that AND you can or have met your income goals – who cares? To earn nearly 11% over a 20-year investing period is outstanding. Likely only via 100% equities and I will remain that way myself for the coming decades.
What are you buying for your 2021 TFSA?
Hi Divinvestor, very nice returns indeed. Congrats. We all have our biases. I am personally overweight Canada as well.
I’d only suggest some risk management as you get within several years of retirement. We enter that retirement risk zone well before retirement.
Dale @ Cut The Crap Investing
With the advent of many all-in-one ETFs, low-cost indexed funds over the last decade, any “advisor” not in the business of fee-only planning and providing a better customer experience via a fiduciary duty should be nervous.
Potentially I’ve had a bias for far too long on dividend paying stocks, or other investing strategies for that matter. If you are meeting your goals and you’re comfortable with your plan – why change?
What am I missing?
Thanks for your detailed comment.
Mark
As personal finance is personal, beating the market or not, or total return rate, those are all irrelevant when a person decides the investing approach. I have a friend investing only in GIC, any choices in the equity market are too risky for her. As long as she is OK financially, who are we to judge her choice.
When I begin my retirement planning 5 years ago, I am very clear I might get a lower total return by investing in dividend stocks. But that’s a conscious choice. As I am closer to retirement time, sleeping tight in the night is the most important thing for me, not the total return rate. Imagine one retired in the year 2000 or the year 2008, who will sleeper better? The one with a blue-chip dividend stocks portfolio, or the one with index funds?
Of course, there are different ways to migrate the sequence of return risk. Having proper asset allocation and being a disciplined investor, one can ride through market crashes smoothly. But I do know some retired people following this path scared and sold on the floor. Will I be scared when the market was down big like in March? Yes, I still was. Would I sell on the floor? That’s still possible. But with a shrunk portfolio that still provides enough investment income for my living expenses, the chance is lower.
So I made the conscious decision that in order to sleep better, I am willing to sacrifice some total return. It’s not a race to get the best total return, it’s just the most comfortable plan for us to achieve our financial goal (which is not worrying about our financial security in our retirement) considering our financial situation, our risk tolerance, our Psychological status.
For my kids though, with enough time horizon for investment, I would suggest they just investing in index funds for sure.
Exactly my points May and well put. If someone feels best with GIC-ladders and cash, AND, they have met their saving or investing goals – who are we to judge? As long as that is an informed decision I have no issue whatsoever.
This is why personal finance is personal.
Of course, no advisor is going to get paid well when you invest on your own, you don’t buy their products or services, and they don’t charge you an ongoing money management fee.
Investing is why more psychological and behavioural than math.
Good work on the indexed funds for kids!
Just found a typo, I begin our 5 year retirement plan 3 years ago.
Dividends are very important to me. I have no pension plan and we derive a significant amount of income from dividends now that we are retired.
I have been a DIY investor for over 30 years. I originally invested in index funds and then migrated to index ETF’s which had lower MER’s. Once I become knowledgable about investing by doing a lot of reading, I invested the portion of my Canadian portfolio in individual stocks that I chose (mainly dividend paying stocks) which has been quite successful for me and I am still confident doing so. I still do a lot of investment reading but I also have time for other personal pursuits such as reading fiction, working out, travelling and cooking. How I spend my time is important!
I have never been comfortable investing in individual US and international stocks since there are so many to choose from and the time consuming amount of work involved in researching suitable investments. So for my US and international investments I choose to invest in ETF’s in those geographic areas. Vanguard and other ETF companies have some great products with low MER’s to invest in the US, international, emerging markets and you can also diversify by investing in growth or value styles. I also invest in Canadian listed stocks that derive much of their income internationally such as Brookfield, Magna, Alimentation Couche-Tard, etc. Many of my US investments are in our large RRSP’s so there is no withholding tax incurred. I am comfortable that our portfolio is well diversified from an equity perspective.
Have I made investing mistakes over the years? Of course I have but I look at them as learning experiences that have allowed me to get to the point where I am in my life. My next concern as I age is that my spouse has no interest in investing and when I drop dead how will she manage her portfolio.
Hey Roger,
the end of your comment made me laugh because i was in the same situation 🙂 my wife got a good pension from her job this is why she never listened to me regarding investing , she like to read books so i got her the wealthy barber and the wealthy barber returns and she loved the books ( they’re one of my fav as well ) after reading those two she showed more interest and agreed to move her investment from sunlife to a diy with TD but we bought VGRO for her just to keep it simple and there’s nothing wrong with simple , and yes she buys the shares herself every month 🙂 so that’s something for you to consider maybe.
Nothing wrong with simple at all Gus re: VGRO or XGRO or ZGRO or other. My wife grows tired of me talking about dividends, ETFs and other – I sound like the Charlie Brown teacher to her after a while 🙂
Hahaha @50 and I still love cartoons 🙂 Mark you should see the look on my kids face when I talk to them about investing 🙂 I opened a questrade account for both of them 2 years ago and convinced them to invest the saving money in XGRO they’re both dripping shares every quarter and the account is up 17% which is amazing compare to cash sitting in bank collecting dust.
They’re 17 and 18 now and thank God they got the concept .
Smart stuff on the XGRO Gus. Aren’t DRIPs great? That should open their eyes 🙂
Drips are amazing Mark, it’s those drips that kept coming during this short downturn this year and of course tuning out the noise that kept me calm 🙂
You bet! Love DRIPs!
Dividends are very important to me as well but I respect there are other ways to invest and grow your asset base.
I liked your comment about built-in diversification with some Canadian companies. I hold Brookfield and others for that reason. I also like ATD.B and wish to buy more of it in 2021 in my taxable account. I figure it’s a good home for it there.
I’ve started to own some XUU in my wife’s RRSP in recent years with some instructions should anything happen to me, just keep it for the next 40 years and sell other stocks and ETFs over time. By then, XUU should be worth a good chunk of change.
Smart stuff Roger, how you spend your time is important!
All the best,
Mark
Thanks for hosting my video Mark, appreciate the introduction. Hope you have a great weekend!
You too!
Sorry, wrong link:
https://risingyieldoninvestments.blogspot.com/2020/02/the-irrelevance-of-dividends-according.html
“The Irrelevance of Dividends, according to Ben Felix”
I’ve commented on this video here:
https://www.blogger.com/blog/post/edit/419883265011768831/7374789926238765646
But, in simple terms he is totally focused on Capital Appreciation and assumes that anyone who places importance on dividends is missing out on the big picture.
If one wants to play the market than maybe we are, but anyone who wants to earn an Income from their investments, have the income grow over time and see their income grow even during market crashes, than dividends is what makes that happen.
Don’t waste your time trying to compare the two, rather choose between them!
Income can grow over time as part of total return though. You can generate your own dividends. The challenge is, you need to know when to sell or have a disciplined approach to sell.
So, dividends are just an important subset of total return but they have no bearing on the future – they just give us very good (i.e., 20/20 view) about the past and some ideas about what the future could bring for those companies. Nothing is ever guaranteed in life or investing.
That said, as you know, I have dividends as part of my plan but I don’t see it as any full-on religion. I think that would be short-sighted.
All the best!
Mark