Weekend Reading – Mortgage help, rock solid REITs, BMO promo codes, hybrid investing and more!
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!
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.
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.”
Incredible work by The Sunday Investor recently. I don’t know where on earth he finds the time to do this stuff….but recently, he “pulled data from 142 U.S. industries and nearly 2,500 stocks and calculated each industry’s median operating income margin for 2019 and 2020.”
Nice analysis of Fortis (FTS) by Dividend Growth Investor.
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):
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.
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!
- As a My Own Advisor reader, during your FREE trial, you can get all 5i’s research reports, learn about model portfolios, the best ETFs to own and more.
- You can get $50,000 managed free with ModernAdvisor.
- Sign up for commission-free investing with Questrade.
Happy investing and see you in the comments section!