Weekend Reading – One-stop shop investing, income questionnaires, taxable investing considerations and more #moneystuff

Weekend Reading – One-stop shop investing, income questionnaires, taxable investing considerations 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.

Earlier this week, I wrote about how to prepare for a market meltdown.

What do you make of our turbulent market?  Worried?  Moderately concerned?  Don’t care?

Honestly, as I mentioned in the post above, you can only control what you think you can control but if we want to be perfectly honest here – you’re not in control of anything.  If you think you can control something or someone, you are simply fooling yourself.  There are just an infinite number of factors that are at play with any decision in life.  When it comes to successful investing – all you can do is create a plan for your objectives, work hard towards that plan as best you can, and be ready to re-adjust as you need to. 

Have a great weekend and enjoy it – and a reminder to do what you can to help keep our planet healthy…

Mark

Featured articles

I liked Robb Engen’s take on choosing VAL or the Mawer Balanced Fund.   A reminder about the talent behind this active Mawer fund, from the article:

“As mentioned, Mawer’s Balanced Fund has returned 8.5 percent a year since inception in 1988. It has returned 10.4 percent year-to-date (June 30, 2019). The fund’s longer term performance is as follows:

• 1-year return – 7.0%
• 3-year return – 7.4%
• 5-year return – 7.8%
• 10-year return – 9.9%”

Impressive stuff.

Here are my favourite one-stop shopping ETF solutions for your low-cost portfolio.

Henry Mah wrote some questions about an income strategy.  I intend to take this quiz soon and turn it into a blogpost.

A reminder you can check out Henry’s books about Your Ever Growing Income here – where he describes his approach to earn tens of thousands of dollars per year in dividend income.

Speaking of dividend income – very nice to see Royal Bank and CIBC increase their dividends this week. 

Insightful answers here from Justin Bender about the home country bias in the Vanguard asset allocation ETFs.  My take:  sure, U.S. assets have been roaring for the last decade but by no means is this a prediction of future days ahead.  I think anything between a 20-50% equity allocation to Canadian stocks vs. other equities is just fine.

Reader question of the week (email adapted for site):

Hi Mark,

I hope you can help?

I like using U.S. dollars since we spend few months in the USA each year – so I’m trying to get my dividends paid in USD $$ where I can.

I bought BPY.UN (Brookfield Property Partners) for my TFSA but my brokerage tells me I’m going to be hit with 15% withholding tax.  Is that right – is my brokerage correct?  Are you able to help me understand a bit more?  Are there certain tax considerations for certain stocks in certain accounts?

Also, I got a rather bitter surprise with my LIRA. I purchased MMP (My Own Advisor assumption:  MMP = Magellan Midstream Partners) in my U.S. LIRA. Got the first dividends paid and saw that they withheld 37% tax!  I guess the reason is, MMP as a Limited Partnership is NOT part of the agreement between USA and Canada when held in a registered account or withholding taxes vary for Limited Partnerships?  Were you aware of this?

Thoughts?

On a more positive note, thanks to your blog, Henry Mah’s book; I’m much more comfortable with my hybrid approach (stocks, ETFs).  Thanks so much!

Great details and great questions.  Please keep your questions coming folks.  I will do what I can to answer them.

Well, regarding U.S. stocks that pay dividends in USD $$ – your brokerage is correct.  The TFSA (unfortunately) is not recognized as a retirement account (like the RRSP is for example) based on our Canada and U.S. Tax Treaty.  Therefore, you or anyone else is charged 15% withholding tax on U.S. stocks held inside the TFSA.

You can see how U.S. stocks including Canadian stocks that pay dividends in USD $$ are treated here; in this post below:

Get U.S. dollars from Canadian dividend paying stocks.

From that post, I wrote:

“In a registered account, such as your TFSA, I think it could make sense to potentially leverage the U.S.-dollar side of your self-directed TFSA for some tax-free U.S. dollar withdrawals for your travel.  You can consider owning Canadian inter-listed stocks that pay dividends in USD $$ or you can consider owning U.S.-listed ETFs or U.S. stocks inside that account.

Just be mindful for the latter, for non-Canadian dividends including those paid by U.S. stocks or ETFs, those dividends are subject to 15% foreign withholding tax inside your TFSA – a subject I wrote about here.“

Here is a detailed post about taxable investing and tax efficient investing considerations.

As for your LIRA, well, I do know many master limited partnerships can hit investors with up to 50% withholding tax.  I wrote about the taxation of stocks that might be considered limited partnerships and a few readers chimed in with their experiences here.   

In summary, when it comes to any investment – know what you are buying, why; what the tax considerations might be to you and what your long-term plan is for said stock, ETF, bond or cash position or otherwise.  I think that only makes sense.  Investing can be simple but it’s not easy.

Mark

Low-cost ETFs and cash back promo codes for your brokerage account

On the subject of low-cost ETFs to invest in (including more transparency about their fee structure in many cases) investors should check out my Bank of Montreal promo codes to save hundreds of dollars when you own such ETFs in accounts with one of Canada’s best discount brokerages.

Happy investing!