Weekend Reading – Rates of return edition, lessons learned from early retirement, best books of 2019 and more #moneystuff
Welcome to my latest Weekend Reading edition (and my first of 2020!) where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Happy New Year! I hope you had a good holiday…
Earlier this week, I shared my top-5 stocks I want to buy more of in 2020. Shortly after that post, I ended up buying more Telus and Emera for our Tax Free Savings Accounts (TFSAs). I can now DRIP both companies inside those accounts. This money, that makes money, will now make more money every quarter.
You can read more about DRIPs on my dedicated page here.
With some upcoming RRSP monthly contributions for 2020, to max out contribution room to both of our RRSP accounts, I intend to buy more VYM (U.S. ETF) units. In doing so, this aligns with my desire to continually increase our U.S. equity allocation over time within our RRSPs – diversifying beyond Canada’s borders.
Did you make any recent investment purchases inside your TFSA or RRSP of late?
Beyond the usual awesome wealth-building material I try and share every week, I’ve also included some rate of return information you should find interesting and further down in this post, I have you covered with TFSA basics and advanced TFSA investing material now that new 2020 TFSA contribution room has opened up.
Health, wealth and happiness to you in 2020!
Mark
Weekend Reads
Here is what Our Next Life learned as part of two years into early/semi-retirement. Some important takeaways for me as I aspire to realize some semi-retirement dreams myself in the coming five years:
- “Early retirement is something you have to learn to get good at, and that takes time.” The concept Tanja shared here is that you need to figure out what the best use of your time actually is. It’s going to take some time and patience for me to figure that out…hopefully my wife is patient with me!
- “Your definition of “slow” doesn’t have to match anyone else’s.” I’ve thought about this quite a bit over the last year. I expressed as much in this post about why I’m striving for financial independence (FI) vs. any sort of early retirement. While I’m a “doer” at heart; I enjoy getting stuff done with quality in mind at that, I’m going to be giving some very deep thought about what my ideal pace is – the correct balance between work and living for today. I want to be productive yet balanced. That includes a relevant, requisite portion of personal time to learn, grow and do other things. I certainly don’t claim I’ll that my plan figured out in another year or so, just something I need to work on…
As part of the blogpost headline, it was interesting to see what my rates of return were in 2019 for some of the key accounts we own. Wow, 2019 was a big year for boring buy and hold investing approaches!
| Account | Key Assets | 2019 Performance |
| Non-Reg. | CDN stocks | 21.9% |
| My TFSA | CDN stocks | 21% |
| Wife TFSA | CDN stocks | 20.8% |
| My RRSP | Some CDN stocks, mostly U.S. stocks, U.S. ETF (VYM) | 23.2% |
| Wife RRSP | Some CDN stocks, some U.S. stocks, but mostly VYM | 23.3% |
| Benchmark for CDN stocks (XIU) | Top-60 Canadian stocks | 21.72% |
| Benchmark for US stocks (VYM) | ~400 U.S. stocks with modest to high dividend yields | 24.18% |
I use iShares ETF XIU as my Canadian dividend paying stock benchmark since I own a big portion of those stocks in that ETF anyhow, just in different quantities and percentages. In fact, the top-10 stocks held by ETF XIU make up consistently over 40% of the fund!
This is a big reason why I decided a long-time ago to unbundle my Canadian ETF for income.
For those who have fear of owning stocks directly, no worries, you’d be very wise to buy and hold XIU anyhow. For the 2019 year, XIU returned approximately 21.72% based on iShares data. For the decade, XIU delivered almost 7% returns.
Owning U.S. assets is a different story, a hard economy to unbundle. So, a growing portion of my portfolio is invested in low-cost U.S. dividend ETF VYM. I also use VYM as my benchmark for owing dividend paying U.S. stocks. VYM has returned a generous 12.8% for the last 10-years.
You can read up more about the premise behind benchmarking here.
Our game plan for 2020
In early 2020, we intend to max out contributions to our TFSAs (one account each) with Canadian stocks. Over the 2020 calendar year, we intend to max out contributions to our RRSPs (one account each) and buy more U.S. stocks and/or more units of VYM throughout the year.
We believe that combination above should help us on our goal to “live off dividends” in the coming years from a 7-figure+ portfolio.
As always, you can see what I own and how my portfolio evolves with time by following my financial independence updates like these. I hope to post a new article on this subject soon.
Other reading material for wealth building
My friend Dividend Growth Investor identified a number of U.S. Dividend Kings to consider investing in for income and growth in 2020. I own two (JNJ, PG) from this list in my portfolio since I’ve gravitated to owning more low-cost U.S. ETFs inside my portfolio over time.
Tom from Dividends Diversify shared 20 dividend stock picks for 2020 and beyond. Yours truly added a pick to the mix.
Ben Carlson, a prolific reader, cited some of his best books from 2019. I have a few on my nightstand to read in 2020.
I enjoy content on The Knowledge Project regularly which included this interview with Neil Pasricha about Happy Habits. The genesis of the book was “after getting a divorce and losing his best friend to suicide in the same year, he found himself in a dark place that was difficult to climb out of. As a countermeasure, Neil started a daily practice of noticing and recording the many small pleasures that life has to offer — warm underwear from the dryer, the smell of rain on the pavement, or getting a trucker to blow their horn.”
Very nice of Sarah from Smile & Conquer to include yours truly in her post about favourite posts of the year. Quite the collection of ideas and views in her roundup.
Roadmap2Retire has a fun 2020 stock picking competition going on.
Imagine going from getting married to owning multiple rental properties and having a net worth well over $1 M in 10 years? This blogger did just that in her decade in review. “Over a decade that steady progress really adds up. We visited 10 different countries (some of them multiple times), welcomed the birth of our daughter, paid off our mortgage and acquired 9 rental properties.” Busy and impressive stuff!
Want to know the road to some riches? CNBC says to drive a crappy car. I’ve always considered the two biggest draws on your wealth will likely be housing and transportation. If you get those two things right in your life those are huge enablers to financial success. Conversely, too much house or too much car will keep you working hard far too long.
Thanks to Norm Rothery’s work, a very cool and updated table of asset returns since 2009 here.
Need help with your TFSA in 2020?
I have you covered!
Here is my TFSA 101 post to help you get started with this account.
If you tend to spend your RRSP refund, the TFSA makes WAY more sense to invest in.
How should you invest inside the TFSA? These are great things you can do.
Can you or should you transfer stocks or ETFs into your TFSA?
How can you diversify your portfolio and TFSA using low-cost ETFs? This post has the goods.
Are there some easy, simple, all-in-one funds for your TFSA? You bet – right here!
Already have a TFSA? Great, but make sure you have it set-up for the appropriate beneficiary!
Got a question about this absolute gift of an account? Flip me a comment or an email. I read every one and I will do my best to get back to you.
Save, Invest, Prosper in 2020!
Happy Investing!
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.
Mark,
Re: Your 2019 Performance Returns & benchmarks you use
I see you prefer to use the TSX60 ETF XIU for your Canadian benchmark yet you use a $USD Dividend ETF for your U.S. benchmark. Considering all your returns are in $CAD why would you not use a $CAD non-hedged U.S. broad market ETF for your benchmark? Vanguard S&P 500 Index ETF (VFV) would be a good one for this purpose. Better yet use the returns posted on the “Periodic Table of Annual Returns for Canadians” for your one stop source for Canadian and U.S. benchmarks.
Its nice you posted Norm Rothery’s Periodic table. Its a wonderful resource, I’ve been using it for quite a few years. The table goes all the way back to 1970 if you pan left via the < symbol on the left.
I suppose I could Bernie, re: use S&P 500 Index ETF (VFV). I will consider that. I guess I figure if I’m trying to beat the index I’m tracking the best index to track is XIU. For the same reason it wouldn’t make sense to compare a balanced portfolio of 60/40 stocks just to XIU or VCE or other – it’s not an apples-to-apples composition.
Thoughts?
Yes, Norm Rothery’s stuff is usually on the side of pretty outstanding and yes, I just showed the recent years.
Big investing plans for 2020?
Mark,
Its funny you mention a balanced 60/40 portfolio because that’s exactly what I have, weighted by income, in my RRIF. I figure I might as well compare to the best so I use Mawer Balanced Fund for my RRIF benchmark. I’ve also used Rothery’s Periodic Table on occasion but that’s a lot more work, ie; it would require me calculating a percentage of TSX, S&P500, EAFE & All Bond and then adding the percentages. One of these days I’ll set it up on excel to simplify things.
Investment plans? I’m mostly in the withdrawal stage (~80% of my RRIF income monthly). I haven’t had earned income since 2011 when I retired but I do top up my TFSA contribution space every January. I added my $6K last week but I haven’t decided on what to buy yet. Dividend stocks are very expensive these days so I’ll sit in cash for now and monitor my watch list. I kinda wish the long overdue bear would rear its head so I can buy cheaper.
“Its funny you mention a balanced 60/40 portfolio because that’s exactly what I have, weighted by income, in my RRIF.”
Bernie, so many people could do FAR worse as you know with anything but that allocation. Well done.
Mawer Balanced is a stellar fund (if you own it?).
The reality is, whether you are 100% stocks via IVV or XIU or a mix of both, or just own VBAL or Mawer Balanced for forever and a day, whatever the case may be, as long as what you invest in is meeting your goals that’s all that matters.
“I kinda wish the long overdue bear would rear its head so I can buy cheaper.” I hear ya. I went ahead and bought some EMA and T anyhow! We’ll see how that turns out but it’s nice to see 6-figures+ in the TFSAs 🙂
Everyone likes to quote the 2019 returns, saying what a great year it was.
But if you compare the end of 2019 levels with say August 31 2018, rather than December 31, 2018, results are not so spectacular. Less than 5 percent gain in the TSX.
True it could have been much worse.
Very true Barbara. You can certainly cherry-pick returns (where they begin and end). It makes sticking to a long-term plan even more important though right? Thoughts?
Happy 2020 to you.
Mark
Happy New Year, to you too, Mark!
Yes, never great to just cherry pick results. But I find that doing a strict calendar year is just that, but is acceptable. It has been those who want to sell you financial products that go on about the great investing year and those who don’t have a clue may just think they will get these results from them going forward and also wonder why when they look at their money it has not increased much overall.
Very fair comments. I know for us, in our asset accumulation years, as long as our income (for retirement) is increasing month after month AND we’re tracking very close to good, established benchmarks, that’s all that matters.
Funny Mark I was about to ask about that very thing LOL
“Your definition of “slow” doesn’t have to match anyone else’s.” I’ve thought about this quite a bit over the last year.
As we are now T 3 years and 2 months from retirement this has been the subject of much discussion between my wife and I. Mostly from the financial point of view but also from the question of “what do you do when you have nothing to do all day”. So I’ve asking around how others found retirement and my brother put it best when he said “time just slows down”.
Noticed this myself, having had a small taste of retirement in the form of 3 weeks vacation over Christmas with no plans. It’s been wonderful, sleeping till 8:30 9 every day. Get up check email have a coffee, play a few games on the iPad and first thing you notice it’s 2 in the afternoon and whoa where did the day go. While I think it may take a bit of time to adjust trust me after a year you’ll wonder how you ever found time to work!
For example, it’s 9:30 and my wife just mentioned that we need to be out the door for 10am, now we need to rush!!!!
NOT WORKING IS GOING TO BE WONDERFUL
I bet it will be Rob! Happy 2020. All the best for your countdown to retirement.
“Your definition of “slow” doesn’t have to match anyone else’s.” I’ve thought about this quite a bit over the last year.
One aspect of early retirement that I haven’t seen discussed is, for a lack of a better of a better word, loneliness. An early retiree friend mentioned this. It can be kind of quiet as everyone is working. I mean what do you do M*-T when all your friends are working. I suspect it’s the reason why FIRE people like MMM end up staring second careers. How do you fill the 40 hours a week that work used to take. For Chris and I it won’t be an issue as we are at the tail end and our whole cohort will retire in mass.
I know for me I’ll need to have more hobbies than this blog but I haven’t quite figured out what those will be yet. I have some ideas though.
I think to Tanja’s points, you need to have a plan and even if you have a plan, you need to be very flexible with it because your time might not turn out the way you had hoped.
I hope to read her book this year.
I noticed your comment about buying more VYM. I am also thinking along those lines, but also feeling a
little ‘defensive’, so am also thinking of diversifying to US REIT VNQ, Utilities VPU, and Energy VDE. My
nervousness probably due to this being an election year in US; the Democrats seem relentlessly vicious in
their opposition to Trump; if his reelection looks questionable at all I’m afraid the market would react unfavorably
and I may better off holding back some US cash to buy at cheaper prices.
I am retired so no more contributions to my RRSP. Also have a LIRA. Will probably start drawdown in 2020
Still max out the TFSA
RRSP saw a 13.5% increase in dividends without any contributions
LIRA saw a 9.6% increase in dividends
TFSA san an 18.9% increase. Of course I did add the $6K last January
I do not track the total portfolio increase/decrease
Bought Cisco, AT&T and ONEOK on the US side
Bought more IPL, CHE and some XBC who do not pay divs. Looking for Cap gain here.
Bought CGL as a safety.
DRG got bought out. Also sold off TA and D.UN.
Sold off a lot of BCE when they hit $65. Now below $60 so I will start to nibble at them.
Went from approx. 2% cash to 35% cash with that sale. Have managed to whittle it down to approx. 17% now.
Funny that I just read an article by one blogger stating that he would dump BCE at $55. At that price I am a major buyer.
RICARDO
Well done with returns without any new money…
As you already know, smart to keep maxing out TFSA.
I still own D.UN myself.
I wouldn’t sell when stocks tank either, I would buy more! I hope to buy more U.S. assets inside my RRSP in 2020 but for now, the TFSA is “done” for another year. Just watch the dividends get reinvested going forward and see the dividend income rise via monthly updates, hopefully?!
Best to you in 2020. Thanks for being a dedicated reader.
Hi Mark….do you include any principal contributions when calculating your annual growth?
My RRSP & LIRRSP – ~80/20 equity/GICs – 21%
Wife RRSP – ~74/36 equity/GICs – 17%
My TFSA – 100 equity – 35%
Wife TFSA – 100 equity – 29%
non -reg – too “young” to have data.
All of these are excluding any principal additions/subtractions.
It was a very good year.
Those do include money inflows/contributions.
Otherwise, I think with just a time-weighted return, that shows the performance regardless of inflows (or money pulled out of the account – which I don’t do). Time-weighted rate of returns are probably good for fund managers though?
Those are some big numbers for your wife’s TFSA = 35%. Wow.
Well done overall, jeepers.
Ya, when I made contributions it skewed the growth figure so I just amended the spread sheet to remove the principal from the calculations. Same thing happened (in reverse) when I pulled $$ out of the RRSP. I don’t bother figuring out multiple year averages. I just use a simple good year/bad year report card (might be the farmer in me with that outlook).
I really should revamp the whole spreadsheet but I’m waaaay too lazy. I did add an “income generated” column. Now I can track how much the generated income changes year to year. Better late than never.
I wouldn’t bother revamping your spreadsheet personally. In the coming years, the only one spreadsheet I will keep is my dividend income one that projects what income I will earn from my portfolio going-forward so I know what I can reasonably spend in early retirement. Otherwise, I don’t care what the market does or does not do. I just care about the income generated from my portfolio since that’s what I’ll spend in the early years.
Should be ~ 5 years away now as soon as the debt dragon is slayed.
I’m with TD and it calculates your ROI for you, which after the last 2 years is looking quite impressive!!!
Regarding cars, well, as long as it’s in one’s means. We bought two brand new cars 2019. Before that, one was almost 19 years old. Easier to buy new cars than second hand ones, also less maintenance at least for first few years. We have a busy life, so saving on time and energy is more important to us.
Of course, we dont buy luxury cars. All basic Japanese ones.
May, I think I might be jinxed with a new car…..we had always bought used, demonstrators or those off a lease. A few years back we went in to get last year’s model but ended up with the first new car of both my and my husband’s life. I kept it pristine, when people dented our doors we went in and paid to get the little dings removed. So then a driver in the USA goes through a stop sign and totals my car….ICBC offered this tiny amount for it, with only 43,000 km. on it. So the replacement we bought was two years old. I just couldn’t love it the same. I now have to get a USA lawyer as their insurance still hasn’t paid up.
Fair point. The thing is, most people really can’t afford car payments, a mortgage, saving for retirement, saving for their kids’ education and trying “live their life” beyond that. It’s really too much. The broader stats are showing that in this country and something has to give eventually…
Could be just me!
Oop! Sorry, Mark!
Nice data, Mike. I share all your views, and am very comfortable with them.. My own rates of return across a half dozen accounts ranged from 13 to 17% for 2019, somewhat lower than yours, but I am quite satisfied. My lower figures stem mainly from the higher proportion of cash held continuously, from 10 to 40%, the higher figure being in the RESP, which is now delivering cash to my grandchildren.
Mike, Mark, other, I have been called worse 🙂
All good and congrats on your gains in 2019 DougP. Well done re: cash to your grandchildren. Hopefully you can teach them about investing.
Great round up post Mark. Thanks for the mention. I love your chart showing your asset mix for each of your different accounts and what that performance was. I’m a bit picture person and appreciate that detail.
Here’s to a healthy prosperous 2020.
Thanks Maria and continued success to you and all those rental properties in 2020! You’ve made some considerable progress.
Wow, Mark. This is a robust reading list to get the new year kicked off on the right foot. Great round-up post and thank you for the mention! Tom
Thanks Tom and stay in touch often in 2020!
The ModernAdvisor link is not working.
Thanks for letting me know, I will let them know! In the meantime, please let them know if/when you sign up that you’re doing so from my site. They will ensure you get your promotion applied. Thanks!
Hi Mark,
for your TFSA purchases…do you have a strategy where you make a minimum purchase for a certain number of stocks? or to put it another way….what guides your decision making about this contribution in your TFSA and that of your spouse’s?
Not really Sue. I save the TFSA contribution room, I put the money in (did on Jan 2), and in order to ensure I don’t go over in any stock I try and rebalance my portfolio by buying other S&P/TSX assets.
https://www.myownadvisor.ca/reader-questions-how-do-you-rebalance-your-portfolio/
“I try and rebalance my portfolio by buying new assets to align with the sector breakdown of the TSX Composite Index. Take the ETF XIC as an example of that.
The TSX Index (and XIC) has a breakdown of roughly:
35% financials (think banks and life insurance companies),
20% energy (think Enbridge, Suncor, Canadian Natural Resources and more),
12% materials (think mostly mining companies), and
a lesser amount of industrials, telecommunications companies; some utilities and information technology.
I don’t worry about rebalancing my U.S. assets very much, I simply buy more indexed ETFs when I have enough money to do so.”
I figured I was a bit low on telcos and utilities overall so I bought some.
I also definitely talk with my wife about things so she knows what I’m doing and why!
I was about to ask how you rebalance your portfolio. An all ETF portfolio would be quite easy to do but when you’re mostly stocks it’s harder.
Definitely harder and more time consuming but it’s also fun for me!