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.
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!
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|
|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!
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.
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
Dale Roberts wrote about investing for income this post here. In his post, he mentioned the use of various BMO funds to juice your income. He also cited covered call ETFs as one particular way to increase income for investors. I think this is a decent approach, but do proceed with caution. I hope to answer a reader question about this approach very soon!
In another post, he highlighted returns of some of his model portfolios. Again, some incredible returns from boring stuff like I mentioned above! (Image from Cut The Crap Investing below.)
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.
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.
How should you invest inside the TFSA? These are great things you can do.
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.
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I’ll be back with a new post and answers to more reader questions next week.