Weekend Reading – Reader questions, early retirement, 2.4% rules, all weather portfolios and more #moneystuff
Welcome to my latest Weekend Reading edition about answering some reader questions, early retirement, 2.4% rules and some all-weather portfolios.
I hope you are keeping well…
Earlier this week, I partnered up with a fan of this site and avid investing writer Mat Litalien to share the top Canadian stocks to weather the COVID-19 market crisis. Thoughts on those companies? Any U.S. companies on your radar as well?
As a preview for next week, I have another very detailed retirement case study to share – so stay tuned for that! In the meantime I have LOTS of great financial case studies to check out here.
Please stay well, stay safe and enjoy this Weekend Reading edition as always.
Weekend Reading including the early retirement 2.4% rule
Armchair Financial Canada wondered about various all weather portfolios. He landed on the “Comfy” portfolio:
Great stuff over at PlanEasy.ca on the impact of saving vs. spending. Incredible how creating a disciplined, early savings habit will deliver phenomenal results over time.
I enjoy reading about various early retirement plans, to see how mine might stack up. The Dragons on Fire recently posted theirs.
They have an asset allocation of “…roughly 70% stocks and 30% bonds, and the bonds have helped insulate us somewhat from the market declines.” They also wrote that “based on 2020 projections (and before my part time consulting job), our dividends/interest/part-time work (aka, “core income”) would cover 80 plus percent of our expenses.”
That’s very good.
Personally, (and I’m probably too conservative though), I wouldn’t want to even semi-retire until we reached our Crossover Point. Regardless…I’m not ready to retire in my 40s. I want to work full-time and I enjoy my latest role at work.
I can’t imagine this…
Dale Roberts has a fine list of recent articles in his Weekend Reads edition. To answer his question, I don’t think there will ever be a “normal” again. Just a new normal living with COVID-19 and the rise of other viruses. This won’t be the last pandemic…
On Financial Independence Hub, more Americans are very worried about retirement as unemployment concerns balloon.
A reader recently asked me about what U.S. healthcare stocks I intend to buy more of. Well, I already own JNJ but I do use ETF IYH to skim the U.S. healthcare stocks I want to own directly. Here are the top ETF holdings as of this week:
Financial guru Wade Pfau hinted the COVID-19 pandemic has absolutely slashed the 4% safe withdrawal rate. What’s the so-called rule now?
“I did some updates in mid-March; and for an investor taking a moderate amount of risk, I put out 2.4% as my equivalent of the 4% rule. That’s still about the same today.”
Sounds like sage advice from this early retiree that ignored the 4% rule on his path to financial independence.
If you want to learn about the Smith Manoeuvre Frugal Trader has you fully covered. My only concern with this approach is the leverage. Unless you have a small mortgage and/or you’re VERY good with leverage I don’t think you should pursue it. In high cost of living areas, such as Toronto, Vancouver, even Ottawa now; potentially leveraging tens or hundreds of thousands or more *I’ve heard of folks leveraging > $250,000* is a significant financial risk. I would be worried if I ever lost my job or had a health scare, I would put that financial burden on my spouse if I wasn’t managing the leverage well. Thoughts on the SM approach?
Reader question of the week (adapted for the site):
I love reading your blog and all the great information you help provide. Keep up the good work.
Mark, what can you tell me about a Vanguard ETF with the initials VDIGX and if you recognize it, is that a good ETF for my portfolio? Thoughts?
Thanks for your questions folks. Keep them coming.
Yes, I do recognize VDIGX and after a quick search I found this is a U.S. mutual fund that invests in large-cap dividend paying stocks.
“The fund focuses on high-quality companies that have both the ability and the commitment to grow their dividends over time. One of the fund’s risks is the possibility that returns from dividend-paying stocks will trail returns from the overall stock market during any given period. Another risk is the volatility that comes with the fund’s full exposure to the stock market. An investor with a well-balanced, long-term portfolio who seeks exposure to dividend-focused companies may wish to consider this fund.”
Reference, Vanguard VDIGX.
The management expense ratio is low (which is great) but there is a minimum investment of $3,000 USD to own fund units. You would also need to confirm with your discount brokerage if you can even own VDIGX inside your registered accounts (RRSP, RRIF, TFSA) (potentially not as a U.S.-listed mutual fund) since I assume that is where you’ll invest your U.S.-listed assets. Not all brokerages are created equal!
For insights on what to own where, check out this post for asset location preferences in various accounts. This will make you a tax efficient investor.
Also, given the blue-chip stocks held in the fund’s top stock holdings, you could consider owning those stocks directly for income and growth. No doubt you’ll find at least a few of those stocks in many dividend investor portfolios!!
Instead of paying $3,000 minimums to buy fund units, to avoid the minimum investment threshold, I think you could consider U.S. dividend Exchange Traded Funds (ETFs) instead, such as VIG. Most Canadian discount brokerages will certainly allow you to own BMO, iShares, Vanguard and other ETFs in registered and taxable accounts. You’ll get more diversification from such ETFs anyhow.
To see what I mean, here is my list of top dividend ETFs to consider for income and growth – to earn cash for life.
You’ll also need to be mindful of converting CDN <> USD. So, consider Norbert’s Gambit for that.
That said, total return matters. That means the growing combination of dividends, capital gains, interest and more is essential for wealth-building.
All the best with your decision, your strive for additional income and diversification, and thanks for your readership.
Save, invest in low-cost products, and prosper!
Use my Deals page where I can save you money, as in hundreds of dollars with Bank of Montreal, Questrade, or you can have $50,000 managed free for a year with ModernAdvisor.
Stay well, and as always, Happy Investing!