Weekend Reading – Saving $62,000, investing lessons learned, XUU for TFSA, 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.
My last edition about getting some mortgage help for next year, rock solid REITs, BMO investing promo codes (to save you $$$), all about hybrid investing and more can be found here.
Weekend Reading – Mortgage help, rock solid REITs, BMO promo codes, hybrid investing and more!
As 2020 comes to a close (and good riddance??), I hope you and yours continue to be well during a very trying year as the holidays approaches.
Best wishes for your upcoming holiday season if that has already started for you, but more on that next week!
‘Till then, have a great weekend 🙂
Dan Kent and the team at StockTrades.ca highlighted some of their favourite stocks to buy in Canada – right now.
Here are some great, simple investing lessons learned from the pandemic. From the list, I particularly liked:
- You can’t time the markets.
- Stay diversified.
Definitely agree with the first bullet – which is why I stay invested.
I also think you should learn to live with stocks!
On the second bullet above, re: diversification, I’ve really started to narrow my choices for 2021 TFSA investing. To help with diversification, I’m tempted to buy a small slice of XUU or similar ETF amongst other stocks.
You can find XUU among my top ETFs to invest inside your TFSA below:
What else might I buy for the TFSA??
Keen readers in the comments section of this blog on some recent posts will notice I have also considered buying a bit of ZQQ (BMO product) or XQQ (iShares product) with any upcoming TFSA contribution room; instead of XUU. Who knows? I might do that. ZQQ and XQQ are essentially the same products from different providers. The management fee for these products is modest (0.39%), and each product is design to track the performance of the Nasdaq-100 but in Canadian dollars.
What might you buy with your TFSA contribution room in 2021?
Although “savings” to a point are fine, there are other great things you an do using your Tax Free Savings Account (TFSA).
How To Save Money wrote about getting a first class flight – something I aspire to have enough points for in another 5 years.
Nice work in Ben Carlson’s post – his lessons learned from 2020 when it comes to investing.
Key highlights from his post me:
- If it’s in the headlines it’s too late (to outsmart the market).
- The stock market has the ability to make you feel like an idiot and a genius in the same year.
Clearly A Purple Life has saving and investing figured out. Kudos to this former high income millennial earner (now early retiree) on saving $62,000 this year.
In one of Robb Engen’s recent Weekend Reading editions, he highlighted the research of Dr. Bonnie-Jeanne MacDonald, Director of Financial Security Research at the National Institute on Ageing, who wants to change the conversation around when to take CPP. Her latest research looked at the substantial (and unrecognized) value of waiting to claim CPP/QPP benefits – upwards of $100,000 (on average) to retirees who elect to defer their benefits from age 60 to age 70.
You can find some case studies on my dedicated Retirement page about when to take CPP.
Dale Roberts tried to make some sense of the markets this week – discussing the Nasdaq, any upcoming Santa Claus rally, Bitcoin and more.
In case you missed some of my latest articles…
What is a financial plan? What should it cover? Lots!
I shared my latest monthly dividend income update here!
I’m running yet another great giveaway after reviewing this book and talking to the author. Read, enter the giveaway, and win!
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.
I’m keeping my eyes open to see if there will be another resurgence in the Japanese equity markets. I don’t think Buffett put near $7 billion into 5 Japanese trading houses a few months ago because he didn’t think they’d do well moving forward. Japan is still the third largest economy in the world, so it makes you wonder has he perhaps got it right. That’s why I still keep the equivalent of EAFE in the portfolio. Bonds as well in the registered (in a global fund of course). You just never know when they may be needed. Annualized real return on Japanese Equities from 2000 to the end of 2019 1.5%, return on Japanese bonds 3.7%. Source: Credit Suisse Global Investment Returns Yearbook 2020.
It’s hard to say but I can see your point. I guess I see supply chains so highly integrated now that if Japan does well, so would other countries but maybe that is very short-sighted on my part.
Could EAFE exceed U.S. equities in the coming decades? I doubt it but you could be right and I could be very wrong.
Maybe for that reason, better to own XAW inside TFSA for the EAFE kicker?
I use something similar. VFV.TO and VUN.TO. I should have just used VFV but I first used VUN and just kept it. But they are pretty much parallel in terms of growth despite VUN having a slightly higher expense ratio. I guess that is because VUN covers more indexes. My purpose for them is really just to keep up with the indexes. Then I also have individual income growth stocks for actual income growth.
I know a number of investors that use VFV and/or VUN inside their TFSA and RRSP. These are good products to support diversification.
The impact of foreign withholding taxes on holding XUU in a TFSA (or RRSP) would cost about 0.26% according to this handy MER + FWT calculator on Justin Bender’s site: https://cdn.canadianportfoliomanagerblog.com/wp-content/uploads/2019/02/CPM-Foreign-Withholding-Tax-Calculator-Updated-Jan-2020.xlsx
Thanks for the mention, Mark!
Yes, thanks for that reference and aware of the withholding inside TFSA. I’m considering it because of the run-up in a few CDN stocks; to offset CDN % in my portfolio and of course, to add diversification. I prefer to max out TFSA before adding more monies to taxable account. (RRSP already maxed.)
Are you investing inside your TFSA soon Robb? Going with VEQT or other?
Hi Mark, sorry – that response about FWT was for the other commenters who asked about it. I know you’re aware of it and I get why you’re looking to add more US exposure.
Your dilemma is one reason why I decided to hold the same asset mix across all accounts (with VEQT in each). Then I don’t have to worry about the constraints of running out of room in my RRSP/TFSA and worrying about how that impacts my overall asset mix and diversification.
So, yes – I’ll be adding to my TFSA in the coming weeks and it will be VEQT again.
Merry Christmas to you and your wife! Hope you enjoy the holiday season.
Gotcha Robb – all good!
Yes, I recall you moved to VEQT since even despite some FWT (Foreign Withholding Tax), fund like VEQT, and other low-cost ETFs including all-world equity ETFs offer very simple exposure to a world of stocks. This diversification and hope for long-term capital gains FAR outweighs some slight small FWT.
Very smart thinking for a lazy way to get long-term returns without any mess of dividend paying stocks 🙂
Same Robb, all the best to you and your family this year and into 2021. Stay in touch!
I had the same question as Ricardo about XUU in a TFSA and withholding taxes
There is a small withholding tax with XUU, but that withholding would also apply to any other CDN-listed ETF holding U.S. assets or any all-in-one fund that is growing in popularity. I haven’t decided yet on my XUU decision. We’ll see!
Give or take, with yields around 2% for most indexed products, withholding taxes would be ~ 2% x 15% withholding for a tax drag of ~ 0.30% when such funds are held within an RRSP or TFSA.
I would wonder about XUU in a TFSA if it is as you say “XUU because it is a lazy, low-cost, diversified way to invest in the U.S. total market”
Would that not attract US withholding fees or cap gain requirements if you are holding US equities in a TFSA?
It would Ricardo. ~0.30% tax drag give or take. The challenge I find myself is striving to own more U.S. assets without any RRSP room, nor do not wish to invest in my taxable account. There are certainly other products so I’m thinking that through!
What are you planning to do with your 2021 TFSA room?
Good observation regarding ZQQ and XQQ, I was evaluating these myself when I made a recent portfolio change. Ended up going with TEC instead (a little more global diversification)
Yes, I won’t rule out either for the TFSA yet! All the best and good idea to cover those in your YouTube channel!