Weekend Reading – Shaming dividend investors, income for life, all about pensions and more #moneystuff

Weekend Reading – Shaming dividend investors, income for life, all about pensions and more #moneystuff

Well Hello!

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.

You can find my previous Weekend Reading edition here – all about my largest stock and ETF holdings, learn about Old Age Security (OAS), information about the 4% (or now 5%??) safe withdrawal rate and much more.

Have a great, safe weekend and see you on the site. Happy Halloween!!

Mark

Happy Halloween

Leading off Weekend Reading, our Bank of Canada folks announced interest rates are likely to stay flat for another 2 years. From the article I read:

The Bank of Canada says it has no plans to change its benchmark interest rate until inflation gets back to two per cent and stays there, something it says isn’t likely to happen until 2023.

The central bank said Wednesday it has decided to keep its benchmark interest rate steady at 0.25 per cent. The news was expected by economists, as although the economy is showing signs of recovering from the impact of COVID-19, things are still a long way from normal, so cheap lending will be needed for a long while yet.

Long ways to go indeed. Scary stuff.

On a personal finance front, lower rates are not so frightful. Our recent mortgage decision is now done. I wrote about our goal to kill off our condo debt in the coming short years here as we march towards financial independence. You can read about that below.

We locked into what should be our final, 4-year term mortgage term at 1.69%.

That means our countdown to working on our own terms (full-time, semi-retirement, seasonal, other) is officially on.

Financial Independence Update – October 2020

I enjoyed this list of moat-y Canadian stocks to buy and hold for the years to come. Thoughts on this list??

Morningstar Moaty Canadian Stocks

GenY Money was very kind to list yours truly in her list of top-6 Canadian bloggers to watch and follow in 2021! Thank you for your kind words and encouragement.

Need income in retirement? Have no defined benefit pension?

Fear not. Jonathan Chevreau highlighted retired actuary Fred Vettese’s book Retirement Income For Life for guidance. In that book (that I also profiled on my site here), Vettese says you should consider the following to generate income as part of asset decumulation:

Vettese recommends investors consider one, two or more of the following:

  1. Invest in passively managed funds to lower your investment costs and fees over time – keeping more of money working for you (versus in the hands of advisors of financial companies).
  2. Start your Canada Pension Plan (CPP) later in life – something I wrote about here.
  3. Use some (not all), maybe between 25-50% or so of your RRIF assets to purchase a non-indexed annuity.
  4. Make adjustments to your spending habits. In “good times” when the market is hot (like 2017 was), consider spending more.  In bad times, when the market declines for a couple of years or remains flat, consider spending less. (Check out Variable Percentage Withdrawal method for that exact reason.)
  5. Consider the “nuclear” option of using a reverse mortgage, later in life.

Retirement Income for Life – Review and Giveaway

Ms. Mod has made the bold decision to take a workplace sabbatical to test out a form of semi-retirement in her 30s. It takes guts to make this call but ultimately from what I’ve learned, based on what others have done, it is generally best for their well-being and pursuit of other dreams. Kudos Ms. Mod!

Need to know about Registered Education Savings Plans (RESPs) for your kids? Wow, great work here by Maria at Handful of Thoughts recently. 

Maria is the proud owner of no less than nine rental properties! I hope to have her on the site in the coming months. 

The team at Explore FI Canada had a good segment on pensions. A reminder about this very comprehensive post about pensions, whether to commute your defined benefit pension (or not) is all for free here.

Should I take the commuted value of my pension?

Ian McGugan shamed many dividend investors in a recent Globe and Mail article this week. While I agree some Canadians may regard “dividend investing as gospel” I’m not one of them. I invest in low-cost, diversified ETFs and have done so for >10 years. I also don’t search for nor chase high-yield stocks either. Sometimes higher yields just happen as a result of depressed stock prices. Same goes for some ETFs actually…

Now, with that out of the way, since most of you don’t pay for the G&M behind their paywall (like I do), Ian suggested some low volatility ETFs could offer “a decent dividend yield but with more diversification than a typical dividend fund”.

Not so fast, since his recommendation of iShares XMV is actually down almost twice as much year to date than boring, plain vanilla iShares ETF XIU. Also, from a total holdings perspective, one could argue another one of his selections from the article (BMO’s ZLB – which I do like) is actually less diversified from a holdings perspective than XIU (47 holdings compared to 60 holdings).

Look, I’m all for ETF investing, including dividend ETFs or not. I own a few low-cost indexed ETFs and always will. But let’s remember before shaming any investors – all investors are different. I suspect no two dividend investors are the same just as much as some indexing fans like Ian don’t have the same exact portfolio composition either. To assume otherwise is foolish.

Argue away.

No arguing with this transparency. Robb Engen shared exactly how he invests here.

Physician on FIRE highlighted how his investing approach has changed since taking early retirement. He is a bit more risky and dabbles with some alternative investments.

Nice to see with some dividend cuts to my portfolio earlier this year, I’ve offset those with two (2) 10%+ recent dividend raises from stocks within my RRSP:

  • Waste Connections (WCN)
  • AbbVie (ABBV).

I hope to have another dividend income update soon. Until then, check out this juicy income update from just a few week back!

Dale Roberts mentioned divesting from fossil fuel companies is now just a click away with this new set of iShares ESG funds.

Last but not least – don’t forget about this book giveaway underway about income investing!

Income Investing Explained – Interview and Giveaway

I’ll be back with more content and a reader question of the week – next week!

Partnerships and Deals – Invest with confidence and save $$$

Thanks to my passion for personal finance and investing, some great companies want to offer deals. As a reader, you might as well take advantage of them although there is never an obligation. 

From my Deals page:

Happy Investing!

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're very close to realizing two major money goals: owning a 7-figure+ investment portfolio along with no debt to start semi-retirement with. Find out how we did it, what's next, and what you can learn from me to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

10 Responses to "Weekend Reading – Shaming dividend investors, income for life, all about pensions and more #moneystuff"

  1. Mark: Thanks again for mentioning my book. I appreciated the questions and welcome any others.
    10 years is really not what I’d consider long-term and not enough time to really access how your portfolio will do, before you need to begin to live off your savings. This is even more important for those without a company pension.
    At least with Income investing, you’ll see the income your investments provide, generally grow each and every year. The longer one follows the strategy, the better idea one will have about how much income they can expect during retirement, without needing to sell shares.

    Reply
    1. Fair 🙂 I’ve been a DIY investor for 20+ years and a dividend + low-cost ETF index investor for 10+ now but I do believe I have enough information to make some choices in the future about whether I can live off my portfolio now or need more time to invest. It is definitely the latter for me.

      People without any company pension will certainly need to make some choices when it comes to investing risk, amount of cash they want as an emergency, and how to draw down their personal assets in a way that is meaningful to them.

      I’m learning more and more for us that asset decumulation is not an easy puzzle!

      Have a great weekend,
      Mark

      Reply
  2. “I’m learning more and more for us that asset decumulation is not an easy puzzle!” that’s for sure. It struck me how fortunate I am to have assets to decumulate.
    1.6% for a four year fixed – wow. May I ask who that is through? Major bank or independent? I saw True North offer a 1.59% for a five year fixed.
    Enjoyed Freds’ books. “Consider the “nuclear” option of using a reverse mortgage, later in life.” I’m sort of doing this now through my HELOC. Have you read “Die with Zero”? Some interesting ideas especially around legacy planning and charitable giving.
    Looking forward to an article from Maria.
    Thanks for putting this together.

    Reply
    1. I got our mortgage through a major top-5 bank actually. I thought that was pretty good overall so I jumped on it with various pre-payment privileges too 🙂

      I have not read that book – do you recommend?

      We hope to be in a position of charitable giving in a few years ourselves – I suspect that is where some legacy might come in along with some $$ to our nieces and nephews.

      I have to edit Maria’s article soon!
      Mark

      Reply
  3. Dividend investing is such a contentious issue and it doesn’t have to be. People can like dividend companies for purely behavioral reasons, or because they want to have a value tilt in their portfolio. Or, something I often see, is that they want to pick stocks and limit their focus to less risky companies.

    People groan about how total return is what matters, but of course everyone knows that. Over the past decade, we’ve seen value-oriented companies lose out to more growth-oriented. As a result, it’s never been easier to talk down to dividend investors, whose portfolios tend to be value-oriented. One can’t know for sure whether value will continue to lag, but the point is I don’t think many people are buying into dividend companies simply because they think they’ll outperform. A lot of dividend investors are just assuming (implicitly or not) that risk-adjusted returns for dividend-focused companies are better. That means their portfolio could lag, but it could also be less risky.

    Anyway, another great roundup Mark. Thanks for all the insightful content!

    Reply
    1. Thanks Loonie. With some investors, advisors, journalists, others – there is very much a desire to “be right”. I don’t have that gene but I can appreciate others have it and need to express it.

      At the end of the day, whether you invest in GICs, Bitcoin, keep cash under your mattress, etc. that’s your personal business and really nobody else’s since the only goals, risks and issues that really matter in life are your own.

      There are lots of reasons and ways to invest and they all have pros and cons in my book!

      All the best to you 🙂
      Mark

      Reply
    1. I prefer not to say publicly but it was one of the big-5 banks. We got 1.69% on our renewal offer. I tend to use RateSpy for my deals. I know the owner of that site. Have you checked out RateSpy Dany? Hope that helps!

      Reply
        1. Ya, low rates are not good for savers but good for leverage. The challenge is, I would argue, how many people should have any leveraged investing at all? Very few I think since lots of debt seems unmanageable for many.

          Thoughts?
          Mark

          Reply

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