Weekend Reading – Shaming dividend investors, income for life, all about pensions 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.
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!!
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.
I enjoyed this list of moat-y Canadian stocks to buy and hold for the years to come. Thoughts on this list??
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:
- 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).
- Start your Canada Pension Plan (CPP) later in life – something I wrote about here.
- Use some (not all), maybe between 25-50% or so of your RRIF assets to purchase a non-indexed annuity.
- 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.)
- Consider the “nuclear” option of using a reverse mortgage, later in life.
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.
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.
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!
Last but not least – don’t forget about this book giveaway underway about income investing!
I’ll be back with more content and a reader question of the week – next week!
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