Weekend Reading – Socially Responsible Investing, calling out geoarbitrage, mortgage advice to millennials and more!
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.
I’m still on vaacaaaation! 🙂 For a few more days…
I have some errands to run today and I might go for a bike ride this afternoon albeit it is very hot in Ottawa today so will need to hydrate frequently!
It feels like 34 Deg. C. now and likely to get warmer!
To my fans, friends and dedicated readers to the U.S., Happy Independence Day!
I hope you enjoy your celebrations! Stay well and safe!
The Sunday Investor wondered if socially responsible investing is really worth it. He looked at the Jantzi Social Index ETF (XEN) and compared it to another popular Canadian ETF (XIU) you could own.
(Personally, for the higher fee (0.55% MER) I’m not convinced with XEN over XIU along with the fact that the top-5 stocks comprise > 40% of the XEN holdings. That’s not overly diverse.)
Our Next Life went after geoarbitrage and other important subjects some overlook in the FIRE movement.
“If you’ve been planning a retirement overseas, I know this is not a welcome perspective. But it’s important to confront what geoarbitrage really is: using our socioeconomic and geographic privilege to take advantage of others’ worse conditions without changing those conditions for them.”
Dale Roberts at Cut The Crap Investing took a look at Horizons Canadian Dividend ETF (HAL) and the AI technology behind it.
Interesting stuff for sure but I don’t invest in any Canadian dividend ETFs and likely won’t ever again.
Impressive stuff by Our Life Financial when she tallied up her passive income year to date – a whopping $34,394.48. Nice to see I inspired you to put an hourly wage to your income!
Christine Benz confessed she was a former ‘FIRE’ skeptic. Her closing argument is something I’ve been thinking and writing about for years on this blog:
“In the end, I’ve concluded that the “retire early” part of FIRE is a bit of a distraction from the really important part of the movement: the value of mindfully allocating our precious time and money in a way that aligns with our values, life goals, and joys.”
This was my article from the week that was:
GenY Money has some advice for your emergency fund. We keep our emergency fund in a savings account as cash – ready to access if/when needed. There is no way I would use our TFSA nor RRSP for that fund.
Tom at Dividends Diversify has some solutions for some serious money problems.
Reader question of the week (adapted for the site):
I passed on the ebook to my daughter. She is looking to buy her first house however I thought she should wait to see how the market reacts to COVID-19 events.
She has lots of questions but wanted to wait until she got closer to actually buying.
Maybe you have some insights you can share on the following:
- what will the market do over the next year?
- what are the important things to look for when deciding on a mortgage?
- any thoughts on alternative lenders?
Being the largest financial investment she will probably make, she wants to get it right.
All the best!
Thanks for your readership and for your questions. I’ll tackle them as best I can!
Q1: what will the market do over the next year?
Boy, wouldn’t we all like to know that one??? 🙂
I recently wrote about how I intend to take advantage of short-term market volatility here so I would offer that guidance to you, your daughter or anyone else actually: continue to be a buyer of assets to buy and hold long-term.
When it comes to the real estate market and future predictions I wish I had all the answers. Locally, I thought it would calm down a bit in Ottawa but it’s still rather hot and seems to be a seller’s market. Prices are jumping higher over time here.
Will that change long-term with COVID-19 impacts really hitting people harder this year? Hard to say but I would definitely argue home ownership is not only an investment decision but a lifestyle decision so definitely ask her to think those things through. Owning a home (or a condo in our case) is neither right nor wrong but it’s far more than a financial decision is what I am saying…
Q2: what are the important things to look for when deciding on a mortgage?
I’ve got a post you can share with your daughter:
More succinctly in terms of actionable steps:
- I would ensure she is pre-approved prior to any property hunting.
- I would encourage her to have a sizable down payment; in cash ready to go; strive for at least 10% and ideally closer to 20% to put down to avoid major mortgage insurance premiums.
- Instead of borrowing to the max always borrow what you can afford. I think a good ratio is to ensure all her housing costs (mortgage, property taxes, maintenance, utilities, updates/upgrades/furnishing costs, etc.) are <40% of net income. That leaves money leftover to eat, save and pay for any transportation costs. I think getting the right balance between any housing and transportation costs are keys to becoming financially independent.
Q3: any thoughts on alternative lenders?
Ya, I’ve never used one for a few reasons. One, I’ve used a mortgage broker to help me negotiate my last two mortgage terms and will continue to do so. I feel they are working with my best interests in mind AND the good ones can negotiate with the larger institutions rather well based on their experiences and rapport. Two, I feel with a larger financial institution I have obtained great prepayment privileges. That has been a big key to killing off my mortgage debt rather quickly. Three, I would be worried about any private lender in particular because those companies can and often do charge higher interest banks than some big banks that deal on much higher volumes. Besides, if credit gets tight those smaller lenders are the first to get squeezed!
I hope that provides some insights and support to her decision making!
Happy investing all and thanks for your reader questions,