Weekend Reading – Stock splits creating value, getting started, how many DRIPs are enough 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.
You can find my last Weekend edition here where I discussed why I bought low-cost tech ETF QQQ, more on the safe withdrawal rate (SWR) debate and more.
This week, travel expert Barry Choi was on my site to answer a question: is travel hacking still worth it?
Too bad about the Raptors loss last night but they’ve had a great two-year run.
Even without some Raptors playoff basketball enjoy the weekend!
This 20-something figured out the major flaw in her FIRE (Financial Independence, Retire Early) journey – she was running away from something, not towards something.
Dale Roberts did his best to make sense of the markets this week.
On that note, these are not easy times to be an investor. More patience than ever before seems to be necessary. My plan remains intact (owning dividend paying stocks and some low-cost ETFs for extra diversification). I reinvest most dividends and distributions paid to buy more shares of what I own commission-free using DRIPs.
While DRIPs are fine and good, I’ll need to invest some cash in the coming months. I’m starting to look forward (a bit) to how I’m going to invest inside our Tax Free Savings Accounts (TFSAs) in 2021. We’re saving up for those contributions now as part of these goals.
I’m considering the following:
- More Canadian renewable-focused energy stocks such as Algonquin Power (AQN), Innergex Renewable (INE) or a few others? OR
- Owning more of what I already own: low-cost XUU (iShares Core S&P U.S. Total Market Index ETF) – that owns these diversified U.S. funds:
Thoughts? I’m leaning on the latter right now for the extra diversification.
Bryan Borzykowski wrote about the latest Tesla and Apple stock-split craze and summarized the perceived value creation for investors this way:
“The bottom line is that stock splits don’t mean a whole lot to investors other than perhaps providing some added flexibility. If you wanted to sell some of your Apple stock, but didn’t want to part with it all, you can now unload some shares and keep the rest. Otherwise, don’t get too excited about all those new shares in your portfolio.”
A millennial emailed me this week to ask how to get started with investing. I directed them to his post but I also shared the following prerequisites that worked for me:
- Do a net worth calculation. Understand your assets and liabilities. If you have lots of liabilities I suggest you pay those down to a manageable level first.
- Following your net worth assessment, understand your cash flow for investing. If you have money to spare/to invest, great, start figuring that out but don’t invest until #3 is in place.
- Establish an emergency fund. We’ve always had one and we keep ours steady at this level.
I believe once you have any small emergency fund in place then you’re able to withstand some small “what ifs” in life while striving to meet some longer-term financial goals. Comment away. I’d like to hear your take on that…
GenY Money shared what CDIC and CIPF cover.
Reader question of the week (adapted slightly for the site):
I really enjoy your site and your personal journey. You write about dividend reinvestment plans often and my question is: will you ever stop running those DRIPs and take the cash instead? You could likely be more strategic with your purchases (as cash builds up) as you well know. I mean, how many DRIPs are enough anyhow?
Curious to hear your thoughts. Thanks.
Great questions and thanks for your readership.
Your email and questions are very timely actually.
I’m likely going to stop some DRIPs in my taxable account rather soon for the following key reasons:
- I’m actually getting tired of calculating my adjusted cost base for the Canadian dividend paying stocks that I own there – such that – I need to know what that is for calculating any future capital gains or losses when I sell any taxable assets. I want to simplify my life. I don’t however have any intention of selling anything right now.
- I would like to start moving more non-registered money to our TFSAs in the coming years to shelter more tax. I wrote about that process and the considerations before.
While I will shut off the DRIP taps in my taxable account I will however keep all dividends and distributions reinvested inside our TFSAs, RRSPs and my LIRA.
How many DRIPs are enough? That’s a “it depends” answer for me. There is no hard and fast rule. Many investors, including myself, love DRIPs for many reasons that you can read about here.
I’ll keep that DRIPping process “on” inside those tax-free and tax-deferred accounts for the coming years until I really need or want to spend the cash in semi-retirement.
Readers, what’s your take on DRIPs? Do you believe in the same compounding power they provide as I do?
I have more reader questions to get to in the coming weeks so stay tuned for those answers. And…keep them coming!
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:
- As a My Own Advisor reader you get full-access, during your FREE trial, to all of 5i’s research reports, all the model portfolios, top companies and best ETFs to own.
- You can use my promo codes when you invest with BMO to save hundreds of dollars right away!
- You can get $50,000 managed free with ModernAdvisor.
- Sign up for commission-free investing with Questrade.
Last but not least I plan on posting my latest dividend income update soon so stay tuned for that 🙂