Weekend Reading – Tips for millennial investors, early retiree primer, asset allocation ETFs 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.
While I enjoyed the time-tested advice in The Millionaire Next Door, I think this personal finance classic left out a major ingredient on the path to financial wealth. Read what that missing element is here.
Canadian Financial Summit
Before we get to the Weekend Reads, just a quick reminder about my upcoming talk at the Canadian Financial Summit: How I’m preparing my portfolio to fund my early retirement.
With your free ticket, you’ll be able to watch my presentation along with some of the “who’s who” in the industry to learn about the following and much more:
- How to invest better, easier, and more efficiently
- How to earn more moneyby creatively advertising innovative side gigs
- How to see through financial jargon meant to confuse you (don’t fall for it)!
- How to get the most of out of your TFSAs, RRSPs, and RESPs!
- How to avoid crippling feesand terrible financial advice (beyond reading my blog…)
- How to legally avoid Canadian taxationwhen you move for work or retirement
- How to drawdown your nest eggin retirement & what a safe withdrawal rate is
- How to minimize costs and save cashwhen doing home renovations
- And MUCH MORE!
Enjoy these articles including my detailed answer that follows these links – and see you next week for new posts including a feature from a successful investor who invests both passively and actively. Those approaches can exist in retirement harmony.
This early retiree believes financial independence hinges on your spending. I would agree. The less you spend or need to spend, the less you need to save. So much so, I also wrote a post some time ago about this very subject but I included my own numbers for better details. I will be updating this post now that we’re into the condo and our numbers are starting to look at bit different…
I get annoyed when I read generalizations about dividend investors – such as those who believe – dividend stocks are being touted as the next bonds. This is, of course, is absolute nonsense: stocks are not bonds and bonds are not stocks. Who believes that? I would be curious.
The tipping point has arrived in the U.S. – passive money management now outpaces active money management.
How many income streams should you have? Canadian Budget Binder has your answer.
Want investing tips as a millennial investor? Here are a few:
- Read this post. I honestly believe many millennials can get wealthy eventually by doing these five things over the coming decades.
- Need some help getting started? Might as well save money doing so.
While you might think nobody wants to bother with you; to help you to invest (meaning investment firms would rather score the big fish than someone just starting out), there are ways to invest when you have only a few thousand bucks to your name. Here are some options based on my partnerships (never an obligation):
For those investors who truly want to DIY invest, pro Justin Bender had some advice for choosing your ideal asset allocation ETF after you open your discount brokerage account.
Back to Justin, his advice was simple:
- “As a general rule of thumb, you shouldn’t invest in any of these ETFs if you require the cash back in less than 5 years.” (This advice wouldn’t apply to millennials – at least not from me – you have decades of returns on your side!)
- If you need the cash in 5–9 years: consider VCIP or VCNS.
- If you won’t need the cash for 10–14 years: consider VBAL.
- If you don’t need the cash for 15–19 years: consider VGRO.
- “If you’re investing for 20 years or more(and you are comfortable dialing up your portfolio risk to eleven), the All-Equity ETF Portfolio (VEQT) might be right up your alley.” I personally think this is one of the best ETFs for a millennial. You have decades of investing time ahead of you and you might as well take full advantage of stock gains (and falls – to buy your stocks cheap!) where you can.
My asset allocation ETF take:
If any stock setbacks (or market noise) freaks you out – consider investing in VGRO or XGRO or ZGRO as your asset allocation ETF. You’ll get long-term returns from stocks and some cushion via bonds when markets tank or correct. A “GRO” fund will also help support your investing behaviour. That’s critical. Whatever you avoid trading in and out of is likely a good fund for you. As a millennial investor or any investor, you make money by time in the market – not timing the market.
Reader question of the week!
I have a question regarding diversity. I have been following you for a while now and know you are a DGI (dividend growth investor), and have built up your dividends to a substantial amount. Impressive.
That being said, are your stocks mostly Canadian? (I am a new investor and have very few stocks of blue-chip Canadian companies.)
So, should I be concerned about diversifying my portfolio at the early stages of growing my dividends? Do you have U.S. and international stocks in your portfolio?
How important is it to diversify? Please let me know your thoughts.
Thanks for your question (and kind words).
Yes, many of my stocks are Canadian. I’ve listed a few of my favourite Canadian stocks in this post here – where I discussed my income strategy and plans for semi-retirement in the coming years.
That said, I also own a few U.S. stocks (and have done so for many years) for diversification beyond Canada’s borders. Further still, I also own U.S. listed ETFs like VYM so I take some of the stock selection process totally out of the equation. In doing so, I can ride the returns of the 400+ stocks that make up the FTSE® High Dividend Yield Index – for a dirt-low fee.
I don’t currently own an international ETF although I have owned VXUS in the past.
Should you be concerned about diversifying your portfolio at the early stages?
Tough question to answer since I don’t know your tolerance for portfolio risk, your other assets in the bank, or your investing goals. Consider these questions and your answers to them as part of your financial plan. Answering these questions will definitely help you with your question above.
I know for me, I was not concerned about diversification out-of-the-gate. Probably because I was a bit naïve and immature as a DIY investor 10-years ago.
Fast forward to today, I know there are individual stock risks. I know Canada only makes up 3% of the world market. I know, sometimes, Canada and U.S. and international stocks do not move perfectly in lock-step. So, I’m slowly buying up more U.S.-listed ETFs to diversify away from Canada while DRIPping / reinvesting all Canadian and U.S. dividends paid as much as possible to earn more shares of the stocks I own commission-free.
For most investors, I think diversification across companies, sectors and geographic borders can work well long-term for this simple reason: you can reduce portfolio risk while maximizing potential return.
This is because different investment products or assets may react differently to the same event.
Diversification will help you because ultimately you may not react to any market event – instead, you’ll simply stick with your investment plan that you’ve designed all along. Remember when it comes to investing, good investing behaviour when combined with low fees trumps all.