Weekend Reading – Ways to be too frugal, minimalism, get the big money decisions right and more #moneystuff
Hey folks!
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 got around to posting these articles this week:
What are you saving money for? I know what our goals are and why we are doing that.
How should you invest in a taxable account? I own Canadian dividend paying stocks in that account now that my TFSA and RRSP are pretty much maxed out. How about you?
Based on the overwhelming success of this review and giveaway, I’m going to spend more time interviewing the author of Your Ever Growing Income, Henry Mah in the coming weeks. After I get more answers from this savvy investor and author – we’ll giveaway more books – stay tuned!
BTW – congrats to Paula from BC who won the recent giveaway as well – your book is in the mail.
Best wishes for the weekend and see you here next week!
Mark
Other articles:
Tangerine had an article entitled: am I being too frugal? Examples of extreme frugality go like this:
- Saving money on electricity by using only candles
- Eating tuna fish by can versus buying any other meats
- Taking additional ketchup packets, coffee creamers and other condiments from restaurants as to stock up for your own home consumption instead.
I’ll admit, as university students a bunch of us did the latter bullet from time-to-time AND I even cut my own hair for a few years. That certainly helped us afford buck-a-beer nights during the weekend! You gotta have priorities folks.
Surprising that some folks really don’t know if they have “enough” – or – they remain ultra-conservative when it comes to saving and investing projections. Take Ellen, who is 72 in this investor profile, who will earn $15,000 per year from CPP and OAS and can easily spend at least $80k per year from her portfolio and will never run out of money with her assets (cash ~ $16k; taxable account ~ $680k; corporate account ~ $311k; TFSA ~ $98k; RRIF ~ $681k and no debt). Well done Ellen.
Pretty bang on tweet here – get the big decisions right in life and live your life! Forget the annoying latte factor and go enjoy some nice craft beers this weekend…
GenYMoney is pumping out some great content of late. Here are her lessons after getting rid of 365 things in one year. I know as we downsize to a condo in a few months, we’re doing a crazy amount of donating, gifting and some selling here and there. When I reflect upon what my wife and I really need, especially what we need to be happy with, it’s shocking how much material goods simply don’t matter. What about you?
A fan and contributor to this site, Brian So, shared this definitive guide to critical illness insurance. Smart stuff worth a read to be well informed.
Million Dollar Journey answered the question: what happens to your RRSP and TFSA after you die?
Great article…and for further reading about your RRSP, TFSA, RRIF and non-registered account beneficiaries …check out this post on my site. I totally agree with MDJ, where relevant to you, make sure you consider naming a Success Holder for your TFSA. We’ve done that too.
Have a great weekend folks.
Mark
If you want simple you also have VCN, VCE, ZCN, XIC, XIU, but with small trade costs. Cheaper alternatives to e-series CDN index.
XDIV is good and cheap, but very highly concentrated in financials.
My vote is something you probably haven’t considered – ZLB. May have much less overlap from your current holdings (more diversification?). Robust low volatility methodology. Excellent CDN sector allocations(more utilities/consumer staples+others), outperformer since inception, more cap gains vs dividends = lowest tax?. Rebalanced 1x/yr, low turnover. MER =.39 Set and forget.
Seems like a great product: ZLB.
How are the T-slips managed with this one re: eligible vs. non-eligible income? Any experience?
Looking back at one year for ZLB:
Total distribution = 100%
eligible dividends = 80.2%
return of capital = 5.9%
capital gains = 9.4%
other income = 1.9%
foreign income = 2.6%
non eligible = 0
I’d say pretty efficient.
Very efficient with low ROC and other income.
Okay folks….Here is the scenario….I’m looking for a relatively simple investment product for my non-reg side that I can park long term funds into. I want it to be simple for tax calculations (ACB crap) so I’d rather not have a bunch of individual stocks like I have in the registered accounts to keep track of. Funds for this will be annual payments from a couple of sources totaling in the $15-35K/year range. I don’t mind a bit of an MER. Would prefer to be C$ based to be eligible for DTC. Not looking for exotic stuff, simplicity is the overriding factor. So far I’m considering TD e-series Cdn Index and have looked at XDIV as well. Anything else out there one might look at?
I find XIU is one of the most tax efficient low-cost ETFs out there. Have a look:
https://www.blackrock.com/ca/individual/en/products/239832/ishares-sptsx-60-index-etf#/
lol….I knew this was going to happen. Just like going to a restaurant where I like everything and can’t make up my mind.
Good point on XDIV RB. It is pretty concentrated in the financials. I guess that’s a factor in the Canadian market. ZLB seems to be a well diversified (better diversified) product. I had looked at XIU in the past, not sure why I hadn’t re-evaluated it this time. It sure fits the bill for what I’m looking for. I might end up just flipping a coin but I’m going to watch the trading today to see how active each of them are. Not that that is a huge factor but I like to see a robust market for some reason.
I have now pretty well discounted the e-series for this route. We still have the Dow and Euro e-series in the registered plans to sop up orphaned cash but I don’t see a lot of frequency in trading in this non-reg account to worry about the trading fees too much. Maybe 3-4 buys per year.
Good luck with the decision Lloyd.
XIU is the grand daddy of etfs in Canada. Nothing will come close to volumes if that’s a criteria for you, because it has most of the institutional money. 3x more expensive than the competitors but still seems to eke out a performance edge.
ZLB trades a little over 1M$ in an average day. More fodder…lol
Backtesting since ZLB inception 2013 vs XIU: will it continue? dunno.
10k invested CAGR % final balance$ biggest drawdown% best yr%
ZLB 13.39 22,167 -5.84 28.37
XIU 8.43 16,697 -13.45 21.21
That’s good, nay great, info, thanks RB. I’m not sure why I’d be concerned with volumes as my intent for now is to hold until I’m dead. I should rethink that item as it really is irrelevant in this case. Maybe I could/should do both? Adds additional complexity, so maybe not a great idea.
I might have to go sit on the tractor for a few hours and give this some pondering.
You’re welcome L.
Hope you can follow the little chart stuff that gets messed up on formating on these sites. I used porfoliovisualizer for the data.
I’m sure time on the tractor solves a lot of things. Kind of like me going out for a run and solving worlds problems.
Good luck with the decision.
Brain So- quite the detailed report on critical illness.
Ellen, summary – has done extremely well. No real worries, even if she does little to change. Diversify more to preserve wealth = good, but will likely come at some expense of income. Although clearly her income will well exceed her needs, and with much capital to draw on as a final back up. Exotic investments and big fees from advisors = no good.
Lower etf fees due to competition- always a good thing.
Michael James- I like that plan.
Totally agree. “Exotic investments and big fees from advisors = no good.”
Thanks for the mention Mark! It’s amazing how much stuff we accumulate without realizing it- especially clothes that don’t get worn. I’m doing the 365 things again and so far, I’m in “June” (I do a little check mark for each item per day on my paper day planner).
Our condo purge/condo move has been a big stress-reliever. Less crap, less (to move) home, less to think about and more. Definitely a step in the right direction! All the best.
Ellen:
– Your current RRIF min withdrawal will be $50k per year.
– You should transfer shares In Kind to the TFSA, leaving you to draw at $45k as RRIF taxable income
– You will probably lose at least half of your OAS, so CPP/OAS will provide $10k taxable income
– So your high taxable income will be $55k
– If you draw $30k in dividends from your non-reg accounts, your total taxable income will be $96k and you’ll probably have to pay $20k-$25k in taxes.
– Your net income after the above should be around $60k=-67890.
If you wanted more after-tax income, increase your draw of non-reg dividends, as you will already be paying the tax on them.
With the above and no change in your portfolio, you should never out-live your investments, if anything they will grow in value, as will your annual income.
“Your net income after the above should be around $60k=-67890.”
Impressive isn’t it? An income-level that most 70-somethings would dream about…
Just checked my holdings and was surprised to find I also have 70% invested in just four stocks. Don’t change Ellen, just keep collecting those rising dividends.
I really enjoy reading your replies on Mark’s site Cannew. Your comments and also those of other posters are very educational; there is nothing like the experiences of other investors to give me confidence I’m on the right track. While my portfolio is quite a bit smaller than Ellen’s I too have a lot invested in a small number of stocks.
Thanks Gary: I think quality always out-performs quantity.
You are so right Cannew and that applies many other facets of our life as well!
Totally agree, I learn from other investors as well. Important stuff/perspectives to learn from even if you don’t subscribe to their decisions!
The more I read of the above article the more amazed I am that she’d even consider the “Expert” advice.
“If Ellen shifts to a portfolio of 50-per-cent stocks, 20-per-cent fixed income and 30-per-cent alternative income, she could expect a rate of return of about 6.5 per cent a year, the planner says. “She would be earning that return with substantially less risk.” She would have investment costs of about 1.25 per cent, 60 per cent of which would be tax-deductible in her non-registered and corporate accounts, he says”.
Sure as he collects between $19,000 to $22,000 in fees and she looses about half of her annual income!
“This 72-year-old’s portfolio is 97% in stocks. Is she taking on too much risk as retirement nears? She does her own investing, choosing stocks that pay steady and rising dividends with good management and solid earnings”.
“To help manage risk, the planner suggests a portfolio that is diversified geographically and by sectors. He also recommends asset class diversification by adding both fixed-income (bonds) and alternative income investments that are carefully vetted by an investment counsel firm for sale to its clients”.
What I find missing is how much Income her current portfolio generates. With a portfolio of probably $1.5 to $1.7 Million (She has roughly $1.8-million in savings and investments with 97% in stocks) and having invested as she has, I would bet those rising dividends are kicking out at least $85k to $110k per year. If not, they are not “rising dividend stocks”.
To suggest changing her investment strategy is DUMB! Even if the market tanked I doubt her dividend income would decrease. The dividend growth may slow but likely not drop.
Other than increasing her cash wedge and some fixed income, i.e., via more GICs as she gets older…such as a GIC ladder, I wouldn’t change a thing. I wouldn’t fix what isn’t broken!