Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Living the Dividend Dream

Posted By |

 

By Mark Seed

Special to Financial Independence Hub

Incredibly, there are some investors out there truly living their dividend dream.

Today’s post highlights one of those investors for investing inspiration…

But let’s back up a bit …

Some time ago … yours truly wrote a controversial post about the intent to live off dividends and distributions from our portfolio.

Indexers gasped and likely unsubscribed to my site!

Well, even though some considerable time has passed since that post my thinking and income goals remain the same – as least in part for semi-retirement planning:

I continue to believe “living off dividends” (and/or distributions) should work out well for us.

And I’m not alone.

For today’s post, I’m profiling a very successful investor …. who not only dreams of dividends but is living the dividend dream right now.

Living The Dividend Dream

Welcome to the site for this latest investor profile, The Dividend Dream.

Living the Dividend Dream - Investor Profile

Source: https://twitter.com/DreamDividend

I look forward to sharing this interesting new investor profile below but first up, a recap about why dividends and distributions continue to matter to me/us on our income journey.

Yes, my approach to live off dividends remains alive and well in 2023!

MOA Dividend Income Target 2023

My dedicated page including many of the stocks I own. 

Here are some reasons why some investors couldn’t care less about dividends:

  • The trouble with any “live off the dividends” approach is that you’d need to save too much to generate your desired income. Fair. 
  • Dividends are not magical – there is nothing special about them. Sure, of course they are not magical or free! 
  • A dollar of dividends is = a one dollar increase in the stock price. True. 
  • Stock picking (with dividend stocks) is fraught with under performance of the index long-term. I’m not convinced about that. 
  • You can never possibly know long-term how dividends may or may not be paid by any company. Fair. 
In many respects these investors are not wrong and/or are not pointing out some challenges with DIY stock investing.

You do need a bunch of capital to generate meaningful dividend income.

Dividends are part of total return.

Stock picking to some degree opens opportunities for market under performance.

However, my responses and approach to some of these items are as follows, since I believe dividend investing offers far more good than harm:

  • While market underperformance may occur (that is subjective and up to personal investment success, luck, and other factors that are very difficult to substantiate), dividend investing offers up some essential long-term investing discipline, for me at least, to stay the investing course, including when markets tank in any given year. If anything, I buy more!
  • This way of investing provides HUGE motivation and inspiration – to keep investing, in any market climate. The way I see it: money that makes money can make more money.
  • Dividend investing, seeing the tangible money flow into our accounts month-after-month, reinforces my belief that nobody cares more about my financial well-being than I do (except for my wife!). Ha.

All kidding aside…dividend investing and having a plan associated with building ever-growing income offers something that some other ways of investing just can’t readily offer: support for the emotional discipline to execute this strategy, come heck or high water, or even until the end of all capitalism as we know it!

But that’s just me and our plan.

Your mileage might vary and that’s OK.

There are many ways to invest and many reasons that folks invest in what they do.

That said, dividend investing is far from any local phenomena.

I reached out to The Dividend Dream for her to share her reasons for investing in dividend paying stocks, including why dividends matter (or not!), and any considerations she has for any investors at any age on their investing journey. [Editor’s note: for now, “she” wishes to remain anonymous, as explained below; hence there is no photo-JC]

Living The Dividend Dream – Dividend Dream – welcome to the site! 

Hey hey … thanks for having me. I appreciate the invite!

Before we dive into your investing thesis, why you own what you own, and much more – tell us a bit about yourself.

Well, what can I say. People call me The Dream, Dream Girl, aka Dreamer.

I’m anonymous for now as I’m still working a bit, although I entered into a “freestyle” work optional state this year (2023). I’m a businesswoman, living in the southern United States. My field is strategy and marketing, and I went to a top MBA school. I’m in my mid-40s and am married to a wonderful woman who is a professor. I am the breadwinner in the family – by far – so I feel financially responsible for our future. And yeah … that’s the skinny, essentially.

Interesting!

I feel personal finance is personal – a constant refrain on this site. What I mean by this is: everyone’s financial situation is different, and they have personal reasons to invest the way they do, to realize their individualized goals.

How did you get started with investing?

I actually have been thinking about “retirement” ever since I was a teenager. Really, it’s always been more about being financially secure and independent. My family fell on some hard times and it scared me. I didn’t really have any choice but to rely on myself. I held several jobs in high school and throughout college. So … long story short, after college I started like everyone else with a 401(k) at work, trying to max that out every year. But when I started getting into my 30s that’s when I started to really breakout out of the mold, rolling past 401(k)s into investment accounts where I had complete control and could pick to hold whatever assets I wanted, not just the choices provided by an employer.

Awesome. OK, let’s get into it. Why dividend investing? Why do you invest the way you do? Continue Reading…

The Vanguard Effect on Mutual Funds, Fees and Performance

Posted By |

 

Vanguard is best known in Canada for its low cost, passively managed ETFs. Indeed, since entering the Canadian market in 2011, Vanguard now boasts a line-up of 37 ETFs with more than $40 billion in assets under management – making it the third largest ETF provider in Canada.

Keeping costs low is in Vanguard’s DNA. Their low fee philosophy hasn’t only benefited investors in Vanguard ETFs – it’s helped drive down costs across the Canadian ETF industry. This process has come to be known as the “Vanguard Effect.”

The cost of Vanguard ETFs is 54% lower than the industry average. Since 2011, they’ve cut their ETF’s average MER by almost half – saving their investors more than $10 million.

The Vanguard Effect has made a noticeable difference for ETF investors in Canada, but the vast majority of Canadian investments are still held in actively managed mutual funds.

  • Mutual fund assets totalled $1.896 trillion at the end of May 2021.
  • ETF assets totalled $297.4 billion at the end of May 2021.

The Vanguard Effect on Mutual Funds

Vanguard took aim at the Canadian mutual fund market three years ago with the launch of four actively managed funds, including the Vanguard Global Balanced Fund (VIC100), the Vanguard Global Dividend Fund (VIC200), the Vanguard U.S. Value Windsor Fund (VIC300) and the Vanguard International Growth Fund (VIC400).

Ticker Name Category Management Fee MER
VIC100 Vanguard Global Balanced Series F Global Equity Balanced 0.34% 0.54%
VIC200 Vanguard Global Dividend Series F Global Equity 0.30% 0.48%
VIC300 Vanguard Windsor U.S Value Series F US Equity 0.36% 0.54%
VIC400 Vanguard International Growth Series F International Equity 0.40% 0.58%

With three years under their belt in the Canadian mutual fund space, I thought I’d check in on the performance of Vanguard’s mutual funds.

While investors can’t glean much over a three-year period, the Vanguard funds have performed well compared to their benchmarks and industry peers.

  • Vanguard Global Balanced Fund (VIC100): +9.28% – VIC100 is a global balanced strategy with a strategic mix of 35% fixed income and 65% equities. It was designed to mirror the Vanguard Global Wellington Fund offered in the US – a 5-star rated fund by Morningstar. VIC100’s returns place it in the first quartile of its Global Equity Balanced category since inception.
  • Global Dividend Fund-Series F (VIC200): +6.06% – VIC200 invests in higher dividend yielding securities across the globe. Its style has been out of favour for most of the time since inception as markets have preferred high growth companies that don’t pay dividends. That has changed Year-to-Date (YTD), and VIC200’s returns are in the first quartile of its Global Equity category.
  • Windsor U.S. Value Fund-Series F (VIC300): +11.28% – VIC300 is the sister fund to the Vanguard Windsor Fund, offered in the US. The fund offers exposure to US large and mid-cap value stocks. Its value orientation was out of favour for the last few years but it’s ahead of its Russell 1000 Value Benchmark after fees since inception. As value has roared back, the fund is in the first decile of the US Equity category in Canada YTD.
  • International Growth Fund-Series F (VIC400): +19.20% – VIC400 has been a top performing fund since inception. It offers exposure to stocks primarily outside of North America. It mirrors a fund of the same name offered to US investors since 1981. The US fund is rated 5-stars by Morningstar. VIC400 has outperformed its benchmark by 12% per year.
As of Jun 30, 2021 – Peers beaten in the fund’s Morningstar category
Ticker Name Category Annlzd 3 Yr % Peers beaten 3 Yr
VIC100 Vanguard Global Balanced Series F Global Equity Balanced 9.28% 79%
VIC200 Vanguard Global Dividend Series F Global Equity 6.06% 12%
VIC300 Vanguard Windsor U.S Value Series F US Equity 11.28% 30%
VIC400 Vanguard International Growth Series F International Equity 19.20% 98%

[Editor’s Note: in September, Vanguard Canada launched two more mutual funds: VIC500 and VIC600]

I recently had the opportunity to speak with Tim Huver, Head of Intermediary Sales at Vanguard Investments Canada about the success of their mutual funds and what we can expect in the future. Continue Reading…

PWL Capital: Model Portfolio Returns for 2022

Posted By |

By Justin Bender, CFA, CFP  

Special to Financial Independence Hub

Unless you were literally born yesterday, you’re probably already aware that 2022 was an extraordinary year for investing … extraordinarily bad, that is. It hardly mattered which asset mix you invested in. Both stock and bond markets experienced double-digit losses, so even conservative investors with bond-heavy holdings saw their portfolio values plummet.

That’s investing for you. We may not like it, but we actually expect some years to serve up heaping helpings of realized risk, sometimes across the board. It’s the price we pay to expect these same markets to deliver longer and stronger runs of future returns.

From this perspective, we hope you’ll keep your eyes and your asset allocations focused on the future as we review the 2022 performance for the Vanguard, iShares, BMO, and Mackenzie asset allocation ETFs.

Before we look at the 2022 returns for our asset allocation ETFs, let’s check out the year-end results for their underlying holdings, starting with the equity ETFs.

2022 Equity ETF Returns

Canadian equity ETF returns were similar across the board, with losses of around 6%.

Disappointing, for sure, but their performance was still better than that of global stock markets, which lost 12% in Canadian dollar terms. That’s in large part due to the Canadian stock market’s overweight to energy companies. The energy sector happened to have a stellar year, returning over 50% during 2022.

U.S. equity ETFs also ended 2022 on a low note, losing around 20% in U.S. dollar terms. During this time, the U.S. dollar appreciated by 6.8% against the Canadian dollar, reducing the loss for unhedged Canadian investors. Once we factor in the return bump from U.S. dollar exposure, our selection of U.S. equity ETFs lost around 12%-14%, in Canadian dollar terms, net of withholding taxes.

BMO’s trio of U.S. equity ETFs had noticeably higher returns than the others. This is largely due to the methodology used to construct the S&P indexes tracked by BMO’s ETFs. For these indexes, an S&P index committee selects which companies to include in each index. The indexes tracked by the Vanguard, iShares, and Mackenzie ETFs have a less subjective process. This means there is more active decision-making going on in the three S&P indexes tracked by BMO’s ETFs, which led to a wider short-term return difference between BMO and the rest of the more passive index-tracking providers in 2022.

International equity ETFs ended the year on a disappointing note as well, losing between 8%-10%.

Two components explain most of the performance differences among our international ETF providers: Continue Reading…

Warren Buffett calls 2022 a good year for Berkshire

Posted By |

By Dale Roberts, cutthecrapinvesting

Special to Financial Independence Hub

Many investors look forward to the annual letter from Warren Buffett. On Saturday, Berkshire Hathaway reported earnings and Mr. Buffett offered commentary and delivered his annual letter to shareholders. The company reported record operating profits and also beat the market handily in 2022. Fearing a recession in 2023, more investors put their trust (and money) in the hands of the world’s greatest investor. Berkshire Hathaway is the largest position in my wife’s accounts. We’re listening to Warren Buffett on the Sunday Reads.

Warren Buffett’s Berkshire Hathaway Inc on Saturday reported its highest-ever annual operating profit, even as foreign currency losses and lower gains from investments caused fourth-quarter profit to fall. Businesses generated $30.8 billion of profit despite rising inflation. Buffett and friends also increased their cash position to near $130 billion.

Sitting on a massive cash pile

The investment giant held ~$128.7B of cash and short-term securities at Dec. 31, 2022, vs. ~$109.0B at Sept. 30. That’s even with the company acquiring Alleghany Corp. in the last quarter of 2022. Owning or purchasing Berkshire delivers an immediate cash hedge, in “pretty good hands”. Should we get a recession, the Berkshire teams will go shopping in a meaningful way. Corrections are when they do their thing and create the conditions for outperformance.

Berkshire’s share price rose 4% in 2022, far outpacing the S&P 500 which fell 18%, reflecting Berkshire’s status as a defensive investment. I have long suggested that investors consider a position in Berkshire (BRK BRK.B). When the going gets tough, Berkshire often gets going.

In the COVID correction Warren Buffett did not get his chance to be greedy. Massive stimulus quickly ended the shallow recession and stock market correction. From the chart above, we can see that the market started to embrace Mr. Buffett and the stock. Will Mr. Buffett get the chance to spend a good chunk of his $130 billion in a recession? Who knows. But I like the idea of having that cash pile in good hands.

You’ll see just a little bit of outperformance from the time of my article, ha. 71% vs 28%.  But to be honest, the S&P 500 gets a little boost for that Author’s Rating evaluation, they did not includes the dividends. But it’s still not a fair fight.

This is not advice, but you might consider Berkshire Hathaway as part of your portfolio defense. For Canadian dollar accounts you can purchase Berkshire Hathaway as a CDR listed on the Neo Exchange. Those are currency hedged.

Dale Roberts is the owner operator of the Cut The Crap Investing blog,  and a columnist for MoneySense. This blog originally appeared on Cut the Crap Investing on Feb. 26, 2023 and is republished on the Hub with permission. 

ETFs to generate Retirement Income

Posted By |

 

By Mark Seed, myownadvisor

Special to the Financial Independence Hub

Image courtesy MyOwnAdvisor/Dreamstime.com

Let’s dive in!

My retirement income plan and options

I’ve been thinking about my semi-retirement income plan for some time now.

Months ago, I captured a list of overlooked retirement income planning considerations that remain very relevant.

There are obvious ways to generate retirement income but I suspect some might not appeal to you for a few reasons!

  • Option #1 – Save more. Sigh. I doubt most people will like this option, I don’t! However, more money saved will help combat inflationary pressure, rising healthcare costs and longevity risk.
  • Option #2 – Work longer. Double sigh. If you didn’t like option #1, you might not like this one! Working longer into your 60s or potentially to your 70s might be the reality for some with a low savings rate.
  • Option #3 – Spend less. Spending less than you make seems simple but not easy!

Simple but not Easy

Meaning, the path to a well-funded retirement is usually (always?) spending less than you make, investing the difference, and growing that gap over time. This has largely been our plan – to let the power of compounding do its thing – but that does take discipline and time. Investing patience is a virtue.

Save, invest, earn

Our semi-retirement income plan has us leveraging a mix of income streams in a few years:

  1. Earn income from part-time work – to remain mentally engaged but also to fund some income needs and wants in our 50s.
  2. Spend taxable (but tax-efficient) dividend income from our basket of Canadian stocks.
  3. Make strategic Registered Retirement Savings Plans (RRSPs) withdrawals in our 50s and 60s.

We’re not quite “there” yet in terms of having 1, 2 and 3 running smoothly to meet our semi-retirement income needs yet, but we are getting there and making some lifestyle choices accordingly…

We hope to semi-retire sometime in 2024.

We have been working hard to build up our taxable dividend income stream for about 15 years now.

We continue to max out our TFSAs as our first investing priority every January (and we’re saving for that again in early 2023).

We have been maxing out contributions to our RRSPs, and we’ll continue to do so for the next couple of years.

What are my retirement income needs? 

In a nutshell, we figure once we can earn close to $30,000 per year from a few key accounts (for example, from our taxable account(s) and TFSAs x2), and then make those strategic RRSP withdrawals on top of that, we should have enough to start part-time work.

Here are some estimated very basic expenses in semi-retirement:

Key expenses Monthly Annually Semi-retirement comments ~ end of 2024??
Mortgage $2,240 $26,880 We anticipate the mortgage “dead” before the end of 2024.
Groceries/food $800 $9,600 Although can vary month-to-month!
Dining/takeout $100 $1,200
Home maintenance/expenses $700 $8,400 Represents 1% home value per year, increasing by inflation.
Home property taxes $500 $6,000 Ottawa is not cheap, increasing by inflation or more.
Home utilities + internet/TV/cell phones, subscriptions, etc. $400 $4,800
Transportation – x1 car (gas, maintenance, licensing) $150 $1,800 May or may not own a car long-term!
Insurance, including term life $250 $3,000 Term life ends in 2030, will self-insure after that without life insurance.
Totals with Mortgage $5,140 $61,680
Totals without Mortgage $2,900 $34,800 As you can see, once the debt is gone, we’ll be in a much better place for financial independence!

Add in other spending/miscellaneous spending to the tune of $1,000 per month on top of that, and our semi-retirement budget is likely at the basic-level about $4,000-$4,500 per month.

What are your retirement income needs?

Until the end of time, I suspect one of the most popular retirement planning questions will be: how can I generate retirement income?

That’s a HUGE quesiton to answer. I mean, we have rising inflation, higher interest rates, and the need to make your money last to fight any longevity risk, higher taxation and the need to cover essential healthcare costs as you age. This also makes how you can generate retirement income a VERY important question to answer.

Passionate readers of this site will know I’m a big fan of investments that generate meaningful income. Sure, you can invest in real estate, private equity, run a business into your 60s and 70s but for many people: the stock market is a common vehicle for average people/average investors to be long-term business owners.

This makes the hope of capital gains or getting paid today via dividends an interesting paradox.

As I get older, while the best total returns are always the goal, I’m more concerned about the tangible income my portfolio can (and will) generate moreso than hoping for stock market prices to work in my favour.

Full stop: I like investments that generate income. I like individual stocks as investments that pay ever growing income!

While I believe in (and own) low-cost, passive Exchange Traded Funds (ETFs) for total portfolio growth, a major portion of my portfolio rewards me to be a shareholder. I am attracted to investments that pay dividends or distributions. You may wish to consider the same for your meaningful retirement income needs.

Should you use ETFs to generate your retirement income needs? 

I believe so, at least a consideration if you’re not going to be an owner of some individual dividend-paying stocks!

While I invest in many Canadian and U.S. individual dividend-paying stocks for income and growing income, today’s post is about those lower-cost income-oriented ETFs you can own in certain accounts to avoid individual stock risks. Continue Reading…

Powered by the Financial Independence Hub.
© 2013-2025 All Rights Reserved.
Terms of Use
Financial Independence Hub Logo

Sign up for our Daily Digest E-Mail!

Get daily updates from the FindependenceHub.com straight to your inbox.