Tag Archives: Financial Independence

How the new MoneySense ETF Finder Tool combines with the MoneySense ETF All-stars

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I will be giving a half-hour virtual presentation on Dec 2, 2021 on how the annual MoneySense ETF All-stars package can help retirees and near-retirees build their nest eggs and then draw income from them. (i.e. Accumulation and Decumulation).]

There will also be some new content on the new MoneySense ETF Finder Tool, which you can find here at the MoneySense site.

Below I describe how the new tool combines with the annual ETF All-star feature to help retail investors craft effective low-cost portfolios of ETFs.

The Canada Virtual Expo talk is on Nov 30 to Dec 2.  Registration is free. For more information, see this link posted at MoneySense.ca. Below is an ad that ran last week in the Globe & Mail: one of the event’s media sponsors:

 

Here’s how MoneySense describes the virtual talk it in the following post published Monday (Nov 29): What the right ETFs can do for you.

Jonathan Chevreau will be presenting: The MoneySense ETF All-Stars and Their Role in Establishing Financial Independence and Generating Retirement Income on Thursday, December 2, 2021 at 12:25 p.m. to 12:55 p.m. EST. Now in its ninth year, the ETF All-Stars helps Canadian investors narrow down the field of ETFs from the more than 1,000 currently available to a short list of roughly 50, spanning Canadian equities, US equities, international, fixed income, and one-decision asset allocation ETFs. Chevreau spearheads a panel of eight ETF experts, who also contribute more eclectic individual picks through the popular Desert Island pick feature. This talk will also cover the new MoneySense ETF Finder tool and how it works with the ETF All-Stars, covering core low-cost diversified investments as well as explore specialized theme, sector and regional ETFs.

ETFs have become so popular that there are now more than 1,000 listed on Canadian exchanges alone, with thousands more on US and international stock exchanges. Now in its 9th annual edition, I write up the feature each spring after conferring with an all-star panel of eight investing professionals and specialists. Together, we narrow the field to the very best options across five categories: Canadian, U.S., International, fixed-income and all-in-one asset-allocation funds.

In addition individual panelists provides their unique “Desert-Island Picks” that they are particularly passionate about and that may merit consideration, but don’t achieve the full-consensus vote otherwise required to make the cut.

Personally, ETFs are the “Core” of my personal portfolio now that I’m living in “semi-retirement” — working part-time, on my own terms, while also drawing income from investments. This lifestyle was described in my coauthored book (with Mike Drak): Victory Lap Retirement. Continue Reading…

How to invest for retirement when time is no longer your friend

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By Mark Seed, myownadvisor

Special to the Financial Independence Hub

 

Save early, save often.

Time in the market is your friend.

Get started, stay invested.

Let’s face it: easy to say, hard to do.

How to invest for retirement when time is no longer your friend?

Read on in today’s post, including answering a reader email on this very subject.

Time in the market 

Cutting to the chase: time in the market, as opposed to timing the market, works because it does not involve short-term predictions or any guesswork at all. This strategy proves that time and patience in the market is better than a quick sale. For example, when a person has a stock or ETF for many years, the power of compounding simply tells us that investment growth will do all the heavy lifting for us. Patient investors will gain larger profits by allowing their investments to grow over time.

“The wonderful magic of compounding returns that is reflected in the long-term productivity of American business, then, is translated into equally wonderful returns in the stock market. But those returns are overwhelmed by the powerful tyranny of compounding the costs of investing. For those who choose to play the game, the odds in favor of the successful achievement of superior returns are terrible. Simply playing the game consigns the average investor to a woeful shortfall to the returns generated by the stock market over the long term.” – John Bogle, founder of Vanguard Group.

John said things better than I did. Most investors should consider investing as a multi-year long-term endeavour.

The secret sauce therefore is spending time in the market – staying invested – and not diving in and out.

I’ve seen this play out myself, in real time, with my dividend investing journey. See the chart below. Sure, I’ve added new money over the years but going forward, my portfolio will continue to grow and is likely to double every 10 years or so even if I don’t add another five cents.

My Own Advisor Dividend Income Update

Further reading: read more about my progressive dividend income journey here.

Waiting for growth can be painful. Or maybe life throws a curveball at you and you simply can’t invest as much as you’d like. Life happens.

I’ve been on record to say if you haven’t saved a cent by age 50, for any retirement at all, you might be kissing any middle-class retirement lifestyle away. With inflation running higher, that might be more true than ever.

But it is never too late to right the ship. It’s never too late to learn something new. It’s never too late to get started with investing: you can invest for retirement when time is no longer your friend.

How to invest for retirement when time is no longer your friend – reader question

Here is the reader question, adaptedly slightly for the site for today’s post:

Hi Mark,

I appreciate all that you do. I recently sold a property and I’m starting all over.

I’m newly self-employed. I have a new rental apartment, but starting from scratch. I’m 55 and have an empty TFSA. I would like to max it out with investments that will act as my long-term account. I don’t need to touch that money for probably 15 years. I hope to put any savings, about $77,000 in there next year.

I’ll also be putting another $150,000-$200,000 into my new business. Day trading? Kidding.

Back to my biggest question – most articles and advice I’ve read about is focused on long-term investing that caters to a younger person whose age allows them to exploit compound interest – I know you write about that too. Because I’m not in that category, I thought I’d reach out and see what you can help with. What is possible? 

Please accept my request or send me any articles on your site that address investing for someone older, with limited funds like myself for the TFSA. 

Thanks so much for your time and consideration.

Thanks for your email and readership.

Well, a few thoughts and I’ll put them in order of what I would consider myself, based on my personal lessons learned as your food for thought.

How not to invest for retirement when time is no longer your friend

I’ll cover how much wealth you can still generate with your TFSA in a bit, but I think it’s important for me to call out that based on market history, because equity markets can be volatile in the short term but rather predictable over the long-term (they rise), an investor who stays invested is probably going to win the race.

Case in point.

Did you predict this massive fall, and rise, in our pandemic-era?

If you’re being totally honest with yourself, I doubt it. I know I didn’t see this comeback coming but I’m sure glad it happened ….

The Cash Wedge

So, whether you invest in stocks, bonds, real estate or more speculative plays like Bitcoin, you should know that you’re mainly rewarded with returns for your exposure to just one thing: risk.

Risk, on the whole, is difficult to define and measure, especially at the personal level but essentially it comes in two main flavours: short-term and long-term.

Short-term risk might be easier to relate to. Stocks, bonds, and other assets can lose money in the short-term. See above!

But investing history consistently tells us for any short-term headaches, by staying invested, “this too shall pass.”This means that an investor who stays in the market (and does not trade) generally speaking has a much higher probability of long-term success than one who tries to pick the perfect time to get in and out.

Further reading: I used to sabotage my portfolio. Don’t repeat my mistakes!

How not to invest for retirement when time is no longer your friend

Another concept I want to bring up is the fact that at any age, there is one major piranha you need to avoid for successful, more predictable wealth-building: the investment industry itself.

Did I just call out all the entire wealth industry? Only some to a point! Continue Reading…

Wealth & Happiness, Part 2: Happiness is a Thought and can be changed

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By Warren MacKenzie, for Canadian Moneysaver

Special to the Financial Independence Hub

In Part One of this series we mentioned how ‘living in the moment’ — that is being free of ideas of self and the things we wish for — is an opportunity for happiness.

In this part we will first explain how happiness comes from our thoughts, not our financial circumstances, and how making money usually generates more happiness than spending it does. We will then look at how money can buy happiness when you give it away, and how it’s not enough to manage money wisely: we also have to use our money wisely.

For example, let’s imagine two people with the same size investment portfolio living in almost identical apartments. In one case, the individual who may have experienced a windfall is overjoyed to be living on his or her own, while the other person, who may have suffered a financial loss, is sad and embarrassed to now be living in such a small apartment. One person is happy and one is sad. The difference is not based on their different circumstances it is entirely based on their thoughts about their situation.

In his book, The Art of Happiness, Dalai Lama says, “Once basic needs are met – the message is clear: We don’t need more money, we don’t need greater success or fame, we don’t need the perfect body or the perfect mate – right now, at this very moment, we have a mind, which is all the basic equipment we need to achieve complete happiness.”

Overcoming challenges

For most successful people, it’s their accomplishments that gives them the greatest happiness, whether that includes looking after their family, accumulating wealth, or showing resilience and problem solving through difficult situations. Successful people know that a happy life is not a life without problems or negative circumstances: rather it is one where we have the opportunity to overcome challenges and problems.

It’s important to realize that most often, the greater the challenge, the greater the happiness that comes from overcoming it. If parents make things so easy for their children that they never have to work hard and learn to overcome challenges, (including financial challenges) their children may not develop the positive self-image and confidence that comes from solving problems and creating their own financial security. Continue Reading…

Is early retirement in your future?

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By Scott Evans

Special to the Financial Independence Hub

We traditionally think of 65 years old as the standard age for retirement, but wouldn’t it be nice to make an earlier exit from the workplace? Many of us dream of an early retirement to be able to spend more of our valuable time with family, on hobbies, volunteering or on other pursuits.

One of the more unexpected outcomes of the pandemic has been a growing trend of younger retirees. Many Canadians have taken time over the past 18 months to think about and re-evaluate their priorities. Have you been thinking about your retirement goals and whether it is possible to retire earlier than you originally planned? If you are one of those people, read through for some tips on how to get closer to your goal.

1 .) Spend less to save more

The easiest way to increase savings is to cut back on your spending. The earlier you can start saving, the more you benefit from compounding returns over the long-term. Your future self will thank you! Cutting back on impulsive or discretionary purchases now, may be the trade-off for the financial independence you are seeking. It will also create better spending habits for your retirement years, and may in fact lead to a more fulfilling life.

2.)  Start Planning

Saving early only helps if you are generating a return on your savings. Keeping money under a mattress or in a savings account will result in you losing purchasing power to inflation each year. You will want to make sure you are not only investing using appropriate financial instruments for your goals, but also holding those investments in the appropriate accounts to maximize growth and to avoid losing money to taxes. To connect your savings with your early retirement goal, it’s essential to plan for how much you’ll need in order to retire and to have a plan on how to draw down those assets tax efficiently.

3.)  Play defense

Saving and investing are strategies that will help you grow your wealth; you will also want to consider strategies that can help protect your income and your savings. Insurance can protect you from unexpected health events that may otherwise cause a loss of income or significant expenses. Having an emergency fund set up is essential to help you get through job loss or another unexpected event that could derail your planning.

4.)  Be tax efficient

Investing inside a TFSA (Tax Free Savings Account) will allow your contributions to grow tax-free and be withdrawn without any tax consequences. This works differently than an RRSP (Registered Retirement Savings Plan) contribution, which is tax-deductible in the year you make the contribution but will be taxed on withdrawal (hopefully at a lower tax rate if you have planned well). Taking advantage of both of these plans with appropriate investments will play a big part in your success, as it will reduce the amount of tax you pay each year and allow your returns to grow tax sheltered. Be aware of your contribution limits for both of these plans and make your contributions early. Continue Reading…

The six phases of financial independence [Revisited]

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By Mark Seed, myownadvisor

Special to the Financial Independence Hub

I’ve recently updated this post to include more links to related content. I hope you enjoy it. 

The term “financial independence” has many meanings to many people.

To some, it means not working at all.

To others, financial independence covers all needs and many wants.

To others still, it means the ability to work on your own terms.

Where do I stand on this subject?

This post will tell you in my six phases to financial independence.

Retirement should not be the goal, financial independence should be

Is retirement your goal?

To stop working altogether?

While I think that’s fine I feel the traditional model of retirement is outdated and quite frankly, not very useful.

As humans, even our lizard brains are smart enough to know we need a sense of purpose to feel fulfilled.  Working for decades, saving money for decades, only to come to an abrupt end of any working career might work for some people but it’s not something I aspire to do.

With people living longer, and more diverse needs of our society expanding, the opportunities to contribute and give back are growing as well. To that end, I never really aspire to fully “retire” – cease to work.

Benefits of financial independence (FI)

In the coming years, I hope to realize my desired level of financial independence.

We believe the realization of FI will bring about some key benefits:

  1. The opportunity to regain more control of our most valuable commodity: time.
  2. Enhanced opportunities to learn and grow.
  3. Spend extra money on things that add value to your life, like experiences or entrepreneurship.

Whether it’s establishing a three-day work week, spending more time as a painter, snowboarder, or photographer, or whatever you desire – financial independence delivers a dose of freedom that’s hard to come by otherwise.

More succinctly: financial independence funds time for passions.

FI concepts explained elsewhere

There are many takes on what FI means to others.

There is no right or wrong folks – only models and various assumptions at play.

For kicks, here are some select examples I found from authors and bloggers I follow.

  • JL Collins, author of The Simple Path to Wealth, popularized the concept of “F-you money”. This is not necessarily financially independent large sums of money but rather, enough money to buy a modest level of time and freedom for something else. I suspect that money threshold varies for everyone.
  • Various bloggers subscribe to a “4% rule”* whereby you might be able to live off your investments for ~ 30 years, increasing your portfolio withdraws with the rate of inflation.

Recall the rule:

*Based on research conducted by certified financial planner William Bengen who looked at various stock market returns and investment scenarios over many decades. The “rule” states that if you begin by withdrawing 4% of your nest egg’s value during your first year of retirement, assuming a 50/50 equity/bond asset mix, and then adjust subsequent withdrawals for inflation, you’ll avoid running out of money for 30 years. Bengen’s math noted you can always withdraw more than 4% of your portfolio in your retirement years however doing so dramatically increases your chances of exhausting your capital sooner than later.

In some ways, the 4% rule remains a decent rule of thumb.

Are there levels of FI?

For some bloggers, the answer is “yes”:

  • Half FI – saved up 50% of your end goal (e.g., $500,000 of $1M).
  • Lean FI – saved up >50% of your end goal; income that pays for life’s essentials like food, shelter and clothing (but nothing else is covered).
  • Flex FI – saved up closer to 80% of your end goal (e.g., $800,000 of $1M). This provides financial flexibility to cover most retirement spending including some discretionary expenses.
  • Financial Independence (FI) – saved up 100% of your end goal, you have ~ 25 times your annual expenses saved up whereby you could withdraw 4% (or more in good markets) for 30+ years (i.e., the 4% rule).
  • Fat FI – saved up at or > 120% of your end goal (in this case $1.2M for this example), such that your annual withdrawal rate could be closer to 3% (vs. 4%) therefore making your retirement spending plan almost bulletproof.

There is this concept about “Slow FI” that I like from The Fioneers. The concept of “Slow FI” arose because, using the Fioneers’ wording while “there were many positive things that could come with a decision to pursue FIRE, but I still felt that some aspects of it were at odds with my desire to live my best life now (YOLO).”

They went on to state, because “our physical health is not guaranteed, and we could irreparably damage our mental health if we don’t attend to it.”

Well said.

My six phases of financial independence

With a similar line of thinking related to Slow FI, since we all have only one life to live, we should try and embrace happiness in everything we do today and not wait until “retirement” to find it.

After reviewing these ideas above, among others, I thought it would be good to share what I believe are the six key phases of any FI journey – including my own.

Phase 1 – FI awakening. This is where there is an awareness or at least an initial desire to achieve FI even if you don’t know exactly how or when you might get there.

FI awakening might consider self-reflection questions or thoughts like the following:

  • I would love to retire early or retire eventually…
  • I can never seem to get off this credit card treadmill…
  • I wish I had some extra money to travel…
  • Wouldn’t it be nice to buy X guilt-free?

(I had my awakening just before I decided to become My Own Advisor, triggered by the financial crisis of 2008-2009.)

Phase 2 – FI understanding. This is the phase where people are getting themselves organized; they start to diligently educate themselves on what their personal FI journey might be.

In this phase, they might set goals or get a better handle on what goes into their financial plan. Even if your plan is not perfect, it’s a start.

They might start asking some deeper questions like:

  • Why is money important to me?
  • What is my money for?
  • How do I know I’m doing it right?

I would say it took me until my mid-30s to get my financial life in order through more financial education and improved financial literacy. It was a process that took a couple of years although I’m always continuously learning and improving. I don’t pretend to know it all.) Continue Reading…