2020-01 FI My Kids

I will just say this outright. Gaining financial independence as a physician is super easy. If you can not obtain FI as a doctor, you are simply not too sharp with money. There is no nice way to say it. You SHOULD get an advisor because you clearly could not scale this yourself. Enough said.

But attaining FI when you do not make a lot of income is much more interesting. My children may not have reliable and/or large incomes. But I will prove to them that none of this will matter.

They are starting so young.

So much of financial fitness is about prevention. So much is what you do not do.

My son is a rational saver and investor. He has zero interest in managing others’ money but he is quite focused on his own.

One does not need to be amazing when it comes to money. It is about getting enough best practices nailed down. That.is.it.

Live within your means. So simple. Yes, the truth hurts. It does not really matter if you make more but just gorge on more. Either way your results will be meh.

And it is not about community. Many have reached FI without ever reading a blog. The steps to reach FI are really not that challenging.

Both my children want FI.

Their strategies will be slightly different.

My daughter plans to attend university for a good long while. She only needs to open a TFSA which we did on her 19th birthday.

Here are their current portfolios.

Son, 21 years old

Account

ETF

Shares

TFSA

VGRO

1,170

RRSP

VGRO

118

Taxable

VDY

300

Networth

46,023

Mailbox Money – YTD

190

Daughter, 19 years old

Account

ETF

Shares

TFSA

VGRO

652

Networth

17,832

Mailbox Money – YTD

68

My son has started working. He is a prodigious saver. He wants to attain FI but has zero plans to retire early. Thank goodness since he is only 21 years old. I tell my children to like what they do. Just like it, you do not have to be “passionate” about it. There is no job charming.

He will be using VDY which is a high dividend ETF. He knows that it is not well diversified. But hey, we only need it to be more reliable than his industry. He will rely on VGRO for his actual retirement funds.

My daughter can keep it simple for now. She can use her TFSA account. I love the tax free status of this account. She loves the fact that there is a limit for contributions each year. She likes to spend the extra. And that is fine as long as she saves for her TFSA first.

They both live at home. I stress to them that this might be their highest savings rate ever. Just wait till life and responsibilities start to catch up with them. Let’s see how much they will be able to save then.

They both know to take advantage of the opportunity now.

2020 VGRO Cheatsheet

I am using VGRO for my family’s investment. Therefore it is probably a good idea to think through why I chose this particular ETF out of the myriad of options available.

VGRO Pros

  1. It is an asset allocation ETF. It invests in about 94% of the global investable equity and bond markets. I certainly do not have that reach.
  2. It is managed by Vanguard. I really like Vanguard.
  3. It is automated. The fund managers will balance back to 80/20 within a 2% band. Mostly with incoming cash flows.
  4. I can use VGRO for our portfolios. When the children are younger, they can use these solely. As they get older, they can add on government benefits, annuities, extra fixed income alongside this.
  5. Lower fees. Less trading costs, avoid bid-ask spread needlessly plus goodness knows what other fees I can’t see.
  6. Behavioral costs. I would be less inclined to tinker with this. It helps me be lazy and I enjoy being lazy.
  7. Less tracking error since it would be done by Vanguard professionally. I am sure that I would otherwise mess it up.
  8. Simplify adjusted cost base (ACB) tracking. I tend to avoid DRIP for my taxable accounts. However having fewer ETFs makes it all simpler.

VGRO Cons

  1. Foreign withholding tax is about 0.19% in an RRSP. To avoid this you would have to use US ETFs which would involve currency conversion. That is because the US has a tax treaty to avoid foreign withholding taxes for an RRSP.
  2. Tax inefficiency of premium bonds in a taxable account. Justin Bender of Canadian Portfolio Manager estimated this to be about 0.05% for VGRO.

VGRO Estimated Total Costs 2020

TFSA

RRSP

Taxable

MER

0.25

0.25

0.25

FWT

0.19

0.19

0.02

Premium Bonds

0

0

0.05

Easy – Costs

0.44

0.44

0.32

Optimized Costs

0.32

0.16

0.21

Difference

0.11

0.28

0.11

Maybe this is not such a terrible trade since I pay no AUM fees. I also make under 30 trades a year. My trading costs are about < 300 per year. Not too bad.

I have no idea if this is the best portfolio. I am sure that it isn’t. But it should be good enough. And that is all that I can expect anyhow. Recall that I am not clever, I have no networks, I tend to take my eyes off the ball like all the time. Need I say more?

Nowadays with all the legislative and taxation risks, why bother trying so hard to optimize it all? I often tell my husband, if they want to take it, it’s fine as long as I did not have to waste extra time and mental bandwidth for it.

I can spend my time doing what I enjoy and I am able to direct my children to do that as well. Then I am at peace with whatever the government dreams up. It is what it is.

But I would not sacrifice time for myself, with loved ones and my sanity in the hopes that any of this is suppose to make sense or be fair. We each can adjust accordingly to what our tolerance is for the trade off between more money and our lives.

Just make sure that you have decided how it is fair enough for you. Then all the blah blah out there will fall away since you are clear about what you want.

I like VGRO. I will use it unless someone in the know can clearly tell me that this is an insane approach.

Thus far no one has yet. Thank goodness.

2020 Financial Plan Update

2020 Financial Plan

Retirement Plan

  1. To 65 years old:
    1. Draw salaries from our corporation
    2. Contribute to CPP
  2. 65 to 70 years old:
    1. Dividends (135K+/ year)
    2. Office Unit Rental
    3. Optimize:
      1. RMD? May need to draw down the RRSP to optimize taxes
      2. OAS? May need to draw earlier than 70 years old.
  3. 70 years +
    1. Needs:
      1. CPP
      2. OAS
      3. RMD – required to draw at 72 years +
    2. Wants:
      1. Dividends. Withdrawal rate from this should decrease when CPP and OAS fully online.
      2. Office Unit Rental – if we still have this

Retirement Plan Notes

I reviewed some numbers with the CPP enhancement. Due to our ages, we would likely not benefit much from the increased amounts. I figured that it might decrease our salary draws by one year at most. I do not need to tap maximum CPP. I simply want to build enough CPP and OAS to cover about 50% of our expenses. That seems to be a good percentage for our needs.

The issue I have with most pensions is that the benefit would all but disappear upon death. That is a good strategy for some folks but probably not for us. I plan to leave some wealth to our kids. But delaying the CPP and OAS are likely the best forms of longevity insurance one can find. Especially for self employed folks.

The best time to optimize our decumulation would be between 65 to 70 years old. This will be during the period of time when we no longer need to draw salaries from the corporation. I will use some excel programs to figure out the best option at that time. This would be the time when I may start to draw from our RRSPs in case they grow too large. It would also be the time I would forecast any issues with OAS clawbacks and would adjust my plan accordingly.

We plan to grow our dividends and interest to 135K per year. It will take years before I can truly see the taxation incurred with our investment strategy. I will need to align my investment and drawdown plans with all the accounting voodoo that occurs in the background.

What is abundantly clear is that all the optimizations will need to be done by 70 years old. Once CPP, OAS and RMDs become activated, there is no dialing these amounts. These taps turn on and stay on. So one must plan for this.

Estate Plan

  1. TFSA
    1. VGRO 80/20 AA
  2. Principal residence exemption (aka leave the house to the kids)
    1. Urban multiplex
  3. CCPC
    1. Universal life insurance – bought in our 30’s
    2. Trust
    3. Estate freeze
    4. Charitable donations
    5. Permanent Life insurance?
  4. The Basics
    1. Will
    2. Power of attorney – including medical
    3. Plan funeral costs. We bought our burial plots in our 30’s when we had the children.

Estate Plan Notes

I plan on “living inheritances”. I want my children to use the assets we have saved as a family while I am still alive. That is why we carved out units in our urban multiplex for them to live in.

The only so-called sacrifice my husband and I incurred was from living in a smaller unit. But hey, it is less cleaning so I dare say we benefited from this.

Anyone can do this. Most folks just do not want to. But families engaging in multigenerational living have been like forever. Some likely had to due to need. I do it because it just makes sense.

My accountant has been telling us to look into permanent life insurance to help with the small business deduction limits. But I do not want to add further complexity and more middle men into our finances. We already have a smaller universal life policy we started in our mid thirties. I am sure one can buy better policies now but we are also 15 years older. So for now, I do not plan to add more life insurance to our CCPC.

Kids’ Plan

  1. Avoid large educational debt
    1. Attend public schools
    2. Live at home during undergraduate degree.
    3. We pay for all their educational costs.
  2. Transportation
    1. Live close to school, work and shopping. This makes life so much easier.
  3. TFSA
    1. VGRO with dividend reinvestment plan. Set it and forget it.
  4. Taxable
    1. VDY – aka “mailbox money”. It might be less diversified but so is your human capital. Just sayin’ 🙂

Kids’ Plan Notes

My husband and I have decided that we will pay for all educational costs for the children. That is the least we can do.

My only stipulation was that any monies to the children would go toward education or investments. I would support either of those.

My daughter would use her portion for future studies. My son would use his for VDY, the high dividend ETF. Whatever floats your boat. There is no right or wrong approach. It simply depends on the individual.

What I have started is a ledger for my children. I do not pretend to know what is “fair” but I can do even. The kids will have their expenses balanced out in the ledger. I will keep it available for all to see in our family. This is aligned with our approach to finances. Anything financial that pertain to the children is open and we can all talk about it.

I plan to review my overall financial plan yearly. It will be interesting to see any changes. I suspect there will be changes.

OMG. There is always something.

Thank goodness I recognize that planning is a verb.

2020-01 Financial Update

“Don’t tell me what you think, tell me what you have in your portfolio.”

― Nassim Nicholas Taleb, Skin in the Game: Hidden Asymmetries in Daily Life

CCPC (Corporate) Portfolio

ETF/ Stock

Shares Added

Shares Total

BRK.B

0

950

VGRO

2,265

17,409

XAW

0

13,531

XIC

0

6,050

ZDB

12,000

30,937

GIC

1 Matured

11 strips

  • Brk.B: Berkshire Hathaway Class B
  • VGRO: Vanguard Growth ETF Portfolio (80/20)
  • XAW: iShares Core MSCI All Country World ex Canada Index ETF
  • XIC: iShares Core S&P/TSX Capped Composite Index ETF
  • ZDB: BMO Discount Bond Index ETF
  • GIC: Guaranteed Investment Certificate

CCPC Plan

  • Keep Berkshire as a legacy stock until we fully enter part time work or retire.
  • XAW & XIC:
    • Plan to tax loss sell when possible.
    • Canadian Couch Potato portfolio.

RRSP (Tax Deferred) Portfolio

ETF

Shares Added

Shares Total

VAB

4,820

10,334

GIC

4 Matured

34 strips

  • VAB: Vanguard Canadian Aggregate Bond Index ETF

RRSP Plan

  • With the new Corporate Tax changes, I need to use the RRSP again.
  • Whenever a GIC matures, I buy VAB. I have too many GICs.
  • VAB is on a dividend reinvestment plan. So easy peasy.
  • Use this account to hold bonds. This is as complicated as my asset location strategy gets.

Non- Registered (Taxable) Portfolio

ETF

Shares Added

Shares Total

VDY

500

902

  • VDY: Vanguard Canadian High Dividend Yield Index ETF

Non- Reg Plan

  • Buy VDY to allow some tax efficient income with eligible dividends from Canadian companies.

Estate Portfolio – TFSA (Tax Free)

ETF

Shares Added

Shares Total

VGRO

448

5,990

  • VGRO: Vanguard Growth ETF Portfolio (80/20)

I treat all the accounts as one portfolio excluding my TFSA since I use it for estate planning.

Networth

Investable Assets

63%

Personal Residence

27%

Other

10%

Investable Assets – 63% of Networth

  1. Real Estate (unleveraged) – 8%
    1. Commercial unit
  2. Paper Investments – 92%
    1. Equities – 22%
    2. Fixed Income – 78%

Mailbox Money- December 2019

My investment philosophy is simple.

I have zero alpha.

I want “know nothing, do nothing” mailbox money.

Cumulative Mailbox Money

Month

2019

January

10,329

February

26,294

March

32,239

April

49,742

May

55,856

June

64,013

July

71,546

August

73,229

September

81,357

October

95,968

November

101,828

December

107,264

The whole point of writing this stuff down is so that I can review how this strategy will work for my family. The premise is that a simple plan can work.

I condensed what made up three posts into one. I tend to make things easier for myself. It has become a habit by now.

Most folks venture toward greater and greater complexity. I do not.

Our simple plan is to make money, save some of that money and invest it. Our so-called investing ranged from GIC’s to investment real estate over the years.

Now that I am on the other side of 50, it is time to pare this down to something that I can follow forever. With the introduction of the asset allocation funds to Canada, it has been a veritable game changer.

My writing will reflect my clearer thinking about my plan. There is no need to write in a fractured sense any longer. I know what I want to track and how it will fit into my overall financial picture.

I like to show our trajectory to so-called mailbox money. I had plans to do this with my GICs but have since discovered that most ETF’s pay about the same dividend rate.

Plus I get a chance to capture growth which I used to believe that I had to do with real estate. I enjoyed investment real estate in the past.

However my main focus is to make our finances simple and easy. I want and need simple and easy. My husband and children will most certainly want that.

Since I have embarked on this plan, my husband and I have a crap ton of newfound time. We no longer have to worry about how much cash to keep around in case the deal of the decade in real estate comes along. I simply don’t care anymore.

I realized that there are so many other things that I would rather do than make more money. The reason we keep our money is that we do not require massive chunks of it like some of our colleagues.

I did the simple things. I bought a house I could easily afford. My cars were not fancy. My children went to public schools. I did not have to take international vacations to have a great time. I just did the simple things anyone could do. Like I say, I have zero alpha.

Plus when I achieved financial independence in my mid thirties, I always knew that I would continue to work part time in my career. The need for some guys to quit their career even with a stay at home wife strikes me as rather odd.

To each his own I suppose.

2019-12 Month Review

The end of a decade is just around the corner. This is very special indeed.

The past decade for our family has had its ups and downs. Much like everyone else.

This is my second year of maintaining a blog. I really enjoy it. Unlike most bloggers, I strive to maintain anonymity.

I like tracking numbers. That’s all I am good at. I have no desire to tell others how or what to invest in. I have no idea what the best financial plan is for anyone else.

I do not want this blog to grow. I prefer to keep this blog small and unknown.

There is a reason I moved to this free platform.

There is too much noise on the internet. There is too much garble. I definitely include my blog in this assessment. Thus my desire to keep it small. No need to enlarge whom I pollute with my ramblings.

I have decided to keep posting. Mainly to keep myself on a regular habit. Furthermore if I never leave comments with any links back to my blog, no one will find me. Yes I know that I have the opposite plan of most bloggers. But I have always had different plans in my life so why not with my blog as well?

The other benefit with being anonymous is that I can keep posting my real portfolio.

I prefer to see what people have in their portfolios than read a crap ton of woo woo.

You will have no woo woo here since I do not pretend to know what the heck you need to do with your finances. The basics is to live within your means. But no one really cares to acknowledge that one.

Personal finance has many variables. But if you can not save money, you’ve already lost the game.

No investment strategy, asset allocation, asset location, advisor or tax efficiency will save you. Sorry.

That is why I report numbers. Because this is how I have managed my finances since I first moved away to university at 17 years old.

I used to track on paper. Now I use google sheets. But the habit is the same. It is unemotional. The process is the same when I had negative numbers and when I have more.

Unfortunately during my penchant for decluttering, I got rid of my prior networth and expense reports.

But I discovered google sheets in 2013 and have not looked back.

My new thing is to track mailbox money. Because everyone can wrap their head around that one.

I plan to continue being a DIY investor. This blog will show whether I am able to do it or not. I will strive to be truthful since I have zero benefit otherwise.

I have nothing to sell. I do not want influence. I just want to track my mailbox money.

Interestingly I have deep dived for the last two years into personal finance. The overwhelming conclusion is that just like fitness, there is nothing new under the sun.

The process of money is and always will be the same. It is the emotional makeup of folks which make it really easy or really hard. For some it is next to impossible.

For average folks, it is about following a simple repeatable process. I know that for people who are amazing entrepreneurs and real estate investors this is laughable. But I need a repeatable process since I want my children to be successful at it.

I have no interest in approaches that require me to be a different person. I am lazy. I detest details for things I do not care about. All I like to do is update my spreadsheet.

In 2018 I started using index funds. Now these are truly “know nothing do nothing.” Exactly my cup of tea.

I even just buy asset allocation funds because I know myself. If the process takes too much vigilance or requires me being clever – just forget it. I will slip up at times and it will make all the decades of vigilance and being clever evaporate.

  1. Earn money.
  2. Live within your means.
  3. Invest what you have saved.

If you can not do 1 & 2, not much else will help you.

All 3 steps have innumerable combinations and permutations it would make ones head spin. Just pick something you can actually follow.

Don’t be a victim but don’t be greedy either.

I strive for financial simplicity, ease and wellness.

More money without financial simplicity, ease or wellness is not anything I want in my life nowadays.

More is definitely not better.

2019-12 Plan Review

Networth % – November 2019

Investable Assets

71%

Personal Residence

27%

Estate

1.5%

Networth Month/Month

0.5%

Networth YTD

9.0%

Investable Assets – 71% of Networth

  1. Real Estate (unleveraged) – 18%
    1. Commercial unit – 37%
    2. Residential unit- 63%
  2. Paper Investments – 81%
    1. Equities – 21%
    2. Fixed Income – 79%

Retirement Plan

  1. To 65 years old
    1. Draw salaries from our corporation.
  2. 65 to 70 years old
    1. Dividends
    2. Rental income
    3. RMD? May need to draw down the RRSP to optimize taxes.
  3. 70 years +
    1. CPP
    2. OAS
    3. RMD – required to draw at 72 years +
    4. Dividends. Withdrawal rate from this should decrease when CPP and OAS fully online.

Estate Plan

  1. TFSA
    1. VGRO 80/20 AA
  2. Principal residence exemption (aka leave the house to the kids)
    1. Urban multiplex
  3. CCPC
    1. Trust
    2. Estate freeze
    3. Charitable donations
    4. Life insurance
  4. The Basics
    1. Will
    2. Power of attorney – including medical
    3. Plan funeral costs. We bought our burial plots in our 30’s when we had the children.

Planning For My Kids

  1. Avoid large educational debt
    1. Attend public schools
    2. Live at home during undergraduate degree
    3. You do not need a university degree for certain careers, so think it through.
  2. Transportation
    1. Live close to school, work and shopping. This makes life so much easier.
  3. TFSA
    1. VGRO with dividend reinvestment plan. Set it and forget it.
  4. Taxable
    1. VDY – aka “mailbox money”. It might be less diversified but so is your human capital. Just sayin’ 🙂

December 2019 Plan

Added VDY

We decided to use VDY in our taxable accounts.

For our account, it is to peg us to spend mailbox money.

For my son, it will be to act as a background for his career. The field he has chosen will be part of the gig economy with plenty of contract work involved. This is the best use of a dividend strategy.

We do not need VDY to be the best way to invest. We want it to be more stable than his work options. VDY does not have a very high bar to hurdle. He should build this portion up ASAP.

Hold Off On RRSP For My Children

Both kids will need to use their TFSA.

Both should hold off on their RRSP. My son should use a taxable account rather than his RRSP. My daughter will likely be in school for a while and thus will need to have more cash for spending.

They should use their RRSP to deferred income taxes when they earn over 50K per year. Otherwise I do not see the point of locking the funds up.

Planning To Spend Mailbox Money

I have a feeling that I will be spending mainly my dividends and interest aka mailbox money. This is the first year that I have kept track of the distributions and it is already close to what I spend yearly.

I have researched about safe withdrawal rates and the total return approach. I know that drawing out 3% from investments would be sustainable. However, a simpler way would be to just spend the cash distributions instead.

The only disadvantage is that I will leave a lot of money unspent but I do not care about that at all. That is a good problem to have in my opinion.

It is akin to the environment. Is it our job to use up all the planet’s resources? Life is better if we can leave a bit for future generations. I already have a good life. I do not feel the compulsion to spend to my limit.

Each person needs to figure this out for themselves. But this has been my truth for a long time.

Asking Ben About My Good Enough Portfolio

I still believe that as long as one picks a decent strategy, many methods will get you where you need to go.

Index investing with paper is an option. It takes a heck of a long time, there is no downside protection and you need to use all your own capital. But it is simple.

There is also positive cash flow real estate. Works fantastically when one makes this happen. Takes know how and some business sense. Also allows for leverage which can accelerate your wealth if done properly.

I am picking index investing simply because I have become quite lazy. I know the issues with it and I am okay with that.

I do not pretend to know anything. All the knowledge in the world won’t help me if I panic and sell during market downturns.

Paper investing takes proper temperament. It does NOT take knowledge. It is seriously a know nothing do nothing approach.

I hold an asset allocation ETF for Pete’s sake.

It is not the most tax efficient. It is not the lowest cost. It is not perfect. But it is good enough for me.

I had to ask Ben Felix of PWL Capital if he thought I was being crazy with just using VGRO + ZDB in my CCPC.

He did not think that I am building an awful portfolio. I am sure he knows much better ways to build a portfolio.

I didn’t ask Ben if I was building a great portfolio. I asked him if I was building an awful one. Because that’s all I care about. I care about not doing something completely ridiculous and missing a big ticket hazard.

Thanks a ton Ben!!!

2019-11 Mailbox Money

Dr. MB & Hubby – 51 & 53 years old

2019-11

YTD

CCPC

4,282

77,817

Personal

1,578

20,859

Total

5,860

98,676

Son – 21 years old

2019-11

YTD

VGRO

0

2,031

VDY

0

4

Total

0

2,035

Daughter – 19 years old

2019-11

YTD

VGRO

0

1,492

I want mailbox money. I do not want side hustle income. I do not even want positive cash flow real estate income. Since let’s face it, it is not truly passive. Real estate investing will always be part business and part investment. One can do the paper forms of real estate investing but that has its own issues.

It takes a lot more capital to reach true mailbox money but it is the most replicable. Not everyone can build businesses. Not everyone can run a real estate portfolio effectively. Not everyone can side hustle effectively either.

But everyone can buy paper investments. And it is simple to DO NOTHING when the markets tank. Simple but not easy.

Having had to deal with real estate investment issues, I can promise you that I would be happier if the solution is to just do nothing. There have been many experiences with business and real estate where we had to do something. But we did not have the skills or networks to get it done. Having enjoyed those experiences allows me to be okay with the paper investments now.

I think people also underestimate their ability to be flexible. I have a myriad of things that I could do if my investments did not perform as planned. Short of the entire capital markets going down the drain, investing in a broadly diversified portfolio should be fine. Admittedly it is the best option for me.

Nothing is guaranteed in life. You can only do what you can with what you’ve got. And if the entire capital markets crumble, then mankind likely has bigger problems than their portfolio.

Building back up plans make sense since why the heck not? But the simplest plan is to live a modest lifestyle so that one is never living so close to the red line. It could also be a more pleasant way to live.

True passive income can only come from publicly traded stocks and bonds. It can also include interest from GICs and high interest savings accounts. Everything else is not truly passive.

So those are the rules of the game. It can not come from anything that reeks of business. You can not be an active trader. This has to be know nothing, do nothing money. It can not be from being too clever. It can not come from having special networks that no one else has access to.

Because that has always been the most annoying thing about most strategies with money. You have to have excess amounts of energy, you have to be amazing, you have to network, you have to be a risk taker. I say yuck to all of that.

I am generally rather sloth-like and thus my money should be as well.

I can not outsmart the markets. I can not outsmart the government. I can not out hustle the next person. Just reading about other’s side hustles simply makes me roll my eyes and go back to sleep.

I just want mailbox money thanks.

2019-12 Portfolio Update – Started VDY in Non-Reg

“Don’t tell me what you think, tell me what you have in your portfolio.”

― Nassim Nicholas Taleb, Skin in the Game: Hidden Asymmetries in Daily Life

CCPC (Corporate) Portfolio

ETF/ Stock

Shares Added

Shares Total

BRK.B

0

950

VGRO

1,300

15,144

XAW

0

13,531

XIC

0

6,050

ZDB

0

18,937

GIC

0

12 strips

  • Brk.B: Berkshire Hathaway Class B
  • VGRO: Vanguard Growth ETF Portfolio (80/20)
  • XAW: iShares Core MSCI All Country World ex Canada Index ETF
  • XIC: iShares Core S&P/TSX Capped Composite Index ETF
  • ZDB: BMO Discount Bond Index ETF
  • GIC: Guaranteed Investment Certificate

CCPC Plan

  • Keep Berkshire as a legacy stock until we fully enter part time work or retire.
  • XAW & XIC:
    • Plan to tax loss sell when possible.
    • Canadian Couch Potato portfolio.
  • Decrease number of GICs by rolling into ZDB whenever one matures.

RRSP (Tax Deferred) Portfolio

ETF

Shares Added

Shares Total

VAB

607

5,514

GIC

0

38 strips

  • VAB: Vanguard Canadian Aggregate Bond Index ETF

RRSP Plan

  • With the new Corporate Tax changes, I need to use the RRSP again.
  • Whenever a GIC matures, I buy VAB. I have too many GICs.
  • VAB is on a dividend reinvestment plan. So easy peasy.
  • Use this account to hold bonds. This is as complicated as my asset location strategy gets.

Non- Registered (Taxable) Portfolio

ETF

Shares Added

Shares Total

VDY

402

402

  • VDY: Vanguard Canadian High Dividend Yield Index ETF

Non- Reg Plan

  • Sold my small tranche of VGRO in November.
  • Buy VDY to allow some tax efficient income with eligible dividends from Canadian companies.

Estate Portfolio – TFSA (Tax Free)

ETF

Shares Added

Shares Total

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  • VGRO: Vanguard Growth ETF Portfolio (80/20)

I treat all the accounts as one portfolio excluding my TFSA since I use it for estate planning. Current asset allocation is 20.5% equities.

I sold the tranche of VGRO in our personal non registered account. This is the first time I have ever had a personal taxable investment account. It is taking some getting used to.

I am buying some VDY as per my husband’s sole request for the portfolio. He wants to “try” some dividend paying companies. We shall see how this goes. I plan to keep my portion of VDY to less than 10% of our equity holdings. That is my ceiling.

VDY is a very concentrated fund. But I am too lazy to buy the top companies individually as many Canadian DIY dividend investors tend to. I would rather pay a small MER than rely on myself to keep my eye on the ball. I will NOT keep my eye on the ball.

Our RRSPs hold VAB (bond ETF) since I do not need this one to grow that quickly. These are the accounts which have the RMD (required minimum distributions). Aka. Government wants their taxes back. Fair enough.

Using all the available accounts in Canada has proved valuable. The government keeps going after more taxes from those who have saved. I tell my children not to stress over work all that much. It isn’t worth it in Canada. Maybe that is an odd thing to say as a parent.

However I see that there is intense competition for university and professional programs. I do not believe that it is as slam dunk as many parents hope. I certainly know my fair share of unhappy physicians. There is no nirvana in the career-o-sphere.

I review my portfolios once a month to stay on track. I prefer to keep to this schedule nowadays. Perhaps an advisor can make a better portfolio but what I have planned should be good enough.

Furthermore, keeping it this gawd awful simple should be easy for anyone in my family to manage if need be.

The world continues to encourage complexity. I hope to preserve this small part of my world as a sanctuary.

2019-11 Month Review

What Do You Believe?

Money is a mental construct. I have always known that money would have limited use for me.

Money is odd. The less you need it, the more it grows. Weird. Honestly.

If you can picture a life without much need for money, you will be set free.

What Does Not Take Much Money?

  1. Good health. We are already blessed with clean air, water and relatively safe environments.
  2. Good relationships.
  3. Education. I used the educational system to train in a profession. My real learning was all free from libraries and the internet.
  4. Hobbies. Think about walks, running, reading, writing.
  5. Transportation with walking, bikes and public transit.

Stop Buying Liabilities

  1. Houses you can’t afford easily.
  2. Cars you can not afford easily.
  3. Travels you can not afford easily. No, you really do not deserve it.
  4. Expensive meals you can not afford easily. Eat simpler.
  5. It takes very little to have a wonderful life. Try not to forget that.

Want To Retire Early?

If someone wants to retire early, they probably have to build perpetual wealth. Basically live on 2-3% of their portfolio. And keep enough of their investments in equities to keep pace with inflation.

Want to retire without using real estate or another uncorrelated asset? Simply save a lot more money. Make sure you at least have a paid off home. And generally live frugally. There is always a trade off with anything financial related.

Are you concerned about the buy, hold and pray passive investing? Do what Rich Dad Poor Dad advocates suggest. Buy 10% of your investable assets in gold and silver. Make sure to build businesses and then invest in positive cash flow real estate.

The only issue with that is it takes skill. And they do not advocate small businesses, the goal is to build larger businesses with over 500 employees.

Those are the two camps I have read about. The issues arise when paper based passive investors think that there is a guarantee. I do not believe there is. The oft quoted line is “past performance does not guarantee future performance”. So no guarantee with that one.

That is why the truth likely sides with one needs to be Uber frugal. And I don’t believe frugality is something one can force themselves to do. Not for the long term anyhow. So for those who are spendy, it’s unlikely that a pure passive paper approach would be enough.

That is unless one spends less than 2% of their investable assets. Then those investors can do paper solely. In fact that is what happened to us. We certainly have no issue owning rental real estate. However I soon realized that we have quite a low spending ratio.

That is the advice I give my children. Save a lot and spend only some of it. You can control what you spend. Make sure to get the housing sorted out. It has to be sustainable. Spend happily and consciously. Some types of spending are more valuable during one’s youth. Waiting to spend money only when one is old is also a source of failure.

If they ventured into investment real estate stay with multiplexes. Apartment buildings require a lot of skills and good networks. One likely needs to be a quarterback of sorts.

And if they started a business be a solopreneur. It is possible in this day and age.

I Just Don’t Care

I do not care about picking the perfect ETF.

No one else knows. All the folks who have all this “knowledge” can not promise you anything. They will get caught in the downdraft no different than a DIYer.

Just like medicine. Many know lots of regurgitative information but it doesn’t really help anyone. I find that useless and I have always been able to block that noise out.

Paper Investing Has Been Solved

  1. Be broadly diversified.
  2. Keep costs low.
  3. Invest for the long-term, like maybe forever.
  4. Automate as much as you can.
  5. Allow the magic of compounding to work.
  6. I just use asset allocation funds because I really don’t care. And it won’t matter how much I care. I will get the same result.

Keeping abreast of financial information is very easy nowadays. Most of it does not apply to me. It has become similar to studying in the past. I could take large amounts of information and condense it to a single page before the finals.

Just be clear on what you want. Then all the noise in the world won’t matter much to you.

2019-11 Plan Review

Networth %

Investable Assets

71%

Personal Residence

27%

Estate

1.5%

Investable Assets – 71% of Networth

  1. Real Estate (unleveraged) – 19%
    1. Commercial unit – 37%
    2. Residential unit- 63%
  2. Paper Investments – 81%
    1. Equities – 20%
    2. Fixed Income – 80%

Month Changes

Equities dropped 24.5% to 20% during the month.

My equities portfolio decreased significantly. This was due to selling Amgen as well as liquidating VGRO in my personal taxable account. Once again we are going to invest in VDY.

My husband wants a portion of the portfolio in a dividend ETF. I could not find too much fault with this. I only requested that I set a limit to the amount this would be. I will make certain that it remains a small percentage.

SBD Issues

With the sale of Amgen, we have breached the SBD limits.

Our solution is to work less next year. My husband is looking forward to having more free time. He has already started decreasing his clinical work. It is not worth trying to optimize everything. Plus no one wants to work for diminishing returns.

Being flexible is an important skill in life. It helps one with their relationships (think children) as well as with one’s finances.

100% Equities?

I will never have 100% equities. I like owning VGRO which is made up of 94% of the global investable stocks and bonds. I prefer the process of rebalancing between stocks and bonds.

Thus no “road to 100% equities” for this doc.

No evidence or excel sheet could nullify my disbelief if I ever did that to our portfolio. I know myself too well. I may not be risk averse but I am not a risk seeking type of investor either.

Why Choose So Few ETFs?

The reason I am using ETFs is to hope to keep up with inflation over the long haul. I am too lazy and lack adequate skills to build a large investment real estate portfolio. I do not lie to myself and say I would not want to. Instead I admit that I am likely unable to.

I accept the volatility of these paper investments. I do not believe equities investing is for the faint of heart. One almost requires great dissociative skills to not allow the market wobbles to impact one psychologically.

Using few ETFs allow me to see what my plan is for our portfolio. Furthermore, I believe that there are numerous ways to build a good enough portfolio.

But the ultimate way to sink one’s portfolio is to sell off when the markets have taken a beating. That would be a certain strategy for failure.

The honest reason I am using so few ETFs is because I don’t think it really matters. Just get some low cost, broad based index funds. Many would have done the trick. I have no idea which ones are much better and I don’t believe anyone else knows either.

Retirement Plan

  1. To 65 years old
    1. Draw salaries from our corporation.
  2. 65 to 70 years old
    1. Dividends
    2. Rental income
    3. RMD? May need to draw down the RRSP to optimize taxes.
  3. 70 years +
    1. CPP
    2. OAS
    3. RMD – required to draw at 72 years +
    4. Dividends. Withdrawal rate from this should decrease when CPP and OAS fully online.

Estate Plan

  1. TFSA
    1. VGRO 80/20 AA
  2. Principal residence exemption (aka leave the house to the kids)
    1. Urban multiplex
  3. CCPC
    1. Trust
    2. Estate freeze
    3. Charitable donations
    4. Life insurance
  4. The Basics
    1. Will
    2. Power of attorney – including medical
    3. Plan funeral costs. We bought our burial plots in our 30’s when we had the children.

I hold only one ETF in our TFSA accounts. I am investing these accounts as if they were for my children. I am not interested in forking over large amounts to my kids at once. But with their decades of compounding, even small amounts will be significant. That is the plan.

It will be a very simple plan if it works out. I contribute the full TFSA deposit on January 1st and invest it on the first trading day of the year. I also set up a dividend reinvestment plan. I essentially do nothing for these accounts all year.

I wish all my accounts were this easy.

It would be great if my children can use their TFSA and RRSP accounts alone to save for retirement. It would be simple and elegant.

The personal residence exemption wherein one can sell their principal residence tax free may be altered in the future. There is stirring that the government may diminish this last bastion of Canadian tax exemption.

Thank goodness I did not listen to my first accountant who told me to buy the most house that I could afford. Things that worked in the past are not guaranteed to work forever. I had learned NEVER to be too attached to one strategy since almost anything can be changed in the future.

The benefit of owning an urban multiplex is that we all start living our lives optimally now. No one has to wait for someone to die before they get to use the asset. Believe me, this is something that I am seeing more with the high price of real estate in Canada. I witness vultures circling some seniors.

With all the legislative and government changes, it makes sense to not try that hard. That is why passive paper investing works for me. I simply do not care much about any of it anymore.

I can see that it will likely not make a huge difference either way. I would rather focus on making my paperwork simpler, my investments simpler and spend my energy on things I enjoy.

Planning For My Kids

  1. Avoid large educational debt
    1. Attend public schools
    2. Live at home during undergraduate degree.
  2. Transportation
    1. Live close to school, work and shopping. This makes life so much easier.
  3. TFSA & RRSP
    1. VGRO with dividend reinvestment plan. Set it and forget it.
    2. Keep finances simple. There is zero need to increase financial complexity. Best to avoid the complexity to begin with.
    3. Just use the tax deferred and tax free accounts for as long as you can.

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