Investing in mutual funds @ TD bank

[NotADcotor]

I really like Ben Felix and he is a fantastic financial commentator. You can take his advice 100% of the time and not go wrong.

I will disagree about dividends though. Not from a mathematical or taxation point of view but from an investor behaviour point of view. It has been conclusively proven that the largest stumbling block to success for DIY investors is human psychology. Panic in market downturns specifically. So, if dividends give an investor the warm and fuzzies and let them avoid selling in a downturn because of the constant dribble of income, then they are worth their weight in gold. I know during two downturns they have helped me stay the course.

disclosure: the bulk of my portfolio is in broad based, whole market funds. I still own some divvy paying stocks though and will likely never sell them.

I collect dividends, some of them I spend on hookers, the rest I waste on bullshit like food, car, property tax etc

Someone on a chat in a game I play was shitting on me for doing it and tossed that video in my face.

He is technically correct if you are in a capital accumulation phase of life. I am not. I don't work. I get my 37K+ from dividends plus GST, HST, property tax rebate and climate change checks.
It's enough to pay for my expenses [paid off house, no waifu no kids] and get two hours of the bouncy bouncy every 2 weeks. Or eat out often [I am not high end]
Stocks go down 50%, I still get my dividends, I can wait it out, without dividends I'd have to sell twice as many shares to finance my life style. Sell low is not a smart thing. Dividends allow me to avoid that.
As long as dividends go up by the rate of inflation, I'm good
Last time BMO cut their dividend, it was during the great depression and WWII for a combined 50% cut. Also back then payout ratios were much higher. Gotta wonder how much worse the stocks did at that time. National cut their dividend in the 80's by half but it went back up quickly. I'd say it's safe
Stock prices are opinion influenced by panic and trend seekers, dividends are a fact.
Also if we did go through the equivalent of a great depression and a world war, I could live on half my income, I'd just have to cut essentials like coitus with prostitutes, the rest I'd be fine, because paid off home. I could even rent a room or two to get some of that old in and out money.

Again, he is right, but not for people who need income, then that advice is stunned. Granted I haven't seen the video, just basing it on the thumbnail and what that guy in chat was trying to argue. Apparently in other work buddy is dividend friendly.

I like the guy I argued with in chat, but it was annoying I could get him to see that he was literally wrong. He got some idea in his head and tried to universally apply it where it doesn't apply.

Oh also, with the dividend credit, with no capital gains, my tax load is 300 a year [I assume from the health levy.
And I can make a bit over 50 K a year in Capital gains without going over the 3K a year limit for installment payments [I can go over once every three years though] which I am keen on. It's a bit difficult though lately.

 

[Zoot Allures]

embedded cap gains will stop me from ever divesting the divvy stocks.

What do you mean by "embedded cap gains" ? Taxes?

 

[Liam011]

What do you mean by "embedded cap gains" ? Taxes?

Exactly. I mean, I will sell them one day obviously but decades from now. Assuming I'm still around and so are they.

 

[speakercontrols]

Unlike the VAST majority of Youtube investing bros, I did the math.

Under a LOT of assumptions...

IF you're investing for retirement income, if you're mid-late 30s, it's better to invest in Canadian dividends in a taxable account. The tax drain will be negligible for the first few years and the tax drain as you approach retirement is far, far, FAR outweighed by the tax advantages of Dividend income in retirement compared to capital Gains. This of course assumes your income is less than (approximately)135K-per year where the cross over between the tax-advantaged dividend income and Capital Gains happens.

If you're younger than mid-30s, it's better to invest for Capital Gains as the tax-free time you're invested far outweighs the greater tax you pay from being taxed on a Capital Gains income.

 

[Zoot Allures]

Dividend bank stocks are solid and safe, but that is accounted for by the market so you
will not get a deal (discount) on them by buying low.

Why buy one bank stock when you can buy them all in a ETF?

Why restrict yourself to banks?

You can buy ETFs with aristocrat dividend companies that have been increasing
their dividends for years.

That fact means they are well managed and safe so get an aristocrat dividend ETF

 

[speakercontrols]

Dividend bank stocks are solid and safe, but that is accounted for by the market so you

I give you BCE & AQN. MFC about a decade ago.

Everything changes

 

[NotADcotor]

Unlike the VAST majority of Youtube investing bros, I did the math.

Under a LOT of assumptions...

IF you're investing for retirement income, if you're mid-late 30s, it's better to invest in Canadian dividends in a taxable account. The tax drain will be negligible for the first few years and the tax drain as you approach retirement is far, far, FAR outweighed by the tax advantages of Dividend income in retirement compared to capital Gains. This of course assumes your income is less than (approximately)135K-per year where the cross over between the tax-advantaged dividend income and Capital Gains happens.

If you're younger than mid-30s, it's better to invest for Capital Gains as the tax-free time you're invested far outweighs the greater tax you pay from being taxed on a Capital Gains income.

Everything I said [not that you were addressing me, does not apply to someone in an asset accumilation phase of their life

A downside of dividends when you are ancient is that I assume [I could be wrong] that the dividend tax credit mark up applies to the OAS and GIS clawback. When I turn 65, my TFSA I can keep going but I will convert my non sheltered stuff [which hopefully won't be much into an annuity which should be very favorable. I don't have kids or any other inheritors and near sure payouts are more important as you get older.

 

[NotADcotor]

Dividend bank stocks are solid and safe, but that is accounted for by the market so you
will not get a deal (discount) on them by buying low.

Why buy one bank stock when you can buy them all in a ETF?

Why restrict yourself to banks?

You can buy ETFs with aristocrat dividend companies that have been increasing
their dividends for years.

That fact means they are well managed and safe so get an aristocrat dividend ETF

I try for two. I buy the banks by worst last years performance, lowest PE ratio or highest dividend ratio.
I picked this up from the Globe and Mail, works on average and for most years. Banks are basically in the same heavily regulated industry and reversion to the mean. YMMV over time.

That is why picking banks might be better than getting them all in an ETF. Even if I wanted them all, I'd just buy them all, the transaction fees for me at least should be less than the MER of even an Index like ETF.

Canadian banks at least are in a heavily regulated industry and have their paws into everything, they serve as a proxy index fund except with higher dividends.

That is why.

Life insurance isnt bad. I am not so sure on Utilities although they are also regulated. Those telecoms, they have to beat out each other and are more subject to the winds of change, athough BCE at that 10% would be tempting if I had no doubts they can continue to pay out. But I don't know and I am too lazy to work it out and then take a chance.

My system by theory and track record works better than owning all the banks, generally pays higher dividends which I like because that's my rent food and whoring money and it requires minimal thought and effort from me.
I own some life insurance, I like to be able to get the 7K I need for the TFSA and the amount of dividends I earn in the TFSA without having to sell a big holding for various reasons. So I keep small amounts in other companies

 

[Zoot Allures]

I give you BCE & AQN. MFC about a decade ago.

Everything changes

Nope.


Unless you have inside info you cannot outsmart the market, of course you may get lucky and pick the outlier that wins but why not just go to vegas and play one high stack game of blackjack for 6 figures. Seriously, you have a 48% chance of winning which is very close to even odds which is better odds than beating the market

 

[NotADcotor]

Nope.


Unless you have inside info you cannot outsmart the market, of course you may get lucky and pick the outlier that wins but why not just go to vegas and play one high stack game of blackjack for 6 figures. Seriously, you have a 48% chance of winning which is very close to even odds which is better odds than beating the market

Sure, but in the long term at least the market goes up, so you don't even need to beat the market to make them sick gainz at a casino you do need to beat the house to profit.
Just sayin.

 

[speakercontrols]

Nope.

Unless you have inside info you cannot outsmart the market, of course you may get lucky and pick the outlier that wins but why not just go to vegas and play one high stack game of blackjack for 6 figures. Seriously, you have a 48% chance of winning which is very close to even odds which is better odds than beating the market

As you say.

However.. (and feel free to post your own performance...)



I invest in pretty much 100% Canadian equities so the TSX is a good benchmark for me for "the market".

I manage multiple accounts for family. As seen in in my RBC DI report, as of October 31st, my 1 year % return is better than 'the market' for all my accounts and my 10 year % return , 3 of the 5 accounts are beating the TSX with the 4th being close. "Since inception" is a little more mixed but in some cases I'm crushing the TSX or doing close enough.

So what you say? Per SPIVA, 2Q2024, I'm doing better than over 90% of professional money managers in Canadian Equity or even Canadian Focused Equity. I also note that Vanguards VCN Vanguard FTSE Canada All Cap Index ETF 10-year rate of return is 8.24%



That being said, index ETFs might catch up with me or not. We'll see...

Everything changes.

 

[speakercontrols]

Everything I said [not that you were addressing me, does not apply to someone in an asset accumilation phase of their life

A downside of dividends when you are ancient is that I assume [I could be wrong] that the dividend tax credit mark up applies to the OAS and GIS clawback. When I turn 65, my TFSA I can keep going but I will convert my non sheltered stuff [which hopefully won't be much into an annuity which should be very favorable. I don't have kids or any other inheritors and near sure payouts are more important as you get older.

This OAS & GIS issue is more Youtube Bro scare tactics.

If you do the math (and depending on assumptions) which I had to for my mother who's investments I manage, there is a 2-3 year period where yes, the DTC is problematic. HOWEVER, with the annual increases in dividends and the tax advantage of the DTC, this disadvantage is very quickly negated. My personal experience is that dividend income grows about 7.5% a year over the last 10+ years. Even without doing the math, you see having an income increasing far more than how OAS/GIS increases can be a beneficial thing.

It's weird that their argument is, "Too much of your own money is a bad thing so you should stay poor so you're eligible for OAS & GIS".

 

[NotADcotor]

This OAS & GIS issue is more Youtube Bro scare tactics.

If you do the math (and depending on assumptions) which I had to for my mother who's investments I manage, there is a 2-3 year period where yes, the DTC is problematic. HOWEVER, with the annual increases in dividends and the tax advantage of the DTC, this disadvantage is very quickly negated. My personal experience is that dividend income grows about 7.5% a year over the last 10+ years. Even without doing the math, you see having an income increasing far more than how OAS/GIS increases can be a beneficial thing.

It's weird that their argument is, "Too much of your own money is a bad thing so you should stay poor so you're eligible for OAS & GIS".

Erm, I pay effectively 0 taxes on my dividend but getting my GIS clawed back 50% is not something to be ignored.
I mean it's better to have income than not have income, but claw backs must be considered in terms of considering the options.

 

[speakercontrols]

Erm, I pay effectively 0 taxes on my dividend but getting my GIS clawed back 50% is not something to be ignored.
I mean it's better to have income than not have income, but claw backs must be considered in terms of considering the options.

Do the math if you didn't have the dividend income? How much income would you have? hmm???

Your argument is still "having too much money is a bad thing".

If you're focusing on "I'm not getting enough GIS", I think you're focussed not on money but free $ instead.

Besides, given that, If a single pensioner receiving a full OAS pension has income of more than $18,600 annually from other sources (2023 data) , they won’t be eligible for any GIS. OAS is generally FAR, FAR more of a concern than investment income. It is also highly unlikely that somebody at this income level would have left over cash at this level for investing leading up to retirement to begin with.

I'm sure they do exist. However, the existence of outliers does not negate the reality of the rest of the population wrt Dividends, GIS & OAS.

 

[NotADcotor]

Do the math if you didn't have the dividend income? How much income would you have? hmm???

Your argument is still "having too much money is a bad thing".

If you're focusing on "I'm not getting enough GIS", I think you're focussed not on money but free $ instead.

You know GIS is clawed back 50% right?
You know there are other options aside from dividends right and once someone hits a certain age those options become a lot more interesting, right.

 

[speakercontrols]

You know GIS is clawed back 50% right?
You know there are other options aside from dividends right and once someone hits a certain age those options become a lot more interesting, right.

See my updated post above. https://terb.cc/xenforo/threads/investing-in-mutual-funds-td-bank.856138/page-3#post-8733479

" those options become a lot more interesting, right." - you're being deliberately vague for your own reasons.

You; I collect dividends, some of them I spend on hookers, the rest I waste on bullshit like food, car, property tax etc
I also think it's somewhat unlikely you're in this GIS-clawback situation (around $20K ish) you're describing. Particularly given that if you were at that income level, I don't think you have any spare $ for 'the hobby' & cars and you wouldn't be on this site.

You: I get my 37K+ from dividends plus GST, HST, property tax rebate and climate change checks.
Given the low cut-off for GIS, I'm uncertain WHY you're even bitching about GIS and clawbacks due to dividends. $37K (which is close to $1M+/- in investment capital) with or without the DTC is WELL above the GIS cutoff rate.

That math does not match your claim. Feel free to show your math of how your GIS is clawed back.

 

[Zoot Allures]

As you say.

However.. (and feel free to post your own performance...)

View attachment 380140

I invest in pretty much 100% Canadian equities so the TSX is a good benchmark for me for "the market".

I manage multiple accounts for family. As seen in in my RBC DI report, as of October 31st, my 1 year % return is better than 'the market' for all my accounts and my 10 year % return , 3 of the 5 accounts are beating the TSX with the 4th being close. "Since inception" is a little more mixed but in some cases I'm crushing the TSX or doing close enough.

So what you say? Per SPIVA, 2Q2024, I'm doing better than over 90% of professional money managers in Canadian Equity or even Canadian Focused Equity. I also note that Vanguards VCN Vanguard FTSE Canada All Cap Index ETF 10-year rate of return is 8.24%

View attachment 380142

That being said, index ETFs might catch up with me or not. We'll see...

Everything changes.

How much do you charge?

What is your investment philosophy?

 

[NotADcotor]

See my updated post above. https://terb.cc/xenforo/threads/investing-in-mutual-funds-td-bank.856138/page-3#post-8733479

" those options become a lot more interesting, right." - you're being deliberately vague for your own reasons.

You; I collect dividends, some of them I spend on hookers, the rest I waste on bullshit like food, car, property tax etc
I also think it's somewhat unlikely you're in this GIS-clawback situation (around $20K ish) you're describing. Particularly given that if you were at that income level, I don't think you have any spare $ for 'the hobby' & cars and you wouldn't be on this site.

You: I get my 37K+ from dividends plus GST, HST, property tax rebate and climate change checks.
Given the low cut-off for GIS, I'm uncertain WHY you're even bitching about GIS and clawbacks due to dividends. $37K (which is close to $1M+/- in investment capital) with or without the DTC is WELL above the GIS cutoff rate.

That math does not match your claim. Feel free to show your math of how your GIS is clawed back.

I got 10 years before I collect GIS*. I also own my own home which cuts my wasted expenses to very little. I can pay my non whoring expenses on what GIS, OAS and various rebates pay out. I am not a big spender
However when I do turn 65 I'll have an even more beefy TFSA, and anything outside I can convert to an annuity and most of that is considered return on equity.
Also if you actually read what I was writing with a view to understanding instead of trying to score some sort of points, you would notice that if I do nothing I will get severe claw backs of GIS
As for cars, I have a car, I plan to drive it until it rots away from rust or I cant get parts to repair it. Fully paid off and built in the second best Toyota/Lexus factory in Japan. It's just aside from property tax and food one of the few things I waste money on.

In 10 years I will get 1086 from GIS [minus clawbacks], 727 from OAS. That's 1800 or about 22K a year. Plus HST, property tax rebates, GST rebate, Climate change check etc.

I spend about 24K a year and that included some non coitus hobby

For spending money properly. I got my TFSA which I transfer 7K a year [Increasing over time] which currently gets me 11K
That's enough for 18 2 hour visits,
My non TFSA money I can convert to an annuity [and probably should at 65 to provide some diversity from the dividends in the TFSA. Nice side effect, it minimizes the impact of the claw back
Plus, by the time I turn 65, I should probably start drawning down on the TFSA because I don't have a wife or kids and give no fucks about charity.

* I am a huge nerd of Potsie like proportions, I like to plan ahead and was doing so even in my 20's

 

[speakercontrols]

How much do you charge?

What is your investment philosophy?

Top 20 stocks in the TSX is my pick list, 4%-5% dividends, never sell and S&P500 when I can.

 

[NotADcotor]

Top 20 stocks in the TSX is my pick list, 4%-5% dividends, never sell and S&P500 when I can.

To totally misquote Tony Stark

"Great Plan"

BTW that was in English and not my native Sarcastic Fat Guy language. They tend to get confused.