Free Lunch Friday #1: John Bogle, dividends investing, and INVRS
Learn all about the OG of index funds, the first homeowner savings account and how to level up your research.
Welcome dear subscribers to Free Lunch Friday.
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What the hell is a FHSA?
The 2022 budget of Canada is now out and there’s a new tax shelter called the FHSA. It stand for “First Homeowner Savings Account” and while it sound like a great initiative to support people buying homes, it’s actually not that helpful. Let me break it down:
You cannot use the RRSP home buyer plan if you open a FSHA. The maximum amount for withdrawal is 35k and would have been nicely combined with the 40k limit of the FSHA.
Speaking about limits, 40k seems really low with the down-payment prices needed across Canada, especially when the average home price is $816 720.
Even if the FSHA is a tax shelter, investing this money over 5 years encourage investors to take risks. The account can only be open for 15 years and your contribution limit isn’t carried year after year like your TFSA.
If you want to make your own opinion on the matter, you can learn more about the first homeowner savings account here.
Make money when you sleep
I’ve recently started building a template of a dividend-focused portfolio. My current portfolio is 80% long-term and ETFs, but I like the idea of building a 2nd one targeting stocks with stable quarterly yields.
I’m trying to find stocks with 3 to 6% yield and leveraging the power of re investing the money yielded by those dividends (it’s called DRIP: Dividends Re Investing Plan).
The goal is to invest enough money to benefit from quarterly(sometimes monthly) dividends. Lots of investors are investing in dividend stocks as part of the FIRE movement.
Here’s an example of how much profit can be made by reinvesting dividends instead of just keeping them.
Compound interest is a powerful force, even more powerful when you re invest dividends.
If you’re interested by that, let me know and I’ll keep writing about this specifically.
All hail John Bogle
I’ve been reading about different styles of investing and I finally found the expert that is perfectly aligned with my philosophy: John “Jack” Bogle.
Founder and CEO of Vanguard and the creator of the first index fund, John Bogle died in 2019 but created a legacy for DIY investors. His idea was to create low-cost index funds that would provide superior returns for the long term investor. Here are his 8 rules of investing:
Select low-cost funds
Consider carefully the added costs of advice
Do not overrate past fund performance
Use past performance to determine consistency and risk
Beware of stars (as in, star mutual fund managers)
Beware of asset size
Don’t own too many funds
Buy your fund portfolio—and hold it
If you’re curious about this investing philosophy, it’s simple. All you have to do is: investing in broad-market (MF or ETF) indexes, diversified between equities, and fixed income.
Buy, hold, rebalance, and stay the course!
My watchlist
I’m a lazy investor, but I’m keeping around 15% of my portfolio to invest in companies I believe in. This is what I’m watching this month:
AQN | Algonquin Power and Utilities Corp is a utility company based in Canada. They bring clean water and sustainable energy to people. Utility stocks are trending right now because they are predictable, they have above-average dividend yields, and offer stable earnings across multiple markets.
TFII | TFI International is a transport and logistics company from Quebec. They recently bought multiple third-party logistics providers in 2021. It’s a billion-dollar organization and the type of boring investment that you keep for a decade.
TOI | Topicus Software is a parent company to Constellation Software (CSU). They have expansion plans and even if the financial metrics are showing lots of debt, it’s typical from a software company. If their playbook look a little bit like CSU, we’re on the right path.
Financial software of the month: INVRS*
It sounds like a stock ticker but it’s not. INVRS is a new platform with the goal to help you research and invest with people. It’s not 100% intuitive and I’m still having trouble navigating around the platform, but it has potential.
I’ve been using stratosphere investing to do my research but the cost of the software is too high for the usage I’m doing. INVRS is enabling you to follow groups of investors and get quick access to financial data.
They should be launching the portfolio feature eventually, which is much needed on the platform. It’s a great software to bookmark, but nothing necessary for the time-being.
*I’m an affiliate of this product and I might be getting commissions if you register.
That’s all for this month folks! If you learned something, please share with your friends that are interested in investing and personal finances.
Note that I am not an investment professional, and this is not investment advice.