Dividend vs Growth Investing, Rising Interest Rates, Withdrawing From Your Portfolio

Dividend vs Growth Investing, Rising Interest Rates, Withdrawing From Your Portfolio

Today, we’re going to tackle the debate of whether you should focus on growth vs dividends when it comes to your investing. Dividends are of course very popular. Everybody likes having that passive cashflow show up in their accounts, but are we limiting our net worth if we focus too much on dividends, as opposed to choosing a more balanced and growth oriented portfolio?

In this episode, we’ll also talk about how to best withdraw money from your investment portfolio, and how to decide if you should be withdrawing from your equities, your bonds, or your cash cushion instead.

We also talk about changing interest rates, and the impact that you can expect them to have on your portfolio, as well as some tips on what to choose for the bond portion of your portfolio.

For this episode, I’m excited to have Ed Rempel back on the show, who is one of the top financial planners that I go to whenever I have questions or need a second opinion about my investments, financial planning or on how to minimize my taxes. He’s been a fee-for-service financial planner for over 24 years, and he’s been a tax accountant for over 35 years with a CPA and CMA designation.

Personally I found that when I ask him questions, his decades of experience as BOTH a financial planner AND a professional accountant really helps me feel secure that he has all the bases covered, as he has a holistic view from both of those worlds due to all that experience. He’s also written nearly 1,000 financial plans for Canadians over that time so he’s truly as experienced as it gets in this field, and he has extensive knowledge on some of the higher-level investment strategies out there.

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Questions Covered:

  1. You wrote a great article about living on self-made dividends, which I found really interesting because it’s a way to actually have some more control on how much income you actually receive from your investments. Can you give us a synopsis of the article?
  2. In your article, a lot of the points apply to taxable accounts, in other words, money held outside the RRSP and TFSA. However, even when using an RRSP or TFSA, I think a lot of us wonder if we should focus our investment portfolio on established companies that have consistently been paying dividends (so that we can potentially just live off those dividends), or if we should instead be including growth oriented companies as well in our portfolio. Can you give us your thoughts on this whole dividend stocks vs growth stocks vs a balanced approach debate?
  3. ​When it comes to withdrawing money from you investments, how can we determine how much to withdraw so that we minimize our risk of running out of money in retirement?
  4. When we wish to withdraw some money from our investment portfolio, how do we decide whether now is a good time to sell-off some of our equity portion, or whether we should instead sell off a portion of our bonds, or maybe use up some of our cash cushion instead? For example, earlier this year we had a bit of a dip in the markets. If somebody is in traditional retirement or early retirement and needs some cashflow right after that happened, how do you decide whether to sell at the temporarily deflated stock prices, or use your cash or bonds instead?
  5. In your article, you mentioned that because of the 2008 crash and low interest rates, there’s been an influx of investors that have been buying up dividend paying stocks. Because of this, you say there’s a bubble with dividend stocks. How do you determine that it is in fact a dividend bubble?
  6. Another thing on the minds of Canadians is the potential for rising interest rates. What tends to happen to dividend stocks when interest rates rise? What about more growth oriented portfolios?
  7. While on the subject of potentially rising interest rates, let’s talk about bond ETFs for second. When building a portfolio with a portion allocated to bonds, what are your thoughts about using a bond ETF that’s all government bonds vs all corporate bonds vs an aggregate bond index ETF that has some of each?

Links & Resources Covered

Ed’s great article mentioned in the episode, as seen in Canadian MoneySaver Magazine:

Is Typical Retirement Advice Good Advice? – Testing Retirement Rules of Thumb

Receive a complimentary 30-minute consultation with Ed by signing up hereBy signing up you’ll also receive the free guide: “How to Find the Right Financial Advisor in Canada”

You can also view the articles mentioned in the episode on Ed’s blog: Unconventional Wisdom

In Closing

If you enjoyed the episode, please take a moment to leave an honest review and rating on iTunes by clicking the “View in iTunes” button at this link.

If you have any tips, suggestions or comments, please be sure to leave a comment in the section below. I read all responses and look forward to hearing from you.

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Happy investing!

Kornel

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