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Weekend Reading: Another Rate Cut Edition

The Bank of Canada cut interest rates again this week – putting its key overnight rate at 0.50 percent – amid talk of weak economic growth and fear of a recession. While not great news for the Canadian economy and our falling loonie, the move is welcome for those like me who have variable rate mortgages and lines of credit linked to the banks’ prime rate.

Pundits widely predicted that the banks would once again fail to pass along the full rate cut to their customers. TD came out of the gate first and announced only a 0.10 percent reduction to its prime rate, but changed course when the other big banks announced a 0.15 percent cut to their prime rate. The banks have passed along just 0.30 percent of the Bank of Canada’s 0.50 percent interest rate cuts this year.

For us that means our mortgage rate has reached an all-time low, dipping to just 1.90 percent, while the rate on our line of credit falls to 3.20 percent. It reinforces my decision to focus on investing rather than paying down our mortgage faster – at least for another year until our mortgage comes due and rates are expected to (finally) tick higher.

Enhanced Universal Child Care Benefit

I was pleasantly surprised to see a larger than usual deposit from the federal government in my bank account yesterday. That’s because enhanced Universal Child Care Benefits kicked-in this month, and the July 2015 payment included the increased benefits from January to June.

If you recall, last fall the Harper government announced that the UCCB would increase to $160 per month for each child under the age of six, and expand to children aged 6 through 17.

This week’s recap:

On Monday I looked at the world of college athletics, endowments, and how it relates to building your retirement fund.

On Wednesday Marie started a new monthly series exploring the real cost of living.

And on Friday I admitted how I used to waste money on movies, books, and CDs in my youth and how I no longer fall for sales like Amazon’s Prime Day.

Weekend reading:

A dividend growth investor expressed his concern over my investing strategy, proving once again that it’s hard to leave the church of dividends without persecution:

Besides unreasonable expectations, I think B&E didn’t have a strategy for picking dividend stocks in first place. Hence, he switched to indexing. Hopefully he doesn’t abandon it for something else during the next bear market.”

Sheesh, give me a break.

Ontario wants to regulate the financial advice industry by imposing education requirements and permits on those who call themselves financial planners. But the industry has other issues, says Jason Heath, who argues that the suitability standard should be replaced by a fiduciary duty of care.

This article in FAIR Canada says that clients who rely on their advisors really get to choose only from among the things their advisors want them to buy.

Carl Richards says the investing signals you should listen to are personal and not in the markets.

Former NHL player Bryan Berard explains how fraudsters devastated his retirement savings.

Speaking of fraudsters, prepaid credit card scams are on the rise and Canadians are losing millions.

The real reason for the forty-hour workweek (or why your lifestyle has already been designed).

Why the author of this article quit her six-figure job and moved to Mexico.

Tough luck to the baby boomer residents of Fredericton, Lethbridge, Alta., and other smaller communities with quiet or weak real estate markets, says Globe and Mail columnist Rob Carrick.

“There’s not much of a retirement windfall waiting for you in the years ahead when you sell and downsize.”

Krystal Yee breaks down the cost of renting vs. owning in Vancouver.

How a Harvard economist screwed up – and then saved – her retirement.

A 58-year-old with $160,000 in his RRSP wonders if he’s saving enough to retire by 70.

Don’t forget to factor inflation into your retirement income projections, says Michael James.

Alexandra Macqueen offers a different way to think about the value of Old Age Security.

A 22-year-old college student blew her $90,000 college fund and blames her parents for “not teaching her how to budget”.

Dan Wesley shares some of the financial lessons he’s learned after four years of marriage.

Many hotels charge a mandatory resort fee – shouldn’t it be included in their published room rate?

Finally, shares of Google surged more than 16 percent Friday, adding nearly $65 billion to its market value.

Have a great weekend, everyone!

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4 Comments

  1. Michael James on July 18, 2015 at 3:24 pm

    I read the pair of “investing sin” posts over at DGI. His supposed concern over your financial welfare wasn’t even in the top 3 silliest things he said. Thanks for the mention.

    • Dividend Growth Investor on July 23, 2015 at 9:56 am

      Michael James,

      I have learned when someone uses words like “silly” to do a personal attack, they lack real substantive arguments.

      Actually, you were one of the inspirations behind the series of articles on investors who put their money to work without a plan (and suffering terrible returns in the process). You didn’t have a plan on how to invest your money for something like 10 – 15 years. I didn’t link to you, since I didn’t want you to get any traffic.

      I am happy that you have a plan now, and wish you to be able to enjoy a long and happy retirement.

  2. Dan @ Our Big Fat Wallet on July 19, 2015 at 7:56 am

    Robb, how dare you leave the church of dividends!? Ha. I never thought of getting Amazon Prime to ship gifts to family/friends, probably a lot cheaper than shipping each item via Canada Post. Thanks for the mention, hope the vacation is going well

  3. Dividend Growth Investor on July 23, 2015 at 10:00 am

    Hi Robb,

    The real beef I had is with your article where you state that you are going to have a 6% withdrawal rate and you used that as a reason as to why a 3%-4% dividend yield is not enough. Your article on living off dividends versus indexing made absolutely no sense.

    As long as you stick to your indexing strategy and do not abandon it for something else, then I have no problems with you switching to indexing.

    This is the whole argument I posted:

    “This blogger sold all dividend paying stocks in 2014. Didn’t mention how much hit the capital gains taxes were. Seems to switch retirement goals/objectives all the time and extends them further. Latest post shows he expects a 6% withdrawal rate in retirement, which is unsustainable. The reasoning behind using index funds was full of logical flaws and shows he doesn’t’ know how to compare apples to apples.

    It looks like he chose indexing because he has unreasonable expectations, and thinks that a 3-4% dividend yield is too low for him to live off. The real problem is their savings rate. The sad thing is this person is advising others, so I would be scared if I were his client and he told me to withdraw 6% of my portfolio every year. Besides unreasonable expectations, I think B&E didn’t have a strategy for picking dividend stocks in first place. Hence, he switched to indexing. Hopefully he doesn’t abandon it for something else during the next bear market.”

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