Abundant Life

Living a Happy Abundant life

Investment Mistake — May 12, 2020

Investment Mistake

It is all in the learning. You know, I am not a financial expert. But, I try to learn and do try to manage my money. Some time before, I learned about Real Estate Investment Trusts.

According to Investopedia, “REIT is a company that own, operates or finances income generating real estate. ” Toronto’s real estate is highly expensive. Many finance advising websites wrote about how you can diversify your income stream by investing in REITs. With further looking in to it, I realized there are few companies (REIT) listed in TSX. With much consideration, I chose to buy few units of one. There was a non registered account which we started long time before. with minimum requirement at that time. There was TFSA in Canada when we started it.

I bought the REIT units in that account. When you live in Canada, you really have to understand the taxes. You have to pay taxes on all type of income. Dividend is taxed as well, if it is not generated in a registered account.

REIT taxes are different than the regular dividends. Aha, it is not even called dividend, it is called distribution. I wasn’t giving much thought to it, until now: I stumbled on this blog post, by RetireBeforeDad. Then I realized, the distribution is different than dividend. A quick search led me to Dividend Earner’s blog, to this post about REIT. It was written in 2018. I have to learn more about T3, ABC and stuff if I really wanted to have that REIT in non registered account. But, there is no such hassle if it is held in TFSA or RRSP.

I will have to do something for the REIT. Creating a life of abundance needs a lot of learning and action.

Photo from Unsplash

Your TFSA Compounder — May 8, 2020

Your TFSA Compounder

I am a regular visitor of the website “My Own Advisor”. The author, Mark gives a lot of information on investing your own money. In a nutshell, it is a DIY investing blog.

Mark’s writings actually motivated me to try dividend investing. So, I started doing it, in 2016. Ever since, I am interested in learning more about dividends and stock.

Recently, I saw this book :Your TFSA compounder. Work your TFSA harder so you can retire sooner

The book is written by Henry Mah. I haven’t finished it yet. But, I will say, it is an eye opener. I was thinking I needed to own several companies to gain a good income. No, Mah says I can have few shares. Taking advantage of Dividend Reinvesting, or DRIP, I can achieve good income from dividends. He also gives four rules to screen your stocks. I was choosing the investments by looking on the current dividend and suggestions from financial websites. Okay, everybody knows Canadian banks pay dividends. Then if you search, you can find Canadian Dividend aristocrats. I want to confess that I made few mistakes by not knowing much about stock screening.

Mah shares his Excel spread sheets for the reader to screen the stocks. We have to do the work. But, hey, knowledge is power.

Every one knows about compounding interest. That is how the money grow. with dividend shares, reinvesting the dividend to gain more dividend is the compounding. If you think about it, DRIP is a no brainer. I mean, to DRIP, you don’t have to pay commission. That is less expense for investing. If the market goes up or down, the income investor can keep cool!

What do you think of investing in TFSA to make your money work harder to have abundance?

FIRE and TFSA — May 6, 2020

FIRE and TFSA

Tax free savings account is a great gift for Canadians. This is the only program that help us the grow our money tax free.

What about RRSP? I was thinking. RRSP contributions will help to reduce paying taxes. But, the money is taxable when we take it out. If you made the money grow, you will be paying the tax on the growth as well.

TFSA helps us to grow the money without worrying about paying tax. Since the contribution is already taxed, the withdrawal is not taxed at all.

Lower income people like myself, will found it better to maximize TFSA first. That being said, I assure you, maximizing TFSA is not easy, if you are not good in saving your money.

Think of this scenario: You get a refund from CRA in 2020. Immediately, park that money in your TFSA. You can mange it yourself, or take advantage of the advisor from bank. In either way, start contributing: that is the important thing. that is the road for money abundance!

Governments are trying to reopen the economy soon. We all will start working soon too, I hope. But, the annual income will be lower than previous years for sure.

If you are young, and started working, think of taking full advantage of TFSA.

Keep Safe and save!

April passive income — May 4, 2020

April passive income

April is over. Due to the Covid19 situation, I was home all the time.

I was having more time to look on the investments. It was great that government decided to pay for people staying home and cannot do work, because of the pandemic. It is not the regular EI benefits. Something is better than nothing. My plan is to put that into savings. It is true that we need a bigger emergency fund than ever. So, I am going to park the money in TFSA.

Even though the stock market is down and dividends got slashed, I managed to earn some money. Most of the dividends are reinvested. April being a good dividend month for me and it made $720. The goal is to have an average of $2000 per month in dividends.

Meantime, I love to look on short term trading as well. But it scares the shit out of me. My self doubts creeps in. What if the decisions are wrong? What if I am stuck with the loss?

Another weekend & Covid19 — April 25, 2020

Another weekend & Covid19

It is yet another weekend, which just feels like any other day. It looks a bright sunny day in Toronto with high temperature as +12 degrees. I was dreaming of going for a long walk.

Morning was only plus 1 degree. so we decided to have the walk right after lunch. There was no other expenses during the week other than the grocery shopping.

I paid all the bills in the morning itself. It feels great to be able to pay all of it. The benefit of living below the means and savings! I am not asking credit card company to differ payments. Not this month any way.

After lunch we laced up and went for walk. We were dressed nicely for the weather. Yet, it felt slightly cold. The walk feels good. We walked about 3 km. It was not that long for many people. But, it is the first walk in the spring for us. So, it felt long. I came back with a headache. Ohoh! Anyway, a painkiller took care of it for now. It is scary to go out.

A friend send me some youtube links for work out. I like one beginner one, low impact and only half hour.

I know, when this situation is over, I need to find a job. There are few vacancies I saw. Not daring to apply for now. Last time, I applied and the employer wanted to see me face to face. I am not ready to take the TTC to go for an interview. I had to chicken out.

I am still auditing the course on Intro to Psychology on Coursera, for the fun of it.

I wonder what people are doing to be occupied during this time!

Investing in mutual funds — April 22, 2020

Investing in mutual funds

We started saving and started investing in GICS. Let us discuss with another type of investment. Mutual Fund. Banks will help to pick a right mutual fund. It is an investment vehicle.

What is a mutual fund?

It is a fund which invests in stocks, bonds and and other assets. The fund is made up of money collected from investors. Then the fund is managed by professional fund manager.

Most of the mutual funds have a minimum purchase requirement. When you buy a mutual fund, you get units. It is good if you don’t want to take the risk of investing on your own in stock market. It gives you an easy option to diversify.

Mutual funds are categorized as series or classes. It is to provide different investment benefits for the investors and to help the advisors to arrange different type of compensation. So each type of mutual fund has different management fees. The management fees include the expenses incurred in creating and managing the mutual fund. When investing in mutual funds, one need to be aware of the costs. Then the gains of the fund are distributed among the investors.

Risks of Mutual Fund

Every investment has risk. Let us explore the risks of investing in mutual funds.

If the fund consists of stocks, then the value of the fund and returns depends on the stock market. some times, the fund will not be able to sell the losing stocks. Bond mutual fund can be at credit risk if the issuer cannot repay the bond. If the interest rate varies, it will affect the fixed investment portion of the mutual fund. Value changes in currency can affect value of fund, when fund has investments in different currencies.

What to look for before investing?

Always read the fund facts. It will tell you what the fund is invested in and the management expenses. It will also tell you about the past performance. Be mindful that past performance is not a guarantee for future performance.

You can compare the fund you are interested in with other similar funds.

Do research on the fund manager. Is the fund management change frequently?

Also, find out what is the goal of the fund. Goal of the fund should match with your goal on investment.

Check how risky is the fund. Can you handle the fluctuations in price and returns.

Find out the actual cost of the fund. These costs are MER or management expense ratio(operating expense), sales charge or commission (Front end load), Redemption fees (Fee when you sell the fund) and distribution fee (Fee for fund marketing).

In the next post I am going to write about Exchange Traded Funds.

Investing In GIC —

Investing In GIC

So we already started saving. That is exactly what I did, several years ago. Once it reached kind of $500, I used to put it in the GIC. GIC is Guaranteed Income Certificate.

How to invest in GIC? It seems like everybody knows how to. I was looking around on the bank website. Different banks have different programs. CIBC had an easy one. Many were asking for a minimum of $500. So, when I had $500, I went to the bank and asked to place it in GIC.

The personal finance expert at the bank asked me several questions. Do I need the money any time sooner? Can i let it in the account for few years? I was thinking hard. I don’t needed it right away. I may want it after an year or two.

I learned that the GIC can be paying interest at regular intervals or it can put the interest back to the account and pay interest for the next new amount. That is cumulative interest. I opted for cumulative for couple of years. I also learned, if the money is for short term, the interest was less, and the bank pay more interest for keeping long term. Cumulative interest is better, because, your money is growing without you doing anything to it.

There are several types of GICs. Some are cashable at any time. When I was starting, those were paying less interest. But the advantage is you can take it out of the account any time without any penalty. There are fixed GICs as well. You can take it out only when the GIC is matured, meaning, if you put it for 5 years, you can get your money only after 5 years. If you want to take it before, you might loss the interest (some or all of it, according to the terms of GIC).

In Canada, we all heard of RRSP and TFSA. If we hold the GICs in any of these plans, there is no tax for the interest earned. But, if it is outside of those, you have to pay tax for the interest earned. The tax on interest is calculated as your earned income. When you have only small investments, every penny counts. So, it will be better to hold your GICs in TFSA. Good thing about TFSA is you don’t have to pay tax on whatever earning you made. On top of that, you can take out your money any time. The contribution room will be there and can be utilized at a later date.

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