Short Takes: TFSA Penalties, Dividend Myths, and more

I’ve known for some time that I need to be prepared to respond in some way if stock price-to-earnings ratios grow ever higher.  The problem was that I wasn’t sure of the best response.  Unfortunately, the extended exchange I’ve had lately with John De Goey concerning the possibility of a stock market crash hasn’t taught me anything new.  But this exchange did prompt me to solidify my plans.  The first step was to reduce my expectations for future returns which also reduces the percentage of my portfolio that I can spend each year.  I’ll write about the second step in the coming days, which is to gradually adjust my stock allocation percentage as a function of stock price levels.

I managed only one post in the past two weeks:

Portfolio Optimization Errors

Here are some short takes and some weekend reading:

Jamie Golombek gets a CRA opinion on an interesting TFSA overcontribution case where a TFSA is empty but still has an overcontribution.  I wrote about this possibility a few years back.

Boomer and Echo dispels some very persistent myths about dividend investing.  I’ve tried to address some of this misguided thinking myself, and the reaction from true believers is often fierce.

Andrew Hallam makes a good point about how difficult it is to know how you’ll react to your first big stock market decline.  He suggests starting with a slightly lower stock allocation than you think you can handle to reduce the odds that you’ll sell at a bad time.  I took a different approach for myself and for advising my sons.  I suggest keeping in mind that it’s pointless to hope that stocks won’t crash.  They are certain to crash, but we don’t know when.  The knowledge that stocks will crash while I own them helps to keep me calm when the inevitable crash comes.

Canadian Couch Potato explains what’s going on inside Tangerine’s Global ETF portfolios.  As he explains, they’re mutual funds whose holdings are ETFs.