In Ask Sherry, Canada, Discussions, Investing, Wealth

Ask Sherry: What is my dividend investing strategy?

You asked, and I am answering every Friday once I have enough questions!

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You can ask any question using the form here.

What is my dividend investing strategy?

Yes. You know what, I was going to email you but then I realized this is a useful comment for others.

In general, I stick dividends in my margin account FIRST just because the taxes are so low for dividends.

(Although that doesn’t matter, I am reinvesting all of the dividends to buy more stock.)

But if I have room in my TFSA, that is where I put it to top up the account, but I always try to put dividends in my Margin account first over any others, because the taxes you pay on dividends are far more favourable than anywhere else (which is to say, low although in recent years the tax agency has been raising the rates on dividends…. ugh …).

You can make up to $50K in dividends and pay about $200 in taxes a year, but I’d have to redo the math for when I actually want to live off only dividend income because I am sure the tax rules will not be as favourable by then.

You can do your research on this on TaxTips.ca


Also, with dividend investing, I am not looking only at dividend yield.

I am also looking for long term gain, such as capital gain…. I want the stock to do well AND pay me money.

This is exactly what happened by the way, with one of my investments. I got paid dividends all the time and at the end, when they got a big buyout offer, my return on that particular investment was about 60%….

That is one of the main reasons how my net worth went up $100,000 in the past 2 months not withstanding my income which is also not insignificant (about $20,000 a month).

Not bad.

Capital gains tax by the way, is only on 50% of the gain.. meaning you earn $10,000 in capital gains, you only pay taxes on $5000 of those gains.

That’s pretty sweet.

You can stick that in a margin account and it would be quite favourable tax-wise.

For anything that is U.S.-based, you SHOULD put it in your RRSP. We have a tax treaty with the U.S. with registered tax accounts and for Americans, only the 401K counts to hold Canadian stocks and NOT pay taxes on the dividends, and for Canadians, it is in the RRSP that is the recognized “tax treaty registered retirement vehicle” where we do not pay taxes on U.S. dividends.

ALL my USD$ and US holdings are in my RRSP. No exceptions, and all as ETFs.

Are luxury bags “worth it”? (*glances at your new Céline*)

(I just bought this secondhand)

“Worth it” .. No. Hermès might be the only brand, with the Birkin classic 35 black with gold hardware being an actual “worth it” investment because its price goes up year after year, and you can resell OLD Birkins for more money than what you paid. For realz… some people even say it is a better investment than gold.

For me I love my new-to-me Céline bag because it is so chic and stylish, and I do feel like my outfit looks that much
better with a great bag. I’m often in flats or boots except at work, so when I’m out “casually”, a very sleek chic bag has really elevated my overall look.

https://www.instagram.com/p/BouDqedlnrG/?taken-by=saverspender

Now could I achieve that with a non-designer bag?

Yes but it would then look like the designer bag (shape, style) and it would look like a knockoff of it and I’d feel that.

Still have a burning question?

You can ask any question using the form here and all of my previous Ask Sherry posts are here.

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Sherry of Save. Spend. Splurge.

Am my own Sugar Daddy. Am a millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I have 11 side incomes that are on track in 2020 to make me $50K - $75K. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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Posted on September 29, 2013

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2 Comments

  1. Kemi

    I like your response to the dividend investing strategy. It’s a good steer for me even if I’m based in in the UK

    Reply
    1. Sherry of Save. Spend. Splurge.

      Try looking UK sites that talk about that. I think The Monevator is one.

      Reply

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