Feb 082016
 

Mortgage Investment Corporations Returns in 2015

The Toronto Stock Exchange lost about 9% last year. But one group of investments that performed well in 2015 were mortgage investment corporations (MIC.) In the beginning of 2015 I held three different MICs. Since I didn’t add any new positions throughout the year it’s easy to calculate my total annual returns from them. Let’s take a look at the results. :)

Liquid’s MIC returns in 2015:

  • Antrim Mortgage Fund: +4.5% return (on $10,300 invested)
  • Atrium Mortgage Investment Corp (AI): +8.2% return (on $2,100 invested)
  • Timbercreek Mortgage Investment Corp (TMC): -0.6% return (on $2,600 invested)

Total returns = 461 + 172 + (-16) = $617

Overall Return on investment = $617 ÷ $15,000 = 4.1% return

The chart below shows the unit price of my AI and TMC investments compared to the S&P/TSX index, throughout 2015. It does not include dividends or interest.

16-02-tmc-ai-performance-vs-tsx

MIC Analysis

My total return for holding $15K in MICs last year earned me 4.1%. This rate of return was lower than the historical average of 5% to 8% one would normally expect from a basket of mortgage based investments. I believe a number of negative factors played into this outcome.

  1. Our economy in 2015 was weaker than economists had expected. The price of oil lost around half its value. As a result, the Canadian economy fell into a recession because it’s very dependent on strong oil prices to grow.
  2. Another reason is because the Bank of Canada cut interest rates not once, but twice in 2015. Lower rates are bad for mortgage lenders like MICs because they make less money if borrowers pay less interest on their loans.
  3. Furthermore the annual account fee I paid to my trustee lowered my Antrim Mortgage Fund return by 1.3%.😖
  4. The last reason is because one of my holdings, Timbercreek (TMC) severely under-performed other MICs. I don’t know if 2015 was just a bad year for the stock or if the drop is due to something more substantial. 😕

Continue reading »

Feb 042016
 

More Income Streams

Most people can make over $100,000 a year if they’re committed to improving their formal education, be dedicated to their careers, and be willing to work 60+ hours a week. But unlike most people, I’m lazy and don’t like to work hard. 😛 So I prefer to use multiple income streams to eventually earn a $100,000 annual income instead. I first discovered the power of combining multiple income sources in 2012. Why remain a one-income household when you can become a two, five, or even ten-income household? 😉 Instead of focusing all our energy on growing one income, I feel the priority should be to promote synergy between multiple income sources to make them all work and grow together.

For example, my full-time job provides me with important skills, which I can utilize in my part-time job to increase my value there and get paid more. My increased part-time pay is saved up and used to buy dividend growth stocks which typically yield 3% to 4% to enhance my dividend accumulation rate. Then I reinvest a portion of my dividends in interest generating investments that yield 5% returns or higher. I can then use the interest income to invest in even more assets to grow my passive income. The more individual income streams I create, the easier it becomes to grow the entire income pot. 😀

In my last update I had 5 streams of incomes. In today’s post I’d like to welcome a new passive income stream. It’s interest-ing! 😀

Interest

Introducing my new income stream, Interest. 👍 I started earning interest on my investments in 2014. Back then I was only making a few hundred dollars a year. But by the end of 2015 it had grown to ~$2,000 per year so I feel obligated to officially include it on my income graph below, (light blue bar).

16-02-mulitple-income-update-2015

It’s always fun to discover new income sources. :) Each one will have its own unique characteristics and advantages. Everyone knows we shouldn’t put all our investments into one basket. I feel it’s prudent to do the same with our incomes and not rely entirely on one job or income source. If I ever lose my primary job, it’s nice to know I have 5 other incomes to fall back on. Phew. 😌

Continue reading »

Feb 012016
 

The Current State of Canada’s Economy

The economy isn’t so hot these days. Oil is down and so is the Loonie. The issue isn’t that we’re at a low point in the economic cycle. The problem is how quickly this happened and caught most people off guard. The price for a barrel of oil fell from $100 to $30 in just 18 months, which triggered big layoffs in our resource based economy, forcing many desperate folks to search for other means to make a living.

16-02-current-state-canada-economy-moose

But it’s not just this country that’s struggling. The entire global economy is slowing down and there are problems in the jobs market across every continent. The Bank of Japan recently announced the use of negative interest rates. This is a pretty big deal. The 3 most used currencies in the world can be manipulated by the European Central Bank, the Bank of Japan, and the Federal Reserve. Both the ECB and BoJ have played the negative interest rate card to devalue their respective currencies. The only bank remaining is the U.S. Fed. Will the U.S. try to stimulate its economy by lower rates into the negative? I think there’s a good chance it will. But since I can’t predict monetary policy I’m just going to focus on my long-term financial plan and stick with what I know. 😀

Maintaining a Long-term Perspective in a Volatile Market

Since my investment portfolio is based on my risk tolerance, short-term events should have little effect on my long term retirement and savings goals. There are many Investment Personality Questionnaires (IPQs) which can be found for free on the internet. Their purpose is to help people determine their propensity to take on risk, which is a good place to start for any novice investor. 😉

Historically, there have been tons of major events that have had dramatic impacts, at least initially, on the markets. But looking back, these are now mere blips on the financial market radars. Those who stay invested and contribute regularly generally have the biggest gains in the long run. 😉

Net worth results from the first month of the year are usually pretty interesting. This year was no exception. Many equity investors experienced quite a roller coaster ride, lol. At one point in January my net worth was down ~ $20,000! That’s naturally what happens when I have over $200,000 invested in equities and North American stock markets drops 10%. Fortunately, by the end of the month they regained most of the loss. :)  Phew.

*Side Incomes:

  • Part-Time Work = $900
  • Freelance pay = $400
  • Dividends = $700
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1400

*Net Worth: (MoM)16-02-net-worth-january-volatile

  • Assets: = $925,500 total (+3,100)
  • Cash = $5,500 (+2000)
  • Stocks CDN =$97,200 (-500)
  • Stocks US = $70,000 (-2700)
  • RRSP = $63,000 (+300)
  • MICs = $15,800
  • Home = $263,000 (+4000)
  • Farms = $411,000
  • Debts: = $498,400 total (-3500)
  • Mortgage = $190,500 (-400)
  • Farm Loans = $197,400 (-500)
  • Margin Loan CDN = $29,500 (-1000)
  • Margin Loan US = $31,000 (+200)
  • TD Line of Credit = $22,000  (-1000)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,000 (-200)
  • RRSP Loans = $0 (-600)

*Total Net Worth = $427,100 (+$6,600 / +1.57%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.71 USD

Continue reading »

Jan 282016
 

What Does Risk Mean?

It’s time again to learn about you, the readers. :D  Awhile ago visitors of this blog were asked which word first comes to mind when they hear the term, “risk.”  Here are the results. Thanks to everyone who voted.

16-01-poll-risk-first-thing

It appears most readers associate risk with uncertainty or opportunity. I would choose uncertainty as the first thing I would think about when facing or talking about risk. Opportunity would probably be the next thing I would think about. Opportunity and loss can both derive from uncertainty but financially savvy people are usually cautiously optimistic about the unknown and we try to seek out serendipitous possibilities. Investors have to think like heart surgeons; 💙 we must never bypass a good opportunity.😆 As Winston Churchill once said, “a pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

Usually the best chance we have at success also comes with a good amount of risk. But the good news is we can lower the risk without diminishing the potential gain. :) We can lower risk through self knowledge and an understanding of the financial world. A lack of wisdom leads to risky behavior. As Warren Buffett once said, “risk comes from not knowing what you’re doing.” That’s why countries that are less financially literate tend to have a less affluent population. People who work in business and investment banking understand how finance works, and not surprisingly they tend to make a lot of money in their fields. The more we know, the less likely we are to fail, and the less risky our decisions will become. :)

——————————————————————–
Random Useless Fact

According to the BBC, in some parts of Australia, 90% of koalas are infected with STDs. Koalas are at risk of becoming extinct because over half of them have chlamydia.

16-01-koalas-chlamydia-extinct-what-meme

Jan 252016
 

Mental Contrasting

Mental contrasting is a visualization technique to help people get what they want. :) It was developed by Gabriele Oettingen, a psychology professor at New York University. This technique has strong empirical support. :) Over the last decade in studies conducted by Gabriele and other researchers, mental contrasting has been shown to increase attendance and academic performance for low-income school children in the U.S. and Germany. In other studies, people who practiced mental contrasting increased their fruit and vegetable consumption by 30%. Maintaining a healthy diet is very important. Some people like to preserve fruit and vegetables because they ‘can‘. 😆

Mental contrasting begins with creative visualization, thinking positively about the future and imagining the ideal outcome. 😀 But daydreaming alone won’t get us very far in reality. What we also have to do is mentally contrast where we want to be and where we currently stand. For example, maybe we want to increase our monthly retirement contributions by $300. We have to embrace our current reality and accept that we need to work hard to reach our goal. By focusing on this gap between where we are and where we want to be, we create a necessity to take action.

Here’s how to implement the mental contrasting technique.

  1. Think about an ideal outcome for yourself in the future.
  2. Determine the main internal obstacles that will probably get in the way of your desired outcome.
  3. Formulate a if-then plan for what you’ll do to overcome those obstacles.
  4. Follow through with the plan and don’t give up.

16-01-never-give-up-so-close mental contrasting

Exercising mental contrasting with implementation intentions means that we believe we can achieve our goals and also realize that we have to put in effort to make it happen. When determining potential obstacles in step 2 it’s important to focus on internal factors like laziness, procrastination, or other personal habits. External obstacles like what our boss does, or how the stock market performs are not things we can control the outcomes of. Strong motivation has to come from within. If we are not willing to improve, then no one can help us. On the other hand, if we are determined to improve, then no one can stop us. 😉

Continue reading »