January is when I adjust the value of my home. I determine the new price by taking my original purchase price in 2009 and add inflation to it every year. In 2012 the CPI in Canada for the entire year averaged out to roughly 1.6%.
Last year my home was $248,000. This year I’m going to add the 1.6% and increase my home value to $252,000 🙂 The government (BC Assessment) thinks my condo should be worth more but I’m using the inflation adjusted method to be on the cautionary side. January is also a month where I get a lot of quarterly dividends 😀 Furthermore, there is a little secret in the investing world called the January Effect. It describes the general increase in stock prices during the month of January. Nobody knows exactly why, but part of the reason might be that many people, especially workers on Wall St. often get big bonuses at the end of the year, so they buy a lot of stocks in January with that extra money which pushes the market up. This happens more often than you might think 🙂 Below is a chart showing the S&P 500’s average monthly returns for the last 14 decades. Notice how January outperforms all other months.
In a normal month my net worth would grow by about $2,000 or $3,000 depending on how much I save and how my investments perform. But because of the events described above January is often a special month where I see a big boost to my net worth which I like to call the New Year Bump. This happens almost every year.
- Eating Out = $100
- Others = $100
*Net Worth: (MoM)
- Assets: = $506,700 total
- Cash = $1,800 (+$800)
- Stocks = $72,100 (+$3,400)
- RRSP = $30,800 (+$1,000)
- Home = $252,000 (+$4,000)
- Farm = $150,000 (Same)
- Liabilities: = $354,200 total
- Mortgage = $204,200 (-$300)
- Farm Loan = $111,700 (-$300)
- Margin Loan = $18,900 (–$2,000)
- Line of Credit = $19,400 (–$400)
*Total Net Worth = $152,500 (+8.7%)
This is why I love investing 🙂 Just buy a broad portfolio of appreciating assets whenever you have extra cash and then sit back and let the market do all the work for you! In 2011, my New Year Bump was +$9,600. I remember being so excited (゜o゜) But last year in 2012, it was even higher at +$10,800. I didn’t think things would get any better than that. Yet this year in the month of January I became $12,200 wealthier thanks to the Bump ヽ(^o^)丿I can’t believe how lucky I am. Who would’ve thought just 4 years of investing would lead to this kind of payoff already. By regularly purchasing and holding profitable investments like farmland, a condominium unit, and a diverse spectrum of stocks from coffee companies to REITs, it appears this strategy works pretty well. Oh yeah, and leveraging helps a lot too. No way could I have accumulated over $500,000 of assets today by myself in such a short amount of time. That’s why I’ve taken advantage of the low interest rates and used the bank’s money to do most of the heavy lifting for me （＾－＾） I’ve been blogging about what kinds of investments I buy since 2010. If you are using a similar investment strategy for yourself then hopefully you’re benefiting from the New Year Bump as well 😀
* Numbers are rounded to the nearest $100.