Oct 012014
 

The American economy is starting to pick up. U.S. stocks have held steady in September. However the Canadian stock market dropped 4.3%, the price of oil fell $3 per barrel, and the value of the Loonie sank to just 89.4 cents U.S.

Thankfully my finances held up okay in September. I did lose about $5,600 of value in my stock portfolio though. 😐 It’s hard to make money when the entire stock market index takes a big hit. However I still managed to end the month with a net worth increase of +$1,400. This is largely due to my rental income which came at the end of the month. I deposited this payment of $5,177 into my bank account, same as this time last year. Unfortunately I’m still cash flow negative on my farmland investment by about $4K a year, but I’m hoping that the land will appreciate in value over time to compensate for any short term losses.

13-10-finalrents

Phew, if it wasn’t for this payment I’m afraid my net worth would have dropped by several thousand dollars. 😕 But instead I eked out a small gain! I receive 2 rent payments annually from the farms; once in the spring and once in the fall.

What a coinkydink. 😉 Just as I experience a month of stock market decline my farmland investment pulls through for me. 😀 I decided to use the extra rental money to pay down some of my debt. I know my debt level might be a bit on the high side and many people have given me pretty strong signals to use less leverage. But for now I think I’m doing alright with over 6 consecutive years of double digit annual returns.

I’ve had a lot of time to experiment and reflect on my financial choices since buying a condo in 2009 and living by myself.  I’ve discovered what matters most is to be flexible and have a solid understanding of one’s unique financial situation. Understanding removes uncertainty and creates confidence, which will lead to a sense of control. I’m comfortable with my debt because I’m confident I have control over it. However it’s important to have a contingency plan as well, which I thoroughly stress test.
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*Side Income:

  • Part-Time Work = $500
  • Dividends = $400
  • Farm Rent = $5,200
*Discretionary Spending:
  • Eating Out = $100
  • Others = $200

*Net Worth: (MoM)chart_14sept net worth graph economy slow down

  • Assets: = $836,000 total (3,900)
  • Cash = $3400 (+1200)
  • Stocks CDN =$88,700 (-5300)
  • Stocks US = $52,900 (-300)
  • RRSP = $49,000 (+500)
  • MICs = $15,000 (same)
  • Home = $254,000 (same)
  • Farms = $373,000 (same)
  • Debts: = $525,700 total (-5,300)
  • Mortgage = $196,900 (-400)
  • Farm Loans = $204,800 (-400)
  • Margin Loan CDN = $27,500 (-2200)
  • Margin Loan US = $24,900 (+700)
  • TD Line of Credit = $31,000  (-1000)
  • CIBC Line of Credit = $11,600 (-400)
  • HELOC = $18,500 (-100)
  • RRSP Loans = $10,500 (-1,500)

*Total Net Worth = $310,300 (+0.45%)
All numbers above are in $CDN. Conversion rate used: 1.00 USD = 1.12 CAD

I hold mostly dividend growth stocks in my margin accounts. They’re large-cap, blue chip companies such as Chevron, Starbucks, or Disney, with large economic moats and have a history of increasing earnings and dividends over time. Apparently the severe weather in the prairies this year has not deterred farm buyers 🙂 Alberta received a lot of snow. Saskatchewan and Manitoba experienced pretty bad flooding. Yet according to a Re/Max report land prices are still going up.

Land in short supply left “well-financed” Alberta farmers ready to make a deal on short notice, Re/Max said, noting tiled land, for example, sold for as much as $10,000 per acre in southern Alberta, up 20% over the previous year.
~agcanada.com 

In Saskatchewan, prices increased from between $1,500 and $2,000 an acre in 2013 to between $1,800 and $2,200 in 2014. Manitoba saw its price range go from between $1,350 and $1,600 to $1,500 and $2,000.
~bnn.ca

My Saskatchewan farms are currently worth about $1,200 an acre on average. If we assume that report is accurate then even a conservative $100/acre increase would give me a solid $31,000 capital appreciation for this year alone. 😀 That alone would be more than enough to cover the entire cost of servicing my total debts, for which I pay about $18,000 of interest per year.

Even in a slow economy farmland continues to outperform. Productive land is a unique asset. It’s something tangible you can touch. When the future looks bleak or uncertain, most people would want to own something with intrinsic value. The worse the economy is, the more desire there is to play it safe like buying land. And unlike other hard assets such as gold, no one can steal your farm.

But don’t bet everything on the farm. Mortgage investment corporations, or MICs, also played a roll in protecting my wealth in September. I blogged about how to invest in shares of Atrium MIC in a previous post. A MIC is kind of like a mixture between high yield bonds and peer to peer lending, and behaves differently from a typical stock. During the month of September the TSX Composite fell 4.3%, however my Atrium shares actually gained 0.5% 😀 Furthermore, Atrium pays monthly interest at a rate of 7% per annum. That’s the type of fixed income investment I like!

Index investing alone will not protect a portfolio from a stock market crash or recession. However a diversified investment strategy, which can include index funds, is often a better approach to maintain financial stability and generate long term growth 😉

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Random Useless Fact:
At first glance most people think this is a parrot. But it’s not. Can you see past the illusion? 14-09-portrait-parrot

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20 Comments on "Fiscal Update Sept 2014 – Economy Slow Down"

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Phil
Guest

The power of true diversification… As to your random fact, provocative pose 😉 -Cheers.

My Dividend Pipeline
Guest

Great job squeazing out a gain in your net worth. I also took a hit in my stock portfolio, but it wasn’t the first and certainly won’t be the last time that happens. I love these types of illusions. A human with their leg sticking out. My favorite one as a kid was the young/old lady photo.

MDP

DivHut
Guest

$400 in dividend income is a nice figure. I believe I mentioned it before but it’s nice to see a portfolio of very diversified income sources. I know many in the DGI community focus exclusively on dividend stocks so you are very different in the sense that you have real estate which includes farmland and other investments. Thanks for sharing your recent update.

plantingourpennies
Guest

We eeked out a gain this month, despite the market drop, and it happened to be by the same amount that our renters decided to prepay their rent for next month. Hooray for those rent checks!

PC
Guest
PC

See nothing to worry about… another winning month for you overall!

Lynx
Guest

It is nice to see in practice how a diversified portfolio can keep your total portfolio up even with large downward swings in other assets. Looking forward to see you expanding your investments into preferreds.

That illusion was pretty amazing too.

AssetGrinder (@AssetGrinder)
Guest

Grats on the positive net worth despite the latest market dip. Tsx getting hammered. triple digit losses lately ouchy.

Tawcan
Guest

That’s great that your net worth increased despite the market dip. That shows the power of diversification.

Lance @ HealthyWealthyIncome
Guest

Can’t win them all every month, but just continuing to be strong and grow over time it all turns out okay. Love the picture at the start. My employees take Black Friday off more than any holiday during the year. Kind of sad…because it’s just a giant debt day for them.

No More Waffles
Guest

Congrats on growing your net worth even with the markets going down lately, Liquid! That’s quite a feat!

Keep it up,
NMW

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