Feb 022017
 

How High Can the Dow Go?

The Dow rose from 7,000 to 20,000 points over the last 8 years. And that doesn’t even account for the dividend payments. By using financial leverage my portfolio managed to outperform the market every year since I started buying stocks in 2009. 🙂 Borrowing to invest is risky. But if I continue to maintain a diversified portfolio of real estate, stocks, and fixed income investments, then it is very likely that my assets will grow overall in value over time. So as long as I can borrow money cheaply I will continue use leverage. It’s all about expected market return vs the cost to borrow. In my previous post from last year I explained how rich people create wealth. Using other people’s money to enhance investment gains proves to be a very effective method. I currently have about $50,000 of available funds remaining before I risk getting a margin call. This gives me quite a large safety cushion. As long as I keep an eye on this number I should be able to withstand the market cycles.

Breaking the 20,000 barrier was a huge milestone for stock investors. But can the Dow Jones continue to climb even higher? The answer may be found in American football. 🙂 Believe it or not the outcome of the Super Bowl game this weekend could have an impact on the stock market’s performance for the remainder of 2017. This idea is known as the “Super Bowl Predictor.” The predictor states that if an original NFL team wins the Super Bowl, then the Dow index will increase over the next year. Otherwise, the stock market will fall. So far this indicator had been bang on every year since 2008, except for one time. So if we want the Dow to hit 20,000 again and continue to grow this year, we better hope the Atlanta Falcons win this weekend. 😀

Anyway, since equity valuations and price/earnings ratios appear to be worryingly high, I decided it’s time to be more cautious with my money. So as I see the growing risk of a bubble forming, I have turned my attention towards alternative investments that do not correlate with the stock market. That’s why today I present a new addition to my asset column.

It’s P2P lending! 😀 Hurray! This makes a total of 10 different asset types I own. And most of them produce a stream of passive income for me! 🙂

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $900
  • Freelance = $800
  • Dividends = $800
  • Interest = $600
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,083,200 total (+33,200)
  • Cash = $1,100 (-700)
  • Canadian stocks = $139,200 (+4100)
  • U.S. stocks = $85,900 (+2700)
  • U.K. stocks = $18,600
  • RRSP = $75,000 (-100)
  • Mortgage Funds = $30,400 (+200)
  • Peer-to-Peer Lending = $20,000 (new!)
  • SolarShare Bonds = $10,000
  • Home = $270,000 (+7000)
  • Farms = $433,000
  • Debts: = $496,200 total (+16,700)
  • Mortgage = $185,200 (-300)
  • Farm Loans = $191,400 (-400)
  • Margin Loans = $59,300 (+300)
  • TD Line of Credit = $16,000  (-700)
  • CIBC Line of Credit = $27,500 (+18,000)
  • HELOC = $16,800 (-200)

*December Total Net Worth = $587,000 (+$16,500 / +2.9%)
All numbers above are in $CDN. 

January has traditionally been a very positive month for my net worth, and this year is no different. This is thanks to the phenomenon called the new year’s bump. I used the average inflation rate of 1.6% to increase my home’s value and rounded the number to $270,000, which is $7,000 higher than the previous year. Stock markets held up well this January, despite a slight pull back over the last couple of trading days.

I will write more about my new venture into the world of peer-to-peer lending in a future post. But it’s basically a fixed income investment in the form of debt financing. Compared to stock market, P2P investments have a low correlation with stocks and are less volatile. However, this doesn’t mean they’re less risky. I invested $20,000 to start. $2,000 came from personal savings, while the remaining $18,000 was borrowed, which is why both my asset and debt have grown this month. I plan to slowly pay down the new debt while I wait patiently for my new asset to grow. This is the same basic strategy I used for all my leveraged investments in the past. 😉

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Random Useless Fact:

It can be quite difficult to tell if a tiger is pregnant, or just fat.

 

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18 Comments on "January 2017 Fiscal Update – New Year’s Bump"

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Smart Provisions
Guest

That’s a pretty good bump! It’s about the size of a maxed-out 401(k)!

Keep the growth going!

Longway2FI
Guest
Longway2FI

I’ve seen your name pop up as a lender in the p2p world and have been patiently waiting for you to write about it… I’m enjoying the p2p world so far but fear the unknown about exactly how risky the loans are. I’m very interested in how others are evaluating which loans they contribute to, or if it’s just the diversity approach of a little bit in each loan available.

ross
Guest
ross

I’ve read generally negative reviews of p2p lending.
I’m keen to hear how it works out for you. I hope it’s lucrative! I’d like to try it at some point.

Passive Income Dude
Guest

Let’s hope the Falcons win because no one wants the Patriots ;). Sorry, but big Broncos fan.

I’m curious to hear the details of your borrowing the $18k for your LC move. Can you share?

Dividends 4 Future
Guest

Lets go Patriots! It will be good for the Stock market go down a little bit so we can buy more 🙂 I’m tired of buying on this crazy high market.

Investing Pursuits
Guest

Liquid,

That is an impressive increase in assets and net worth. Looking forward to the write up on the peer to peer lending.

Dividend Diplomats
Guest

F35 –

$16.5K?! LET”S GO!!! Nice job, talk about a killer month and add to the net worth. Keep it going and congrats.

-Lanny

David
Guest
David

I enjoy following your investing strategy and was wondering if this incorporates a pension through your employer in any way.

Matt
Guest

Wow, looking at that first graphic really shows how great the past 8 years have been for the market. However, stocks can keep climbing or things can change. DJIA at 20k is just a number at the end of the day.

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