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
- Part-Time = $900
- Freelance = $800
- Dividends = $800
- Interest = $600
- Fun = $200
- Debt Interest = $1200
*Net Worth: (MoM)
- 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. 😉
Random Useless Fact:
It can be quite difficult to tell if a tiger is pregnant, or just fat.