Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Oct 062015

Sherritt Bonds Plummet in Value

Bonds are usually safer than stocks. But it’s also possible to lose a lot of money in bonds if we’re not careful. Last year I blogged about buying $5,000 of Sherritt’s high yield bonds. I made this decision based on the attractive 8% annual yield! 😀 Sherritt International Corporation is a mining and energy company that operates in Canada, Cuba and Madagascar. Sherritt’s primary business is mining and refining nickel ore and similar base metals.  I expected the bonds would mature in November 2018 and I’d get back my principal.

However, a lot of things have changed since 2014. As with all mining companies, the value of Sherritt’s business depends heavily on the price of the underlying commodity it sells, in this case, nickel. When I bought the bond last summer the spot price of nickel was roughly $9 per pound. And it appeared to have stabilized. However, 15 months later, the price has now dropped in half to just $4.5 a pound. 😕 Below is a 5 year chart of the price of nickel.


Obviously this had a devastating impact on resource and mining stocks. Teck Resources and Freeport-McMoRan are both down about 50% year to date. And Sherritt is down 70%. I guess you can say these mining companies have hit rock bottom. 😆 Even though I don’t own any Sherritt stocks, I’m still a little concerned as a bond holder. With the common share price dropping this low, there’s a real chance that Sherritt could file for bankruptcy protection in the foreseeable future. And if the company’s board of directors choose to do that before my 2018 bonds are due then I may not get my $5,000 principal back. 😐

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Oct 032015

Stocks Continue to Fall

Stock markets in September continued to head lower. The Dow Jones dropped 2% during the month. The S&P500 fell 3%. And up here, the TSX Composite fell 5%. This isn’t inherently good or bad. It’s good for beginner investors who are thinking about buying their first index fund. But it can be bad for retirees who are counting on their nest eggs to outlast their lives. I’m somewhere in between that spectrum. I already have some skin in the game, but most of my investing years are still ahead of me. :)

*Side Income:

  • Part-Time Work = $300
  • Dividends = $500
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1400

*Net Worth: (MoM)15-08-networth-chart

  • Assets: = $893,300 total (-5400)
  • Cash = $2,000 (-1000)
  • Stocks CDN =$85,800 (-3000)
  • Stocks US = $63,400 (-2100)
  • RRSP = $56,500 (+100)
  • MICs = $15,600 (+600)
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $502,100 total (-2600)
  • Mortgage = $192,200 (-400)
  • Farm Loans = $199,300 (-500)
  • Margin Loan CDN = $27,900 (-1000)
  • Margin Loan US = $27,600 (+400)
  • TD Line of Credit = $24,500  (-500)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $2,400 (-600)

*Total Net Worth = $391,200 (-$2,800 / -0.7%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.75 USD

I wouldn’t read too much into the recent market performance because September has historically been the worst performing month on average. And since the country has been in a technical recession for the first half of the year it’s not surprising investors have a more bearish outlook for stocks lately, even though the economy and stocks are not really correlated in the short term.

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Sep 302015

Deciding what to do with new money

As the average global population continues to age there will be greater instances of wealth transfer from the old to the young. Most people will come into a bonanza sooner or later. Maybe it’s $5,000, or maybe it’s $500,000. Whatever the amount happens to be, it’s essential to grasp the significance of this opportunity and not squander it. A dollar saved is worth more than a dollar earned because of income and payroll taxes.

There is no shortage of questions on the internet that has the renowned format, “I have $X amount of money. What should I do with it?” The following snippets are taken from Reddit.


First of all, congratulations for saving, earning, inheriting, winning, or however else you came into the money. :) The simple answer to what you should always do with your new found fortune is this: Maximize the utility of that money based on your personal core values and financial situation.

But that might be easier said than done, so let’s elaborate. Maximizing utility means making the best use of that money and stretching the value of each dollar to its greatest potential. This is determined by your values and financial affairs, and to a degree, the current state of the economy. Values drive motivation and we’re all motivated by different things. Wanting to retire early requires a different set of values and financial strategy than becoming a home owner. Understanding your financial situation means knowing what money means to you.

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Sep 272015

3 Year History

Usually when investors talk about expected market returns we like to look at historical averages. Over the past 115 years stock markets in the developed world delivered an annualized return of roughly 8.5%. This means we can probably assume that a normal range would be somewhere between 6% and 11%.

I use TD as my discount brokerage at the moment. It has a useful tool to help me gauge my portfolio performance over the years. Most of my stocks are held in registered accounts such as TFSAs or RRSPs, which have preferential tax benefits. :) Here is a quick overview of how my securities in those accounts have performed over the last 3 years. The green line represents my portfolio performance.


As we can see my overall stocks have achieved a 7.33% annualized rate of return since Sept 2012. This is not that surprising and falls within the 6% to 11% range of a normal market return. :) Also since I can’t use margin to borrow and invest inside these registered accounts, none of my stocks in this chart uses any leverage.

The blue line represents the Canadian stock market index, which has only returned 8.65% over the last 3 years, or 2.8% annualized. This means I technically beat the market here in Canada by more than 4% a year, which is just peachy keen! 😀 But that’s probably because I hold some U.S. stocks in my RRSP and TFSA.

The purple line represents the S&P 500 index in the U.S. The graph shows it has climbed 80.22% since 2012. But keep in mind that this factors in the currency exchange. Otherwise, the return in $USD is closer to 47%, which is still pretty dope. The U.S. currency has become very strong over the past couple of years. Any Canadian who held U.S. stock would have seen double-digit returns even if the price of their stocks didn’t change domestically in U.S. dollars. 😀

Here are a few things I learned from this performance chart. I’ll be keeping these things in mind going forward.

  • It’s possible to pick and choose individual stocks without underperforming the market index, as long as you have the discipline to buy and hold most of the time.
  • Canadian stocks rely too much on commodity prices. Whenever oil and metal prices fall the market really struggles. :(
  • Buy some foreign currencies to hold investments that are denominated in those currencies.
  • Diversify globally. Holding a Canadian equity index fund, like the Vanguard Canada All Cap Index ETF, (symbol VCN,) would have barely even beat inflation over the past 3 years, and even the past 5 years.

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Sep 242015

A Smart REIT for Retirement

One way to diversify income at retirement is by going into real estate. Owning a rental property is a great way to achieve some extra income. But a more stable and passive way to invest in property is to own REITs, which are companies that hold many different properties and typically pay monthly distributions to their unit holders. One of these companies is called Smart REIT. And last week I contributed $3,000 to my RRSP and purchased 111 units of SmartREIT at $29 each + $9.99 for commission. 😀 It currently pays a fetching 5.5% annual dividend, and I plan to hold this name indefinitely for my retirement income needs.


SmartREIT (SRU.UN) used to be called Calloway REIT, but earlier this year it acquired SmartCentres in a $1.16 billion deal and changed its name. The take-over was to acquire 24 shopping centres, mainly in Ontario and Quebec, making the new company one of the largest REITs in the country with 149 properties under management and $8.3 billion of total assets.


A large part of a successful real estate business is finding high quality tenants. A quick look at the top 10 tenants for this company, based on gross rental revenues, shows that Smart REIT is working with some excellent renters with very traditional business models and high profitability.


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