May 062019
 

Another Strong Month for Stocks

The age of monetary tightening is on pause, at least for now. Central banks have pumped the brakes on increasing interest rates. This has been great for the U.S. and Canadian stock markets, which have both hit new highs in April. But does that mean it’s time to sell and take profits?

Probably not. It’s really hard to predict market movements, and record high stock prices can continue to climb higher before starting to fall. So I’ve opted to go for another strategy; Park some savings in bonds and wait for a better opportunity to jump into stocks again. 🙂

So at the end of last month I used about $25K of my cash savings in my RRSP to purchase 1500 units of BMO Mid Corporate Bond Index ETF (ZCM.)

It has a 3.2% yield, so I shall be earning an additional $67/month of investment income going forward. Not a big change, but better than nothing. 😀 The cash in my RRSP to make this investment came from my old work pension. I transferred the money to my personal retirement account after I was let go.

Liquid’s Financial Update

*Side Incomes: = $2,800

  • Part time job =$700
  • Freelance = $500
  • Dividends =$800
  • Interest = $800

*Discretionary Spending: = $2,300

  • Food = $400
  • Miscellaneous = $500
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Total Assets: = $1,353,200 (+13,100)
  • Cash = $11,400 (-800)
  • Canadian stocks = $175,000 (+3600)
  • U.S. stocks = $131,800 (+7200)
  • U.K. stocks = $22,500 (+800)
  • Retirement = $130,300 (+1500)
  • Mortgage Funds = $35,400 (+500)
  • P2P Lending = $34,800 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $410,300 (-700)
  • Mortgage = $188,400 (-400)
  • Farm Loans = $178,200 (-400)
  • Margin Loans = $43,700 (+100)

*Total Net Worth = $942,900 (+$13,800 / +1.5%)
All numbers are in $CDN at 0.75/USD

 

I’m not selling any stocks because despite the uncertain direction in the relatively volatile equity market I’m still earning nearly $1,000 in dividends every month, and I don’t want to sacrifice real dividend income for a hypothetical crash that may not happen in the near future. So it makes sense to buy some fixed income assets such as the corporate bond fund, ZCM. My intent is to hold ZCM for the 3.2% annual interest income. Then sell this fund, and replace it with stocks once the stock market goes into a correction. 🙂

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Apr 022019
 

Getting out of 21st Century Fox 

Five years ago I wrote about purchasing 26 FOXA shares for $34 USD each. At that time the stock was trading at 20 times earnings, so it wasn’t exactly cheap. However I saw great potential in this company because it had a lot of popular brands and intellectual properties. I had planned to hold this stock for decades. But I didn’t have to.

Fox shareholders approved the acquisition by Disney, and last month I was forced to sell all my FOXA stocks for $1,843 CAD. That’s a tidy 83% return on investment, before even adding on the dividend income I received over the years. 🙂 Plus, there’s no capital gains tax because it was held in my RRSP. Yay!

Overall March has been a really positive month for my finances. All my liquid assets went up in price.

Liquid’s Financial Update

*Side Incomes: = $3,300

  • Part time job =$700
  • Freelance = $600
  • Dividends =$1200
  • Interest = $800

*Discretionary Spending: = $2,400

  • Food = $300
  • Miscellaneous = $700
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Total Assets: = $1,340,100 (+8,200)
  • Cash = $12,200 (+1000)
  • Canadian stocks = $171,400 (+800)
  • U.S. stocks = $124,600 (+4000)
  • U.K. stocks = $21,700 (+900)
  • Retirement = $128,800 (+1000)
  • Mortgage Funds = $34,900 (+200)
  • P2P Lending = $34,500 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $411,000 (-900)
  • Mortgage = $188,800 (-300)
  • Farm Loans = $178,600 (-500)
  • Margin Loans = $43,600 (-100)

*Total Net Worth = $929,100 (+$9,100 / +1.0%)
All numbers are in $CDN at 0.75/USD

 

Preparing for Interest Rates to Drop

It’s been several years since the Bank of Canada lowered interest rates. The last cut was in 2015. Central banks around the world dropped rates near zero as a reaction to the global finance crisis in 2008 and rates have been low since. Policy makers expected the economy and rates to rebound back to normal in short order. But they discovered an inconvenient truth to the markets; low interest rates are addictive. Once consumers get a taste of easy credit, it’s very difficult for them to pull back.

Continue reading »

Mar 042019
 

Slowing Economy and Rising Insolvencies

It was a pretty good month for stocks. The Dow Jones actually gained 11% during the first 2 months of 2019, its best 2 months in a decade. 🙂

But not everything is looking positive. Bond yields have been falling since December, suggesting slower growth. And the number of Canadians who filed for insolvency rose dramatically last year due to higher interest rates and mounting household debt. 🙁 The Bank of Canada governor Stephen Poloz has stopped hiking rates since October of last year to give debtors some breathing space. But it may already be too late. According to the Office of the Superintendent of Bankruptcy, 125,266 Canadians became legally insolvent in 2018, the second highest number since 2011. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP), which represents 90% of Canada’s licensed insolvency trustees, said Canadian bankruptcies are set to spike in 2019. It appears that some people weren’t aware that there is always a lag between interest rate changes and the impact on household finances.

Overall February was a pretty good month for myself, with an above average net worth increase. This was mostly due to the strength in the financial markets. 🙂

Liquid’s Financial Update

*Side Incomes: = $3,200

  • Part time job =$1200
  • Freelance = $500
  • Dividends =$1000
  • Interest = $500

*Discretionary Spending: = $2,300

  • Food = $300
  • Miscellaneous = $600
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Assets: = $1,331,900 total (+10,600)
  • Cash = $11,200 (-600)
  • Canadian stocks = $170,600 (+4400)
  • U.S. stocks = $120,600 (+3700)
  • U.K. stocks = $20,800 (+200)
  • Retirement = $127,800 (+2500)
  • Mortgage Funds = $34,700 (+100)
  • P2P Lending = $34,200 (+300)
  • Home = $367,000 (2019 assessed land value)
  • Farms = $445,000
  • Debts: = $411,900 total (-5600)
  • Mortgage = $189,100 (-400)
  • Farm Loans = $179,100 (-500)
  • Margin Loans = $43,700 (-4700)

*Total Net Worth = $920,000 (+$16,200 / +1.8%)
All numbers are in $CDN at 0.75/USD

The higher cost of debt has personally increased my monthly interest payments. 🙁 However, it has also increased my interest income from certain investments. Hurray for interest rate hedging. 🙂 For example, below is a part of an email I received last week from one of the private mortgage funds I’m invested in.

As interest rates increase and loan losses remain historically low our top-up dividend was growing close to 1%. We are expecting the rate of return to shareholders for the year ending June 30th 2019 to be higher than last year.” – Portfolio Manager of Antrim MIC

I made a lump sum payment towards my margin account to pay down some of my margin loan. I would like to get my total debt balance to below $400,000 by the summer. This is to prepare for future rate hikes that could be coming later this year.

 

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Random Useless Fact:

It looks like someone used a black marker to draw glasses on the left kid’s face.

Feb 062019
 

Markets make a big comeback in January

December 2018 was a terrible time to be long in the stock market. If it weren’t for the brief rally on the last week of the month, the S&P 500 and Dow Jones would have had their worst December since the Great Depression. But suddenly the bulls took over in the following month.

All in all, 2018 was the worst for stocks in 10 years.

Panicked selling at the end of December would have caused someone to miss out on the amazing gains in the first month of this year. It just goes to show that investors should make decisions based on long term planning, and not on emotions.

I didn’t make any big financial moves in January. I deposited $10,000 from my savings into my retirement account but haven’t bought anything with that money yet.

Liquid’s Financial Update

*Side Incomes: = $3,400

  • Part time job =$600
  • Freelance = $500
  • Dividends =$1000
  • Interest = $700

*Discretionary Spending: = $2,000

  • Food = $300
  • Miscellaneous = $900
  • Interest expense = $1400

*Net Worth: (ΔMoM)

  • Assets: = $1,321,300 total (+110,000)
  • Cash = $11,800 (-8600)
  • Canadian stocks = $166,200 (+10400)
  • U.S. stocks = $116,900 (+4200)
  • U.K. stocks = $20,600 (+1200)
  • Retirement = $125,300 (+10400)
  • Mortgage Funds = $34,600 (+100)
  • P2P Lending = $33,900 (+300)
  • Home = $367,000 (+92,000) (New 2019 assessed land value)
  • Farms = $445,000
  • Debts: = $417,500 total (-1300)
  • Mortgage = $189,500 (-400)
  • Farm Loans = $179,600 (-400)
  • Margin Loans = $48,400 (-500)

*Total Net Worth = $903,800 (+$111,300 / +14.0%)
All numbers are in $CDN at 0.74/USD

Real Estate Value Adjustment 

In my previous net worth update I received some feedback in the comments about how other people value their homes. I bought my apartment 10 years ago. My old method of purchase price + annual inflation doesn’t accurately depict the market value of my apartment anymore. So I’ve decided to use the government assessed land value of my property, which gets updated in January every year. Most recently for 2019 my home’s land value is $367,000 according to BC assessment. So that’s what I’ll do every year from now on. 🙂

After updating my property’s value to better reflect current market conditions, I’m quite pleased to find out that my net worth is now $903K. I’m looking forward to reaching 7 figures soon. 😀

Continue reading »

Jan 072019
 

 

Changes in the Financial Markets in 2018

  • Currencies:
  • Canadian dollar weaken from 0.80 to 0.73 USD.
    (Less purchasing power and more expensive imports, such as food from the U.S.)
  • U.S. dollar index up to 96 from 92.
    (Non Americans pay a higher premium to buy U.S. investments.)
  • Stock Markets:
  • Most markets around the world dropped in 2018, especially Emerging and Asian markets.
  • Canadian S&P/TSX stock index fell about 12%
  • U.S. stock market fell about 6%
  • Canadian Aggregate bond index ETF (ZAG) total return = 1.8%

It wasn’t a great way to end the year but on the whole I’m pretty happy with my situation. The last quarter has been the worst for my net worth performance so far. But the good news is I’ve still gained $96K overall in 2018 thanks to a great first half of the year. 🙂 Below is my net worth update for December.

Liquid’s Financial Update

*Side Incomes: = $3,400

  • Part time job =$1100
  • Freelance = $800
  • Dividends =$1000
  • Interest = $600

*Discretionary Spending: = $2,000

  • Food = $300
  • Miscellaneous = $800
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Assets: = $1,211,300 total (-14,300)
  • Cash = $20,400 (+600)
  • Canadian stocks = $155,800 (-6800)
  • U.S. stocks = $112,700 (-4700)
  • U.K. stocks = $19,400 (-1000)
  • Retirement = $114,900 (-2500)
  • Mortgage Funds = $34,500 (-200)
  • P2P Lending = $33,600 (+300)
  • Home = $275,000
  • Farms = $445,000
  • Debts: = $418,800 total (-1400)
  • Mortgage = $189,900 (-400)
  • Farm Loans = $180,000 (-400)
  • Margin Loans = $48,900 (-600)

*Total Net Worth = $792,500 (-$12,900 / -1.6%)
All numbers are in $CDN at 0.74/USD

At the end of 2018 my net worth has grown to $792,500. This is a $95,900 increase from the previous year’s end when I had $696,600. It’s not a smooth progression, but I’m grateful to be going in the right direction overall. 🙂

2018 was a bit of a strange year. I lost my job, stocks entered into a bear market, and interest rates climbed 3 times. This series of events has never happened to me before so it’s been fun trying to navigate the new economic landscape.

In terms of what I want to do for 2019, I will be changing my financial strategy a bit. Here are some themes I plan to focus on.

  • Preparing for higher interest rates. Should the Bank of Canada continue to increase rates this year I will be drastically reducing my debt.
  • Buying more bonds. It wasn’t until the recent stock market correction that I truly realize how fixed income investments can keep volatility at bay. Investment grade bonds rated A and BBB currently pay over 4% coupon. It’s not a bad alternative to equities these days.
  • Reassess how I calculate the value of my primary residence. My initial method of using my purchase price + inflation isn’t keeping up with reality anymore. How do you guys value your real estate when calculating your net worth? Do you use the government assessed value, or get someone to come appraise the property?

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Random Useless Fact: