Jan 192017
 

Meet the World’s Wealthiest

Charity group Oxfam recently reported that the world’s 8 richest people have as much combined wealth as the poorest 50% of the world’s population.

Here is the list of the 8 richest individuals, in order of net worth:

  1. Bill Gates: America founder of Microsoft (net worth: $75 billion)
  2. Amancio Ortega: Spanish founder of Inditex which owns the Zara fashion chain (net worth: $67 billion)
  3. Warren Buffett: American CEO and largest shareholder in Berkshire Hathaway (net worth: $60.8 billion)
  4. Carlos Slim: Mexican owner of Grupo Carso (net worth: $50 billion)
  5. Jeff Bezos: American founder, chairman and chief executive of Amazon (net worth: $45.2 billion)
  6. Mark Zuckerberg: American chairman, chief executive officer, and co-founder of Facebook (net worth: $44.6 billion)
  7. Larry Ellison: American co-founder and CEO of Oracle  (net worth: $43.6 billion)
  8. Michael Bloomberg: American founder, owner and CEO of Bloomberg LP (net worth: $40 billion)

The level of extreme wealth has become more concentrated over time. In the previous year, it took the net worth of 62 individuals to match the poorest 50% in the world. Here’s a look at the trend over time.

The middle class is feeling squeezed in many parts of the world. From 2000 to 2014 the number of households in the U.S. considered to be middle class fell significantly. A study from Pew Research shows that a majority of Americans no longer lives in the middle class. Median income of U.S. households in 2014 was 8% less than in 1999, according to Pew. For context, a 3 people household making $42,000 would be considered middle class.

One similarity shared by most multi-billionaires today is a focus on philanthropy. 🙂 Bill Gates would already be worth 12 figures today if he hadn’t given so much to charity already. He has been estimated to save over 6 million lives with his efforts to eradicate Malaria, end Polio, and help third-world countries grow rice. Warren Buffett wants to donate 99% of his wealth to charitable causes. Hundreds of other billionaires have signed up for the Giving Pledge, a campaign to encourage the rich to give away most of their money.

We all want to make money. But once we reach a certain level of financial success and become independently wealth, we have to think about how to use our excess wealth in the most meaningful manner possible. Helping other people in need is probably one of the best ways to achieve this. 🙂

I would be inclined to donate more money too if I were rich. I have already decided that if I ever win $1 million from the lottery, I will donate a quarter of it to charity because I am so generous. 😉
I still have to decide how I want to spend the remaining $999,999.75 though. 😄 j/k.

Continue reading »

Dec 292016
 

The Most Expensive Home in Canada

If you’re in the market for the best property money can buy then look no further than Vancouver, B.C. Earlier this year the exclusive downtown penthouse in Coal Harbour went on the market for CDN $58,888,000, which makes it the priciest Canadian home to be listed on the MLS.

This custom designed, upscale penthouse features two full stories, and over 8,000 square feet of living space. It has a spectacular panoramic view of the ocean, mountains, Stanley Park, Lions Gate bridge, and English Bay. The drawback for most apartments is a lack of parking spaces. But you won’t have that problem here. This luxury pad comes with a private garage for 7 cars. 🙂

Luxury Living Near Central Park

What if you have lots of money and want to live on the east coast? Well not to be outdone, New York City has its own selection of ultra expensive homes for sale. A duplex penthouse on the top of the new One57 skyscraper in Manhattan sold last year to an anonymous buyer for US $100,500,000. Nope, it wasn’t me. 😛 At an incredible height of 1,000 feet (~300 m) tall, you can see just about everything from this penthouse. It has unparalleled views of Central Park, the Hudson and East Rivers, and nearly every New York landmark on the horizon. Wow. Imagine waking up to that view every morning. 😀

Located on the 89th and 90th floors, this 11,000 square feet apartment comes with a steam room, a library, a movie theatre, and 6 bedrooms including a rather large 550 square feet master suite. Not surprisingly, this sky high apartment also comes with sky high expenses. The estimated maintenance cost is around $18,000 per month, which actually isn’t bad considering the apartment’s value, eh?

Continue reading »

Dec 192016
 

2016 is turning out to be a spectacular year for equity investors. 🙂 The Canadian S&P/TSX index is up 17% year to date, while the Dow Jones index in the United States is up 14%. Wow! That’s impressive even by historical standards. The markets have done an excellent job of beating expectations lately. 😀 We could even see the Dow hit 20,000 points before December 31st if we’re lucky.

December is usually a good time to re-examine our investment portfolios and see if there’s any adjustments we need to make to our asset allocation or general financial plan. Personally, this last quarter has been quite eventful for me as I’ve contributed over $30,000 in new investments. As of now here is a breakdown of all my assets and liabilities. 🙂 Everything has been rounded to the nearest $1,000 in $CAD.

Net Worth At a Glance

Assets by Account/Type: 
$19,000 – TFSA at Canadian Western. Private mortgage fund.
$47,000 – TFSA at TD. Mostly income trusts.
$14,000 – Cash trading account at TD. Mostly stocks.
$86,000 –  RRSP at TD. Bonds, U.S. equities, and MICs + REITs.
$170,000 – Margin Account at IB. Mostly dividend stocks.
$10,000 – SolarShare bonds.
$263,000 – Primary residence.
$433,000 – Farmland.
Total Assets = $1,042,000

Liabilities:
$186,000 – Home Mortgage
$192,000 – Farm Mortgage
$58,000 – Margin Loan
$17,000 – TD LOC
$17,000 – HELOC
$10,000 – CIBC LOC
Total Liabilities = $480,000

Total Net Worth = $562,000 🙂

Farmland still makes up a rather large piece of the pie chart. I can’t complain that my farmland went up 10% in value, but I would like to see my stocks and fixed income allocation increase to create a more balanced portfolio.

Last year in December 2015, my farmland represented 44.6% of my asset allocation. This year it has gone down to 40.3% so I am making progress. But it is still not enough. I have to stay focused on my goals and make changes to my situation. As George Bernard Shaw once said, “The people who get on in this world are the people who get up and look for the circumstances they want, and if they can’t find them, make them.”

So in 2017 I plan to buy more fixed income assets and dividend paying stocks to increase my relative position in those liquid asset classes. 🙂

Below are some more details about my various investment accounts.

Continue reading »

Dec 012016
 

More Millionaires 

The best way to make a lot of money is to work for the mint. 😄 But even if you don’t, chances are your finances have been improving. About 25,000 Canadians became millionaires in the past year according to a report released last week by Credit Suisse. The bank claims that there are currently 1,117,000 individual adults with net assets exceeding US $1,000,000. 😀 We normally see studies of Canadian millionaires based in $CAD, but this study uses $USD to define millionaire status. These kinds of wealth studies are telling, but they tend to underestimate real net worth because participants may forget, or choose not to disclose particular assets such as their precious metals, art, collectables, jewelry, etc. Many of these items such as gold can be acquired anonymously with no paper trail. I think the real number of millionaires is quite a bit higher.

Based on its forecasts in the growth of Canada’s GDP and equity market capitalization, Credit Suisse expects the number of millionaires to increase by 50% to 1,680,000 in 2021. I hope one of those new entrants will be me. 🙂

But 2021 is still five years away and a lot can happen since then. I believe low interest rates are the main cause of asset price inflation which has resulted in so many new millionaires in recent years. But a pull back could be right around the corner. Let’s take a look at history.

16-12-snp-500-index-chart

Between 1988 and 1990 much of the world was in recession with riots breaking out in the UK. 10 years later between 1998 and 2000 we had the Asian financial crisis and the dot-com crash. 10 years after that between 2008 and 2010 we had the great recession with the Lehman and AIG panic, and European banking crisis. They say history doesn’t repeat itself, but it rhymes. And I am certainly seeing a pattern here. 🙂

Continue reading »

Aug 152016
 

Asset Allocation for the Wealthy

I don’t always recognize good investment opportunities when I see them. But I do know that we should never invest in funerals… because it’s a dying industry. But when I run out of investment ideas I usually turn to the wealthy.

I think it’s extremely important to follow what rich people do. It gives us insight about financial opportunities that we should be aware of. People with extremely high net worths tend to have either a natural knack for managing money, or are at least smart enough to hire the best advisors to invest on their behalf. Of course wealthy people don’t make the best investment decisions all the time, but their historical performance is consistently higher than the average Joe, which is how the rich continues to stay rich. 🙂

One way to track the “smart money” is to follow the quarterly member surveys from Tiger 21, an exclusive network of high net worth investors. To get into this private club all you need is to have a minimum net worth of $10 million. Easy right? 😛 This confidential and anonymous survey asks members about where they have their net worths allocated.

16-08-tiger21-highnetworth-investors

Almost all participants are either self made investors or entrepreneurs with a good eye for business trends. With hundreds of members spread across North America, the results of the survey should represent a fairly accurate cross section of investment opinions from some of the most sophisticated millionaires and billionaires in the world. So what have the wealthy been doing during the last year? For the most part they have decreased their exposure to real estate and increased investments in private businesses. 🙂

Below we can compare the Tiger 21 survey results from the first quarter of last year with the same quarter this year.

Continue reading »