Dec 192016
 

2016 is turning out to be a spectacular year for equity investors. ūüôā 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. ūüėÄ 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. ūüôā 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 Р RRSP at TD. Bonds, U.S. equities, and MICs + REITs.
$170,000 РMargin 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 ūüôā

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, ‚ÄúThe 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.‚ÄĚ

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. ūüôā

Below are some more details about my various investment accounts.

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Dec 012016
 

More Millionaires 

The best way to¬†make a lot of money¬†is to work for the mint. ūüėĄ¬†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 $1,000,000. ūüėÄ We normally see studies of Canadian millionaires based in¬†$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. ūüôā

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.

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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. ūüôā

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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. ūüôā

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? ūüėõ This confidential and anonymous survey asks members about where they have their net worths allocated.

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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. ūüôā

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

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Feb 182016
 

Expensive Diamond Sells for Record Price

In 2014 Hong Kong real estate mogul Joseph Lau bought his daughter, Zoe, a¬†rare 10 carat blue diamond for $32.6 million!¬†But when his other¬†daughter, Josephine, found out she understandably became jealous and asked him for an expensive diamond too. He¬†couldn’t help but feel guilty and obliged to buy her something special as well. But Zoe’s diamond is one of a kind. So he planned to¬†buy¬†Josephine an even bigger and more expensive diamond.

In late 2015 at a Sotheby’s auction, Mr. Lau was¬†the top bidder on an insanely¬†rare 12 carat “blue moon” diamond. He paid in Swiss francs equivalent to US $48.4¬†million, which set a new record for¬†the world’s most expensive diamond ever sold! And he bought it for his little princess. Maybe it’s just me but¬†I think somebody is¬†trying a little too hard to win the world’s greatest dad award. ūüėõ

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Some people are not¬†convinced that spoiling his daughter with a fancy vivid blue diamond ring is the best parenting move he could have made, especially considering that Josephine is only 7 years old. ūüėÄ But next to sound judgment, diamonds are the rarest things in the world, at least according to De Beers. ūüėõ Since¬†Mr. Lau has an estimated net worth of $10 billion, I can’t blame him for wanting to splurge on his family once in awhile.

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Nov 262015
 

Discreet Success

What¬†I appreciate the most about investing is the option to be¬†inconspicuous about it. ?¬†If someone¬†buys a detached house in an affluent neighborhood like Lawrence Park¬†for $5 million, then people will know he’s rich. There is no way¬†to hide his wealth¬†from his close friends or his employer. If he¬†drives to work in a comfortable¬†Aston Martin One-77 then his¬†coworkers will find out about his affluence. But when it comes to his financial holdings, nobody¬†has to find out what, or¬†how much he has. ūüôā¬†This usage of stealth wealth is how most millionaires are able to blend into society.

 

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Keeping our wealth a secret allows us to enjoy work, travel, play, and financial security without attracting unwanted attention to ourselves. We can’t hide our success if we’re famous, but we can hide our financial position¬†if we’re rich. ūüėČ Driving an older model vehicle is an excellent way to disguise wealth. It allows us to spend like poor people while we continue to grow our income and wealth like rich people without any distractions.¬† Continue reading »