Fiscal Update Dec 2019 – The end of a great decade

 Fiscal Updates  8 Responses »
Jan 062020
 

Happy New Year! 😎 As a personal finance blogger, I celebrated New Year’s Eve properly in the traditional fashion – by looking up the new value of my home on the BC assessment website. 😀 Needless to say my condo’s assessed value for 2020 has dropped. I will update my net worth next month to reflect the new value, but today’s post is meant to highlight my December 2019 finances.

A bullish decade

The U.S. stock market has been on a bull run for 130 months now – a historical record. But who would’ve guessed? In 2010 the dreadful malaise of the great recession was still lingering on investors’ minds. The stock market was still recovering. And many people felt uneasy and hopeless as the S&P 500 index returned virtually nothing from 2000 to 2009.

But it was a completely different story over the next 10 years. From 2010 to 2019 investors saw steady gains on Wall Street, with relatively low volatility and few setbacks. The S&P’s annualized return in the 2010s was 13% according to the NY Times. Not too shabby. The 29% return last year in 2019 really helped out any boomers who are retiring this year.

On the labour front, the unemployment rate dropped from 9.9% in 2010 to just 3.5% now. Real median household incomes rose 12% during that time.

Canadians have much to celebrate as well. The TSX Composite gained around 6.7% annualized. It’s not great, but also not bad. The MLS price index shows homes are now worth 67% more across the country than 10 years ago. But that varies a lot depending on location and type of home. Bond portfolios rallied around the world as central banks competed to see who can lower their interest rates the most. Overall it had been an economically fruitful decade for many people. 🙂

Increasing my cash holdings

I remember that 2018 was a rough year where the stock market fell 12% in Canada, and 6% in the U.S. But since we entered into 2019 on a fairly low point, this past year has been an absolute blessing. The market rebounded and helped to propel my wealth upwards by $261K in a single year. Which isn’t all that impressive once you take into consideration that I already had $1.2 million worth of assets going into 2019, and that all asset classes I owned went up in value. It was just a great year for investors in general. 🙂

I made some adjustments over the past month in order to get ready for the new year. My plan is to increase my liquidity for a potential real estate purchase in the lower mainland in 2020. My price range is between $400K to $700K so I would require a sizeable cash amount for the down payment.

I sold all of my TD e-Series mutual funds worth about $13K and closed my fund account. I had started investing in the e-Series funds a long time ago in order to demonstrate to readers how to set up the account and how to operate it. This was before Vanguard ETFs came to Canada. So I was basically showing people how to buy index funds in 2013 before it was cool, haha. 😀 I gradually put more money into the fund over the years but have now decided to sell everything. 🙂 Index funds have become too mainstream anyway.

I also sold $20K of REITs and other stocks in my TFSA and withdrawn the cash to my chequing account. I will put the $20,000 back into my TFSA this year, along with an additional $6,000 of new contribution.

Farmland Update

My farmland has been sold. I am still waiting to receive the final adjustments and paperwork by mail from my lawyer in Saskatchewan. But there shouldn’t be any issues. The total commissions and fees related to the sale add up to about $24,000 – which I’m including in today’s net worth update. 🙂 Technically I didn’t pay the fees until January, so I’m including the amount as a December liability below for best accounting practices. I will write a detailed post on my farmland sale in the upcoming weeks. 🙂

Liquid’s Financial Update December 2019

*Side Incomes: = $2,900

  • Part time job =$1100
  • Freelance = $200
  • Dividends =$1200
  • Interest = $400

*Discretionary Spending: = $2,500

  • Food = $400
  • Miscellaneous = $800
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,434,300 (+27,700) 
  • Cash = $49,500 (+36,300)
  • Canadian stocks = $184,000 (-16,500)
  • U.S. stocks = $146,300 (+5800)
  • U.K. stocks = $23,400 (+700)
  • Retirement = $143,900 (+900)
  • Mortgage Funds = $37,900 (+200)
  • P2P Lending = $37,300 (+300)
  • Home = $367,000 (assessed land value 2019)
  • Farmland = $445,000
  • Total Debts: = $404,800 (+22,700)
  • Mortgage = $185,200 (-400)
  • Farm Loans = $161,300 (-600)
  • Margin Loans = $34,300 (-300)
  • Farmland sales cost = $24,000 (new)

*Total Net Worth = $1,029,500 (+$5,000 / +0.5%)
All numbers are in $CDN at 0.77/USD

Many analysts thought 2019 would be a bad year for the S&P 500 given all the worries about trade wars and recessions, but the market actually closed out its best year since 2013. January is often an accurate bellweather for the rest of the year. I’m looking forward to see what new market events 2020 will bring. 🙂

 

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Random Useless Fact:

Fiscal Update Nov 2019 – Millionaire Status Achieved

 Economics  42 Responses »
Dec 022019
 

Best Bull Market Ever

Stock markets are at record highs. The year to date return of the S&P 500 is 25% – a staggering performance! But of course making money from companies isn’t just about percentages. Otherwise everyone would simply invest in hard liquor. Because where else can you get 40%? 😎

In 2008 my net worth was $0. But thanks to the strong market performance over the last 11 years I’m finally a legit millionaire! Hurray! 😀

I’m currently worth $1,024,500 😀.  Apparently only 1% of self-made millionaires become wealthy before the age of 40. So I feel very fortunate to have this experience now. But my journey is far from over. In about 3 years I will be 35 yrs old. By then I hope to realize my ultimate goal of becoming financially free – hence this blog’s name. 😀

Every few years I update my financial freedom progress. The last time I fully inspected my finances was in 2017. During that update I calculated my net worth to be $610,000. I guess I should post another update soon to see if I’m still on track.

In terms of which investments got me to where I am, the biggest heavy hitters I have in my portfolio are stocks and real estate. 🙂 Both asset classes have performed tremendously over the last decade. That’s the wonderful thing about investing. You don’t have to be highly educated or technically skilled. You can simply buy something and wait for it to go up. Then you automatically go along for the ride and watch your money grow. 😉 As a buy-and-hold investor of dividend stocks and real properties I’m able to keep my trading and management fees to a minimum. Here is my current asset allocation breakdown.

Why have investments gone up so much in value since the great recession? It’s primarily thanks to the central banks. Around the world they have quadrupled the money supply in the financial markets from $5 trillion, to over $19 trillion. Apple cannot issue shares via a new IPO, and nobody is making new land out there. So nearly all the newly printed money is chasing after existing, finite resources. The result? Investors win. Investors who use other people’s money to invest win more. And savers lose.

Although my wealth hasn’t changed much month over month, there’s something visceral about that $1 million figure that makes me feel like a proper Bourgeoisie. 🙂 Maybe it’s all in my head. But it feels pretty amazing to have this level of financial security.

However I have to be careful. With great wealth comes great temptations. The average millionaire goes bankrupt at least 3 times, haha. Both Henry Ford and Walt Disney lost all their money and filed for bankruptcy before achieving a more permanent level of success. I hope I can keep the moment going and continue to build up my portfolio. 😀 It would be nice to eventually earn a six-figure passive income from my investments.

Liquid’s Financial Update November 2019

*Side Incomes: = $3,200

  • Part time job =$800
  • Freelance = $500
  • Dividends =$1200
  • Interest = $700

*Discretionary Spending: = $2,400

  • Food = $400
  • Miscellaneous = $700
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,406,600 (+22,100) 
  • Cash = $13,200 (+4100)
  • Canadian stocks = $200,500 (+5400)
  • U.S. stocks = $140,500 (+5600)
  • U.K. stocks = $22,700 (+800)
  • Retirement = $143,000 (+5300)
  • Mortgage Funds = $37,700 (+600)
  • P2P Lending = $37,000 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $382,100 (-3,000)
  • Mortgage = $185,600 (-500)
  • Farm Loans = $161,900 (-500)
  • Margin Loans = $34,600 (-200)
  • Line of Credit = 0 (-1800)

*Total Net Worth = $1,024,500 (+$25,100 / +2.5%)
All numbers are in $CDN at 0.75/USD

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Fiscal Update October 2019 – Tale of 2 Economies

 Fiscal Updates  13 Responses »
Nov 042019
 

I hope everyone had a good weekend. Many people turned back their clocks 1 hour marking the end of this year’s daylight saving time. But time wasn’t the only thing that fell back. Economic growth in the U.S. pulled back to just 1.9% for the 3rd quarter of 2019, lower than the previous 2 quarters. Last month I wrote about anticipating this GDP number, and warned that if it continues to fall (which it did) then we may be close to a U.S recession. The Canadian economy is also in trouble, managing to eke out a 0.1% gain in the latest month.

Yet somehow the U.S. stock market reached an all time high at the end of October. Senior citizens must be thrilled to see their retirement funds performing so well. 😀

So economic output is slowing down, but investors have never been more optimistic – pushing stocks to record highs. How does this happen? It’s basically the result of the U.S. Central Bank’s monetary policy. In late October the Fed lowered interest rates again, trying to stimulate the overall economy. However, all it did was push investors to buy stocks over bonds because bonds now pay lower interest/returns. But a higher company stock price doesn’t improve business hiring, productivity, or employee salaries. The average American worker doesn’t see any direct benefit from the Fed’s monetary stimulus. Only Wall St. does.

The result is a diverging economic reality between two worlds; the working class that’s just one paycheck away from financial ruin, and the investing class who continues to see growing asset prices. Over the last 10 years, the S&P 500 gave investors about 13% annualized return. So the fact is if someone put $1,000 into a low cost index fund in October 2009, then today he would have $3,400 – assuming he reinvested the dividends. Wow. And all this required zero effort on the investor’s part. Amazing. 🙂

So the lesson here is simple. Focus on investing your savings, and be patient. Investing is like cooking a juicy steak; the less you touch it the better. Working hard at a job can only get you so far. But the real secret to financial success is to leverage the Central Bank’s policies, and invest in a diversified portfolio to build wealth the easy way. 🙂

Although October was a good month for stocks, I had a major expense (property tax payment for my farms) that stifled my savings. In the end, I was able to grow my wealth by $8,300 for the month. Not bad, but I didn’t reach the $1 million net worth milestone I was aiming for. Oh well. Better luck in November. 🙂

 

Liquid’s Financial Update

*Side Incomes: = $5,400

  • Part time job =$600
  • Freelance = $400
  • Dividends =$1200
  • Interest = $500
  • Farm rent = $2,700

*Discretionary Spending: = $3,700

  • Food = $300
  • Miscellaneous = $2,100
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,384,500 (+7,000)
  • Cash = $9,100 (+300)
  • Canadian stocks = $195,100 (+2400)
  • U.S. stocks = $134,900 (+1400)
  • U.K. stocks = $21,900 (+500)
  • Retirement = $137,700 (+1900)
  • Mortgage Funds = $37,100 (+200)
  • P2P Lending = $36,700 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $385,100 (-1,300)
  • Mortgage = $186,100 (-400)
  • Farm Loans = $162,400 (-500)
  • Margin Loans = $34,800 (-200)
  • Line of Credit = $1,800 (-200)

*Total Net Worth = $999,400 (+$8,300 / +0.8%)
All numbers are in $CDN at 0.76/USD

This will probably be the last year I pay property tax for my farmland. I have been in contact with a realtor in Saskatchewan, and have already instructed him to list both my farms for sale. 🙂

Agricultural land has not been immune to the wider real estate slow down across the country. But there does seem to be some interest in my farms so far. In terms of market pricing, my realtor says I can probably expect to sell my farmland for about $446,000 in 2019. That’s pretty close to the farmland value I’ve already been using to calculate my monthly net worth so I will stick with my existing number for now.

Farmland values have had a great run in Canada, but slowing economic growth, trade barriers, and changing local conditions suggest to me that it’s time to reduce my exposure to Canadian farmland.

 

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Random Useless Fact:

Fiscal Update September 2019 – Slowing Economy

 Fiscal Updates  8 Responses »
Oct 012019
 

Tight Race Ahead

In a few weeks Canadians will vote for a Prime Minister to lead the country. Who knows what kind of chicanery will ensue. According to the CBC poll tracker, which aggregates all publicly available polling data, the Conservatives hold a narrow lead over the Liberals. Looks like it’s going to be a close call. 😮

canadian poll for 2019 election

Financial markets are always uncertain right before an election because policy changes can drive consumer incentives and business decisions. During the past quarter leading up to this month’s election the stock market has seen lower volumes of trading. Many companies put off hiring and investing until they know which political party is going to win.

Meanwhile south of the border, the United States economy is slowing down. Its 2nd quarter GDP growth dropped to 2%, down from 3% from the previous quarter. Manufacturing data also shows weakness and poor sentiment about businesses. Business earnings growth estimates have dropped from 7.6% last year to just 2.3% now. As a result the U.S. central bank dropped interest rates by 0.25% last month. This is good news for people who have floating rate debt in US dollars like myself. 🙂 So now my investment expenses are slightly lower than before.

Markets were slightly positive in September bumping up my net worth to $991K. It’s nearly at the $1M mark. 🙂 Below are my financial results ending September 30th.

Liquid’s Financial Update

*Side Incomes: = $2,700

  • Part time job =$700
  • Freelance = $400
  • Dividends =$1200
  • Interest = $500

*Discretionary Spending: = $2,200

  • Food = $400
  • Miscellaneous = $300
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,377,500 (+4900)
  • Cash = $8,800 (+1200)
  • Canadian stocks = $192,700 (+3200)
  • U.S. stocks = $133,500 (-1800)
  • U.K. stocks = $21,400 (+700)
  • Retirement = $135,800 (+1000)
  • Mortgage Funds = $36,900 (+300)
  • P2P Lending = $36,400 (+300)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $386,400 (-3,300)
  • Mortgage = $186,500 (-400)
  • Farm Loans = $162,900 (-500)
  • Margin Loans = $35,000 (-400)
  • Line of Credit = $2,000 (-2000)

*Total Net Worth = $991,100 (+$8,200 / +0.8%)
All numbers are in $CDN at 0.76/USD

Another month is in the bag. 🙂 The Canadian dollar got stronger which is both good and bad. On one hand Canadians have stronger purchasing power globally so we can buy more things for cheap. But on the other hand our assets outside the country are worth less when converted back into $CAD.

 

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Random Useless Fact:

The hamburger got its name from a cut of beef in Hamburg, Germany, and doesn’t contain any ham.

Fiscal Update August 2019 – Gold Makes a Comeback

 Fiscal Updates  12 Responses »
Sep 032019
 

Gold and Silver Outshine the Equities Market

Stock markets fell in August across North America and Europe in general. 🙁 But there is a silver lining. Precious metal companies managed to do quite well. A couple of months ago I explained why silver is a great investment for 2019, and how it’s more undervalued than gold. I disclosed buying 300 shares of Wheaton Precious Metals (WPM) in July because I thought the price of silver would continue to rise. Thankfully it did. My net worth today is $2,000 higher because of that one investment decision. 🙂 Hurray!

Besides WPM I also own shares in Newmont Goldcorp (NGT.) If I didn’t have so much silver and gold related assets in my portfolio my net worth surely would have dropped in August. But diversification saved the day and I managed to grow my wealth by $4,100.

Gold had been in the dumps for several years since 2013. Its price dipped to a low of US$ 1060/oz in 2016. However things are looking very different now. Since the start of this year gold’s price has grown by 21%. It’s one of the best performing asset classes of 2019 so far, currently trading at $1548/oz. But silver has performed even better at 24% return year to date. The price of silver had a large rally last week and is now sitting at $19.17/oz. 🙂 Precious metals are making a comeback this year, due to more dovish monetary policies worldwide and the uncertainty of the U.S. and China trade war.

 

Liquid’s Financial Update

*Side Incomes: = $2,700

  • Part time job =$900
  • Freelance = $400
  • Dividends =$1000
  • Interest = $400

*Discretionary Spending: = $2,200

  • Food = $400
  • Miscellaneous = $300
  • Interest expense = $1300

*Net Worth: (ΔMoM)

  • Total Assets: = $1,372,600 (+600)
  • Cash = $7,600 (+2100)
  • Canadian stocks = $189,500 (+300)
  • U.S. stocks = $135,300 (-1600)
  • U.K. stocks = $20,700 (-800)
  • Retirement = $134,800 (+200)
  • Mortgage Funds = $36,600
  • P2P Lending = $36,100 (+400)
  • Home = $367,000 (assessed land value)
  • Farms = $445,000
  • Total Debts: = $389,700 (-3,500)
  • Mortgage = $186,900 (-400)
  • Farm Loans = $163,400 (-400)
  • Margin Loans = $35,400 (-700)
  • Line of Credit = $4,000 (-2000)

*Total Net Worth = $982,900 (+$4,100 / +0.4%)
All numbers are in $CDN at 0.75/USD

I have been an advocate of gold and silver since 2011, suggesting everyone should have at least a little bit of each in their portfolios. The value of my 1 kilogram Arctic coin has held up nicely in Canadian dollars. I have been slowly buying more bullion over the years at lower prices than today and stashing them away.

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