Feb 022017
 

How High Can the Dow Go?

The Dow rose from 7,000 to 20,000 points over the last 8 years. And that doesn’t even account for the dividend payments. By using financial leverage my portfolio managed to outperform the market every year since I started buying stocks in 2009. 🙂 Borrowing to invest is risky. But if I continue to maintain a diversified portfolio of real estate, stocks, and fixed income investments, then it is very likely that my assets will grow overall in value over time. So as long as I can borrow money cheaply I will continue use leverage. It’s all about expected market return vs the cost to borrow. In my previous post from last year I explained how rich people create wealth. Using other people’s money to enhance investment gains proves to be a very effective method. I currently have about $50,000 of available funds remaining before I risk getting a margin call. This gives me quite a large safety cushion. As long as I keep an eye on this number I should be able to withstand the market cycles.

Breaking the 20,000 barrier was a huge milestone for stock investors. But can the Dow Jones continue to climb even higher? The answer may be found in American football. 🙂 Believe it or not the outcome of the Super Bowl game this weekend could have an impact on the stock market’s performance for the remainder of 2017. This idea is known as the “Super Bowl Predictor.” The predictor states that if an original NFL team wins the Super Bowl, then the Dow index will increase over the next year. Otherwise, the stock market will fall. So far this indicator had been bang on every year since 2008, except for one time. So if we want the Dow to hit 20,000 again and continue to grow this year, we better hope the Atlanta Falcons win this weekend. 😀

Anyway, since equity valuations and price/earnings ratios appear to be worryingly high, I decided it’s time to be more cautious with my money. So as I see the growing risk of a bubble forming, I have turned my attention towards alternative investments that do not correlate with the stock market. That’s why today I present a new addition to my asset column.

It’s P2P lending! 😀 Hurray! This makes a total of 10 different asset types I own. And most of them produce a stream of passive income for me! 🙂

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $900
  • Freelance = $800
  • Dividends = $800
  • Interest = $600
*Discretionary Spending:
  • Fun = $200
  • Debt Interest = $1200

*Net Worth: (MoM)16-12-networthiq_chart-nov

  • Assets: = $1,083,200 total (+33,200)
  • Cash = $1,100 (-700)
  • Canadian stocks = $139,200 (+4100)
  • U.S. stocks = $85,900 (+2700)
  • U.K. stocks = $18,600
  • RRSP = $75,000 (-100)
  • Mortgage Funds = $30,400 (+200)
  • Peer-to-Peer Lending = $20,000 (new!)
  • SolarShare Bonds = $10,000
  • Home = $270,000 (+7000)
  • Farms = $433,000
  • Debts: = $496,200 total (+16,700)
  • Mortgage = $185,200 (-300)
  • Farm Loans = $191,400 (-400)
  • Margin Loans = $59,300 (+300)
  • TD Line of Credit = $16,000  (-700)
  • CIBC Line of Credit = $27,500 (+18,000)
  • HELOC = $16,800 (-200)

*December Total Net Worth = $587,000 (+$16,500 / +2.9%)
All numbers above are in $CDN. 

January has traditionally been a very positive month for my net worth, and this year is no different. This is thanks to the phenomenon called the new year’s bump. I used the average inflation rate of 1.6% to increase my home’s value and rounded the number to $270,000, which is $7,000 higher than the previous year. Stock markets held up well this January, despite a slight pull back over the last couple of trading days.

I will write more about my new venture into the world of peer-to-peer lending in a future post. But it’s basically a fixed income investment in the form of debt financing. Compared to stock market, P2P investments have a low correlation with stocks and are less volatile. However, this doesn’t mean they’re less risky. I invested $20,000 to start. $2,000 came from personal savings, while the remaining $18,000 was borrowed, which is why both my asset and debt have grown this month. I plan to slowly pay down the new debt while I wait patiently for my new asset to grow. This is the same basic strategy I used for all my leveraged investments in the past. 😉

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Random Useless Fact:

It can be quite difficult to tell if a tiger is pregnant, or just fat.

 

May 162015
 

46% of Canadians credit card holders carry some kind of balance each month, and we all know how high the interest rates can get on those. Over time the free market has come up with solutions to provide more affordable lending to borrowers in many parts of the world. In the U.S. and Europe for example, peer to peer lending has grown significantly in popularity as consumers look for alternative means to finance large purchases and pay down high interest debts.15-05-marketplace-lending-grouplend

Canada has been lagging behind in this segment of the financial market for some time but just last year a new Vancouver based company became the first to offer a legitimate marketplace lending solution. Grouplend plans to give Canadians a fast and convenient platform to borrow money with lower interest rates than credit cards or pay day loan services. I recently had a chance to sit down with its director of business development, Sean, to learn more about possible opportunities in this space for consumers and investors.

Grouplend leverages the power of technology to bring together creditworthy borrowers seeking loans with investors looking to earn a fair return on their money in an online environment that provides personalized services with competitive interest rates. The company claims to have over $50 million of loan applications already. The way it works is pretty straight forward. Large institutions and accredited investors pool money into a fund which is lend out to borrowers. These borrowers can take out a loan up to $30,000. The term of the loan is fixed for 3 years. The interest rates start from 6.3% and goes up depending on the borrower’s income and financial situation.

I can see this benefiting two main groups of people: consumers who want to consolidate their debt or want to borrow money for a short amount of time, and investors who are willing to risk lending their money to fellow Canadians to hopefully make a return.

The borrowing process is simple. Let’s say you have a line of credit at your bank at 9% and want to lower your rate. You may be able to replace this LOC with a Grouplend loan at a lower interest rate. On the main page of its website, use the questionnaire near the bottom to get your no-obligation personalized quote in a couple of minutes. If you like the conditions and interest rate, you may proceed with your loan application. To verify your identity and credit worthiness you will need to email them some documents like scans of your drivers license, 2 most recent pay stubs from work, etc. If the application is approved it takes as little as 24 hours for the loan money to be deposited into your bank account. You can also set up automatic repayments. After 6 months of on-time payments, you may even apply for a second loan. A process that used to take weeks and meetings with a financial representative at a bank has been condensed into a few mouse clicks and keystrokes. 🙂 There is no origination fee, and you can pay back the loan in full at any time without penalty. This is a great opportunity for borrowers to save money on their high interest debts. Paying less interest means becoming debt free sooner, which frees up more money for retirement savings and investing. 🙂

For fixed income investors who are looking for alternative to bonds Grouplend allows individuals to pool their money into funds that consumers can borrow from. On its FAQ page the website encourages investors to reach out by email if they are interested. Due to regulatory and securities issuance in Canada only accredited investors can invest in Grouplend funds. Generally speaking an accredited investor has to either earn a high salary or have a net worth of $1 million. An employee benefit plan or a trust can also be qualified as accredit investors if total assets are in excess of $5 million.

Today’s world is all about going digital and crowd sourcing to become more efficient. 🙂 I find the start ups for marketplace lending to be an interesting development. Since almost half of Canadians with credit cards hold a balance I expect there to be strong consumer demand for a lower cost, convenient, online loan platform moving forward.

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Random Useless Fact:

Use the phrase, “My understanding was…” instead of, “I assumed…” so that other people will merely think you misunderstood something as opposed to being viewed as having hastily jumped to a conclusion based on insufficient evidence.