Fiscal Update – Jan 2013 – New Year’s Bump

January is when I adjust the value of my home. I determine the new price by taking my original purchase price in 2009 and add inflation to it every year. In 2012 the CPI in Canada for the entire year averaged out to roughly 1.6%.

2012 inflation rate in Canada, new year bump

Last year my home was $248,000. This year I’m going to add the 1.6% and increase my home value to $252,000 🙂 The government (BC Assessment) thinks my condo should be worth more but I’m using the inflation adjusted method to be on the cautionary side. January is also a month where I get a lot of quarterly dividends 😀 Furthermore, there is a little secret in the investing world called the January Effect. It describes the general increase in stock prices during the month of January. Nobody knows exactly why, but part of the reason might be that many people, especially workers on Wall St. often get big bonuses at the end of the year, so they buy a lot of stocks in January with that extra money which pushes the market up. This happens more often than you might think 🙂 Below is a chart showing the S&P 500’s average monthly returns for the last 14 decades. Notice how January outperforms all other months.

historical stock performance, the new year bump

In a normal month my net worth would grow by about $2,000 or $3,000 depending on how much I save and how my investments perform. But because of the events described above January is often a special month where I see a big boost to my net worth which I like to call the New Year Bump. This happens almost every year.

*Side Income:
  • Part-Time Work = $600
  • Dividends = $400

*Discretionary Spending:

  • Eating Out = $100
  • Others = $100

*Net Worth: (MoM)

  • Assets: = $506,700 total
  • Cash = $1,800 (+$800)
  • Stocks = $72,100 (+$3,400)
  • RRSP = $30,800 (+$1,000)
  • Home = $252,000 (+$4,000)
  • Farm = $150,000 (Same)
  • Liabilities: = $354,200 total
  • Mortgage = $204,200 (-$300)
  • Farm Loan = $111,700 (-$300)
  • Margin Loan = $18,900 ($2,000)
  • Line of Credit = $19,400  ($400)

*Total Net Worth = $152,500 (+8.7%

This is why I love investing 🙂 Just buy a broad portfolio of appreciating assets whenever you have extra cash and then sit back and let the market do all the work for you! In 2011, my New Year Bump was +$9,600. I remember being so excited (゜o゜) But last year in 2012, it was even higher at +$10,800. I didn’t think things would get any better than that. Yet this year in the month of January I became $12,200 wealthier thanks to the Bump ヽ(^o^)丿I can’t believe how lucky I am. Who would’ve thought just 4 years of investing would lead to this kind of payoff already. By regularly purchasing and holding profitable investments like farmland, a condominium unit, and a diverse spectrum of stocks from coffee companies to REITs, it appears this strategy works pretty well. Oh yeah, and leveraging helps a lot too. No way could I have accumulated over $500,000 of assets today by myself in such a short amount of time. That’s why I’ve taken advantage of the low interest rates and used the bank’s money to do most of the heavy lifting for me (^-^) I’ve been blogging about what kinds of investments I buy since 2010. If you are using a similar investment strategy for yourself then hopefully you’re benefiting from the New Year Bump as well 😀

* Numbers are rounded to the nearest $100.

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01/31/2013 3:23 pm

Maybe I’m mis-remembering, but I thought historically in-flows to mutual funds were highest in Q1 (propped up by people making contributions to their IRAs before the April 15th deadline). And since mutual funds are more likely to hold long positions than short, the funds then need to purchase shares of individual companies in order to offset the purchased shares of their fund. So it wouldn’t shock me that Q1 has historically healthy returns.

Jean decary
Jean decary
01/31/2013 4:25 pm

Well done Liquid!

$25000 dividends
$25000 dividends
02/02/2013 4:09 am

hopefully the vancouver real estate market won”t tank either

01/31/2013 7:02 pm

Congratulations!. Debt definitely does help, you just have to be careful how you use it. I remember gearing up significantly just before 2008-2009 crash, I was able to take off some cash in time, but having large debt levels significantly limits you flexibility. Your margin loan looks to be relatively modest compared to your stocks so you should be in good shape. On a $500k portfolio, I think i had almost $250k in margin loan at one stage, which almost sank me!

01/31/2013 7:34 pm

Nice work, as always! I’m impressed you always keep your discretionary spending in control. In addition to people making their contributions to their IRAs before April 15th, the RRSP season may also have an affect!

02/01/2013 9:15 am

I have been looking for a caliper and chef knife too! I remember a friend telling me he picked up a caliper for a couple bucks some time last year. I was hoping I could use it for some motivation, so let me know how it works for you! What type of knife did you get?

01/31/2013 10:07 pm

Sweet numbers, I will work harder to keep up with you!

Alex Yang (@yyangalex)
01/31/2013 11:22 pm

thats actually a pretty good way to value real estate. RE in the long run appreciates at inflation + 1-2% so i think its pretty accurate. i might try that myself

i think January effect is due to several things. Beyond what ppl mentioned already, i think fresh year for money managers, so they’re more willing to take risk and bid markets up. Also, I think new year means ppl start looking at FY2013/14 multiples instead of 2012/13.

regarding your leverage, something to think about: if you were a business, you’d have a debt to equity ratio of 230%, or 2.3.

Alex Yang (@yyangalex)
02/01/2013 5:17 am

yes but their cash flows and revenue are essentially guaranteed by 25 year contracts. maybe you can sign a 25 year lease for your farm 😛

JC @ Passive-Income-Pursuit
02/01/2013 8:52 am

Any positive move is always welcomed, but a $10k+ move is just awesome. The January effect is pretty interesting. Kind of surprising to see that much outperformance when compared to the rest of the months. My goal is to increase my net worth by $100k this year and January was a great start for that. Congrats on a great month!

02/01/2013 10:47 am

The bump for New Years sounds like the best belated xmas present you could get for yourself. Awesome and I appreciate the breakdown and the history of the January effect. Thanks!

myownadvisor (@myownadvisor)
02/01/2013 4:27 pm

Great work Liquid!

+almost 9% is awesome!


Chris @ Stumble Forward
02/02/2013 11:30 am

Those are some pretty awesome numbers because I’m not even close to that. Good Job.

02/03/2013 4:14 pm

I am following your progress with interest. We have a 5 year target to create a pot worth £2.5 million. Seems an awfully large number – even larger when you write it as £2,500,000.00p – but this is what we calculate we need to see us out!

The difference is that we will use other vehicles as we are in the UK. but hopefully the effect will be similar.:-)

02/04/2013 2:30 am

And you started this 4 years ago?? That’s impressive, gives me hope for the future, as at 40 (!!) I feel I’ve left a few things rather late….

02/04/2013 11:30 pm

Congratz on the return! I invest in stocks, but mainly in Hong Kong stocks since I am more familiar with the market there. It’s been a tough year but I have definitely learned much. I was not that kind of sit and hold type but now I realize sit-hold-observe strategy can bring me more benefits and help me focus. Recently I am very interesting in the real estate market in Vancouver also. I don’t have a great capital now so I am thinking if I can get some small amount of, but quick, cash out of the estate market.

Brick By Brick Investing | Marvin
Brick By Brick Investing | Marvin
02/05/2013 5:19 pm

Love the break down of your finances. Great numbers, congrats. Look to forward to seeing you increase your net worth!

01/31/2015 8:13 am

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