Fiscal Update – June 2015 – Market Turmoil

Greece is holding a referendum tomorrow, Sunday, on whether or not they want to accept the bailout terms from their creditors. I’m not great at economic forecasts but I feel like the majority will vote yes for better or for worse.

[Edit] The result is out. Greeks voted No, lol. This is why I’m not an economist. [/Edit]

In other news it hasn’t been a very good month for global markets. Both the U.K. FTSE 100 and the French CAC 40 indices are down about 4% for the month of June. But China experienced the most dramatic loss. The Shanghai Stock Exchange Composite Index fell by 25%. Sufferin succotash! ? A whole bunch of millionaires in China just lost 1/4 of their wealth in the span of 30 days.

Here in Canada our stock market index dropped 3.5%, not as bad as other countries, but still enough to wipe out any gains it’s accumulated so far in 2015. As a result my net worth is down for the first time in years, lol. This means my portfolio is finally large enough that my change in wealth is determined more by the fluctuations in the market than by my savings rate.

*Side Income:

  • Part-Time Work = $600
  • Dividends = $500
  • Interest = $0
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)15-06-networthiq_chart

  • Assets: = $897,400 total (-5000)
  • Cash = $2,500 (-2000)
  • Stocks CDN =$93,600 (-1300)
  • Stocks US = $65,100 (-200)
  • RRSP = $51,200 (-1500)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $508,100 total (-4300)
  • Mortgage = $193,500 (-400)
  • Farm Loans = $200,700 (-500)
  • Margin Loan CDN = $29,600 (-1900)
  • Margin Loan US = $25,800 (+100)
  • TD Line of Credit = $26,000  (-1000)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $4,300 (-600)

*Total Net Worth = $389,300 (-$700 / -0.2%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.80 USD

This is why it’s important to understand our financial decisions. Warren Buffett said “if you understood a business perfectly and the future of the business, you need very little in the way of a margin of safety.”

For example, when I look at my assets listed above I know what purpose each line item plays in my financial plan to reach early retirement. I know why I have $2,500 in cash right now, not more, not less. When I look at any of my investments I know why it’s in my portfolio. As another famous investor Peter Lynch once said, “know what you own, and know why you own it.” 😀

Understanding our decisions won’t necessarily make us rich, but it will mean that when the market corrects like last month we’ll have the discipline to not panic and sell. 🙂 Many novice investors are overly confident in their abilities to time the market and trade more often than they really should. As a result, they usually buy and sell at the wrong times. 😕 Sometimes the biggest barrier keeping us from success is our own mentality. We have to be careful not to overestimate our abilities, or else we’ll just crash and burn like this poor little guy. 😛

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Random Useless Fact

15-07-freedom-person-net-worth

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Bricks
Bricks
07/04/2015 10:15 pm

[A whole bunch of millionaires in China just lost 1/4 of their wealth in the span of 30 days]

Most millionaires don’t keep all their assets in the stock market. I would say 20% of someone’s net worth would be in the stock market, so most likely even if their stock portfolio went down by 25%, their net worth would have only gone down 5% give or take. They would have the rest of their assets in real estate, businesses, and private equity etc.

Engineer Cents (@engineercents)
07/05/2015 5:51 am

I’d definitely sweat with a $2.5K emergency fund. I hate having mine go below $20K, though that might be in part because my job/income is bursty too.

Investing Pursuits
07/05/2015 7:50 am

Liquid,

There was a lot of drop in stock prices. There were some bargains out there. My portfolio balance was down even with capital additions.

Stephen (@MyWordsNStuff)
Stephen (@MyWordsNStuff)
07/05/2015 9:33 am

You’ve had better months! Hopefully things rally this next half of the year and we end on some great gains

Jason @ Islands of Investing
Jason @ Islands of Investing
07/06/2015 12:03 am

Your net worth is still looking pretty solid – no need for such little bumps in the road to worry you 🙂

TheEighthDigit.com
TheEighthDigit.com
07/06/2015 11:35 am

A 700$ dip on a 389k$ is notting to worry about. Bigger stock crash will happen in your investment carrer.

It’s all about risk tolerance, I wouldn’t be confortable with leverage stocks at the current price level but then again I never got a +13% month either.