Year End Review – 2015
I remember 2015 like it was yesterday. 😛 I hope everyone is having a great New Year so far. Let’s review some of the biggest financial news and stories from 2015.
- Falling commodity prices. – The Standard & Poor’s GSCI commodities index plunged 34% in 2015, down 80% from its peak. It’s now at the lowest level since 1999. This doesn’t directly affect me since I don’t work in that field, but I like how this keeps inflation at bay. Cheaper oil, metals, and other natural resources mean I pay less for transportation, furniture, groceries, and other goods.
- China’s slowdown. – The Dow Jones industrial average dropped 11% in August on fears that everyone had underestimated China’s troubles and their global impact. This isn’t necessarily a bad thing. High rates of growth is unsustainable. And a market correction is an opportunity to buy stocks at a discount.
- Interest rate hike in the U.S. – The Federal Reserve raised the short-term rate by 0.25% in December. This increases the value of the U.S. dollar. Meanwhile, the ECB, Bank of Japan, and China continue to go in the reverse direction to expand their money-easing policies.
- Slide in the Canadian dollar. – Canada’s economy was weak in 2015 due to lower oil prices and we spent half the year in a recession. So naturally our loonie’s value fell compared to the $USD. This is good news for me since I collect a lot of dividends in $USD. 🙂
- Continuing expansion of the freelance economy. – Uber, Airbnb, Etsy, contract workers, and indie app developers have helped to create an economy where more people are working in a freelancing capacity rather than a regular job in a traditional workplace. Even old trades like construction is being effected because carpenters can sell their services on sites like Thumbtack. I like this trend of becoming a more free and open society with less red tape.
- Massive corporate mergers. – Mergers and acquisitions worldwide totaled $4.8 trillion in 2015, a new record. This may not be a big deal to some, but it has real implications for stock investors. For example, it’s how I made a large profit when Burger King bought Tim Hortons back in 2014.
- Lack-luster stock market returns. – According to the CBC, the Canadian stock market index was down 11%. The U.S. markets did better but both the Dow and S&P500 were down. The technology heavy Nasdaq however was up 6%.
At the start of 2015 I set 2 financial goals for myself; have a net worth of $400,000, and make at least $16,000 in passive income. 🙂 Fortunately I was able to hit both by the end of the year. I’ll post my net worth breakdown next week. My pre-tax passive income came from roughly $9K in rent, $5K in dividends, and $2K in interest.
What I learned from the past year is that it is harder than ever before to predict how the markets will change over the next 12 months. This is why it’s important to have financial protection in place and to diversify our investments. Canadian stocks and bonds as a whole did not perform very well last year. But according to the Real Estate Board of Greater Vancouver, the price for a detached house in Metro Vancouver climbed 22% from the previous year. The average condo price was up 14%. The stronger U.S. dollar suggests Canadians who invest in U.S. stocks should have seen some good returns as well. 🙂 So a diversified portfolio of equities, fixed-income, real estate, commodities, and other currencies would have actually performed okay last year despite the stagnant economy in most parts of the world. On average I was able to earn a double digit return in 2015 on my overall investments. I’ll make some new goals for 2016. But first, I need to do some bookkeeping. I haven’t looked at my bank account since last year. 😉
Random Useless Fact:
Nice review of 2015, there were certainly a lot of headwinds for markets and speculation on interest rates and oil production. Congrats on hitting both your financial targets for the year.
Thanks. I didn’t hit my stretch goal of saving up for a new car but as it turns out I don’t need a new car anyway. 🙂
While I love your optimism and upbeat attitude, there is a fine line between that and delusion. Unless you are close to retirement (past accumulation stage), earn your main income in USD, or have your passive income much bigger than your regular income, I find it hard to believe that you can see the fall of the Loonie as an overall positive. No matter how positive a spin I put on it, the fact is that for younger investors in their accumulation stage, who are paid in CAD at their main job, the fall of the Loonie is a big negative, USD dividend income notwithstanding.
I agree. Sometimes I need a reality check. A falling Loonie is a net negative for young Canadians, expect for maybe a small part of the population where they work in manufacturing for a U.S. company and get paid a regular wage in CAD but receive stock options and bonuses in USD. I suppose in a similar way, for younger investors in their accumulation stage, a rising stock market can be somewhat of a negative thing. 🙂
Happy New Year! That’s amazing that you hit your goals.
2015 hit my investments hard. Ow ow ow. I was previously investing mostly in Canadian funds. I’ve since started moving more into American and international markets. But still… Ow ow ow ow.
You won’t lose anything as long as you don’t retire, sell, and start using that money. It’s all good for now. There’s time to recover. Yes, buying some American and international investments is a good idea. I like to hold them in my RRSP. 🙂
China halted trading today after 7% plunge due to weak manufacturing data. The Greek issue will not go away. Puerto Rico has started surfacing. Wars gave pop up everywhere. 2016 will be even more volatile. I’m saving cash for the big crashes.
Yeah, markets probably won’t stabilize until after the election.
Good plan.. I ‘ve been doing the same… I don’t like trying to time the market but with the volatility it seems I can wait a week or so and get in at a 2-4% lower cost basis so why not?….
Sounds like a good plan.