Fiscal Update – Dec 2013 – Year of Easy Money

Overall in 2013 my net worth increased by $68,600 or 49%. Not bad 😀 But I can’t take most of the credit for it. As I will explain further below, more than $40,000 of my newly created wealth was purely coincidental. My financial performance in 2013 was mostly a reflection of the overall positive market trend, and not so much the results from my own acumen 😛

In 2012 with only $20K of my own savings I was able to buy a property worth $150K. That investment worked out so well that I used the same strategy in 2013 to buy another property for $172K. I’m very grateful to the financial services industry for lending me other people’s money, so that I may use their emergency funds and hard earned savings (which they’re not currently using themselves) to boost the economy and multiply profits for my own gain! 😀 Don’t worry, I’ll pay them back some day 😉 But without borrowing money from the bank in this low interest rate environment, there is no way I could have accumulated so much financial assets today.

*Side Income:

• Part-Time Work = $600
• Dividends = $400

• Eating Out = $100
• Others = $500 (including a $400 microscope)

*Net Worth: (MoM)

• Assets: = $742,500 total (+3,700)
• Cash = $200 (-1000)
• Stocks CDN =$79,600 (+2700)
• Stocks US = $46,500 (+1500)
• RRSP = $39,200 (+500)
• Home = $252,000 (same)
• Farms = $325,000 (same)

• Debts: = $533,600 total (-1,000)
• Mortgage = $200,400 (-300)
• Farm Loans = $208,800 (-500)
• Margin Loan CDN = $27,400 (+1300)
• Margin Loan US = $24,000 (+400)
• TD Line of Credit = $34,700  (-1200)
• CIBC Line of Credit = $14,800 (-200)
• HELOC = $18,000 (same)
• RRSP Loan = $5,500 (-500)

*Total Net Worth = $208,900 (+2.3%)
All numbers above are in CAD. Conversion rate used: 1.00 USD = 1.07 CAD

The way to invest successfully isn’t necessarily trying to pick winners and losers. We just have to be in the game 🙂

For example I have a $U.S. trading account to buy U.S. stocks in. A year ago $1 CAD = $1.01 USD. But by now $1 CAD = $0.93 USD. Which means it’s now 8% cheaper for Americans to shop in Canada, haha. So it’s not about picking the right equities (stocks) because any Canadian could have simply put some idle cash in a U.S. account at the beginning of the year, not invested in anything, and still make 8% in profit simply from the exchange rate delta, lol. Easy money 🙂 And if that cash was used to buy stocks like I did, then that’s even better since the markets really outperformed in 2013.

I blogged about how I purchased super awesome companies like Google, Disney, Starbucks, etc. Which all performed well last year. The TSX Composite (Canadian index) returned 10.6% in 2013. The S&P500 did even better with a 31.8% return, jumpin’ jellybeans 😯 that’s a huge gain. But technology stocks grew the most with the Nasdaq Composite up 41%, Bloody Nora! 😯 All one had to do to gain from these market returns was just buy an index ETF, such as the Vanguard S&P 500 ETF (VOO) or the iShares S&P/TSX 60 index fund (XIU), which typically holds a large basket of blue-chip companies that track the stock market indexes. Again, easy money 🙂 No research or thinking necessary. I personally like to choose individual companies to invest in, but because I have a large diversified portfolio of large cap stocks, my overall performance pretty much tracks the index as well 🙂 My stock portfolio returned $15,000+ in 2013, not including new purchases. Thank goodness for leverage too. Anyone could have borrowed money from the bank at 4.25% like I did (regardless of their credit rating) and invested that money in the stock market for double digit profits 🙂 Without leveraging my margin account I would not have so much gains on paper today.

Same goes for real estate. The Canadian Real Estate Association released a report last month which estimates home prices in Canada on average rose by 5.2% in 2013 (4.1% in B.C.) So a $250K condo in B.C., like the one I have, would have appreciated by about $10,000 in 2013 on average. Home appreciation = passive easy money 🙂 By the way, did anyone else hear about the insane housing numbers out of Kitimat B.C.?

Same goes for farmland. It doesn’t matter where you choose to invest because according to a Re/max report farmland values in pretty much every province was higher in 2013 compared to a year before. By a conservative estimate according to the chart below, my two farms in East Central SK, has appreciated by at least $15,000 combined in 2013.

The remaining $28,600 of my net worth gain came from a mixture of personal savings (about $15K for the year) dividend income (about $5K) and equity build up (about $8K) since every time I make a mortgage payment for example, $400 goes to reduce the principle loan, which lowers my debts, which increases my net worth 😉 So the only good financial decision I’ve made in 2013 was to simply stay the course and keep saving and investing. Then lady luck took care of the rest 😉

The green numbers in this post represent a breakdown of my wealth progress in 2013 🙂 I may be just a regular graphic designer on a middle class salary, but by also working a part-time job at a local school, I am able increase my savings rate to over $1,200 a month. And through investing, calculated leverage, and diversification, I can supercharge my net worth growth, and bring me to financial independence faster 🙂

I hope all you wonderful readers had a prosperous year of investing too (^_^) Some people may think the markets are overvalued now and are tempted to sell. But I personally wouldn’t 😉 If central banks around the world continue to print excessive money throughout 2014 then I expect we’ll have another year of financial market gains because the extra liquidity will have nowhere to go except inflate all the asset prices even more 😀

The only asset class that didn’t do well in 2013 was gold 🙁 But that’s okay because every time the price of gold falls by $100/oz I’ll simply buy more. When the financial market zigs, gold usually zags, so it’s good to have some gold on hand for insurance purposes. Tip of the day: Hard commodities have always been cyclical and I’m confident one day gold will rise back up to $1500/oz which would be a nice 25% return from today’s price of ~$1200.