A Financial Update from Pete – A 50 Year Old Multi-Millionaire

Back in March 2014, I wrote a short piece for MDJ on my journey to a $5M net worth by 50. See: “Lessons from a 50 Year Old Multi-Millionaire.”

We reached the $1M net worth destination by age 40 and $5M by age 50. After working (we’re educators) and investing for about 20 years, working, which I still do, is now an option. Over the years, I’ve set many net worth (NW) goals and achieved them. The most recent milestone happened in 2013 – our NW increased by $1M; well $949,722 to be exact. That breaks out as 50K savings, about $170K in dividend income, and the balance in unrealized capital gains. 2014 is starting out on a strong footing with our NW increasing by ($254K) by March 21.

Here’s a quick update. I’ve kept to my plan and have a NW of $7.1M as of September 2, 2016. My goal is to hit the deca-millionaire mark within the next 5 years (how to calculate net worth).

As a brief re-introduction, I’m a recovering “save-oholic” along with my wife of nearly 25 years. I’m a school principal and my wife is a teacher. We’ve worked in education since our late 20s and are approaching the age at which we could retire early. I would kindly refer readers to my original article and the Q&A that follows it to get more background into my situation, philosophies, and approach.

The last few years have been quite good for our net worth growth. We gained $857K in 2014, $600K in 2015, and are up by $721K in 2016 so far. I don’t want to jinx myself but I might be on track to possibly increase the NW by $1M or more in 2016.

Net Worth

Our largest asset is the investment portfolio ($6.5M), but I also have a primary residence (~$500K value), some cash on hand (~$60K) and three vehicles (~$35K value). We have done well with our personal real estate over the years having lived in areas with generally rising real estate markets and selling our first house after a nearly 50% gain in just 3 years.

Recently I purchased (with $300K cash) a small downtown property (an older house that had been renovated into offices) to lease to a friend who runs a small business. It’s my first foray into real estate and I’m quickly learning that it is much more work than an investment portfolio! My goal is to realize a capital gain on it as the economy picks up.

Investments and Performance

Our investment performance has been decent since 1992 when I started investing. We have averaged 8.34% (CAGR) to the end of 2015 (how to calculate investment returns). I’m on a bit of a roll having beat both the TSX and DJIA annually for the past 5 years. My average dividend yield on my Canadian holdings is 3.87% and 1.43% on the US holdings. That generated just over $200K in income in 2015 (some of that is earned in registered accounts).

My portfolio is 70% Canadian stocks and 30% US. For US stocks, I own (in order of largest to smallest holdings): FB (3,000 shares), SBUX, SYK, LLL, AAPL, VIVO, AFL, V, GOOGL, and EGL.

For CDN stocks, I own (in order of largest to smallest holdings): TD (12,400 shares), PKI, BCE, MRU, RY, GWO, IGM, HCG, EMA, IPL, WSP, HR.UN, ENB, CPG, NWC, HLF, RUS, FTS, ECA, HSE, POT, and HOT.UN. (A list of top dividend growth stocks)

For those of you counting stocks from my last article, I have done some house cleaning as I had 49 holdings at that time and 32 now. As usually happens, I have come to regret selling some of those. Lately I have been adding some positions in strong companies in the oil and gas industry anticipating a turn-around (ECA, CPG, HSE).

I spend about 10-15 hours a week studying companies, tracking quarterly EPS, keeping updated on news. Far from a chore, I enjoy doing this study and analysis, and think of it as a part-time job. If you have been following business news, you may have noticed that POT and PKI have recently surged in value due to some merger and acquisition activity. A positive quarter from the Canadian banks was also welcome news. As one person recently tweeted, and I completely agree: “don’t hate big banks, own them.”

Usually things are quite boring but my attention and activity perk up in times of market or company crisis. I readily use margin to buy shares when I want them rather than worry about whether I have the cash or can generate it from a sale. Right now I’m carrying about $250,000 in margin but no other debt.

RESPs

Lately, my self-directed RESP (how an RESP works) has been on my mind since my daughter has just started her first year of university and we made our first withdrawal. This 9-holding plan has a value of about $325K. I’ve made the maximum contributions for my daughter and son (who is in grade 10) over the years, and have received the maximum CESGs (government grant). It’s earning about $13K per year in dividends.

The funny thing about RESPs is that after I proved to the bank that she was enrolled I was allowed to take out a whopping $2,500 in the first 13 weeks of school… I was amused by that since the first 13 weeks are costing roughly 3x that amount! I think withdrawals are unlimited after that but be prepared to bankroll the first term.

Final Thoughts

I guess the other thing on my mind lately is early retirement. We’ll likely travel a bit in retirement and I have plans to write an outdoor adventure guide book. As an avid outdoors person, I also have climbing Kilimanjaro and walking the Camino de Santiago on my bucket list. My only worry is that I’ll have more time on my hands in retirement for managing my investments so I’ll likely be more active (and making more mistakes) than I should be!

Thanks for reading. Pete.

About the Author: Pete and his wife are educators in Western Canada, and are regular followers of MillionDollarJourney.com

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Ariel
4 years ago

Hi Pete,

Any Dividend Portfolio Update?
Would be very interesting to read some of the lessons that you learned from your last post…

Thanks!

Ariel
4 years ago

Hi Pete,

How is your update for Feb 2017 and any new lesson that you learned from your last post that you can share?

Also instead of invest in particular stocks, you don’t like the idea of buying ETFs?

thanks!

Pete
4 years ago

Hi Jill. It sounds like you are the opposite of me because I’m not very knowledgeable on real estate. It looks like you have done very well so congratulations!

As I read your comment I immediately thought of the Canadian Shareowner’s Association for learning how to invest. They have really good tools designed for people who know very little about investing but it does take some time and energy to work through.

Regarding changing up my portfolios, I monitor constantly, and make changes regularly. I have owned about half of my stocks for 10 or more years and owned the others roughly since the start of 2014. The longer term holdings tend to be what I consider “core” holdings and consist of (but not limited to) Canadian Banks, insurance companies, utilities, and some US stocks like Starbucks, Aflac, Stryker, and L-3 Communications (LLL).

Value wise, those core older holdings are about 65% of the total. I do some significant housecleaning once in a while, but most of my trades are adding to positions – buying on dips usually. I’ve done about 30 trades this year across all the portfolios. Once I decide to own something, I build a position gradually with smaller purchases over a period of quarters or even years. For example, I built my position in LLL between 2004 and 2008 to 1,200 shares, buying at most 300 shares at one time. I’m considering selling it now because it has had a recent run-up and it seems over-priced relative to my projections of earnings.

In terms of a mock portfolio, here is what I have in my kids’ RESP at the moment and the quantities. There are odd quantities because of DRIPs. TD Bank – 833, Investors’ Group – 725, Parkland Fuel Corp. – 3,405, Great West Life – 495, Royal Bank – 543, BCE – 577, WSP Global – 230, H&R REIT – 632, Inter Pipeline – 522 and roughly 14k in cash. It has returned 21% YTD including dividends. Please don’t take this “mock portfolio” as a “model portfolio” that might be appropriate in your situation. It’s just a sample of how I invest and not appropriate for everyone.

Good luck and I hope this helps.

Eric
4 years ago

Hi Jill, I just read your comment, and congratulations on your real estate investments.

I also invest in real estate and in the markets

if you are looking to diversify in the markets, I learn a lot from a book:

A Better Option: Strategies for Stocks, Options, and Futures Trading
by Interactive Financial

that teach you a method similar to real estate, buy and hold, and collect rents, in the stock market and bonds

Jill
4 years ago
Reply to  Eric

I will check out the book. Thanks that may be what I’m looking for or at least a place to start.

Jill
4 years ago

Pete, I’m curious as to how often you change up your stocks in your portfolio and if you have an ongoing mock one that you share? I have thought about taking the securities course myself as I’m not extremely knowledgeable in this area and I’ve made most of my money in real estate I would say. I’m now 47, widowed and a mom of 2 children now 22 and 19. My husband died when I was 37 and it was a lot easier to save then, but I’d say my NW then was probably ~600-700,000 and is now ~2.6-2.9M. I would like to be able to invest better in the market as I have little to no success within my RRSP and TFSA. At this point I focussed more on Real Estate, but I would like to diversify more and be confident in other investing. My main goal is be FI by age 57. I got kinda gutsy with my real estate (typically more conservative) after my husband passed because I was more worried about my future. We had 2 investment properties (condos) before that, and within 3 years following his death I had 3 more. I love growing my money, and luckily for me real estate jumped substantially in the Vancouver and surrounding areas. So now….I just have to figure out how to keep diversified and keep it growing at a steady healthy rate.

Pete
4 years ago

Hi Ariel,
A) The results are from a lot of factors including: Not selling in that dip but rather buying quality companies that were on sale, and continuing to save throughout.
B/C) I’m sorry but I can’t give you personal financial advice. I just tell my story so you and other readers can see how I accomplished my goals.

Ariel
4 years ago

Hi Pete,
thank you very much for your answers.

I read again both of your post, and is very impressive that you turn in 10 years (from your 40s to 50s) 1 million to 5 million , that is a return close to 20% per year.

My questions are

A) that was mainly for the opportunity of buying in the 2008-2009? or also because you save a lot?

B) Do you recommend to save and invest until the income of my portfolio cover my expenses?

C) I’m 38 years old and have around US$400,000 in US stocks and bonds, what advise can you give me to reach +1 million in liquid assets?

thank you very much for your help

Pete
4 years ago

Hi Ariel,
1)It feels great. It is liberating. Once I freed my mind of money concerns and worries, to some extent, it opened up new possibilities in my life.

2)No. I sleep well knowing that for the most part I own good, growing dividend-paying companies that will likely survive a crash. My evidence is that this was the case in 2008, and to a lesser extent 2002.

3)I’m not a fan of diversification into fixed income and don’t subscribe to “traditional” fixed income allocation recommendations. I usually have $20k or so in cash on hand and the ability to generate more on short notice if needed. I have roughly $800k in real estate and another $140k in REITS at this stage. I’ll buy more REITS if I feel I need more diversification into real estate. If you haven’t done so, read my first article. I explain a bit about my approach/ attitude toward diversification.

4)I’m not worried in the slightest about having all my money in one financial institution like the TD Bank or any other of the big 5 Canadian banks. I think the logic of spreading money around to multiple Canadian banks is irrational. See https://en.wikipedia.org/wiki/Banking_in_Canada for some logic behind my opinion.

5)I don’t think much of using options. I have been given clearance to buy and sell options in one of my TD accounts but have never done so. I believe it would be extremely difficult to make that strategy work and I think transaction costs would eat into your margins, and you may be exposed to considerable risk. As a general rule, I’m not a fan of insurance in (nearly) any form, but like investing in insurance companies.

6)No, I don’t give a fixed percentage per se, but I give a not-insignificant amount to charities. However, more importantly, in my mind, is that I give extraordinary amounts of time (~300 hours per year) in volunteer work to a youth-serving organization, and serve on committees/ boards of local organizations.

Ariel
4 years ago

Hi Pete,

I love your story and thank you for sharing and for your advice! I will appreciate if you can answer the following questions

1) How does feel to have more money that you can spend in your life (if you continue living in the same frugal way, I think that is more than enough for the next 50 years)

2) You wrote that your ” largest asset is the investment portfolio ($6.5M)” you are not afraid of a market crash where you can lose 30% to 50% of this portfolio in 1 year?

3) It’s not a good idea to diversify and put a % of this portfolio in cash, bonds and real estate?

4) Also having all your money in just 1 broker, is not too risky? what happened if it go broke or there’s a problem with this broker like mfglobal or pfgbest?

5) What do you think of buying puts options as a insurance to protect your portfolio?

6) Do you give a % of your profits to charity?

all the best and thank you for your answers

Pete
4 years ago

Sure Jose. I think the number 13 is from when I stated that the RESP has never held more than 13 holdings. However, currently there are 9 holdings (in order of weight from high to low) as follows: PKI, TD, RY, BCE, IGM, GWO, IPL, HR.UN, and WSP. The market value as of Sept. 30 is $325,883 and includes cash of $13,817. I have to sell something prior to December 1, since I’ll be making a large enough withdrawal so that my daughter will use her tax credits for 2016.