Welcome to the Million Dollar Journey May 2010 Net Worth Update – Summer Correction Edition.
For those of you who believe in seasonality, there is a recognizable historic pattern of market performance between the months of October and May, and bearish the remaining months. That’s where the saying “sell in May and go away” comes from, but what is the reason? It could be that large institutional traders go on vacation over the summer months, or it could be simply a self fulfilling prophecy.
As with any patterns, they don’t work all the time with 2009 being the prime example. If someone were to sell in May 2009, they would have missed out on a large portion of the astronomical gains. However, more importantly, will this mantra hold true for 2010? It seems that market sentiment expects a correction after the big run up and large volatility has already started. What do you think, will we see large correction this summer?
It may be time to start hedging your equity position. For me, I’m still holding my equities, but I also have a large position of cash that’s just waiting for the right opportunity.
Lets talk a bit about the numbers for the month. With the volatility, my investment accounts have taken a bit of a beating, as indicated by the drop in capital value. In fact, I’ve picked up a couple new positions in my Smith Manoeuvre portfolio which I’ll detail in future post.
On the other hand, savings has increased dramatically this month. Even though our cash flow was strong, this wasn’t the main reason for the increase. I had over estimated my tax owing for 2009 (calculated behind the scenes), and we received a largish tax refund. In addition this, the $3,000 capital gains tax owning as reported in previous updates was eliminated by selling non-registered equities at a loss. We took a portion of the extra cash to catch up on our TFSA‘s which are now maxed out.
On to the numbers:
Assets: $ 521,470 (+1.36%)
- Cash: $4,500 (+0.00%)
- Savings: $42,000.00 (+20.34%)
- Registered/Retirement Investment Accounts (RRSP): $75,200.00 (-2.84%)
- Tax Free Savings Accounts (TFSA): $19,970 (+33.40%)
- Defined Benefit Pension: $29,450.00 (+1.73%)
- Non-Registered Investment Accounts: $13,100.00 (-5.07%)
- Smith Manoeuvre Investment Account: $54,000.00 (-4.76%)
- Principal Residence: $283,250 (+0.00%) (purchase price adjusted for inflation)
Liabilities: $71,100.00 (-6.20%)
- Tax Liability: $0 (-100.00%)
- Principal Residence Mortgage (readvanceable): $17,100.00 (-9.52%)
- HELOC balance: $54,000 (+0.19%)
Total Net Worth: ~$450,370.00(+2.67%)
- Started 2010 with Net Worth: $399,600.00
- Year to Date Gain/Loss: +12.71%
Some quick notes and explanations to net worth questions I get often:
The $4,500 cash are held in chequing accounts to meet the minimum balance so that we pay no fees (accounting for regular bill payments). Yes, we do hold no fee accounts also, but I find value in having an account with a full service bank as the relationship with a banker can prove useful.
Our savings accounts are held with PC Financial and ING Direct. We usually hold a fair bit of cash in case “something” comes up. The “something” can be anything that requires cash such as an investment opportunity that requires quick cash or maybe an emergency car/home repair. We also need cash to cover any future tax liabilities.
Our real estate holdings consist of a primary residence plus a rental property. The value of the principal residence remains valued at the purchase price (+inflation) despite significant appreciation in the local real estate market.
The pension amount listed above is the value of both of our defined benefit pension plans. I basically take the semi annual statement and add the contribution amounts (not including employer matching) on a monthly basis.
Stock Broker Accounts
Another common question is which discount broker do I use? We actually have accounts with multiple institutions. I’m hoping to reduce the number of accounts that we hold in the near future. Here is a review of some of the more popular online stock brokers.
I've Completed My Million Dollar Journey. Let Me Guide You Through Yours!
Sign up below to get a copy of our free eBook: Can I Retire Yet?