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 Cash

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.

Real Estate

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.


  1. Ryan Martin on May 31, 2010 at 12:29 pm

    I like how you break up your gains. I track the accounts for my wife and I pretty much the same way but do not separate the gains in each account; it’s all pooled as one portfolio (networth increase).

    Do you have set goals for each account? Meaning, do you have each account weighted differently which may cause dramatic differences in increases/decreases (one is more conservative than another)?

    • FrugalTrader on May 31, 2010 at 12:48 pm

      Hey Ryan, thanks for the feedback. If your talking about my investment portfolios, I generally allocate assets in various accounts depending on the tax efficiency. For example, I keep foreign equities in my RRSP. You can read more in my portfolio allocation article.

  2. Financial Cents on May 31, 2010 at 1:57 pm

    Hey Frugal,

    Keep up the great work/progress on your net worth. A great gain considering market volatility.

    Instead of “sell in may and go away” how about “buy good companies today and hold to make hay”?


  3. Nelson on May 31, 2010 at 2:01 pm

    You managed to have a positive month despite the awful month of May we got. I don’t know how you do it. Good job.

  4. Tom on May 31, 2010 at 4:02 pm

    Great update on Net Worth, I find it very intersting that again plain old boring savings is what really growing your net worth. Not the smith manover, not tax efficient investment in RRSP’s. Even the 33% gain in the TFSA account, I’m guessing is based on saving being deposited and not from investments in that account growing.

    What this really shows to me is again, spend less then you make and your net worth will grow.

  5. Blain on May 31, 2010 at 4:03 pm

    I have a generic net worth calculation question. I noticed you included a future tax liability line item for your non-registered investment capital gains; Why do you not include a similar line item for a future income tax liability associated with your RRSP? My problem stems from valuing $10000 in RRSP assets the same as $10000 in TFSA assets for the purposes of net worth, as unless you plan on a very low RRSP withdrawal rate in retirement the RRSP will almost certainly be subject to income tax. Wouldn’t it be more prudent to include an income tax liability (say 10%-30% of assets depending on your estimated withdrawal rate) against your RRSP? Thanks in advance for your feedback.

  6. Mike W on May 31, 2010 at 4:44 pm

    I think it’s fascinating how you share this information, and make yourself publicly accountable to reaching your goal. I saw that your goal is to reach a net worth of $1m by age 35, but am unsure of your current age. Mind to share?

  7. Mike W on May 31, 2010 at 5:03 pm

    @ #7 (me…): nevermind, found it… actually we’re the same age. Good job on your progress, man.

  8. FrugalTrader on May 31, 2010 at 7:43 pm

    @ financial cents – good call, i’m a big believer of buying, holding and collecting dividends.

    @ tom – i’m surprised myself, looking back at my records, the bulk of the net worth gains are due to increasing income and saving more.

    @ blain – you are right in that there is a tax liability for the RRSP. However, it’s difficult to estimate. What if I retire early and start withdrawing from the RRSP during very low income years? Or what if I withdraw over high income years? I may start building in taxation once I get closer to retirement.

    @ mike w – I plan/hope to be a millionaire by the end of 2014.

  9. Ryan on June 1, 2010 at 12:22 am

    Nice work. A great month considering the market volatility.

    I hit 3% growth this month, all due to debt repayment from savings and a big tax return also, no thanks to the crazy markets!

    Keep up the good work.

  10. Ms Save Money on June 2, 2010 at 5:45 pm

    Wow! you’re making great progress as always. It’s always a good idea to have a sufficient amount of cash to jump on opportunities that come up.

  11. John on June 5, 2010 at 5:25 pm

    >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.

    Hey FrugalTrader,

    Sorry if this has been discussed before, but what is the usefulness of this (relationship with a full service bank) other than financial security? Would you mind sharing? I’m doing all my banking + personal finance through discount institutions/brokers at the moment so I’m very curious as to why this is (and if I’m missing out on something)….

    • FrugalTrader on June 6, 2010 at 3:33 pm

      Hi John,

      I find having a relationship with the bank does have its advantages. For example, there was a service charge on my account the other day that should not have been. Instead of calling telephone banking, which can sometimes be painful, I just wrote a quick email to my bank rep to have it fixed. Or another example was when I purchased my rental property, it had a quick closing (within 2 weeks), and they put in the extra effort to close along with giving me the best rate that I was quoted when I shopped around.

      Having said that, I have way too many accounts. I’m considering consolidating some of them for more convenience.

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