Welcome to the Million Dollar Journey September 2011 Net Worth Update – The Volatility Continues Edition. For those of you new to Million Dollar Journey, a monthly net worth update is typically posted near the end of the month (or beginning of the next) to track the progress of my journey to one million in net worth, hopefully by the time I’m 35 years old (end of 2014). If you would like to follow my journey, you can get my updates sent directly to your email or you can sign up for the Money Tips Newsletter.
Before I start with the update, I’d like to take a moment to pay my respects to Fraser Smith. Mr. Smith, the man who popularized The Smith Manoeuvre, passed away in late Sept 2011. Although Mr. Smith did not invent the strategy of leveraging your home to invest, he popularized the strategy, and empowered investors who had the risk tolerance. In fact, the Smith Manoeuvre strategy was one of the first strategies that I wrote about (and implemented) when I started Million Dollar Journey in 2006. There is no doubt that the Smith Manoeuvre will live on in the personal finance world for many generations to come.
August was the beginning of significant volatility in the market and has continued through September. It’s kinda painful checking in on portfolios when the markets are in a tail spin, but it’s also helpful for testing risk tolerance. For me (and a lot of you), there’s quite a few years remaining until retirement, and with a significant drop in portfolio value, all I see are buying opportunities. We have added to the family RESP, added a couple of positions to the leveraged portfolio, and purchased a small amount of a US large cap dividend stock. For those of you with the same train of thought, what investment opportunities do you have your eye on?
Investment performance really dragged down overall net worth which has resulted the second negative month in a row. Fortunately, our savings amount buffered the losses a little and we still remain up +10.6% year to date. Hopefully the last quarter of the year will bring some gains!
On to the numbers:
Assets: $ 640,448.00 (-0.53%)
- Cash: $4,500 (+0.00%)
- Savings: $56,000 (+9.80%)
- Registered/Retirement Investment Accounts (RRSP): $111,000(-3.48%)
- Tax Free Savings Accounts (TFSA): $28,500 (-5.00%)
- Defined Benefit Pension: $36,000 (+1.12%)
- Non-Registered Investment Accounts: $29,600 (+1.02%)
- Smith Manoeuvre Investment Account: $83,100 (-4.15%)
- Principal Residence: $291,748 (+0.00%) (purchase price adjusted for inflation annually)
Liabilities: $81,100 (+0.25%)
- Principal Residence Mortgage (readvanceable): $0 (0.00%) (Paid off in 2010!)
- Investment LOC balance: $81,100 (+0.25%)
Total Net Worth: ~$559,348 (-0.64%)
- Started 2011 with Net Worth: $505,800
- Year to Date Gain/Loss: +10.59%
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 – ie. our credit card bill). 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 has proven 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 and REITs 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. The commuted value of the pensions are not included in the statements as they are difficult to estimate.
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.