Net Worth Update September 2010 (+2.06%)
Welcome to the Million Dollar Journey September 2010 Net Worth Update. For those of you new to Million Dollar Journey, a monthly net worth update is typically posted near the end of the month (late this time) to track the progress of my journey to one million in net worth. If you scroll down below, you’ll see that the net worth is getting close to the $500k mark with a little over 4 years to go. If you would like to follow my journey, you can get updates sent directly to your email.
Not a lot to report this month except that we had quite a gain this month with all the stock broker accounts landing in the green. With the ever present negatively in the media, I did not expect September to come out so strong. My biggest gainers are a couple of REITs that were purchased just after the market started to turn around in 2009. My biggest losers are some of the penny stocks I own.
I have played around with a bit more trading as of late, but there is still a large percentage of cash in my portfolio. In particular, I traded a covered call option of a technology stock on the Nasdaq, but it got called away because of the strong market. Although I made a small profit on the trade (10% total), it would have been better if I could simply keep writing covered calls on the same stock and continually collect the premiums.
In addition to the strong markets, our savings remain strong. We did not have any significant expenses in September, so in combination with our relatively low expenses, it equates to more cash in the bank (how we save money).
For those of you who track your net worth, how did it turn out for September?
On to the numbers:
Assets: $ 545,550 (+1.53%)
- Cash: $4,500 (+0.00%)
- Savings: $39,000.00 (+11.43%)
- Registered/Retirement Investment Accounts (RRSP): $99,200.00 (+1.22%)
- Tax Free Savings Accounts (TFSA): $20,400 (+3.55%)
- Defined Benefit Pension: $31,200.00 (+1.30%)
- Non-Registered Investment Accounts: $12,000.00 (+3.45%)
- Smith Manoeuvre Investment Account: $56,000.00 (+2.75%)
- Principal Residence: $283,250 (+0.00%) (purchase price adjusted for inflation)
Liabilities: $64,900.00 (-2.26%)
- Principal Residence Mortgage (readvanceable): $10,100.00 (-14.41%)
- Investment LOC balance: $54,800 (+0.37%)
Total Net Worth: ~$480,650.00(+2.06%)
- Started 2010 with Net Worth: $399,600.00
- Year to Date Gain/Loss: +20.28%
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.
Savings
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.
Pension
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.
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@ Mick
Bought my first house at 23 (10 years ago), with very little $ down. Fixer-upper in a popular area. Dabbled in student rental (basement appartment). Sold privately for a good gain. Also started working at a large company at that age….thus the plan sponsored savings begin (stock plan, DCPP, DB). Bought a small cottage at age 28 with my wife. Used exclusively as a summer rental (paid the mortgage, etc). Huge “PITA” factor! Sold shortly before the market turned, and made a $50K profit. This was the begginning of my TD Waterhouse non-reg investing. Bought most of my stuff at highly discounted prices. Earning great yields on most. I’m realistic about the future. No real estate ventures on the horizon, and 2 kids under the age of 3 at home. Combined income of 110’ish. A wife that likes to spend! Slow and steady from now on.
Having a covered call called away is bittersweet.
If you still like the stock, you could write a put to collect a premium and buy it again at a cheaper price or keep writing puts, and then if you end up owning it again you could write another covered call. I don’t know what kind of account you have it in, though.
I don’t track my net worth; the markets are fickle. As primarily a dividend investor I track my passive income streams (from dividends and elsewhere. I’m up a bit this month, as I am every month.
Zip, I know that an RRSP is not able to incur debt and writing a call option creates a liability. I simply assumed that the ITA would not look at the entire transaction as a whole when determining if something was a liability.
Thanks for the info, as a result I probably will start using covered calls.
@FrugalTrader => Awesome numbers…soon to be half-lionaire :)
@Freedom 40 => Like your thinking! “Looking to achieve $1 million at age 40″…but hey when did ya start investing?
Well done again!
I find my networth percentage gains dropped dramatically since I started tracking them 15+ years ago. With initial networth growth of 20-30% yearly, I thought I would be a billionaire in no time…lol
With much diversified investment portfolio now, I would be a happy camper if I can get 10% yearly nowadays. Being risk averse as I age doesn’t help either. :(
@Commander T: Writing option is allowed in RRSP and covered call is perfectly okay inside the TFSA as well.
http://www.m-x.ca/f_publications_en/options_put.pdf
http://www.taxtips.ca/rrsp/qualifiedinvestments.htm
FT,
I don’t trade covered calls, however it is only because I do not have a non-registered portfolio. I believe that as writing options is forbidden inside of registered accounts (both RRSP and TFSA).
I know as much as I do simply because I studied options extensively in University and because a very close friend of mine is a trader for a living.
That being said, if I were to trade covered calls I would probably look at selling calls with an expiry about a year away with a strike price such that if the option were exercised at expiry, the return on just the stock would be 10 – 15%. I like setting the strike price this way because even if the option is exercised my return on the position will be excellent. In addition you will receive a larger premium for selling an option further into the future, this is really helpful for minimizing the trading commissions and the spread.
@DAvid, i’m with you, net worth is assets-liability and really has nothing to do with cash flow.
@Commander T, good point! Do you trade covered calls? If so, do you have a specific strategy?
I would say that having your call option being exercised early is great news. It means that who ever called you just sacrificed the time value of the option (an option can only be exercised at its strike price, but if an option is exercised earlier then expiry the holder is giving up the possibility of the stock going higher which theoretically should always be a higher probability then the stock falling in value.) In fact with the exception of companies that pay dividends it can be mathematically proven that one should not exercise an option early.
The way to realize that there is significant upside to being called is that when you write the call you are effectively capping the maximum profit that you could earn on the stock. You have effectively earned the maximum profit on the position, just early (and money today is worth more then the same money tomorrow).
Seems to me that your house becomes net worth the day you move into the nursing home. I’d count it as net worth simply because you can sell it should you truly need to do so.
DAvid
@Chris, no, it really doesn’t worry me at all. I under value my residential real estate on the NW statement, so even if markets tanked, we’d still be ok. We use the house to leverage the investment loan, so to me, my house is generating income.