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Discussion Starter #61
Why do you call this scenario stock leverage instead of real estate leverage? I about twice a year pose this question or one like it, and nobody ever answers it: Why is one house purchased in one market on one day universally regarded ( other than me I guess) as lower risk than 20 stocks accumulated over 50 or 100 transitions and a number of years?

Hboy54
I actually agree, its an un-diversified, rather illiquid asset. Yet for some reason the banks, society, etc. consider it lower risk, as reflected in their interest rates than a diversified blue chip portfolio which is incredibly liquid and could be liquidated by the lender in a second (with nil cost). Yet, generally, the former is easier to leverage than the later.

I think the best approach is to consider real estate leverage along with every other type of leverage as an overall portfolio (very much not 'a house is a home', more 'a house is an asset') and just attempt to keep the leverage ratio, as a whole, in line.
 

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Discussion Starter #62
November 1 (effective)

Past month has been rather busy work wise - as in one of the busiest months ever. Still looking for a house (when I have time to look, which isn't that often). Not much available in my preferred areas, but no rush. Thanks to the last month's run up and a quarterly draw, net worth has finally breached the $500,000 mark which was one of the yearly goals. Now to see if the market will cooperate and leave it there. Leverage, currently is practically nil (less that $500 in margin and dividends will probably clear this up for year end), and cash is accumulating too much for comfort (though allocatable towards the house, if found, so I guess this isn't too much of an issue). I'm tempted to put the house hunting on hold until regulation b-20 is in place, it may have an effect on cooling the market, but hard to predict.

Anyhow, after anticipating for tomorrow's payments (because I know I won't be able to post tomorrow):

Assets
TFSA 1: $52,000 ($100 monthly contribution)
TFSA 2: $21,400 (no contributions)
RRSP: $124,500 (no contributions)
Non-Registered (CAD): $66,400 (net of margin, contributed $200.00)
Non-Registered (USD): U$443 (no contributions)
Savings Account 1: $4,500
Savings Account 2: $100

Corporate Current Account: $48,000 (will move $40,000 or so to investment account tomorrow to either deploy or earn a tiny bit of interest on)
Corporate Investment Account: $189,700.

Liabilities
Margin Loan: Net amount reported. However basically nil now.
MasterCard: $2,600 (revolving balance, paid monthly, this is really high this month with insurance payment due)
Visa: $0
Lines of Credit: $0
Corporate MasterCard: $600 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated net worth is now $504,000. (+$59,200).

For the years stated goals:
1) reduce spending and increase savings by not eating out as much; - Not happening from the looks of things. Really need to work on this a bit.
2) working a bit more than I currently am (damn economy makes it difficult); - will have to see what the last 2 months bring, sitting close to average due to a bad spring.
3) attempt to hit a net worth of $500,000 by year's end; - On an interim basis, hit this. However, now it will be up to the vagrancies of the market whether it stays there.
4) contribute maximum to RRSP and TFSA; and - Done
5) attempt to contribute $100,000 to accounts this year (been a bit below that the last few years, so far, YTD, I've contributed about $38000 so I think this is doable). - Once the cash in my business checking account is deployed, this will be done.

What is apparent is that spending related items are not being hit, while income related ones are. Need to watch that lifestyle creep / spending moving forward.
 

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Discussion Starter #66
December 1, 2017

Was a bit bored at work last month, so did a bit of short term trading. Made some quick money on ENB (already sold out of it as I avoid oil/energy related stocks entirely given I'm in Alberta) and am trying to deploy some of my house downpayment funds as not much appearing on the market for housing options and an expected large cash infusion coming with next draw either January -- if I find a house in the interim, I likely won't need cash to close until at least then anyways. So instead of getting too much dead cash sitting around waiting, deployed some of it. Down to holding around $50,000 cash in my investment accounts. Also bought a few call options on WEED for April of next year, thinking being that the hype should push the stock over my strike price by then ahead of the legalization and I can make a few quick bucks in the hype -- if not, it was some fun money to watch (won't break the bank). Regardless, I have no intention of a long term hold.

Other than that, uneventful month.

Assets
TFSA 1: $52,300 ($100 monthly contribution)
TFSA 2: $21,600 (no contributions)
RRSP: $126,000 (no contributions)
Non-Registered (CAD): $67,400 (net of margin, contributed another $200.00)
Non-Registered (USD): U$455 (no contributions)
Savings Account 1: $4,200
Savings Account 2: $50

Corporate Current Account: $6,700
Corporate Investment Account: $232,000.

Liabilities
Margin Loan: Net amount reported. However basically still nil.
MasterCard: $1,400 (revolving balance, paid monthly)
Visa: $0
Lines of Credit: $0
Corporate MasterCard: $300 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated net worth is now $509,000. (+$3,000).
 

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Discussion Starter #67
Year End 2017

Well 2017 is 'in the can' so to speak. December was quite quiet at work with the holidays but the markets were generally cooperative. Goals in 2017 were to reduce spending and increase savings (which, sadly, does not appear to have occurred be being addressed adequately); increase employment income by working more (handled that quite easily even given the economy by targeting more lucrative work); reach a half-million net worth (done) and maximize all accounts/invest $100,000.00 over the year (done).

For December I made a few transactions, I had a few WEED calls outstanding that I rolled up for a significant (on percentage basis) profit -- because of the dollars involved they don't even move the needle on a dollar basis, but fun non-the-less. I'll probably roll these up or out one more time before closing out of WEED and related entities ahead of the purported legalization deadline (when I see the market peaking). The play money is now entirely the gains from rolling up/out options (and the rest cleared off the remaining margin) so we'll see if it was worth the effort come July.

Speaking of margin, I'm now, for the first time in a few years (since 2014) paid out of margin -- which probably means that 2018 is going to be a blockbuster year when I don't have any of that leverage in play.

For 2018 goals:
1) Still trying to reduce spending a bit, will really have to put a concerted effort in this. I've already cancelled out of my usual spring vacation.
2) Increase net worth to $750,000.00 by year end (trying to stretch a bit on this one);
3) Contribute another $100,000.00 to investment accounts by year end;
4) Increase net practice revenue by 10%; and
5) finally find and buy a house.


Assets
TFSA 1: $53,000 ($100 monthly contribution)
TFSA 2: $21,700 (no contributions)
RRSP: $126,500 (no contributions)
Non-Registered (CAD): $69,500 (no contribution, margin is now repaid from options income)
Non-Registered (USD): U$464 (no contributions)
Savings Account 1: $3,600 (anticipating for January 1, 2018 rent)
Savings Account 2: $4,400 (moved some money from my corporate account over as it is on its way to my TFSA for January 1 as the 2018 TFSA contribution)

Corporate Current Account: $6,700
Corporate Investment Account: $228,000 (removed $4,300 which is on its way to my TFSA).

Liabilities
Margin Loan: Nil margin now.
MasterCard: $990 (revolving balance, paid monthly, this is really high this month with insurance payment due)
Visa: $0
Lines of Credit: $0
Corporate MasterCard: $590 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated net worth is now $512,000. (+$3,000). It seems very consistently that if I don't receive a draw, my net worth moves around $3,000.00 per month plus or minus.

For rates of return over 2017 (XIRR method) I made 13.27% and increased my net worth by around $183,000.00 in 2017; $132,000 or so was in contributions. Since January 1, 2014 (4 years), my rate of return (XIRR method) is 12.54% per annum (which I'd be happy to keep up for the next 30 years or so).
 

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Discussion Starter #68
Feb 1, 208 (effective)

Very late for February 1st update, have been incredibly busy at work. January was a good month but as everyone will have noticed, early February was a bit of a drop in the markets -- which is, of course, immediately after I deploy some new capital. Oh well, it will come back up (hopefully).

Effective as of February 1, 2018:


Assets
TFSA 1: $53,000 ($100 monthly contribution)
TFSA 2: $27,000 ($4,300 contributions, with the $100 in the other TFSA per month, this is maxed out now for the year)
RRSP: $131,000 (no contributions)
Non-Registered (CAD): $69,500 (no contributions)
Non-Registered (USD): U$490 (no contributions)
Savings Account 1: $4,700
Savings Account 2: $500

Corporate Current Account: $14,200
Corporate Investment Account: $271,000 ($40,000 added).

Liabilities
Margin Loan: Nil margin now on all accounts, some minor positive cash holdings, which I don't like.
MasterCard: $3,500 (revolving balance, paid monthly, had some car repairs this month unfortunately)
Visa: $100, (used it to keep it active).
Lines of Credit: $0
Corporate MasterCard: $250 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated net worth is now $567,000. (+$55,000) as of February 1. However, unless things change for the rest of the month, a significant drop is coming for March 1 update.
 

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Discussion Starter #69
March 1, 2018

Well, February was a ride, but thankfully by the end of the month had somewhat recovered. Still waiting on my accountant to get a ballpark corporate tax picture together so I can deploy some dead money (cash holdings in investment accounts), and still house hunting without much luck as there doesn't appear to be too much on the market at the moment.

Effective as of March 1, 2018


Assets
TFSA 1: $52,000 ($100 monthly contribution)
TFSA 2: $26,000 (no contributions)
RRSP: $130,000 (no contributions)
Non-Registered (CAD): $67,000 (no contributions)
Non-Registered (USD): U$450 (no contributions)
Savings Account 1: $6,400
Savings Account 2: $500

Corporate Current Account: $10,000
Corporate Investment Account: $269,000 (no contributions).

Liabilities
Margin Loan: Nil margin now on all accounts.
MasterCard: $1,700 (revolving balance, paid monthly)
Visa: $0.
Lines of Credit: $0
Corporate MasterCard: $300 (revolving balance, paid monthly)
Corporate Line of Credit $0


Estimated net worth is now $560,000.00, (-$7,000.00) from February 1 -- but much better than the -$22,000.00 I was at one point during the month.
 

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Discussion Starter #70
May 1 - effective

Got very busy at work / generally, so missed my April update. Looks like I'll be receiving a small inheritance on the coming months/year or so of $100,000 and renegotiated my engagement with my firm on a more lucrative basis (though not quite as well as I was hoping). I'm not including the inheritance in net worth until received (cash based accounting as opposed to accruing it). Similarly, on my personal taxes my accountant is indicating a refund but until received I won't accrue it. A large amount was owing on corporate tax which has been paid.

Investments have been 'tanking' lately, so all gains over the past 2 months have been effectively from free cash flow being directed into investments/savings. Still far too much cash kicking around, but having trouble pulling the trigger on anything just yet -- hopefully in the next week or so. I did buy some Telus common shares back in March as something to do, but thats it for investment changes.

Assets
TFSA 1: $53,000 ($100 monthly contribution)
TFSA 2: $27,000 (no contributions)
RRSP: $130,000 (no contributions)
Non-Registered (CAD): $69,000 (no contributions)
Non-Registered (USD): U$450 (no contributions)
Savings Account 1: $7,100
Savings Account 2: $27,000 (money on its way to RRSP)

Corporate Current Account: $17,000
Corporate Investment Account: $280,000 ($30,000 withdrawn for taxes and to move funds to RRSP, $50,000 deposited for a net of $20,000 deposit).

Liabilities
Margin Loan: reported net -- slight bit of margin in play from purchasing Telus shares while waiting for funds to percolate through to that account.
MasterCard: $1,800 (revolving balance, paid monthly)
Visa: $0.
Lines of Credit: $0
Corporate MasterCard: $150 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated net worth is now $607,000.00, (+$48,000.00) from March 1 with anticipated rent.

As for 2018 goals:
1) Still trying to reduce spending a bit, will really have to put a concerted effort in this. ** So far, not going well **
2) Increase net worth to $750,000.00 by year end (trying to stretch a bit on this one); ** depending on if the inheritance comes through this year or next, this won't be much of a stretch any more **
3) Contribute another $100,000.00 to investment accounts by year end; ** well on track. Based on my 'back of the napkin calculations', so far, net, it looks like I've contributed almost $81,000 since January 1 to investments **
4) Increase net practice revenue by 10%; and ** on track for this or greater **.
5) finally find and buy a house. ** also not going well; you can either get close in to the city center, or reasonably sized, not both, no matter the price it seems **
 

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Discussion Starter #71
June 1 2018

Not much of interest happened this month financially on the investment end. Monies from corporate end went into the RRSP and I had a few larger expenses (accountant bills for the year etc.) drop in May.

Trying to deploy cash but need to deploy to my Canadian allocation and I don't see anything I'd like to own in Canada at current prices -- might end up putting it towards banks which are my 'go to' for Canadian allocation when I can't find anything to buy.

Assets
TFSA 1: $54,000 ($100 monthly contribution)
TFSA 2: $27,000 (no contributions)
RRSP: $161,000 (around $26,000 contribution)
Non-Registered (CAD): $71,000 ($1,500 contributions)
Non-Registered (USD): U$475 (no contributions)
Savings Account 1: $7,400
Savings Account 2: $300 (money made it to RRSP, so back to nil balance)

Corporate Current Account: $5,600
Corporate Investment Account: $286,000 ($3,000 contributed).

Liabilities
Margin Loan: reported net -- around $5,500 of margin in use.
MasterCard: $1,300 (revolving balance, paid monthly)
Visa: $0.
Lines of Credit: $0
Corporate MasterCard: $900 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated net worth is now $612,000.00, (+$5,000.00) from May 1st.


Also (finally) had time to run XIRR calculations for the year: sitting at annualized 7.00% overall, but early in the year.
 

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Discussion Starter #72
Jan 1, 2020

I've been deleterious in keeping this updated - life has got in the way. Not going to try to update back to June 2018, but can give a 2019 update as a few financial items of note.

1) Bought a new car, a Porsche sports car. Don't regret it for a minute even though it was totally consumer spending; but a blow out here and there is to be expected. Effectively paid cash for it as the financing on offer was not competitive enough - I just had to bridge on an operating line for a week or two while moving money around. Picked it up in late fall, and put 1 good road trip on it and around 6,000km.

2) Took 2 vacations, one over Christmas and New years of 2018/19 and another in December 2019 to the same country. Again, a bit expensive, but enjoyable non-the-less. All indications is that 2020 will be a big year at work so might as well come in a bit rested and relaxed ahead of time.

3) No luck on a house yet, nothing much appealing in Edmonton for sale - I'm finding that everything is the newer floorpan 1/2 lot houses (which I dislike) or too much commute for what I'd be willing to put up with (or so grossly overpriced that they won't sell in this market). Still looking.

4) Received a small inheritance, which I promptly invested in the markets.

Currently trying to rationalize asset holdings a bit and have the paperwork sent in to move TFSA 1 into TFSA 2 and consolidate. The provider of TFSA 1 (a mutual fund company from when I used those) was sold around 8 years ago and their returns have been lagging on a 6 year (as far back as I tracked) basis. They are also adjusting a bunch of funds indexes and investment objectives which I dislike. Once those assets are moved to TFSA 2, I'll be liquidating and redeploying this capital.

Given the lack of updates, I'll just post the contribution information for all of 2019.

Assets
TFSA 1: $63,000 ($100 monthly contributions - total $1,200 contribution)
TFSA 2: $34,000 ($4,800.00 contribution to max out, made in January 2019)
RRSP: $224,000 (around $26,500 contribution to max out, made in mid 2019)
Non-Registered (CAD): $90,000 ($1,200 contributions, not sure why I contributed here, probably had some cash kicking around)
Non-Registered (USD): U$90,000 (CAD$100,000 contributed using Norberts Gambit)
Savings Account 1: $6,000
Savings Account 2: $6,030 (money in this account getting ready for TFSA contribution time)

Corporate Current Account: $3,000
Corporate Investment Account: $286,000 ($110,000 contributed).

Liabilities
Margin Loan: reported net -- around $17,500 of margin in use.
MasterCard: $2,100.00 (revolving balance, paid monthly)
Visa: $0.
Lines of Credit: $0
Corporate MasterCard: $200 (revolving balance, paid monthly)
Corporate Line of Credit $0

Estimated liquid net worth is now $1,060,000 (rounded, not including vehicles which may or may not have any value). Past the $1MM mark. Next step, the $2MM mark.


Also had time to run XIRR calculations for the year, which is part of why I'm pulling TFSA 1: sitting at annualized 22.50%. However, this is entirely based on December of 2018 being a down period and starting from a 'trough'.

For 2020, I'd like to keep the savings rate around the $140,000 to $150,000. There are a few consumer expenses I know are coming up in 2020 that might hurt this, but $140 - $150 shouldn't be pushing it too far.

Onwards and upwards.
 

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Wow, so you went from 100K net worth to 1M in just five years! The law field has been good to you.

Also, you've enjoyed big gains using leverage / aggressive investments during a bull market.
 

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Discussion Starter #75
Congratulations for becoming a millionaire...:)

Have you decided about your final goal such as 5MM, 10MM or 20MM?
No fixed amount, I have a number that I'll adjust for actual inflation as time goes on, which provides for a comfortable retirement and, once I've hit it I will be a bit less misery.



Wow, so you went from 100K net worth to 1M in just five years! The law field has been good to you.

Also, you've enjoyed big gains using leverage / aggressive investments during a bull market.
Yes both career and markets have been good of late. Hopefully both continue for the next 30-35 years!
 

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Have you considered increasing your leverage to get to 2 million more quickly? Whether it's using the mortgage, lines of credit, margin, etc. Maybe even something with options, like using SPY calls.

Since people may wonder how I can say that when I'm such a conservative investor myself, I'll add: our situations are different. I don't have a high income, nor a steady income, and just don't make the kind of money a lawyer can make. I need to be more conservative with my investments. I'm only 30% equities. But perhaps someone like Sm5 can afford to take much higher risk like 150% or above 200% equities, since they can bring in enormous income. In my situation though, I have to be more careful to not risk losing what I already have.

Additionally I am somewhat risk averse (or I am concerned about how I might react to sharp drawdowns). Sm5 does not appear to have the same concerns, and that changes everything as well.

I have a friend who has a net worth of around 10M. His annual income ranges from 500K to 1M. He does take incredibly high risks, including options positions to effectively be very long the market. We've debated on this topic but we both agree, he can afford to do that. I can't.
 

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^ Reported for Sarcasm. :p
I think I added my clarification after you posted. It isn't sarcastic, I'm serious. It comes down to differences in personality, risk tolerance, and overall finances.

I'm 30% equities and it's right for me. For other people, the right number may be 80% or even 250% equities.
 

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Since people may wonder how I can say that when I'm such a conservative investor myself, I'll add: our situations are different. I don't have a high income, nor a steady income, and just don't make the kind of money a lawyer can make. I need to be more conservative with my investments. I'm only 30% equities. But perhaps someone like Sm5 can afford to take much higher risk like 150% or above 200% equities, since they can bring in enormous income. In my situation though, I have to be more careful to not risk losing what I already have.

Additionally I am somewhat risk averse (or I am concerned about how I might react to sharp drawdowns). Sm5 does not appear to have the same concerns, and that changes everything as well.

I have a friend who has a net worth of around 10M. His annual income ranges from 500K to 1M. He does take incredibly high risks, including options positions to effectively be very long the market. We've debated on this topic but we both agree, he can afford to do that. I can't.
Ohhh I see.

Well, yes an upper middle class person can "afford" to take more risks without risking their middle class life when they're older, due to new incoming cashflow, but this risk taking is also entirely "unnecessary" unless one desires an opulent lifestyle of hedonistic pleasures, where $10M provides what $1M will not. A lower middle class / middle class income earner, however, is more and more likely to slip downwards towards a low income old-age, unless they invest fairly aggressively, like a 60/40. They can't "afford" to be so conservative.

Seems to me that if you are in your 30s-40s and thriving in a career, you should invest your large income fairly conservatively (perhaps like your own portfolio James - I'd be getting very interesting in something like that if I were 40 with $2M). But if you are 40 with a bit of money, not a lot, and a middle-class or uncertain income, I don't think you can afford to be only 30% equities and expect that your disposable income is not going to erode away over the forthcoming decades, leading to a low income retirement.

Myself and wife are targetting 60/40 for investable assets, excluding home equity, and I think that's just about right to balance inflation risk and ease volatility. I've actually been very impressed with my wife's Tangerine Balanced fund (60/40), and would probably use it myself if I were able to control my investing urges effectively.

This is all rather an impossible discussion though to make conclusions about, because lifestyle desires is the real driver for most people choosing their investments. Change your lifestyle desires, change your investments.

If one only desires to have a comfortable, simple life - Buy a smaller than average detached house that's walking distance to your stores, pay the mortgage as quickly as possible, become handy at fixing your own stuff around the house, be thrifty with your purchases, and invest the remainder of what you got in a "Balanced" diversified fund of some kind that has around 50-70% equities... That is the surefire best bet to not end up impoverished during the age 55+ part of life or have your income decay.
 

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I don't want to derail his money diary, but these are really neat things to think about. Personally I am putting more emphasis on the "psychology" aspect over purely theoretical returns. The ideal return of say 60/40 or 150% equities only is valid if you are able to stick with the plan and don't get freaked out during bear markets. I use a conservative allocation so that I can tolerate the bad times and continue sticking with the plan, even under worst case conditions.

But if you are 40 with a bit of money, not a lot, and a middle-class or uncertain income, I don't think you can afford to be only 30% equities and expect that your disposable income is not going to erode away over the forthcoming decades, leading to a low income retirement.
The expected performance loss with my 30% equity allocation is only about 0.5% to 1% CAGR versus 60/40 so I'm not too worried that I'm ruining my life by not taking more risk.

I also suspect that I will end up with superior long term returns to some more aggressive investors because of emotional reactions they will have during bear markets. I've already seen this in real life. I'm already doing better than some of my friends with higher equity allocations. Yes, I'm getting higher long term returns with less stock risk.

Advisors and books never account for those real world effects, namely, human reactions to volatility and bear markets.
 
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