Thinking of buying a luxury car? Maybe you like to ride around in style or perhaps you’re hoping a brand new luxury car will guide you through a mid-life crisis. Either way here’s something to consider when buying a new luxury car.
“Every 25.5 seconds, a vehicle is stolen in the U.S., according to the National Insurance Crime Bureau. Vehicle theft is the costliest property crime in America, costing consumers more than US$8.6 billion annually.”
Here is a list of the 7 luxury cars with the highest probability of being stolen. (all prices in US Dollars)
1. Cadillac - Escalade SUV - Base price: $55,045
2. BMW - 7 Series Sedan - Base price: $78,900
3. Land Rover – Range Rover SUV - Base price: $77,250 (tie)
3. Lincoln Navigator 4-wheel-drive SUV - Base price: $46,575 (tie)
4. Lexus – GS Sedan - Base price: $44,150
5. Mercedes Benz S-Class long-wheelbase sedan - Base price: $86,525
6. Mercedes Benz SL-Class convertible - Base price: $95,575
So basically if your going to drop a lot of cash on a luxury car it might be worth spending a few extra bucks and getting a decent security system put in.
Monday, April 30, 2007
Friday, April 27, 2007
Taxes
This post is just a reminder that for those of you that often leave things to the last minute --- the deadline is quickly approaching…so unless your 100% sure you’re going to get a refund make sure you have them in by midnight Monday, April 30.
If you haven’t filed your taxes yet you’ll probably have to file electronically so here is a list of the software packages and web applications that are certified by the government of Canada for the 2006 tax year.
Have a good weekend and happy filing.
If you haven’t filed your taxes yet you’ll probably have to file electronically so here is a list of the software packages and web applications that are certified by the government of Canada for the 2006 tax year.
Have a good weekend and happy filing.
Thursday, April 26, 2007
Follow Up To “Calculating Networth” Post
I just wanted to take this post to respond to some questions asked by silverm in the comments section of a recent post. Due to the length of my response I chose to respond here instead of in the comments section. Additionally, I respect silverm’s opinion as I often read his posts on various investing forums and wanted to give his questions a proper response. I also want to thank those of you who commented on my networth postings and correctly pointed out that I should change the title of my monthly “Networth” updates to “Retirement Nest Egg” updates. Despite the title change my method of calculating this number will remain the same and I believe the logic behind it is sound based on my personal situation.
My Response to Comments:
Your network calculation looks arbitrary. For example:
You have a $200,000 home with a $100,000 mortgage. You also have a $50,000 portfolio. Then your retirement nest egg is $50,000?
In my situation - yes my retirement nest egg would be $50,000. I would just like to point out that depending on your interpretation of what a retirement nest egg is it could be argued that my nest egg is 2 different figures:
$150,000 = investments + equity in real estate
$50,000 = liquid investments
To me retirement is about cash flow not hard physical assets. I do not include the equity in my primary residence because I don’t plan on selling it (I’m not a renter). I do agree that it probably should be included in net worth…but not in my retirement nest egg. I think this also depends on individual circumstances though. If I bought a $500,000 primary residence with the intention of living there for a while and then downsizing to a $300,000 place before retirement than I would probably include the $200,000 difference in my nest egg calculation.
Someone else who has an identical home with a mortgage of only $50,000 has less retirement nest egg then you, even though he's further ahead on the amortization?
I would say that he is yes (because to me retirement is about cash flow and not physical assets). It could be argued that their networth is the same but in my opinion not their retirement nest egg (unless they both planned on selling their primary residence). Just to illustrate how interpretive this point can be, who has the greater retirement nest egg:
Person 1: lives in a paid off $1,000,000 house (never plans to move or sell) and lives on $20,000 government pensions.
Person 2: lives in a $200,000 house (never plans to move or sell) with a $100,000 mortgage and a retirement nest egg off $900,000.
Both people have the same networth but would obviously be able to afford very different lifestyles in retirement.
My Response to Comments:
Your network calculation looks arbitrary. For example:
You have a $200,000 home with a $100,000 mortgage. You also have a $50,000 portfolio. Then your retirement nest egg is $50,000?
In my situation - yes my retirement nest egg would be $50,000. I would just like to point out that depending on your interpretation of what a retirement nest egg is it could be argued that my nest egg is 2 different figures:
$150,000 = investments + equity in real estate
$50,000 = liquid investments
To me retirement is about cash flow not hard physical assets. I do not include the equity in my primary residence because I don’t plan on selling it (I’m not a renter). I do agree that it probably should be included in net worth…but not in my retirement nest egg. I think this also depends on individual circumstances though. If I bought a $500,000 primary residence with the intention of living there for a while and then downsizing to a $300,000 place before retirement than I would probably include the $200,000 difference in my nest egg calculation.
Someone else who has an identical home with a mortgage of only $50,000 has less retirement nest egg then you, even though he's further ahead on the amortization?
I would say that he is yes (because to me retirement is about cash flow and not physical assets). It could be argued that their networth is the same but in my opinion not their retirement nest egg (unless they both planned on selling their primary residence). Just to illustrate how interpretive this point can be, who has the greater retirement nest egg:
Person 1: lives in a paid off $1,000,000 house (never plans to move or sell) and lives on $20,000 government pensions.
Person 2: lives in a $200,000 house (never plans to move or sell) with a $100,000 mortgage and a retirement nest egg off $900,000.
Both people have the same networth but would obviously be able to afford very different lifestyles in retirement.
Wednesday, April 25, 2007
Stocks That Trade At Book Value
Here is a link to an article by Norm Rothery - “Investing by the book”
In his article Norm makes a case for buying companies at their book values and outlines 5 Canadian companies that are trading at approximately their book value. It should be no surprise that all of the companies identified by Norm are currently out of favour and will definitely only suit investors with a long time horizon as it may take the market a while to realize the value of the company.
In his article Norm makes a case for buying companies at their book values and outlines 5 Canadian companies that are trading at approximately their book value. It should be no surprise that all of the companies identified by Norm are currently out of favour and will definitely only suit investors with a long time horizon as it may take the market a while to realize the value of the company.
Tuesday, April 24, 2007
Credit Card Debt – A Middle Class Rant IV
Well it’s about time for another one of my rants...credit card debt. There are a number of shows out there now ie - “Till Debt Do Us Part” that profile a couple or family with debt issues and provide them with debt counseling, if they listen to the counselor they receive some cash to put towards their debts. I’ve painfully watched a few shows, not because they were so good, but because it was so pathetic that I just couldn’t look away…In each show a middle class couple with decent jobs ended up racking up so much credit card debt that they had trouble paying the interest each month. The stupidity of this blows my mind. If people are using their credit card to buy food, shelter, emergency medical treatment etc... than that would be just sad…but if it’s being used to buy consumer items (wants instead of needs) than that’s just stupid. Although I don’t personally know anyone who’s gone bankrupt (except the person I bought my house from) I do know many people who are so incompetent at managing their money and debt levels that it’s borderline unbelievable. It’s usually not one or two large items that tip peoples debt levels from manageable to unmanageable, it’s usually multiple smaller ones that accumulate over the months, yet they all seem so shocked when they finally realize that they're over-extended. I can just imagine the thought process before raking up that much debt... “hmm...I can just make my minimum house payments, my credit card is almost maxed but I definitely need a flatscreen TV and hey maybe I’ll grab some takeout on the way home to celebrate...”
Don’t get me wrong I think debt is essential and often beneficial (keeps the economy going) but the uncontrolled consumerism that ruins families is just stupid...but hey maybe it’s just a new form Darwinism...I’ll call it Financial Darwinism...just filtering the weak from the moneypool…..
Don’t get me wrong I think debt is essential and often beneficial (keeps the economy going) but the uncontrolled consumerism that ruins families is just stupid...but hey maybe it’s just a new form Darwinism...I’ll call it Financial Darwinism...just filtering the weak from the moneypool…..
Friday, April 20, 2007
I’ve Been Tagged
Yesterday I was “tagged” for the first time by Frugal Trader over at Million Dollar Journey, so now I have to reveal my most obsessive thoughts.
So here they are in order, starting from clinically obsessed to slightly unhealthy obsessed.
1.The Stockmarket - (big surprise here eh?). I spend a lot of time thinking about the market, individual stocks, and equity strategies. Since I’ve started blogging the obsession has gotten a little worse…but I really do enjoy it.
2.Fishing – I love to fish and go every opportunity that I have, summer, winter, spring, fall it doesn’t matter I’ll fish for whatever is in season.
3.Retirement Planning – This is linked to my stockmarket obsession. I’m actually spending a lot less time thinking about retirement planning now as I’ve finally developed a strategy that I can stick to and works for me. While developing my retirement strategy this would have probably been my #1 obsessive thought but now I simply execute the strategy instead of constantly thinking about it.
4.Food – I love food (all food) and I love eating. I sometimes wonder what I’m going to have for supper when I’m still eating lunch.
Well I think that’s it when it comes to “obsessive thoughts”. I do have the odd random thought on other subjects but they are usually fleeting and I try to keep them to a minimum...
I'll be out of town until Monday night so I may not have a chance to post on Monday (depending on time and connectivity) but will have something up Tuesday for sure. Have a great weekend!
So here they are in order, starting from clinically obsessed to slightly unhealthy obsessed.
1.The Stockmarket - (big surprise here eh?). I spend a lot of time thinking about the market, individual stocks, and equity strategies. Since I’ve started blogging the obsession has gotten a little worse…but I really do enjoy it.
2.Fishing – I love to fish and go every opportunity that I have, summer, winter, spring, fall it doesn’t matter I’ll fish for whatever is in season.
3.Retirement Planning – This is linked to my stockmarket obsession. I’m actually spending a lot less time thinking about retirement planning now as I’ve finally developed a strategy that I can stick to and works for me. While developing my retirement strategy this would have probably been my #1 obsessive thought but now I simply execute the strategy instead of constantly thinking about it.
4.Food – I love food (all food) and I love eating. I sometimes wonder what I’m going to have for supper when I’m still eating lunch.
Well I think that’s it when it comes to “obsessive thoughts”. I do have the odd random thought on other subjects but they are usually fleeting and I try to keep them to a minimum...
I'll be out of town until Monday night so I may not have a chance to post on Monday (depending on time and connectivity) but will have something up Tuesday for sure. Have a great weekend!
Thursday, April 19, 2007
Dividend Growing Stocks - II
GE
I'm sure everyone knows who GE is but...for those of you who don't...they are a large multinational conglomerate who manufacture almost everything… from jet engines to power generation, financial services to plastics, and medical imaging to news and information.
-has paid a dividend every year since 1899.
-increased their dividend every year for the last 31 years.
-has grown their EPS each year for the past 10 years (2003 excluded)
-current yield of 3.2%
-5 Star rating by S&P
-trailing PE of 17.2
-2007 projected P/E: 16.33
-2008 projected P/E: 14.6
-Progressive company building for the future with their ecomagination concept.
All in all a great company and a great choice for those of you following a dividend growth strategy.
I'm sure everyone knows who GE is but...for those of you who don't...they are a large multinational conglomerate who manufacture almost everything… from jet engines to power generation, financial services to plastics, and medical imaging to news and information.
-has paid a dividend every year since 1899.
-increased their dividend every year for the last 31 years.
-has grown their EPS each year for the past 10 years (2003 excluded)
-current yield of 3.2%
-5 Star rating by S&P
-trailing PE of 17.2
-2007 projected P/E: 16.33
-2008 projected P/E: 14.6
-Progressive company building for the future with their ecomagination concept.
All in all a great company and a great choice for those of you following a dividend growth strategy.
Wednesday, April 18, 2007
Canadian Tour of Personal Finance Blogs – Reviews
Today I’m just going to review some of the posts that other bloggers have contributed to the tour. I honestly didn't have time to read everyones post so I'm only going to review the posts from blogs in my "Blog I Read" section.
Canadian Dream
He contributed a post entitled “How Much Do You Need to Retire”. His post begins with some sound advice by dispelling the notion that there is a magic percentage of your income that you’ll require in retirement. He then describes the method he would use to calculate how much income is actually required in retirement. He has a pretty extensive list of the costs and revenues that you should use (I won’t list them all here) to generate a rough idea of how much you should have in retirement. Part of the review process of the PF blog tour is to provide some constructive criticism but the only thing that I would suggest is that after the final retirement figure is calculated that it be increased by 10% to ensure that the retirees lifestyle is protected in case of unforeseen events ie- higher than expected inflation, unexpected expensive house repairs like a flood, you end up with 20 grandkids etc… I would just rather have a little too much than a little too little… A great post and I look forward to reading his next post where he’ll go over the numbers for his specific situation.
Investoid
Investoid went over the “save half, spend half” approach that he uses to balance investing for the future versus living for today. He goes over the technique and explains some of the benefits that it has for him and his family such as it “forces us to look at how much value we truly place on an item or experience”. Personally, my wife and I use an allowance system but I have no real criticism here...if it works for you and your family then do it...if not find something that does.
The Money Diva
She discusses how retirement planning can be divided into two stages, accumulation and declining. The Money Diva is quite proficient at the accumulation stage with a networth in excess of $600,000 however, she is admittedly less proficient at planning for the declining stage and has realized that “to retire, you need income. Net worth doesn’t pay the bills every month.” The post provides some food for thought for those contemplating retirement.
Canadian Dream
He contributed a post entitled “How Much Do You Need to Retire”. His post begins with some sound advice by dispelling the notion that there is a magic percentage of your income that you’ll require in retirement. He then describes the method he would use to calculate how much income is actually required in retirement. He has a pretty extensive list of the costs and revenues that you should use (I won’t list them all here) to generate a rough idea of how much you should have in retirement. Part of the review process of the PF blog tour is to provide some constructive criticism but the only thing that I would suggest is that after the final retirement figure is calculated that it be increased by 10% to ensure that the retirees lifestyle is protected in case of unforeseen events ie- higher than expected inflation, unexpected expensive house repairs like a flood, you end up with 20 grandkids etc… I would just rather have a little too much than a little too little… A great post and I look forward to reading his next post where he’ll go over the numbers for his specific situation.
Investoid
Investoid went over the “save half, spend half” approach that he uses to balance investing for the future versus living for today. He goes over the technique and explains some of the benefits that it has for him and his family such as it “forces us to look at how much value we truly place on an item or experience”. Personally, my wife and I use an allowance system but I have no real criticism here...if it works for you and your family then do it...if not find something that does.
The Money Diva
She discusses how retirement planning can be divided into two stages, accumulation and declining. The Money Diva is quite proficient at the accumulation stage with a networth in excess of $600,000 however, she is admittedly less proficient at planning for the declining stage and has realized that “to retire, you need income. Net worth doesn’t pay the bills every month.” The post provides some food for thought for those contemplating retirement.
Tuesday, April 17, 2007
CPI
This is my post for the Canadian Tour of Personal Finance Blogs.
For those of you unfamiliar with CPI (Consumer Price Index) you might want to check out the following link for a definition before reading the remainder of the post.
http://www.bls.gov/cpi/cpifaq.htm
There has been some debate amongst both professional and amateur investors/advisors about the validity and accuracy of CPI (consumer price index). Some people argue it’s too low, while others argue it’s too high. There are many highly educated, respected and experienced economists on both sides of the fence, and quite frankly I’m happy to leave the academic arguing to them. The purpose of this post isn’t to further the argument one way or the other but simply to point out that regardless of which side of the argument you’re on inflation pressures should be a factor in your retirement planning. Inflation is an important consideration by anyone considering retirement, but especially those considering early retirement as they have a longer time horizon to consider. Do you remember what a dollar bought you 20 years ago compared to today? What do you think a dollar is going to buy you in another 20?
Those who argue that the published CPI number is higher than it should be usually base their argument on the fact that the basket of goods used to calculate the CPI either aren’t used by everyone or that the basket does not account for substitutions ie- if bananas go up you buy apples, chicken instead of steak etc...I believe there is some validity to this argue (depending on your consumption habits), but I would not base my retirement on it. Although you might not feel the full percentage effect that CPI indicates I believe that as an investor aspiring for early retirement it would be prudent to use the CPI figures as a minimum guide or benchmark when making predictions of future cash flow requirements. Nobody can predict the inflation rates of the future but for those of us who plan to be retired for 40+ years no amount of substituting or cutting back is going to insulate us from some percentage of real daily inflation in our lives. I don’t think that I’ll feel the full percent effect of CPI but I’m going to use the published CPI figures in my planning as a safety cushion...just in case.
Canadian CPI Figures
American CPI Figures
For those of you unfamiliar with CPI (Consumer Price Index) you might want to check out the following link for a definition before reading the remainder of the post.
http://www.bls.gov/cpi/cpifaq.htm
There has been some debate amongst both professional and amateur investors/advisors about the validity and accuracy of CPI (consumer price index). Some people argue it’s too low, while others argue it’s too high. There are many highly educated, respected and experienced economists on both sides of the fence, and quite frankly I’m happy to leave the academic arguing to them. The purpose of this post isn’t to further the argument one way or the other but simply to point out that regardless of which side of the argument you’re on inflation pressures should be a factor in your retirement planning. Inflation is an important consideration by anyone considering retirement, but especially those considering early retirement as they have a longer time horizon to consider. Do you remember what a dollar bought you 20 years ago compared to today? What do you think a dollar is going to buy you in another 20?
Those who argue that the published CPI number is higher than it should be usually base their argument on the fact that the basket of goods used to calculate the CPI either aren’t used by everyone or that the basket does not account for substitutions ie- if bananas go up you buy apples, chicken instead of steak etc...I believe there is some validity to this argue (depending on your consumption habits), but I would not base my retirement on it. Although you might not feel the full percentage effect that CPI indicates I believe that as an investor aspiring for early retirement it would be prudent to use the CPI figures as a minimum guide or benchmark when making predictions of future cash flow requirements. Nobody can predict the inflation rates of the future but for those of us who plan to be retired for 40+ years no amount of substituting or cutting back is going to insulate us from some percentage of real daily inflation in our lives. I don’t think that I’ll feel the full percent effect of CPI but I’m going to use the published CPI figures in my planning as a safety cushion...just in case.
Canadian CPI Figures
American CPI Figures
Friday, April 13, 2007
Canadian Tour of Personal Finance Blogs
I just wanted to give you guys a heads up that over the next week or so I will be participating in the Canadian Tour of Personal Finance Blogs facilitated by http://www.canadian-money-advisor.ca. The purpose of the tour is “is to get to know other bloggers who write about personal finance, and to show case these bloggers articles and expertise to their readers.” I haven’t chosen a topic yet but I’m thinking it might as well be something controversial so we can get a debate going among different blogs. I've noticed that many of the blog that I read daily (see my blog links) are also going to be participating.
Thursday, April 12, 2007
The Complete Users Guide to Warren Buffet
Sorry for the late post but I had to attend some training that I had forgot this morning. Anyways...I just wanted to share this interesting article that I came across:
The Complete Users Guide to Warren Buffet
The article describes “four savvy strategies for intelligently capitalizing on Buffett's wisdom”. The basic premise of the article is that investors shouldn’t focus on Buffets' long term holdings but instead focus on his recent acquisitions (ie- JNJ, UNH, PKX) and on the long term macro trends that Buffet has identified in the market (ie- retiring baby boomers, China). The article also reassured me that my recent decision to buy JNJ for the long term was valid. It’s worth a read.
The Complete Users Guide to Warren Buffet
The article describes “four savvy strategies for intelligently capitalizing on Buffett's wisdom”. The basic premise of the article is that investors shouldn’t focus on Buffets' long term holdings but instead focus on his recent acquisitions (ie- JNJ, UNH, PKX) and on the long term macro trends that Buffet has identified in the market (ie- retiring baby boomers, China). The article also reassured me that my recent decision to buy JNJ for the long term was valid. It’s worth a read.
Wednesday, April 11, 2007
1 Million at Forty
I recently received an inspirational e-mail from a reader who like me had the dream of accumulating $1,000,000 by age forty. Although she has not yet met that mark she has accumulated a large six figure portfolio and is on track to have a million bucks by forty. I asked her about her investing strategy and she was kind enough to give me the 9 rules that she has followed to achieve her wealth.
1. Don't invest money you can't lose.
2. Take any tax advantages you can.
3. Receive cash from dividend and reinvest.
4. Don't invest more than 50% of your money with asset managers.
5. Listen to old, rich people.
6. Put as much as you can into your kids names (tax advantage).
7. Spend some of your money to enjoy life.
8. Give some of your wealth away.
9. Bring your spouse on your journey.
She also gave me some advice on my portfolio --- hold more real estate and take more risks...
1. Don't invest money you can't lose.
2. Take any tax advantages you can.
3. Receive cash from dividend and reinvest.
4. Don't invest more than 50% of your money with asset managers.
5. Listen to old, rich people.
6. Put as much as you can into your kids names (tax advantage).
7. Spend some of your money to enjoy life.
8. Give some of your wealth away.
9. Bring your spouse on your journey.
She also gave me some advice on my portfolio --- hold more real estate and take more risks...
Tuesday, April 10, 2007
Evil Blog Contest
Ok I admit it...todays post has no benefit to any of my readers (unless you can find some humour in my groveling). Todays’ post is a self indulgent, shameless attempt at me winning a new 30GB Microsoft Zune.
John Chow from www.johnchow.com is having another evil blog contest and in order to enter I have to whore out my post for the day and let you know about Johns' blog. Johns' blog was designed to help people make money on the internet and he is giving away a Microsoft Zune to a lucky blog owner who is willing to promote his site.
John Chow from www.johnchow.com is having another evil blog contest and in order to enter I have to whore out my post for the day and let you know about Johns' blog. Johns' blog was designed to help people make money on the internet and he is giving away a Microsoft Zune to a lucky blog owner who is willing to promote his site.
Monday, April 9, 2007
Calculating Networth
I’ve been asked this question by a few of the blog readers and thought that I should respond as a post as other people are probably asking themselves the same question.
Question:
“Why do you refer to your portfolio value as your net worth? Or did I read it wrong...”
You didn’t read it wrong...I do refer to my portfolio value as my networth. I know this isn’t the traditional way of calculating networth but for my purposes I feel it’s the most accurate considering my early retirement goal. I’ve done a rough calculation and the cash flow from 1 million dollars is way more than enough for me to retire on…..but I’m pretty conservative and want to have a cushion in case something in my plan goes wrong (plus 1 million is a nice round number – really rolls off the tongue).
I’ll outline the items that a traditional networth calculation includes and try to explain why I don’t.
ASSETS
Cars – I don’t include them because they’re a depreciating asset and for me a necessity. Just an example but if someone had no money in the bank but a paid off $60,000 BMW I wouldn’t say he’s worth $60,000 (if he sold the BMW bought a $15,000 civic and put the rest in the bank I’d say he’s worth $45,000)
Equity in my Primary Residence – This is my thinking (it might be skewed a little) but including your primary residence is pointless, basically because you have to live somewhere (my mortgage is less than rent). I’ll include the equity in my home once I sell it. As an example, if I sell my home for $200,000 and buy another one for $150,000 I’ll invest the extra $50,000 and include it at that point. Just to illustrate this point, if I lived in Vancouver where housing values have sky rocketed and I have a house worth $400,000 to me it’s not worth including in my networth unless I’m planning on moving to a cheaper town, or downsizing to a condo (which are also ridiculously expensive in Vancouver) because as I said you have to live somewhere and I don't ever plan on renting.
Money in Chequing Accounts – I don’t include simply because it’s not large enough to really make a difference (when it does get large enough I transfer it to my investing account)
Work Pension Plan - I’m part of a defined benefit plan (indexed to inflation), so basically when my years of service + age equals 85 I can retire with X amount of my full time wage. I don’t currently count it because it is not that large and hard to calculate on a monthly basis but I will include it when I leave the position.
Any Personal Items or Collectables – Well I don’t really have many and if I did I wouldn’t include them because I won’t ever sell them (I’m keeping my clothes and fishing tackle until they’re worthless)
LIABILITIES
Personal Debt – I don’t have any.
Car Loans - None
Mortgage – (I know people are going to have a problem with this) but I do have a mortgage but don’t count it against my networth. I don’t count it because I have a very modest house that’s 30% paid off and my mortgage payments are less than rent in the city I live in. Additionally, I don’t count the equity in the house toward my networth. (If I did consider mortgage debt I’d have to consider the value of house – which would inflate my networth.) I plan on posting on the topic of mortages in the near future.
If there are any more questions that you have I’d be happy to answer them in the comments section. Cheers.
Question:
“Why do you refer to your portfolio value as your net worth? Or did I read it wrong...”
You didn’t read it wrong...I do refer to my portfolio value as my networth. I know this isn’t the traditional way of calculating networth but for my purposes I feel it’s the most accurate considering my early retirement goal. I’ve done a rough calculation and the cash flow from 1 million dollars is way more than enough for me to retire on…..but I’m pretty conservative and want to have a cushion in case something in my plan goes wrong (plus 1 million is a nice round number – really rolls off the tongue).
I’ll outline the items that a traditional networth calculation includes and try to explain why I don’t.
ASSETS
Cars – I don’t include them because they’re a depreciating asset and for me a necessity. Just an example but if someone had no money in the bank but a paid off $60,000 BMW I wouldn’t say he’s worth $60,000 (if he sold the BMW bought a $15,000 civic and put the rest in the bank I’d say he’s worth $45,000)
Equity in my Primary Residence – This is my thinking (it might be skewed a little) but including your primary residence is pointless, basically because you have to live somewhere (my mortgage is less than rent). I’ll include the equity in my home once I sell it. As an example, if I sell my home for $200,000 and buy another one for $150,000 I’ll invest the extra $50,000 and include it at that point. Just to illustrate this point, if I lived in Vancouver where housing values have sky rocketed and I have a house worth $400,000 to me it’s not worth including in my networth unless I’m planning on moving to a cheaper town, or downsizing to a condo (which are also ridiculously expensive in Vancouver) because as I said you have to live somewhere and I don't ever plan on renting.
Money in Chequing Accounts – I don’t include simply because it’s not large enough to really make a difference (when it does get large enough I transfer it to my investing account)
Work Pension Plan - I’m part of a defined benefit plan (indexed to inflation), so basically when my years of service + age equals 85 I can retire with X amount of my full time wage. I don’t currently count it because it is not that large and hard to calculate on a monthly basis but I will include it when I leave the position.
Any Personal Items or Collectables – Well I don’t really have many and if I did I wouldn’t include them because I won’t ever sell them (I’m keeping my clothes and fishing tackle until they’re worthless)
LIABILITIES
Personal Debt – I don’t have any.
Car Loans - None
Mortgage – (I know people are going to have a problem with this) but I do have a mortgage but don’t count it against my networth. I don’t count it because I have a very modest house that’s 30% paid off and my mortgage payments are less than rent in the city I live in. Additionally, I don’t count the equity in the house toward my networth. (If I did consider mortgage debt I’d have to consider the value of house – which would inflate my networth.) I plan on posting on the topic of mortages in the near future.
If there are any more questions that you have I’d be happy to answer them in the comments section. Cheers.
Friday, April 6, 2007
Have a Great Long Weekend
I just want to wish everyone a happy and safe long weekend. I'm out of town today through Sunday but will be posting again on Monday.
Cheers,
MCM
Cheers,
MCM
Tuesday, April 3, 2007
Networth April 1 – 2007
Networth at the close of April 1, 2007 (no change from last month)
TRP - 4.23%
ABX - 3.94%
CSH.UN - 3.27%
GWO - 4.80%
PFE - 4.28%
POW - 4.10%
BA.UN - 0.38%
L - 3.80%
UNS - 2.85%
GZ - 2.93%
TD - 13.28%
EIT.UN - 2.83%
JNJ - 3.45%
MMM - 3.89%
O'Shaughnessy’s Global Fund - 4.06%
American Growth Fund - 1.07%
CDN Value Fund - 3.78%
Small Cap Growth Fund - 3.96%
Deep Value Fund - 11.03%
Health Science Fund - 0.92%
Bond (9% yield) - 5.54%
Money Market Fund - 11.60%
There was no change in my networth since last month. However, I did make a few purchases EIT.UN and JNJ that I plan to hold for the long term.
TRP - 4.23%
ABX - 3.94%
CSH.UN - 3.27%
GWO - 4.80%
PFE - 4.28%
POW - 4.10%
BA.UN - 0.38%
L - 3.80%
UNS - 2.85%
GZ - 2.93%
TD - 13.28%
EIT.UN - 2.83%
JNJ - 3.45%
MMM - 3.89%
O'Shaughnessy’s Global Fund - 4.06%
American Growth Fund - 1.07%
CDN Value Fund - 3.78%
Small Cap Growth Fund - 3.96%
Deep Value Fund - 11.03%
Health Science Fund - 0.92%
Bond (9% yield) - 5.54%
Money Market Fund - 11.60%
There was no change in my networth since last month. However, I did make a few purchases EIT.UN and JNJ that I plan to hold for the long term.
Monday, April 2, 2007
Investing in Stocks vs. Real Estate
The topic of investing in stocks vs. real estate has started to come up recently on some investing forums and I just wanted to put in my 2-cents on the issue. I don’t think you can make a blanket statement that either stock or real estate investing is superior to the other. I think the success of either type of investing depends on the strategy and due diligence of the individual investor. I know a real estate investor who has been “flipping” houses part-time for 2 decades. Her and her husband successfully and consistently make money on real estate regardless of the macro trend of real estate. They are successful because they actively follow the market and buy “undervalued” houses based on current market conditions and fix/renovate and sell at a profit (usually within 3 months). I on the other hand don’t have their acumen and interest in real estate and as a result don’t put any of my investment capital into physical real estate (other than my primary residence). However, I do have an interest, background, and long term conservative strategy that I’m pursuing with equities. So which strategy is better? I think the answer is obvious: real estate is better for those with a strategy and passion for real estate while stocks are better for those with a strategy and passion for securities. The most important thing is not stocks vs. real estate it’s doing your due diligence and having a realistic, well researched investing strategy that you’re willing to stick with through thick and thin.
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