Net Worth Update: May 2018

Monthly Summary

In May 2018 we are still dealing with the same range bound market. This stale market environment has gone on for about four months now. That compares to about seven months for the little slide of 2015/2016 correction and around four month for the 2011/2012 correction.

There is a bright area of the market, which is interesting considering it might be the most expensive major market category in the world. Yes, U.S. small-cap stocks, trading at the 99th percentile of their historical valuation, are advancing to new highs. In the past price growth in small-caps has indicated there is some depth to the U.S. market and room for advancement. However, I don't like to count the chickens before the eggs hatch, so I'm not jumping on the small-cap trade. Instead, I'll wait until we see more growth in the bigger broad market index.

Another major factor keeping me from being more aggressive is the continuing declines in international markets--particularly emerging markets. Emerging markets are the cheapest corner of the stock world, both on a standard P/E ratio and Cyclically Adjusted P/E ratio. If there is room to grow anywhere, it would be in the Emerging markets space. That valuation growth isn't happening despite higher commodity prices and what the talking heads are calling "continued global economic expansion".

I still do not believe it's a good time to pile aggressively into the stock market. Most major market categories are not trending well, so why take the risk? I am still holding a large amount of cash and waiting for an opportunity to put that money to work.

On the brighter side, it looks like things are turning around in the short-term bond arena. If you have been sitting in cash, unsure of where to put your money, topping up your short-term bond allocation could be a good choice. My favorite short-term bond ETFs: XSB.TO, VSB.TO, and BXF.TO are all positive for the year. While BXF.TO has a higher fee than the other two, it is more tax efficient and the tax savings will more than outweigh the cost when held in a non-registered investment account.

In April, we finished the month with a total of $662,087 in our investment accounts. We were down -0.62% that month on a investment return basis. This month I once again added a regular contribution to our joint non-registered account and we eeked out a small positive investment return for the month.

I hope through sharing our real numbers you will be inspired to start saving and investing young—it pays!

The Current Numbers

Here are our current Investment Assets as of the last trading day in May. We invest in TFSAs, RRSPs, and a non-registered joint margin account. We use a version of Dual Momentum and a moving average/breakout trend strategy to determine what we buy and when we sell our ETF positions. I often employ leverage in positions, so our results tend to swing a bit more each way than the underlying indices.

January 1 of the current year is in brackets to help illustrate the change during the current year. Net Worth Change reflects the total increase/decrease of this past month including new contributions.

The Investment Return is the total year-to-date return on our investment positions, corrected for new contributions at the end of the month. Due to the end-of-month adjustment, the true rate of return on a daily adjustment basis would be slightly different dependent on the intra-month return on the new contribution.

Total Investments:  $667,450 ($670,856)
Monthly Net Worth Change:  +$5,363
30x Rule Safe Annual Income:  $22,248  ($22,362)
YTD Investment Return:  -4.90%

Background Story

My wife and I are late-20s professionals working in the public sector. We don't earn enormous salaries, but by keeping our spending under control we save a large portion of our incomes each month. Our Investment Assets are 100% the result of our own hard work and the return on investments; we have not received any gifts or won any lotteries.

While we both work in pension careers, for this purpose we don't include pension values in our net worth nor pension contributions in our savings. Our investment assets and contributions are from our net paycheques.

We invest primarily with index ETFs using a dual strategy portfolio that I personally developed and maintain. To keep our investing costs as low as possible, I use Questrade and Interactive Brokers as my online brokerages. Questrade is my go-to choice for registered accounts. Interactive Brokers offers powerful tools, low commissions, and low margin interest for our joint margin account.

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