# Mordko Money Diaries



## mordko (Jan 23, 2016)

About us:

- Mr and Mrs Mordko, in their late 40s.
- Mr Mordko's income: 150-200K
- Mrs Mordko's income: currently 0; might do charity and/or a bit of work going forward if she feels like it.

2 children, both been through this and that and rep hockey and all that comes with it; now at university (which costs less):
- Child A: finishing off his co-op; will be entering a postraduate programme next year. Should get CPA and stand on his own 2 feet by 2019. 
- Child B: 3.5-4.5 years before graduation. 

Housing:
- Currently renting; paid for by the client.
- Looking at re-entering the housing market in the next 12 months with a budget of 700K-1M.

Objectives:

- Buy a hobby farm and feed ourselves 100%
- Retire by the age of 55, once both kids are on their feet.

Assets:

- Investments in Canada: $970K. 100% shares, Couch Potato style portfolio.
- Investments in UK pension funds: $160K. Almost 100% shares, Couch Potato style portfolio.
- HISA: $800K (earmarked for the house)
- DB Pension (Mr Mordko) - no idea what the value is, but I would guess transfer value >$500K if I were to change jobs right now. Which I might.
- RESP (remaining balance): $40K.

Total assets: ~$2,470,000

- Other (not counted in the total worth): 
a) a small DB pension from UK for Mrs Mordko from the age of 65
b) Small state UK and Canadian pensions for Mr and Mrs Mordko from the age of 67/65.


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## redsgomarching (Mar 6, 2016)

wow! would love to hear about how you started off mordko! looks like you are well on your way to your goals! Mind sharing us your story? ups/downs? job history?


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## scorpion_ca (Nov 3, 2014)

Excellent...might get valuable guidance those who are the top such as mordko....Would you mind to share your professional background....how to find a job where to make more than $150k a year? What would you do differently if you can go back to the time?


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## mordko (Jan 23, 2016)

Thanks. Yes, we are on track, which is nice. 

My professional background is engineering/physics. I am from Russia; when I graduated it was still Perestroyka and Russia was popular, so a British company hired me. Started in a smallish company which has since been bought several times over, so now working for a large international corporation. Don't like it all that much; smaller is better. Early on I was looking after both winning and executing work as well as managing staff. That included a few high profile international projects and was fun. My salary grew quite fast. Lately it all kinda stalled; I think the more you enjoy your work, the faster your pay goes up. 

My wife is also an engineer, she used to work part time. Then she got bored with office work + we needed a bit more freedom to keep 2 boys in rep hockey. She likes houses and working with people, so she became a realtor. We have just moved to a different area, so she is not working right now. 

We were also quite lucky with our real estate - more than half of our net worth comes from owning and selling houses we lived in since 1995. The best deal was with our second house in the UK; it was purchased for 102K (pounds) with an 80K mortgage in 1998. It was sold for 240K (pounds) in 2004. The company asked me whether I would be interested in moving to a new division in Canada, so I did because there isn't much hockey in England. At that point the pound was worth 2.4CAD, so we cleared about $500K and bought a house in GTA for $780K in 2004 with a $360K mortgage. It has now been sold for $1.75M with a $90K mortgage.

Our stock investments have been relatively small - most of the spare cash went into kids's activities/education and mortgage repayments. What has been invested stayed within index mutual funds; more recently - ETFs. I have return data since 2002; stock investments are showing 8% annual return; although real return is obviously a bit lower; probably around 5-6%. 

Everyone gets opportunities. Lucky people are the ones who grab them.


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## My Own Advisor (Sep 24, 2012)

"At that point the pound was worth 2.4CAD, so we cleared about $500K and bought a house in GTA for $780K in 2004 with a $360K mortgage. It has now been sold for $1.75M with a $90K mortgage."

Very well done.

With your investments and pensions, you should be easily ready to retire at age 55. Especially with no debt and a $700k - $1M largely paid off home.


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## humble_pie (Jun 7, 2009)

mordko said:


> I am from Russia ...



but you told us you are from belarus
which you spelled the old way
byelorussia

you've always been fiercely aggressive re how much you hated russia
still do hate russia ... :biggrin:


.


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## mordko (Jan 23, 2016)

humble_pie said:


> but you told us you are from belarus
> which you spelled the old way
> byelorussia
> 
> ...


Never ever have I told anyone that I am from Belarus. One simple reason: I am not from Belarus.

Nor have I ever told anyone that I hate Russia, that's dumb. I am not a fan of the imperialistic murderous regime that is running it, that much is true.


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## mordko (Jan 23, 2016)

My Own Advisor said:


> "At that point the pound was worth 2.4CAD, so we cleared about $500K and bought a house in GTA for $780K in 2004 with a $360K mortgage. It has now been sold for $1.75M with a $90K mortgage."
> 
> Very well done.
> 
> With your investments and pensions, you should be easily ready to retire at age 55. Especially with no debt and a $700k - $1M largely paid off home.


Thanks. We shall see what the future has in store... But we won't need a lot of money, most of our expenditure had to do with a) house b) kids and c) food during winter months. In summer and fall we have been feeding ourselves to some extent and only bought meat. Growing stuff small scale is kinda fun. 

Still, one can never be sure about tomorrow.


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## Dilbert (Nov 20, 2016)

Good stuff and thanks for sharing Mordko. I always thought growing most of your food needs was a great concept. Problem is, that as we age, some physical issues can impact our abilities. Caveat emptor.


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## mordko (Jan 23, 2016)

Dilbert said:


> Good stuff and thanks for sharing Mordko. I always thought growing most of your food needs was a great concept. Problem is, that as we age, some physical issues can impact our abilities. Caveat emptor.


That's true. On the other hand growing food, caring for chickens, etc... forces one to be active and extends the ability to continue doing so for longer. The method I use (square foot guardening) is comparatively light on ones physical abilities. Watering is done automatically via drip irrigation. Once the system is set up, planting and picking stuff for a single family isn't all that hard.


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## DigginDoc (Sep 17, 2015)

I appreciate your plan. My wife and I traded down in the last two years. Sold our acreage and moved to the lower mainland from Penticton. Retirement was 14 years of gardens, fruit trees, grapes, chickens and a few years of BnB. Loved it and miss it. Too much to handle now. Good luck with your green thumb and investments.
Cheers
Doc


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## mordko (Jan 23, 2016)

Cheers, Doc  Hope you enjoy the next phase of your retirement. What do you do?


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## Dilbert (Nov 20, 2016)

mordko said:


> That's true. On the other hand growing food, caring for chickens, etc... forces one to be active and extends the ability to continue doing so for longer. The method I use (square foot guardening) is comparatively light on ones physical abilities. Watering is done automatically via drip irrigation. Once the system is set up, planting and picking stuff for a single family isn't all that hard.


Very cool!


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## james4beach (Nov 15, 2012)

Congrats mordko on your excellent situation.

It's funny though how much comes down to luck in the market. In the case of mordko's family, a huge portion of his gains and net worth came from real estate gains. At the time this was highly leveraged exposure _to a single asset_, and it worked out great.

That's lucky, but it could have gone the other way too. US homeowners leveraged into houses in 2005-2007 and were devastated, as were British and Spanish homeowners who entered in recent years.

mordko correct me if I'm wrong, but would this be an appropriate analogy to your history? Say we have an investor with 300K net worth, and he uses leverage to buy 500K of XIU. He buys early in a bull market and dramatically increases his net worth  High leverage, *one* asset.


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## OnlyMyOpinion (Sep 1, 2013)

I don't see the analogy. Mordko admitted they were lucky with their house purchase & sale timing. Buying a place because you need a home for your family and having a good outcome is not the same as speculating in the market with a leveraged etf purchase.


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## mordko (Jan 23, 2016)

OnlyMyOpinion said:


> I don't see the analogy. Mordko admitted they were lucky with their house purchase & sale timing. Buying a place because you need a home for your family and having a good outcome is not the same as speculating in the market with a leveraged etf purchase.


Exactly. We needed a family home in locations with great schools and the rest was down to a bit of luck. The place we had in the U.K. that went up by 2.4 times in 6 years was in an area which was looked down upon by the Brits when we bought but became very up market when we sold. We did feel the price went up a bit too fast and indeed 10 years later it sold for the same price even though it had conservatory added. Same thing happened with GTA as crazy Toronto prices spread outwards, the value skyrocketed. Incidentally, prices in the US have dropped very unevenly and the recovery has been uneven too. People who bought wisely got lucky. 

Aside from the obvious that one needs a place to live and a home isn't really an investment like shares, there is another important difference with ETFs. When you sell them after a nice growth, you pay capital gains.


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## DigginDoc (Sep 17, 2015)

mordko said:


> Cheers, Doc  Hope you enjoy the next phase of your retirement. What do you do?


Thanks Mordko Both kinds of luck here.
My last phase started ok but a cancer scare and major surgery over Christmas interrupted my plans. Think it will be ok now but we shall see. (All you guys make sure they get the finger at the docs regularly) When I am back on my feet and I will continue to metal detect. a lot of fun, especially when you find gold. :glee:
I was in policing in Vancouver and retired with the municipal pension. Together with the CPP and OAS for my wife and we have done ok. (should have kept the house in Van when we moved to the Okanagan...:mad2:My last house is worth 4M today plus.) Did ok in the OK though and bought a new car and nice Townhouse last year with money in our jeans. 
Most posts include a long term situation. We won't be using any of our investments so that will probably be my question in my own soon post.
cheers and good luck again
Doc


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## mordko (Jan 23, 2016)

Also worth noting, that while we were leveraged, the mortgage payment was easily affordable at all times, and would have been even if the rates went up by a lot. And the rent on a family home in the burbs would have been a lot higher than interest and tax. 

Where we got really lucky, was with our very first home. It was mortgaged with a building society, which was supposedly owned by its clients. When it privatized, they payed us. What are the chances of loan sharks paying you for borrowing from them?


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## mordko (Jan 23, 2016)

@Doc, glad you are OK now. Yes, we can only plan up to a point... I got the finger last week. Didn't enjoy it. Look forward to your post.


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## BoringInvestor (Sep 12, 2013)

Congrats on starting your money thread! I look forward to following along.


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## mordko (Jan 23, 2016)

@BI - thanks, please do.


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## mordko (Jan 23, 2016)

At the end of January, I am 50% stock, 50% cash (the latter earmarked for buying a house).

The stock is invested in a worldwide CouchPotato as follows:

US - 35%, Canada - 30%, Developed outside N America - 20% (about half in the UK), EM - 15%. 

Money-weighted returns on stocks, Jan 31 2017:

1 month -0.13%
3 months 2.06%
6 months 4.1%
YTD -0.13%
1 year 11.2%

January was flat; the indices went up but USD went down by almost 3%.


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## mordko (Jan 23, 2016)

I am still roughly 50% stock, 50% cash (the latter earmarked for buying a house).

The stock is invested in a worldwide CouchPotato as follows:

US - 35%, Canada - 30%, Developed outside N America - 20% (about half in the UK), EM - 15%. 

Money-weighted returns on stocks, Jan 31 2017:

1 month 3.4%
3 months 5.6%
6 months 9.5%
YTD 3.7%
1 year 19.9%
Since 2002 8.95%

Money-weighted return is significantly higher than time-weighted because the portfolio is dominated by the money placed in the portfolio in January and I was lucky with the timing. The returns are kinda meaningless for the same reason.

In February the US and EM investments have done real well while Canada and developed countries did OK but not great.


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## mordko (Jan 23, 2016)

Also, I am expecting actuary's valuation of my DB pension which is about to be transferred to a DC pension, so there will be quite a bit more to invest in the next couple of months... And I am hoping to buy a house in the 700K range at some point over the next 2 months.


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## mordko (Jan 23, 2016)

We bought a house and >30 acres of land for $1M. The cost is higher than hoped for but my dog did love the place very much. And it will be generating income while providing me with easy access to work (<20 minute drive). 

By the time all of this is sorted, I expect the overall asset breakdown to look like this:

- $1M - house
- $1.5M - investment (including LIRAs, spousal RRSP, TFSA and taxable)
- $0 - debt, although we might use Line of Credit to fund investment projects, like roof-top solar power and the purchase of various agricultural toys.


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## Koogie (Dec 15, 2014)

mordko said:


> We bought a house and >30 acres of land for $1M. The cost is higher than hoped for but my dog did love the place very much. And it will be generating income while providing me with easy access to work (<20 minute drive).
> 
> By the time all of this is sorted, I expect the overall asset breakdown to look like this:
> 
> ...


Congrats ! That acreage especially is very fine. You say it is income producing ? Is it arable land you are going to lease out ?
My hope is to follow in your footsteps in a few years. I've already reduced work to a sort of semi-retired level and am going to milk that for a while but I can't wait to get out of the golden horseshoe and back into somewhere quieter. We'll probably stick with southern Ontario but definitely will be spending a lot less time here.


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## mordko (Jan 23, 2016)

Thanks  Part of the land is a wild forest + wetland and a pond, which my spaniel approves of. The other chunk is an established tree farm. We are planning to try and run it ourselves but will need a lot of education. 

We did exactly what you are thinking about; got out of the overpopulated GTA but stayed within 1.5-2 hours of Toronto. Didn't end up quite as remote as I was considering, mainly because I am still working albeit for a different employer. My wife has effectively retired though. Guess I am targeting retirement (except for the hobby farm) in ~8 years when I hit 55 or so.

When you say "less time here" - are you thinking about Florida? That is fun but we'll probably get a few dogs and other animals... Besides, I kinda enjoy having different seasons.


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## james4beach (Nov 15, 2012)

Congrats mordko


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## gibor365 (Apr 1, 2011)

mordko said:


> We bought a house and >30 acres of land for $1M. The cost is higher than hoped for but my dog did love the place very much. And it will be generating income while providing me with easy access to work (<20 minute drive).
> 
> By the time all of this is sorted, I expect the overall asset breakdown to look like this:
> 
> ...


Congrats ,I understand you didn't take a mortgage and paid in cash?
Is all your $1.5M invested in equities? No cash?
If it's not secret  can you share what area is your new house? I suspect somewhere around London? What is estimated property tax?

30 acres it's a lot.... I understand iit's like 3 soccer fields, right?!
Pond is nice ...you may grow trout there


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## mordko (Jan 23, 2016)

@gibor, 

- correct, we won't be taking a mortgage. After closing we will set up a line of credit and I will use it to fund certain projects, like solar power. 

- it's not near London but in that general direction. Property taxes are just 3k a year, which is peanuts compared to the 12k we used to pay. They have been reduced substantially because of land use.

- soccer fields vary in size from 1 acre (50 by 100 yards) to 2.5 acres. This place is 365 by 365 meters which is a good size hobby farm but less than half of the total is usable for farming.

- trout is a good idea but the pond is more like a swimming pool right now, with a sandy beach. It's fed by a stream rather than by underground springs and probably gets too hot for trout. We will check the temperature in summer.


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## mordko (Jan 23, 2016)

Right now I have just over 1M invested in shares. I also have a pension which is being evaluated by an actuary and will be commuted to a LIRA and a non reg fund. Trudeau will get his grabby hands on the 53 percent from the non reg portion which I consider nothing short of outrageous. I will only get 57 percent of the pension straight away, because almost half of it is unfunded and will be paid over 5 years. 

To cut a long story short, 1.5M is my estimate of projected liquidity, taking into account the commuted value of the pension. Could be more or less, there is no way of knowing. Once it's paid out, I will allocate a portion of the total to fixed income. I am thinking of a 20 percent target but haven't quite decided.


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## Koogie (Dec 15, 2014)

mordko said:


> Thanks  Part of the land is a wild forest + wetland and a pond, which my spaniel approves of. The other chunk is an established tree farm. We are planning to try and run it ourselves but will need a lot of education.
> We did exactly what you are thinking about; got out of the overpopulated GTA but stayed within 1.5-2 hours of Toronto. Didn't end up quite as remote as I was considering, mainly because I am still working albeit for a different employer. My wife has effectively retired though. Guess I am targeting retirement (except for the hobby farm) in ~8 years when I hit 55 or so.
> When you say "less time here" - are you thinking about Florida? That is fun but we'll probably get a few dogs and other animals... Besides, I kinda enjoy having different seasons.


Very nice. Christmas tree farm ? Coming from a farming background, I can tell you that if are going to be claiming the property as agricultural, what you are really going to need is an education in farm taxes ! 

Ironically, we have also been looking in that same general area. My wife is originally from the London area and her father lived by the lake near St Thomas. She is also effectively retired (she works for our company one day a week). I'm thinking to sell the company and hang it up earlier than 8 years since I've had enough and we don't have any dependents to leave a legacy to. We bought a mortgage-less house in the Hamilton area a year and a half ago intending to stay a while and keep the company going but I am already itching to get out. lol

Probably not Florida but maybe California quite a bit every year (my wifes sister lives there). Probably also the UK every year as my family is getting elderly and a lot of them are in poor health. I to enjoy the seasons... except one of them... ha


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## mordko (Jan 23, 2016)

Right, my wife has to travel to England every year, for the exact same reason. Sadly we don't have anyone in California, only some of my relations in Philadelphia and the place isn't great. 

My son is an accountant, should get his CPA next year. I am just making sure he gets lots of diverse experience, with our foreign investments, farming taxes and everything else that comes with it... Should keep him busy. Thinking of hiring my other son as a farm hand for the summer, that would turn it into a real family business 

Hope it's not winter you are disparaging. With all the cross country skiing and outdoors hockey opportunities, it has to be the most fun season of them all...


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## gibor365 (Apr 1, 2011)

> trout is a good idea but the pond is more like a swimming pool right now, with a sandy beach. It's fed by a stream rather than by underground springs and probably gets too hot for trout. We will check the temperature in summer.


 then maybe perch, bass and cat fish?!



> soccer fields vary in size


 I meant a big one 


> Property taxes are just 3k a year


 unexpectedly low..



> To cut a long story short, 1.5M is my estimate of projected liquidity, taking into account the commuted value of the pension. Could be more or less, there is no way of knowing. Once it's paid out, I will allocate a portion of the total to fixed income. I am thinking of a 20 percent target but haven't quite decided.


 we have about same value include everything, but I'm more conservative and have in Cash (HISA/GIC) close to 50%.



> My son is an accountant, should get his CPA next year. I am just making sure he gets lots of diverse experience, with our foreign investments


 My son gonna get businee/math degree next year and he practically have already job in capital market in big bank.... hopefully he will be able to help me with our investments 



> Right, my wife has to travel to England every year, for the exact same reason. Sadly we don't have anyone in California, only some of my relations in Philadelphia and the place isn't great.


 about 10 years ago I was planning to do what you did , now I'd prefer to travel more, so imho big house/land is a a big burden,
My brother lives in UK, just bought small house there, my wife's relatives live in Florida ....Should be visiting them more frequently, also planning to take long term vacation to warmer places, like Andalusia ....


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## mordko (Jan 23, 2016)

We kinda travelled enough, I am tired of travelling. 10 years in England and my work have taken us through every country in Europe. I've been to some more exotic places with work. And kids sports have taken us across the US, at least the eastern half. 

My brother in law retired in his 40s, they have money and never had kids. They have houses in Sweden, England and southern France and just keep moving around between golf courses and clubs. And he is a really nice, really bright guy but I can't fathom that way of life. Spending half of your adult life doing nothing except travelling? Somehow does not seem enticing.

So settling is quite alright. We will get a couple more dogs, maybe some ducks, geese and chickens and generating a bit of income out of a hobby farm seems like fun. I will carry on working in my regular job till I am 55 and then, depending on cash flow, we might just switch to hobby farming.


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## gibor365 (Apr 1, 2011)

> So settling is quite alright. We will get a couple more dogs, maybe some ducks, geese and chickens and generating a bit of income out of a hobby farm seems like fun.


 If you like dogs, you also can become a breeder  ... when you talking about "some ducks, geese and chickens " do you mean just for fun? or you want at some point kill them and eat them ?!


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## mordko (Jan 23, 2016)

I'll eat them. I am eating chickens now, and these poor sods never had any life at all.


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## mordko (Jan 23, 2016)

OK, the actual commuted value of my pension is a little larger than my guesstimate. It comes to $567.5K total. Good news. $310K will go into a LIRA and the balance will be paid out in cash. The Juniour would like to grab more than half of the cash component in taxes but it ain't happening for him. When the governments try to tax more than half of other people's money they get nothing at all. 

As of today our net worth shows $2,505,291. However in June, as we pay up for the new house and farm, our liquidity will go down to $1.5M. Kinda sad, but as a poor 47-year old immigrant, I should be able to get by.


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## MrsPartridge (May 15, 2016)

I see: - Investments in Canada: $970K. 100% shares, Couch Potato style portfolio.

Does this mean instead of actual shares, the whole amount is in index funds or ETF but only equity? Couch Potato means a large part in bonds or fixed income. 

Index funds or ETFs for 970K? Would this be better as individual stocks instead so that you don't have to have some companies in the index that you don't care for?


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## mordko (Jan 23, 2016)

- Right now I have $2.5 million altogether. You can do the math. Whatever isn't in shares is cash and fixed income. This is anything but "100% shares". Once the commuted value of my DB pension is transferred into my disposal, I will allocate 20 pc to bonds. I will also allocate more funds to stocks. At the moment my effective FI component is higher than my actual target.

- I don't know which companies I "don't care for". I bought the world. Diversification is a free lunch which I am happy to consume. Yes, with proper research and education it may be possible to beat the market. I don't have the time or the need.


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## Dilbert (Nov 20, 2016)

mordko said:


> - Right now I have $2.5 million altogether. You can do the math. Whatever isn't in shares is cash and fixed income. This is anything but "100% shares". Once the commuted value of my DB pension is transferred into my disposal, I will allocate 20 pc to bonds. I will also allocate more funds to stocks. At the moment my effective FI component is higher than my actual target.
> 
> - I don't know which companies I "don't care for". I bought the world. Diversification is a free lunch which I am happy to consume. Yes, with proper research and education it may be possible to beat the market. I don't have the time or the need.


+1, makes sense to me. :courage:


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## mordko (Jan 23, 2016)

April 1st - $2,508K total, of which $1,088K is in stocks and the rest is split between HISA (earmarked for house) and the commuted value of my DB pension.

The stock is invested in a worldwide CouchPotato as follows:

US - 35%, Canada - 30%, Developed outside N America - 20% (about half in the UK), EM - 15%. 

Money-weighted returns on stocks, March 31 2017:

1 month	1.4%
3 months	5.2%
6 months	9.7%
YTD	5.1%
1 year	19.2%
Since 2002 9.2%

Money-weighted return is significantly higher than time-weighted because the portfolio is dominated by the money placed in the portfolio in January and I was lucky with the timing. The returns are kinda meaningless for the same reason; the monitoring period is too short.

In March the Developed and EM investments have done real well while Canada and US didn't do very much one way or another.

The house purchase will be closed in June. Also, 57% of the commuted value of the DB pension will be received and invested in April. The whole thing is in a flux; but by the time its all sorted I plan to have:

- $1M in a house/farm. The farm should be generating >$30K income, at least that's the plan.

- For the liquid investments, target allocations will be as follows:

a) 80% - stocks; 20% - fixed income (including HISA). 

b) Stocks will be split 35%/30%/20%/15% - US/Canada/Developed/EM.

c) FI will include $50K in HISA and the rest in bonds with the focus on Canada/government. 

I also plan to borrow, maybe $100K or so. All of it will be invested in the farming business.


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## Koogie (Dec 15, 2014)

Looks like a good and sensible plan. We are in about the same place but have significantly less in real estate (about 15%) and a lot more in FI(about 40%) . That FI allocation is due to my DW and her need to sleep at night. Happy wife, etc.. 

I also haven't been quite as ruthless as you in getting my allocations to exactly where I want them but that is mainly because I am an inveterate deal hunter and I haven't seen any deals in the market since Brexit.

We have no particular allocation to EM. I was burnt by EM in the late 90s and I still can't get it out of my head that that market segment is anything other than a value trap. Given the amount of money we have in multinationals as well (via US and Int'l etfs) I consider that enough exposure to EM. Also, I recall reading once that the majority of lasting profits made in emerging markets are made by multinationals anyway. 

How much of that liquid portfolio do you have in registered accounts ? That obviously can make a helluva difference going forward. At this point we can only shelter about 20% of our liquid portfolio in registered accounts. Both a good problem (because of the portfolio size) but also a bad problem considering ongoing taxation and it's effects on growth and on current cash flow.


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## mordko (Jan 23, 2016)

Right now I have 40% non-reg and 60% reg, but the ratio will swap once the commuted value of my pension is moved into a LIRA account.

EMs do go up and down but avoiding them altogether is - in my opinion - wrong. A bit like technology; pulling out isn't the right answer to getting burnt. It is entirely plausible that companies with headquarters in China will benefit and American multinationals lose out from the current protectionist policies. If not... Well, that's what diversification is all about. 

Yes, I try to be fully invested as far as the spare cash is concerned rather than wait for the deals. Will we lose out? Quite possible. Or maybe not. Guess the idea is to have it all on an autopilot. 

My DW prefers not to look at what's going on - much as I tried to have her involved... She can't handle the "down" phases. Which leaves the decision-making part to me alone. Anyway, even 40% FI is low when one is nearing the end of his career - at least thats what the experts say. Guess I am thinking of using a "two pots" type approach once I get to the withdrawal phase in about 7 years time. You kinda need a set amount in fixed assets to last ~5 years or so with the hope that markets will - eventually - recover. 

My real estate is only partially home and partially and income-generating farm. So... your asset allocation might not be all that different in that respect. 

When are you planning to move to the withdrawal phase?


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## Koogie (Dec 15, 2014)

mordko said:


> EMs do go up and down but avoiding them altogether is - in my opinion - wrong. A bit like technology; pulling out isn't the right answer to getting burnt. It is entirely plausible that companies with headquarters in China will benefit and American multinationals lose out from the current protectionist policies. If not... Well, that's what diversification is all about.


We can peaceably disagree on EM. :nonchalance: I fully embrace diversification but that also doesn't mean putting money into every niche market (IMHO). For me EM is a niche. And yes, we can't pick geographic winners. That is why my US and Int'l ETFs of choice are so broad (VTI and VXUS). If EM picks up, the resulting broad market shifts will bring me along for the ride with their tens of thousands of holdings. I am just not skewing the results by overweighting EM. Mind you, I do skew my results by not fully embracing index investing (I hold a lot of CDN divvy stocks)



mordko said:


> Yes, I try to be fully invested as far as the spare cash is concerned rather than wait for the deals. Will we lose out? Quite possible. Or maybe not. Guess the idea is to have it all on an autopilot.


This is the correct attitude to have and I believe you are at less risk of missing out than I am. My approach is not correct. However, I recognize that trait in myself and deal with it accordingly. I guess what I am saying is we can make small (recoverable) investing mistakes in life and still be moving forward.



mordko said:


> Anyway, even 40% FI is low when one is nearing the end of his career - at least thats what the experts say. Guess I am thinking of using a "two pots" type approach once I get to the withdrawal phase in about 7 years time. You kinda need a set amount in fixed assets to last ~5 years or so with the hope that markets will - eventually - recover.


Well, I think once you are dealing in portfolios the size of yours and mine, you also have to look at the numbers of absolute dollars involved and not just percentages. 40% may be a low percentage number but in dollar amounts it is overkill (based on our spending) and would probably see us through 12 or 15 years at least of downturns. I am sacrificing growth for comfort. Because it is probably growth and associated risk I don't need. We are also following a simplified "bucket" based approach to early retirement by spending down the FI first and letting equities grow. 



mordko said:


> When are you planning to move to the withdrawal phase?


Good question. I think probably in the next few years. I want to shut the company down (it is a service company and not really sellable) and move out of the city back to the countryside. There are complicating factors with my business partner (and his timing for closure) and with my wifes health. Still, good problems to have.


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## mordko (Jan 23, 2016)

May 1st - $2,496K total, of which about $1M is in stocks and the rest is split between HISA (earmarked for house) and the commuted value of my DB pension. This does not count the value of a DB pension (relatively small, in sterling) and non-cash assets. 

The stock is invested in a worldwide CouchPotato as follows:

US - 35%, Canada - 30%, Developed outside N America - 20% (about half in the UK), EM - 15%, except that new money is being invested and allocations are out of wack. 

Money-weighted returns on stocks, April 30 2017:

1 month	3.4%
3 months	8.3%
6 months	13.1%
YTD	8.65%
1 year	24.8%
Since 2002 9.65%

Money-weighted return is noticeably higher than time-weighted because the portfolio is dominated by the money placed in the portfolio in January and I was lucky with the timing. The returns are kinda meaningless for the same reason; the monitoring period is too short.

In April the Developed and EM investments have done really well while Canada didn't do very much one way or another. The return was also "helped" by a falling Canadian dollar. British pound in particular has risen vs CAD by 7.25% so far this year. 

Total net worth dropped by about $10K because we bought a new pick-up truck for the farm. Most of the cost was offset against our investment gains for April but not all. And it will be partially offset against future taxes. Also, the commuted value of my pension was paid up, partially. $150K of it was paid in cash, but the Feds got hold of 30% ($50K) which also hurt the total. I'll do my best to claw back as much as possible, or at least not to add to what's already been nicked from the pension fund by the Feds.


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## Dilbert (Nov 20, 2016)

Mordko, I really enjoy reading about your progress. Sorry to hear about the tax hit you took.
Wishing you lots of success!


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## GreatLaker (Mar 23, 2014)

It looks like things are really cooking for you Mordko. 

Great returns! I have been on both sides of the money-weighted vs. time weighted returns, sometimes investing then watching markets drop or drift sideways for a year, or like last year investing and watching markets go way up, despite Brexit and things that go Trump in the night. You are right that it is mostly luck, except for those fortunate few that can reliably time the market. :concern:

Do you mind saying what you use to calculate the returns?

Also caution regarding the withholding tax on the commuted value, 30% is just the standard withholding amount. The lump sum could easily kick you up into Justin's new screw-the-rich top marginal tax bracket.


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## mordko (Jan 23, 2016)

Dilbert said:


> Mordko, I really enjoy reading about your progress. Sorry to hear about the tax hit you took.
> Wishing you lots of success!


@Dilbert - many thanks! Appreciate your comments.


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## mordko (Jan 23, 2016)

GreatLaker said:


> It looks like things are really cooking for you Mordko.
> 
> Great returns! I have been on both sides of the money-weighted vs. time weighted returns, sometimes investing then watching markets drop or drift sideways for a year, or like last year investing and watching markets go way up, despite Brexit and things that go Trump in the night. You are right that it is mostly luck, except for those fortunate few that can reliably time the market. :concern:
> 
> ...


- Yes; and it's probably too early for me to claim that my timing has been lucky. A disappointment in Trump's taxplans followed by a major drop in the next couple of years could turn the tables within a month. 

- I have a large Google docs spreadsheet which reads and records the values of various ETFs and accounts which we hold. Also sends me an email when dividends are paid in and when rebalancing is required. Inflows and outflows of cash have to be put in manually. Then XiRR is used to calculate money-weighted returns. Time-weighted returns are calculated using the code from Boggleheads' wiki. 

- Yes, absolutely, most of the pension lump sum would normally be taxed at the brand-new "screw the rich" 53% tax rate. I am putting quite a bit of thought into planning avoidance. For example I changed jobs and moved more than 40km closer to my new office location. Also sold/bought the house. All associated expenses are deductable (guessing ~$70k). I am also about to discover my newly established farming business making a major loss in 2017. 

Kinda sad that the system is designed to ensure that effort goes into tax planning rather than production.


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