# Financial advices



## b_foot (Dec 16, 2010)

Hi There,

I'm new here and hoping to hear some investment advices and/or savings goal. Here is the background:

- couple in 30's (35 and 32) with a 1 year old boy (hoping for another baby in 1-2 years)
- recently paid off the mortgage and looking for ways to invest
- net monthly income is about $8800 (combined income) and could save about $4K per month
- no company pension

Assets:
- house: 300K
- 120K of registered investment portfolio that is filled with bank stocks, prefs and a few other companies. The breakdown by industry are: 65% financial; 15 Telecom; Resources 15%, 5% others.
- 45K cash outside of RRSP

Liabilities:
- 20K Staff Loans 

From what I can gather, if I save about $55K a year, I should be able to achieve $2M target in about 20 years (I intentionally exclude the house, thinking that the house can be used to fund children post secondary education). Hoping the $2M will yield 5% and will bring us about 75K of net income per year (after tax). As soon as $2M goal is achieved, we will stop working all together. 

Here is my questions:
- is the $2M goal achievable or is it being too naive? 
- since I'm hoping for only a 5% yield, my portfolio should be fairly conservative. I'm looking for investment ideas. 

Thanks.


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## steve41 (Apr 18, 2009)

To do this properly, I would want to know both gross salaries, and an indication of how you might expect those salaries would grow over time. Plus, is the "we can save $4000 a month" wishful thinking, or is it a real month over month, year over year reflection of your ability to save? 

Also, do you have a realistic retirement age in mind?


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## Jon_Snow (May 20, 2009)

b_foot said:


> Hi There,
> 
> I'm new here and hoping to hear some investment advices and/or savings goal. Here is the background:
> 
> ...


Wow... you are doing great. My wife and I are able to save about the same amount per year (50-60k). Having no kids, I think I can "get by" with a portfolio of about 1.5 million.


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## OhGreatGuru (May 24, 2009)

_(I intentionally exclude the house, thinking that the house can be used to fund children post secondary education). _

I don't understand that remark. Do you plan to re-mortgage your house to pay for the post-secomdary education? Seems to me RESPs should be part of your strategy.


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## Cal (Jun 17, 2009)

No mention of TFSA's...not sure if that is assumed to be included in your registered accounts.

Not sure on what the 45K is sitting in cash for. Is that what you feel you would need in the form of emergency funds.

Registered monies seem heavily weighted in financials. Would consider adding some energy sector weighting, and perhaps a REIT.

It is a great start that the two of you are off to. Also great to see someone who is not hosue rich, cash poor.

2M seems like a reasonable goal. At 5% it appears you will be able to live off of the income easily.


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## b_foot (Dec 16, 2010)

To reply a few questions some have raised:

- In my spreadsheet, I had a 2% savings increase year over year in recognition of salary increases. 
- My gross income is $110K (bonus, pension supplement included) and wife's gross income is about $50K.
- $4K savings is an actual number. We used to pay about $4300 on our monthly mortgage, now we're mortgage free, we redirect the mortgage payment into savings. Our mortgage payment + additional savings was about $55K a year. Our expenses are higher recently after the baby has arrived, but i think $4K/month is still a reasonable amount.
- my realistic retirement age is about 55 (20 years from now)


> I don't understand that remark. Do you plan to re-mortgage your house to pay for the post-secomdary education? Seems to me RESPs should be part of your strategy. 
- I'm hoping the house can be used to fund children post secondary education, in additional to RESP. If RESP alone is sufficient, that's great. Let's treat the house as a bonus. I'm trying to be more conservative.

- Sorry, I did not intentionally left off TFSA. We max'ed the TFSA. My wife's 10K is in savings account; my 10K portion is currently sitting in questrade account waiting to be invested. I would like to use this 10K to go after highly speculative stocks for the tax free capital gain. A few gaming companies are on my radar. 

- My wife is super conservative and would not consider anything other than bank prefs. 80% of her portfolio is sitting either in GIC or high interest savings account. That explains the 45K cash. 

- Yes, I know my portfolio is heavily weighted toward financial industry. At some point, I would like to rebalance it. For the time being, it serves me well. I loaded up a lot of canadian bank prefs with 7% yields as well as Citi bank stock with average cost around $1.70. 

I guess I'm looking for a systematic way to invest the $50K/year savings. Thanks.


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## b_foot (Dec 16, 2010)

Since this is a dairies thread, just an update on the numbers since I last posted.

Assets:
Liquid Asset/Cash:	86,361
Investment	196,217
House	300,000
Car	15,000

Liabilities:
Staff loans (0%)	18,500
Mastercard (0%)	17,000

Net worth	562,078

We managed to save $50K in 2011 and according to the plan for 2012, we should be able to save about $52K in 2012. 

We have two children now, youngest is 6 weeks old. My wife is on mat leave till end of 2012. Imagine when wife goes back to work, our budget will not improve much due to the daycare cost. It is the single biggest expense we had in 2011. 

We accumulated larger amount of cash because my wife is very risk adverse. My portfolio consists of a lot of common and prefs on CDN and US banks. I'm waiting for CITI bank stock to go back to $40 -- my average cost is around $2.80. It may take a long time though ;-) 

This year I would like to put a industry concentration limit on my portfolio. I'm over exposed in financial sector. 

Any other suggestions?


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## Four Pillars (Apr 5, 2009)

b_foot said:


> - I'm hoping the house can be used to fund children post secondary education, in additional to RESP. If RESP alone is sufficient, that's great. Let's treat the house as a bonus. I'm trying to be more conservative.


This still doesn't make sense. How does one use a house to fund education? Will you sell the house? Is this your house or are you talking about a 2nd investment property?

Congrats on the 2nd kid.


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## b_foot (Dec 16, 2010)

Four Pillars said:


> This still doesn't make sense. How does one use a house to fund education? Will you sell the house? Is this your house or are you talking about a 2nd investment property?
> 
> Congrats on the 2nd kid.


Let's think of the house as a cushion. If we have enough, we will keep the house, if not, we will sell the house to fund kids' education. I guess in my wildest dream after the kids go to university, my wife and I would travel and stay at a warmer place and come back to visit them in the summer months. We will rent if we have to.


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## Montrealer (Sep 13, 2010)

> Here is my questions:
> - is the $2M goal achievable or is it being too naive?
> - since I'm hoping for only a 5% yield, my portfolio should be fairly conservative. I'm looking for investment ideas.


Buy real estate, buy it early and hold on to it and I bet you have the potential to be worth more than $2,000,000.00 once it's all said and done.


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## the-royal-mail (Dec 11, 2009)

Buy a lottery ticket and I bet you have the potential to be worth more than $2,000,000.00 once it's all said and done.


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## b_foot (Dec 16, 2010)

the-royal-mail said:


> Buy a lottery ticket and I bet you have the potential to be worth more than $2,000,000.00 once it's all said and done.


I'm glad that I do not count on lottery ticket in my retirement plan


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## b_foot (Dec 16, 2010)

Just an update:

Assets:

Liquid Asset/Cash: 62,407
Investment: 309,973 (RRSP, RESP, TFSA, Unregistered)
Hose: 320,000 (spent $20K to finish the basement last year. I added that full cost to the value.)
Car: 10,000

Liabilities:
Staff Relocation Loans: 17,400 (0% interest)

Net worth: $684,980

The stock market has been helping a little bit lately. The liquid asset is higher than what I want it to be. I will be more comfortable if it is around $15K. As I indicated in the other thread, the daycare expense is killing us. But someone pointed out that with a staying home mom is the most expensive option. My wife and I talked about she stays home with the kids. I don't think we're going to do it. 



The following is our monthly budget for 2013:

Salary / Income (net)	10,000.00
Daycare	1,800.00
Property Tax	425.00
Auto Insurance	90.00
Home Insurance	92.00
Life Insurance	115.00
Staff Loans	83.33
Phone	20.00
Natural Gas	75.00
Hydro	150.00
Hot Water	30.00
Foods + Household	1,500.00
Misc	300.00
Auto Expense / Gas	300.00
Kids	150.00
Travel	250.00
Furnitures/Gadgets	150.00
Clothing	300.00
Savings 4169.67

I also have pension supplement provided by employer in the form of cash every January. Bonus has been low in the last few years. We could save about $60-65K (including pension supplement + bonus) a year. 


Our goal is to be able to retire (aka do what we want) when the kids goes to the university -- which is in about 17 years. 

Apart from winning a lottery ticket, anything obvious that I should be doing? Thanks.


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## Sampson (Apr 3, 2009)

Sell the hose, I hear the market for these is about to drop, but wait until you get the nice Spring bounce when gardeners start to do their thing.


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## b_foot (Dec 16, 2010)

Just a quick update after breaking the big milestone:

Liquid Assets (cash or cash like): 16,644.04 
Investment Assets (taxable account, RRSP, TFSA): 714,627.64
Real Estate and car: 330,000.00
Liabilities: 42,917.00
Net worth: 1,018,354.68

My investment assets have grown a lot -- helped mainly by the market. I don't anticipate seeing 25% to 48% returns year after year. In fact, I suspect the growth for 2015 is mediocre at best. 

Our projections for retirement (aka can-do-whatever-i-want) is 12 years from now.


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## james4beach (Nov 15, 2012)

_Incroyable_, congrats! You went from 685 K to *1018 K* in just two and a half years. I suggest treating yourselves... go take a vacation to Cuba (before the Americans flood in there)!

How did you do it?

You've obviously done more than just save 50K or 60K a year. Can you please share what accounted for the net worth gain of 133 K per year?


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## b_foot (Dec 16, 2010)

james4beach said:


> _Incroyable_, congrats! You went from 685 K to *1018 K* in just two and a half years. I suggest treating yourselves... go take a vacation to Cuba (before the Americans flood in there)!
> 
> How did you do it?
> 
> You've obviously done more than just save 50K or 60K a year. Can you please share what accounted for the net worth gain of 133 K per year?


I think the main factor is the stock market and US dollars. My investment strategy has been following the simple version of couch potato with allocation of 40% USA, 40% International, 20% Canadian. I exposed as much as possible to US dollars. I bought the USA and international ETF in US funds. As you can see, US market and the dollars has been helping a lot in the last few years! I also have some hand picked stocks that I bought in a few years ago, they grow fast (one tanked, but most of them way above the price I paid) -- MSFT, BMY, CSCO, T, MU, C. 

Another factor is our income has grown -- that helped a bit. The kids are done day care. We diverted the day care money to travel. 

I guess I will post another update in a few years and see how it goes  Cheers.


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## james4beach (Nov 15, 2012)

Ah I see! I was guessing it was along those lines ... the S&P 500 in USD has nearly doubled in value in just a couple years.

The USD/CAD is up 30% or more in the last 2.5 years, certainly a huge boost to any USD denominated assets.


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## peterk (May 16, 2010)

Well done on your excellent savings and huge growth!

Is that 714k invested entirely in equities or do you have a bond portion to your couch potato portfolio? If the former I see you've gotten your wife to get over her risk averse-ness. That is very little cash for a family of 4 that spends some ~$7,000/month, in my opinion. To have such a small cash holding (emergency fund) and 0% bonds or GICs is quite a risky position to be in. But clearly it has worked out quite smashingly for you so far.


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## b_foot (Dec 16, 2010)

peterk said:


> Well done on your excellent savings and huge growth!
> 
> Is that 714k invested entirely in equities or do you have a bond portion to your couch potato portfolio? If the former I see you've gotten your wife to get over her risk averse-ness. That is very little cash for a family of 4 that spends some ~$7,000/month, in my opinion. To have such a small cash holding (emergency fund) and 0% bonds or GICs is quite a risky position to be in. But clearly it has worked out quite smashingly for you so far.


The couch potato strategy is entirely in equities. We don't have GIC. We have about 12K in prefs and maybe about 5-6K of bonds scattered between wife's RPP and a small portfolio at wealthsimple. My wife is still risk averse, the difference is I manage investment assets under her name on her behalf  Cash balance tends to go up and down throughout the year -- it could range from 2K to 30-40K depending on the time of year. I do want to keep as little cash as possible -- I think 8-10K is probably ideal. For emergency funds, we have HELOC and LOC. If need be, I could liquidate my portfolio and have the funds in a few days. 

Please don't get me wrong, I don't anticipate to have that kind of growth year after year. One can get lucky (me) once in a while, definitely not year after year. I was in touch with an investment advisor @ TD recently on transferring my portfolio to them. I'm leaning toward it. I don't mind the 1.25% commission (commission will come down as the portfolio gets bigger) as long as it could generate higher return to cover the additional cost. Still undecided. I have read the pros and cons, the fact that having someone looking after our money is kind of scary


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## james4beach (Nov 15, 2012)

> My wife is still risk averse, the difference is I manage investment assets under her name on her behalf


Please be careful to respect your wife's wishes regarding acceptable risk. Let's face it; you've gambled in the stock market and won in this time frame. If we had been in a bear market, you could have suffered spectacular losses. It's really easy to forget about bear markets when we've had such a spectacular run-up like this.

I think it's very important for your wife to be fully aware of the level of exposure to risk assets, and that you and her are on the same page about how much risk is acceptable


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## b_foot (Dec 16, 2010)

james4beach said:


> Please be careful to respect your wife's wishes regarding acceptable risk. Let's face it; you've gambled in the stock market and won in this time frame. If we had been in a bear market, you could have suffered spectacular losses. It's really easy to forget about bear markets when we've had such a spectacular run-up like this.
> 
> I think it's very important for your wife to be fully aware of the level of exposure to risk assets, and that you and her are on the same page about how much risk is acceptable


Absolutely. That's the reason why I even consider having someone looking after our portfolio.


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## Sampson (Apr 3, 2009)

b_foot said:


> I was in touch with an investment advisor @ TD recently on transferring my portfolio to them. I'm leaning toward it. I don't mind the 1.25% commission (commission will come down as the portfolio gets bigger) as long as it could generate higher return to cover the additional cost. Still undecided.


This sounds like a terrible idea. You have done so well and more importantly, understand your strategy completely. The advisor will not bring value, unless you need other aspects such as estate, insurance, planning etc. Don't pay for 'stock picks'. I know many people who have mid-sized (high 6 figure, low 7-figure) portfolios with these types of advisors and they really don't do any more or provide any more consistent market-beating returns than average.

About investing your wife's money... I do the same as you, and I manage her expectations and wishes by providing updates. These are in the form of semi-annual and annual updates - which include description of all holdings and the accounts where monies are held, performance compared to a couch-potato, and how she could continue in my absence - i.e. directions of how to rebalance annually. Just as you have empowered yourself, get her on the same page and continue with what has brought you success in the past.


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## b_foot (Dec 16, 2010)

Sampson said:


> This sounds like a terrible idea. You have done so well and more importantly, understand your strategy completely. The advisor will not bring value, unless you need other aspects such as estate, insurance, planning etc. Don't pay for 'stock picks'. I know many people who have mid-sized (high 6 figure, low 7-figure) portfolios with these types of advisors and they really don't do any more or provide any more consistent market-beating returns than average.
> 
> About investing your wife's money... I do the same as you, and I manage her expectations and wishes by providing updates. These are in the form of semi-annual and annual updates - which include description of all holdings and the accounts where monies are held, performance compared to a couch-potato, and how she could continue in my absence - i.e. directions of how to rebalance annually. Just as you have empowered yourself, get her on the same page and continue with what has brought you success in the past.



Thanks -- I do provide updates a few times a year in term of net worth, just not the investment strategy. 

> how she could continue in my absence

That sounds more like me. I do have a check list things she needs to do in my absence  Cheers.


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