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Thursday, February 11, 2010

The 100 000$ investment portfolio strategy: how I plan to make it happen even after I got laid off by BMO Bank of Montreal

Even after I got laid off by BMO Bank of Montreal, my ultimate goal is still to reach the 100 000$ in investment portfolio value. It’s going to happen in 2010, and I am going to explain how its all going to work out.

Ok, so here’s how it goes:

On date of February 6, 2010, I had 65 285.94$ in assets. Awesome. At that point, I am currently only missing 34 714.06$. At this point of my life, I am pretty impressed by myself. But still, I am missing 34 714.06$.... Where am I going to find the money?

No worries. This is how it’s going to goes, in just a few steps:

1. Dividend earnings

With the investment that I currently hold, as I explain in the previous post, I am going to earn 3 323.59$. My dividend earnings represent an extra income. At 3 323.59$, the amount is quite important. Let’s move on:

34 714.06$ - 3 323.59$ = 31 390.47$

Nice, but there’s still missing 31 390.47$.

2. RSP Loan

For 2009, I have more than 10 500$ to invest in my RSP. So I am going to invest yes, but it will be with the help of my dearest friends of Bank of Nova Scotia (BNS) – which institution partly belong to me by the way since I am a stockholder. I didn’t get the loan yet, but I have an appointment on Monday and I might be able to get the loan, since I am already fantastically rich.

31 390.47$ - 10 500$ = 20 890.47$.

Now we are talking. Only missing 20 890.47$. But yes, 20 890.47$ is still a lot of money!

3. Natural increase earnings

Because of our extra particular successful way of investing, out portfolio is going to simply grow naturally. I like to be super optimistic. I am going to advance an increase of 10%. It’s a lot, but possible.

65 285.94$ (portfolio value in date of February 6, 2010) + 10 500$ (of the RSP loan)
= 75 785.94$ (WOW!)

75 785.94$ x 10% = 7 578.59$

20 890.47$ - 7 578.59$ = 13 311.88$

Much much better! At this point, I will only be missing 13 311.88$ before reaching my first
100 000$.

4. Normal investment flow: one investment every 2 months or so

Since forever now, it’s seem, I invest on a regular basis. For the rest of 2010, I might be able to invest the equivalent of 13 311.88$, even if I got laid off by BMO Bank of Montreal. Major benefit: my prospective investments are all dividend payers. So each 2 months, I increase my dividend income and also the value of my total assets.

Need a clear example? Probably next month or so, my next investment plan is 200 stocks of Premium Brands Holdings Corporation. The advantages of adding Premium Brands Holdings Corporation in my investment portfolio are multiples. First, stocks of Premium are under 15$, which make Premium Brands Holdings Corporation pretty affordable. Also, Premium dividend is quite juicy: 1.176$ per stock! At 200 new stocks, this will increase my dividend earnings of 235.20$! And don’t forget to add the value of the stocks itself: let’s say 13.70$ per stock: 2 740$. If, in a year, I repeat the same circus, but of course with different companies, not only that I will become fantastically rich, but I will be able to reach my first 100 000$ in 2010. Got the picture? So what are you waiting for? Shouldn’t you doing the exact same thing? :o)


teeth said...

You state that you are the greatest investor, I laugh when I read this.

You estimate that in order for you to get to the 100k mark, you will need to borrow another 10k, in addition to the 20k in debt that you already have. That's ridiculous.

And, you dividend earning is only about 5% of your portfolio value, which in reality is not very much at all. I think the average for the whole TSX is about 3%.

Also, $2500 of your dividends come from Income Trusts. Since these will be transformed to corporations in 2011, the dividends will be chopped, probably by about 25% to 50%. Everybody knows this, it will happen. I don't think you realize the impact it will have on your dividend payments.

In reality, once you get rid of the debt, you have about 45k in net worth. It's good, but you still have work to do, and don't let it go to your head.

I estimate, that by 2011, under the best conditions, you will have a net worth that my be about 13k more than this, so maybe around 58k.

If you borrow money for your RRSP, you will have about 75k in your stock account, plus the dividends of 3k, so about 78k. Plus, you will likely put more money into your investments from your income, so you may put another 10k, so, if your investments do not drop in value, you will end 2010 with about 88k in your investment portfolios, and about 30k in debt.

But, if I had to place a bet, I would say that, based on the types of investments you currently have, you will end up losing money. I say you probably lose about 10% in value, so you will end 2010 with a portfolio value of 80k. As for net value, 80k minus your debts of 30k, and you will be left with net value of 50k.

Time will tell, we can check back at this post on January 1 2011.

Sunny said...

Did you notice the domain address, That's something that's as hilarious as when I say I am a great invetsor. I did say: I am the greatest investor, I said something like I am the greatest of the small... You need to be a regular reader to understand my sense of humor. All this is more to do something for myself by myself. Getting in debts for my RRSP might sound ridiculous to you, but its not for me. My blog is all about showing up my failures, my debt, and where I am right now in my finance. And if its make me happy to borrow in my RSP to invest, guess what, I will do it. But I won't get deeper in debts after this loan. My way is very personal, it had nothing to do with major investors and so on. Its more about getting things done the way I want. You now might understand why I got fired by BMO Bank of Montreal. I am too perfectly perfect. Too perfectly me. As for now, I am still on for the 100 000$, with or without 20 000$ in debts.

teeth said...

Well, you write in your profile that your "larger goal is to reach financial freedom." You cannot do this by simply increasing your debts (borrowing money) in order to buy stocks. You do this by increasing your net worth. There is no way around this.

You wrote in the last post "So what are you waiting for? Shouldn’t you doing the exact same thing?" Well, I just want to present a contrary point so that readers do not blindly follow your advice.

You present contrary information because on the one hand you say that you prefer the safety of dividend paying investments, but then you take large risks by borrowing money to invest...

And then, when your stocks decrease in value, you justify them by saying that they still provide dividends. You simply ignore the fact that the value has plunged...

You state the values of your investments, but not how much money you have made (clearly because the investments are not really worth more than the price you paid, and in fact have mostly dropped in value)

People may read your blog and think that it is a good way to invest, while in fact it is very dangerous. We will see how your predictions turn out by the end of the year... time will tell. Until then, good luck. I am a regular reader and admire your ability to save.

Also, I really don't think you will be granted the loan of 10k to invest in your RRSP. But, tell us how it goes.

Sunny said...

Thanks for sharing. Yes, my goal, my larger goal is t reach financial freedom, but it will take me a couple of years to reach that point. As for the "So what are you waiting for? Shouldn’t you doing the exact same thing?" - it was my punch line. If you read the right column on top - I have a warning saying I am not a pro. For my RSP, I need to invest at least 10 000$ if not, I am going to pay extra in taxes. I was thinking about transforming some of my investment into RSP, but since I cannot decide what to do exactly, I just wanted a RSP loan. I promise, after this loan, I won't get deeper into debts. :)

Ron said...

I agree with teeth on the leverage, although I don't feel there's much downside from these levels, but anything can happen (the unexpected). But I wouldn't had wanted to be that leveraged (30,000 debt for 75,000 in equities) entering the downturn of fall 2008 and early 2009. Your portfolio could've easily been down 50% to 60%. Now losing 50% of your money hurts, but losing 50% of money that's not yours is even worse. But I must say, I like your determination and your way of doing things. It might not be perfect, but it's better than not saving at all. Remember the TSX was at 11,400 in Sept 2000 and is at the same level today. You need to find a way to take some profit along the way (pay off debt, buy bonds) or you can lose that hard earned money pretty fast.
Best of lucks!

Sunny said...

I understand. Its true that anything can happen. But that my investment lost half of its value, that Ido not believe that. Why? Because even while we were in the stock market crisis, my investment portfolio only lost 25% in value at that time, but I quickly recover. I mean, I can live with a 25%-30% value lost - it could happen at anytime that it wouldn't affect me much. At 29, I have a lot of time ahead. And now is the time to explore and enjoy the "joy" of leverage. Not when I will be 45 and retired. I want to enjoy my money now. I want to get the 100 000$ in assets for 2010. I guess everyone had understood that by now lol. Yeah, my plan is not perfect, I did mistake, I am not perfect myself, I lost money but... overall, I did quite well, from my point of view, from a personal perspective. And I want to continue doing it my way. Like for me, I just want to sharemy things and if someone out there can figure out something better for him or herself than, mission accomplish - I wouldn't had blog for nothing - overexposing myself over the Internet. Can you beleive, my readers know EVERYTHING about me - this is even better than getting the Playboy centrefold. Don't you think you so? I am better than Playboy girls. I am the Dividend Girl :) (isn't punchy enough?? lol).


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