Net Worth Update: Q3

Hey!

Accompanied by all the big enterprises reporting results, I can’t stay behind in reporting some numbers of course!

As the stock market has been rising lately, so did my net worth. However, there was an enormous rise in net worth. Why? This was due to 2 main factors: 1) subsidies 2) gift.

The subsidies are coming from the government linked to the apartment I bought. Long story short: this should be a little over €100,000. The gift I received came from my parents and was €75,000. Whether or not it is ethical to accept gifts, is another debate. My main rule of thumb was to not accept what I could not pay myself.

In the calculation of the mortgage, the intrest costs for the coming 20 years are already included. I leant €160,000 and the intrest costs are around €32,000 in total. I value the apartment around €320,000. There are some other costs involved linked to the mortgage, notary, administration… These are deducted as you can see above. I will still have some costs to furnish the apartment, so any frugal tips are welcome!

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It’s gonna be hard to achieve impressive results in the future as my monthly cash flow will be reduced by around €800 due to the mortgage. However for every €800 I pay, €640 stays in my pocket and only €160 is paid for intrest over the years. Assuming an appreciation of housing prices in the future, this will help boost the net worth. This will hopefully offset the opportunity costs of not being able to allocate this money into the stock market.

Side notes:

– The only regulation for receiving the subsidies is to put your place of residence at the apartment for 20 years. As this does not prevent me from buying other real estate, I don’t consider it a dealbreaker.

– By stumbling upon this opportunity, this implies I already reached my Financial goals by age 25.

–> Even without the gift I crossed the €250,000 mark on my own. This means I will have to put up a new goal.

– It took me more than 2 years of searching the real estate markets to find a unique deal like this. I consider the apartment both an investment and living opportunity. Some quick calculations showed that, hypothetically, even if I would never live in the apartment and pay taxes/maintenance every year, I would still end up with a decent profit.

How are your goals developing?

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Dividend Report Oct ’17

Time to dive into October’s dividends!

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October:

Euronav: €7,13

Vanguard S&P500 UCITS ETF: $9,31
Altria Group: $12,95
Cisco Systems Inc: $6,91
Symphony International Holding Ltd.: $385

Total dividend: €361,12
Used exchange rate: 1,17$/1€


Symphony’s special dividend ($385) really saved the month. It was rather unexpected but happily received.

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Another massive YoY increase! I don’t expect the special dividend from Symphony to hit my account every year but it sure as hell is welcome. It will be hard to obtain the same results next year.

How was your passive income in October?

Investing in Belgium for Beginners

Let’s assume you are convinced of the importance of investing and want to start. What are the first steps?

Pick a broker

There are plenty of brokers online. I would recommend to not choose for a classic bank because they will sell you their own products on which they make the big bucks. They also have the habit to (over)charge you for every fucking service. Yes, I’m talking about you BNP Paribas (amongst others). For instance, they charge money to receive and deposit dividends from companies on your bank account. Scandalous!!! As if Belgian people don’t already pay enough taxes on their dividends (30%).

I would suggest going with online brokers such as BinckBank, Lynx, MeDirect, DeGiro… Depending on your own wishes and requirements, compare the costs and services. I have accounts at BinckBank and Lynx. I like BinckBank for their fast & clear communication and easy to understand platform. Lynx is more complicated but allows in turn way more possibilities to trade. I would suggest Lynx for a more active investor/trader who already has quite some experience. Lynx is also better for option trading. Watch out for the ‘lending of securities’ (in Dutch: uitlenen van effecten). Brokers such as DeGiro use it often and try to lure you with some extra yield. However, these actions are in most cases not profitable from a risk/reward view and I avoid them due to high risks when things go south. If you would consider doing this, read all informations very well!

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Investing is not some kind of blind darts!

Where to put your money?

Depending on your own will and time, you can choose to buy individual stocks. This, however, requires lots of follow-up and research. Prepare to read annual reports and many more. This is in my opinion the most profitable way of investing if you know what you’re doing. I consider this active investing.

What about bonds? It depends, in times of high yields it might prove very smart to buy a couple of bonds. Buffett did the same in his old days. However in these days, with yields at extremely low numbers, it does not make sense for me. Unless you want to bet your money on the Nigerian government, you’ll have a hard time finding some good-yielding bonds.

Mutual funds? Often banks promote their own products, for instance mutual funds. This is a basket of different stocks in which you can invest with a smaller amount. I’m not a big fan of these funds. Fund managers and banks almost always pay themselves (very) generous remunerations (1-1,5% easily) and they don’t guarantee a higher profit than the index. These forms of active investing are underperforming the index in more than 80% of the cases. Buffett even dared the hedge fund managers to a risky bet in 2007; which they are quite guaranteed to lose.
See this link: Buffet’s bet

Trackers/ETF’s: the way to go? If you don’t want to invest your time in analyzing and picking individual stocks, then I would suggest you go down this road. ETF’s are a very cheap way of investing in an index and their purpose is to duplicate the index. Costs are way lower than those of mutual funds (0,20-0,40% on average) and they often outperform mutual funds and the average stock pickers over longer periods. You also have less worries about individual companies and the risks are more spread. Don’t expect 20%+ years over year but the average return is 6-7%. That’s not bad for basically doing nothing at all. This requires 2 minutes a month to buy additional shares.

Important: If you don’t need the dividends from ETF’s, opt for capitalizing ETF’s (‘Acc’ as abbreviation). ETF’s that distribute dividends have a ‘Dist’ tag. Capitalizing ETF’s keep the money inside the fund and this way you avoid paying 30% taxes on them. I prefer Vanguard or iShares to invest in ETF’s.

I’m a proponent of investing in American stocks. If I would have to pick a portfolio of ETF’s, it would mostly consist of S&P500 (at least half), All-World and Emerging-Markets. Pick ETF’s in which you strongly believe. This makes it more bearable on a mental level.

There are plenty of other investment possibilities such as precious metals, oil, valuta or cryptocurrency. I do not know enough about these products and don’t really see them as an investment so I stay away from those. If you do have the knowledge or firmly believe in them, don’t let me stop you.

Bogleheads is a very interesting website if you want a closer look to all possibilities in Belgium.

Discipline 

Keep your income high and the expenses low. Have the discipline to pay yourself first. Invest this money on a monthly basis or quarterly basis for example. Be sure to check how much transaction costs you have to pay. I’m paying around €7/transaction so I don’t buy in smaller numbers than €1,000. This way the transaction costs don’t take too much of my yield.

One of the mistakes I made was in my first month of investing. I transferred €7,000 onto my broker account and started speculating, hoping for some quick profits. It was the week before August 24, 2015 (Black Monday). It didn’t turn out that well and after 2 years I finally got to close some positions at a very small profit. After that life lesson, I knew where I wanted to go. Advice: don’t put all your money at once in the stock market! Today I’m very happy I started with only €7,000.

Even when the stock market goes down, keep on buying. Especially then. Your profits are made when you buy, not when you sell. From time to time, stock markets will crash. That’s life. However, they always bounce back up. It might take some years but they do come back stronger. Try to behave rational and look at the underlying strength and fundamentals of a company or tracker. Search for value (=/= price).

Analysts are not goddish. Sometimes I ask myself how some analysts arrive at their price target or recommendation because it makes no sense at all. For smaller companies, analyst price targets might be self-fulfulling prophecies so I don’t take them for granted. I believe they give an idea of the market sentiment on a particular stock and how the future projections might evolve. Do your own research before buying into stock. For research I base myself on previous results instead of future projections. Growth can have a price too, but without a solid history it is more speculation in my opinion.

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A way too big loan?

As I mentioned in my previous post Great news, I took a rather big mortgage of €160,000 to pay off my apartment.

As a matter of fact, I could have paid cash for my apartment without a loan. So why didn’t I go down that route?

Return of stocks > cost of intrest on loan

My intrest rate is 1,89% fixed. Add up the accompanied costs of acquiring a loan and my total yearly intrest rate (costs included) should be around 2,20 – 2,30%.

However, it is not that hard to achieve yearly around 6-7% in the stock market. If you put in some more work, it can even go higher. So, given the high margin of safety, the choice was easily made. This way I can keep all my money in the stock market and keep collecting dividends.

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The money I receive from my parents, will mostly go into the apartment for furniture, machines, painting… I expect to still have some cash left after that. Problem is that I had to promise not to buy stocks with the money from my family (they are quite opposed to the stock market, unfortunately). That cash can be put in a savings account to pay for apartment expenses while I can keep transferring my wage minus the mortgage in the stock market.

Another option would be to buy a second property and I will probably walk down this aisle if the current tax laws stay applicable. I would look for a studio/apartment up to €140,000 and rent it out.  This would be a combined effort of paying an amount cash and getting another loan. The rent should cover the loan. This way I can optimize my tax form. I would like to achieve this by age 25.

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Dividend Report Aug + Sept ’17

Another 2 months passed by so it’s time for a dividend income report!

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August:

Government bond: €235
National Grid: €61,19
Novo Nordisk: €25,65
General Mills: $20,99
Hormel Foods: $4,55
Verizon Comm: $13,74

= €321,84 + $39,28 = €355,13

September:

Unilever PLC: €26,59
Resilux: €326 (capital reduction, not a real dividend!)
Royal Dutch Shell: €47,27
Imperial Brands: €15,41
British American Tobacco: €13,49
Pfizer: $2,86
Grainger Inc.: $15,23
IBM: $8,03
Johnson&Johnson: $6,00
Gilead Sciences: $20,11
HBSC PLC: $43,89
LyondellBasell: $40,95

= €428,76 + $137,07  = €544,92

The used conversion was 1,18$/€.

September got a huge boost from the capital reduction of Resilux, which was tax-free. It were 2 good months and October looks promising too.

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Great news!!!

After a couple weeks of absence, I’ve finally something big to announce. Get your seatbelt on.

Since 2 years I have been following the real estate market to get to know the price setting and market conditions. I did this in order to find a decent, payable property to live in when I graduate. As soon as I graduate, I will probably work at the military airport in Brussels and because commute is not possible (very time/money consuming), I wanted to buy my own place to stay.

So, after starting the final year at the academy, I accelerated the pace. At first I found an apartment near Brussels at a reasonable price with a commercial ground floor to rent out. There were 2 major problems: the commercial space needed BIG renovations and because of a new shopping center, people were abandoning the commercial places in the neighbourhood and there were at least 15! places for rent. No opportunity lost here.

On the other hand, I had been keeping an eye on some kind of social project but there were only a couple of selling days. Here comes the interesting part. It concerns a new apartment block which should be finished by summer 2019. The apartments are located at Laken (Brussels) and are 3 kilometers away from the Atomium and The Great Market/Commercial City Centre. No complaints about location.

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It receives major subsidies from the government and enjoys a beneficial rate of 6% VAT instead of 21% VAT which makes quite a difference. The only negative point: I have to put this apartment as my place of residence for 20 years. There were some other regulations like an income limit at the time of buying, first property, blablabla… but I fulfilled the entree preconditions. After 20 years, there are no more regulations and I’m free to sell the place and pocket the subsidies. I expect the housing prices to raise over a period of 20 years so the worth of the subsidies will raise as well.

After some further research, I decided that the pro’s outweighed the contra’s so I signed my contract to buy the place! It’s a very spacious 2-bedroom apartment with 115 square meters of living space (1,250 square feet) and a 10 square meters terrace (110sqfeet). It’s visible on the image.

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Let’s talk numbers. All numbers are a pretty correct estimation, it might vary a couple of hundred euros due to costs hard to estimate.

I’m only paying around €204,500 for my apartment and parking spot. (This is almost peanuts).

My subsidies and low-level VAT come in for around €108,000. This is already deducted from my buying price. It’s crazy how cheap I got this place considering it’s completely new. Thanks to the subsidies! There will come in some costs like solicitor and loan costs so this will reduce my net worth a little bit. I might do some small adaptations to the standard settings of the apartment like changing the floor or sanitary so I expect the costs to go up. However, these will also add value to the apartment so it’s not money down the drain.

I expect the apartment to be worth between €315,000-€325,000 when it’s finished. I’ll have to buy some furniture too off course. I plan to install a bar into my living room because let’s face it, it’s awesome.

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Some other great news: my parents are giving me a gift of €75,000 to help me fund the place. This might be a matter of moral trouble to some people, but I look at this rationally. Being the only child, inheritance taxes are gonna be a living hell. This means it’s better to already pass something to lower the taxable amount. If you have to choose between yourself and the government, it’s pretty easy ain’t it? 

Another great thing: my aunt (no kids, no husband) decided to give me €10,000 once the place is built so I can buy my furniture. Thank you auntie! Same explanation as above.

I went to the bank to ask for a loan and got a pretty decent deal. I’m getting €160,000 on a 20-year timeframe at a fixed intrest rate of 1,89%. This implies a monthly payment of +-€800.

This means I’ll easily be able to keep my money invested in stocks, yay! This was a conditione sine qua non. I was ready to transfer a little amount but because my intrest rate is so damn low, I’ll just keep killing it buying stocks. As long as my stock returns are higher than my intrest payments, there’s no fucking problem. Thanks for the cheap money!

Getting a loan way bigger than necessary means I’ll have plenty of cash available. I will put this in another future post.

The subsidies (€108,000) and the family gifts (€85,000) will skyrocket my net worth way over €300K. 

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Net Worth Update: Q2 ’17

A long overdue net worth update upcoming!

Let’s first feed you some numbers:

As you can see, my portfolio and other funds are listed. My net worth has been increasing considerably last year. See the graph below.

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We see a whopping 40%! increase in net worth. I would sign for that percentage for all the upcoming years…

This means I’m well on my way to reach my Goals of 2017.

Concerning my Financial goals by age 25: I’m at 55,76% of my net worth goal of €250K.

How’s your NW developping?

 

New buys Q2 ’17

Brace yourselves, new positions incoming!
The new additions to the portfolio which were made during Q2!

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1) Scandinavian Tobacco Group: 170 shares. Cost basis: €2,488 . This is a Danish, rather small tobacco company which focuses on high quality, pipe tobacco. It’s no mass production but more for a middle- to high class public who know how to appreciate a good tobacco product.

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2) AB Inbev: additional 50 sharesCost basis: €5,366. I racked in some nice profits from a bold short put. I decided to reinvest them mostly in the company.

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3) Euronav: 100 additional shares, cost basis: €712. An oil tanker company of whom I had bought 100 shares when I started investing but they went downhill after the oil price drop. The company trades at around 25% discount to their book value and the management is doing good things, in my opinion. When the oil market starts to rebound, they will profit.

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4) 300 Ahold Delhaize Turbo’s @ stoploss 15,1Cost basis: €1,296. I bought them right before the Amazon-Whole Foods take-over which proves again that markets can’t be timed. This was a bold move to play on a temporary undervaluation and to rack in some quick profits. I couldn’t believe my own eyes when the stock took a deep dive after the Amazon news. This position will be closed when it rebounds. I need the money for other purposes, see later on. However I still think that Ahold is worth at least €20 a share, patience will reward.

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5) Bpost SA: 90 sharesCost basis: €2,065. This is comparable to UPS or another post/parcel delivery service. They are a Belgian dividend cash-cow and trade at very fair multiples.

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6) Resilux: 20 shares for a grand total of €3,042. This is a Belgian small-cap company that produces PET-forms for the consumer industry. They are quite small and therefore not influenced by big funds or investment companies, which I like very much. Attractive valuations and a family owned business. Buy tip! If I would have more cash, I’d for sure buy extra shares of them! In the next months they will distribute €16,30 per share in cash to the shareholders, tax free.

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7) Norcros PLC: 1,750 shares for a total of €3,536. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. (source: google finance, it was pretty accurate). They are a small firm with a high cashflow and small market cap. There are some questions about their pension deficit but after some homework it was proven to be a non-issue. They are pretty undervalued and have the capability to expand in the future.

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8) LyondellBasell NV: 30 additional shares, cost basis: €2,235. This NYSE traded company stays an unpopular chemical company and is just unloved by Wall Street. It is however interesting for European investors because we don’t pay US or NL taxes on dividends. It has a troubled history concerning their bankruptcy in 2010, but those worries are part of the past and I think they are a very profitable business with capable management and good investors (Leo Blavatnik).

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9) General Mills: 72 shares, cost basis: €3,670. This is a $30 billion U.S. consumer foods company which raised many childs and adults. I like their Haagen-Dasz ice cream way too much!

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10) Gilead Sciences: 15 additional shares, cost basis €890. Mostly a dollar-cost averaging operation. This starts to become a pretty big position but I’m confident they will put their war chest to good use. Patience will pay off.

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11) W.W. Grainger: 13 additional shares, cost basis: €1,995. Part of dollar-cost averaging but a very solid MRO-company. Dividend growth history of more than 46! years. You just gotta love it!

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12) Cisco Systems, 40 shares. Cost basis: €1,150. The market is a bit skeptic but they have plenty, plenty of cash oversea which will come back eventually. Trump, tax holiday? 😉 Almost every human being is affected by Cisco products, even if not in a direct relationship. Might buy more if an opportunity represents itself.

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13) Altria Group: 18 additional shares, cost basis €1,030. After some new government regulations, the market became afraid and sold off the shares. I scooped them up at a nice discount. They also own 10% of AB Inbev.

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14) Hormel Foods Corp.: 45 shares, cost basis: €1,407. Very well managed, family-owned business in the consumer industry, meat processing to be more exact. Ultra low debt and a long dividend growth history.

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15) Pfizer: 15 shares. Cost basis: €445. Small position, how cute! Normally I don’t tend to initiate these small positions but it was better to spend the cash and transaction costs of only $5 were super low.

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16) Symphony International Holdings Ltd.: 5,500 shares. Cost basis: €3,963. Another big, new position. This holding operates in Asia and has many assets. They are investing in companies in particularly high-growth sectors; primarily healthcare, hospitality, lifestyle and branded real estate which will benefit from the rising disposable incomes of Asia’s increasing, and increasingly aspirational, population (source: corporate website). They trade at around $0,85 but their NAV is approximately $1,28. Their director recently bought 2 million shares himself and I think the discount to their NAV will narrow down a lot. Plus, it is a nice geographic diversification for my overall portfolio which yields a very decent 5% net in dividends.

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This was a massive investment quarter. But, there’s a catch.

Recently I found 3 investment opportunities: Resilux, Norcros PLC and Symphony International Holdings. I was too short on cash to make a decent investment in all 3 of them so I created a construction. I sold my entire stake of 80 shares in AB Inbev and 100 shares of Ageas. As I don’t wanted to sell them, I immediately bought 1 call option on each of them at a very low premium (loss of less than 1%). To buy the 100 shares of AB Inbev and 100 shares of Ageas, I only need €10,400 in cash because the premiums are already paid. I expect to complete these buys as soon as halfway November because I already have €2,900 in cash. This means a remaining cash deficit of €7,400.

After that, the cash balance will practically be reduced to zero. I don’t feel comfortable having almost no cash so after this construction I will save up some cash for opportunities.

I hope you enjoyed my new buys and additions to the portfolio! I’m curious to see the dividends next year.

Did you go on a shopping spree lately?

Positions sold Q2 ’17

Hey everyone, time for some portfolio changes!

I’ve been quite active last quarter on the stock market. Normally I don’t tend to be so active, however circumstances and thoughts pushed me towards it.

First of all, I was finally able to sell my Peugeot shares for a small profit of 8% after keeping them for 1,5 years (€135). They were a ‘heritage’ from my first investment days and I was looking forward to put this money elsewhere, more predictable. I don’t like their cars either. The smaller ones really have no comfort for the passengers. I thought I needed new kneecaps after carpooling.

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Secundo, I sold my position of 20 shares in food giant Nestlé SA for a profit of almost 20% in less than 8 months (€230). I sold them shortly after the activist news for 2 reasons. The multiples are getting pretty high and the dividend tax is killing me. 35% Swiss withholding tax and 30% Belgian withholding tax is just too much. These taxes take away more than 1,8% in annual return. Too bad, I liked the company. However, I like money more.

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Next I sold Allergan PLC. I bought them with the prospect of the merger with Pfizer which unfortunately was cancelled. Fundamentals weren’t too clear in my opinion so I decided to sell my small stake and cut losses (luckily enough). This resulted in a loss of €297. Lessons learned.

Fourth and last position I sold was Wal-Mart. I bought them almost 2 years ago when they were on the slaughter bank. I got a 30% profit, being $725 (dividends not included). In my opinion they are slightly overvalued and I do not like the current retail businesses anymore. They are way too competitive and margins are very thin. Almost all retailers are investing big-time in their business and Amazon is another threat to be taken care of. It’s a solid company, but the business is not my cup of tea anymore.

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So far my sold positions... This freed up some cash of course, which was put to work in the weeks/months after.

In a next post I will discuss the rather long buy list with a net worth update!

Note: Normally I do not like to sell stocks of good companies, however this felt justified due to a changed tax regime or business challenges.

Have you ever been forced to sell a company you like because of changing market conditions?

 

Lack of imagination

When I talk to people about the future, they tend to always be average. Most of them want to own a house, have a car and maybe an apartment at the Belgian coast for their old day. Don’t forget a decent pension after a career of 45 years. Then they see their life as succeeded.

Seriously? Is that what you would settle for for the rest of your life? I can’t imagine a life following the herd.

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Think bigger, set goals and achieve them. Truth is, I don’t tell them my real vision on my future. They simply wouldn’t understand or would think I just don’t understand life.
One of the first things that pops into my mind is flying a helicopter or relaxing in Miami enjoying a cocktail. Celebrating New Year at the beach in Sydney or have Christmas in Lapland, home of Santa. Skydiving above the Palm Tree Islands in Dubai or walk on the Great Wall. Maybe work a couple of years in the USA or own a company? The options are endless.

Of course, this comes at a lofty price tag, but isn’t that why people become financially independent? To pursue dreams and lifegoals? This might all sound cocky and big talk but what’s the point in living an average life? It really irritates me how people don’t dream big or set high goals.

Aiming for the stars and landing on the moon isn’t that bad after all. Most people stay on the Earth.

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Without big dreamers, no multinational companies would exist. No man would have put a foot on the Moon or flown a plane. No telephone or electric cars. The world needs people with huge dreams to innovate.

Do you sometimes get irritated by how little people dream?