Obsessed

I’d like to start this post with a quote from Conor McGregor fitting right in:

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I’ll add a quote from Felix Dennis:

Most people don’t want to be rich.”

At first, I didn’t fully grasp the meaning of the phrase. But, after some thinking, it actually is very true. Very few people have the dedication and persuasion to chase what they want. I see it every day in daily life. Things are too hard, people are tired, want to have fun or don’t want to put in the effort. No one will throw everything into your lap. Nothing worth having comes without effort. Sacrifices are unavoidable. Did you ever reach something awesome without hard work?

Research showed that 74% of the 18-34 year olds in Belgium does not invest. This is in my opinion the most interesting target group, as this lays the foundation for wealth and a maximum compounding effect. Of the remaining quarter that does ‘invest’, only 18% decided to go with stocks. The rest does put some money in mutual funds, bonds or low yielding tak 21-23 products. I was astonished by this numbers. This means only 4,68% does invest in money making assets with potential. Taking the whole Belgian population into account, this amounts to 9% which is still really low.

During my study time, there were a lot of people with higher grades than me. Not only because of luck, but mostly because they had a better understanding of the matter. So I would expect them to be good on the stock market as well, or at least have an understanding of it. Truth is: they don’t and it’s a missed opportunity. How is it possible that smart people don’t figure it out for themselves? Lack of interest, knowledge, scared?

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But the actual point of this post is about finding a balance between investing and living your life. The thing is, I love the game of investing. However I do not think one should love investing to actually invest. Going with an all-world or s&p500 ETF might provide very decent returns as well with few to zero activity needed. Sometimes I’m having trouble between deciding to live in the now vs investing. I try to allocate as much cash flow as possible towards my stock portfolio and thus we meet the opportunity cost. I’m not a man who needs lots of stuff to feel good, but I do appreciate quality and soundness in products. When I’m considering to buy something I often compare the price to a stock. Last week I was looking at new shoes and the price was approximately the same as 1 AB InBev share. I preferred the 1 share above a new pair of shoes.

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Does this make me an alcoholic?

Normally I don’t have problems to restrain myself from buying items. What does make it a problem for me is if it could have an impact on my social life. Let’s go on Saturday to an adventure park, dine at a restaurant, continue the evening in the movies theater and finish with some cocktails. That’s all fun and games but in the end of the evening you’re €120+ out of the pocket. I do however not like it to refuse an evening out or say no to a social event.

How do you handle this problem? Do you make a weekly/monthly budget for social activities or events? Do you sometimes regret not being able to go out when the budget is zero, even though you do have cash available?

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Dividend Income Nov ’17

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Let’s dive into the numbers:

Scandinavian Tobacco Group A/S: €40,68
Pandora A/S: €12,31
AB Inbev: €112

HSBC Holdings: $43,89
Verizon Communications: $14,04
General Mills: $23,33
Hormel Foods: $3,54

= €164,99 + €71,86 (used conversion rate: $1,18/1€) = €236,85

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It’s the first time that I ever received dividends in November, happy me!

One shot, one opportunity!

I’m going to try to keep it short.

Stock prices are trading at high multiples, real estate is selling at expensive prices and bonds are not interesting at all. Precious metals are not that attractive for the longer term and cryptocurrency is just a bubble, right?

So, what to do with your money? To make it more interesting, what would you do when you were young again?

Imagine your somewhere in your mid-twenties and I’m giving you a budget of €250,000 that you are free to invest. To keep it simple, you don’t have to worry about a car, a house for your family or your future kids college money.

What investment paths would you take? 

The purpose of this post is to get to know different people’s opinion on what to do with saved up cash. In my opinion, it’s always interesting to read plans or possibilities. 

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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?

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?