It’s been a while since I’ve written about my investment strategy, so I thought it was time for a little update on that front, seeing that this is supposed to be a personal finance blog. – I realize that it has taken a bit of a slant towards the personal part, rather than the finance part lately 😉
I’m all about the balance (pun intended), so it’s time for some lofty thoughts, numbers, pie charts and maybe a(nother) pun or two (we’ll see about that!).
Being an IT guy, I have decided to adopt a well-known term from the tech-industry, and adapt it to my investment strategy: KISS! (Keep It Simple, Stupid!)
That sounds simple enough, right?…
Basically the idea is that by keeping it simple, you minimize the risk of errors – this approach can obviously be applied in many aspects of life! – Try it out for yourself; Whenever you’re faced with a difficult decision or a tough choice – KISS! 😛
I used to be a very confident person, but with age I’ve grown more and more anxious and uncertain (thank you, life!). In the attempt to regain some of that past confidence, I’ve decided to once again listen to my gut, and stick to my first impulse (because that’s usually the right one!). Being a bit anxious and uncertain, I decided a long time ago that the stock market wasn’t for me. This whole rollercoaster ordeal simply affects my mood too much (I’m not the only one, just look at Marc over here, who had a rough December – like a lot of the other stock-holding FIRE guys).
You just have to NOT look at your portfolio every day!
Yeah, like that would ever happen…I’d look at that shit 4 times per day! (I know, because I do this sometimes with my pension – which is currently invested in stocks, via a handful of indexes). So, to really understand my disdain towards the stock market, we have to take a look at my Net Worth.
I basically have 3 pots: My house (equity), my pension (60+ retirement money) and my FIRE pot.
Let’s see some charts, man!
I did not realize until just now that my Net worth is getting very close to my Total Balance goal. Funny! Remember though that my Total Balance goal is for the FIRE pot alone, as I intend to use the FIRE pot to eventually bridge my way between early retirement and my actual retirement (I can start withdrawing my pension when I’m 60).
As promised, a pie chart (uuuhmmmm, piiie):
(Notice the symmetry! I did not plan for this – it’s just the magic of coincidence 😉 )
So it turns out, I currently have 40.5% of my Net worth tied up in the stock market. Given my disliking of the stock market, this is a bit surprising! Unfortunately, my current pension provider does not really allow me to de-allocate my funds from the stock market.
BIG NEWS: My company has chosen to switch pension provider as of March 1st 2019! YAY! They have even chosen one of my preferred providers! YAY! So soon (April-Mayish), I will be able to allocate a vast majority of my pension funds to REITs (Real Estate Investment Trust) instead of stocks. This is indeed good news! I will write a post about that at a later date, once the move has been executed. (EDIT: I moved 75% of my Pension portfolio out of the stock market in April 2019) (EDIT: I moved a portion back into the stock market in April 2020).
I currently add roughly DKK 118.000 (€15.733) to my pension pot every year (this is mandatory – even if I wanted to change it, I couldn’t). Interestingly enough, I add just about the same amount in equity (mortgage payments) as we pay down our loan with DKK 112.000 each year (this does not include interest payments). It shall be interesting to see, if our equity can keep up with my pension (it shouldn’t, as I expect at least 5%+ interest on my pension yearly on average). Anyway, as I outlined in a previous post we are planning to reduce our loan repayments, in order to leverage our equity – but our loan isn’t up for refinancing until April 2020, so I won’t be able to launch that plan for another year. (EDIT: Yeah, so that plan didn’t quite pan out either!).
Nick, you’re starting to ramble – back to your investment strategy?
Yes, sorry! Now that we’ve established my current exposure towards the stock market, my FIRE-KISS plan can now easily be explained:
My investment strategy:
- Accumulate a shit ton of money (“a shit ton” is relative of course – I think I’m getting there!)
- Allocate 10-15% of that money towards a high yield, high risk asset class (hello, crowdlending)
- Allocate another 10-15% towards the stock market, via a few select indexes/ETFs (hello, aktiesparekonto)
- Use the rest to buy real estate! (show me something good soon, imbro!) (EDIT: Hello, Property #1)
I was kind of hoping for brickshare.dk to launch something interesting in Q1, but it appear that they’ve lost their mojo and gotten themselves into some sort of trouble with the authorities (that’s the word on the street – but since they’ve failed to inform the public about what’s actually going on, we don’t really know what’s happening – but they are not accepting new signups at the moment, and previously promised projects are yet to be seen). I expect them to resolve the issues in Q2 though, so hopefully we’ll see some good news from them shortly (we’re giving them the benefit of the doubt 😉 ). (EDIT: We now know that they were working on attaining a so-called FAIF-license with the danish FSA, which they have received and have now released several new projects)
Anyway, why am I planning to invest 70-80% of my FIRE pot in passive real estate investments? – KISS!
Real estate is in generally considered a fairly low risk asset class – but also a very illiquid asset class, which fits me perfectly! I have a 10 year+ investment strategy, and I really don’t need the distraction of having the possibility to keep second-guessing my investments (the other day I seriously considered going long on the Cannabis market).
Slow and steady wins the race.
There’s not a lot of assets out there, which are as slow and steady as real estate 😉
How does your strategy look? Enjoying the rollercoaster rides?!