– Do you try to hit it out of the park, or do you move the fuck out of the way, to avoid getting it in your face?
I apologize for the baseball analogy (and the foul language), but it seemed appropriate, giving the topic I’m going to ramble about today!
You see, I believe that the Universe generally want me to succeed in life. Sometimes that faith is challenged though (I’m not religious, but I do believe in some sort of higher cosmic power. Sort of…). This week has been one of those weeks!
We try not to let the little things get to us, right? So what if someone took your parking spot right in front of you, and it’s the last one on the lot, and you’ve been driving around for what seems like hours to find one!? Karma will get that a**hole for sure!
Anyway, as parents of a 4-year old with two full-time jobs, two cats, two cars and a mortgage on a 200 year old house, there’s not a lot of tolerance for such kind of events to happen on top of one another, before someone lose their shit…Today that someone was me! (Well, almost).
To paraphrase my favorite (not so secret) television agent:
This is one time where I feel hugging is not going to cut it. – So I’m gonna write it out! π
As always, when I’m struck by bad luck, it somehow always ends up costing me money. Have you noticed that too? Perhaps it’s because I’m so fixated on money these days, that everything ends up being about money. This experience however (stay with me – I’m getting to it), has really taught me something that I’ve been neglecting in this whole FIRE process; I need to know my risk (profile). Any investment that you make – the FIRST question you should ask yourself, is how does this investment fit with my risk profile?Β Never mind the yield – the risk is what you should be concerned about!
This week, I got a lesson that I had forgotten about my risk profile – particularly in these 3 different “asset classes”:
- My employer provided pension scheme
- My house
- My kid (really!? – Admittedly, calling my kid an asset is a stretch – but bear with me on this one)
All good things come in 3’s. So goes the expression. Well, sometimes all bad things also come in 3’s (from my experience).
So, back to the point! Bad thing number 1 (this week):
After getting a new job (again), I once again found myself having to move my pension scheme to a new provider (one that I do not like, I might add, as I’m not impressed with their performance). I was forced to move my pension scheme from the provider that my old company use, to the provider that my new company use. Well, I wasn’t forced per say, but you can’t opt out of a company provided pension scheme – and also, my old pension plan comes with an important set of “rules” attached to it. One of which allow me to retire by the age of 60. These “rules” can be transferred to a new pension scheme (and put on top of the new – and any future money in there), but ONLY if you move it within 3 months of your job switch. This actually used to be 3 years, so these restrictions have certainly been tightened. I was aware of the 3-year rule, so I thought I had plenty of time to move it. When it turned out that I now only had 3 months, I had to move it straight away, to keep my option of retiring at 60.
Given that my pension is primarily invested in stocks and bonds (which is one of the reasons I don’t have stocks in my free-money portfolio), the yield this year has been somewhat non-existing. Anyone who has stocks (particularly indexes) in their portfolio knows that it’s been a tough year. Luckily, my previous pension provider had managed to not actually lose any of my money. So I was quite pleased with that. Anyway, my pension was transferred to the new provider. I then had to pick an investment profile. They have several to choose from (risk +/-), but firstly you have to pick between an active investment strategy, or a passive investment strategy (indexes). Looking at the historical performance of the two, I opted for the passive one. I realize now that this was a mistake. The passive investment profiles have lower fees, but it’s also clear to me now, that the passive investment strategy clearly has it’s forte when the market is going UP. When the market is going DOWN, you have no way of trying to “cushion the fall”. You just have to ride it down, and then wait for it to come back up. With an active investment strategy, you have options you can use, to try and minimize your losses.
Anyway, two weeks into my new relationship with my new pension provider, my portfolio was down by -8.45%.Β Lovely. Had I listened to my gut (and thought about my risk profile!) I would have chosen an entirely different investment profile (I would have basically just left the money un-invested at a 0% yield – but safe from the inevitable storm that’s brewing in the stock market). Anyway, now I just have to ride the wave, and hope it comes back up! (Which of course it will eventually. It just annoys the fuck out of me that I went from 0% to -8.45% when it could have been avoided).
As a result of this, I have decided not to follow my pension for a while (out of sight, out of mind – right?!). Since I’ve moved it around so much (5 different jobs in 10 years), I’ve actually lost track of how much my average yield has been over the years (my first pension scheme was opened in 2007). I am going to try and make a graph of my pension savings. I have a hunch it actually looks pretty good (I managed to dodge the 2008 bullet due to a little luck, and following my gut – which is why I believe I could have also avoided this downturn). Maybe it will cheer me up! (maybe it wont?).
Now, bad thing number 2 (this week):
When we decided to buy a house from 1850, we knew that we were bumping up our risk profile significantly. Older houses simply just require more upkeep than newer ones. This is why we opted for a 10-year extended ownership change insurance (ejerskifteforsikring) when we bought the house, which ultimately mitigates some of the high(er) risk. This is an insurance that is supposed to insure you against unforeseen damages or “incorrect” constructions in the home. Yesterday evening, I learned that the insurance company had filed for bankruptcy, effectively rendering this insurance void. YAY!
The kicker here is: since the last company of this kind went bankrupt (two years ago) they decided to change the rules to avoid this situation in the future. These new rules kick in on January 1st 2019…What are the odds!? 12 days before the new rules kick in, our insurance is void. The new rules protect home owners against this sort of situation in the future, in that there’s a fund that will effectively “take over” ownership of the insurance, so you can still file claims against it, for the entire period that you bought it for. 12 days!!? ((/#&#”!%#”!&/#%”!&/#(“!)). F U, Universe!
Bad thing number 3 (this week):
Our little one sometimes complain about an itch in her crotch. I told her, she should take a freaking shower a little more often. A while ago, she would shower twice per day (she had just discovered our rain-shower tub). I told her she could not keep showering twice per day, as water cost money! So now, she doesn’t shower at all! (we make her when we can’t remember when she last took a shower…).
So when she got up this morning and went to pee, she discovered that she couldn’t. She said “Dad, I feel like I have to pee – but I can’t go!”.
Great. We just went from DEFCON 3 (this is the basic level, when you have a 4-year old) to DEFCON 1! – 3 days before Christmas! If there was a DEFCON 0, this would be it! At this point, I was ready to go back to bed an never get up again! I had the whole insurance issue AND my horrible pension provider stats on my mind already, and I was sure this whole FIRE project was going to crumble beneath my feat (like I instantly felt that my house would also do – now that I no longer had any insurance!).
Anyway, it didn’t seem to bother her (she wasn’t in any pain), so she just kept to her morning routine, and at one point she was ready to go to daycare (fully dressed and everything, which almost never happens!). We decided to send her to daycare (the doctors don’t open until 8 anyway, and it was only 7:30), and see if the situation wouldn’t resolve itself. We then called the doctor, and got an 11’o’clock appointment for her.
UPDATE: at 9:07 the daycare called and said she had pee’d without any fuzz at all…Crisis averted. We’re back to DEFCON 3…
So with 2/3 bad scenarios still active, I hope to God (hmm) that we get a smooth Christmas!
Lesson learned: ALWAYS consider your risk profile – and be prepared to adopt accordingly!
The guys and I wish you a Merry Christmas! π
That’s a decent chunk of bad luck right there Nick! But glad you’re back to DEFCON 3 with situation 3 π
Many people seem unable to grasp the concept and importance of personal risk profile and tolerance. If I invest a a bit of my free funds in crypto (I did last year…well, more than that…I built a mining rig to mine for Ether), it doesn’t mean I am crazy! All I got was ‘how do you dare to take so much risk?’ But nobody asked about my risk tolerance and portfolio and other (safer) investments.
I used some funds to build a mining rig and mined enough to have a return of 0%. One of my best investments ever as I now know how to build a monster mining machine or gaming PC for that matter (had never done that before) π
I suggested to a co-worker back in 2011 that we used some spare Xeon processors (we had a lot) to build bitcoin mining rigs. He didn’t feel it was worth our time. WORST mistake ever! Even if we had just managed to mine 1 bitcoin, we would have done it on company time with company hardware, so it would have been money in the bank! π Oh well, you can’t win every time π
Oh boy, what a week. Seems like you could do with a few Cuba Libres following those two (three) crises! π
I also have my pension in passive investments (and I can nearly hear which provider you have), but luckily I have only had a small loss this year. Part of my passive investments are in a highly risky biotech index fund that have pulled up my returns in the three previous years. It’s a dangerous game, but it is working out so far – and I consider pension funny money, since I won’t see them for the next 40 years anyway.
I too considered pension funny-money, but since I now plan to start using them in 25 years, they are starting to become less funny to me π
And since I proclaimed my love for real estate, I would much rather have ALL of my pension money in REIT, rather than stocks…
If/when I manage to RE, I will take control of my pension money, and channel the majority into real estate, no doubt. But for now, I’ll have to live with the poor performance of my current provider, which really sucks!
As proclaimed yesterday, I started working on graphing my pension money through the years. It turns out that it’s really hard to “track” your pension savings, when they have been with 5 different providers in 10 years. My e-boks doesn’t have anything in it prior to the year of 2010 (I got my first pension scheme in 2007), and even the letters I do have from the pension providers back then, doesn’t say anything about my average yield and the size of my portfolio. This seems really stupid! So far I’ve only been able to track the exact value of my pension portfolio back 3 years. Going further back, it gets kind of blurry! However, from my payslips I can see how much was transferred to my pension provider each month. The problem is, there’s also insurances that are paid from those deposited money, and I know they’ve varied A LOT in price over the years. One year I paid DKK 22.000 for insurances via my pension plan (death, loss of earning capacity, private healthcare etc.)! 22.000 DKK! At least I only pay about DKK 10.000 for those insurances with my current provider, so that’s something π
Anyway, it turns out my pension on average grew DKK 120.000 per year since 2007. I know I didn’t pay that much into my pension (I only made DKK 30.000/month back in 2007), so I guess someone along the way managed to secure me a decent yield π If only I knew which of the 5 different providers to thank for that (Well, I know it’s not Skandia that’s for sure)! π
Yes, transparency and pension are two opposite poles. I have noticed some of the Danish players are starting to move ahead on this, but they will be eaten alive if they don’t improve their interfaces and transparency before startups like Grandhood and Matter (bought by Skandia though I believe) become large players.