Thursday, November 10, 2016

Here's to the Eighties!


Typewriter, Schreibmaschine by Frank Jakobi


A couple of days ago I made a new milestone by getting a new first digit for my portfolio. On Monday the 7th of November, I recorded, for the first time ever, a portfolio value over 80k euros or 80 035 euros to be exact.

This is only 164 days after making my previous milestone of 70k back in May. What? That's less than half a year which leaves me a bit surprised actually but this is a surprise I'm quite happy to handle.

I didn't record an exact portfolio breakdown on Monday so I'll do that here now. Donald Trump just won the presidency yesterday on Wednesday and there's an ongoing market rally which may inflate these numbers a bit.



29.05.2016 10.11.2016 change
Savings account 7101 5043 -2058
Passive funds, broad 22325 26698 +4373
Passive funds, niches 7089 8411 +1322
Actively managed funds 5310 6579 +1269
Listed stocks 19286 24954 +5668
Unlisted stocks 5250 5250 0
Fixed income 100 100 0
Cash 3700 4258 +558
Total 70161 81293 +11132


From the portfolio breakdown it's easy to see that since May, I have been buying quite many individual stocks. Should perhaps limit that because I do believe the market to be at least somewhat efficient and that passive funds are likelier winners over the long term.

Also, my net worth also just made 6 figures and is currently at around 101k. However, I don't really pay much attention to my net worth as my apartment is my only noteworthy asset outside of my portfolio and I couldn't really sell my apartment for as long as I wan't to live in it. Further, I consider my apartment perhaps more as a liability than an asset, so I'll just stick to focusing on my investment portfolio.

Anyways, next stop: the nineties! :)

Wednesday, October 19, 2016

The struggle with style


Figure hunched by David Rosen

I'm struggling to some extent with my investing style. I can't make up my mind on what my style actually is.

The thing is, every investment guru out there has a different style, and they all think, or at least say, that their style is the best and "you should do it like this also!". There's indexers and stock pickers. Technical analysis and fundamental analysis and quantitative methods. Value and growth and dividend investors. Market timers and dollar-cost-averagers. Event waiters, contrarians, patient money and traders. Allocators and robo-advisors. And so on.

And many of the gurus make a compelling case for their particular style of investing. I have not locked down a single style for myself but my portfolio is more of a collection of different approaches. A more cordial person could call it a "core and satellites" method. Someone less eloquent might call it a mess.

Some time ago, maybe two years back, I wrote a short investment plan for myself but haven't really looked at it since. I should probably return to the subject and try to define my methodology better. And then stick to it ;P

I recently came across a brilliant interview by Charlie Munger, Warren Buffett's "wing man" for decades. I hope I'll some day reach the same level of clarity :) The whole interview is pure gold but his and Warren's investing style is described at 5:58.


His four criteria are such gold I'll add a transcript of what he says here:
"1. We have to deal in things that we’re capable of understanding,
2. Once we’re over that filter, we have to have a business with some intrinsic characteristics that give it a durable competitive advantage,
3. Then of course, we would vastly prefer a management in place with a lot of integrity and talent,
4. And finally, no matter how wonderful it is, it’s not worth an infinite price. So we have to have a price that makes sense and gives a margin of safety, given the natural vicissitudes of life.
That’s a very simple set of ideas."

Monday, September 26, 2016

The reason I use a credit card for everything

rainbow of credit by frankleleon


I hold a multitude of credit cards.

In my wallet there's a Visa Debit from S bank, a Mastercard Gold from Nordea, a Mastercard from Hypo Bank and a corporate American Express. Of these I used only two: The S bank card for all purchases from the S group (because of the 0.5% cash back offer (”maksutapaetu”)) and one of the credit cards for everything else.

The reason I use a credit card for almost all of my purchases is that then I can have much less cash on my bank account. This may seem counter-intuitive for some: I actually want to minimize the amount of money on my bank account.

That's because of the time value of money or time preference in economics, i.e., the idea that money now is more valuable than money in the future. This is because capital has an earning capacity. If there's no cost involved, one should always choose to pay later. Due to the low interest rate environment this doesn't currently mean as much as it used to but the principle is sound.

When I use a credit card to pay for everything, I don't need to keep money on my bank account. Instead I can invest that money. Let's say I would invest 1000 euros, that I would otherwise keep on my bank account, for 50 years and make 6% on that investment, then I would end up with around 18 400 euros. Now, that is extra money just from behaving more smartly without zero sacrifice or saving more, etc. Using a credit card is a no-brainer.

I always pay off my credit card bills in full. The interest rates on credit cards are quite high and no person who's in control of their finances should have an outstanding balance on their credit cards.


Saturday, September 3, 2016

Finns' trust in national pension scheme is crumbling according to Nordea

distrust by Fabrice Le Coq on Flickr


A couple days ago Nordea bank released information on a survey they had commissioned about Finns' opinions about their pensions. More and more people are starting to question the pension system and it seems I'm not alone with my ideas. A severe distrust seems to be spreading and fast.

I tried to locate the actual survey data but could only find distilled information. There's a press release about the survey from Nordea and subsequent news articles on national media outlets such as HS, Kauppalehti, Talouselämä, Taloussanomat, etc.

Men were especially pessimistic. Only 23% of the men surveyed had said that they believe the level of the national pensions will be enough. This was an 8 percentage point decrease from last year. Let me repeat that: Only 23% thought their pensions will be big enough.


The survey also asked about people's saving habits and found that more than half of the population, 58% actually, are saving for the future. This represents a 4 percentage point increase over a the previous year's result. The average savings amount was 50 to 200 euros a month. Those are actually pretty ok numbers if they would turn out to be true. The data can be somewhat biased though.

They also report that about 15% of the people who save have a special pension savings account (”PS-tili”) or a voluntary pension insurance. I should look into those with more gusto but on the surface they seem quite expensive and/or susceptive major political risks. Maybe I'll write a blog post about these in the future.


I also took a look at another data source which seems to contradict Nordea's data. OECD reports savings rates as percentage of household disposable income per country per year. According to OECD the savings rate in Finland was actually a negative in 2014 with a savings rate of -0.2%. This corresponds to about 5% in the USA and about 15% in Sweden. Man, those Swedes...

OECD: Savings rates of countries as percentage of household disposable income

The OECD data feels more representative overall and the Nordea data more biased but this is merely my speculation. At least the OECD data tells the same story as my last blog post about Finn's net worths. What do you think?

Saturday, August 13, 2016

Finns are rather poor



Finland versus the world - Meh


According to OECD (1), Finnish households have pretty much the lowest mean net wealth within the OECD. The diagram below shows that only Slovak Republic households are more poor, than the Finnish.

The average (mean) household in Finland only has a net wealth (net worth) of around 130k euros and a median household net worth around 80k. (I estimated the number from the diagram below so the numbers are not totally accurate.

The OECD average household net worth is about 220k. Other European nations like the UK, Spain or Belgium have more than double mean and median net worth. A certain precidental candidate would probably call this situation ”Sad.” and for once he'd be right!

Mean and median net wealth per household in selected OECD countries, 2010 or latest available year, values in 2005 USD PPPs.

Finland versus Finland - you need to sit down!


If we then look at the Finnish net worth data (2) in more detail we make stunning conclusions. I really hope you're sitting down for these two!

The first of the two tables below shows the net worth of Finnish households by different fractions and age brackets within the population.

Household reference person age Number of households (thousands) P10 P25 (lower quartile) P50 (median) P75 (upper quartile) P90 P95 P99 (aka ”the 1%”) Average
All households 2622,5 50 10 000 110 000 252 116 458 673 655 092 1 350 122 195 332
Under 25 163,7 -5 338 -547 1 791 12 000 40 246 117 938 386 698 19 684
25-34 409,1 -11 165 0 15 759 75 976 177 600 277 457 1 092 402 70 691
35-44 389,4 80 17 944 109 315 238 516 422 910 592 303 1 301 458 192 767
45-54 466,3 760 34 196 152 292 305 707 535 405 766 782 1 403 161 231 805
55-64 483,9 1 000 52 976 167 693 335 601 572 704 813 221 1 733 005 264 078
65-74 374,2 3 250 79 011 186 663 334 460 568 994 773 406 1 725 706 276 495
Over 75 335,9 2 008 62 812 150 312 251 163 391 425 603 473 1 109 891 195 622


The fractions mean a euro limit that is the highest value within that group, e.g., P25 means 25% of households are below that number and P90 means 10% of households are above that number. People don't accumulate more net worth during their years of employment. They just don't save. This looks kind of bad but still somehow manageable..

But there's a caveat: most of people's net worth is in their homes and appartments. The next table tells a much more dire story. This table lists the households' financial assets including stocks, bonds and mutual funds.

Household reference person age Number of households (thousands) P10 P25 (lower quartile) P50 (median) P75 (upper quartile) P90 P95 P99 (aka ”the 1%”) Average
All households 2622,5 350 2 000 9 098 32 099 94 698 170 935 625 334 50 373
Under 25 163,7 60 500 1 570 7 189 18 000 30 000 85 232 8 316
25-34 409,1 300 1 100 5 000 16 039 40 610 71 190 236 922 22 658
35-44 389,4 350 2 006 10 000 29 052 73 682 133 938 585 480 51 514
45-54 466,3 500 2 685 11 000 36 186 106 920 180 338 800 790 52 973
55-64 483,9 306 2 500 13 850 57 500 145 978 252 222 851 823 72 253
65-74 374,2 500 2 988 13 897 50 000 133 334 219 003 877 849 73 308
Over 75 335,9 700 2 512 10 000 32 000 92 190 166 944 461 209 42 624

What the?! The medians for all relevant age groups are only around 10k euros. I find these numbers to be really low; even people who are able to save some money are not really investing that money to make more money. People should let the magic of compounding work for their benefit.


So where do I fit in? Your's truly is upper quartile based on net worth and even top 5% based on financial assets as most of my assets are in my portfolio. There's a lot of work left to move more to the right.

References

Sunday, July 10, 2016

Passively active: Spiltan Aktiefond Investmentbolag

Forsberg celebrates an assist by Matt Boulton (Flickr)


I just established a new position: a mutual fund called Spiltan Aktiefond Investmentbolag and in this post I’ll tell you why.

I heard about this product from a campaign held by (one of) my broker(s) Nordnet. They are having a campaign where every 100 euros used for purchases of Spiltan funds is considered a lottery ticket in a draw for a 1000 euros worth of similar product. But this certainly was not my reason for the purchase. ..In fact, that would have been one of the worst reasons for purchasing anything else than an actual lottery ticket (=entertainment, not a investment). But it's always nice to get something extra.

Earlier I had noticed that in the Swedish market there is a number of publicly listed investment companies like Investor, Industrivärden, Kinnevik, etc. To some extent, I guess these companies can be thought of as actively managed mutual funds that are just publicly listed. But they generally emphasize their active ownership, development of the companies and long time horizons; all traits not generally attached to many mutual funds.

I had been interested in these Swedish investment companies but got stuck in the difficulty of picking my horse in the race and kind of forgot about it. This is where the discovery of Aktiefond Investmentbolag came in. It’s a passively managed mutual fund that holds stock of about ten of these investment companies, the biggest two being over 50% of the fund: Industrivärden and Investor both at 27%. The fund charges a reasonable fee of 0.2% and pays no distribution.  

Spiltan Aktiefond Investmentbolag, 10 biggest holdings


Through Industrivärden one gets exposure to Handelsbanken, SCA, Volvo, Sandvik, Ericsson, ICA and Skanska. 
Industrivärden, holdings


Through Investor, one gets exposure to Atlas Copco, ABB, SEB, AstraZeneca, Ericsson, Wärtsilä, Sobi, Nasdaq, Electrolux, Saab and Husqvarna. 

Investor, holdings


That seems like a lot of the Stockholmsbörs.. So why not buy a Stockholm index instead? Since inception (2011-11-30) the fund is up +134% whereas the Stockholm index that accounts for dividends is up +86%. That’s an outperformance in the neighborhood of 10% p.a. Yeah, yeah, I know! Past performance and so on.. But the underlying companies seem to emphasize their long term view and commitment to their companies of ownership which may be their secret sauce? Still, paying overhead for putting over 50% of the money in just two companies is a downside here, and that's why I don't plan on making future purchases. Let's see how this will fare, this fund is less than 1% of my portfolio.

Spiltan Aktiefond Investmentbolag, performance

Saturday, June 4, 2016

What's the speed of my money?

Speed by Patrik Nygren


In my previous post "Reached 70k!" I mentioned that I’d broken 70k euros in my portfolio. I have set up a script that records the value of my portfolio every day so I decided to dig into my data a little bit.


I have previously not taken note of crossing these kind of milestones but I decided to do that in retrospect. I wanted to find out on which dates I have reached my previous 10ks. Here’s the data:

Portfolio value
1st occurrence
0
1.1.2011
10000
5.12.2011
20000
6.11.2012
30000
25.4.2013
30000 #2
2.5.2014
40000
3.11.2014
50000
22.1.2015
60000
4.11.2015
70000
27.5.2016


30k is listed twice because after I made it there the first time, I bought an apartment and took the down payment, around 10k euros from my portfolio. At that time in my life I also did some other purchases for the apartment. Getting back to 30k again took some time.

By the power of compounding, the accumulation of money should get faster. Did that happen? To some extent maybe yes but there’s not enough data to tell, really. 



Portfolio value Days


0 to 10k 339
10k to 20k 337
20k to 1st 30k 170
1st 30k to 2nd 30k 371
1st 30k to 40k 541
2nd 30k to 40k 185
40k to 50k 80
50k to 60k 286
60k to 70k 205


The average addition of 10k took a little less than 250 calendar days (about 40 euros per day) but the data is quite sloppy. There's just too much variation to gain insights from these data, well, at least any extrapolation will be hard.

What jumps out from the data is 10k number 5, from 40k to 50k only took 80 days. Wowza! That was from the 3rd of November 2014 to the 22nd of January 2015. I tried to back track what had happened. The S&P 500 was basically flat during that time while the Finnish OMXH was up about 3.5%. I checked my contributions to the portfolio from that period and they were around 5k so another 5k came from my holdings. 

During that time I was holding a bunch of American equity ETFs and the EUR/USD exchange rate went from 1.250 on 16th of December to 1.147 on 22nd of January. This seemed to be magic ticket. Actually the next day, 23rd of January it was already at 1.1234 and my portfolio had made another 1000 euros. Unfortunately I can’t take credit for an exchange rate change and even more unfortunately it will also fluctuate in the other directions as times go by.