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

(1) – OECDStatistics brief, June 2015 - No. 21, Household wealth inequalityacross OECD countries: new OECD evidence, by Fabrice Murtin and MarcoMira d’Ercole

(2) – Tilastokeskus: Liitetaulukko1. Nettovarallisuuden fraktiilit vuonna 2013, Liitetaulukko 3.Rahoitusvarallisuuden fraktiilit vuonna 2013, julkaistu 1.4.2015

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

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.

Reached 70k!

Wikimedia Commons

I’m excited! Today marks another milestone for me as my portfolio is showing for the first time ever, a number starting with the number 7. 70 161 euros to be exact.

This owes thanks to the recent revival of markets. Performance wise my portfolio has now reached about 0% YTD. Which, let’s be honest, is not good but a lot better than the about -12% I was looking at in mid February. Contributions to the portfolio YTD are around 5k. Here's my time-weighted return (TWR) chart YTD:

The breakdown of my current portfolio is as follows:

Savings account	7101
Passive funds, broad	22325
Passive funds, niches	7089
Actively managed funds	5310
Listed stocks	19286
Unlisted stocks	5250
Fixed income	100
Cash	3700
Total	70161

Now, onto making that first number '8'!

Beware when getting off the train! - February action plan review

Commuter train: Serampore by Saptarshi Sanyal on Flickr

Shit! I haven’t updated the blog in quite a while now. A review on my February action plan is quite overdue. In my previous post Mr Market is panicing: What to do? I was looking at the high volatility of the market and decided on two actions:

1. Sell and re-buy instruments for tax loss harvesting
2. Look at buy opportunities

Let’s see how I did on these two action points.

The good

My goal with selling and re-buying was to generate technical losses to minimize my taxes on dividends as since this year, a Finnish tax payer can deduct also capital losses from dividends (previously they were only deductible from capital gains).

I did manage to sell off positions for a total turnover of about 11 200 euros and a realized capital loss of about 1 200 euros. This means a future net tax savings of 1200 * 30% = 360 euros. This loss is deductible for the next 5 years so I’m certain I’ll be able to use in it’s entirety.

I also did some changes to investment instruments, e.g., changed my frontier market ETF from DX2Z to FM (from swap to physical replication and from 2% TER to 0.79% TER). I also got rid of my only bond holding which was Vanguard’s BSV. I didn’t see holding bonds as such a good idea anymore because of the low interest rates environment we’re currently experiencing.

The bad

But. I only made new purchases in the value of 6 600 euros. Oops! This means that I was holding about 4 600 euros more cash after than I had before commencing the February action plan.

This was a learning point in investor psychology. After seeing the low-low prices of the (temporary) bottom, it was not as easy to commit to repurchasing the same instruments back at a (little) higher price. Learning points:

1. Beware of getting off the train. The train may take off while you’re on the station. Commit to getting back on.
2. It doesn’t have to be sell-and-buy only, but you can also buy first and sell later. You can actually diversify your risks by mixing buy-and-sell and sell-and-buy 50-50.

The ugly

The previous also means that I didn’t succeed in my secondary goal of buying more. Mid-February would have been a nice dip to buy something more but that didn’t happen. I don’t believe in timing the market but acting on these kind of dips could and should be done. I’m sure I’ll be more ready next time. 

Status Quo

Status Quo by Harry (Howard) Potts on Flickr

It’s been a volatile year so far. First from the start of the year until the 12th of February my portfolio lost about 7 200 euros (-11.3%). Then, since the 12th of February until today the 15th of March my portfolio has gained about 5 200 euros (+9.0%), so my total YTD performance is a loss of about 2 000 euros (-3.1%).

The percentages don’t directly add up because percentage changes don’t work symmetrically; A loss of 50% (100 -> 50) will require a gain of a 100% to get back to original value (50 -> 100).

Portfolio development YTD. Cost basis in red, value in blue. No change.

During these 3 months I’ve also made additional monthly contributions to the portfolio in the value of 2 100 euros (700 euros per month). From the chart it's possible to see that my monthly additions to the portfolio did not hit the bottom of the market. Such is life I guess? With a more active approach I could have been able to time the market? Maybe not.

My additional contributions in fact very closely cancel the effect of the loss I’ve made. My current portfolio value stands at about 63 800 euros, which is exactly the same as it was on 31st of December 2015. After all the turmoil, that’s an interesting result.