Table of Contents
We’ve already sent 25% of 2018 home, I can’t believe it! How fast is this thing called “life” going??
Anyway, my dear voyeurs, welcome to my quarterly financial update. If you have followed other personal finance bloggers last couple of months you got the idea: it’s not been a nice quarter.
I still remember that crazy Friday, January the 26th. Everybody was waiting a market correction since 2012. But since then we’ve been keeping enjoying this amazing bull market! Would January be the month when everything collapses?
in face of that, on Friday January 26th 2018 the market was up 7% compared to January 1st. Combined to the fact that the USD dropped 3%, my NW measured in USD was up by about 70k! It crossed 950k USD. For the first time I was happy for something against my long term plan: a USD drop. I measure my wealth in EUR, so a drop of the other two currencies is not good for me, but getting close to A F***ING MILLION DOLLAR has been terrific!
“I will reach the million in February!“, I believed.
But at the same time “Wait, it doesn’t make sense. The market is going up up up since almost 9 years. CAPE is very high, it’s not sustainable a 7% monthly growth, and the month is not over yet… this is a local maximum, I should sell everything today!”
But of course I didn’t. And then it dropped 10%. And in March it dropped again. I wish I sold everything!
But then again, assuming I sold everything when should I had come back into the market? After a 10% drop? What if that was the beginning of a 80% recession? So I would have stayed out for a while… then the market recovered more than half… then what? still wait for the big crash? what if the market surpassed previous high? No, that’s exactly the game I don’t want to play. I might have outsmarted (thanks to pure luck) the market once, but this would have brought me a false sense of “being the smartest guy” and would have convinced me to try again in the future, with more money. No way. The best investor is the dead investor. Don’t try to be smart. Try to be emotionless. Greed and Fear, stay away from me!
Ok, back on track! Welcome back to my quarterly financial update. As usual, the reference doc is my new 2018 NW spreadsheet. I just added two sheets on the spreadsheet, one for 2018 Net Worth and one for 2018 Expenses.
I made a lot of changes in the structure of my sheets. Last year I compressed my NW into few entries, this year I’m going to expand them back to give more details. The NW sheet contains all assets and liabilities, cash flow, more FIRE metrics and much more. On the expenses side I’ll keep things simple and only provide aggregated (by category) numbers.
NW Delta +22.3k EUR. Mr.Market lost 20k, currencies ate another 10k (both CHF and USD are losing terrain compared to EUR, and I measure my NW in EUR) .
NW Delta per Month:
- January: +24.6k (crazy Mr.Market, crazy cash flow)
- February: +3.1k (Mr.Market dropped a lot, but currencies helped staying above the water)
- March: -5.4k (Mr.Market dropped again, and currencies didn’t help. Cash flow did)
Cash Flow has been amazing though:
Totale income: 64.6k CHF. Income per Month:
- January: 32.4k (cashed 2017 Bonus, cashed some dividends)
- February: 13.7k (just regular salaries for me and Mrs RIP)
- March: 18.5k (900 CHF bonus cashed, Hooli stocks vesting, VHYD dividends)
Total Spending: 13.8k CHF (average: 4.6k per month). Spending per Month:
- January: 4458 (Maldives trip, Billag, Mrs RIP personal expenses cash withdraw)
- February: 5382 (some splurges, plus a piece of furniture)
- March: 3993 (awesome, below 4k!)
Total Savings are 50.8k CHF and Saving Rate is 78.6% for the quarter!
Earning and saving a lot of money but still staying below our end of January Net Worth sucks a lot, but that’s the game baby. That’s loss aversion! Plain, clear, simple loss aversion. Just acknowledge it and be thankful that thanks to an amazing cash flow we digested a couple of bad Mr. Market hits almost without receding a centimeter!
Well done, RIPs!
2018 Net Worth Document – what’s new
This year NW sheet changed a lot compared to last year’s one.
The sheet is divided in sections: Net Worth, Finance, Simple, Currencies Split, Cash Flow and FIRE.
The first section, Net Worth, contains all assets and liabilities split by asset class: real estates, stocks, bonds, cash, other and virtual. There’s also a “75% stocks 25% bonds” class, but that’s just to attribute this position to the right categories in the investing sheet. Each value indicates asset value at the end of the month.
In stocks I list individual positions/ETFs. I eventually aggregate them by market in the investing sheet.
Bonds are mainly Pension Pillars 2&3, plus some other minor position.
Cash is aggregated by currency. In the personal version of this spreadsheet (that I don’t share) I have a dozen entries here.
Other holds credits and liabilities. Like credit card debts, that I always pay in full at the beginning of next month. I don’t like debts and their associated criminal interests.
Taxes belong here.
2017 Taxes: In March last year we got legally married in Switzerland. In October I got permanent residency (C permit). These two events changed our tax situation.
Since October 2017 we’re no more paying quellensteuer, i.e. income withholding tax. In December 2017 I’ve voluntary paid some amount as suggested by the staat und gemeinde as “expected city and cantonal tax difference for 2017”. Their forecast was lower than I expect the actual tax will be. And federal taxes were not included.
I expect a final tax bill of roughly 7800 CHF (row 29). I’ll be filling our 2017 tax declaration in April (this month) so I’ll soon get a better estimation. For the final bill I still need to wait another year while the tax authority verifies and eventually corrects my tax declaration.
2018 Taxes: this year I’m not paying quellensteuer at all. That’s why incomes (row 76) are greater than last year ones. But I’m not cheating: I’m also accounting for “estimate income taxes” (row 79), under the hypothesis of 25% average tax rate (row 80). Total estimated taxes due for 2018 (row 30) is the accumulation of these monthly estimates. If I decide to pay some 2018 tax advances I’d put the amounts on the next entry (row 31).
I need to decide when (if?) to pay some expected taxes advance. The earlier (and the more) I pay, the greater the benefits: 0.5% interest. Amounts due and unpaid after September 30th accrue negative interests of 0.5%. As I’ve previously discussed, I don’t know if I want to take this cheap loan from the Swiss Government. I’m scared of pissing off the tax authority and at the same time I don’t want to invest money that are not mine.
What do you readers think?
Do you play Taxes Hold’em? 😀
In virtual block I account for assets that are not guaranteed yet, like fraction of expected bonus and 13th salary, not yet vested Hooli stocks and 2016 tax return.
The 2016 positive tax bill (9k CHF that are coming back to my pockets, row 36) is virtual since the tax authority has not confirmed it yet. The 2016 tax calculation was incomplete since some “virtual dividends” attributed to Accumulating ETFs were not in ictax (the official tool to check how an ETF is considered by Swiss Tax Authority in terms of share values and profits) and the final outcome was “10k CHF on my pockets”. I’m playing safe and accounting for expected taxes on missing dividends.
The “not yet vested stocks” are here to smoothen NW deltas over time. My stocks vesting is quarterly, with varying size. If I don’t account for this then June and December (and to some extent March and September) would be crazy. Same for 13th salary (December) and yearly bonus (January).
The risk of adding pro-rated fractions of these not guaranteed amounts is that if I get fired, I quit, Hooli goes broke or simply they decide to not give me a bonus or cancel/delay my stock vesting scheme then my NW would hit a wall. That’s why I consider these entries “virtual”. Virtual money are not taken into account in the investment sheet.
The Finance section tracks share prices and currency pairs. They’re not conventional currency pairs. For historical reason I keep using things like CHFEUR instead of EURCHF. One day I’ll fix that.
The Simple section aggregates by asset categories. The “75% stocks, 25% bonds” is attributed 75% to stocks and 25% to bonds. Who would have guessed that? 🙂
The Currencies Split section aggregates by asset currencies and converts all to EUR to be able to measure apples to apples. In Net Worth By Currency sheet you can see the portion of my NW by currency over time.
The Cash Flow section tracks the cash flow, i.e. incomes and expenses.
Salaries (row 76) are actual salaries (mine plus Mrs’) plus minor bonuses and other minor things. The salaries used to be net of taxes, but this year it’s more complicated. Salaries here are net of pension Pillar 1, Pillar 2 and unemployment contributions.
Dividends (row 78) and Vested Stocks (row 77) are actually distributed and vested in the current month. The only exception is the January 2018 dividends. First dividend received by VHYD and not took into account in December 2017. So I “damaged” my 2017 income (and saving rate) and pumped 2018 metrics by a whole 263 (minus taxes) USD 🙂 You may wonder why I don’t have an entry in the net worth section for Hooli stocks. The reason is simple: I don’t hold them. I sell them as soon as they vest and send the money to Interactive Brokers.
Expected income Tax (row 79) is there since, as I already said, I’m not paying withholding taxes. I want to measure income, savings and saving rate after tax so I need to estimate taxes month by month. I don’t want to consider taxes as expenses the months I pay them. Doing this makes everything more complicated, since actual taxes will surely be different from my expectations. Expected Income Tax refers to the current month and it’s being accumulated in “Expected Tax 2018” (row 30).
On the tax deferred account subsection of the cash flow(rows 84 to 87) we have Pillar 2 contributions (including employers matches) and expected lump sum taxes on tda, i.e kapitalauszahlung steuern. As for expected income tax, the expected tax on TDAs (row 87) only refers to current month and they’re accumulated in the net worth section (row 20).
Expenses are split between monthly (row 90) and yearly quota (row 91). This year I’m experimenting a different way to account for expenses. We have monthly expenses and yearly expenses (column N in the 2018 expenses sheet). We put in yearly expenses those expenses that by their nature it’s unfair to bound to a specific month. Like buying a piece of furniture or paying the yearly TV bill or the yearly public transportation pass. The goal is to track both regular expenses and exceptional expenses for each month.
The metrics I care about are just below: total income (sum of salaries, stocks, dividends and pillar contributions minus taxes), expenses, savings and saving rate (rows 93 to 96).
Ok, I just lied.
The metrics I actually really REALLY care about are in the FIRE section, of course! 🙂
Monthly Target Allowance (row 99) is an input. I plan to need 3500 EUR as starting withdrawal amount in Early Retirement. Yearly Target Allowance (row 100) is 12*Monthly as a consequence.
Desired Withdrawal Rate (row 102) is my SWR, another input field. I’ve been playing with it for a while, starting at 4% as any good “FIRE seeker of the next door” would do thanks to uncle Bengen & the Trinity Study guys, then settled to a safer 3.5% after having consumed the Safe Withdrawal Rate series on earlyretirementnow.com.
FU Number (row 101) is a consequence of yearly allowance and SWR. It’s the amount of wealth such that in comparison my yearly target allowance is its WR%. Indeed 42k is 3.5% of 1.2M.
FI Progress (row 103) indicates what percentage of FU Number my current Net Worth is. When this will reach 100% I’ll be Financially Independent.
Months Left (row 105) counts how many months are left to reach 100% FI, assuming our NW would keep growing each month by the average of last 12 months growth. It’s a linear forecast, not an exponential one. I use linear forecast since NW growth is mainly driven by income (which, sadly, is not growing exponentially) and not by compounding. Fire Date (row 106) is a consequence of months left.
Current Allowances (rows 108 to 110) indicate the yearly, monthly and daily income such that if we could be living on that income we would be Financially Independent today. It’s the WR applied to current net worth. Essentially, I’m not Financially Independent today because I’m claiming I can’t live on 2210 EUR per month. I’m still working because I think I’m not able to live on that income. Ouch, that’s really touching from this perspective. I’m still going to work only for the wants in life, not the needs, since 2.2k EUR are way more than ok for the needs in many amazing places in the world.
Just for fun, putting my numbers in nomadlist.com (amazing retirement calculator, try it out) I discovered we could retire today – at our current spending level, adjusted for costs of living – in 284 out of 375 cities took into account by the website including all of the Italian ones but Milan, which would be available to us in 2 years.
Current WR – Real (row 112) is the WR we would need to live at our current spending regime out of our net worth. Expenses are measured over last 12 months, excluding wedding. When this will be equal to the Target WR (row 102) we’ll be Financially Independent without the need of geo arbitration. I don’t want to wait for this.
Current WR – Ideal (row 113) is the WR we would need to live at the desired spending level (row 100) out of our net worth. When this will be equal to the Target WR (row 102) we’ll be Financially Independent.
Year of Expenses (rows 115 and 116) counts how many years of current (or ideal) expenses could be extracted out of our net worth assuming no inflation and no net worth growth. Mostly meaningless, but a funny metric. Knowing we could cash all our assets, quit our jobs and and keep living our current lifestyle for 14.5 years before running out of money gives me some peace of mind 🙂
Money Making Machines (rows 118 to 120) are listed in our net worth document just for fun. To remember us what’s the meaning of money in our model. Money buys Money Making Machines. A machine that generates 1 Euro per month costs 343 EUR (at our desired WR). 1k per month? 343k EUR. If you want to become financially independent, you need to buy money making machines.
The constants section is there to model few constants and avoid duplicating numbers in cells. Yes, I’m a software engineer and a programmer, so I’m a nerd.
Income: 64.6k CHF – Expenses: 13.8k CHF – Savings: 50.8k CHF.
Saving rate: 78.6%. Awesome!
Saving rate for 2018 so far: 78.6%.
Net worth: 757.6k EUR, Delta for the quarter is +22.3k EUR. Bad, we saved 50k…
FI% advanced to 63.13%.
100% FI Forecast: 39 months left. It was 36 at the beginning of the year.
FI Date Forecast: June 2021. After 3 months it moved 6 months away… that sucks a lot.
Current Allowance: Year 26,516 EUR – Month 2,210 EUR – Day 72.65 EUR.
Current Withdrawal Rate: Real: 6.89% – Ideal: 5.54%.
Years of Ideal expenses accumulated: Real 14.5 – Ideal 18.0.
Success Rate at current WR, 40 years horizon: 45.37% (based on cfiresim). It means if we just try to retire today and apply our anticipated strategy (3500 EUR per month, inflation adjusted) while earning nothing for the rest of our lives we’d be ok in 45% of simulations 🙂 It’s really reassuring! P.S. 40 years horizon looks a little bit pessimistic, but I think it’s a reasonable approximation for the actual reality: some social security and pension will kick in way before – we’re paying Pillar 1 contribution and we’re not modeling that – but on the other hand we plan to live longer than 40 years.
The new progress bar 🙂
1) Spending projection below 60k per year.
That’s good. We are keeping our expenses under control!
Seeing a month below 4k (March) feels good, even though I know the next months will be super expensive. Baby RIP is coming, parents will be visiting, stuff will be bought and a couple of friends’ weddings are in sight (and I have no dress). I expect to be craving for another below4k for a very long time.
2) Saved 200 CHF per month cleaning fees.
Kind of related to the previous one, but let me introduce you to my new employee: Roby.
Roby is not very good at removing the dust from bookshelves and washing the floor, but it’s super skilled at passing the broom!
Our cleaning lady fired us several months ago. We had a discussion about replacing her with a new one or… doing the chores ourselves.
You won’t believe me, but I was the one pushing for finding a new one!
But I married an awesome woman: “Idea! We’ve got this robot as a wedding gift. It’s super cool and apparently our plush hamster loves it! Let’s try to go without a cleaning person for a while!”
We’ve solved 3 problems: one, having to find a new cleaning person, which is a hassle on its own. Two we saved roughly 200 CHF per month. Three we had to face hard work again. Main problem with these subtle lifestyle improvements is that they’re permanent. Once you get someone to mow your lawn you won’t do it again. Same happens with house chores. But we reverted it! Go away comfort zone!
“But my love, you’re pregnant and you’ll soon be unable to do your half of the house chores… how are we going to face that in a couple of months?“… said the poor Mr RIP back in January.
Guess who’s doing the chores now that we entered the ninth month? 🙁
1) Mr Market went south.
All my funds, with the exception of Emerging Market, are between 1% and 4% down compared to December 31st. That’s ok, it was expected sooner or later. It just hurts.
I had some cash at the end of January, thanks to 2017 bonus being cashed end of January. Given the high volatility I wanted to do some DCA for a while, something like buying 2k worth of ETF each week, but then after a small drop in the market I decided to go all in and bought Vanguard High Yield Dividends (VHYD). They kept going south and I blamed myself, again.
Same lesson learned for the billionth time: don’t time the market! Define a strategy and stick with it.
2) CHF and USD went south.
I define my net worth goals in EUR, but I own assets in EUR, CHF and USD. When a currency drops, my NW measured in that currency skyrockets. That’s why I experience a +60k USD in January. Thanks to the market, but also thanks to USD dropping 3% compared to EUR and 4% compared to CHF.
Since January 2017 (15 months ago), USD and CHF kept declining and so my NW in EUR is growing slower than I wanted.
3) Software Engineer passion went south.
Ouch, this 2018 is not my most productive year so far. After Maldivian trip I had trouble adapting back to a software engineer mindset. I switched team within Hooli at the beginning of March, I’m sure passion and energy will soon come back.
I’m forty, I’m becoming a dad in a month and… maybe Nigel Marsh (watch his amazing TED!) is right:
“every man should be forced to take his fortieth year off.”
― Nigel Marsh, Fat, Forty And Fired: The year I lost my job and got a life
Isn’t this exactly what this blog is all about? 🙂
Other financial facts
1) Small Investment refactor: stock component 60% –> 65%, bonds 30% –> 25%
I hadn’t spent enough time to study bonds and how to invest in bonds. I’m keeping their percentage low to just cope with reality. Bonds don’t earn much these days. I prefer to achieve diversification through bond-like stocks, like dividend stocks.
2) Small Investment refactor: Europe stocks 50% –> 40%, High Dividend stocks 10% –> 20%.
Nationalism in European countries is raising. Look at the latest Italian election. All parties are populists and somehow nationalists. Those who won are all saying “Europe is evil”. I’m not among them, I believe that a strong Europe (not the one we have today) is the way to go to economically survive in a scenario dominated by US and Asia. But everywhere Europe is being used as a scapegoat, as en excuse to justify the lack of perceived wealth. I don’t believe Europe is going to be strong in the near future, so I’m gradually reducing exposure to European stocks (but still 40%).
At the same time I increased drastically High Dividend stocks. I bought a lot of them in February and March. Performances have been “meh” so far, but they’re paying dividends quarterly. This quarter the dividend was 0.39 USD per share, which is 0.7% of the share value. It’s less than 3% on yearly basis, so not so much “high dividend”.
The rationale behind this is that I really like Yield Shields. Take a look at this article on Millennial Revolution (and the previous 3 on the same topic). A Yield shield helps reducing the Sequence of Return Risks, i.e. having to withdraw from your assets when stocks are low. Maybe I should have pivoted toward yields instead of growth later, when I will actually be “retiring”. But I’m close though 🙂
Anyway, these changes are changes in ideal asset allocation, it takes time to have them applied. I don’t sell as soon as I change my strategy. I try to buy underrepresented assets with fresh money and instead of selling over represented assets I wait for the net worth growth to dilute their percentage.
I will be selling to rebalance once I’ll be withdrawing from our portfolio though.
Here’s my current asset allocation ideal vs real
I didn’t update my Investor Policy Statement yet since this is just a temporary small refactor. I plan to do a big refactor hopefully in April. I may change actual ETFs (US domiciled?) and change actual asset allocation. Along with 4 colleagues at Hooli we had setup a study group, where we share our ETFs and strategies in a shared spreadsheet. Need to take some time off to run my analysis and draw conclusions.
3) Bought 5k of PostFinance Pension75.
We had roughly 40k in Pillar 3a saving accounts. I was thinking about investing in PostFinance Pension75 Mutual Fund (it’s not an ETF) since almost a year, but I had not done it until a couple of weeks ago. Just to be clear, it’s not a good Fund on its own for two reasons: 1% TER and too much Swiss exposure (Nestlè, Roche and Novartis).
But is it better than a saving account? I don’t know, it’s another way to play with bonds vs stocks.
The deciding factor was PF offering me 100 CHF had I invested at least 5k in one of their funds before March 31st. I’ve done, invested 5k (now they’re slight below starting value) and waiting for the 100 CHF to be credited on my account.
I have two philosophical issues here:
First, PF sending letters to account holders offering bonuses to buy stocks is the beginning of the “dumb money wave“. I have financially illiterate friends who are being contacted by banks to invest money in their funds… look here, this is a 8 years record of amazing performances! Really? How come? 8 years of amazing performance during the second longest bull market of history? You guys are aweeesooome… When you see dumb money coming to a market, run. It’s the dumping phase of the pump and dump strategy. Run. Away.
Did you notice anything? Need a hint? Need some zoom?
Did I understand correctly? Out of 1% of TER, 0.60-0.95 is PostFinance Sales Remuneration??
Holy sheet… anyway, I’m experimenting with this semi-shitty fund since there’s noting much else I can do with my PF Pillar 3a money.
4) I’m actively trying to sell my flat in Milan.
I’m trying to do it on my own, with the help of my brother in law. While fighting with realtors who want to “help me” selling the house I discovered the sad truth: in that neighborhood only immigrants buy houses. With no money. Begging for a 110-120% mortgage. So they go to the realtors and ask for help. They don’t look for apartments online. They (almost) don’t actually care about the apartment. They just want to escape high rents and take advantage of (temporary) low mortgages.
That’s a really bad market.
Banks have already been there a decade ago, so they’re not over estimating apartments to make a 120% mortgage looking like a 90% one. Immigrants have no savings and no way to meet a potential seller. They’re at the mercy of the mortgage issuer and the realtors, i.e. in the hands of the mafia.
I’m not in a hurry, I’m resisting their insistence to make me sign a contract where they take 5% of the sale price from me (and I assume same or more from the prospect buyer).
After a while one of them accepted to not take money in my side, but still tried to make me sign shitty contracts. Right when I was close to send him to fock off he came with a 80k EUR signed offer, asking zero on my side. That should be awesome news, since I value my apartment 70k EUR on my Net Worth.
The problem is that the offer is only valid upon mortgage approval and the prospect buyer is asking for 100k mortgage… Will the banksters evaluate my apartment at least 110k to make a 100k request seem acceptable? I’m not optimistic.
Let’s wait. The realtor said he’s still looking for other candidates. He said “the hardest part is not finding someone who likes the apartment, they don’t care. The hardest part is filtering those that have more than 10% chances of getting a mortgage”
What a ridiculous situation!
I wish this poor guy gets his mortgage and I’ll be done with this hot potato forever!
5) Blog monetization!
Yes, this blog has finally been sent to work to bring some money in daddy’s pockets!
And so far it’s been earning… wait for it… ZERO 😀
Seriously, while researching for my last post (Interactive Brokers 101) I discovered that IB offers referral bonuses. I’m experimenting with it 🙂 I expect zero, it’s not hard to meet my expectations!
I don’t like ads or other unethical and disturbing ways to monetize a blog.
I’m not here to make money with my blog, but given that readership is growing steadily since July 2017 (more than doubled in last 3 months), and people started giving me positive feedback on a daily basis I told myself “why not”?
In future I may explore other ways to make this blog pay at least its own hosting costs. But no worries, I won’t sell myself off 😉
1) We’re waiting for our daughter.
… to destroy our plans 🙂
Joking, of course! I’m excited, and scared. But more excited. But scared. What scares me is the fear I will have no more time for myself. Let’s see. I wish I could have reached FI before becoming a father, but I have played my cards too slow in life and landed to well paying jobs only in my mid 30s.
2) Mrs RIP will stop working in April.
Just a month before our daughter is due. Salary is expected to be 80% of her previous salary during sickness and maternity leave (which is only 14 weeks here). Then she’ll decide what to do after, considering that her salary will be just enough to pay for child care.
3) Happiness is flowing from several sources.
I’ve been acting in theater for 2 consecutive weeks in March. Add to that 3 weeks of intense rehearsals. Being on stage is always the best thing in the world. On stage I feel at home, I feel like I will never retire if that one were my job.
I’ve been in Rome in February, and I gave a talk to high school students in the high school where I’ve been 25 to 20 years before. My high school. A talk on how to professionally succeed in life and how to get a job at companies such Hooli. I caught the attention of ~130 high school students age 16 to 18 for three hours. At the end I got a standing ovation and ~25 students contacted me via mail to ask for personalized advices and suggestions with their pet projects and ideas. It’s been the single most fulfilling thing I’ve done in last decade. I wish I could help them (and many others) more, but my time is a so f***ing scarse resource!
More people around me – colleagues and friends – discovered my secret identity 🙂 and asked me for personal finance and investing advices. I’ve helped them understanding investments and all the associated concepts. I’ve received way more “thank you” than in my 15 years software engineering career.
Despite not having much time to blog, the visits to my blog are increasing. You guys are commenting and sending me personal “thank you” messages that make me so happy – you can’t imagine how much!
It seems to me that all the things that are providing me happiness these days are related to helping others and interacting with people on fields I feel an expert on.
That’s a good thing, of course, I’m not complaining. But at the same time it makes me even more eager to reach financial independence as soon as possible to spend my life helping others!
These days I’m living day by day. Waiting for our daughter, supporting my wife, blogging, reading, working out a bit… anyway, few action items for Q2 2018
1) Major Investment (and IPS) Refactor.
Enough already said. Reassess my values and goals. Redefine Asset Allocation. Decide in which ETFs to invest. Rebalance.
2) Attend to FIWE 2018.
Financial Independence Week Europe. This year I won’t miss it!
3) Keep blogging, increase number of articles and online presence.
It’s not the right time to start other projects. It’s time to pick few battles given that the baby dictator will leave me resourceless and tired. The one thing I want to fight for is this blog. Plus running. Plus reading. Plus… oh no, my life is doomed!
Today I spend an insane amount of time in reading, (lifelong) learning, trying to self improve. I guess between 5 and 8 hours per day. No, I’m not joking! I think I follow ~50 blogs and ~50 youtube channels. I read 2-3 books in parallel (reading The Obstacle is the Way right now, along with Homo Deus) and all of this costs me the famous scarcest resource of all time: time. It’s something I really love doing, but how will I be handling this tremendous inflow?
I don’t understand how people could get bored in life. There so much – sooooo much – to be discovered, learned, enjoyed for free, at a click distance!
All this time spent learning and trying to improve myself compounds while I’m idle doing the dishes, or taking a walk. So ideas flow, mental connections happen, creativity flourishes. The biggest fear of becoming a parent is that all of this may go away and my brain could atrophy. Is it a stupid fear?
That’s all for this quarter 🙂
Dear Mr. Rip,
Thanks for another insightful update.
Regarding the dividend investing (VHYD), how would you describe the experiment so far? Moreover, if you would be a new investor, would you now invest your chosen CSSPX and SCOC as distributing ETF’s or still would go via accumulation route as you did so far?
Hi Elvita, all good questions I’ll try to answer AFTER my Major investment refactor 🙂
Right now VHYD has not been very good, I expected high dividend stocks to be less correlated to growth stocks.
Congratulations on the incredible 78.6% savings rate. It’s really awesome. It seems you are doing really well, even though the market is not. But as you said, let’s not worry about the market. I wish I’ll ever see an income such as yours!
Keep up with the good work on the blog and on your finances!
Regarding the bonds, in past I’ve dived into the The Bond Book by Annette Thau. One thing I’ve learned from it, when interest rates goes up, price for existing bonds goes down. I’ve pulled the trigger and heavily reduced the bond exposure in the last month (I don’t believe low interest rates will last much longer). I’ve realized that general recommendation of having bond allocation to offset stock risks is way to general. If we get back to higher interest rates, bond prices can easily plunge for two digit % numbers.
Yes, last time I investigated bonds I reached same conclusion. Even though claiming where interest rates are going in the future looks like timing the market.
Fair point. Though current bond interest rates provide hardly any upside (low returns), at least for big stable enterprises/governments. I haven’t looked into riskier high bond yield ETFs yet.
Can’t you move your 3rd pillar money to a better fund?
Things like https://forum.mustachianpost.com/t/a-new-low-commission-3a-3rd-pillar-etf-solution-from-viac/545
Congrats on the good saving rate and the really good “investment” that is the vacuum robot. We also have one at home (2 babies (< 1 year old) + many adults + often kids visiting us = lots of dirt!); it’s sooo good to have it! We even gave it a name: Wall-E 🙂
Fantastic what you write about the time spent with teenagers in your old high school. You should repeat it in a year or so.
As I can’t come to FIWE this year, I will not have the chance to meet you. Would have loved to, as I am following your blog for quite a while now. Maybe next year! Last year’s FIWE was fantastic, I’m sure you will enjoy it.
Thank you Noemi for your kind words 🙂
I’m sorry we won’t meet at FIWE this year, my fault that I declined last year’s one on a short notice 🙁
let me tell you something: different people may like (or dislike) more or less your blog, your blogging style, your mindset etc. etc.,
But one thing is absolutely objective about what you write: your posts are a gold mine of information, pointers, useful bits.
Well done, really! Each time I read one of your articles I find plenty of inspiration.
On the not-so-bright side, I am afraid your fears towards parenthood are realistic, and believe me I do have experience on this…
Thanks REITSMAN! That’s what’s motivating me to keep going 🙂
Btw, I’m not popular enough to have haters 😀
I didn’t realize Milan had such a bad market. It’s crazy to think that somewhere that seems so beautiful and regal could have issues like that. What will you do if you don’t sell anytime soon?
Well, to be sincere my flat is not exactly in Milan. It’s 12km straight line from the Duomo, but outside Milan.
WOW what an amazing saving rate! I’ve only just discovered your blog so congratulations on expecting your new daughter. Its really hard at first if your used to having time to yourself but girls are ususally fairly independent.
I love how your first screenshot contains more words then most of my entire blog posts 🙂
Hi LMF, welcome to my blog 🙂
Yes, our saving rate usually spikes at the beginning and the end of the year, due to bonuses and stocks. Then it goes down to ~70%.
Well, last year we had some extras for the wedding and this year we’ll have a baby so… let’s see 🙂
I really enjoyed reading your first quarter in 2018, to your saving rate I can just say WOW. I’m barly scratching at the 50% mark with currently 44.88%.
The 3a Säule is mostly BS here in switzerland for people that know how to manage money, exactly because of those damn expensive bonds with ridicouous high TER’s. That’s why I simply don’t put any money into that, additionaly god knows how the tax laws will be when I’m 70 and the money gets paid out. It’s good for people that can’t save but otherwise it’s unfortunatly bad in my opinion.
If I may ask. I assume you’re not livingin the german speaking part of switzerland since you’re from italy, or am I wrong?
I’m actually living in the German part of Switzerland as I wrote several times. And fun fact: I don’t speak German after 5.5 years! I just understand a little bit. So guilty!
Anyway, I agree that the Pillar 3a funds are BS compared to other investments but the tax benefits you get at the beginning changes cards on the table. If you marginal tax rate is high, say 30%, then dropping 6.7k CHF into a Pillar 3a gives you 2k immediately. Then the Pillar 3A grows slower than your after tax money, but it takes several years to earn back the taxes you saved. And dividends and profits are not taxed. And Pillar 3a don’t count toward wealth tax.
Anyway, no matter what the tax benefits are, given infinite time you’d be better off having NOT invested in Pillar 3a.
So there has to be a break even point in time, meaning that after that point you are losing money.
If you plan to get your money back from the Pillar 3a before that point, you should invest. If you plan to get your money back after that point, you shouldn’t invest in pillar 3a.
My guess is that the break even point is 5-10 years from now, and I think I’m going to get my money back before then.
Da hast du noch einiges zu lernen 😉
Actually a smal update, I just opened an account for ma 3a Pillar on VIAC. I can invest there my 6768 CHF almost fully (97%). They use costefficent ETF’s and I’ll be paying 0.55% TER p.a.
I will test this solution and max it out this year. With this solution I even catch 2 flies with one clap. I really like to invest into single stocks and now I can buy ETF’s even with Tax benefits 🙂
Since you’re in the german part of switzerland, is there any way to hook up with you. Or will you be on any bigger event thats interesting? I.e. the Invest in Stuttgart next year or anything similar.
Last friday I organized in Zurich the 2. Dividendmeetup 🙂 where people (5) meet to speak about anything investment/FIRE related.
Viac seems to be “the new big thing” for Pillar 3A investing, even MP made a post about it few days ago (https://www.mustachianpost.com/2018/05/25/is-viac-the-new-best-third-pillar-for-swiss-mustachians/).
I will consider it, but I’m not an early adopter.
At least I’ll wait until they let you invest in whatever fund you want. Will then their 0.55% TER be on top of other funds? Needs some clarifications.