Challenge: Live below 1000 $

2018 is over.

So the other day I made room for a new chapter in my personal finance Excel Book. The name of the chapter was 2019.

Just for fun I would throw some numbers around. I don’t know why. But it kind of surprise me that if could cut back my spending even further. I would be quiet close to have enough money a year from now.

In 2018 I have been spending around 10.000 DKK/month (1500 $). And if I subtract my student loan payment, and some work related expenses. My spending is around 8.000 DKK/month (1200 $).

I have then decided to try live a month for less than 6.500 DKK (1000$). I know that Jakob Lund Fisker from earlyretirementextreme.com, has a yearly budget on 7.000 $/year. And being active on various forums. I hear about people who has Monthly budgets below 3000 DKK (500 $). I think it is very inspiring to hear people living on very low budgets.

Starting a Fresh New Year

So I thought to myself. Why not just try to start 2019 with a monthly spending significant lower than my previous years. If im able to only spend 6000 DKK (950 $), I can then subtract all of my job related expenses and my monthly student loan payments. Which means I’m more likely to have expenses for 4500-5000 DKK (800-900 $). And that would be around 30-40 % less than my previous years. If I don’t feel like spending that little, I can just spend more the next month. My theory is that no matter how little I spend, it will not affect how happy I’m. So why not just try to spend way less than normal. At least just for a month.

With expenses around 4500-5000 DKK/month (800-900 $), my annual expenses will be something like 50-60.000 DKK (9.000-10.000 $). And if we multiply that with 20, I will need around 1-1.200.000 DKK (150.000-180.000 $). And with some leverage I think I can hit that number in 2019.

Even with no rate of return I should be able to go from 600.000 DKK (90.000 $) (my current statement) to 1.000.000 (150.000 $) in 2019. With 200.000 DKK (30.000 $) from my own pocket, and 200.000 DKK (200.000 $) leverage.

Budget For January

My payments this month (January 2019) looks like this:

Rent: 2350 DKK (400 $)

A-kasse (Salary insurance): 1344 DKK (200 $)

SOS (Children charity): 235 DKK (40 $)

Student loan: 1005 DKK (180 $)

Internet: 219 DKK (40 $)

Food: 600 DKK (100 $)

Laundry (half-year payment): 400 DKK (80 $)

Fuck up money: 600 DKK (100 $)

Total: 6155 DKK (950$) 

This is what I “budget” to spend for January 2019. The biggest difference will be how much I spent on food. I’m sort of frugal according to how I spent my money on food. But it is definitely a place where I can save money.

I have read about how Jakob Lund Fisker is shopping at exotic grocery centers. To buy big bags of rice, beans and onions as the core of his food. And I have checked the prices at my local shop called “Asia Bazar”. If I buy 5 kg of rice, 3 kg of beans and a large sack of onions, I will approximately spent around 160-180 DKK (30 $) and that food will last for 10 days, ish. (Yes I eat a lot).

I will make a weekly update, on how things are going.

And feel free to join me, and let me know how you are doing as well.

Back To the Roots

In Denmark we have this luxury of free education, and being paid while doing so. I think that a student who is above 18 years and is living on their own, gets around 5500 DKK/month (800 $).

What I’m trying to say here is that there is a lot of young people who spent less than 1000 $ a month.

I kind of did that myself when I studied as a building constructor. But I did manage to get 100.000 DKK (15.000 $) in student loans. It was first at the very end of that education that I had a totally mindshift about money and freedom. It happen when I read mrmoneymustache.com for the first time.

1 $ Traffic of Your Choice?

I’m came up with this fun experiment. From this day on I’m going to sell sponsors for every blog post I make.

The first sponsor is going to cost 1 $. The next will cost 2 $, the third 3 $ and so on.

You will get a headline, 50 words and a link for your site at the bottom of a blog post.

I think the average page views a day is around 50, and on the best days they are around 500.

If you would like the very first spot for 1 $ let me know by writing me on:

Loui@wannabewalden.com

5# My Monthly Financial Independence Update

The Quick Takeaways

This month savings rate: 55 %

This month leverage: 140 %

Rolling savings rate since February 2016: 55 %

Total value of portfolio: 590.000 DKK (90.000 $)

Years worth of annual expenses: 5.8

% Change since last month: 0 % 

So What The F*** Happen This Month

The stock market has not been friendly this december month (if you are selling). I’m still trying to fund 20 times my annual expenses, and this mean that a market drop is quiet lucrative for me. When the market is down, I’m able to buy more shares with the same amount of money.

Since last month I have gone absolutely nowhere. Except for having more leverage. As the avid reader might see, this is the first time ever I have leveraged more than 100 %. I have done that because I would like to end up the same place as last month. And not have a decline in my portfolio. This is a strategy slightly inspired by Dollar-Value-Average. I could write an entire blog post about that strategy, so you will get a brief one now.

Dollar Value Average

Dollar-Value-Average is where we decide what amount our portfolio is going to rise + interest, and then we need to hit that target every month. For simplicity, let’s just say that we would like to raise our portfolio with 100 $/month. Then the following months would look like this:

  1. = 100 $
  2. = 200 $
  3. = 300 $
  4. .. And so on

If the market goes up, and we have 120 $ at the start of the second month, we will only invest 80 $, because we would like to hit that target of 200 $. If the market is down at the start of the 3rd month, and we only have 180 $, we will then invest 120 $ to reach our 300 $ target.

That strategy is called Dollar-Value-Average. It is a simple method, of buying more when the market is down, and buying less when the market goes up.

And that is what I have done this month. I have leveraged more, in order to stay at the same level as last month.

2018 and my savings rate

This is how my year looked like according to my savings rate:

  • January = 30 %
  • February = 65 %
  • March = 48 %
  • April = 55 %
  • May = 53 %
  • June = 75 %
  • July = 73 %
  • September = 19%
  • October = 51 %
  • November = 67 %
  • December = 55 %
  • Average = 59 %

I had a higher savings rate in 2017 where I managed to save 62 %. So I’m not completely satisfied with “only” saving 59 % this year. In 2016 I didn’t have student loan payments, that could be the answer to a slightly lower savings rate.

My goal for 2019 will be to save above 66 %. It will be tough, but manageable.

Blog Post This Month

Here are the following post I managed to write this month:

Fire and Water

I Have a Dream!

Quit The Rate Race

A Wuss-Entrepreneur

How Did You Do?

Did you come one step closer to become financial independent? Let me hear about it in the comments!

A Wuss-Entrepreneur

Work and Love

Instead of buying all sort of things, we can instead make a personal fund of a sustainable stock index fund. That can make room for taking up work that we love. Work that makes us thrive, and not just to survive. 

There is many people who take up work which they love. They are often called “entrepreneurs”. But in this modern culture is often found as “risky” because we need to make a living (3.000 $ ish) while doing so.

How horrible wouldn’t it be if you and your family should live a deprived life on 2500 $/month 

Concerned “Non-FIRE” Citizen

If we can take that money and make sure our basic expenses is covered. We can take up work that doesn’t even pay us. Imagine if everybody started worked with their heart instead of their wallet? Don’t you think we would have way better products. If we had endless time to come up with ideas, with no deadline, and didn’t have to worry about pleassing some investors?

Say Hello to The Wuss-Entrepreneur

A Wuss-Entrepreneur is a person who would like to have something on their own. Educating, creating and offers products they think the world needs, but made with love. 

A Wuss-Entrepreneur doesn’t want to risk the roof, the food, and the wellbeing of their families. Or their own future. 

They don’t want to spend 80 hours/week for their newborn company. 

What they do want is a work scheduele on their own terms.

A wage that match what they desire. This can turn out to be less than what your old boss thinks is appropriate.

Maybe they want to create something that changes the world, but are not seen as something worth spending money on.

Or it can be the opposite. Maybe it is something you just love doing. Like art. But the Wuss-Entrepreneur don’t feel like doing it full-time, or risking anything doing it. 

FIRE and Being A Wuss-Entrepreneur

FIRE and being a Wuss-Entrepreneur goes hand in hand, like early mornings and coffee.

It is the best combi ever. And here is why. 

It Will Increase our Portfolio Value

The beauty about FIRE is that everything is really simplified. As a rule of thump, if we can hit 25 times our annual spending, we should be set for life. 

So for every 1000 $/year we can make being a Wuss-Entrepreneur. We will increase our portfolio hypothetic with 25.000 $. Because thats the amount we would like to have in our portfolio, if we were going to withdraw it. 

Imagine if we can make 10.000 $/year being a part time wuss-entrepreneur. That means our portfolio is going to be 250.000 $ bigger than what our current statement says. 

AWESOME!

We Can Start as Many Businesses We Want

There is no reason to just hold on to one business. We can start as many as we like. And work whenever we want.

Or we can learn a new skill every year or two.

According to an old American public speaker named Earl Nightingale, if we can study for 30 minutes a day we can master any topic in this world.

By reading 30 minutes for six months we can become legimate experts.

By reading 30 minutes for 3 years we can become in the top of our field.

By reading 30 minutes for 5 years we can become a national authority.

By reading 30 minutes for 7 years we can become on the best people in this world.

Let’s do the math. If we are able to reach fire in an age of 40 years old. We still have aproxemaitely 40 years left of our lifes.

By reading 30 minutes a day, we can still in an age of 40 become one of the best people in world on 5 different topics.

And no need to worry if you think being one of the best in world sounds to big and scary. Just studying and practicing something for a year, would make us able to make at least 1000 $/month on almost anything.

Imagine this. If you started a whole new chapter of your life, tomorrow. Within 20 hours of reading you will know the basics of that new topic, and from there you can start to teach other people (and make money) about this new topic. In six months from that point you will be a freaking expert on that topic, and would probably be able to make living doing so.

Work Whenever We Like

I have never understood why everybody is taking vacation in the summer here ind Denmark. To go for an exotic trip away from Denmark. I know people have kids, and that’s why they have vacation in the summer. But I can’t really find a good reason to leave the country.

We don’t have the same climate as Sweden and Norway, where they have way more snow than us. And Denmark looks pretty much like a pancake. That means the winters is often just dark, with “snow” there seems more like an slush-ice. So we can’t enjoy a ski trip, like our fellow scandinavian friends.

As a mason I love working in the summer. There is nothing better making a tile roof in the summer. And eating lunch with a coworker on the roof, looking across Copenhagen. It is the most awesome feeling ever.

I could see myself working every summer, and staying in Denmark when the weather is (often) super awesome. And then leaving the country in the dark winter.

Or we could just work a couple of days each week. Imagine working part time at job. Only showing up Wednesday-Friday, being able to catch a beer with co-workers on fridays. And skip the monday everybody is dreading?

What If We All Felt Like This Guy?

I Have a Dream!

I have a dream …

Partly stolen from a brave man. (AKA Martin Luther King).

He had a dream, and so do I.

I really don’t believe that way we live our lives today is the best way for our happiness and well-being. We have never been more stressed than we are today.* So why do we keep on going the same path that has led us to this stress?

I have a dream of ..

.. Where Weekends are Weekdays

We have never been more stressed than we are now. I have never been sick because of it. But I have tried having to many deadlines at the same time, where I had to work 16 hours a day to reach them.

Why don’t we just swap the weekdays with weekends?

Lets have five days a week where we only do things we actually want, and two days where we work.

.. Where We Work to Thrive, Not Survive

Imagine if money wasn’t an issue? What would we then do? I think there is an insanely amount of people who pick an education because of status and how much money they can earn.

What if started to do stuff that we really had a burning desire for.

And not to just to make ends meet? Or impress others?

Imagine if we could be a “Put-in-an-activity-you-love” Instructor, but we didn’t have to worry about the food on the table. Or what about other people would think of us?

.. Where We Don’t Have Mortgages

When did it ever become normal to buy something that we need 30 years to pay off? I have never understood, and I never think I will understand it. Why we would pay that amount of money to have a place to live.

I have been working in the building industry for more than 10 years now. And I have seen both spectrums of how people can live. It is not more difficult to build a 100 m2 house that cost below 100.000 $, than it is to build a +200 m2 house that will cost you more than 1.000.000 $.

Imagine if we only spend 5 years or less to pay off a mortgage. Or not even having one? From day 1 we didn’t have any debt in the house.

So why are we building so big and unaffordable houses?

I can’t tell.

.. Where Meat Is a Luxury

Many of us in a western culture is raised with having meat in every single meal. And we can’t blame our parents for teaching us eating meat. Back in the days we was not informed on how meat-eating can affect the clima. We didn’t knew it was a problem. But we do know that now. I love the taste of meat. But there is no reason to incorporate it in every meal. Let’s start to see it as a luxury we do when we have to celebrate something big. And not something we eat everyday to survive.

There is a cheaper, easier, healthier and more environmental way to eat.

.. Where our Transportation is Awesome

I can often be stoked about how our computers and mobiles seems to have an exponential form of growth. But if we take a look at the cars, trains and bikes, there seems to be almost none growth.

The first car invented back in the 1900 had four wheels, and it run on gasoline. That is over 100 years ago, and it is not until recently that we started to drive in electrical cars.

The same goes with the bike. It still has to wheels, and a metal chain. I think the bike is one of the greatest invention. But it was not until recently that it became legal in Denmark to ride on a Speed Pedelec (a 45 km/hour e-bike). 

Riding e-bikes that goes 45 km/hour is a game changer. My dad who has 30 km for work, can now go by bike instead of the car. Save a boatload of money, being more environmental, and maybe live longer because of a better health. 

.. Where We Quit Social Status and Start Being Compassionate

I’m very open about how many money I have. 

I don’t want my money to earn respect, trust or anything else. My money has one function only, and that is buying my own time back. 

Imagine if everybody quitted the fear of “Not-being-good-enough”, and could stop spend time on impressing people we don’t know. And start to be compassionate about our friends, family and people who are in tough situation because of bad luck. 

.. Where We Have a Green Capitalistic System

Many people think of money as a greedy and en evil thing. And connects capitalism with fossil fuels, cutting down trees and the end of the world. I don’t want to disagree with that feeling. But what if we could use the power of capitalism to make a better world? I’m not talking about only surviving on this earth, what if we could leave the world as a better place for our kids and grand kids?

I believe that we can make a capitalistic system where everyone can benefit from it in their pensions, and still make the world a better place. With sustainable companies that makes this world a better place to live. 

.. Where We Have Time for our Kids

No needing to rush in the mornings because we are in hurry to our work. 

No need to work long hours on work, because you need to pay for the nanny who take care of picking up our kids.

Or paying the house cleaner, too clean up after the kids.

Or paying the restaurant for takeaway food for the family because we don’t feel like cooking after a long work day.

Just having time for the spouse you love, and for the kids you have putted into this world. No more, no less.

.. Where We Don’t Spend Money in Order to be Happy

If we live in modern western country. Most of us will have decent place to live. And a supermarket filled with healthy foods within biking distance. Which is our needs.

Anything else besides that is wants. Whenever we think that this next purchase (besides paying rent, or buying groceries) is going to make us happy. That is the exact same time that we buy a freaking lie.

The lie is that we don’t need to buy anything in order to become happy.

If we feel a little bit sad. And we think a purchase is going to put an end to that sadness. We are going to be sad our whole life.

Happiness cannot be traveled to, owned, earned or worn. It is the spiritual experience of living every minute with love, grace and gratitude. – Denis Waitley

I have no freaking idea who Denis Waitley is. But that is a hell of a quote.

*https://www.apa.org/news/press/releases/stress/2017/state-nation.pdf

4# My Monthly Financial Independence Update

The Quick Takeaways

This month savings rate: 67 %

This month leverage: 100 %

Rolling savings rate since February 2016: 55 %

Total value of portfolio: 590.000 DKK (90.000 $)

Years worth of annual expenses: 7

% Change since last month: 7.2 % 

So What The F*** Happen This Month

This month has been a very ambivalent one.

The finance is doing great, my portfolio went up 5 %, and I didn’t have to many expenses this month. That is why the portfolio is up almost 8% since last month. With I think is a significant amount.

I have also changed bank. Now I have an account where I make 5 % interest on the first 50.000 DKK (7.500 $). Which is better than the 0 % I made at my other bank.

I got told by the national team coach in rowing, that they didn’t want me on the 2019 season team. Rowing has been the main focus of my life since 2009. It is tough to do something that much, and then get a message that they will not spent more time on you.

My goal for a long time has been to qualify a boat for the 2020 Olympics. And the situation I’m in now is not very good to accomplish that dream.

It is a very weird feeling something I have been doing for almost 10 years, is maybe coming to an end. And it is not even my own decision. This is not my first time experiencing some resistance in rowing. The other times I have had a similar experience, it has been like gasoline on a campfire. My motivation just went through the roof.

This is first time where I’m questioning the whole thing. I have promised myself not to make any immediate decision. I will stay fit, and show up a bit more in my own rowing club, which is also nice to see all of my old friends. But I’m starting to see for the first time in my life, that there is other things in this life besides rowing.

For the first time in 10 years I’m able to go where ever I want, whenever I want. Which is a very ambivalent feeling. I’m used to having a coach telling me when and where to show up, and suddenly I’m able to do whatever I like. I can imagine this might be the feeling whenever a person has been to jail for long time. What would seem awful to the main public (training 12 times a week or being to prison) ends up being comfortable.

And I still love to work my ass off. But the big question is do I still want to do it 12 times a week, if I can’t be a part of the national team?

How Random is The Stock Market?

How random is the stock market?

Many say that they can predict the stock market. While others admit that they can’t and stick to a passively managed solution. (Hint: I’m one of the boring passive folks)

I can’t help it, I keep study how investments works. And no matter how much I study the most frequent answer is that a passively managed investment portfolio is the best solution for the mass.

The other day I learned that we can (kind of) predict the stock market.

There is a certain pattern that keeps showing up in the stock market.

Have you ever heard of the Francis Galton?

He was a super nerd borne in 1822. But he was a nice nerd!

Francis Galton was the man who build the foundation of statistics. Which we are going to talk about.

He invented a board, which later on ended up with the name The Galton Board. (I don’t think he came up with that original name him self)

He discovered that if we want to quantify almost everything. There is a certain trend, or a pattern. Which would look something like this:

Billedresultat for standard deviation curve

This will later on be called “The Standard Deviation”.

That pattern will show up every time we want to measure something. If we want to quantify the average height of a person in this world the mean is likely going to be 1.70 m (Just a guess).

And far out on the left. There is likely to be 1 out of 10.000 which is going to have height of 1 m. And far out on the right, there will be a person who is also 1 out of 10.000. But that person has a height of 2.15 m.

Galton and The Stock Market

In this modern society, we are bombarded with information. There is so much information that we often don’t acknowledge how big of a privilege it is.

All of the statistics and research I can find on almost everything today. Is something that people in the 1920 could not even dream of.

The 4 % rule was is not something people knew about back in the days for example.

The cool thing about Galton’s finding. Is that we see the exact same pattern in the stock market. At ifa.com I have taken a  50 year period (600 months), and looked at the monthly return of a 100 % stock index portfolio. And this was the pattern that came up:

As we can see, it is the exact same pattern as Galton’s standard deviation.

Galton and My Portfolio

600 months, is a long period. So I thought it would be a fun experiment to see how my monthly returns would look like.

Will my monthly returns have the same bell curve?

After I read my first book called “A safe investment” I then bought my very first stock in August 2013. That book suggested that you bought 10-20 individual stocks, in different sectors and kept them forever.

Which I initially did. Later on I learned about how almost everyone is better served with index funds. So just before I graduated as a building constructor in November 2015, I sold all of my individual stocks and bought index funds instead.

From August 2013 to November 2015 I had individual Danish stocks, and from November 2015 til this date, I have had global diversified index funds.

From august 2013 to this day there have been 62 months. Only 1/10 of the 600 months I demonstrated from the IFA example.

But you know what ?!

My Galton curve ended up almost the same as the 600 month.

Which I was quiet stoked about.

As you probably can see. I have three months of +9% monthly returns, and I only had 2 months of -4 % or worse. If we believe in Galton’s theory there will be 3+ months of -9 %/month or worse ahead of me!

Yikes!

But what I do know that If I stay in a 100 % stock index portfolio, I will have approximately 1 %/month before costs on the long run.*

How To Predict the Stock Market With Galton

This means that we can predict the stock market. We know that the majority of monthly returns will end up in the middle. Which will be around -2 to +2 %.

But we also know that when we have a monthly period with is either a -20% or  +20 % that it is most likely to be a 1 out of a 600 scenario. And according to the statistics is not going to happen again in our life time.

There will be periods where we will have more negative monthly returns (bear market) and there will be periods where we have more positive periods (bull markets).

But if we stay in the market, we know that this bell curve will show up.

So when a bear market shows up, just stay the course, and remind yourself that someday it will be more tilted to the right.

A Short Awesome Video on Galton and The Stock Market

*IFA.com

Coast FIRE – Ever Heard of That?

The other day I learned a new term – Coast FIRE.

The traditional way of chasing FIRE is to have all of your expenses covered by a passive income, often in a stock index fund.

We know that in order to have enough for the rest of our lives, we need to have 20-25 times our annual spending.

But Coast FIRE is a bit different. And it is quit powerfull for many of the young fellaz out there trying to reach FIRE.

The power of compound interest is very big when we are able to save money as young. If we have a 7 % annual return, our money will double every 10th year or so. This means that if you have a 1000 $ it will double to 2000 $. From there it will double to 4000 $ and so on. If we have a good amount of money when we are 30 years old. That money can easily double 4-5 times.

Or said different. Our 1000 $ at age 30 can easily grow to 16.000-32.000 $ in our life time. 

What Is Coast FIRE?

With Coast FIRE we take advantage of that compounding.

Let’s imagine that you read this in age 25 (no worries if you are older). If you can to get to 500.000 DKK (76.000 $) by the time you are 30 years old, you never have to worry about that retirements saving again. From there we won’t have to add another dollar for the rest of our lives to that account. Because it will compound into A LOT of money.

If we leave 500.000 DKK (76.000 $) in a stock index fund from 1976-2016 we would have ended up with about 13.000.000 DKK (2.000.000 $) (adjusted for taxes, inflation and fees)*. That amount at age 70 will roughly put us in the top 1 % wealthiest here in Denmark.

And that is Coast FIRE. Figuring out how much money you will have to save and invest, and them leave the entire portfolio until the day that you retire.

If we earn 20.000 DKK/month (3000 $) after taxes, and saving 50 % of that in able to reach Coast FIRE, we are only spending 10.000 DKK (1500 $) a month.

If we are able to reach 500.000 DKK (76.000 $) at age 30, we can from there go out and take a part-time job that pays us 10.000 DKK/month. Because that is what our spending is. And with peace in mind know that our financial situation is going to be great because of compound interest.

We can take up jobs that we find more enjoyable than the stressful corporate job. I could see myself as a rowing/crossfit trainer or having a small mason company. Because that is something that I enjoy.

But even if we do stuff that we love for 40 hour/week, that too will be an ignoring task. I love rowing for example, but after two months on a training camp, doing nothing but, eat, rest and train, I look forward to come home. But I still love rowing.

How to Reach Coast FIRE in Two Years

And I’m here to tell you that we can reach Coast FIRE in as little as two years. If you are between 20-30 years old when you read this. You will be able to become very rich and not spend 40-50 hours/week on a job.

Let’s imagine that you get inspired to reach FIRE. but the numbers you need to reach are to overwhelming, so you decide to go for Coast FIRE.

At this very stage, your portfolio is at 0 $, but you have burning desire.

If we earn 20.000 DKK/month (3000 $) after tax, and save 50 % of it. That means we save 120.000 DKK/annual (18.000 $). Because we are young it can make sense to leverage our investments with as much as 2:1. Said another way, for every 100 $ we invest, we borrow another 100 $, so we end up investing 200 $ instead.

Now we are saving 240.000 DKK/annual (36.000 $) instead of the 120.000 DKK. That means that we can hit our 500.000 DKK in as little as two years from now.

But Loui?! Then I would have 240.000 DKK (36.000 $) in debt.

Yes that is correct.

240.000 DKK (36.000 $) can seem like a big sum of money when you are young. But if we compare it to how much money they can compound into AND how much money we can earn in our entire life. That money is only a couple of percentages of our entire earning power.

If you read this, and decide to do it. You can have a full-time job for as little as two years for your WHOLE life. From there you only have to make 10.000 DKK/month, which is something that you could do part-time with jobs you actually like. Or you could work full-time a couple of months, and then travel to cheaper places where 7.000 DKK/month would make you live a royal person.

And that portfolio is going to grow. If we want to, we could start to withdraw from it down the road. Because it becomes big enough to finance everything on our budget, and retire at a traditional age with bit less money than 13.000.000 DKK (3.000.000 $).

*IFA.com

3# My Monthly Financial Independence Update

The Quick Takeaways

This month savings rate: 51 %

This month leverage: 100 %

Rolling savings rate since February 2016: 55 %

Total value of portfolio: 550.000 DKK (84.000 $)

Years till I hit a 7 % SWR: 2.6 Years

% Change since last month: 1.8 %

So What The F*** Happen This Month

I think we all know this month has been a rowdy one. Stock wise. Excluding this day (where everything seems to go up) my portfolio is down 25.000 DKK (3.800 $).

I have been quiet excited about the market drop. I have taken this quote from Warren Buffett quiet serious.

Be fearful when others are greedy, and be greedy when others are fearful – Warren Buffett

All stocks has pretty much only gone up for a long time.

The Shiller PE 10 were at the second highest ever recorded.*

So I can have a hard time justifying buying stocks. And because of that I have decided to have some of portfolio in cash. Around 10 %. There is several reasons for that:

  • By having some cash I can rebalance if the market should take a big dive.
  • And I think it is a responsible thing to do when I leverage my investments by 50-100%. It means that I can afford the leverage. If everything tanks, I still got some cash reserves to make sure that everything is good.
  • Plus I would like to have a 1-2 years of cash when/if I quit my fulltime job. And this resonates very well by having 10 % cash. So if I end up with a portfolio of 2.500.000 DKK (380.000 $) I would have around 250.000 DKK in cash. Which is equivalent to two years of my spending.

BUT!

When the market did drop this month, I could finally justify buying some stocks. And Morningstar begins to call that the general market is undervalued**

I don’t practice market timing. So I will buy whatever the market does. But I would lie to you, if I said that I didn’t feel an inner resistance when everything just goes up and up and up.  And that’s where my 10 % cash allocation feels good.

Just Bring Another 2008

I think this month would be similar to something that happen back then. We just need to experience them for 9-10 consecutive months.

But this month has just proved that my portfolio can decline 4-6 %, and still be able to make the portfolio rise. 

*http://www.multpl.com/shiller-pe/

**https://www.morningstar.com/tools/market-fair-value-graph.html