AD 2017. Lighthouse for the Cruising Ship.

Living is nothing but consuming time until you die.

-Tehching Hsieh

I came across this performance art piece by Tehching Hsieh, a Taiwanese where he explored the meaning of time and living. Within a year from April 11, 1980 to April 11, 1981, he challenged himself to punch a time clock EVERY hour on the hour. In his ‘Timeclock’ piece, he recorded his progress every hour by taking a single film exposure. And then he compressed into a 6 mins video of art.

As crazy as it sounds, 24 punches per day for 356 days equals 8760 hours that he has to be awake to punch the time clock on the hour. I think he only managed to get 8627 mugshots, which meant that he missed 133 punches. All basic societal routine is thrown out, in terms of sleeping, eating, being free to roam about and this brings his interaction to time as close as it can be.  This is in essence watching a deliberate human interaction with time and his reflection on his experience shows how we can reinterpret living and time.

Notes:

  1. Notice how he wears a prisoner-esque clothing, perhaps to reflect the ‘Life Sentence’.
  2. Missing 133 time records in his piece either due to human failure or mechanical failure. Very reflective of how life experience is.
  3. Doesn’t this remind you of everyone around us, punching timeclocks as our daily routine? We are a slave to this then. There are some freedoms we cannot attain.

I punch time for every hour; its repetition but another way to see it, its is not repetition because it’s a new hour

In life we are in a process

 And here I am punching my time clock. If life is as bleak and simple as he breaks it down to be, I think it is up to ourselves to fill in all the bits in between punching the time clock to make it what it meaningful to ourselves and to have to freedom to fill it up with what we value and find important.

Lighthouse for 2017!

There are certain goals I would like to set out to try to get myself going a little. I don’t want to be too focused on attaining too far-fetched goals but hopeful this can be a guide to give me direction when I get lost in my journey (too often this has happened in the past). This are some financial ones I have set out in a forum I am part of:

1) Save £15 000 in 2017
2) See Dividend in 2017 increase compared to 2016
3) Keep outgoings at a similar level compared to 2016
4) Complete a full years worth of accounts, including Savings Rates, Outgoings
5) Read at least 5 Books
6) Join Park Run and get it going.

Others I want to include to keep exploring myself and help me grow as a person:

7) Produce a short film (A simple one will do)
8) Travel more – Crazy idea to plan a hike from Chamonix-Zermatt (Hey if you are not going to do it when you are in your 20s, when are you going to do it?)
9) Write more. Poems, Prose, anything.
10) Spend time with people I love (more than anything, it helps you learn about yourself)

I think like FI, many other things in life needs that bit of planning and visualizing and working towards before you arrive there. For some, it might come naturally or society has pre-programmed it into most, but for others it will take some exploration and deliberation. No one said it was easy.

I am curious what else I will encounter in 2017. And you?

-FIREplanter

2016 in Review

The year of 2016 has been a year of growth, in many aspects of life. Financially, relationships, goals, prospects, meaning…

The FI journey is important in that you need to evaluate what is important in your life first and foremost. Most things in life we have is finite, time, money, food, resource.. The earlier you realise that the earlier you can focus on living in the moment and investing for the future.

The principles you value, the friends you enjoy just being with, the people you meet along the way that you look at them with your heart and think these are beautiful people with beautiful lives. The key thing though is that you need to live to figure these out. My predilection for stories, fiction or not and the moral of the story helps in some way to gain some sort of insight (whether true or false).

Net Savings

monthly-cash-savings-bar-chart

It seems that I am doing fairly well being in positive balance most months of the year. The missing months of July and August is down to poor record keeping. However because of how I track my net cash worth, it will likely reflect in the following months values, hence the yearly net savings value should still be fairly accurate.

One method I found that was very motivating for helping me keep up to speed on a monthly basis was to join a savings community online. There are various threads over at the MoneySavingExpert Forums where people keep each other motivated with their monthly savings and what’s been happening in their various lives that makes savings difficult or easier. Unfortunately, this is not so much as an exciting topic over dinner with friends or mates over beer, hence I have to do it over the online community to gain some encouragement.

Portfolio

portfolio-volatility

My YTD value of my portfolio is up just about 12%. How well have I done compared to the indices?? Worst than some, better than some… Does it really matter? Perhaps. Would it change anything I do? I hope I have better sense than that. I am waiting for a bear market at a appropriate circumstances where I am in a stable financial situation to sort out my mentality with regards to risk. That would be the real test of my mettle I reckon.

This is all really a big ‘experimentation’. I mean you can only know how much you hate or enjoy the rollercoster only after you have experienced it right? However, better buckle up my safety harness!

 

Decade of Deaths, Weddings, and all the rest.

2016 is also the year when my granddad passed away. This was a fairly novel experience for me and my generation and it has taught me some lessons. There are people you love, and you want to be with them when they need you. You want to be able to be with them when they need you. That is important. Two of my friends my age had similar experiences as well and I think I can see some similar reflections on their part. This will happen more often from now on, this is inevitable.

The ages of 20s is also when there are numerous wedding invitations flying across through the mail and where social media is just flooded with wedding photos. I attended 2 of them myself this year and I took it more of an opportunity to reminiscence with old friends and also to figure out what it is all about. I enjoyed it immensely but hope not to get caught up in the hype. I really wished them all well and hope to see them do well themselves.

So the Decade of 20s is now known as the decade of Deaths and Weddings.. Perhaps by the late 20s, I will be used to this.

Imagine a Life of You and I

Everlasting Strawberry Summers

Sneezing at pink blossoms

Sharing stories like no tomorrow of soft rye, work and  adventure

Morning coffees on rain fell weekends

Late night brews and chats

Train rides across the city

Napping in front of moving pictures

The heart yearns for The silhouette of my dreams and likewise the mind is occupied

yet Life is such a stoic existence that the only way is to

Swallow that bittersweet feeling and call it living

Pieces of Me by haleshine

I hope you had a decent 2016. Time provides all and takes all in the end. Enjoy the journey.

-Fireplanter

I Wished I had a Barbershop

I wished I had a business like this.

There is no future in house work.

Maybe when I save some money I can have a barbershop someday.

But I can never save.

Money slips through my fingers like that.

Trouble is I have lived up to every penny I’ve earned.

Why shouldn’t I?

We’re here today and gone tomorrow and then where are you?

Quote from Hannah from The Great Dictator

This classic from Charlie Chaplin has his stylistic style of satire slapstick and moving lines. And then I found this quote which made me stop and record it down.

Now we can all relate to the difficulty of saving, of living up to every penny  we have earned. After all, we have worked hard enough to make the dough, why shouldn’t we be able to enjoy the fruits of our labour??

“You Only Live Once!”

This is especially true in times of true hardship where there is no visible sight of the exit route, where your future looks bleak and you feel trapped by debts, lifestyle inflation and costs of living. The middle class trap. Hence it is very easy to take the easy way out and spend to release the steam or stress. Some even make the mistake of spending on credit, which is basically spending future earnings.

‘Money Slips through my fingers like that’

Ouch.

Fortunately, the start of the line offers us a solution. Own a barbershop. A Barbershop is a business which has a capacity to produce an income. In the real world, this translates to use your savings to buy assets and assets tend to produces an income. 

Assets

There are various asset classes that we can own. They are the following main classes:

  • Cash
    • We all know what cash can do. It appears to be the most apparently valuable and useful asset to us given its liquidity and ability to allow us to buy goods and services. It also can provides us a buffer from dipping into the our more volatile aspects of our portfolio in turbulant markets. Cash is King sometimes
  • Fixed Income assets
    • This includes Treasury bonds, UK Gilts, Corporate bonds. Basically a IOU from the government/company that you lend money to for a set time-frame and they agree you to pay you back a set percentage of interest. The complexity comes from the IOU having a value that can rise or fall with the markets.
    • Risk/Return is higher than cash but less than equities.
  • Equities
    • Owning a business or a slice of the business in the form of stocks/shares and getting a return from dividends. Nothing beats owning a business and it generating a return itself.
    • Key thing is the value of the business/stock/share is only as valuable as the next buyer is willing to pay for. Hence market sentiments and how well the business is run plays into this.
    • It is risky to own just one business but the idea is owning hundreds of companies through a tracker fund would diversify the risk of a few companies not performing as well.
  • Property
    • I call it the ‘Romantic asset’
    • People have this romantic idea that house prices never fall and always rise and will continue to rise and is the best to own as an asset. However the same has been the case for Equities. All asset prices tend to rise with inflation!
    • The disadvantage of property is that it is extremely illiquid and requires some effort in manging the property. 
    • If you are owning to stay in, it doesn’t even count as an asset as it does not provide a source of income. 
    • I would consider investing in it as a diversifer in my portfolio though through Real Estate Investment Trusts as it behaves differently to equities though the market cycles.
  • Commodities
    • The bad boy asset: Steel, Copper, Gold, Oil…
    • The most volatile asset out there! Just reading about Oil price drop over the past year, I get the sinking feeling of one that owns the oil companies. Same for minerals and rare materials, steel price drop affecting the Australia/UK markets.
    • Might be useful at some point but at the size of my investment, it would be a long while before I look at this asset class more closely.
    • Buffet hates these. They don’t produce anything.

Key message is to Diversify Diversify Diversify. Have your finger in every pie (that is worthwhile having your finger in). Don’t put your eggs in one basket. etc etc etc.

Well you get the message.

And hopefully I shall own my own Barbershop one day!

–Fireplanter

The Long Bet

The case for passive investing has been well put forward by this long standing bet between the Sage of Omaha and Protege Partners.

“Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”

So the story goes that Mr Buffet postulates that within a 10 year period, the index of S&P 500 will perform better than a portfolio of selected stocks by portfolio managers. He actually bet US$1 million on that with Protege Partners, a hedge fund company.

To put simply, passive investing is to follow the stock market blindly by investing in all the companies listed on a particular index, such as the S&P 500. The S&P 500 index comprises of the 500 largest companies listed on the US stockmarket by market capitalization. By investing in the whole index, you are basically going to be tracking the performance of the stock market, ie. if the stock market does well, so will your investments, if it does poorly, your investments will follow suit. There is no activity in actively selecting stocks, hence the ‘passiveness’ of the investing.

On the other hand, to buy individual stocks or to invest in a mutual fund with a manager, you be will subject to picking stocks. You would be trying to better the performance of the stock market. (If not, what’s the point of picking stocks in the first place right?) However, to beat the performance of the stock market (which would the average performance of all the stocks), you would need to pick the stocks with ‘above average’ performance. To attempt to do that, you would need up to date information on the companies, knowledge on how the markets/companies/industries function, analyse all the above and then make a judgement which would be companies with the ‘above average’ performance and then you need luck as well for things to go well as you planned. And to make sure  you achieve that on a year on year basis, you would need to do that and reassess things regularly again and again.

Reasons the average investor would do better with passive investing compared to active investing more often than not:

  1. Fees
    • Current fees for passive investing via tracker funds costs as low as 0.07% (Total Expense Ratio) for instance for the Vanguard S&P 500 UCITS ETF. This is compared to managed funds which can be from anything from 1-2%. One of the more popular equity income funds Woodford Equity income fund has a Annual Management charge (AMC) of 0.75%. The Vanguard UK FTSE 100 tracker has a fee of 0.09% to compare with.
    • Hence the active funds have to perform signifcantly better perhaps 1-2% than the average market performance before fees just to meet the same returns as the index tracker fund. And this has to happen EVERY SINGLE YEAR to justify the fees.
  2. Diversification
    • The greater diversification of index tracker funds over hundreds and hundreds of companies makes the risk of investing less than choosing just a few companies. You have to be careful of certain indexes which may be overly populated by certain sectors, eg Tech stock in in S&P, Financial in the FTSE. Basically this is a case of spreading your eggs across as many baskets as possible. The first rule of investing is to protect your capital and we do this by spreading the risk.
  3. Not needing to choose
    • Not having to choose is a brilliant strategy! You avoid choice paralysis, you don’t get bogged down by inertia, you don’t have to worry about the specifics of each and every company if you are not interested at all. Owning a slice of every company on the index means you get the benefit of getting the average returns from the market regardless of what happens. And being average is mostly good enough.

As of end of 2015, the S&P index fund has been outperforming the hedge funds the past 8 years. It is surprising and perhaps counter-intuitive as to how such a simple strategy can be more potent then doing some research and picking out the better performing companies. This is apparently better shown after there has been year after year of changing market conditions. The active funds, just can’t keep up!

protege2016-720x400
 

Source: Berkshire Hathaway Annual Shareholder Meeting 2016

 

On of my favourite writers on investing proposes that active investing is a Zero Sum Game. When there is a buyer, there has to be a seller. When someone profits from the sale, someone will lose from the buy or vice versa. The total net effect is that there is no gain or loss in the market. The only net gain is from the dividends being paid out from the companies. The price of the asset on the market will be volatile depending on peoples valuations. However the tendency of prices is to go up as companies become more valuable and produce more and as inflation pushes the prices of assets upward. Joining the active game is where you might just as well be the winner or the loser just the same at the cost of a fee to the active managers or transactions costs brokers charge!

We might as well settle for average and let time do the compounding for us.

 

 

 

 

Dividends: the Fruits of the Market

So August, September and now October is just passing me by since I last looked at FIREplant. Not exactly dedication is it? I am still keeping an eye on the finance bit side of things tho and continuing to read into the markets and news about Brexit and pound and elections and stuff that happens all around the world. And life just goes on…

This is just an update on the Dividends I have earned so far this year. Fruits of the market. Some dividends are paid yearly, some are paid quarterly but the funds that I have picked pays out quarterly dividends. I think it gives me somewhat of a bit of motivation when I can physically see the returns trickling in. Another benefit of quarterly dividends is the chance of rebalancing with the dividends if the portfolio allocation gets out of their desired allocation if I need to, although my level of dividends at the moment is not enough to do anything significant.

2016 Q1 Q2 Q3
VAPX 64.85 66.2
VEUR 132 45.45
VHYL 88.91 67.89
VFEM 25.28 69.63
VUSA 13.18 15.98
Total 0 324.22 265.15

I have not bought any more units since I dipped into the markets, so the dividends are coming off the same number of units I have bought.

Each quarter of dividends current equates to roughly 0.6-1% of the portfolio value, but given that the value of my portfolio has increased 20% since April 2016 it doesn’t seem to bad. A good learning point is that % yield on a portfolio may fall when the value of portfolio increases and vice versa, the % yield may increase when the underlying assets fall in price. Hence, looking solely at the yield doesn’t tell you about the whole picture but may be indicative of how the underlying price of the asset is.

It is interesting to see also that the same number of units for VEUR paid out a third of dividends from the previous quarter or how VFEM paid out 2+x in Q3 compared to Q2. Perhaps this is due to how the underlying companies in VEUR/VFEM pay out their dividends throughout the year or could this be due to other socioeconomical factors? I don’t reckon it matters much it the grand scheme of things but it would be interesting to see what happens next quarter.

All in all, I am quite satisfied so far with my picks and the dividends. Over the course of 1 whole year, the estimated dividends on the whole portfolio would be roughly 2-3%, excluding any underlying volatility of the price of the portfolio. The challenge is to focus on the dividends and try to ignore the volatility of the portfolio. I hope when the volatility shows up as a fall in price of my portfolio, I don’t get the butterflies in the stomach. That is the true test for any investor I reckon. Hence the importance for  Cash as a buffer/reserve as an emergency fund.

What is your Cash Worth?

So the month of June and July has not been kind to me in the slightest. Not in terms of the financial side of things but all the other aspects of life. If I were to be FI, there would probably be a lot less of these mental shenanigans.

It feels like I’m rowing solo across the Atlantic. The planning is done, the course is set and all I gotta do is row.

Behind me are hundreds of miles of flat, grey ocean. There’s nothing on the horizon. In front of me, are thousands of miles of flat, grey ocean. There’s nothing on the horizon.

It’s hard to tell I’m moving at all.

An ancient mariner would pass the time by juggling mortal danger and hallucinations. A modern mariner has the same options as well as their GPS tracker and calls from home.

All four are needed to keep the rowboat on an even keel.

– Financial independence – adrift in the vastness by Monevator

So your portfolio in stocks can go up and down. You can’t predict it. Everyone says the economy will be bad bad bad post-Brexit. Maybe it is bad, but my portfolio is about 8% up from beginning of April. Amateur financiers, economists should probably not even try to explain the phenomenon. I mean even if the experts can explain it retrospectively, it is probably just academic speak anyway. And with so many experts all around, it is difficult to recognize the truth from all the ‘noise’.

Now what can steady the ship as it sails along to shores of the promised land is your Steady Cash Savings! Hence I introduce the measuring your Cash Worth!

I like to keep things simple and easy so this is how I do it.

At the beginning of the month, I review all my accounts (current, savings, bonds, credit) and record the value of each account on a spreadsheet. I add all the sums together with abit of help from Excel’s excellent in-build functions and get a total sum. I then compare this month to month to see what’s the increase of my Cash Worth.

This is what it looks like on a chart since Nov 14 till now.

Cash Worth

I shall try to aim to keep 1 years worth of living expenses as buffer rather than fixing on a fixed percentage of my entire net worth. I think it is an interesting choice to make in designing your whole portfolio, and it needs to weigh in your risk profile as well.

  • How well can you take being out of job? (Let’s face it there’s no guarantees!)
  • How long do you expect to be not working?
  • How much interest can your cash be generating in a simple current,savings accounts strategy?
  • How safe is your cash in the above mentioned accounts?
  • What is the alternative? More Stocks/Shares/Bonds/Property? What is the outlook like?
  • Savings for short term big events? Weddings/Mortgage/Holidays

So many ideas and more questions to answer. (I think I am thinking like a Independant Financial Advisor now!)

I hope the steady stream of inflow is a constant, or even an exponential growth chart as I try to avoid lifestyle inflation as much as possible with hopefully income growth! This constant is so much more soothing than the volatility of  stocks and should be thought of as the fertilizer to the FIREplant. The regular drip feeding to my FIREplant portfolio is proudly starting to show signs of its first fruits last month of 1% dividends in the last quarter!

Let’s get the snowball rolling! 😀

The Pursuit of Freedom

We can only escape so far. We can only be so free. There is a point where we can no longer be free-er. Most times our own attitudes and fears are trapping ourselves. The environment most of us live in contributes to that as well.

I haven’t been feeling great these few days as I have taken 2 weeks off work and I know the team isn’t coping too well with other people being off sick and stuff. Imagine this, away on annual leave, but not getting peace along with it knowing you are contributing to part of the problem (not really, it’s the problem with the system i think). I think it is important to learn that live goes on with or without you. You are never the centre of the universe you thought you are. On the journey I realise there are many things other side of work that is worth valuing and spending time on (family, friends). On the other hand, the act of going to work gives me structure in daily life and new experiences.

A needless anxiety I shouldn’t be suffering. I need hasten my plan to build more of the plants to fuel this freedom.