One of the biggest achievement of mankind was when people have changed from gathering to growing food. Later on cultures in the valleys of rivers like the Nile, Euphrates, Ganges and Yangtze started to flourish.
This has happened more than ten thousand years ago, and history has proven that great civilizations can only emerge from strong economies.
The discovery that you can grow your own crops, domesticate livestock had such a big significance that it only can be compared with the start of using of tools, the invention of wheel, or the free WiFi 🙂
One of the easiest forms of investing is via purchasing an ETF (Exchange Traded Fund). This investment form has first been introduced in 1993 and by today it became extremely popular. In 2015 there were over 4,000 different types of ETFs, therefore the choice is endless.
An ETF can suit almost all kind of investment needs from simple index ETFs (e.g. VTI, which represents the total US stock market) through sector ETFs (e.g. VFH, which represents the US financial sector) to some really wide spread investment vehicles (e.g. GIVE, which holds both US and global stocks, just as bonds, all focusing on environmental friendly and sustainable themes).
It’s been a week since we know that the next president of the US will be Donald Trump. Once thing I can promise: this is never gonna be a blog about politics. Also this post will be totally politically neutral. First of all it’s easy for me to be neutral as I live in Europe. Secondly everyone must respect the decision of the American people; at the end of the day the guy got almost as many votes from them as Hillary 🙂 But let’s stick to the topic of finance and let’s see what kind of conclusions we can make from this week!
Today’s post will be about emotions and how you should put them aside when making investment decisions. Investment is about numbers, percentages, ratios and other, factual things. There should be no place for emotions here. At the same time we continuously meet with emotional impacts that can affect our investment decisions. They can come from many sources: analyst up- or downgrades, the new super investing opportunity we hear from our neighbor, headlines of financial news, or the result of the presidential elections. These impacts can make you buy or sell assets, while such decisions should not be based on them. Let’s demonstrate this with an example:
Another month, another step closer to financial independence. In October our investment rate was according to the plan, adding nearly EUR 2,000 to our portfolio via share purchases. We’re in the middle of the Q3 reporting season and the results so far quite mixed with both positive and negative surprises. Overall the S&P 500 closed slightly lower this month, but due to the stronger dollar our portfolio had some small gains in euro. Let’s see the details!
In the previous post we have checked some ideas that could be useful to consider when deciding about the portfolio allocation during the wealth accumulation phase. It became quite clear that based on historical data (which is of course never a guarantee for the future) it worth having a portfolio which is fully or at least heavily loaded with equities. How much weight is allocated to stocks vs bonds mainly depends on the risk tolerance and the time frame that you expect this phase to last for. In this article I’m trying to check whether it worth to keep a certain percentage of bonds just in order to reallocate them to stocks during market downturns.
In the previous parts we have looked in detail how various portfolio allocations might affect our retirement income. In each cases we started with a portfolio that has values USD 600k five years before the planned early retirement date. But unless you have 600k in hand, we need to earn it somehow. Let’s see how to get there!
In the first three part of the series it became quite clear that a portfolio consisting solely (or at least heavily) stocks provides the highest long term return, besides of the potentially serious deep dives during the investment period. Is it safe to say that if we want to perform the best during the first, wealth accumulation phase of our early retirement plan, we should invest all/most of our assets in equities? And if yes, is it true under every circumstances? What if the economy isn’t doing well for a long time? What if we are facing long periods of deflation? What if less and less people work in the economy? What if we were… Japanese?
This is the first month end since this little blog has been launched. From now onward I will give an update on where we are on the road to one million. I will let you know what investments were added to the portfolio, share the dividend income on a quarterly basis, and hopefully can demonstrate how every little step you make takes you closer to financial independence. Let’s see where we are now!
￼Ever since I have decided to retire early I was always wondering what should be the perfect allocation of my portfolio. I want to accumulate wealth as fast as possible, but at the same time I don’t want to take any reckless risk that would wipe off the work of the years. The fastest way to get one million euro is to save 500k and put it all on red at the roulette table. But in case I lose it all on black, I would be extremely…. sad. I need a better plan!