The first one for 2021

Finally. 2020 is gone and 2021 has begun. And the start couldn’t be more promising. A little rough, and it’s also affecting me and my journey, but promising nevertheless.

Let’s start with the biggest drama, the virus. COVID is not gone. In fact, it seems to get worse, but it’s not that we wouldn’t have expected that. Most of us make a big deal every year at the end of each and every year about things coming to an end, starting new, new year’s resolutions. But in reality, the next day after the 31st of December is just that. Another day. Another sunrise. Nothing more than another shift in the tides of time. So why should have anything changed in comparison with the day prior to January 1st, 2021?

Correct. Nothing changed. COVID is still spreading and to top it off, there seems to be a slightly mutated version of the virus going around. Spreading faster, it seems to be more difficult to track and isolate.

Japan has declared a state of emergency, China is once again shutting down regions, towns, and cities, and even Thailand came back into a de facto lockdown. The authorities are very cautious in not calling it a lockdown, but the measures in place include massive restrictions on travel, business, and semi-curfews. So I guess using the term “lockdown” is debatable, but certainly not too far off.

And of course the big elephant in the room. The US is in its final days of getting rid of Donald Trump. There is no question that he is leaving a legacy, but in my wildest dreams (or should I say nightmares) I wouldn’t have thought to watch the news and to see what is unfolding in the “oldest democracy in the world”. Shocking. But not surprising. I mean seriously folks. Electing a real-estate shark for president, what would you expect? And it’s not just any real estate guy. It’s one of the worst that ever walked the globe.

Trading the future

Having said all that, expectations are positive. We all know, things need to get worse before they can get better, and the way I see it, we are about to reach the peak of the crisis.

Infections are on the rise, but so are vaccines. Several types of vaccinations are being distributed and administered across the globe, and the ramp-up will only get faster from here. We know there is a life after COVID, and it’s clearly visible on the horizon.

MAGA supporters had a short uprising, but it seems they had not enough support, no real plan, and they were badly organized. So this ended rather quickly. The way I see it, all they did was to bring the Republican party on the brink of collapse. This brings not only a definitive end to Trump and his presidency but potentially also to any other political aspirations anyone in the Trump family might have (had).

So, we see all this happening, and we know that the future will be better. Therefore stocks are rising, and investors are preparing for a bright and profitable second half of 2021. And so am I.

Happy New Year everyone.

The last one for 2020

First things first: Merry Christmas everyone! Nevermind where you live, Christmas is probably not as it’s supposed to be. And neither will be the New Years Eve event. COVID infections worldwide came roaring back across the globe and have crippled public life once again. Even in countries that previously did well in handling it. Yes, even here where I live, in Thailand.

So, while everyone is awaiting the vaccines to roll-out on scale, we have to remain cautious and vigilant, and hold the line until we get through the worst part of this pandemic. My personal expectation is set around the target date of sometime around May 2021.

2021 will get better

I am pretty optimistic for the next year and expect things to get significantly better. While the economic crisis has shattered businesses and destroyed livelihoods, there is a positive effect to it.

As bad as it may sound, the crisis has cleared the market of many weak companies. Stronger companies discovered weak spots and dependencies that had to be addressed. People have realised that some business models are not as bullet-proof as they thought, and some traditional business partners are less reliable and trustworthy than one would have expected. Those who get through this crisis will come out stronger on the other side, new alliances and partnerships will be formed, and unproductive and inefficient constellations have been abandoned.

For investors, these are good news. Especially for those who invest long-term. Getting through a crisis on this scale builds trust and confidence. This in turn will support pricing of shares and dividend payments. The recovery will come.

That is unless…

But of course, the very first thing that COVID taught us is that such dramatic events often come unexpectedly. And while we might indeed be done with COVID sometime next year, the world is far from secure from other crises that might happen right after that. Whether it’s another virus, a military conflict on a global scale, trade-wars, who knows. Everything can happen.

However, the smart thing to do is to remain optimistic. Historically and statistically, optimistic investors fare better and end up better off than pessimists. Always. Because unless the world literally collapses, markets do recover. Businesses adapt and come back. Innovation never stops, it’s part of our DNA.

So with these positive lines I like to say thank you to all my readers for following this blog in 2020, and I am looking forward to keep writing for you also in the coming year. What can you expect from me in 2021?

  • I will continue writing about financial independence. As you know, my target is to become financially independent, and I intend to reach this target by investing in stocks. This will continue and I will keep writing about it.
  • I will start writing about investing in stocks in Thailand and about Thai companies. In 2020 I have opened an investment account for my wife and for my daughter here in Thailand, and started investing on their behalf with surprisingly good results. The experience I gained through this will be something that I like to share with other potential investors, especially those who are living in Thailand.
  • I will start writing about how to set up a business in Thailand. Currently my wife is about to open a small business, a health-food cafe with smoothies and smoothie bowls. We are working on it together and learning a lot about how to open a small business here. We are in the final stages now, but once setup and done, I will share the experiences made along the way in a few articles.

So this is it! Goodbye 2020, hello 2021!

I am wishing you all a healthy and successful new year ahead!

Portfolio year-end evaluation

As the year is coming to an end, it’s time for a portfolio re-evaluation. I do this every year in order to determine what I did good, bad, or just wrong, and what I can and should do better in the next year.

Keeping a cool head

I wrote it many times. When it comes to investments, you need to keep a cool head and take emotions out of the equation. You need to stick to your thesis and know that you’re in for the long run no matter what. But this is easier said than done.

When your shares are moving up for a while and you see your profits surging by 20%, 30%, or even 50%, you might feel the urge to sell your shares just to make sure that you can actually keep that profit. I call this phenomenon “negative greed”. It’s greed because you want to keep the profits, and you want to make sure that your account gets credited before anything happens to it (like another downturn in the market). But it’s “negative” because once the shares are sold, you have obviously no more shares that could grow even further from there. You secure profits, but you lose chances for more profits.

Similarly, when your shares are moving down, it’s hard to stay cool while watching your account going negative into the double digits. When a recession hits and all you can see is a screen with red numbers on it, thoughts will crawl into your head. Thoughts, that question your decisions, making you wonder whether that whole thing is just a big scam that you fell for, and that you should have better listened to all your non-invested friends who think you’re nuts for being an investor.

On both counts, I did quite well in 2020. While I experienced all the emotions and drags as described above, ultimately I kept a cool head. The only shares I sold were those of Apple (AAPL) after the stock-split. They soared by over 150% and I sold some to be able to buy a few new shares of other companies which I considered to be good opportunities. What did I buy?

New investments

  • Wereldhave – A dutch shopping mall operator who suffered dramatic losses in its share price in recent months and who is due for recovery once this whole Covid drama is over
  • Starbucks – The company is showing over and over again that it’s one of the best in the market. The pandemic didn’t hit it as hard as one would have thought, and it will come out stronger in the aftermath
  • Veolia – After watching a documentary on Netflix about drinking water (the show is called “Explained”, highly recommendable) I decided to start focusing more on water-related investments

I also started a savings plan into an ETF. It’s called “Xtrackers MSCI World Information Technology UCITS ETF 1C” and it’s focused on tech-investments world-wide. 100 Euros a month that have started to flow into this ETF, completely paid by the dividends I receive each month.

One more word about Wereldhave. I had this company in my portfolio in the past, and I sold it at a loss when they cut the dividend and when the covid crisis hit. But I kept it on my watchlist and observed the stock movements on a weekly basis. When I noticed that the stock stopped moving further down (after dropping more than another 50% since the time when I sold them) and the company announced a new management team as well as a full restructuring of their business model, I got back in. The shares are now up 40% since I bought them.

Dividend growth

In terms of dividends, Starbucks and Veolia will contribute to my annual income in 2021 as they both pay stable and each year growing dividends. Wereldhave used to pay a strong dividend until the crisis hit. They canceled all dividends in 2020, and I don’t think the company will be able to pay out any dividends in 2021. I expect them though to start paying dividends again sometime around 2022.

My dividend income shrank in 2020 compared with 2019. This was mainly due to my largest and also most disappointing investment: A company called Aurelius (AULRF). It’s a business development company (BDC) which I purchased back in 2018. It was showing not only superior growth opportunities but also had an amazing dividend yield, and since 2018 it developed into my single largest holding position.

Unfortunately, it also became my most disappointing investment. The share price dropped by almost 70% and the dividend was cut down to zero in 2020. However, in the last couple of weeks recovery started to kick in. My losses are now at -56% and given the recent business reviews, I am quite confident that shares will continue to tick up. Also, the dividend should recover in 2021. But I admit, this one is my single largest nail-biter.

Overall it looks like my dividends year on year will reduce by some 11,60%, and this despite the growth of my total invested cash by 8,99%.

Monthly passive income

The total decline of dividend payments by 11,60% is obviously not great, but overall, my monthly passive income remained largely stable. My total dividend yield on investment came down to 3,22% from 3,97% in the year before. For 2021 I expect it to move back up into the 3,5% to 3,9% range.

Considering the scale of the covid crisis, I see my thesis of investing and putting money to work in the stock market confirmed. And 2021 is almost guaranteed to produce similar or better results, with most stocks set to soar once the vaccine distribution starts kicking in.

From Bad to Worse

When it comes to the pandemic, there are some good news and reasons to be hopeful. Several vaccines are either in their final development stage or about to get approved. Right on time for the end of the dreadful year of 2020. 2021 can only get better. Or can it?

We still have 5 weeks for 2020 to go, and no matter what happens until New Year’s Eve, this won’t be the end of the challenges. Challenges with the pandemic, and challenges with the economy. Production, distribution, and the re-opening of borders will take time. So will the recovery of the economy. And we are not talking about days or weeks. We are talking about months and years.

Why things might get worse

Markets tend to be optimistic, but corporations tend to be cruel – by perception. Despite the silver lining on the horizon, chances are that most companies will continue cutting costs, reducing payrolls, and doing whatever necessary to survive. But not only that. Many companies see this as an opportunity to push through decisions that may have not been possible without such a crisis.

Some of these decisions might be radical, but necessary and possibly have been even urgent for a while. Upgrades of IT systems. Reviews of procedures. Reorganizing teams and the abolishment of established structures. But there is also a downside to it, especially when it comes to the “reorganizing teams” part. People are losing jobs.

Same old or not?

Now don’t get me wrong. This is nothing new. Maximising revenues and minimising expenses is what every business does. That’s how you generate profits. This was the case before the pandemic. During the pandemic. And it will stay with us also after the pandemic. It’s simply how every business works.

But when corporate number-crunchers tell you that everyone is replaceable and that the numbers still don’t look good enough, then you might want to get creative in your response. Short-term requirements for a quick brush-up of the balance sheet might become costly in the long-run. And as everybody “on the ground” knows well, some people are truly not replaceable.

So, while cutting expenses and especially payrolls is nothing new to us, the magnitude of the cuts in the current environment is immense. And many of these cuts are not just until this pandemic is over. Many of these lost jobs will disappear permanently.

Things are not over for the service industry

The tough times are not over, and especially the service industry will continue to suffer. Hotels, bars, restaurants. People will vacation less abroad. Companies will continue keeping business travel at a minimum. Since so many people depleted their savings or borrowed money, they will eat out less and keep parties and events on the low.

As my readers know, I am managing a hotel. For the last 12 years in this industry I was never worried about my profession, and I never worried about my job (which includes finding a new one when I felt it was time to move on).

But this time it’s different. This is the first time that I am not confident in receiving the opportunity to extend my contract (which is due in May 2021). And it’s also the first time that I have doubts. In the case that it should not be renewed, finding an immediate new opportunity will be a serious challenge.

Many of my colleagues have already lost their jobs. Many of them are smarter and more experienced than I. It’s therefore only logical to assume that I might follow in their footsteps rather sooner than later.

One more reason to keep preaching financial independence, and the purpose of having multiple income streams. And practicing it.

What a year

Today is the 14th of November 2020, and what a year this has been! With only 6 weeks to go and all the bad news going on, all I want at this point is for it to end.

Whatever your idea or opinion about the Coronavirus might be, we have to acknowledge plain facts that it had an immense impact on literally the world as a whole. This is beyond anything my generation experienced so far.

Jobs were and are being destroyed, incomes diminished, entire industries shut down, and thousands of people are still dying across the globe. And just to be clear: Whether it’s a direct or indirect count, if the virus triggers the death, then it’s on Covid to me.

Since I am working in the hotel industry, I am directly affected by it. In order for my business to survive, I need to cut expenses, reduce jobs, reduce salaries. It hurts. It’s many tears and many broken hearts. Many tough decisions every single day. And despite having the promise of a vaccine now visible on the horizon, we still have a few more months of pain and suffering ahead.

Also let me share with you this: As a business insider in an executive role, I can tell you here and now that this won’t get better any soon. Even post-covid. For most, the jobs that were cut aren’t coming back. The recovery of the service industry, the largest industry in the world, will take years. In order to survive cost cuts will remain in place until further notice.

Financial independence has never been more important

What I am sharing and trying to explain above is that the world is not going to get really significantly better any soon. And even if, how do we know that there won’t be another outbreak in one, two, or five years from now?

We have learned that there is no such thing as invulnerability. There is no such thing as total job security. And when times get really tough, even the best employers might be forced to make some tough choices to the detriment of employees.

Business owners face even greater risks, especially when they operate on thin margins and have not sufficient funds to survive prolongued periods of time without a regular income.

So what are our choices? How can we financially prepare for such an event?

There aren’t many choices, frankly, and there is no single solution. What we have to do is to create layers of protection. To create multiple income streams. And being invested in the stock market is one such strong layer. Also during the current crisis, it has again shown to be a reliable protection for tough times.

I am not talking about the value of my shares. I am down 25% in my portfolio so far. What I am talking about are dividends, my passive income stream.

Let me compare it with my salary, which is currently being cut by 25%. Next month it will be probably around 30%. At its peak, the cut was at 40%. But my dividends have decreased by only 11% year on year. And while I am not certain about my salary, I am quite confident for my dividends to fully recover next year.

Some of the most reliable dividend companies have not changed their policies and kept paying the same or even increased amounts throughout the crisis. This has again reconfirmed with me that for those who seek financial independence, being invested in the market is essential.

This crisis has been a huge reminder that we need to take responsibility for our financial well-being into our own hands. We can’t always rely on others, not to mention governments.

And it’s not just about the money. It’s about having that pressure off your chest, knowing that you have one more layer of safety, one that will contribute to protecting you and your loved ones when times are tough. This feeling alone is beyond any monetary value.

What the pandemic is teaching us

As I am writing these lines, we are into the 8th month of the pandemic. And as this year has only 9 more weeks left before coming to a painful end, it doesn’t look like the pandemic would stop there. We are in for a long and rough ride ahead with several more months to get through.

But every challenge bears also opportunities, and during these 8 months, there were already plenty of lessons for us to remember for the future ahead. Especially when it comes to our jobs and finances.

Lesson 1: There is no such thing as job security

The first lesson was to recognize that there is no such thing as “job security” when a real crisis hits. Given how our economies are connected and intertwined worldwide, any crisis that comes on a global scale is likely to effect employees and business owners everywhere and in almost every industry.

This pandemic showed us how quickly companies find ways to reduce staff counts and reduce payrolls. Whether people get furloughed, put on unpaid leaves, or forced to accept pay-cuts. When a crisis hits, people suffer. So one would do better preparing for such an eventuality.

Lesson 2: Emergency funds make sense

I wrote about emergency funds before, but let me repeat it again: Everyone should have an emergency fund that covers 3-6 months worth of expenses. More cautious types might even consider saving for up to 12 months.

Having an emergency fund won’t negate your worries when a crisis hits, but it will certainly ease them. Knowing that you don’t need to panic when the next rent or utility payment is due is already a huge relief. Not having the immediate pressure or struggle to afford your regular daily, weekly, and monthly expenses will keep your head clear and allow you to focus on finding the right solution to the challenge at hand, without the pressure or need to compromise on less adequate opportunities.

Lesson 3: One source of income is not enough

It’s good to have an emergency fund, but to increase your defenses even further, you should also not rely on a single source of income. Creating multiple income streams is a critical step not only for those who plan to retire with a better standing but also for those who want to prepare for emergencies.

Lesson 4: Be prepared to help others

If you have an emergency fund, additional sources of income, and are even able to keep your job while a crisis is spreading across the globe, then you have generated a unique opportunity for yourself: You can protect yourself and those in your care, and you might also be able to support others.

A friend in need, a local shelter for the homeless, or an orphanage. There is always someone in need. Whether it’s money, food, or clothes. Giving feels good, and even more so in such a difficult time.

Will stocks crash if Biden wins?

The presidential election in the US is just around the corner. November is only 3 weeks away. And while early voting has already started in the largest economy in the world, markets around the globe are in full speculation on who might win and how this could effects stocks. The loudest faction is of course the one that is stronger invested. The Republicans. And their argument is the same every four years: If the Democrats win, the economy and stocks will suffer.

Of course we cannot predict the future, but if the past is any lesson, then it’s safe to assume that the comments shared by Republicans are at least misleading, and this is easy to proof. Let’s look at the economies of the last presidents in the US:

Blue stands obviously for Democrats, and red for Republicans. The full article can be found HERE with my thanks to Fortune.com

These numbers give a very clear indication on what kind of leadership inspires growth and success. And it’s not a Republican leadership. Looking at these facts as an investor I certainly support the Biden campaign to emerge victorious, to help the US economy to get back on track, and I don’t worry about my portfolio if Biden gets his turn. If anything, I expect things to improve significantly.

This may take a little longer

A few of us were looking forward to seeing the stock markets recover during the last quarter of 2020, which started only 12 days ago. But as we are moving into the 38th week of this year, there is little reason to believe that the markets will start to rise again any soon.

Many businesses have been scaled down, people furloughed, budgets cut, investments deferred, assets repurposed. A vaccine for the virus seems still far off, but even if we would get it tomorrow, it will take more than a few months to get to where things were before. How long? Nobody knows.

Be greedy when others are fearful

Following the advice of Warren Buffett, investors should get greedy when others are fearful. The meaning behind this is of course that when stock prices are in free fall, it usually is a good time to be looking out for good bargains. But is the market now really already fearful? Is it a good time to be looking out for bargains?

The truth is that nobody really knows. Some shares may fall again. Others may rise. Some may be easier to analyze than others. But the universal rule remains valid in good and in bad times: There is no such thing as a bad time to invest in good companies.

My approach during this time remains the same as previously. I keep investing. I am buying companies that I believe to have a solid business, that will survive the current and future challenges, that continue paying dividends, and which I believe to continue doing all this for years to come.

While looking for the right companies at a good price, I also stick to my split-investment strategy. I am not putting all my money immediately into one stock, but invest only a limited amount first, and add to the position again a few months later on.

Following this strategy, I may not fully benefit from a stock price increase, but I limit my risk and have the opportunity to purchase more shares at a lower price in the event the stock price may fall.

Being greedy has never been good advice. Not being scared and having a strategy is in my opinion a better approach.

Nobody knows what the future holds

When you wake up in the morning, you never really know what the day will bring you. You might have a schedule. Some appointments. Places to go. People to meet. Things to do. But there is no guarantee that all these things will indeed happen.

A person you wanted to meet might cancel the appointment. The place you wanted to go might become not accessible for some reason. And the things you wanted to do might become less of a priority as the day evolves.

The same goes for any business, and of course, for stock investments.

We never know what will happen in the stock market. While promising news about some stocks you bought might have prevailed in the market during the last week and made you feel very confident of future gains and profits on your investment, a single unexpected event can turn everything around.

Hope can turn to fear. Smiles to tears. And instead of counting your imaginary wealth, you might scramble to think about how to manage the next rent payment.

Benefits of having a plan

This is where strategy and planning comes into play. Of course we cannot predict the future. Nobody can. But we can put systems and strategies in place to help us mitigate potential challenges and at the same time offer us the chance to take advantage of potential opportunities.

Those strategies to name a few include:

  • Having an emergency fund of 3 months or more of your regular income/expenses
  • Having an investment thesis, an investment plan
  • Diversifying investments across countries, industries, and currencies
  • Having a good mix of dividend-paying stocks and growth stocks
  • Being calm
  • Being patient
  • Having some investment cash ready on the side
  • Not being scared to sell a stock at a loss when the story behind it doesn’t match your investment thesis anymore
  • Not being scared to buy more shares of a company that is losing value, but that perfectly fits your investment thesis

Taking the time to plan ahead, and to continue working on this plan as we learn, as markets and industries develop, and as challenges arise while opportunities pop-up on unexpected fronts makes all the difference between successful investors and gamblers.

Breaking Rules

Nothing is as it should be this year. 2020 will go down in history as one of the worst years for my generations (X / Y – I am right on the brink).

Highest unemployment as far as I can remember across the globe. People are restricted to travel between countries, in some areas even between cities. Foodbanks, charities, and NGOs are stepping up and doing what they can to get people through hard times, even in the richest and most developed nations. Medical supplies are running short, equipment gets scarce. And governments are printing cash for people like there is no tomorrow.

Every weakness of our economic systems has been exposed by now. The mantra of a small government and an unhinged economy has been crushed to pieces. Whether it’s Germany, the US, UK or Thailand: Without government support it would all collapse.

It’s a terrible situation, but we will get through this, as humanity always did. There is light at the end of the tunnel, and I am confident that we will thrive again once this is all over.

And having said that, as bad as it is, it’s also a great lesson and experience for us. Instead of lamenting and complaining, we have right now the opportunity to analyze the situation and to think about how we can handle a similar occurrence in the future. Because we know that this wasn’t the first, and certainly won’t be the last pandemic that we will have to deal with.

Financial independence should grab more spotlight than ever before

The current situation showed lots of weakness in the structure of our society, especially to those who are in the rat race. As the crisis triggered massive unemployment, salary cuts, and put people in danger of losing access to their basic needs like shelter, food, and healthcare, it has never been more obvious that the rules we follow are flawed.

People are talking about jobs, minimum wages, worker protections. Protections from evictions, free medical support, and other measures to help all of us getting through the challenges of the pandemic. And it’s all good and right. We need to work, we need to have our rights protected, and we need a framework of rules to make sure those in power don’t abuse those who are not in a position to protect themselves.

Unfortunately, the same rules that protect us are also the rules that limit our opportunities. They push us into the rat race, into the dependence on people who employ us, and on governments that care for us. We give away some parts of our freedom and receive in return limited protection that helps us to make it through the days ahead.

But those who really want to get at least a slice of their freedom back, they got to break out of the rules and take ownership of their future. It’s especially situations like the current crisi, when financial independence becomes more important than ever.

Being financially independent means that you can afford to have a shelter without relying on the government, that you can put food on the table without relying on charities, and that your health is protected. Financial independence is not about getting rich. It’s about freedom.

The steps for reaching financial independence are only a few:

  • Earning as much as you can
  • Spending as little as possible
  • Saving and investing the surplus
  • Building passive income

Only four steps that explain it all. Simple and while not easy, definitely achievable with the right mind-set, plan and determination. And the benefits are immense. Not only may it allow you to retire early from your regular job. Achieving financial freedom will also empower you to pursue other paths and passions which you might have not considered previously due to financial commitments that couldn’t be neglected.

Even more importantly though, it will also prepare you for hardships, and situations as we are experiencing right now. It’s undeniable that those who build up emergency funds that cover 6-12 months of expenses, or who have passive income streams, are significantly less worried while the virus is causing panic and havoc across the world.

The FIRE movement is just a smart thing to do

When you explain the idea of financial independence and the FIRE movement to people who never thought about it, you will hardly find anyone who would disagree with it these days. There is nothing about massive unemployment, stagnant wages, and deteriorating economic conditions that would encourage people to go back to the old days.

And this is not a one-off event. It will happen again. Maybe it will be another virus. Maybe something else. But we know that hard ships are part of the equation throughout our lives. So wouldn’t it be a smart thing to do something about it? To prepare for it?

As my readers know, I am promoting investing in stocks. And surely, many companies got in trouble and had to cut or reduce their dividends, hence also impacting my passive income. But what this crisis showed me clearly is that while there is no 100% protection in this kind of environment, the odds are still clearly favouring investors over regular workers.

I work in the hardest hit industry of the pandemic: I am a hotel manager. And while my salary was cut by up to 40% as my hotel had to close for a few months, my passive dividend-income went down only by 9% on average year to date so far, and I expect it to remain on that level.

If you ever had doubts whether FIRE is for you, these doubts should be gone by now. And whether you invest in stocks or real estate, or any other way that generates passive income streams, it should be (or become) a part of your plan.