Why investing in Pharma makes sense

Today, let me dive a little into the topic of income-investment and why I believe that every income-focused investor should have some pharma stocks in his or her portfolio.

As my readers know, my goal is to escape the rat race with the help of investments in the stock market. With my eyes targeting financial independence, having a passive stream of income is crucial. One way to get it is to invest in dividend-paying companies. The strategy is called income-investing and it is a reliable strategy of building up passive income, large enough to be able paying bills (and more) once the decision to retire has been made.

When it comes to income-investing ideas, how to pick a stock, and what one needs to be aware of, the pharma industry emerges quickly as a good direction to look at.

Profits for years to come

My personal portfolio contains shares of two pharmaceutical companies: AbbVie (ABBV) and GlaxoSmithKline (GSK). They are not THE biggest in the industry, but large enough to reward their shareholders with frequent dividends for many years now. And chances are good that this won’t change anytime soon.

Big Pharma is a term that is being used in a mostly negative manner. Overcharging customers, abusing their power, and either way, health should be free for all, shouldn’t it? Maybe. Maybe not. But what is pretty certain is that this industry has a tremendous cash-flow that is only increasing with a growing and ageing population.

People get sick. It’s how humans work. We get sick, we get better. For most of the time anyway. But the part of getting better for most of the time involves medications, treatments, surgeries, vaccines, anti-biotics, hospital stays. It’s a never-ending battle that will always require someone to develop, produce and distribute all those essential products that help us to have a long and healthy life.

They can do what no one else can

Some people may think that supporting Big Pharma can’t be the only way to get things done. Some smaller companies should be able to pull it off as well, right? Research, development, production, distribution. Well, the bad news is, that smaller companies simply can’t do all this. And even if they try to share the work process with other companies, chances are that they either fail or can’t make enough profit for a sustainable contribution.

There was a recent story about a company called Achaogen that comes to my mind. The company was working on a new type of antibiotics. The scientists and researchers were looking for a way to develop a new type of antibiotics, as the currently widely available versions are becoming increasingly less effective. They were largely successful in the beginning but failed after a very short time in operation. The business was just not profitable enough to sustain.

This case highlights the need for some for really large economies of scale, cross-incentives among products, and distribution scale that a small company simply can’t sustain. And we are talking only about antibiotics. How about those much larger and even more cost-intensive projects. Cancer, HIV, dementia. There are so many challenges in front of us. They require the right people, with the right education and research experience, the right equipment, sufficient funding, the right connections for distribution and the stamina to dive through ups and downs of the world without going bankrupt.

Bill Gates, for example, is working closely with many companies including GlaxoSmithKline through his Gates Foundation. When asked about the reason for this collaboration instead of just using his immense wealth to simply find solutions on his own, he said it very simply: These companies can do things that no one else can do.

This is a powerful statement for any investor out there. It says that, to a large part, there are not many alternatives. That’s a big moat to cross and perfect protection for any long-term investor.

The risks are limited

Unsurprisingly, AbbVie and GlaxoSmithKline are both considered to be rewarding long-term investments for income investors not only by me but by pretty much every analyst out there. The combination of the long-term focus, available resources, knowledge and power of distribution, together with a reliable and stable cash-flow give pharma companies excellent risk/reward ratios.

Some analysts point out that the big cash-cows might at some point disappear, especially when cheaper alternatives come to market. When patents run out. When the competition catches up. These concerns are legit. It will happen. But unlike some electronic toys or tools, health is a different story with plenty of areas that are still under development and which are almost impossible to copy in a simple and cost-efficient process. The electronic cycle for product improvement is only roughly 1 year and has very limited regulations in place. Health related products take 10-15 years to develop and are subjected to heavy approval processes and regulations. This will always keep the competition at pace, even if some profit margins might occasionally suffer or take a blow.

Disclosure: I own all stocks mentioned in this article.

The dividend season is coming!

As the calendar has continued to roll into March, we are quickly approaching the dividend season in Germany. While most companies in the US pay out a dividend every 3 months, German companies do so only once a year. One could argue about which system is better or worse, but that’s a topic for another discussion.

In Germany…

The majority of companies in the largest German Stock Exchange Index (DAX) is paying out dividends from April to June. Right on time before summer vacation, to ensure that we get the necessary pocket money to go on holidays. Well, or if you are smarter, to re-invest it.

Traditionally over the last years, right before the announcements for upcoming dividends will happen, share prices start to rise as analysts evaluate and predict the expected payouts. And despite challenges across the globe, 2019 does look like a great year again. To understand the significance of this season, you need to take a look at some numbers. The expectation for 2019 alone for the DAX companies is a total payout of 35 Billion Euros!

35.000.000.000

That’s the number. Can you even imagine to have something like this on your account? Well, most people can’t and most people will never come even close to it, so this doesn’t really need to be your target. But receiving a piece of that pie is definitely worth the effort.

This is even truer if comparing dividend yields with traditional saving accounts. While it is currently quite easy to find companies which offer a yield on your investment of 3% or more, most saving accounts will be still below the 1% margin. It means that even with a modest 3% yield, you can receive 3 times the money that you would get if it’s parked on a traditional savings account. Just think about that. This the reason why investing simply makes sense.

In Thailand…

Interesting enough, Thailand has 2 major dividend seasons as most Thai companies pay dividends twice a year. The first season is similar to the German one, between April to June. The second one is around September and October.

I didn’t write much about the Thai stock market yet as I am still gathering experience, but I am setting up a stock account for my wife. As you might have guessed, I prefer stocks over life-insurance. Interestingly, Thai companies offer much higher dividend yields across the board and while some might think that investing here is risky, the truth is that the risk is pretty much controlled.

Due to the close relationship between politics and business, major companies are pretty well protected and with the country growing and moving forward, their profits are almost on autopilot. I will write more about this at a later point, but for now, I am getting ready for the dividend season here as well.

Re-investing is the key to long-term success

Receiving dividends at much higher yields compared with savings accounts is a beautiful thing. Even more so is the fact, that many dividend-paying companies tend to increase those dividends year over year. Re-invest those payouts, and you will create the 8th world-wonder: The magic of compound interest. Or compound-dividend. This is the one and only true key for long-term success, which any average person can achieve with very little effort.

Regular, growing dividends will enable you to escape the rate race much sooner. Or, if you prefer to keep working, offer you a nice supplement to your monthly paycheck or retirement payout. While many financial advisors will discuss with you about the 4% rule and about taking out money from your savings/retirement account when you get old, dividends offer you a much better option: Not taking out any money at all. If you are invested long enough, you can receive dividend-yields of 5-6% easily without selling even 1 stock, thus being able to enjoy a great lifestyle until your last breath.

This is no hocus-pocus. This is the power of investing.

FIRE – It’s about time, not money

Financial. Independence. Retire. Early.
F.I.R.E.

If you are interested in financial freedom, sooner rather than later you will stumble upon this term. While reaching financial independence and being able to retire early is not a new concept, it seems that these days it got plenty of steam, and there certainly is a very good reason for it. Probably more than one.

One of the main reasons I could think of would probably be the ever-increasing lack of job security, and the increased amount of options to travel and to explore the world.

Job security is becoming a relict of the past

As far back as I can remember, I was being told that to make a career one has to be flexible, adaptable and independent. While I got no problem with this and actually very much embrace the idea, one needs to realize that with more flexibility, we are also talking about more freelance jobs and short-term contracts. The traditional life-long assignment with one company has not become a rarity just yet, but it is becoming less common.

Don’t get me wrong, I don’t want to blame the industry or politics for this though. Frankly, I couldn’t imagine and wouldn’t even want to work for the same company all my life. Even 4 or 5 years would feel like an eternity to me. I rather believe that this is pretty much a reciprocal alignment of interests from both, the modern employee and employer’s side.

Working in hotels, I usually receive a contract for 1 or 2 years for each property. It happened only once, that I received an unlimited contract as a manager, but in most cases, it’s a limited offer. It’s a common standard in international hospitality so I don’t spend too many thoughts on this, but for most of my friends, family, and colleagues from my home area of Germany, there is not much understanding why anyone would agree to work on terms like this.

It all comes down to security, or does it?

Of course, the main idea behind the thinking of my family, friends, and colleagues is about the job and pension security. While schools and universities are preaching independence and flexibility, parents and politics are trying to push us into “stable” careers where you don’t need to worry about growing old – and receiving a sustainable and handy pension. This might be less common in the US, but it is pretty much the idea on which Europe has been built on.

I am traveling for a long time now, and my personal attitude was to always put freedom ahead of security. I hated the over-regulated German system and always wanted to get out of it. So, talking about security was always just some annoying concept to me. Being young, educated and in a booming industry, I was feeling like I could take on the world and handle everything by myself, while having much more fun, traveling and exploring the world along the way.

But things change, and you surely start to think differently when you turn 35 and got a family to support. For me, something happened around that time, when my daughter was born.

If you got no kids, you won’t be able to understand the fundamental change in your attitude that just comes naturally shortly after your kid is born. Your thoughts and priorities will slowly start to shift, towards wanting to make sure that you can care not only for yourself but also for your loved ones – no matter what. You might be a master in survival, but your significant other and your little ones might be much more vulnerable and you might start taking this into account at some point.

Many people start then to think about security for their family. As for my case, while security is a part of it, my worries shifted not towards security, but even more towards freedom. Freedom for myself, for my wife and for my daughter.

It’s all about time and what we do with it

I mentioned it over and over again and I will not get tired of repeating it: A successful career is the single, most important piece of the puzzle that you need to work on to reach your target of financial independence as early on as possible. The logic is simple: The more you earn, the more you can save, invest and the earlier you can start living off your investments and your savings.

A successful career has also plenty of other benefits, namely opportunities to gather experience and to face challenges in areas which you might not be able to have access to as a regular rank & file employee. Every experience helps us to develop further, to learn more and to understand the world, people and everything around it a little better. Therefore, I absolutely think that one should aim high and try to move up the career ranks quickly and with a high motivation to learn and to develop.

But having said all that, there is really no reason to do it for all your life. Especially when you have a family, spending 60-70 hours a week in an office becomes less and less desirable. You want to have more time, and you want to have the freedom to use this time the way that it will benefit you and your family the most.

Now here is the single most important realization about any job:

To work means to trade time for money. Your time is limited. Money is not.

You can only have more time if you have sufficient money to support yourself. If you don’t have money, you need to trade your time for money. You need to work. The more you have to work, the less time you have for anything else.

It’s simple, but yet only a few people truly recognize the significance of this logic.

Thus, the ultimate goal is actually not really about money. It’s about time. It’s about the freedom not to need to trade your time for money. This means that we have to use our careers, our income, and our skills to invest in assets and to set up businesses, that will allow us, step by step, to reduce the amount of time that we would normally need to trade for money.

Once we reach the point that we don’t need to trade time for money anymore, then FIRE becomes a reality. Or, whatever you would prefer to call it.

On a final note

There is one more thing that I will dedicate a separate post later on, but that I would like to shortly bring up today. If you truly understood the point above, then you will also realize another fact. Since your time is limited – on a daily basis – there is also a limit on how much you can earn by trading your time for money – on a daily basis.

Think about this: Let’s say you are a barber. It doesn’t matter how good you are and how much you charge for a hair-cut, there is a time limit as to how many haircuts you can perform per day. Meaning, there is a limit to how much you can earn.

Becoming independent also means that you remove this natural barrier, by focusing on money earning methods that are scalable. Meaning: They have no time limit attached to them and can produce higher results, without trading in additional time.

This might sound a little bit more complicated, but I will get on this topic in detail at another time soon.

Evaluating your expenses

My family was never wealthy, frankly speaking, there were times when we had trouble to get through a month and as far as I remember, we mostly lived paycheck to paycheck. This resulted in a very low pocket money which our parents would hand out to me and my brother. It didn’t bother us when we were very young, but things became unacceptable when we turned teenagers.

Hanging out with friends, buying new sneakers or going for a party costs money, as do computers (I still remember that first C64) or books and magazines. I wanted to have all those things, and there was only one way to get them. I had no choice: I had to work.

The Time & Money Relation

The legal age to start working in Berlin in 1994 was 14 years (don’t nail me on the details, I might be 1 year off) and I quickly found part-time jobs which I could do after school. It was a great experience for me: Working just 1,5 hours in a shop cleaning or filling up empty drawers would provide me with the income that before I had to wait for an entire week. We are talking about roughly 10 DM – today the equivalent of approx. 5 €.

I realized how much time I had wasted in the past: 1 week vs. 1,5 hours for the same reward. Just that the latter one would require my active participation.

The lesson learned was that I could get much more money by spending more time working. Having realized this, I didn’t want to spend time at home anymore. I wanted to go out and work.

However, since that very first time, while I basically kept on working until today (I am 38 now), this feeling that I had when making my first salaries didn’t come up too often with later jobs. I was always tight with money and therefore I learned very quickly that if I wanted to get anywhere with my wishes for what I want and what I need, I had to prioritize – and sacrifice.

Measuring expenses

It was a tough lesson and I hated the very idea that most things were still out of reach for me. Because you see, we get used to our salaries very quickly and by some miracle, the more money we get, the more things we start to see that we want to have which are out of our reach.

So, when I started to work the initial happiness didn’t last that long. I got unsatisfied with the situation, as I needed to make constant choices and set priorities. To help myself manage my expectations in a better way, I developed very quickly this 1 way of measuring expenses, which helped me to actually really understand what I truly wanted every time when I reached for the wallet.

I was counting hours.

I was counting how many hours I needed to work, to either get the money back that I was about to spend, or, how many hours I would need to work in order to be able to afford something I wanted. With this idea in my head, the evaluation of “wants” and “needs” took a truly different perspective.

Time is limited. There are only so many hours in a day and with my limited knowledge, school and friends to take care of and family, there was simply a limit of how much I was realistically able to earn. Measuring working hours against the price of a product would clearly show me if it’s something worth working for.

At that time I also learned that in the future I would have to learn to control these 2 factors: My hourly income and the amount of available time to take advantage of it.

This habit stayed with me until today and in a sense, investing in stocks became the ultimate solution, because this is what stocks, especially dividend-paying stocks, do.

They take time almost out of the equation because analyzing and purchasing a stock is a one-time effort. But it can reward you for decades. The only difference is, that instead of time to exchange for money, you need to put money as a downpayment first, and receive both, time and money slowly back, stretched over a long period of time until it starts to out-weight your initial investment.

The more you invest, the more time you free up and at the same time your hourly income increases. Patience and diligence is the key here.

Just chasing higher salaries will seldom give you time back. And working less will seldom give you opportunities for higher salaries.

You see, this is what investing is all about, and this is why it’s, in my opinion, the best way to escape the rat race.

What is passive income?

Today I would like to clarify a few points regarding the term “passive income”.

There is probably no financially successful person in the world who would not preach the mantra of protecting your financial future by having multiple streams of regular income. Relying on your job alone is a risky endeavor. You are dependent on your boss, on your companies success, your colleagues, your health, and so many other factors that could trigger a chance of losing your job and your income.

Not being prepared and without other sources of income, you might struggle to pay your rent, medical bills or even sending your children to school. Even if you are prepared and have some savings left, being unemployed may eat up these savings before finding a new job and destroy possibly years of diligent saving within just a few months.

Therefore, having several sources of income is very important. Since our daily time capacity is rather limited, these income streams should be set up as passive income streams. Meaning: One should not have to put too much (or even for the better: any) work into it.

Here is where the misconception may already start and where one should never forget the basic rule of any investment: If you don’t put anything into something, chances are you don’t get anything out of it either.

We all dream about it: Receiving money and doing nothing for it. Well, it does sound wishful but not easy. And it is not easy indeed. The thing about passive income is the time and effort you have to invest to start creating it in the first place. There is no magic bullet or “trick” how to get around it: In order to create passive income, you need to invest time, effort or money – or all of it. This is especially true for the type of passive income that I am promoting: Dividends.

Let me be clear about it: Passive income is not a side-gig. I think it’s great if you have a hobby and use it to generate some extra cash which you can use either for investing, to build up more savings or your next vacations. But passive income needs to be an automized source of income that requires no more than an occasional adjustment. That’s it. You should not have to sit in your cubicle for 9 hours daily just to move to the next cubicle after that for another 3-4 hours to ensure you have an extra income. That’s not how it’s supposed to be.

Before I talk about dividends, let me give you some examples of passive income which do not include financial instruments:

  • Referral payments from your online blog
  • Royalties from your e-book
  • Income from registered patents or issued licenses
  • Paybacks from your participation in a lending club

All these examples have the characteristic that you don’t need to actively do anything all the time to receive payments. They may be not all reliable, but they are automated and generate income in as small or as big amounts as they turn out to be successful.

The more money you would like to receive from your e-book, the better you have to write and promote it. Once. You want your patented reading lamp to be a success? Make it awesome and find some distributors. Once – or – a few times but not daily. The lending club shall pay you back monthly with interest: Borrow them your money. Once. Unless you want to get more. I think you get the point.

So the key element is, that you have to put some time, effort or money into your future source of income first before it starts generating anything. And there is no guarantee it will work. This makes it so tricky and is ultimately the reason why it scares off so many people: It requires a lot of time to start, you need to invest (time, effort, money) and it does not offer any immediate gratification. All the things that our brain responses positively to are not given.

This is even more true for dividends. Because to receive dividends, you have to invest it all: Time, effort and money. Money that you earned in your daily job and money that you understand to be your immediate reward for the work you put in during the whole last week or month – depending on where in the world you live. So why should you put your hard earned Euros or Dollars or whatever currency you use into something that seems so complicated, far off and that feels much less rewarding?

I admit, the psychological gap is hard to surpass. Investing in Stocks, REITs or whatever financial instrument you go for is an abstract model. The stock market doesn’t feel real to us, it’s nothing that we associate with our true needs. Having some stocks of a company doesn’t make us feel of being a company owner. Even though this becomes our entitlement to a tiny fraction. It is nothing we can eat, or dress or even put into the garage if we don’t want to use it anymore. And yet, it is possibly one of the strongest and most rewarding instruments to create wealth that almost anybody in the world has access to.

The dividend season in Germany is starting now, and in 2018, the biggest German companies alone, which are grouped in an index under the name DAX, will pay out approx. 34,3 Billion Euros to its shareholders. Let me write this number down in its full beauty:

34,300,000,000,000

That’s quite some zeros. And not only this, but you should know that this number grew by approx. 13% compared with the year 2017. This is cash money that is being transferred in tiny fractions to all shareholders who are invested in the DAX. Money that you can withdraw, without touching your stocks, and spend on whatever you want or need. Why would anyone not want to be a part of it and to get some piece of that cake?

Buying stocks/shares is not a highly sophisticated financial process. It is as easy as buying a piece of cake. Literally. Or figuratively. However, sincerely speaking, the piece you buy in the beginning will probably be very tiny and it will most probably not fill your stomach at all. It takes time for it to grow to a level, that it will be truly fulfilling your needs. But the good news is: Once it’s there, chances are that it will last a lifetime and if constructed in a clever way, it may even support your family for generations to come. The sooner you understand this concept, the sooner you will be able to profit from it.

This is why in a previous post I explained The Time Replacement Model (TTRM). Every stock you purchase that generates dividends replaces a tiny fraction of the time that you spend at work. The more dividends you receive, the more time gets replaced until you reach the point that you don’t need to work at all. Unless you truly want to. And it is truly passive because putting your money in the right stocks will still let you sleep well at night. No matter what happens in the world. I will get back on the SWAN stocks (Sleep Well At Night) at a later point.

Take care of yourself

Let me start by saying this: We only got 1 live. You might believe in reincarnation, but no matter what you believe or how you turn the story around: You always got to start from scratch. You are born and you end up under the earth or in an urn.

The available time to make the most out of our life is pretty limited. When we are young we tend not to appreciate this and waste precious time on plenty of useless tasks: Watching TV, playing video games, “liking” cat pictures on your friends Facebook, sleeping off hangovers, etc. – just to name a few.

There comes a point when we realize how much time has actually been wasted on such useless tasks and believe me, it can be a very frustrating moment. Sure, we need relaxation and free time and can’t be constantly working, learning, adding new skills or perfecting existing ones. But, we just really should appreciate the time we have and try to make the best out of it.

Having said all that, let me tell you why I bring this whole thing up: Considering that our time is limited and we should try to make the best out of it, spending most of this time at work seems just not right. I don’t believe that working all your life just to get by makes any sense. I got no problem with being active, creative and certainly, I got no problem at all with earning money. It just shouldn’t be something that you HAVE to do just to ensure that you have something to eat in your fridge, that you are able to send your kid’s to school and that you can handle your medical expenses when they come up occasionally.

Unfortunately, our society is built upon exactly this model. While some systems provide better social security than others, ultimately the overall idea is the same all around the world. The majority of the population gets by on a day to day basis, earning just enough to make it until the end of each month with little room to generate some savings and being hardly able to afford 2 weeks of vacation once a year. They spend a large part of their lives in exactly this manner, craving for the time when they hope they can finally escape into retirement, only to realize that their health has deteriorated, their financials may not be enough to do what they were hoping for and that on top they already forgot how to have a life without their daily commute to work.

There is, of course, a small minority earning significantly more, working significantly less and having much more time & money to take care of themselves at a much earlier point.

For most parts, this minority is somehow directing, entertaining, managing, or in any other way influencing a poor-to-middle-income majority. And when you think about it, it makes perfect sense. While we are constantly adding money to the markets, the basic rule is still valid: For one person to have a lot of money, many other people need to have much less. And while everything in our society might suggest that there are people in charge who care about you, either in your company or government, the fact is that you are out there on your own. Realizing this is the first step and the second step got to follow up immediately: You really need to start taking care of yourself.

It’s kind of a sad setup, isn’t it? Maybe. But it also gives clarity about what you have to do and where your focus should be upon.

Obviously, there are also other things than money to worry about, but the words life & freedom only start to make sense together when the basics are covered and your most pressing worries about food and shelter are gone for good.

And this is what this blog is all about. So how do you get to the point that you can cover the basics – without working? The 2 magic words are Passive Income and this will be the topic for one of the next posts to come.

2018 – Is it time for a crash?

Last week was apparently the worst week for the stock market since the BREXIT announcement back in 2016. My portfolio took a hit with some of my favorite stocks crashing down. In particular, one of my REITs (Real Estate Investment Trust) crashed 12% while announcing a dividend cut.

The company is called Wereldhave and is a Dutch Shopping Mall REIT. I don’t have a large position in it and see an opportunity here to add more and to lower my average purchase price, but yes, it hurts. Having said that, the dividend yield is still fine and it will keep creating passive income for more years to come.

About passive income

Now this is just my 2nd article and I didn’t really start describing in detail yet about what I am doing here. If you like to see my introduction, take a look at my previous post. To sum it up: My goal is to reach financial independence and to have the freedom to retire early. Or FIRE.

Passive income is one of the main tools to reach my target. The reason is simple. It is hard to talk about freedom if you are depending on a job, a boss and a paycheck. If you have to worry about food, shelter, medicine and education, then it can hardly be called freedom.

Also, while you might not worry about all these things as long as you have a job, you might start to worry when your company gets in trouble, when your job becomes redundant, when you get older, when the economy goes down… there are countless reasons that may create a situation in which you will have to seriously start to worry about your income.

So getting to the point where this freedom-restriction is not your major concern anymore is pretty vital. True freedom doesn’t work without financial independence. Passive income streams are therefore crucial, and for me, the way to get there is through investing.

What to do when the market goes down

While 2016 and 2017 were great years for investors, 2018 might be a rough one and I actually think that we may see a correction in some sectors. My portfolio may drop as I do have some speculative titles in it, but while some people spend their money on avocados, cappuccinos, and clothes, I prefer to pour it into dividend-paying equities that will hopefully support me in a not too distant future and start to cover my cost of living.

Any crash in the stock market is, therefore, an opportunity to purchase more stocks, lower my average purchase price for equities that I already bought in the past and set up new positions that will bring me closer to my target.

So let’s see what happens. Apple came down in price nicely despite reporting record profits. Starbucks got back to “normal” prices. AT&T is still in a good dividend yield range, Realty Income is back to a 5% dividend yield, IBM seems to turn-around and getting stronger in its cloud business section. In Europe, my all-time favorite BDC (Business Development Company) Aurelius announced a 5 EUR dividend which at the current price is a 9% yield – and 10% at my entry point, Vodafone is speculating about takeovers, and BT Group just announced a very robust business. While some people might get spooked, I am pretty optimistic and all these equities now yield over 5% on average, some up to 10% a year.

Corrections offer buying opportunities

I am looking forward to the correction and some amazing buying opportunities. So is it time for a crash? I don’t think so. Most companies actually are reporting record earnings and the bigger players are swimming in cash. Stock valuations in Europe are very moderate and while in the US they may seem high for some, the tax cuts and improved economic conditions will soon let this numbers go up. Dividend yields are good and might even get better after the correction. There is no reason to panic. Unless something really terrible happens in the world, a crash is not very likely anytime soon.

However, I am not an oracle so just in case the crash happens anyway: You better keep some cash on the side to get in the market right after the crash. Now we know very well that it’s almost impossible to time the market and to generate optimum profits with our limited time, knowledge, access to information and speed of execution. But, it actually doesn’t matter.

As a simple rule, I tend to look at it like this: There are companies which I simply know will be around in 10 years from now like i.e. the titles I mentioned above. It doesn’t matter if the world economy crashes, I KNOW there will still be a Starbucks, people still need to make phone calls and access the internet and premium brands such as Apple are very hard to kill.

These companies are seldom truly over-valued, and no matter how much they crash, as a result, their valuations will only get better. 10 years from now, will be 10 years back in the future, and you will most probably sit on triple-digit earnings and enjoy rising dividends for your passive income stream.

Disclosure: I am invested in all the shares mentioned in this article.