The Incompetent Investor

Monday, January 14, 2019

Chapter 8 - “Portfolio Update” January 2019 Update Net Worth $78227 (+$2084)

January 14, 2019
Chapter 8 - “Portfolio Update” January 2019 Update Net Worth $78227 (+$2084)




Welcome to Chapter 8 of the Journey to Financial Independence. Every month I share how I am tracking towards financial freedom by providing you with an update of where the family portfolio is up to in regards to our ticket to financial freedom. Note my definition of financial freedom is not to stop working, it is much more than that. Have a read here if you are interested.

New readers, if you have not read some of the challenges I have faced in hope of financial independence, have a read here. Perhaps you have had other challenges yourself? Tough career break, career change, relationships, medical setbacks and so on... we all have challenges.. 

Portfolio Update 

This month has been a better month for the ASX which has seen the family portfolio regain some ground. 


As noted, from the previous portfolio update, the S&P/ASX 200 has regained circa 3.08% since my last entry. Consequently, the portfolio update this month was a bit more uplifting! 

Am I Concerned About A Bear Market?

There is a lot of commentary noting that a bear market is approaching. What am I doing? At this stage I am consistently adding to the portfolio given I intend to never sell my dividend producing LIC's/ETF's. Cufflinks, a great finance blog, explained that in 2017, we saw a six year rally in every major investment class (Ashley Owen, Cufflinks, 2019). According to this article, never before in history had we seen every mainstream asset class enjoying positive returns (after inflation) for 6 continuous years (Ashley Owen, Cufflinks, 2019). The last time this occurred was in 1925 to 1928, which was...before the 1929 crash and the 1930s depression. 

Is this time different? 

Probably not. However, in our circumstances, we are not planning on receiving our dividends for another 15 years or more. Therefore, my dividend spitting machines will be used to reinvest through the market cycles. In my mind, as long as I am increasing the total units held, my income over time will increase. People tell me I am crazy. They explain that I should pull my money out and try and time the market. In principle that is a great idea. However, nobody can do it consistently. Have a read of my blog post here as to why I personally believe most people are unable to time the market. 

Summary 

I hope you are all kicking goals to the start of 2019. My year has been awesome. I've got a new job working in the Community Development sector and I absolutely love it. I've got awesome colleagues who are supportive and appear to be genuinely happy for me when I am doing well at my role. This is always a relief when you move to a new city, state, and job. 

Family Portfolio LIC/ETF Update

I've added Milton to our family portfolio this month. A total of of 876 units were added. 

Family Holding's 


That is all from me. Catch you all soon!

Cheers from Darwin! 



Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 

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Thursday, January 3, 2019

Chapter 7 - “Strewth! I lost 21% of my wealth in 2018. What lessons have I learnt?”

January 03, 2019
Chapter 7 - “Strewth! I lost 21% of my wealth in 2018. What lessons have I learnt?”
This blog is unlike others in that I am sharing the numerous incompetent decisions I have made in my financial journey. As the blog evolves, I trust these ‘Life Lessons’ posts will become more infrequent (hopefully lol). However, for the moment given the mistakes are relatively young, I will be entirely transparent and share them with you all. Sadly, I had a huge lesson as recently as last year (2018).



This post hopes to uplift others who have made poor decisions. Many of times, when we are hit financially, we can lose confidence and feel a sense of despair. I know I did.

We all have our preferred bloggers/podcasts who are kicking goals and sharing immense amounts of knowledge. To me, these bloggers act as essential role models to motivate myself and presumably others on the path to FI.

What separates my story from other FI bloggers (I think anyway) is my journey is a bit of an underdog story. Although, let me make this very clear, I absolutely grant that I am blessed to be living in a developed country. FI is not even a possibility for many citizens living in developing countries. I just wanted to point that out because I think we can get lost in the FI community without recognising how lucky we are to even be discussing the FI concept. For many, this is not a realistic reality unfortunately. 

By now, you are probably wondering how I lost 21% of my wealth… I will share that in a moment.

First, I just want to share some of the tests I have faced on the path to FI. Some readers may resonate with some of these experiences, and if not, you could face them one day (touch wood).

When I was medically discharged from the Army, I spent a good couple of years participating in rehabilitation at the St Barbara Pain Clinic at St Vincent Hospital in Melbourne. It was a tough few years emotionally. 



The St Vincent bunch were an awesome team. Without their help, I would likely not have gone onto completing my Bachelors the following years. Surprisingly, the whole FI thing was actually a real priority of mine at the time.
Despite my eagerness to obtain FI, my mental health was poor due to the chronic pain, which transferred onto disgraceful investment decisions in an attempt to cut corners. This involved investing in speculative companies and awful newsletters seeking upwards of $400. I will share my investing newsletter experiences another day. Compounding to the existing problems was not being able to progress my career. 

After a number of years of endeavouring to get my life back on track, I eventually started my first professional job outside of the Army at the age of 31.

Now.. what you want really read about… the 21% Net Worth Hit…

One freezing day in Melbourne, I rocked up to work feeling pretty standard. Struggled to get out of bed after a late night gaming session. Had my morning dump followed by a hot cup of water. When I arrived at the office, I proceeded over to my desk to say g’day to my colleagues. I did the regular check of my stocks and other assets.

When I looked at the … yep…. BITCOIN price… I could see Bitcoin has been smashed overnight. To make matters worse, I worked in a flipping call centre (a good cultured one but still brutally busy). I rocked up to work at 8:25 and the phone lines opened at 8:30 on the dot. 




I remember having to plan bathroom breaks each day for the 2 years I worked in a call centre environment. Logging into my smart phone to either sell or at the very least get a better understanding of what was going was tough given how busy I was. I received a call smack on 8:30am. The bloke on the phone obviously had no idea how much stress I was under.

The price continued to slide… (in hindsight, probably should have ended the call and gone to the bathroom. I suppose I had too much honour and put my own foolishness before the customer. Silly? Probably).

Anyway, by the time I logged in… most of my money had vanished… BOOM.. GONE….SUMPLA (Hindi for finished).  Remember the South Park episode where the fella deposits money and the banker responds….. “… andddddddddd its gone”….. That was the essence of my CRYPTOCURRENCY experience. 21% of my total net worth down the drain in literally hours overnight. 




What the hell was I thinking? My now self would slap me across the face for even considering investing more than 5% of my total net worth into a risky asset class in Crypto. Greed at its finest.


While the lesson was expensive, what have I personally learnt from this disgusting experience?

Not to invest more than 2-5% of my total net worth into a risky asset class like Crypto
Not to invest into something I do not understand
I should have consulted somebody I trust (my father) who truly looks out for me when I was thinking irrationally. I bypassed my father and spoke to my mates who had no idea themselves. Recipe for disaster.
I have realised, at the age of 31, the path to FI is a slow and steady one. No need to cut corners aka invest in speculative assets (in my mind).  
Truly value money to avoid large irresponsible allocations towards risky investments.
Never give up on the path to FI. Have a entry level job? No dramas, spend less than you earn and hit it hard! 


In the end, if we all remain discipline, we will all hit FI eventually. It is the silly decisions that delay the process like the ones discussed above. Despite the struggles and financial hits, just remember not to take life too seriously. At some point, you will move on from this world. 

You can allow that particular event to break you, complain about it, compare yourself to others, or you can be joyful, live in the present, and learn from your mistakes

 It is easier said than done I know, however, to the best of your ability, just remember to be grateful that you are alive. If you struggle with that, go visit an ICU ward to put some of the financial lessons into perspective. Or simply hug your son, mum, dad, girlfriend, wife, husband and so on :-)... 




Peace and Happy New Year! 




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Monday, December 17, 2018

Chapter 6 - “Should I Invest in Cyber Security? Let's Take a Closer Look”

December 17, 2018
Chapter 6 - “Should I Invest in Cyber Security? Let's Take a Closer Look”

How do you feel about Cyber Security? I was curious over the weekend on how I could morph this interest into a strategic investment.  


My experience with getting hacked was after I was being a keyboard warrior on League of Legends a few years ago. All of a sudden after a few verbal blows to my opponent, my internet was compromised and I was disconnected at will. This honest to god is a true story. Even as somebody who is pretty familiar with computers, I was gobsmacked as to how a 13 year old was holding my internet connection at ransom. After 6 hours or so so, in the end I apologised. My anger got the better of me that day (I am not a angry person by the way). I learnt my lesson after that. I am now the most down to earth and humble player  when I play computer games. You just never know who you are going to piss off ha ha. 

If one of my team mates is deliberately letting the opposing team win (which is quite common in League of Legends sadly), I will comfort them by saying, "that is okay pal, we are all gifted different levels of ability,  just do your best", as opposed too.... nah actually I wont go there..ha ha...





Before I even consider investing in cyber security, I first needed to do some intelligence gathering. 


As you read this very blog post, you are either doing it on a laptop, your phone, or another electronic device of some variety. The reality is we do most things through technology particularly with the rapid advancement of IoT (internet of things). All our wealth and sensitive data is stored upon these devices. It is widely accepted that Australia is facing increased frequency of attacks to its national and economic infrastructure (ACSC 2017, 16). 

As a regular Joe myself, I don't believe we fully acknowledge the importance of having advanced cyber defence capabilities to protect the countries national & economic interests in a globalised connected world. 2018 has been a interesting year in respect to Cyber Crime. Let's have a look at some of the high profile Cyber Crimes of 2018. 

Under Armour: On March 25th 2018, Under Armour had learnt that MyFitnessPal was breached. MyFitnessPal is a exercise and diet application which is particularly popular amongst the active community. It was estimated that 150 million records were breached. The sneaky bastard managed to infiltrate a multi billion dollar company. 

Exactis: On the 26th of June 2018, Exactis disclosed 340 million people had their personal data compromised which included businesses as well. Exactis is a marketing and data aggregation firm based in Florida. The breach was based upon Exactis having 2 terabytes of information stored on a publicly accessible server. Individual's physical addresses, emails, phone numbers, and even children's names were breached. This particular event once again reaffirms the importance of having advanced cyber security infrastructure within businesses, particularly those that hold sensitive data

Aadhaar: On the 3rd of January 2018, it was disclosed that 1.1 billion records had been breached. You heard me, 1.1 billion. A couple of reports from Tribune News alleged they paid 500 rupees for login credentials of Indian Citizens which was offered by some shadowy criminals on whatsapp. 500 rupees is approximately $10 AUD.  Pretty freaky stuff right?



To see the top 10 High Profile Cyber Attacks of 2018, check out this fellas blog post


The capabilities of cyber crimes are becoming more diverse and constantly evolving, and their operations generally dwarf in comparison to costs of governments and organisations. Sophisticated modern day criminals no longer need to blow down doors to obtain money and sensitive data. The new age criminal is extremely intelligent and they consistently scan for organisations and governments that lack basic security systems to propel attacks. 

Unfortunately, hackers will always find a way to break into computer systems. Although, while that is true, it is also important to recognise that there are some brilliant minds that work on the other side and are equally as motivated to defend attackers. The overarching message here is that companies & countries must prioritise cyber security as part of their long term vision to ensure they stay on top of the continually growing threats that exist within the technology driven world we live in today. 


Take a look at what cyber criminals earn...




What ETF's am I considering to take a position in the cyber security space?

At the moment, I am looking at 'HACK' which is managed by Betashares. I don't know about all of you, but I recognise picking stocks is a fools game. Especially an arguably speculative sector like Cyber Security... Below is a graph of the Betashares ETF, 'HACK'. 



To give you some context, I purchased CVT many years ago in 2015 for circa 0.45 cents. Ever heard of them? I doubt it. They are a cyber security company. They are trading at 0.017 cents today.  Nothing against the company, but to me, micro stocks are essentially gambling. HACK on the other hand invests into the leading companies in the global cyber security sector. Still a risky asset class, but not as crazy as investing into a little company like CVT like I had done. Each to their of course.


HACK currently has $121,077,312 under management according to their website and have an annual management fee of 0.67%. In other words, $10,000 would cost you $67 in management fees. According to the website, HACK pays a distribution semi annually which is nice to see. 

(Betashares HACK Fund Returns After Fees) 

Looking at the funds returns, it appears the fund has slightly under performed the general cyber security industry. The fund has only been around since the 30th of August 2016 and yet it has returned 15.38% pa which is pretty flipping good. Again, this is not comparable to your AFI, MLT, BKI, A200 and so on. It does not have a long term proven track record. 

In my mind, while HACK is not a singular company, the sector itself is still relatively speculative and you would expect to have vicious swings to the upside and downside. Given our ever evolving world in terms of technology, I will be picking up some HACK at some point. In terms of my asset allocation towards HACK, I personally would not be dedicating more than 5% to HACK at this stage. 

To do some of your own due diligence feel free to check out HACK Betashares

That is all from me... as I was writing this post this afternoon, my wife advised me that we received a $600 fine from the local counsel for something rather. The uphill battle to FI is real.... the computer I've been hoping for hangs in the balance now!!!! 

Please remember to always do your own research and never invest into something you do not understand. 

References 

https://www.acsc.gov.au/publications/ACSC_Threat_Report_2017.pdf

https://blog.barkly.com/biggest-data-breaches-2018-so-far

https://www.thesslstore.com/blog/2018-cybercrime-statistics/

Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.



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Friday, December 14, 2018

Chapter 5 - “Portfolio Update” December Update Net Worth $76143 (-$503)

December 14, 2018
Chapter 5 - “Portfolio Update” December Update Net Worth $76143 (-$503)
Scarn on friends... Going to keep this update short as I am in Melbourne with the family spending some much needed time with my son and wife. In addition to that, I am sure you all have better things to do than read masses of content during the festive season! I discussed I was looking to buy a gaming computer as mentioned in my last blog update. I decided I would buy the costly parts individually either second hand or on special to save as much as I can.



As you can see from subject heading net worth update, the markets have not been doing too well. That is all good. As I have discussed, I am in this for the long haul and downward movements in the markets here in Australia & abroad do not worry me too much. In fact as long as I have cash/or a job, I welcome them. You could kind of compare it to my recent experience buying a GTX 1070 second hand. For those who are not computer illiterate,  it is a gaming video card.



Brand new this card costs $550-$600. I managed to pick this card up for $350. I prefer buying things on a discount if I can. You could apply this exact same logic to LICs/ETFs. If they go down, you have the opportunity to buy additional units today than you did yesterday.



As you can see, having recently shifted my strategy in 2016 from individual shares to LICs/ETFs (with the exception of ANZ), I am not exact kicking goals just yet. I am sleeping so well at night though. Much better than I was when I was holding cryptocurrency and individual stocks.On Friday, I added an additional 640 units of AFI.

In summary, the primary hits to the net worth this month were:

- Knee Brace for Meniscus Tear - $300
- GTX 1070 GPU Card - $350
- Overall Market Declines
- Christmas Presents =/

On a side note, if you want to explore an alternative way to FIRE, check out Money Flamingo. They have some great ideas and to be honest I am considering following their concept towards FIRE. As always please remember this is not financial advise and ensure you do your own research when committing to anything that involves your hard earned money! 

That is all from me for now, have a awesome and most importantly safe Christmas! 


Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.


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Monday, December 3, 2018

Chapter 4 - “Meditation, Consumerism, & The Simple Things”

December 03, 2018
Chapter 4 - “Meditation, Consumerism, & The Simple Things”
Meditation, Consumerism & the Simple Things
Introduction
Quick shout out for International Day of People with Disability, which was on the 3rd of December 2018. Start spreading the message, just because somebody has a disability does not mean they cannot contribute significantly to your organisation or community. Some of the brightest minds on the planet, past and current have some form of disability! The Disability sector is an untapped sector of the workforce that will empower the individual, the economy, and the organisation! 



I am heading back to Melbourne this week to visit the family. I must say, I do not miss the weather down south. I came into work Monday morning, and one of my colleagues proclaimed how hot it was over the weekend. It was a consistent scorching 35+ degrees over the weekend. I responded how pleasant it was. The horror in my colleagues face was rather amusing. She asked why I had not moved up to Darwin earlier. She made a very compelling point. Hot climates is the fundamental prerequisite for my utopia. I am also curious why I left the move so late.

In my mind, the only hesitation that held me back is my attachment to my family. It is the subtle family traditions that I miss most. Sunday night Curry Nights at the parents’ house was always amazing. Leaving your family behind is always the hardest part of relocating to a new place. Fortunately, in the present age, we are blessed with technology and logistical advancements that allow us to travel and communicate very easily. We are a fortunate generation that is for sure. In any case, I have finally made it to my paradise. If not Darwin down the road, it will be somewhere hot! 

Subjective Definition of FI & Fixating on Financial Independence


I often ask myself why I need financial independence. Since High School, it often entered my mind. I have been transparent in terms of the journey thus far; the ride has not been a steady one. I have met many people who are quite happy to allocate the minimum consistent allocations towards superannuation, take on enormous debt and just see what happens when they reach preservation age. Most of them appear happy and do not complain. Pending no health setbacks and a smooth working history, majority can retire comfortably in Australia. You see, financial independence is very subjective. 

For the mainstream Financial Independence advocate, it is generating adequate passive income to fund their lifestyle and expenses should they decide not work. On the other hand, for me, it is being able to support my son, my wife, myself AND my parents should they face some challenges in life. For instance, if my sibling/dad/mum was to lose their job because of their health for example, guess what, I have $150,000 of income coming in every year. I would not even hesitate to support them. 

I suppose what I am trying to say is, financial independence is a wonderful luxury to obtain, but it is not for everybody. FI extends beyond self-serving needs. While some of the above principles are not preached throughout the FIRE community, I would be confident that many, if not all, would also not hesitate to assist their family when in need. Speaking for myself, I believe it is important to remind ourselves of the finer points of life (family, being joyful & living in the present) to ensure we do not become too fanatical about reaching Financial Independence. While it is a huge priority of mine, I have learnt to take a deep breath and not fixate on it as often. 

Unfortunately, having lived with chronic nerve pain for 7+ years now, Financial Independence is certainly triggered more frequently when I have a rough day. Thoughts such as, “if I was FI, I could just stay at home and not endure the expectations of my working commitments alongside this pain”. While you may not endure chronic pain, perhaps you fixate on Financial Independence for others reasons. For instance, perhaps you have a tough working environment, or you often compare yourself to others through Facebook (which we are all guilty of from time to time), or maybe you are eager to travel the world to broaden your interpretations of the world. We all have different reasons as to why at times we can fixate on Financial Independence. I have found some great tools to ensure you remain balanced and down to earth on the journey to Financial Independence. 

Meditation

You are probably thinking what the heck does meditation have to do with financial independence. Well, for some context, growing up in a Hindu household, I always went to Pujas (Indian cultural celebrations) and would regularly meditate. The problem was though; I did not meditate because I wanted to, I meditated because my parents would always drag me along. Fast forward circa 25 years, and I can finally say I have been enlightened on the benefits of meditation. You certainly will not see me meditating for 30 minutes; no way, stuff that, I prefer ‘quality over quantity’.  10 minutes is more than enough. I highly recommend downloading the application called “Insight Timer”. It is great for beginners and you will be amazed how you feel afterwards. This application encourages thoughtless awareness. That simply means not thinking. Just for a brief period of the day, you do not have to think about FI, the stock market, real estate, personal problems, relationships, needs and wants, and everything else in-between. Not thinking is actually really difficult. 

There is a lot of research that argues the benefits of meditation. Take a quick read at https://www.mayoclinic.org/tests-procedures/meditation/in-depth/meditation/art-20045858 to get an overview of some of the benefits of meditation. Having started meditating each night before bed has definitely helped with the journey to Financial Independence. It has also helped me appreciate the finer qualities of life. For instance, simply waking up and walking is a blessing in disguise. Sure, you may be many years of FI, or perhaps you do not have your dream job, have a long-term injury, but you need to recognise some people were never given the opportunity to even make it to their adult-life. I find that reminding yourself to be grateful to be alive, having employment and having access to free healthcare if needed as a great strategy to become more grateful for the life we lead.

When I worked in a call centre, in a complaints environment, I found it extremely difficult to be rationale on how lucky I was. However, each time I hit a wall, I reminded myself that millions of people, maybe even billions of people O/S would dream to have the same job I did, in the call centre, being paid $30 bucks an hour. Had I not reminded myself frequently, I am not sure I would have stuck with the job. In the end, my resilience grew significantly. In addition, having got through a complaints role being on the phone, talking, up to 7 hours a day, I now know I can get through any job. I cannot help but notice that we all have a sense of entitlement. It is a tough world out there. No wonder the developed world has high rates of mental illness. Reminding ourselves of the luxuries we have in a development country is a great tool that aligns well with Financial Independence.

In summary, be grateful to be alive, live each day at a time and remain resilient towards setbacks financially. You may obtain FI latter than your peers, that is okay, as long as you remain joyful and healthy, disciplined, and humble. You will reach it one day, and when you do, you will truly appreciate it! Most importantly, do not forget to enjoy life along the way! 
Consumerism & Finer Points of Life 

When I say enjoy life along the way, I do not mean go out and buy shit loads of depreciating assets ha ha. You cannot buy happiness I reckon. Going to the local park with the family and the dogs is free! That being said, I am a bit of a hypocrite. I have been fighting my inner-demon (consumerism monster) for weeks. I’ve recently moved to Darwin and with any move, it takes time to build a network of friends. On top of that, I have a meniscus tear, so playing basketball on the weekends is also not an option unfortunately. I am a long time proud serving gamer. Is it time to buy a gaming computer? I do not technically need a gaming computer, but I would love one so I can hibernate on weekends and fight glorious battles for the virtual empire. Having meditated over the last few weeks (lol), my mind is clear and I have made peace with the decision to invest in a depreciating asset. Sometimes you just need to detach from the justification from providing rationale on every buy. Although, this mind-set is dangerous, the purchases could spiral out of control delaying Financial Independence for years, even decades! I suppose the point I am making is, sometimes it is okay to just go and make a purchase. What good is all the money in the world if you are six feet under? The key is be reasonable, intelligent, and responsible.

When we purchased a 2008 Honda Accord Euro for $23,000, looking back this was not an intelligent decision for the position my family was in at the time. I recently had my vehicle valued; my mechanic advised I would be lucky to get $3000. That is a $20,000 loss not including opportunity costs! Was this a smart purchase? Definitely not and I am happy to acknowledge that mistake. I was hyped by the idea of the vehicle having leather seats. It did not even matter in the end; the dogs destroyed the leather seats! Mechanically, the car has been awesome. Therefore, I can walk away with a small victory. Impulsive decisions can be a curse, so if you are like me, sit on it for a day, and then make the decision. This is something I continue to work on. To conclude this segment, I believe it is okay to make purchases that you value (in moderation).

I also believe that you do not need to spend large amounts of money to enjoy a good life. Make some fresh rolls, throw it in the bag and then head to the cinemas with the family. Head down to the local park with the dogs and have a picnic. Go for a bicycle ride as a family followed by a movie at home with home cooked food! Always a good reminder to be grateful. There is normally 99 great things going on, and 1 bad thing, and the 1 bad thing normally takes up 90% of our brain space. 
I am interested to know, what is Financial Independence to you? What have you been thinking about buying recently? Have you tried meditation, and if so, has it helped you with your journey to Financial Independence? Next Portfolio update will be on coming soon..


Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.

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Sunday, November 18, 2018

Chapter 3 - “Financial Independence is More than Jetting Across the World” November Update Net Worth $76,646 (-$760)

November 18, 2018
Chapter 3 - “Financial Independence is More than Jetting Across the World” November Update Net Worth $76,646 (-$760)

I have been unable to post for a few weeks as I have recently moved to Darwin. The landscape and weather in Darwin and across the Northern Territory is beautiful, particularly if you love hot weather! I will post some photos soon to share the wonderful culture and beauty that exists within the Northern Territory.



In this chapter, I wanted to write about the importance of financial independence in the face of life challenges, many of which are unforeseen, or, perhaps you have a physical or psychosocial limitation that you endure on a daily basis (I don’t like the word ‘disability, so I prefer to avoid it as often as possible).

According to the Australian Network on Disability (https://www.and.org.au/pages/disability-statistics.html), there are over 4 million people in Australia that have some form of disability. That is circa 1 in 5 people. This is quite a large portion of Australia’s population. In other words, it is very likely that you will know somebody with a limitation, or even experience some limitations yourself throughout your life (touch wood). You see, financial independence is more than a self-centred objective to live a comfortable life. For many of us, it is a general requirement to empower our families and ourselves. For example, consider that you are injured, or your underlying condition flares up meaning you need to reduce your hours at work, or stop work altogether for a while. In addition to this, compounding to the stress is the reality that in some instances you will need to justify your pain or limitation to medical professionals, or agencies who determine whether you are eligible for supplementary income.

Do not get me wrong, there are many medical practitioners who are empathetic and advocate on your behalf. My point is that the whole process can be challenging, dis-empowering and stressful which can further exacerbate your condition reducing an already strained quality of life. I do not know about you, but if I can help it, I prefer not to have other people or agencies dictate the family’s financial security if I can help it. That being said, we are fortunate in Australia to have the supports we do (NDIS, DVA & Centrelink and so on). That is why you will never hear me complaining about paying tax in Australia. In fact, I would be happy to pay more and model ourselves similarly to some of the Scandinavian countries (personal thoughts). 

Moving back to the financial component of this chapter, I strongly believe reaching Financial Independence is more than just being able to retire early and jetting off overseas to enjoy good food and culture. For many people, it is financial security to provide for their families, themselves, and be in a position to reduce their hours or take a break from work should they experience some struggles in their life. As mentioned above, 1 in 5 people will experience some struggles in their lives. Beyond this, further down the road, you will be in a position to work for the good of your heart, perhaps volunteering your time to reduce inequality and injustice in Australia or throughout the world.

Perhaps you want to invent a device at improves water quality in remote areas throughout the world. Everybody has different motivations in life (above are some of mine), but the main point I am making here is Financial Independence can be different things for different people. For myself, with lived experience, it is empowering myself not to be reliant on agencies and others for my financial security. To the best of my ability, I hope to be financially independent in all moments of my life, the good times and the bad times. Whether you have experienced some challenges in your life or not perhaps some of the content may resonate with you.

In relation to the family portfolio, I have recently added ARG to the portfolio. I have also added additional units in Milton & BKI Investments Co.  I am watching bank shares with interest. However, with property softening perhaps there will be better buying opportunities.

FAMILY PORTFOLIO CURRENTLY - NOVEMBER
-$760 
Net Worth $76,646 (excluding super) 
Part of the process is going through market cycles. If you look at the graph below, you can see the markets have had a nice little correction recently.


Holdings 
ANZ Bank – Individual Share
BKI - LIC
MLT - LIC
VDHG - ETF
AFIC – LIC
ARG – LIC

Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.






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Saturday, September 8, 2018

Chapter 2 - "Timing the Market & Ego" October Update Net Worth $77,406 (+$2195)

September 08, 2018
Chapter 2 - "Timing the Market & Ego" October Update Net Worth $77,406 (+$2195)

Chapter 2 – Timing the Market & Ego’s


Who here has gone to a party and witnessed a true battle of ego’s taking place? The glorious Williams Street (Melbourne) automotive mechanical engineer proclaiming that they managed to sell just prior to a market correction, and then somehow predict the bull run in cryptocurrency, to then sell at the all time high and then shift their funds into resources prior to its cyclical movement. To most, they appear to have a market understanding challenging the likes of Warren Buffet & Benjamin Braham. Metcalfe (2018, 1) found that simple math proved that you will be more likely to lose than win. Furthermore, a study conducted by Vanguard (2018, 5) found that markets are highly efficient and therefore tend to reflect prices based on the publicly available information; thus, active managers are very rarely able to predict major market movements. In addition, the active fund managers when reallocating asset allocations, must be able to reap the rewards of selling and re-buying whilst factoring in capital gains and transaction costs.


Above is a nice example of a passive emerging market index vs a active emerging market fund. While the years are not current, it illustrates that often active market funds can significantly under-perform the index. Something to have a think about.

Thankfully given the conundrum of timing the markets, with ETFs and LICs, it provides an equal playing field between big and small investors, which is a wonderful thing. The greatest thing about ETFs and LICs is that it takes control from active fund managers and gives you and me more control over our money at a fraction of the cost. There is no need to enter and exit the market on a regular basis unless you are a trader, and if you are a trader, I would apply the 10,000 hour rule. Have you dedicated a life time to learning this art? It is no wonder that most traders fail. I don’t despise active managers or traders. I think many are talented, but for most everyday people in my opinion, passive simple investing is the way to go.

 Also, studies show that ETFs outperform active managers over a long period of time. I am happy to see studies that suggest otherwise over 20+ year periods. In respect to passive investing, there are some perks.  Firstly, you can take a seat in front of your TV, sink into your couch, get yourself a can of coke and check your investments every so often. Secondly, you can grow a cash war chest ready to take advantage of market corrections. Finally, you can sleep well at night not stressing about the single company you own going into possible liquidation. Moving back to timing the market, at a time, I believe even I was somebody who was happy to boast to my friends and family that I managed to buy ANZ and Stock X at all-time lows. However, I was not overly eager to share my losses. This my friends are a fundamental trait of any human. Our egos can get the better of us. 

Naturally, as humans, we feel warm and good about ourselves when we share our successes. I can already envision the hundreds of Facebook statuses over the years. It’s healthy to share your successes with others but in my opinion, there needs to be a healthy balance, and perhaps with personal finances especially, remain humble and reap the rewards of compounding interest using the silent assassin mentality. In my experience, I’ve finally learnt that you should be a humble down to earth investor driving a safe but affordable car living within your means and saving for the future to support yourself, your partner, children and your parents. There is no need to seek acknowledgement from others to feel good about myself.

If others are genuinely happy to hear your experiences to learn and grow, well go for it. Just remember to provide a clear disclaimer that you are not licensed to provide advise! This point of view is obviously very subjective, but I see no positives of going around boasting of your profits. If you insist, please ensure you share your losses too others so they can appreciate the realities of investing and not presume its all-golden roses once you get involved with equities.

In summary, this blog entry advocates against timing the market. It also discussed how I’ve learnt not to run my mouth to others seeking acknowledgement. I’ve taken the silent assassin approach. My ego no longer needs to be caressed. The fact is I am not that intelligent, and I understand that, and as I always advocate, play to your strengths and grow rich at the same time. In respect to my allocations, I will share this in another post. In other words, what I mean by this is, having 70% in equities for example, and 30% in bonds/cash.


(Dalio et al. 2017, 1)

I'd like to just touch base quickly on the growing concern of inequality throughout the world. This picture illustrates that the wealth of the top one-tenth of 1% of the population is about equal to the bottom 90% of the population. The last time this happened, we had the great depression. Obviously times are different today, but perhaps even more of a reason to get your finances in order and remain discipline and focused on reaching financial success.

In respect to my family portfolio, I have added 30% of the family monthly salary into AFIC.   
FAMILY PORTFOLIO CURRENTLY - OCTOBER 
+$2195
Net Worth $77,406 (excluding super) 
ANZ
BKI - LIC
MLT - LIC
VDHG - ETF
AFIC – LIC
Stay tuned for my ongoing progress as each month passes ... 

References



Metcalfe, Guy. 2018. "The Mathematics Of Market Timing". PLOS ONE 13 (7): e0200561. doi:10.1371/journal.pone.0200561.

https://www.bridgewater.com/resources/bwam102317.pdf





Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 

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Monday, August 20, 2018

Chapter 1: "Mistakes acknowledged - Time to Rebuild" .. September Update Net Worth $75,211

August 20, 2018
Chapter 1: "Mistakes acknowledged - Time to Rebuild" .. September Update Net Worth $75,211
"Financial Health is Empowerment"

Well, where to begin? I think we need to take a step back in time to provide some perspective and context on my investing story. It started at the age of 17. I loved the idea of growing 'wealthy' given I was relatively unmotivated in life and I saw investing as an easy way to generate passive income and relax by the beach in India. I heard about Warren Buffet at the time, and I was blown away by how he created wealth by buying shares in companies. My father, an educated man, with a master’s in accounting explained the benefits of starting young to allow the effects of compounding to take place. See https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/compound-interest-calculator on how compounding interest works. Unfortunately, this 'lesson' stuck with me for a few weeks and I soon lost focus. Despite losing focus I was geared up and ready to take on the investing world. What did I do? I invested in rubbish companies with small market caps. Many of them don’t exist today. Only 1 survived. It was SBM.asx. The remainder went into administration and I was left with nothing. In hindsight, a simple ETF, or LIC would have done the trick and I would be laughing today. See https://www.asx.com.au/education/investor-update-newsletter/201503-etfs-versus-lics.htm for some examples of LIC's vs ETF's.

Along with the experience above, I continued trying to pick stocks. I invested in “REVOLUNTARY TECH INVESTOR REPORTS” which promised to give me huge returns. It was a fortune! What the hell was I thinking? From memory, and I won’t name the company as I believe it was a complete scam, it was $2000. I really can’t justify what I was thinking at that time to be so stupid. This is ultimately where the blog name inspiration came from. I will concede I was truly incompetent at a time. In fact, I think we all have an element of incompetence to our investment ability with the exception of the greats. After all, incompetence has fuelled the royal commission in Australia (2017-18 royal commission into the Australian banking and superannuation sectors). 

Perhaps not having a mentor over-looking didn’t help. Although, at the end of the day I am accountable for my own actions. In addition to this, I went on investing in other newsletters that picked stocks. Some did okay, some did horrible, some did worse than horrible. Once again, I would have been FAR better off keeping it simple and investing in ETF’s and LIC’s.  Fast forward 14 years and I don’t have much to show for it.  A combination of poor education, thinking I could outperform the market, greed and some additional compounding unforeseen circumstances did not help my plan to financial independence. In fact, it was quite the opposite. Mistake after mistake. The reality is, had I kept my strategy simple I would be in a powerful position today. Thankfully, I still have plenty of time, and we all have the potential to stop making poor decisions over and over. As the saying goes, the first time an idiot, the second time a duck, third time you are a reptile that can’t be saved. I am one of those individuals who is on his fourth strike, and I intend to make no more deliberate mistakes moving forward. 

What lessons have I learnt throughout my own personal investing career? 
·        I am not a boss investor. I will not be the next Warren Buffet and it is time to accept that fact.
  ·    By keeping it simple, there really is no need for additional newsletters that promise the world. Many come to mind where money could be better spent. I should point out there are some great ones but with a simple approach, they may not be necessary.  

·    Investing your money in small caps, micro caps or penny stocks is as good as throwing your money into the public toilets (I concede some people do great with penny stocks, but I do find that people are always happy to boast about their 400% gains and not their 500% losses). I consider penny stocks like a degree. If you can dedicate 3-4 years studying how penny stocks operate and how to filter through the junk on a full-time basis, perhaps you are ready to give it a crack. Until then, I have a personal rule I have established for myself which is to invest no more than 3-5% to small caps should I absolutely insist on doing so (no plans at this stage).

·         Do not buy the most expensive car to look like a ‘cool’ dude or gal in front of your mates. This is probably one of the biggest destructors of wealth. You may as well attach some 5KG weights to your ankle and try run an ultra-marathon. Just don’t do it. Buy a safe, cheap and reliable car to get you to work and back home. I personally like the 5% rule. Previously, I did not follow this rule, however, now I dedicate 5% of my total net worth to a car at any time a car upgrade is required. Should my net worth be 0, or negative, well I will ride my bicycle to work. I acknowledge this is not always possible if people live in the sticks. The fundamental message here is cars destroy your wealth, they are a depreciating assets. The only benefit I can think of is it may score you a couple handsome/pretty guys or girls depending on which side you bat in the short term. Once they realise you are in the red, I would bet they would be long gone before you can say “good thanks”.
          ·   Don’t pick individual stocks. I don’t have the aptitude nor the patience to sit through reading financial reports on individual companies I own. I would much prefer playing League of Legends then reading through company reports. Even if I had the aptitude and time, would I be even be outperforming the index? There is no guarantee. Therefore, instead of logging into my brokerage account and seeing one of my significant holdings taking a beating, I prefer investing in the index using ETF’s and LIC’s.
·  
          ·  Other Speculative Asset Classes: Cryptocurrency for example. I respect the underlying technology and I also respect people who are bullish on the industry. However, the sector has grown significantly, and late investors margin of safety has been reduced significantly. Personally, a lot of the coins I hear about don’t have much use cases. Obviously, there are some exceptions and the truth is I am not that educated on the sector. I have however been personally hit financially from cryptocurrency and I have learnt my lesson in regard to ‘greed’. In my opinion, should I ever invest in this asset class again which is unlikely, I would not allocate more than 2-5%. Crypto has been one of my three investing lessons which is, there is no quick way to become wealthy. No short cuts in other words. Slow and steady.


·    ·  Finally, pay off debt. I have friends whom I will not name (although I love) that have this perception that they can’t touch their savings to pay off debt. Instead, to buy a car, or a computer, or anything, they prefer to take out credit because psychologically they feel like their savings are going backwards when they take money from their saving account. The uncomfortable truth is debt is a major destruction of wealth. Credit Cards are ahead of the pack in this regard. In summary, I am a big advocate for reducing debt and getting those emergency accounts set up in case you need money to access for emergencies.
I realise a lot of these points above are subjective and some people love penny stocks, crypto, and picking personal stocks and so on. However, I am a living case study that it simply does not work… most of the time. There would be many case studies where individuals dominate picking stocks, and crypto.. and hey, maybe their might set up their own hedge fund or be the next Buffet…. but me… I accept I am not the most intelligent investor going around and therefore I will play to my strengths which is keeping it simple. I do not intend to take significant risks moving forward. There is no need.

The purpose of this blog is to show others throughout the world that there are people out there such as myself who have made mistakes financially but can turn their financial success around. I intend to document my progress and be as transparent as possible. The best comparison would be morphing from an overweight lazy investor to a smart focused investor. I have learnt there is no quick way to financial independence. We all have the ability to retire early however we need to remain down to earth and focused and accept our strengths and limitations.

FAMILY PORTFOLIO CURRENTLY - AUGUST
Net Worth $75,211
ANZ 
BKI - LIC
MLT - LIC
VDHG - ETF 

Stay tuned for my ongoing progress as each month passes ... 

Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.   

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