Tracking Results: 2st Quarter 2020

See about how i track results here

 

Second quarter was overall better , there was a good recovery from the massive losses i had in the first.  Closing the quarter i sold my shares of Public Power Corporation(DEH) with the aim of re-buying in the future and i too the risk of buying more shares of Gulfport energy and average down my cost. Portfolio wise maybe that was too risky since it is my largest position and my performance is highly correlated with the performance of the stock.

Equity: 12 working Salaries (money i have contributed to the market till now)

Closed positions:

Paperpack Manufacturer (PPAK) : + 65.7 %
Public Power Corporation (DEH): + 65.19
National bank of Greece(ETE): + 99.89%
Pireus Bank: +64.61 %

Profit from closed positions: 4,8 working salaries.

 Portfolio: 
 My Portfolio now  consists of 6 stocks. 

2 Greek stocks: Tpeir(Pireus Bank) and Alphabank.
2 energy stocks: Gulfport Energy (a natural gas upstream company) and Gazprom the biggest natural gas producer in the world 
Lastly i have Facebook and Macy's.

  In the following  graphs i list the stocks By weight, Country and Sector-industry

 

 

 

Total Loss: 0.5 working salaries

Year on Year monthly  passive income:  - 26% of  monthly working Salary

 2020 2nd Quarter Results (monthly adjusted): made about  80% of monthly working salary  every month

 ROI   ↓ -4%  ( This is the total returns i got from my net contributions since i have started investing in the market)

When are you financially free?

Warren Buffet the most famous investor of all time once said  '' if you dont find a way to make money while you sleep you will work until you die'' .You gain  financial freedom when you make money and cover your life expenses without you, needing to work for them . This means  you are not financially free when you can make a lot of money from your job  or you  have a lot of money waiting for you in your bank account, but you are financially free when you have a sum of money invested in assets that in return make  you enough money each year, to be able cover your annual living expenses.

Let's examine 2 objections that some may have on the statement of being financially free only   when you dont have to work for money and only if your money can produce you  more money.

1) What  if i love my job?

 It's great if you do something you love, getting paid for it and be able to  support your lifestyle with it. But would you do it for free? and if you would, how many hours of your life would you dedicate doing it for free? how sure you are that you will always be able to follow the required schedule your job needs and always be in mood doing it?  How safe you feel betting your life on the income you get from your job? What happens if for whatever reason you must stop? that's why loving your job is not the same as being financially free. 

2) What if i have so much money that can last till i die?

    You dont know the value of your money in the future,  new money is being printed in the market all the time that's what always was  happening, current nominal value of money lose their actual value in time. No one feels financially free when he gets poorer as he ages, this happens by 2 ways, one is by inflation (currency losing value) and the other one is by your annual expenses that are only about to increase every year.that means your bank account will have less money each year. Even if you dont care about leaving any inheritance behind you, human nature is always seeking for more not for less. You may think you are different  but more or less you belong in one of 2 categories of people. If you dont make money your survival instincts will  hit you and that will make you feel fear as you see your buying power and bank account value  diminish every year, on the other hand  if you are one of those people who  dont care about making money and feel safe of having a lot , then you will end up spending it faster than you think. That's why  many people who have  won a lottery or have inherited a big fortune ended up bankrupt, no one who is ignorant about his wealth can keep it. You dont want to spend money faster than you make.



Finally i need to add , you are not financially free just by covering your expenses with money you make from your investments, these cash flows must  also be safely produced and be predictable. Risky investments may produce higher returns in general but are not predictable.

The ideal scenario is to make money each year  that can cover your expenses and leave you some money  to re-invest, this will increase your cashflows each year.That's how you get financial abundance.

All in a small equation how much money do you need to have financial freedom?

 yearly cash expenses  = safe returns from Invested Capital

so what are considered safe returns from investments? generally anything  under 4%.


Check the post about  the 4% rule here!

Tracking Results: 1st Quarter 2020

See about how i track results here

This was a disastrous quarter that reversed my progress and gave me my real first experience of how fragile are the markets.  Although my losses were big, this hasnt affected me that much psychologically. I don't believe i'll have another quarter like that and i haven't sold most of my positions so my losses are on paper and not realized. My results would be even worse if i hadnt sold  to realize some of my profits during the year.

Equity: 12 working Salaries (money i have contributed to the market till now)

Closed positions:

Paperpack Manufacturer (PPAK) : + 65.7 %
Public Power Corporation (DEH): + 52.16
National bank of Greece(ETE): + 99.89%
Pireus Bank: +64.61 %

Profit from closed positions: 3,6 working salaries.

 Portfolio: 
 My Portfolio consists of 7 stocks. 

3 Greek stocks: Public Power Corporations(DEH), Tpeir(Pireus Bank) and Alphabank.
2 energy stocks: Gulfport Energy (a natural gas upstream company) and Gazprom the biggest natural gas producer in the world 
Lastly i have Facebook and Macy's.

  In the following  graphs i list the stocks By weight, Country and Sector-industry

Total Loss: 3,1 working salaries

Year on Year monthly  passive income:  - 28% of  monthly working Salary

 2020 1st Quarter Results (monthly adjusted): lost about  3  monthly working  every month

 ROI   ↓ -26%  ( This is the total returns i got from my net contributions since i have started investing in the market)

The 4% rule

The 4% rule shows  the amount someone can safely withdraw yearly from his invested money and theoretically never run out of money. So someone who can live with  annual expenses that are about4% of his invested money ,can safely retire.

 For example a person who has saved 1 million euros can retire with an annual  income 4% of that,  which is  0.04* 1 million = 40.000 euros annually  that's about 3.300 euros monthly.

The 4% rule is more a rule of thumb than an actual rule ,it is based on the assumption that an investor is invested on a safe diversified portfolio with a nice mix of bonds and stocks. These returns are based on historical data  of the last century  .The 4% rule was first popularized by an  influential 1998 paper by three professors of finance at Trinity University

Many have doubts about using the 4%, so many may use 3% but is even that safe? In the investment world there is the notion of the risk free rate, the risk-free rate is the return you get for bearing no risk.These are returns you get for investing in safe government bonds of  countries with zero default chance, for example U.S.A or Germany in the euro area. But take a look at what have happened in euro area the rates have turned negative, so this mean you pay interest for owning the bond.

 The conclusion after all these, is that you cant store your money safely  and rely on risk free-rates.Even the risk-free rates arent really  risk-free.U.S.A is considered to be the most stable and safe country and with no default risk. The same way people in the past  thought  the Roman empire will last forever!

The world isnt a safe place,we should know this  by now,we cant get rid of uncertainty but at least we can take less risks than the average person around us and that will make us feel safe enough. Given on how things are  now, as long as you invest in businesses  that produce value you can make money. A nice mix of real estate, stocks and bonds can easily give you 3-4 % . The good part is you dont even need to sale to get profits. You can create for example, a safe dividend portfolio that pays you divided of 3% and with growing dividends every year. Then you can sell a very small part of your portfolio each year to get the additional 1%.

The 4%  is something that looks  similar with what a pension after 25 or 30 years of work looks like. If you think about it, it is no different of what an average retiree gets after working for 25-30 years. 4% is if you reverse it 100/4=25 . That means if you make each year 4 from your job you need to work 25 years to make 100. 3% is 33 years of yearly income. So in other words you need to have stored 25 to 30 years value of work to retire.If you have already accumulated 25 -30 years of work you can retire on about that income.

  Paradoxically the 4% rule is inherited in our working life system. Work for at least 25 years and then you can retire.

 Retiring early through passive income for people that have an average job is a Utopia,especially if they want to follow  a passive investing strategy.
How early you can retire it depends on the relation between your income and expenses,if you have high income and average expenses then you can get quicker to the average income and retire earlier ,but if you have an average job to retire earlier you must live poor and retire as poor that's the trade off.

 If you need to take something valuable out of the 4% rule is that your yearly  income from your job worths about 4% of  the same income in retirement .If your goal is to retire earlier then you have to accumulate money that account for at least 25 years of work.

Why is critical to stop Coronavirus early?

Many claim that countries around the world are over reacting with the measures they're taking to stop coronavirus.

Opinions like the common flu kills more people or that only old people are in danger , not only devalue people that have  underlying health problems but are wrong too.  It's important to stop the virus as soon as possible and i'll explain you why.

First, the common flu kills 1 per  thousand people. Corona virus estimated death rate is about 3%.But if you actually see the stats , from the cases that are closed the death rate is as high as 10% .Then compared to common flu's transmission rate of 1.3 ,Coronavirus is  estimated 2 to 3.  You see  that the numbers show that Corona virus is much worse than a common flu.

Another reasons why Governments need to act without any delay, is because of  how fast the virus spreads and the inability of any health care system to cope with a sharp increase in demand for

 hospital treatment. The longer it takes for coronavirus to spread the population, the more time hospitals have to prepare. Here is a diagram  that shows how a  no immediate action from government part's to slow coronavirus spread can break the health care system



 To see how critical is the early detection and slow down of the virus you must see how fast it grows, from the moment it hits 100 cases in couple of days it can grow 10 times , if left unchecked then in one week can go from 1.000 cases to 10.000. It is easy to see why there is a panic, there is no choice to do nothing from that point, it can go from 1.000 to 10.000 and then to 100.000 in no time. Usually the first week,the measures are taken, if they are successful ,you can slow the growth rate from 10 times to 3-5 times in the next week ,then to 2 and eventually control it. Usually the first 2 weeks is a good indicator on where you are going. 2 weeks of slowing down the growth can help you by the 3rd week control it.

A good example is south Korea and a bad example is Italy. Using a logarithmic scale in the diagram can help you see better of what i am talking about. In the following diagrams the vertical axe scale is adjusted so the  distance between each line is the same for each multiple of 10.So the distance from 10 to 100 is the same as from 100 to 1.000 and from 1.000 to 10.000 etc.

 
 

Using a logarithmic scale, helps you to see the magnitude of exponential growth and how easily the situation can get out of hand. A slope of the line that stays the same, show that the cases are growing at the same rate. A falling slope shows that the virus spread is slowing down. This maybe is not shown in absolute numbers immediately but it is shown on the growth rate. Having the same number of cases as the previous week doesnt seem a success especially when you have more than 10.000 cases but it is a big step on fighting the virus. And that's  why it is important to slow it down fast when the numbers are relative low . If the numbers are already high compared to the ability of the national health care system to treat patients and the growth rate isnt slowing down fast,then the tragedy is unavoidable. The key to success is to act fast when the number of cases are low and not delay to take drastic actions. The mistake is that humans have an innate tendency to compare and understand information linearly while the virus expands exponentially. 

That's why everyone needs to understand that governments dont overreact when they panic with small number of cases, they see the potentials of the virus to spread fast, if  governments or citizens dont co-operate and  do what it takes, then the effects can be even bigger than they look. It's false to think that you save the economy by not taking measures, the economy is destroyed even more.As we now see by not making travel bans from China sooner to not damage the economy, the economy has been damaged even worse.

No matter the origin of the virus ,the effects are visible ,and it's not useful now to politicalizing the problem , we all should be united to face it and get rid of it as soon as possible.

You can check  daily the new cases by country ,examine the logarithmic graphs and make your own conclusions here https://www.worldometers.info/coronavirus/