fredag 12 maj 2017

Renting or buying

If you need to ask, then rent.... Until you have saved enough money to buy.
In today's real estate market, with extremely low interest rates you might be tempted to buy directly. But make sure that you have the financial power to pay even when the interest rates raise. Check what the monthly cost would be if the interest rate would go to 6, 7, 8, 9 or 10%. Could you still pay? Would you be forced to sell?
Buying a house for 3 million SEK (around $300k, €300) on an ordinary salary is something I advice against. But that is what the asking price is for houses in a small town in Sweden today.

The thing is that renting is steadily getting more expensive as well. When we rented some years ago, it was an old apartment building with water included for around 4500 SEK. New developed apartments that are smaller and without water went for 9500 SEK. Like with everything else in life, it depends on what your goals are. For us it was a no brainer to chose the older appartment building and save up for a deposit on a house.

When we bought the house we live in today, we got lucky (or we haven't found the faults) and were able to buy a house for a small amount of money. Many of our friends did not even look at houses this far from the city (25 minutes by car, 1 hour cycling) and ended up spending 2 - 6 times more! So ask yourself, do you need to buy in a certain area or would you be willing to travel to work. We bought another car, but with the house price so low we still pay less then friends in town even if we include car payments and petrol costs into the calculation.

A friend once told me when he was house hunting that if the house is in any way attractive there will be a family with small children that are desperate that will keep bidding over their original budget (and yours). And when we started to look, that was the exact case on all houses we looked at besides the one that we ended up buying.

So, my advice is to Rent and Save and continue to hunt for a perfect house that goes for less then the market expects. Calculate in whatever renovations are needed and see if its in your budget. Make a deal that suites your budget, not the high risk budget of suburbian house owners.

These are just my thoughts. Your situation might be different so do your own research and make an informed decision. I am not an expert : )

Top 7 tips to maximize your investment power

Two and a half year into our investment strategy I feel that it is going pretty slow. Judging by the daily stress about investment advice in newspapers and on the internet I am not the only one who wants to speed things up.
But in the back of my head I have my plan that is buy and hold for a long period of time, and that pretty much filters away all the advice in mainstream media. So what is there left to go on?
Here are some tips on how to maximize your investment power and improving your current financial situation.

1 Debts

Make sure that you have a plan to pay off your debts. Not the most fun compared to spending money on investments. But as long as you have debt that you pay interest on, you are not increasing your own investment power, instead you are making someone else's investment power raise. That interest ends up as dividends to the shareholders of the bank that you owe. So, step 1 pay off your debt.
If you pay 100 per month on loans, that is 100 per month that you could spend on investments.

2 Decrease your expenditure

Another relatively easy step to take. Stop that magazine subscription and put the cash to your investment account instead.

3 Pay yourself first AND increase the amount

I hope that you already pay yourself the first thing when you receive your paycheck. What you may not do is to increase the amount over time.
There are some events that that could trigger an increase normally. For example when you get a raise. But even if you do not get a raise, just login to your bank and increase your automatic cash move from time to time. If you can live without the amount you move automatically today, maybe €10 more from time to time doesn't leave an impact. But do not rush it, the idea is to invest the excess, not the money you need to live your life..

4 Take an extra job

Really? you may ask. But yes, really. If your goal is to start living on your investment in the future then maybe sacrificing one evening per week/month for an extra buck could be OK. It's not like you actually need the money, but you want to get that little extra to boost your investment so why not?
My father did this, he used to clean supermarkets during evenings... I have done it as a bouncer at a pub. What extra job you get is up to you and your qualifications. And as you don't need it, you can quit whenever you get tired of it.. : ) Whatever extra money you did earn and add to your investment will continue to work for you for years to come. The longer money can grow the bigger effect they will make. So sacrificing a little time now may be reaped for a long time.
But note that you may have an clause about competing businesses in your contract.. Make sure you don't break it as you may end up with losing your main job instead of getting an extra. Always read your legal agreements when you sign.

5 Study

You can always spend your time on studying. Knowledge is power, and this might get you from average to cutting edge. Or at least to your next promotion.
I have always spent time home reading. Much is around subjects that I work with in my main job. But from angles that I may not have the opportunity to try out at work.
Invest your time in yourself by studying and making you more attractive on the job market. Check your local university for available evening classes or enroll at an online class. My employer gives us access to pluralsight, that is full of classes on subjects related to software development. Maybe your employer has similar programs in your field, ask your boss. And make sure your boss knows that you want to progress. This way I have been given the possibility to study during work hours. But I guess it depends on the employer that you have. Some invest in their employees, some do not.
A question that I ask when I interview candidates for my team is what do they have that makes them interesting. Home projects and study in their free time is something that I value high. That and cycling :)

6 Forget about it

Find something else to occupy your mind with. If you are investing part of your salary each month, you can forget about it for a couple of years. Trust in the compounding effect.
If you continuously monitor the progress, you will not see the progress. Instead you will be tempted to meddle with the portfolio. If you instead let the investment work for you without any meddling the results will grow. This is the power of long-term investing.
Find a hobby, join a club. Meet people and live your life. Paying yourself first and investing in index funds (the easiest strategy) will just solve the issue. The 'slow' feeling is just in your head!

7 start a blog!

or not. At some point I thought that this would be a good extra income source but in reality it's not. But it might work for you, it has worked for some people so just because my blogs aren't generating revenue.... yours might.A really sucky number seven but I'm out of ideas.. if you have any please leave them in the comments!

Sorry for the seventh tip, but for the rest the idea is to maximize the investment each month so that you can retire earlier. 10% of your income is a good start, 5% is a start but in the end you will want to grow that percentage over time so that you can fulfill your dream of retirement earlier. I read somewhere that 60% is the holy grail, seems quite far away but if you have the possibility to spend less and invest more. DO IT! The upside is that you learn to live on less.. meaning that you need less when you retire so that is also affecting how long it will take you to get there!

Hope this motivated/helped someone out there. : )
Until next time: Work to Live, Don’t Live to Work

Disclaimer. I am in no way an expert on capital management or investing. On this blog I only wish to share my findings, ideas and comments on current events and fields that interest me. I hope that my thoughts can entertain you. I expect that everyone reading take their time and do their own research before acting on anything read on this blog. Investing is not for everyone. E&OE.

fredag 5 maj 2017

My current plan, 2017 May

Another month has passed and the outside world is moving in a leisurely way.
The terror attack on Stockholm was solved fast, I am quite impressed with how fast a small country like Sweden was able to mobilize its police force and take control of the situation.
On other news, the Brexit carousel is moving forward at a steady pace but it seems like the markets don't really care as prices are still moving upward. I am currently waiting on a correction to happen but just like all other timings of the market, I'm not really counting on it.

Q1 report season passed during April, nothing new on the companies that I am focused on. They are still 2 good companies that grow.. So why should I look elsewhere?

So. Stick to the plan, continue to buy one of my 2 options, this month I ended up buying the bank. As a happy surprise my own bank Länsförsäkringar had lowered the brokerage fee from 100 SEK to 20 SEK. This actually makes a huge impact on my small transactions each month. Just to give an example:

Share price Broker fee Shares bought Total fee Total price per share Overhead per share
82,15 SEK 99 16 88,69 SEK 6,54 SEK
85,15 SEK 99 19 89,58 SEK 4,43 SEK
77,20 SEK 99 23 81,39 SEK 4,19 SEK
102,30 SEK 99 18 107,80 SEK 5,50 SEK
105,60 SEK 20 20 106,40 SEK 0,80 SEK

So, no large sums. But as I've said before, I'm just starting out. But from the example above the benefit of lower brokerage fee is clearly seen on the overhead per share. Buying with a high brokerage fee is like buying at a higher price then you thought you did.
Make sure that you always record both the market price of the share you bought and the actual total fee you paid to make a follow up.

But enough of that for now. Spring is here, 20 degrees Celsius in the sun and I'm enjoying a bottle of homemade cider.

photo of home made apple cider in a glass with bottle in background and house even further back

Until next time: Work to Live, Don’t Live to Work

Disclaimer. I am in no way an expert on capital management or investing. On this blog I only wish to share my findings, ideas and comments on current events and fields that interest me. I hope that my thoughts can entertain you. I expect that everyone reading take their time and do their own research before acting on anything read on this blog. Investing is not for everyone. E&OE.

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