My current plan, 2017 April

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This is a day of sorrow, this is the day when Sweden got targeted in a terror attack.
I do not have words, got the information around 1530 when I was leaving work. Apparently a truck rammed a busy shopping street (walking street) and. 15 hurt and 4 dead as we speak.
Svd published a lot of pictures that tell stories.

Currently following the events unfold on live TV.

My biggest fear is that this will boost the racist trolls that are taking over in Sweden. There are extremists in every society, country, political wing and religion. Don't fight refugees, fight extremism.
I do hope that the Swedish government acts in a calm way.

As this is my planned 'My current plan' I have to do this update as well as during my lunch break (3 hours before the attack) I followed my original plan and bought more shares in my favorite candy shop. This time the buy was boosted by this years dividend payouts. The dividend payout was 3 times more then last year. A good result but it is dimmed by today's events and I really do not want to think about economics today.

My thoughts are with the families of the victims of the attack. Be strong!
Be sure to follow #openstockholm on twitter where people are helping each other, actually genuine caring. Warms my hearth.

Be strong!

The power of compounding

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I tend to keep away from actual numbers on this blog, mostly as they are not my strong suite and that I want to the readers to do their own homework.
So lets see how that goes when we will cover the subject of compounding.

Introduction

Compounding is the idea that when you receive interest on your investment and reinvest it you will start to receive interest on that interest as well. And next year, you will add another round of interest and so on. After some years, the snowball starts to build itself faster and faster.
This is the reason why you should reinvest your returns, be it interest rate or dividend payouts. The numbers go crazy after a few years.

One time investment: Savings account vs. reinvesting

A very simplified scenario. Say you invest 100000. And each year, you will receive 6%. The following table shows the growth with and without reinvestment, i.e. compounding for the first 25 years. I.e. plain is your savings account with 0% interest.

year	savings account	reinvested
1	100000	100000
2	100000	106000
3	100000	112360
4	100000	119101
5	100000	126247
6	100000	133822
7	100000	141851
8	100000	150363
9	100000	159384
10	100000	168947
11	100000	179084
12	100000	189829
13	100000	201219
14	100000	213292
15	100000	226090
16	100000	239655
17	100000	254035
18	100000	269277
19	100000	285433
20	100000	302559
21	100000	320713
22	100000	339956
23	100000	360353
24	100000	381974
25	100000	404893

The difference is a whooping 304893. Just by locking in your money and reinvesting each year the original investment has grown 4 times!
OK, the example is a little biased against the savings account. So lets look at a more realistic calculation.

Continuous investment: savings vs reinvestment strategy

In a more realistic scenario you would continue to invest new money each year, say 30000 per year the numbers would be the following:

year	savings account + additional savings	reinvested + additional investment
1	100000	100000
2	130000	136000
3	160000	174160
4	190000	214610
5	220000	257486
6	250000	302935
7	280000	351111
8	310000	402178
9	340000	456309
10	370000	513687
11	400000	574509
12	430000	638979
13	460000	707318
14	490000	779757
15	520000	856542
16	550000	937935
17	580000	1024211
18	610000	1115664
19	640000	1212603
20	670000	1315360
21	700000	1424281
22	730000	1539738
23	760000	1662122
24	790000	1791850
25	820000	1929361

The difference now would be 1109361. That's a lot of money.

Living on the yearly returns

If you, like me, plan to live on the returns from your investment, given the above numbers the following would be paid out per year if you stop reinvesting.

years	savings account	savings account  + additional investment	reinvested	reinvested  + additional investment
10	0	30000 for 10 years	10137	30821
15	0	30000 for 15 years	13565	51393
20	0	30000 for 20 years	18154	78922
25	0	30000 for 25 years	24294	115762
30	0	30000 for 30 years	32510	165062

Savings accounts: you would need to do withdrawals to get any money as most accounts have 0% interest rates.
After 10 years, the reinvesting plus additional investing will generate an extra investment unit of 30000 per year by itself. And after 25 years, it adds the initial investment each year!
And going from 25 to 30 years adds another ~50000 per year.

Conclusion

I know my plan. Continuously invest and reinvest all dividends! Event if the 6% per year rate is just fake and in reality it would be different depending on a number of variables, taxes, costs, market fluctuations etc. But the effect of interest on interest on interest over and over again is just something that must be leveraged in any long term investment plan.

Hope this helped a little bit in showing how this effect works :)

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.

My Current Plan, 2016 October

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As I've hinted in previous posts, I don't follow the diversified investing strategy or invest in index funds myself. I still think that that is the best risk averse way to invest, perfect for your retirement plan or when you are saving for your kids and most of all when you do not want to put any real time into it.

That being said... I have too much time..

So, after reading a lot on the subject. Going through Graham, Buffet and numerous books that I don't remember the names of, that could be the subject of another post I devised my own strategy.
So lets go through the overall ideas that influenced me to form my own plan.

There is no one way to wealth, everyone do it in their own way

Some preach diversification, others are into value investing and then again others only want dividend payers. Buy only companies that are cheaper than the money they have in the bank, or buy into big well proven companies that are stable. Buy and hold or Buy and sell?

So there is no single path to riches.

There is no such thing as market timing.

At least not in the long run and I am in it for the long run.
This seems to be the least common denominator that everyone agrees on. Everyone meaning the authors and investors that have a horizon of a decade or five.
Graham didn't have to time the market as he basically bought the whole basket and then micromanaged that portfolio to see when things were ripe for harvest. Others buy at a nice price (not always the best) and hold the investment for a long period and see it grown.

What I look for

Management

Do I trust the management to drive the company forward into a money maker for me?

Dividend payout

I.e. a cash flow that can be re-invested. And when time comes, a cash flow that can substitute a full time job or 2. Best deal if it has a long term increased dividend strategy.

I can figure out how they make money

This is key. I don't want buy into a company if it is in a field that I don't know about. If it is unclear how the money gets created, then it is a no.

A Great Company

I don't want to go through the endless waves of small unknown companies that may become the next [insert any skyrocketing company here from your local financial news]. I want a boring old money maker with a well recognized brand that is out there and has 'always' been. Think Coca-cola.

Does not ask shareholders for a cash-in from time to time

Another no way. Steady long term business that is able to finance itself and pay a dividend.

Not my employer

I like my employer, I like working for them. But, a big but if.. If they go out of business and I loose my job, I don't want to loose my investment at the same time. Or the other way around. Just think about it. You see your investment go into ruins and the next day you get fired. Not an ideal situation. I don't buy my employer.

Is  better than the ones I already have?
If the proposed return of investment isn't better then from worst company I already own, then I might just as well buy more of the ones I know of.

When to I plan to sell

Never :)

But honestly, no.. I do not have an exit plan. I do have an emergency plan for when the

Management turns sour

As time goes by, the management team of a company change their members or the bigger shareholders want a change and it may turn out to be in a direction that I am not comfortable with. When trust is lost, that's when I might sell. Emergency plan, not an exit.

Until that happens, the market may do whatever it likes. If I trust my companies, then I'll hold on to them. Preferably for me would be if the market thinks the worst, as it just gives me an opportunity to buy more shares at a cheaper price.

So. That was a summary of the strategy that I follow. Currently holding 2 companies and buying more of them every month. Until something better comes up, I'll stick to those two.

Hope this gives some ideas to other people starting out in building their own future :)

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.

Tips on finding extra income sources

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So far I have assumed that we have a fixed income from a day job to work with. When you start to get more interested and involved in investing you will soon notice that the investment potential of an ordinary paycheck is not that huge. How could we find additional streams of income that we can add to our investment?
Lets look at some options.

Reinvest your returns

This should be a no-brainer, during the build phase of your money machine you should reinvest everything. For funds, many of them do this automatically and you don't have to think about it. If you are investing in common stock of businesses then there is a chance that there is a dividend payout from time to time. You should add this sum to your next investment.
Over time, this approach together with your normal savings/investments should start to yield larger and larger return.

Start a business on the side.

If you have the know-how, why not monetize on it on your spare time? Register a small business and start doing extra jobs. Could be anything from photography and web-design to household chores.
If things go well, this could turn out to become your main business in the future. And until then, put all returns into your investment portfolio.

Garage sales

Sell off some stuff that you do not need anymore.
Advertise in a local newspaper and remember to figure out a pricing system that you want to follow on the big day.

• Make sure that you have a permit if it is required in your area.
• Bundle items. Lower valued items together with medium valued can boost the sell factor
• If you have more valuable items, try researching a little to figure out the price-tag that you can put on them. But expect that people will haggle about the price no matter what.
• Get extra change so that you don't stand there empty handed when someone hands you a large bill.
• Put on price labels that are easy to read.
• Use prices that match the change you have available at the start.
• Make sure there is enough parking place outside of your house. If you have advertised, there can be a real rush and its not fun to see potential customers go somewhere else. If 5-10 cars cant park then try finding an other location. 
• In the last 30 minutes, lower prices to get rid of the last things. You've already decided that you don't want it anymore, then turn it to a profit even if it is less than what you asked for in the beginning. 

In the end, if you feel that you have got the hang of the haggling business, you could try starting a side business. Buying items from other peoples garage sales and then selling at your own. Its quite a lot of work but a fun way to meet people.

Write

If you have knowledge of a subject, why not write about it?
For information on how to publish your own book, go to Writersdigest.com they have a large in-depth guide on the subject.

If you instead want to write smaller articles that maybe not suite as a book, try out blogging.
With the correct ad-placement you can turn it to a revenue stream as well. Key notes on blogging is to have a continuous publishing schedule to keep people coming back for more. This is something that I am not that good at. I tend to write a lot of articles and then have huge gaps until I get into writing mode again.
If you have your own hosting, try out wordpress. Their free service does not allow advertising (as they put their own ads into your blog). If you do not have your own hosting, then blogger is the way to go.
Also, make sure that you use high quality images that convey the subjects. Best are of course photos and images that you create on your own, but using one or two images from various free stock image sites can upgrade the quality feeling that you get at a glance.

Another way to monetize on articles is to sell them to magazines, try contacting a magazine that writes in the field that you want to write in. Put together a portfolio (could be your blog) and send them a question if you could write for them.


Good luck :)