Before you start investing you want to have an investment strategy in place. Here is a suggestion.

Pay of any debt first. This does not include mortgage (most of the time) and might not include student loans. That is up to you. More on debt here.

After you have paid off all debt, save for an emergency fund and for foreseeable expenses. If you rent a place, probably 3 months’ worth of expenses is enough. If you own a property, you might want to consider four to six months. Account for family member that rely on you as well. So with children maybe keep a higher emergency fund as well. Foreseeable expenses include new (used) cars, constructions, holidays etcetera. Everything you foresee spending money on that is not a ‘normal’ expense.

Have that all in place? High Five! Only money that is left after that is money set for investing.

If you just start out investing you can split all investments in two main categories, offensive and defensive. Defensive are the lower risk investments that also have lower yields. This includes bonds, ETF Bonds, savings account, gold, checking account and cash. A defensive investment strategy might be 75% bonds and 25% stocks. Defensive investing knows less volatility and makes more sense if you invest short term. The change of losing money when you need to sell is smaller.

Offensive is everything with a bit more risk and also a bigger change of higher yields. Here there is more risk involving with changes of higher yields. You can lose more as well. In this category for me are ETFs in stocks. Some asset managers say ETFs are defensive. In the market crash of march 2020 almost all ETFs crashed hard. It was temporary but it showed they are volatile. Average returns are about 8%. That is why I think ETFs are offensive. Because of the volatility your ETFs can be worth (a lot) less then what you bought them for temporarily. Only invest for the long run to make up for the short term losses.

Very offensive individual stocks, shorts, cryptocurrency, speeders or sprinters. It’s more like gabling and less like investing. I call this ‘play money’. This is for the fast, high gains and not to ‘set and forget’. If you are willing to put a lot of risk and a lot of time in to investigate the market, you can have a high return but also a big loss.

A rule of thumb I heard of is your age in percentage of bonds and the rest in stocks. So if you are 30 years old you put 30% in defensive investments and 70% in offensive. When you are 60 years old, 60% defensive and 40% offensive. The older you get the more defensive you get. This is because when you reach the age of retirement you want to get your money (partially) out. If the market is volatile you risk a lower yield when you are still investing offensive when you are older.

For the sake of this article I calculated how much in my portfolio is defensive, offensive and ‘play money’.

Jackson and Vladimir don’t care. At all.

Turns out I have 27,5% in defensive, 70% in offensive and 2,5% in play money. For this rule I’m pretty fine but for me that is a bit too defensive. Especially considering I have an emergency fund in place. F I count my emergency fund as a defensive asset, the ratio will be 38% defensive, 60% offensive and 2% play money. I will rebalance until it looks more like 10% defensive, 87,5% offensive and 2,5% play money. Rebalancing is balancing back the assets until you reach the strategy you choose for is restored. This rebalancing can be done different ways. I can sell some bonds and buy stocks until I reach the desired ratio or I put the next few months in stocks until I reach it. I’ll do the latter.

What’s your investment strategy?

Till next time,

Elske

I am not a Financial advisor nor am I YOUR financial advisor. I am not a trained financial professional. This blog is for entertainment purposes only.

What do you want to invest in.

Investing is done on the stock exchange. It’s a place where shares and stocks are being bought and sold. There are different stock exchanges, for example London stock exchange or Nasdaq. This used to be a place where suit and tie guys were screaming, selling and buying from each other. Now it is all electronic. You can’t go there directly, you need a broker or a bank to give access to buy or sell stocks. There are a lot of different brokers. They all look quite alike but there are some differences. Most important are the transaction fees and service fees. This varies quite a bit. Best is to choose one that has low fees or no fees. Also there is a difference in user experience and customer service. Most are just fine. My platform of choice is DeGiro. They are low fee and once per month I can even put money in selected index funds without any fees in the ‘kernselectie’.  

Other brokers for example are eToro, Binckbank, Lynx, Plus500, Bux, Trading212 and Meesman. There are many more.

So you selected a broker to start investing. Now you can choose different products. Here I will cover stocks, bonds and ETFs.

If you buy a stock, you own a little piece of a particular company. If dividends are paid, they get paid to you monthly, quarterly or yearly. So you earn by keeping the stock. Also the stock can go up or down so you make a profit or a loss if you sell the stock.

Bonds are a loan to the government or a company. They borrow money and return it at the end of the duration. On top they pay you interest. Mostly bonds are less volatile, a more stable way of investing. Downside is that the yields are generally lower compared to stocks. This is a stable part of your investment portfolio.

ETF or exchange traded fund is a basket of stocks that follow a certain index. Usually this is widespread with hundreds or thousands of different stocks. If you buy an ETF you buy a piece of all the stocks or bonds in that index. Your return is the same as the index in total and you don’t need to buy all the individual stocks. This saves a lot of transaction fees and you can start with a smaller budget. Because ETFs spread over so many stocks, if one company doesn’t make a profit, another will make up for it. Also ETFs are passively managed because they simply follow the market. This results in lower fees then actively managed funds (investment funds).

So how do I buy all of them stocks?

If you want to buy (or sell) a stock or bond or ETF, you place an order. This is you saying you want to buy a certain amount of stocks for a certain price. Of your order has been executed, you bought a stock.

An example. I want to buy Vanguard FTSE All-World UCITS ETF at DeGiro. First I have to sign up at DeGiro. When I have a working account I deposit the money I want to invest from a checking account. In the search bar I type vanguard. It looks like this.

I choose the first one because it is in the kernselectie and I can buy it without transaction fees once per month.

The green K is for buy. Click.

Now you will see the following (but with other figures).

On top there is the title of the ETF. Then it says the abbreviation VWRL, et cetera.

Below is the current price. R is for realtime price.

The bid and let.

The bid is the highest price a buyer is willing to buy the share for.

The selling price is called the ask price or let (here laat). This is the lowest price a seller wants per share.

There is space in between, you call this the spread. In this example the spread is 2 cents. That is the space between the highest bidder and the lowest seller. When the market is open, this changes every few seconds.

Then it says buy in the green (koop) and sell in the red (verkoop).

Next to it is dayorder. You can choose day order or a continuous order.  When you set a limit for that day (day order) and the transaction is not made, the order will disappear. If you choose continuous order, the order will stay.

Below that is limit order on the pulldown menu.

There are different types of orders. We will briefly review them.

Limit order. This is the most common. You want to buy a certain amount of stocks for a certain price. When the price of the stock is equal to the price you put in the order, the stock will be sold to you. When the price is not reached, the deal is off. The closer your price is to the price of the stock, the higher the change your order will be executed.

Market order. With a market order you buy for the best market price on the moment of the transaction. So you only put the amount of stocks in your order, not the price you want to pay for it. Only do this when the stock exchange is open. This way you will buy around the price of the stock. A lot can happen to the price when the exchange is closed and you might pay a lot more if the value has gone up.

Stoploss order. A stoploss order is ment to protect you from big losses. If the stock you own falls below a certain price, you can use a stop-loss order to set the stock to be sold at the set price. If the stock exchange is closed and the price falls below the set stop loss, the share will be sold at the then current price. To prevent this, a stop limit order can be set. This indicates that your share cannot be sold for less than the set price.

So if you want to buy the share keep it on limit order, at limit put the same amount as the let. At amount type in the amount you want to buy. In this example two. Right of the amount (in this example two) the total price is filled in automatically.

It should look something like this.

Click place order and your first purchase is a fact. You are now an investor in more than 6000 companies!

Happy investing!

Elske

I am not a Financial advisor nor am I YOUR financial advisor. I am not a trained financial professional. This blog is for entertainment purposes only.

Before starting investing you have to be clear on why, how and how long you want to invest. Do you want to spend hours a week watching the news and trends, do you want to actively trade or do you want to set and forget? Put everything in at once or rather invest some every month?

How will you react when there is a recession or a crisis? Will you panic? Will you sell everything at the lowest point out of panic and buy back when it is higher? You have to be clear on that. It makes all the difference.

What can I say, I can put a picture of Wallstreet or whatever here but look at him! It’s Vladimir but two years ago!

Why do you want to invest? Some answers here could be: For my (early) retirement, for my kids, for rainy days, buying a house etcetera. Get really clear on why you want to invest. This way you have more focus on actually doing it. For me the answer is to save up for early retirement and to buy a homestead just outside the city.

How long do you want to invest? Don’t invest money you need soon. Only invest with money you don’t need. Yes I say that double because it is important. There will be times when the market goes up for a couple of years in a row but there will always be crisis waiting. We just don’t know when. If you need your investments when the market is very low, you have to sell when you are in loss. That would be sad and is not the point. Wait the crisis out. As long as you stay in the market your assets will go up again. Sometimes you have to sit it out a couple of years. Investing is for the long run. In 10, 15 or 20 years you will always be at a win if you invest in Exchange Traded Funds (ETFs). More on that later.

‘Compound interest is the eight wonder of the world. He who understands it, earns it… He who doesn’t, pays it.’

Albert Einstein

How much time do you want to spend investigating the market? This is a very personal thing. You can be an active trader. Beating the market would be cool and if you look at some forums it is achievable. It is persuasive but remember: people tell everybody about their wins but rarely about the losses. If you want to be an active trader, make sure to watch the world news, watch the different companies and read a lot of books about the topic. If you invest in companies, you have to get to know the company very well. Have an opinion and be prepared to win more than average, but at a greater risk to lose more than average as well. Active trading is time consuming.

Another option is to ‘set and forget’. Meaning you will put money in an index fund regularly (every month for example) and not look to time the market. I choose ETFs (index funds) with low fees and wide coverage of the market and I know my assets will go up with the market at the same pace (or down). This requires a lot less time, effort and knowledge. Average returns will be between 5-8% annually. This will vary every year but talking about the long run. 

Do you put your money in all at once or over time? For me I do it over time. Every month I put what I have left in an index fund. I try and make that the same amount every month. This way I don’t need to time the market (although I try and look for the lowest point in that month). Remember: Time in the market beats timing the market. The earlier you are in, the better the results will be over time. Compound interest is real and you should let it work in your favor. Maybe if you inherited or otherwise found a large sum of money you would like to invest, you could do it at once but most people don’t regularly find themselves in that situation so we will go with every month.

Panic selling at a loss? If you panic sell because the digit turned red for you, maybe investing isn’t for you. The market is volatile, meaning it is going up and down all the time. You have to get used to it if you want to be an investor. This is why it is so important to only invest money you don’t need in the short term. If you need the money in the short term to pay bills and the numbers are down, you will panic. That is normal. We are investors because we don’t want to live paycheck to paycheck and we want to not worry about money anymore. We want to sleep safe and sound, doesn’t matter what the market is up to.

Conclusion: We want to invest for the future. This is personal but we all have dreams don’t we? So we invest for the long run and we don’t want to be on top of the economic news 24/7. Just set and forget. Ideal is putting money in every month and hold. That is what I will focus on here.  

Till Next Time,

Elske

I am not a Financial advisor nor am I YOUR financial advisor. I am not a trained financial professional. This blog is for entertainment purposes only.

Hi!

If you are interested in stocks or finances or if you read the news, you probably heard about Gamestop. I bought GameStop, BlackBerry and AMC Entertainment Holdings stocks. Here is how:

DeGiro

I allready have an account at DeGiro. It’s a low fee broker. The individual stocks require another knowledge test, and i had to take it before i was able to buy the stocks.

After succesfully taking the test, I’m ready. Buying it works the same as buying any other stock or EFT in DeGiro. And it is not blocked.

Open to the following countries:

·  Austria

·  Belgium

·  Czech Republic

·  Denmark

·  Finland

·  France

·  Germany

·  Greece

·  Hungary

·  Ireland

·  Italy

·  Netherlands

·  Norway

·  Poland

·  Portugal

·  Spain

·  Sweden

·  Switzerland

·  United Kingdom

TradeZero

To difersify I also made an account at TradeZero. This can be done worlswide. It took some time but it’s easy to follow the steps. Also the 24/7 chat function works pretty good! I had some trouble transferring money to my account and asked the chat for help. After a little while (They are probably very busy with all the new accounts opening) a real live person was helping me out.

Transferring from the EU to US takes up to 3 days, i will keep you updated when I am able to buy the stocks.

Open to ALL COUNTRIES!

Here is something i like you to think about: Don’t ever NEVER EVER invest money that you don’t have or that you need in the near future. You might lose all or parts of your investments. Invest only in things you are well informed about.

Here is a suggestion on what to do with your money:

Money you need in the next month –> Checking account

Emergency fund of about 3-6 months of expenses –> Savings account

Money you expect to need in the next year or so (i.a. car, holiday, home improvement) –> Savings account

Everything that is left over and you don’t need in the foreseeable future –> Invest it!

80% in large cap indexfunds

10% in bonds or other more conservative ways of investing

10% to play aroound with (crypto/Gamestop/other high speculative things)

Good luck investing!!

Till next time,

Elske

I am not a Financial advisor nor am I YOUR financial advisor. I am not a trained financial professional. This blog is for entertainment purposes only.