Monday, October 13, 2014

Family budget comparison 2008 – 2014

Non-inflation adjusted table of our family finance for the last 6 years:
Family Financial Independence budget comparison

-         Education expenditure is up by ~$10,000.  Expect to remain stable next year.
-         Car insurance remained almost the same. However additional cost was two set of tyres (winter –summer) and annual service.
-         Miscellaneous expenditure was up due to the administration expenses (~$4,000).
-         Medical bills are up (additional dentist cost ~$2,700).
-         Bills are up (electricity and heating are up, etc).
-         Home, after extended period of time we started renewing some of the furniture – bed, carpets.  Additional electronics cost us  ~ $3,200.
-         Joy – $4,000 extra in comparison with last year. Two separate week breaks cost us $9,600 this year, which is $,2700 more than last year on the holidays. Another $1,300 increase came from random miscellaneous expenses.

Monday, October 6, 2014

October 2014 update ($ 318,479 -$13,808 or - 4.2%)

Accumulated $4,000 USD as part of my annual saving goal for October
Received $ 350 as quarterly dividends for my holdings in S&P500 and Emerging markets ETFs.
Vanguard S&P500 ETF gained $1,100
Grand total additions: US$ 5,450

EUR lost $11,983 towards USD
GBP lost $1,470 towards USD
RUB lost $900 towards USD
Vanguard emerging markets ETF lost $710
Gazprom shares lost $3,000
Company shares lost $670
Rosneft shares lost $525

Grand total losses: US$ 19,258

Thursday, September 11, 2014

S&P 500 lacks of insiration and talent to create value

Earlier this year I suggested that so-called most of the Companies are not ran in shareholders’ interest.
It took some time to do the actual facts digging, but here they are:
Out of S&P 500 index 449 companies used 54% of their profits ….to buy back their own stock, this represents $2.4 trillion dollars. Dividends payouts consumed another 37% of the earnings.  This was happening last ten years from 2003 through 2012 and continues today.
There is three main reasons for it:
- -   One of the main metrics CEOs are being rewarded based on so called total shareholder return. It combines share price appreciation and dividends paid to show the total return to the shareholder expressed as an annualized percentage. It is calculated by the growth in capital from purchasing a share in the company assuming that the dividends are reinvested each time they are paid.
         This means that they are inevitably driven to push shares prices at all cost.  Average  CEO salary in S&P 500 index is $30.3 million each in 2012, 42% compensation comes from stock options.
-   -    In Western Europe some countries actually establish minimum returns on pension funds, meaning that the companies have to achieve it, or their shares will be unloaded.
-  -     Lack of vision and talent to invest back home. Obviously, the leaders are run out of profitable investment opportunities. One of the chief functions of top executives is to discover new opportunities.  Buying the socks back begs the question whether the CEOs are doing their job.  For example, the only money that Apple ever raised from public shareholders was $97 million at its IPO in 1980.

Friday, September 5, 2014

September 2014 update ($ 332,287 -$17,051 or - 5%)

Accumulated $8,000 USD as part of my annual saving goal for August & September
Received $6,314 USD as Gazprom dividend (6.6% a year).
Received $ 490 USD as Rosneft dividend (7% a year)
Received $65.5 USD as Vanguard S&P 500 dividend (2% a year)
Company shares went up & dividends reinvested $603 USD
Vanguard S&P 500 gained $ 400 USD
Grand total additions: US$ 15,870

Precious metals lost $540 USD
EUR lost to USD $9,346 USD
GBP lost to USD  $2,895
Vanguard Energy ETF lost $ 600 USD
$30 USD Confiscated by Company due to cancellation of the reinvestment programme
  Gazprom shares down by $18,080 USD
Rosneft shares down by $1,170 USD
Loss due to forced selling of Vanguard funds and additional investments 290 USD
Grand total losses: US$ 32,951

Wednesday, July 16, 2014

Dividends for financial independence

Dividends for mine holdings:
Per share, USD
After taxes, in EUR
Annual dividends , % at purchased price
Annual dividends at current price %
Vanguard Energy ETF
Vanguard S&P 500 ETF**
Company stocks*
* Has a tax effective reinvestment policy, where all dividends reinvested straight away avoiding income taxation. Only capital tax is paid once they are sold, however option exists to start receiving dividends only at some point in time.
** I bought Vanguard ETF S&P back in April 2013 and the ETF pays dividends quarterly.

Friday, July 11, 2014

July 2014 update ($349,340 +$29,470 or +9%)

Accumulated $4,000 as part of my annual saving goal
EUR is up to USD,  represents 7,750 USD gain
GBP is up to USD, represents  2,650 USD gain
RUB is up to USD, represents 670 USD gain
Vanguard ETF is up by 1,800 USD
Vanguard S&P 500 is up by 400
Gazprom shares are up by 9,550 USD
Company shares are up 760 USD
Rosneft shares are up by 1,520 USD
Precisous metals up by 370 USD
Grand total additions: US$ 29,740

Thursday, June 12, 2014

The most important thing

         I started catching up on the financial independence reading and Howard Marks wrote the  first book I would like to recommend to you, as worth reading. Howard is current chairman and co-founder of Oaktree Capital Management.
Admittedly, as many other books on financial topics the book is about philosophy and mindset rather than analytical process. There is no surefire recipe for investment success or step-by-step instructions.
         The book helps to understand an investor concept of the risk and tolerance to it. I have to confess that prior reading it I never thought of it that way.
As an example, I liked an analogy an analogy about professional tennis, as a “winner’s game”, in which match goes to the player who’s able to hit most winners: fast-paced, well-placed shots that an opponent can’t return. Given anything other than an outright winner by an opponent, professional tennis players can make the shot they want almost all the time: hard or soft, deep or short, left or right, flat or with spin. Professional players aren’t troubled by the things that make the game challenging for amateurs: bad bounces; wind; sun in the eyes, limitations on speed, stamina and skill; or an opponent’s efforts to put the ball beyond reach.  The pros can get to most shots their opponents hit and do what they want with the ball almost all the time.
          The tennis the rest of us play is a “loser’s game”, with the match going to the player who hits the fewest losers.  The winner just keeps the ball in play until the loser hits it into the net or off the court. In other words, in amateur tennis, points are not won; they lost.
The same goes with the investing – we could not possibly predict future but need to cater for various scenarios and  avoid losing money in the bad times. Controlling the risk in your portfolio is a very important and worth-while pursuit. The fruits, however, come only in the form of losses that don’t happen.