Friday, October 9, 2020

Enough by John C. Bogle

  Some of my expectations which I had before reading the book were met. As a founder of Vanguard company John C. Bogle allocated significant part of the book describing advantages of the mutual funds and greed of the active managers.
The book is intentionally simplified, there are no numbers, calculations or anything else. Its targeting emotions.
There is an interesting statement on the greed: “… the rampant greed that threatens to overwhelm our financial system and corporate world runs deeper than money.  Not knowing what enough us subverts our professional values. It makes salespersons of those who should be fiduciaries of the investments entrusted to them.  It turns a system that should be built on trust into one with counting as its foundation.  Worse, this confusion about enough leads us astray in our larger lives. We chase false rabbits of success; we too often bow down at the altar of the transitory and finally meaningless and fail to cherish what is beyond calculation, indeed eternal”.  
 
With internet at our fingers, waiting online to serve us, we are surrounded by information, but increasingly cut off from knowledge. Facts (or, more often, factoids) are everywhere.  Wisdom, the kind of wisdom that was rife seventy – one hundred years ago is in short supply. Soon we shall know everything that does not count and nothing that does. 
 
Leadership and values
A difference between a leader and a manager? Managers task is to do things right,  then as leaders, whose task is to do the right thing. 

Friday, October 2, 2020

September 2020 update ($583,327 -$22,778 or -%3.8)

 ↑ Financial independence savings for last month $2,000
Grand total additions: $2,000 USD

↓ Emerging Markets Stock Index Fund is down by $2,717 or -2.0%
↓ Eurozone Stock Index Fund is down by $3,519 or -2.8%
↓ US 500 Stock Index Fund is down by $6,165 or -4.0%
↓ Global Small Cap Index is down by $3,038 or -2.6%
↓ Fidelity Growth Fund is down by $411 or -0.7%
↓ EUR is down to USD by 2.4% or $6,392 for my portfolio
↓ GBP is down to USD by 4.5% or $2,535 for my portfolio
Grand total losses: $24,778

Financial Independence September 2020 update

Tuesday, September 29, 2020

British FTSE trading like an emerging market

 My August financial independence monthly update contained graph, comparing various indexes. This included British Financial Times Stock Exchange Group (FTSE) and Moscow Exchange (MOEX). 

Couple days ago “Fortune” writer Bernard Warner made similar observation, but his writing made it to Yahoo finance. British FTSE is performing worse than Russian market in 2020

Figure1. British FTSE trading like an emerging market and trailing behind Russian index in 2020

Lets see Bernard’s arguments:

Monday, August 31, 2020

August 2020 update ($606,105 +$34,659 or +%6.1)

↑ Emerging Markets Stock Index Fund is up by $4,505 or +3.4%
↑ Eurozone Stock Index Fund is up by $5,399 or +4.6%
↑ US 500 Stock Index Fund is up by $10,453 or +7.3%
↑ Global Small Cap Index is up by $6,753 or +6.1%
↑ Fidelity Growth Fund is up by $2,089 or +3.9%
↑ Financial independence savings for last month $2,000
↑ EUR is up to USD by 1% or $2,183 for my portfolio
↑ GBP is up to USD by 2.4% or $1,277 for my portfolio
Grand total additions: $34,659 USD

August 2020 financial independence update

Saturday, August 1, 2020

July 2020 update ($571,446 +$35,466 or +%6.6)

↑ Emerging Markets Stock Index Fund is up by $4,084 or +3.4%
↑ US 500 Stock Index Fund is up by $7,565 or +5.6%
↑ Global Small Cap Index is up by $4,157 or +3.9%
↑ Financial independence savings for last month $2,000
↑ EUR is up to USD by 7% or $16,795 for my portfolio
↑ GBP is up to USD by 5.6% or $2,868 for my portfolio
Grand total additions: $ 37,468 USD
 
↓ Eurozone Stock Index Fund is down by $1,470 or -1.3%
↓ Fidelity Growth Fund is down by $532 or -1.0%
Grand total losses: $2,002
Financial Independence update July 2020

 

Friday, July 3, 2020

June 2020 update ($535,980 +$23,162 or +%4.5)

↑ Emerging Markets Stock Index Fund is up by $7,087 or +6.4% 
↑ Eurozone Stock Index Fund is up by $5,138 or +4.9%
↑ US 500 Stock Index Fund is up by $2,570 or +1.9%
↑ Global Small Cap Index is up by $2,683 or +2.6%
↑ Fidelity Growth Fund is up by $1,194 or +2.4%
↑ Financial independence savings for last month $2,000
↑ EUR is up to USD by 1% or $2,076 for my portfolio
↑ GBP is up to USD by 0.8% or $414 for my portfolio
Grand total additions: $23,162 USD

Financial Independence journey - June 2020 update

Friday, June 26, 2020

Dividend Aristocrats

Typical definition of a dividend aristocrat is a company which has increased dividends for 25 consecutive years in the nominal terms. We have inflation every year and if a company continues to perform in the same way, it should be able to raise dividends in line with the inflation, making it a dividend aristocrat.  This is not the case and there are only 62 out of S&P500.
 Is it worth investing in dividends aristocrats’ stocks?
 Lets have a look for investing $10,000 in dividend aristocrats vs. S&P500 in 2010 until now. I selected a random sample of 15  out of 62 companies. Companies highlighted with red under performing  S&P500 fund (all dividends are re-invested in both cases):
Dividends Aristocrats - are they worth investing in?
Notes:
  •  Most companies pay dividends 4 times a year. Dividends are reinvested 4 times. For my calculation I did reinvestment once a year for the cumulative dividend.
  •  Compound inflation in the USA between 2010 and 2020 is 25%.
 I used to focus on cash engines in the past. Just looking at the dividends is not a guarantee of high return. For example, if I invested in ExxonMobil, my nest egg would be lagging S&P500 quite a lot, while missing diversification.  “3M Company” is highlighted with red, because it’s just marginally higher S&P500 and such performance does not justify the investment in the single stock.
 Perhaps, a portfolio can be created of dividend aristocrats and the ones that have beaten S&P500 over 10-20 years period.  This assumes that you can have an account with low fees, as additional 2-3% drag will kill all the advantages.
 Over the past 63 years, the S&P 500’s composition has changed dramatically. In 2007, the index’s 50th anniversary, S&P published a list of the 86 companies that remained from the original line-up. That number has steadily declined, and today, only about 60 original members remain. 
As original members have dwindled, so has the average tenure of companies in the index. In 1964, the average index tenure of an S&P 500 company was 33 years. As of 2020, tenure shrank to 20 years.
 I will certainly think about it.  Your views and opinions are very welcome.