Wednesday, November 6, 2019

October 2019 update ($529,310 +$14.576 or +%2.8)

Emerging Markets Stock Index Fund is up by $2,158 or +1.8%
Eurozone Stock Index Fund is up by $1,407 or +1.2%
US 500 Stock Index Fund is up by $2,712 or +2.1%
Global Small Cap Index is up by $2,998 or +2.7%
EUR is up to USD by $2,216 or +1%
GBP to USD is up by $1,956 or +4.7%
Additional cash to invest $1,159 under my pension plan.
Grand total additions: $14,576
Financial Independence - October 2019 update, hot to achieve the financial independence

Change of the pension fund provider. When I started my private pension fund to take advantage of tax breaks, I did my online research. The company I chose had the best rating for smaller pension pots (under $300 K), as the fee was 0.25% or no more than $125 a year.
As  it is very typical in the UK, this is not true.  The company set up an "administrator" subsidiary, which charges some fees. Such fees are not reportable for comparison. All together I am paying $250 a year.
The tipping point was to receive their estimate for the year (they have to do it by law):  if I contribute 720 a month for 30 years, my pension would be 500 a month (with average life expectancy they will pay it for 15 years).  This is great success of British finance sector. They assumptions:  investment return – 5% a year, inflation -2.5%, investment cost (including infamous administration) – 1.25%.  So, in real terms the money will grow 1.25% a year and still they will pocket most of what will be left.
I decided close the private pension fund and combine the pot with the company one. Company is an FTSE behemoth, so it will be cheaper for me in the long run, as with new fund I will indeed pay 0.26%.    

Choice of funds.  I was also reading Vanguard analytics, where the fund analysts offered their view on the market performance in the next ten years.  Where US would grow 1.7% and China 6.1%.  Global equities (excluding U.S.) will perform at 6.5%-8.5% a year. Projected inflation is 2% a year. This essentially means that in real terms the US economy stalls and no growth in wages is projected.  I am planning to invest UK growth index fund with passive management style. 

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