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In this thread, @10KDriver shares a simple way to measure and track your progress towards financial independence. 1 Financial independence is an end goal. To define this goal properly, you need to answer 2 key questions. (i) When would you consider yourself financially independent? And, (ii) In how much time do you want to get there? 2 Typically, financial independence means: a) You won't have to work another day in your life for money, and b) You and your family will still be able to live comfortably to the end of your days. 3 Let's say you want to reach financial independence in the next 10 years. How much money do you need to amass by that time? Well, suppose your family's expenses are ~$60K per year now. If inflation runs at ~2% per year, 10 years from now, your annual expenses will be ~$75K.
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 /Start of Thread 1/ Get a cup of coffee. In this thread, I'll walk you through the Rule of 72 -- and related "mental math tricks" for investors. 2/ As humans, we tend to think linearly. When we see a curve, we like to mentally approximate it by a straight line. This helps us cope with changes in the world around us. Changes that happen a constant pace. Changes that don't need our attention for very long. 3/ But in finance/investing, we need to think exponentially, not linearly. Money compounds. Growth doesn't happen at a constant pace; it accelerates over time. Most of us are not programmed to intuitively "get" compounding -- over the long run.  4/ So we need some "mental shorthands". Rules of thumb that help us develop intuition about exponential growth. Tricks that help us do "compounding math" in our head. One such trick is to think of compounding as a process that doubles our money every so many years. 5/ So the question is: how long does the compounding process take to double our money? The Rule of 72 gives us a simple approximate formula for this:  "Don't stop a raging bull." In other words, do not short a stock going parabolic. It is a perfect recipe to self-annihilation. Bitcoin [$BTC] just hit an all-time-high today at $35,751. That's nearly 10x from its March low at $3,596 . 🤯 If one was short on Bitcoin on this explosive rise, leveraged at that, is definitely tapping out.  Vivek outlined a decent bull thesis on Bitcoin as well as the risks associated with it in his Medium article. His bull argument includes Bitcoin's use case as global payment, a catalyst to tech innovation, a monetary policy hedge, proven resilience, viewed as digital gold, potential high valuation, and its halving as potential catalyst. These arguments, however, aren't novel propositions. ARK Invest 2018 Big Ideas projects cryptocurrency to become a multi-trillion industry in years to come. And no, they don't talk about societal doom and gloom as has been spouted by a few permabulls. Rather, the hedgefund asserts the "merits of Bitcoin as a monetary asset." They have a well-researched, technical white paper to support their view.
Recommended Reading: Bitcoin: A Novel Economic Institution With its meteoric rise, what could have possibly thrust BTC to new highs in 2020?  Browsing through my 2020 goals and realising how deformed my lists are, is a bit melancholic. I was eager to attend seminars, lectures and FI-RE meet-ups but that didn't bode well due to lockdowns. And by the looks of it, we aren't going back to pre-COVID normalcy anytime soon. However, there is more to life than this stupid virus and to continually live in FUD is egregiously unproductive.
Moving on from 2020, I will embody a "Think more. Execute Ideas More. Everything Else is a Noise." mentality this year as guided by Anton Kreil's 10 Secrets. What I mean by thinking more is simply generating as many ideas as I can, prioritising them and executing the best based on what I want to achieve. A zero ounce of energy would I waste on anything other than the latter. Learn Read 21 books related to finance and investing. Complete 2 online finance courses per quarter. Listen to finance and investing podcasts only. Create Consistently post on my Youtube channel. Post at least twice monthly on this blog. Journal once a week. Invest Create a 10-position portfolio in eToro. Double Revolut account. Invest monthly on Bitcoin. End. The market took a nose-dive reacting to the worsening Coronavirus spread in the first quarter of the year; only to bounce and catapulted to the moon partly driven by the perpetual quantitative easing of Central banks and ensuring zero interest rates. For what is worth, the market is artificially inflated but it is also indisputable that many sectors profit from the lockdown like eCommerce, Social Media, Digitisation, Cybersecurity, Biotech, Gaming, and other Stay-at-Home Stocks. SPACs getting popular as an alternative route for companies to go public; Bitcoin at all time high, dragging other crypto-assets along with it. When vaccine approval was announced, the hospitality and travel stocks rebound. In return, indices are ripping. Perhaps even the gloomy, dooms-like 2020 has silver-lining. How this translates to my portfolio? Let's take a look.    Return My average return for the year is 28% with only 1 instrument in the red, which is $VUKE. My best performer is BTC, a highly speculative and the riskiest asset that I own. Not a bad return for my trading accounts considering I only started this year actively doing so. A bull market really makes people feel smart about the financial market which is incontestable with the rise of Fintwit superstars coming from nowhere posting their thesis and 100 baggers stock picks. I am not dumb not to know this and I am taking action to ensure that I could still operate in a bear or kangaroo market.  Allocation Overall, my investment allocation is as follows, 50% ETF/Index, 49% Trading Accounts and 1% Bitcoin. For 2021, I will increase my Vanguard allocation by 10%, cap trading account contribution to 35% and BTC at 2%. I am not adding to my Revolut Investment anymore. My eToro gets a boosts next year as I build my trading track record. My overtime money goes to my Trading 212 account as usual. 2021 Adjustments I will not make changes on my currently owned equities except for $VUKE where I will de-risk my exposure by buying the entire UK market. I am no longer comfortable that out of the 100 biggest FTSE companies, only 1% is Tech. However, I will not sell at a loss. I am also bullish on Brexit. I will increase my BTC position to 2%. I will protect my capital at all cost and build an actively managed long and short positions. I will complete 2 financial courses per quarter. I will only read finance and investing books for the entire year. End. On March 11, WHO declared Covid-19 as a global pandemic phenomenon. It didn't take long before the market crashed on March 24, a day after PM Boris also announced UK national lockdown. Before the crash, I was aware that my portfolio started tanking right after the Rona virus was spreading in Wuhan, China. This was all over the news but predominantly downplayed by China and WHO. At this stage, I decided not to do anything; for one, I didn't need the money and, secondly, I have fully financed emergency fund. Three months later, Covid cases and deaths rose astronomically all over the world with lockdowns imposed all over. I stayed with the course all these times, buying my funds on my Vanguard account and catching falling knives on my stock picks to average down. I wasn't actively participating in the market nor was I affected with my PnL (Profits and Losses). I was guided with the FIRE mindset, where, over the long term, my positions will recover so the status quo wouldn't matter. Until my yahoo finance and google market alerts were jam-packed with V-shaped recovery narrative, Tesla parabolic and Tech stocks ripping; I decided to follow the news, check stocks on the daily and started trading. I understood the basic concept of chart reading and interpretation prior; but executing them in real time and making quick profits were new to me. I made 20+ more trades using small position sizes to prove my "strategy" and I was convinced that I could actually do it. With the market "mooning" and convinced with my newfound skill, I decided to stop the bleeding and closed all my individual stock positions in July. My realised PnL for that month was -£1473.84. I allocated 2 hours per day and 6-8 hours on my days off of study - following the market, reading concepts and theories, testing strategies, reading qualitative analysis on substack, discovering hidden gems on twitter and reddit. Very quickly, I learned to use financial websites, identifying bucket shops for pumps and dumps, momentum, short positions, SEC filings, etc. I have devoured countless hours of trading and investing content on youtube and finally, could relate to the Chat With Traders podcasts I have been listening for almost a year now. I became immune to the Covid news, then finally, stopped following it altogether. Trading became my new normal and I loved it.  As can be seen on the chart, I have recovered all my losses last month and more (including unrealised gains). I have made many mistakes but learned a ton. I believe that if I could streamline my trading strategy whereby, regardless of the market condition, I'll make money more than I could possible ever make with my full-time job. I love taking risks, and if I could decrease such risks using my brains, much better. I could discuss what I have been doing per month but I think it is pointless, I'll remind myself in 2 years once I have a lengthy track record. Maybe then, I'll consider talking about my experience.
Retrospectively, all I wanted was to recoup my losses and make smart decisions with my stock picks with high conviction; it morphed into the creation of big ideas I would never have considered before I started trading. I am ankle-deep under water, I want to keep going until I find myself fully submerged. No turning back from here. End. In January 20, 2020, out of the blue, I made a challenge were I should invest £20,000 (Php1,300,000) on or before December 20, 2020. Details of the challenge can be found here. Today, my total investment is £19,084.42. I fell short, not miserably but I failed nonetheless. I would have made it if Santa came a bit early but didn't - I am talking about my salary (lol). Anyway, my investments were allocated to the following:  Addendum: My workplace's salary for December was distributed on the 22nd. I invested £1,025 of that income; therefore, my total investment for the year is £20,109.42. My Vanguard account is tax-wrapped (ISA) so it made sense to prioritise it. I have a with-profits savings account with Sheffield Mutual that I am paying £130 per month. This is tax-wrapped, with life insurance account and is invested mostly in the UK. For the month of August, I invested all my savings to Trading212. By November, I opened Revolut and eToro to trade using a dollar-denominated account. Lastly, I explored BTC this year. I reckon it doesn't hurt if I invest to an instrument that is gaining institutional interest this year at less than 1% of my portfolio. But that's just me of course.
Also, another requirement for this challenge is to hit the annual Stocks and Shares ISA limit of £20,000 before the next tax cycle that starts April every year. Hence, I will need £7,472.13 to hit that target. Given my current allocation, I would miss this by 25%. Not fun to be a nurse but I would probably make another challenge starting January. Maybe £21,000 (Php1,400,000) before end of 2021? P.S. Article adjusted with my December income. Monthly investment here. End. Social media is a medium where one could interact with someone in the internet via text, video, gifs, photos or reactions. Everyone with a smartphone, in one way or another has a social media account in one or more of the following apps - Facebook, Messenger, Whatsapp, Instagram, Snapchat, Reddit, Youtube, Omegle, Twitter, Stocktwits, Discord, Tik Tok or Parler. Whilst I have multiple social-media accounts, I only use a few and utilise them to my advantage.  Summary Facebook If I have to breakdown my facebook activity for the year, it will be 10% interaction with family and friends' posts, 10% Facebook stories, 60% article sharing, 10% Tesla and Elon, 10% phubbing and entertainment. I think I have already graduated from my egotistical, narcissistic, like-my photo stage to now sharing political and Tech articles with zero care of the world. What is more, I could actually use Facebook as free cloud storage with the option to set posts as private for future use. I optimised Reddit participation when I have found well-thought out and organised resources about investing. Useful Subs /r/ukpersonalfinance /r/Options /r/stocks /r/SPACs /r/wallstreetbets Wallstreetbets (WSB) is a sub with 1.6 million members posting profits and losses, memes, due diligence, and stock-pick yolo-ism, from retail investors all over the world; calling themselves autistic, degenerate gamblers. It became extremely popular, CNBC even mentions it. The memes give me giggles but with over a million members, the brain power of the sub cannot be denied. You will see posts like - Sample 1, Sample 2, Sample 3 and websites like Sample 4, Sample 5. If you know where to look and know what to consume, there are hidden jewels in the sub you will never going to get somewhere else. Forget about Trump vs Twitter shenanigan, Twitter is the home that politicians, economists, Tech-nerds, hedge-funds, and retail investors are active. This, in turn, creates a networking effect in the Fintwit community. For example, it was Twitter that I get to learn SPACs because of Chamath Palahapitiya which has led me to follow astute SPAC investors who also follow extremely helpful websites like spactrack. News also spread like wildfire in Twitterverse, so reactive search on stocks is only a few second search using the $ sign plus the ticker. It was Twitter that I get to learn how quantitative and qualitative analysis are made by hedge-funds and to network on quality substacks, blogs and podcasts. I think people see Twitter as a toxic community as a whole but that is not the case. I block bots and turds, follow bulls and contrarians alike, and bookmark insightful and helpful threads for future reference. I have Instagram where I follow investing accounts but not as effective as Twitter. Stocktwits for pre-market and after-market data but the ideas are downright bin-worthy. The idea that soc-med are time-wasters is simply untrue. Well, it could be if you allow it to consume you. However, if you know what you are looking for, you will find it.
End. If you are an OFW, investing in the Philippine stock market may not be a good decision penny-wise. But if you desperately want to own Jollibee shares, by all means, proceed with whatever floats your boat.
The reason why I don't invest in Pinas is simple - Fees. And more fees. 1. Trading Fees This is taken from the COLFinancial website, a popular investment platform in the Philippines. For Buying - Commission Fee: .25% (of gross trade amount) Value Added Tax (VAT): 12% (of commission) Philippine Stock Exchange Transaction Fee (PSETF): .005% (of gross trade amount) Securities Clearing Corporation of the Philippines Fee (SCCP): .01% (of gross trade amount) For Selling - Commission Fee: .25% (of gross trade amount) Value Added Tax (VAT): 12% (of commission) Philippine Stock Exchange Transaction Fee (PSETF): .005% (of gross trade amount) Securities Clearing Corporation of the Philippines Fee (SCCP): .01% (of gross trade amount) Sales Tax: .60% (of the gross selling amount) *Note: The Commission fee has a minimum charge of P20.00 per transaction. And if you require a broker-assisted trade, the commission charge is .5% of the gross trade amount. Example Buying - Total fees for buying 20,000 shares of ABC at P5.00/share Commission: P250 VAT: P30 PSE Fee: P5 SCCP: P10 Total: P295 Invested: P100295 Selling - Total fees for selling 20,000 shares of ABC at P5.20/share = P104000 Commission: P260 VAT: P31.20 PSE Fee: P5.20 SCCP: P10.40 Sales Tax: P624 Total: P930.80 Gain = P4000-P295-P930.80 = P2774.2 That's a lot of money lost. What if the stock go down and you decide to sell at a loss? 2. Handling Fees Some handling charges are listed below:
3. Mutual Fund Fees Pesolab has a detailed article about how mutual fund fees work. Click here. In summary, below are the fees expected if you invest on mutual funds in the Philippines.
Example Philequity MSCI Philippine Index Fund, Inc. Sales Load: 5% Exit: 1% Holding Period: 90 days Management Fee: 3% Brutal! I am not familiar with the brokerage firms in the Philippines, it does not interest me. But, imagine if you buy funds via a broker, you also need to shoulder the transaction fees of buying and selling. That is too much. In comparison, I could purchase funds in the UK with an expense ratio of just 0.06%. I will never touch a fund whose expense ratio that is greater than .30%, yet alone 1% or 3%. Yikes! 4. Other fees Although not related to investment fees per se, investing in the Philippines require you to send money regularly to top up your account, and doing so require you to pay remittance fees. On top of that, you have no control over the exchange rate between GBP to PHP or USD to PHP. You may lose from this as well. My head is hurting writing this article (lol). It appears to me that my beloved country is not investor friendly which is a shame especially if you want to support companies back home. Hopefully, things will change in the not so distant future. For now, the UK offers the best deals if you want to invest in the stock market. Even better in the US. End. |
