Marc's Journal

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marcdemar
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Marc's Journal

Post by marcdemar » Tue Nov 06, 2018 3:43 am

My journal

I am Marc, 50 years old and a late starter as far as FI/RE is concerned. I was born and raised in the Netherlands. I spent 3 years in the US/Michigan, 1 year in Ireland/Dublin and I am now based in Scandinavia/Denmark.

I was never really into saving/investing, but when my investments were kick-started by joining my company's (I'm in the IT business) ESPP program a few years ago, allowing me to buy shares against a discounted price, I started thinking. I'm now fully committed to reaching early retirement as soon as possible.

I'm writing this journal in the hope to get some feedback on my journey and decisions. And to keep myself accountable.

Current state of my portfolio:

- Mortgage-free home: $300K - I include this in my portfolio as I am willing to sell (or take a reversed mortgage for realizing my ER dreams)
- Company shares: $60K
- Crowdlending: $1700

My savings rate is 30%. That's not too high, but the majority is used for buying company shares. Current discount is an amazing 60%, so the effect is bigger than 30%.

I work with the following scenarios:

1) Save enough money to bridge the years between early retirement and full pension age (68 where I live).

This is realistic, but not preferred. With my current savings rate and depending on the markets I can probably reach this situation in 5-7 years (I am short of around $300K) - after which I would deplete the savings/investments (withdrawal rate well above return rate) until full pension age. After that I will rely on my pension.

2) Save money to bridge years between early retirement and full pension age and supplement my pension

This is preferred over option 1) and realistic as well. I need to save/invest more, reduce spending and possibly work until I reach 60 (or retire earlier and work part-time for a few more years), but then I should have enough.

3) Have enough to live off for the rest of my life

This is the dream obviously.

Without reducing my spending (now and after I retire) this would be beyond reach. However, one interesting option is to emigrate to a cheaper country. I am researching various places at the moment. Cluj-Napoca in Romania is one of them. Cost of living -60% compared to where I live. Moving there would be a game-changer. I have been there several times and love the place.

About my portfolio

My portfolio is very concentrated. If we forget about my home, then most of the money is invested in my company's stock. I keep expanding this because I can buy shares for a discount. Things have to go very sour before I would start losing money.

Right now I have the risk tolerance to keep those assets, but when I get closer to early retirement I am more interested in a steady, predictable (passive) income stream. That's why I have started to invest in crowdlending. I plan to invest a lot more in various platforms (including crowdfunding of real estate).

Many people advice me to sell of my company's shares and diversify. Diversification is definitely something I need to work on, but the current ESPP program is extremely profitable. It is a continuous beneficial 'sequence of returns' as I get 1.5 (or more) shares for the price of one.

That's it for now.
/Marc

Smashter
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Re: Marc's Journal

Post by Smashter » Tue Nov 06, 2018 10:52 am

It seems like you have great income, but you didn't mention anything about your expenses. If you list out what you are spending money on it could be a great way to get some feedback and see if there is are any "easy wins" in terms of expense reduction. Even a slight boost above a 30% savings rate can have a big effect on what you ultimately need to retire.

prognastat
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Re: Marc's Journal

Post by prognastat » Tue Nov 06, 2018 11:16 am

To retire in 10 years you would probably need to bump your savings rate to something closer to 50% unless you do end up moving to a place with a much lower COL than you currently are in.

As for the investments I don't think I would be comfortable having that much of my investments in one company and even less so if that company is also my employer as if something goes seriously wrong with the company you could both lose your job and at the same time lose most/all of your investments. I'm not too up to speed on investment options in the EU since I'm in the US so someone with some more experience there might be useful on providing good alternatives.

Smashter is definitely right that posting expenses can be helpful for people providing feedback on this and tips to cut some spending.

marcdemar
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Re: Marc's Journal

Post by marcdemar » Tue Nov 06, 2018 12:02 pm

Thanks @Smashter

Due to the fact I can buy company shares for a discount means I effectively save around 50% (currently). I know this is artificial, and I am not guaranteed the same discount, but it does boost my capital gains instantly. Annually I buy for $21K discounted shares. They represent a value of more than $30K. On top of that I plan investing $6K annually in crowdlending/funding.

As far as expenses is concerned, I am not as much in control as I should be (okay I know what to do the upcoming weekend). But there are some candidates where I could/should reduce costs:
- Car - it's a lease. $635 a month including insurance
- Gas for the car. I'm in Europe and gas is expensive here. I use about $150 a month.

Public transport where I live is good. My job just around the corner. I/we do need a car for longer distances sometimes, but this could be solved with a rental, occasional Uber or whatever.

And thanks @prognastat

You are absolutely right that having shares in the company I work for isn't that good. It's a 'single point of failure'. It really boosts my portfolio, but I could lose it all (including my job) if the company folds. I will definitely move some of my assets away from the company stock.

prognastat
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Re: Marc's Journal

Post by prognastat » Tue Nov 06, 2018 12:09 pm

Given the great discount you get on the stocks, I definitely would buy as much as they allow/you can afford. I wouldn't hold on to it longer than necessary though. Depending on the tax situation selling them immediately is probably not a great deal, but once it counts as a long term investment and the rate drops on them(f it does in your country) I would sell off and invest in something safer.

marcdemar
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Re: Marc's Journal

Post by marcdemar » Tue Nov 06, 2018 12:57 pm

Great advice. Thx. I will start with researching the tax implications and then draw up a plan for selling off some of the shares.

marcdemar
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Re: Marc's Journal

Post by marcdemar » Wed Nov 07, 2018 4:21 am

I will focus on the savings/investments until I have a better picture of all expenses to see where I can reduce them to speed up my journey to early retirement.

As far as investments are concerned, the following charts reflect the current status:

Image

A: All my investments to date - RSU (restricted stock units) and ESPP are all linked to company shares

B: All investments in a waterfall chart. As you can see I started investing in something called Mintos. This is a P2P platform

C: The quarter on quarter development of the investment in company shares

D: Current portfolio. The real estate asset is my own mortgage-free home.

I will post updates regularly so you can follow along with the diversification (very needed!). I will also try to formulate a clearer goal and then measure how far I am in reaching it.

Current monthly investments

$1750 - Company (ESPP) shares (these investments only show up in December and June each year. My company withholds money from my salary and buys shares every 6 months)
$500 - Mintos (or rather P2P lending and crowdfunding of property)

Do I want to invest more? Yes. Can I? Only after convincing my better half ;)

Will
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Re: Marc's Journal

Post by Will » Wed Nov 07, 2018 5:43 am

Interesting journal and nice to see another fellow Dutchman starting a journal. I don't know how the situation is in Denmark, but in the Netherlands a lease car is probably the most expensive option to own a car, though most people do not realize this. Is it a private lease or paid for by your employer? Seems to me that there is some scope for improvement here, especially if it's private.

I also use Mintos for P2P lending, and am also a user of Twino and previously Bondora (I quit after they forced every user to invest over their auto-invest tool without proper filter options). A word of caution from my side though: Be aware that these investments are basically the worst of the worst of junk bonds, these are mostly loans to individuals who even regular banks did not want as a customer. Many loans are 'guaranteed' by the loan provider, which means that you get your money back in case of default. I expect that, during a proper economic downturn, many of these loan providers will not survive the massive defaults happening then. I do not have any data to back it up, but this 'guaranteeing' of loans seems like a party which will eventually stop. Since your investments are not very liquid you will not be able to get out quickly when this happens (it took me more than a year to quit Bondora, could have been quicker but then I would have needed to take a huge loss). For this reason I have only invested a very modest sum in these P2P platforms (2% of my net worth). Investing $500 per months in these seems like a lot to me.

marcdemar
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Re: Marc's Journal

Post by marcdemar » Wed Nov 07, 2018 6:40 am

@Will
Good to know I'm not the only Dutch person on here ;)

It's a private lease. And yes, it's expensive. Convenient, but expensive. The best option is probably to buy a second hand car at a reasonable price. Or have no car at all. But that requires a bit of math. To see whether an occasional rental, taxi or other transport could be a (much) cheaper solution.

Thanks for your feedback regarding P2P. I am quite aware that we haven't really seen these platforms during a proper economic downturn. What will happen to the loan originators? It is very likely that many will fold. I will spread the money over various platforms and a number of loan originators, but I am also going to invest in crowdfunding of property and buy more shares (probably index funds).

All in all, everything is still well within my risk tolerance. I have a mortgage-free home which is the majority of my portfolio. P2P sits at 1% currently. I may expand it to 10-15% over time.

jacob
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Re: Marc's Journal

Post by jacob » Wed Nov 07, 2018 8:16 am

marcdemar wrote:
Wed Nov 07, 2018 6:40 am
Thanks for your feedback regarding P2P. I am quite aware that we haven't really seen these platforms during a proper economic downturn. What will happen to the loan originators? It is very likely that many will fold.
http://earlyretirementextreme.com/my-mo ... osper.html

marcdemar
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Re: Marc's Journal

Post by marcdemar » Wed Nov 07, 2018 9:49 am

@jacob Thanks for the link. Very interesting to read about your experiences with prosper.

I'm not sure Mintos operates like Prosper. On Mintos you invest in loans from loan originators. They have 'skin in the game' (like a minimum 10% stake in the loan) and offer buyback guarantees. Now, these may not be worth much if there's a serious economic downturn and one loan originator goes bankrupt after another....

I'd like to approach it like this: Part of my portfolio is for alternative (or non-traditional?) assets. It's the experimental corner. I've read good stories and bad ones about P2P, but I want to see for myself how this plays out. Maybe I stumble, maybe I don't. But I will have learned something ;)

Last November (2017) I built a mining rig. I spent quite an amount on buying all the parts, had to learn a lot about how to put all the parts together, how to mine, how to create wallets, transfer coins, etc. I made a small profit (as I could sell some of the coins just before the hype was over). Was it a good investment? The mining itself not. But I learned how to build computers from scratch and have now done that for a few people which earned me some good cash.

I will always be willing to use part of my funds for experiments. That's what keeps me going and learning.

This doesn't mean I shouldn't listen to good advice of course. I am the first to admit I am quite new at this. Investing was never really my thing.

I'll keep you posted about my journey in this journal.

prognastat
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Re: Marc's Journal

Post by prognastat » Wed Nov 07, 2018 11:08 am

Getting out of a private lease is definitely bound to improve you financially. They tend to be the worst way to finance a car and one of the harder ones to get out of.

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