How am I investing in 2021

I'm still alive, thank you all who've been asking. I just have been focusing on other things than this blog lately. Work has been busy and other side projects as well. And frankly, I got a little fed up writing about the same stuff. But now I've got a few new ideas. One of them requires more people to use my FIRE caluclator. Though the input data is completely anonymous it lets me understand gross and net income levels across different countries.

How has my investing changed in 2020?

One thing is for certain: last year was bizarre. And times continue to be so. Did you notice you can get a 0% interest rate mortgage for 20 years in Denmark now? What that tells me is that banks, at least in Denmark, are either not concerned of inflation and the housing bubble is prominent enough for banks to exploit it.

Very few seem to be concerned of inflation. That despite central banks having injected trillions into the economy. This suggests high confidence for the economy that's now 12 years old (less the fairly small hiccup last spring).

Still, Shiller PE ratio is ridiculously high at 35, having been higher only very briefly during the dotcom bubble. And it seems to only be getting worse.

High stock valuations have historically meant lower stock returns - at index level. Thus, at least index investing doesn't feel highly attractive at the moment. Maybe stock picking could work, but it requires a surprising amount of skill.

But things looked a lot different after the first quarter of 2020. When stock market valuations were taking a nosedive in March last year, I liquidated a lot of my stock and peer lending portfolio to be ready to buy more at a discount. My timing didn't work perfectly, but it was better than holding throughout the crash. And since then, I've made about 50k in the stock market with less than 200k equity. Many have done much better, I know.

But now, we're again in a situation that stock valuations are ridiculous and nothing makes sense. Am I invested in stocks because of fear of missing out? Do I honestly believe the growth can continue? What's the alternative?

The alternative is not to be un-invested. The alternative is a fairly lucrative peer lending market - if you believe stocks will underperform it. Which they statistically should, except that the world might be too different for history to be relevant anymore.

Indexes are probably expensive

You've probably heard the saying that when you hear stock advice from a taxi driver it's probably time to sell. I believe the same applies to random tiktok people.

Judging by the comments in the video, they aren't even trolling. The scariest thing is that this particular TikTok represents the sentiment and palpable euphoria of today's stock market. It's time to be careful.

On one hand, the indexes are most expensive in the US (when looking at cyclically adjusted PE ratios). This is greatly impacted by mega cap companies, which is evident from the table below.

CompanyMarket CapPE Ratio (TTM)
Apple Inc2.3T37
Microsoft corporation1.8T36 Inc1.7T80
Alphabet Inc1.4T35
Tesla Inc800B1,328
Facebook Inc759B26

Take those away and it'll lower the Shiller PE quite significantly, but it's not just them. NVIDIA: 89, PayPal: 102, Netflix: 91, NIKE: 79, Salesforce: 62, Broadcom: 74, Shopify: 779, UPS: 99, Starbucks: 182, Zoom: 271, Square: 361 - just to name a few known brands. Bottom line: if you own indexes, you own these companies, and others that have very high valuations. Historically, that has not been too profitable.

So I'm moving away from US indexes. European indexes are a lot more affordable, but a lot more boring. I'm also shifting the weight again more towards peer lending platforms that I like and ensuring I'm balanced and diversified, as that is scientifically the best way to do it.

The p2p platforms I am currently on

My peer lending platform shrunk from 200k€ to a bit over 100k€ during 2020, but it's still massive. Compared to previous year when I was more or less trying out anything and everything, I'm currently trying to pick the best from each category. There are enough categories to end up in adequate diversification this way too, and the added bonus is that there are fewer platforms to keep track of.

My current favorites, for different reasons and in no particular order, are:

  • for obvious reasons. It's the largest, most popular consumer loan platform and loan originator defaults are just another Thursday for them by now. Seeing that they can handle disruptions like that with smooth processes is comforting. Mintos has returned 11%. My Mintos review.
  • backed by a large, highly profitable corporation and providing short-term consumer loans on multiple continents. RoboCash has returned a steady 12%. My RoboCash review.
  • the multi national real estate peer lending platform with laser focus on risk management and transparency, along with a spotless history. It's my only real-estate platform and I even have auto-invest on with them. Estateguru has yielded 11%. My EstateGuru review.
  • the easiest green investing platform. Investing in solar cells in South Africa, that pay dividends as well as offset your CO2 footprint. I invest every year at least the amount that offsets my 10 tons of CO2. The solar panels give a nominal 11% return, but inflation and electricity price development can affect long term real returns. My SunExchange review.
  • the high risk, high return SMB crowdlending platform. It's the one that survived when so many others fell. I also appreciate how they handled the loans during corona time. Crowdestor returns dropped from 17% to 10% during corona. My Crowdestor review.
  • market leader in Lithuanian consumer loans, listed, regulated, issues their own loans but they also have a fast-growing payment initiation service. NEO Finance has a solid 12% return rate. My NEO Finance review.
  • October has been in business for a long time and they focus on low-risk SMB loans. Low risk means also lower interests though and returns have been 5%. My October review.

A special mention goes to it gives the brutally honest picture of the consumer lending market with delays, defaults and the years-long debt collection process. I wouldn't anymore put too much into Bondora, since it takes so long to return the investment. I'd also read someone else's opinions about this platform in addition to my Bondora review, as it is somewhat controversial.

I'll try to take some time to give a detailed update to the reviews.

Oh, cryptocurrencies

I have only a little bit in cryptocurrencies, mainly Bitcoin and Ethereum, but a small sum in Litecoin and IOTA too. I don't really believe in the technology itself. A Bitcoin transaction costs 15€ at the moment and takes minutes to hours. On top of that, a single transaction takes 700 kWh, which corresponds the amount of 10 Tesla's battery capacity. So, instead of driving 10 Teslas from full to dry, you can do one BTC transaction.

So, the technology is very expensive. I don't believe Bitcoin itself will become useful in other means other than speculation. The blockchain technology itself has some uses, but they're not as common as VC investors might have thought.

IOTA is a fascinating cryptocurrency, one that is quite different from the rest. It relies on tangle rather than blockchain, has massive scalability, zero transaction fees etc.

Nevertheless, I do think the Bitcoin euphoria is far from over. People will hoard and HODL on crypto coins tomorrow too. Some think they will preserve value in a stock market crash. If enough people do, then they will.

My choices for crypto have been: BTC, LTC, ETH and IOTA. Maybe XRP. What are yours and why?

Value and small cap stocks

I've mentioned this before, but in an overheated equity market, there's little room for already-hyped stocks to grow. Yes, Tesla might still grow 10x, but what is the likelihood of that? Also, if something negative were to happen, there's a lot of room to drop from that 1,328 PE ratio.

Instead, value stocks that have great fundamentals and are underpriced have obvious upside and much less downside. I use a service called ValueSignals to learn about great European value stocks. Their example portfolio that gets a monthly update at the moment holds 35 stocks, out of which 8 are up over 100% and three at least 350%. While the European STOXX600 ended at -4% last year, ValueSignal's example portfolio did +18%

I'm also getting to know more small cap stocks, in the US since that's where all the action is. I don't have a tool for that yet or a system, but if I find one, I'll let you know. A lot of great small cap growth companies on my radar have had massive gains during January alone. The daily moves are massive, but the potential drop if winds change are large too.

Fingers crossed for a great 2021!

2020 was really difficult in many ways, but I was able to come out on top by selling my stocks before the big drop, then gradually getting back in (a bit too slowly though). In hindsight, there was potential for a staggering, life-changing year with better timing, but timing is very difficult.

2021 looks much better, as there is a plan for the pandemic and while it's far from over, there's much less uncertainty. Let's hope for a good one!

Fingers crossed 🤞

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