June 2021 update: earnings, expenses and wealth

I've been looking at my finances and this year looks just amazing - again. I can't wait to tell you about it! Here it goes:

I'm a huge proponent of diversification. While sometimes I stumble and make huge losses by diversifying in the wrong things, more often it leads to massive wins. This spring I've struck gold a few times.

I like to think of my portfolio in categories or buckets, each driven by a different rationale. For example, the P2P category where services such as Mintos, Swaper, Lainaaja and Bondora are my largest holdings, they are my high-yield interest category. In that bucket I stay on top of EU regulation and platform health.

In the SMB loan category I have Crowdestor and October and I'm closely following how the companies are developing as well as what the leadership is doing (not to forget returns).

In the real-estate category I have a Estateguru (super good) and Reinvest24 (so far good too). There I am most focused on their process, how they do valuations and look for signs of any shortcuts. I also own most of my home and a duplex in Finland.

I have a clean investing category, where I hold Sun Exchange and previously also Trine.

So while I diversify, I try to think of the different buckets as different strategies, each making my money work for me in different ways. If you remember my post about Modern Portfolio Theory, you'll know that having multiple assets that have weak or no correlation with each other leads to better risk-to-return ratio and thus a less bumpy ride.

Platform returns

Here's a table with return rates, my current top favorites and review links.

Platform Return stake
Mintos ⭐ 12% review
Estateguru ⭐ 12% review
Lainaaja 11%
Swaper  12% review
PeerBerry 12% review
NEO Finance 12% review
RoboCash ⭐ 11% review
Crowdestor ⭐ 10% review
Bondora 9% review
October 4% review
Trine 7% review
Sun Exchange ⭐ 7% review

The P2P platforms generate solid returns month over month, especially the consumer lending platforms and high-quality real estate platforms.

As you can see, I've trimmed some of my platforms above. This is mostly due to getting overwhelmed with too many platforms to track and their overlapping risk. If a platform invests in loans of the same loan originator than another one, there's little point in getting on it.

But the platforms are not all. I really like to own equity. They say stocks are the best performing asset class and a man of my age should have 60%-70% in stocks. I don't quite agree with that, since my P2P portfolio has a CAGR of 7%. P2P is not a low-return asset class, and this includes four bankruptcies.

But the best thing is: stocks and P2P don't really correlate much at all with each other. Two high-return asset classes that have little correlation with each other? Awesomeness!

Stocks are up +30% YTD

Since the summer of last year, I've had a significant stock weight. When I used to have 1/3 in Stocks, P2P and real estate, it's more like 45% stocks now, at the expense of P2P. There are a couple of reasons:

  1. I wanted to take advantage of the stock market lows by selling my P2P loans
  2. Stocks have overperformed massively in the last few months

Some of the great bets I've had this year are $ANVS (Alzhimer drug), $AVGR (peripheral arterial disease), $UPST (AI-based credit risk evaluation) - all growth stocks. So, my starting point was a bit off-balance and now the performance of stocks has skewed it more. Should I do something?

While I'm loving the stock market, it's getting more crazy by the day. It's becoming obvious that things cannot continue the same way forever. The expected annual return for the next 10 years is at -4.3%. We all know a reset is coming, we just don't know how and when.

Preparing for a reset

I have a lot to write about this topic, which I will save for a later blog post, soon. But here's the summary:

  1. Low inflation and low interest rates have channeled capital into the stock market
  2. Quantitative Easing has further channeled capital into the stock market
  3. Inflation is expected to rise

Central banks have filled their balance sheets with treasuries and increasing interest rates would lead to massive losses for them as well as cause widespread bankruptcies. It's unlikely they will be willing to do this. So, they'll let inflation rise.

Which will cause unforeseen turbulence in the market. Stocks valued by their discounted future cash flow will crash. Stocks that cannot transfer inflation into their prices will crash. Treasuries will crash.

Maintain liquidity and adjust for inflation

What's the right action for potential inflation? Blue-chip stocks with great pricing power (energy, utilities, REITs, retail, banks, natural resources, food etc.) and short-term high-yield loan platforms such as Mintos, Swaper, RoboCash, NEO Finance and PeerBerry.

My portfolio is definitely very off balance and I have too much growth stocks and too little p2p platforms and value stocks. Value stocks are the best choice in a high-inflation environment. I already have some great positions in value companies through ValueSignals.com, to which I have started to add more at the expense of growth stocks. I've made so many awesome picks with ValueSignals, for example Italian Wine Brands and Augeon Plc, both up +200% in two years since I bought them. These two probably are too late to get on to, but the newer picks in the newsletter look super interesting. I just bought the June newsletter pick yesterday, as it hasn't yet picked up.

Unexpected expenses, uh-oh!

The year begun super well with expenses tracking well behind budget. May brought some surprises though. Car needed fixing and we had to do repairs around the house. These completely destroyed my savings rate to negative. The full year-to-date is still above 50% so I'm not in major trouble.

I'm building a total wealth management dashboard on Google Drive. If you wish to test drive it (I mean really take it into use, not just glance at it), drop me a line at thewealthyfinn@gmail.com. I welcome beta testers!

Double comma, here I come!

When I started investing in 2008, I had nothing. The first 100,000 € took me 62 months. The most recent, the sixth 100k, took only 8. The target I originally set out for myself was to be in the double comma club when I'm 40.

If I keep growing with roughly the rate I've been able to grow thus far, I won't be far off. I'm going to turn 40 in 2023, but I have given myself time until I turn 41. It still counts, right?

At this point the targets (dashed blue line) I would need to hit are:

  • Saving more than 2,000€ per month (I can do that)
  • Getting 12% return on investments (insanely difficult, given the outlook)

If the crash comes close to the end, there's no way I can divert it. Long-term average returns are in the 7% range and while I've been better than that for more than 10 years, maybe I won't be in the next 3.

However, if the crash comes very soon, I might have time to recover before my deadline.

Wish me luck!

Blog posts may contain affiliate links

No comments:

Post a Comment

Others have liked these posts