• Mr H

Monthly Finances - September 2022

Is this quickly becoming one of those investing opportunities of a lifetime?



Life, Health & Early Retirement - 29 Months Since Retirement


Let me cut to the chase, September was a bloody awful month for our investments, in fact, the entire 3rd year of my retirement is looking like a massive black hole. But I'm actually feeling super positive about the future.


Allow me to elaborate.


There have previously been two massive financial market events in my lifetime. The first was the dotcom boom bubble bursting (say that fast 5 times) in 2001 where tech stock had become so ridiculously overvalued that the bottom fell out of the market and caused a spectacular crash.


The second was the global financial crisis of 2008 when the entire financial system broke because the stupid banks were giving people known as NINJA's (No Income No Job Applicants) massive mortgages of more than the value of the house they already couldn't afford. Obviously when it unsurprisingly came to light that they couldn't pay their mortgages, the markets collapsed and banks across the world had to be bailed out buy us, the tax payer, or go bust. Many of them did just that and sent the financial markets into one of the biggest tailspins of all time in a matter of days.


The one thing that was common in both other than the obvious is that it presented the average man on the street the opportunity of a lifetime to buy shares in quality companies at a bargain price that was almost guaranteed to provide significant returns in the 5-10 years following the event. Yes, of course that same man on the street had already lost a fortune on anything he/she already owned in investments but it's not a loss until it's sold.


What is also common to both of these events is that I didn't benefit from either. In 2001 I was 25 and was struggling to make ends meet to pay the mortgage payments on my first house which I had bought just a year earlier, spare cash was pretty much non existent. In 2008 I was 32 and whilst I didn't have much excuse then, I was already fully invested and was still living a non-FIRE which meant mostly living beyond my needs and having a bunch of credit card debt and a car that was way too fancy for my pay cheque.


So maybe, just maybe, this is the third event in my lifetime and whilst I am mostly invested in the market and firmly sticking to FIRE commandment number 2 which is "Thou shalt never sell investments during a crash" , I'm ploughing all spare cash, mostly side hustle profits, into the markets.


So to wrap this overly elongated explanation, I'm super positive about the current situation because I think we're just about at a point where the stocks I like investing in (Mostly US low cost index tracking ETFs like the S&P500) are actually good value and even if they continue to go down for the rest of the year and maybe even some of next, I should be scooping up as many as I can for our long term future.


So you may think I'm bonkers and feel free to comment below if you do but I'm actively buying up as much stock as I can in solid companies and funds so I don't miss what could be the third and final massive buying opportunity in my lifetime. Because if it's 10-15 years until the next one, I'm gonna be too old to start risking our future and I'm hoping by then I don't even look at the stock market and we just enjoy retirement without a financial care in the world.


Time will tell if I'm right....or just unhinged! But for now, in the words of the great Warren Buffet, my approach will be:


Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble

Net Worth


Our Net Worth: R18,080,458 / $1,015,443/ £904,023

Previous Month: R17,669,648 / $1,004,353 / £883,482

Change: +2.3% (Previous Month +1.3%)

Whilst there was a reasonable increase in net worth in September, it a bit of an optical illusion as the dollar pretty much peaked whilst the rand and British pound were in the doldrums so because I'm heavily invested in the US, it makes things look better than they actually are and whilst the spreadsheet says an increase of around R400k / $11k / £20k you can see the dollar increase is much lower than the other currencies.


I decided to take a bit of a look at the financial year so far to see how deep the damage has been and it's bad, but it's certainly not terminal. On the 1st March this year, our net worth was R18.9m / $1.05m / £948k so in 9 months, we're down about R800k / $39k / £44k which is a lot but when you unpack it, there's a bit of a story.


On the downside, according to my accounting software, I've made about R1m / $58k / £50k in side hustling so far this year so that can be added to the losses. Booooooo!


But in the upside, our spending has been R500k / $29k / £25k so that can be deducted form the losses again.


So in truth, we're down by around R1.3m / $76k / £65k which is just shy of a 7% drop in our net worth since the start of the financial year.


Unfortunately, the hard truth is that without the side hustle, things would be pretty dire. That's an unsettling thought. Let's hope we're through the worst of the crash and things start to improve sometime in the next 12 months. Unfortunately, "hope" is not a word I like to use when it comes to our financial future!


Investment Performance

  • Monthly Investment Return: +R489,299 / $27,183 / £24,464

  • Investment Return Percentage: +2.8% (+0.8% Last Month)

  • Annualised Investment Return: +5.1% ( +4.5% Last Month )


Again, ignore the impressive investment numbers, everything is down across the board, it's simply the currency fluctuation which is already starting to correct itself in October so expect a drop in next months report which is likely to cancel this out.


However, my plan to navigate through these choppy waters is showing small but significant signs of success.


Firstly my Dollar Cost Averaging strategy using the EasyEquities platform seems to be working. I've set up a fancy spreadsheet which automatically downloads the latest stock prices every couple of minutes and I leave it running on a screen in my office while the markets are open. Every time one of my stocks drops by 5% from my average purchase price, I get an alert and I buy enough stock to re-balance it. The same happens the other way and when I'm showing 5% of profit, I take profits back into my holding pot. By sticking to this process religiously I take all the emotion out of the process and whilst the market is see-sawing, it keeps me in balance with the markets and when they eventually recover, I'll make profit as a result.


I'm not sure how obvious this is to everyone as a concept (My readers are a pretty savvy bunch) so if anyone doesn't understand what I'm doing, here's a very simplified example;


  • I buy 100 shares of Acme for $100 per share meaning I have 100 shares worth a total of $10,000 and my average cost per share is $100

  • The price of Acme drops by 5% to $95 per share and triggers my buy alert. My shares are now worth $9,500 so I buy £500 dollars more to put me back at a total value of $10,000. Now I own 105.36 shares at a cost of $10,500 and an average cost per share of $99.64

  • The price of Acme goes back up to $100 per share and I get a sell alert/ My shares are now worth $10,536 so I sell $536 to bring me back to $10,000 value again.

  • This means I now have the 100 shares I started with again but my average cost per share is now $99.64 so I'm showing a profit of $36 or 0.36% after just two trades.

Clearly you need to factor in trading costs which is why I'm only trading at 5% and not say 2%. Across my portfolio I probably make 3-4 trades per day and the market is pretty volatile now so they're a mix of buys and sells. This allows me to trade without emotion in a very emotional market and limit my downside risk while the markets are still falling. It helps me to average my cost per share down so when the market does turn I'll get a maximum return. This overcomes the risk of selling your stock, sitting on the side-lines and trying to pick the right time to buy back in which is almost impossible if you're unable to see into the future or don't have a time machine.


The second area I'm working on is consolidation. Whilst the markets are down is a perfect time for me to consolidate my investments as every time you sell and re-buy shares, you create a taxable event and whilst things are tough, that is minimised and can even result in a loss which can offset gains in the future. What is important is to sell and re-buy quickly so you don't miss out if the market suddenly spikes up. I've been consolidating my South African shares into a few selected low cost index trackers with a view to not touching them and sitting out the storm. My SA listed ETFs of choice continue to be Sygnia's S&P 500 tracker and Satrix's MSCI world. Both of which have served me well, are super cheap from a fees perspective and seem to get impacted less than most as they're so broad.


Finally, I have completely de-risked my crypto trading now and have some very tame trading bots running with zero leverage and trading only the top 4 cryptocurrencies which are Bitcoin, Ethereum, Ripple and Binance Coin. The bots make about 100 trades per day and I make about $4 per day in Bitcoin which might sound like a fairly paltry amount considering I have around $12,000 invested. The missing piece of this jigsaw is that it makes $4 a day in Bitcoin which is down right around 60% year to date. If at some point it goes back to it's all time high, that $4 a day would be the equivalent of around $15 per day so if (And I get there's a few "If's" in this thinking) it does that in 2 years time, my little bot would have made me around about 45% per year return and almost doubled my investment. Of course the value of Bitcoin could go to zero and I lose $12k but its survived worse than this in the last 12 years so I'll take my chances.


Side-Hustles


September was a good month as I got paid for my busy August and there was a fair bit going on. October looks like it's going to be quiet and then I suspect there'll be a little flourish in November before things go quiet through to the end of January.


That suits me just fine as the summer is coming and sitting in an office should be the last thing I'm doing. I've been finding time to start to focus on life after consulting and actually managed to start working on my food based side hustle which has ended up being developing a range of hot sauces.


A bit random I know but it brings a few things together for me into something I can get a lot of enjoyment out of. Firstly I'm growing a range of "SuperHot" chilli's which will take a bit of time but if you ever tasted a Carolina Reaper or an African Ghost Chilli, you will know a little goes a long way! So tick number one is I get to grow my own stock which is something I've enjoyed doing since I've been a child and whilst tomatoes were always my favourite veg to grow, Chilli's are not massively different in term so of technique. Second is I then get to spend hours in the kitchen/Laboratory developing the sauces which is where I'm in my happy place, I love creating recipes and massing about with my kitchen gadgets so tick in the box number 2. Then finally I love building little businesses and have had a few over my life so I get to spend time designing the branding, building the website and working on a business plan which is applying some of the skills I picked up over 20+ years working in a corporate environment.


The reality is it's unlikely to make a fortune and it's certainly not going to replace the consulting money but it doesn't feel like a job so if it washes it's face and makes enough for a holiday or some extra fun money then I'm OK with that. Early days though and much to do but I'm loving it and my first sauce "The Mango Fandango" is in the bottle and whilst it's fairly mild because I haven't grown my killer chilli's yet, I have to say it's pretty damn good!


Picking A Winning Stock 2022


Lets check in on Tribal Finances investing gurus and see how the competition is going





The one thing that's giving me a bit of comfort for my 7% net worth hit in 2022 is that it could have been worse, I could have owned the Tribal Fi 2022 stock picking competition portfolio!


We are collectively down 30% YTD and if it wasn't for "The Oracle" Stuffyuncle, we would be down 45%. As a set of personal finance and investing enthusiasts, it's fair to say we should be hanging our heads in shame, me more so than most!


I'm currently in the midst of a stewards enquiry into lawrenceinvesting's pick RMB, the share price dropped by over 60% last week but it seems to be due to special dividend of R1.17 per share which will rocket him back into 2nd place with a 5% profit. I'll do a full investigation and update accordingly next month.


Apart from that, it's all looking a bit bleak for the rest of us but this game isn't about being the best, it's just about not being the worst. Unfortunately for me, I'm solidly the aforementioned worst but I don't think it would be possible for a company to come out with any more bad news without going under so I'm still holding on to the small glimmer of hope that Coinbase will be a phoenix from the flames and whilst I have given up on the probability of winning this year, it would be nice not to be last.


There's one thing that is for sure, no one can say it hasn't been interesting this year


Summary


I'm pleased that we've put contingencies in place for this horrible economic outlook and also pleased to have made a start on a new side-hustle. I'm confident that it is the right time to be a buyer in the markets but I'm also confident we're not going to be seeing a recovery inside 6-12 months so its going to be a rough ride and my plan is to get away from this computer, enjoy the sun and pretend it's not happening as there's not much more than I'm already doing that's going to make a difference!


As of 30th September 2022 at our current budget and investment performance, we have enough money to last until I'm 70 which is 26 years away




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