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A bit late this month, because things went a little haywire!
Life, Health & Early Retirement - 3 Years & 6 Months Since Retirement
Apologies to anyone who was waiting for this month's update. I'm afraid it all went slightly bat shit crazy in September and then went turbo bat shit crazy with chocolate sprinkles on in October!
Does anyone remember me having a little moan a few months ago about wasting time "schmoozing" potential clients and how much I hate doing all of that and that I don't get paid for it either which makes it even more annoying blah blah, poor little me?
Well, it would appear I'm actually an accomplished schmoozist because pretty much since the beginning of September, I have barely lifted my head from video conferences, phone calls, spreadsheets and PowerPoints as three opportunities presented themselves at once and like the greedy little boy that I am, I said yes to them all.
Needless to say, pretty much every other past time and project I have underway went for a toss as I navigated some pretty complex corporate bingo cards to help a few clients get on the front foot with some of their own projects.
Well I say all other projects, but that's not quite true, but a little more of that a later. It's actually a good job I did as the stock market lost it's damn mind again and whilst it seems to be recovering in November, its still like being on a roller coaster and technically the market is pretty much flat over the last 6 months which is no bueno compadres.
Mrs H and I are packing for a trip to the UK this week to take full advantage of the need for us to see clients but to also catch up with the family pre-crimbo. While Mrs H travels regularly, I haven't been back for two years so I'm looking forward to it getting dark 3pm everyday, being below 5C the whole time and pretty much raining horizontally through a force 10 gale. Seriously (ish) though , I'm getting to spend some time with my mum, attend my sisters 50th birthday celebration, going on a boys trip with my best mate and getting to spend time with my kids and granddaughter. And all of that not through WhatsApp / Messenger / Facetime / Google Meet (delete as appropriate) for once. I'm sure it will be great despite the suicide inducing weather of the United Kingdom.
Net Worth
This Month Net Worth: R14,990,428 / $796,431/ £655,176
Last Month: R14,671,420 / $815,071/ £637,888
Change: +1.6% (Previous Month -2%)
Despite the markets being up and down like a fiddlers elbow over the last few weeks, it does still feel like we're oscillating on a point so there's no major wins but fortunately, no major losses.
And now I'm a bit better diversified between the somewhat more boring but largely less volatile alternative investments like solar, cattle and Impact farming and the traditional, but more heart in your mouth stocks and ETFs , I can still post a decent return even when the market is flat, which is great.
For probably the fist time, I feel like the portfolio is manageable, well diversified and doesn't need too much tweaking. In fact my last "WTAF" investment from the days when I thought financial advisers knew something that I didn't finally matured.
This one was a doozy.
A very large South African advisory firm who "helped" me move my UK pensions into a vehicle called QROPS (which I won't bore you with an explanation of but if you want more info, ask in the comments), told me it was by far the best option for us as British expats. The truth I know now is that they were actually a pretty good concept but were subject to high fees because they paid massive commissions to the so called SA independent financial advisors that sold them (that's my guy!) and then they would get more commission for selling you products that also pay him/her a high commission (they're all heart these financial advisers, huh?) to put inside the investment.
Even then the cheeky little scamp charged me a 1% Annual AUM Fee (assets under management) just to make sure that "IT"was really in there (I could definitely feel it). Needless to say, I think that conman and his company must have been creaming about 3-4% annual fees off our roughly R6m pensions. That was along time ago and now I manage it myself, I pay around 0.2% annual fees for the product and my low cost ETFs that I put in it are an average of about 0.15% so all told it's good value as obviously it's also tax-free until I draw down from it.
However, the aforementioned idiot IFA was in charge of the investing back then and clearly was trying to find fairly decent investments that paid him the best commission. And back in 2017 he spent $60,000 of my hard earned on a product called a structured note. On the face of it, these products look OK, they pay a yearly interest payment of about 8% as long as the investments was 1 point higher than the purchase price and as long as world markets don't drop by more than 25%, your capital is protected. They even have what's called a memory so if it doesn't pay out in year 1 and then does in year 2, you get paid out for year 1 .
What's not to love right?
Well it's amazing how a little bit of personal investing savvy can do to show you the error of your ways and here's why that wolf in sheep's clothing investment truly sucked for me.
I live in a high inflation country. 8% annual return is great in most places in the world but not good old SA. We average around 5-6% inflation so the real return on that note is 2-3%, that's not enough to pay the bills
The problem that isn't apparent to the untrained eye on these investments is that they don't compound. What that means is, I invested $60k which meant my 8% was $4,800 a year. The problem is that it's the same amount every year for 6 years. So 6 x $4,800 = $28,800. That is a 48% return over 6 years. With me so far? Well hold onto your pants. If I had put the same money in a compounding investment like say, a money market account or Bond ETF (which would probably pay similar returns), I would have got $4,800 in year 1, $5,184 in year 2, $5,598 in year 3 and so on for 6 years. That means, the structured note would gave me back $88,800 after 6 years, whereas a compounding investment with a target return of 8% would have given me $95,212 or 10% instead of 8%
So it sounds pretty rubbish so far right? Well guess what, it gets waaaaaayyyy worse as I found out last month. The investment matured and the closing price was below the starting price so guess what? You don't get the last bonus and any that are in "memory". Now due to Covid, war and a general screw up of the world over the last 6 years, there were 3 memories including the last one which , yes you guessed it, are now distant memories of a better time!
So I should have cancelled and got out of dodge as soon as I figured out the investment was a sham right? Wrong, because of the high commission fees and general greed of the low-life end of financial advice, I would have to pay all of those costs by way of an exit fee.
The upshot it that this was a valuable lesson in the use of financial advisors and in general the global retail investing industry. I got $74,400 of my hard earned cash back after investing $60k for 6 years, that's an eye watering 4% return in a country that averaged 5.5% inflation over the same time. Oh well, the financial advisor, his company and the owners of the structured note did great, so that's nice.
In an act of self punishment, I went and looked at the return I would have got had I gone for one of my favourite low cost index tracking ETF's: Vanguard Mega Cap Growth Fund - MGK. Guess what return I would have got had I invested it there? 123% or 21% annually- I would have got $133,800 back.
Oh well, you live and you learn, guess where the $74,400 is now? Yep, you're right.
And at this point I should say, I know some of my readers are in the finance industry and are even possibly on the advisory side. No offence meant, this guy (and his company) was a really special one, I'm sure there are highly reputable companies that offer a great service for those who don't have the financial savvy of your average FIRE investor and need someone to make sure they don't find themselves penniless in their retirement. On the flip-side, if any of you are currently sitting in a leather chair, with an eye patch, stroking a white cat, and laughing at my misfortune, shame on you!
On with the show.
Investment Performance
Monthly Investment Return: R248,681 / $13,212/ -£10,868
Investment Return Percentage: 1.7% (-1.6% Last Month)
Last month the big wins were somewhat ironically based on the story above, from our pension investments. Since I wrangled them back into my own control and stopped thinking that someone who barely knows me and is 10 years my junior might know so much more about investing than me that they'll do a better job, they are pretty much all steadily growing like passive index tracking ETF should.
They're also up until this month all US focussed and dollar denominated. I mention that because I just bought a UK dividend ETF for reasons that might seem a bit bonkers.
Because I'm British, I hold my pension in the Great British Pound but I invest mostly in the United States Dollar. That means there's a lot of dividends in dollars and a lot of fees in pounds and that means there's also a lot of transferring between the two, which guess what, has exorbitant fees (you just can't get away from those damn fees) so after some detailed math, I realised I was throwing a fair bit of cash down the drain on small FOREX transfers. The solution? Easy, buy a UK ETF that pays dividends in GBP and buy enough of it to offset my pension fees.
The ETF of choice was a bit obscure but I've gone for the Xtrackers MCSI USA Energy UCITS 1D - XSEN. Try saying that with a mouth fool of sweets!
This is a passive ETF that tracks the US energy infrastructure index. What made me pick this is that I grew up in the energy business and spent some time in the US where I learned that (and it may not still be true) that the US energy infrastructure e.g. the wires and transformers and power stations were not in great shape and had got to the point that they would be so massively expensive to fix in one go, that they have largely been bush fixed and patched and kept going (sounds a bit like SA) and that it will be like the famous saying "It's like painting the Golden Gate bridge" in that as soon as they finish fixing everything, they have to start all over again.
Whilst I don't know if it's actually true, I have had this knowledge for a couple of decades and a bit of research shows it's not really improved much so what better business to be in than energy infrastructure? And what is the easiest way to get into the US Energy Infrastructure business? Well I could re-train for 3 years, try and get a green card, sell all of my wordily possessions, move across the world, pledge allegiance to the flag and eat too much fast food. Or I could buy an ETF that invests in all the companies that already do it.
I'm a bit busy right now, so I went for option 2 and XSEN was in my opinion the best option.
30,000 Great British Pounds or if you prefer, 700,000 South African Rands later and I'm in the business of being in the energy business. And most importantly, XSEN has a relatively low annual fee of 0.12% and a dividend of around 3% so I'll hopefully se a nice bit of growth but also save on all of those pesky FOREX charges with my roughly 900 quid a year pay-out which should also comfortably cover my pension fees.
That should be a case of winning right there.
Budget & Spending
This months expenses: R75,966/ $4,036 / £3,320
Budget : R75,000 / $4,150/ £3,500
Well after a good old fashion rant on last month's post, I have managed to grab the horns of the expenses and wrestle it to the ground. You don't get much closer than that! Well, you can get R966 closer but lets not split hairs people.
I would love to tell you that we found a gap in the expenses but we didn't.
I do feel like the budget is just hanging on in the current cost of living crisis but anything comes in left-field and we're humped. And it does, constantly. Winston the wonder puppy went to see the dog doc as the poor little bugger is suffering with his annual skin allergies and we discovered he had a cracked tooth that must have been hurting him so we whipped him back in for that removing. That came to about R10,000 with medication.
I only paid the rescue centre R3,000 when I got Winny 10 years ago and he came then with loads of teeth included for free
He's my boy though and I love him, so no amount of money is too much to see him out of pain. Although I could have happily killed him every time he spat out the pain pill I had cunningly concealed in a hot dog every morning for a week after.
Then there was the worst night of weather in Cape Town's history which resulted in my man cave having 30cm of water in it. It could have been a lot worse as the insurance company have agreed to pay out for all the repairs and damage but you know that's coming back with a massive premium increase in January.
Where we actually find ourselves is that we now have a lot of stuff we need, want and that are generally in need of repair but we've put them off as we can function without them. It's a bit of a shopping list so Mrs H and I have resorted to a prioritised list with associated costs that we need to make a plan for by cutting costs elsewhere.
The temptation to go sell a bunch of shares and just blitz the whole list is high but that adds risk to the long term plan so whilst it doesn't feel too good being retired and broke (even though you have money), it's necessary right now.
Although with summer arriving, I have made the executive decision to get the leaky pool fixed because A. its now officially a mosquito farm, and B. I have convinced myself I'll make the money back on jumping in the pool instead of turning the aircon on so it will pay back in energy. Yeah, right.
Side-Hustle
I can sum up the consulting business in a few words right now and they are: Hella busy, can't wait to get paid, cant wait for it to be over, exhausted but smashing it.
There, you're up to date.
So let me fill you in on a fairly innocuous but momentous decision. I am in the coffee business. Well to be more precise, I am a partner in a coffee business.
As you know, I have been trying to hone in on a new side hustle for some time and I had a few criteria, namely: Fun, travel, food/cooking, creative/making. Well this ticks some immediately and has the possibility to tick them all if we can get it off the ground.
We're still in the start-up phase but it is very real, we have machinery, and workstations and coffee beans, so many coffee beans. And between grafting my back side off on the consulting, I'm drinking more coffee than I have ever as we develop our recipes and techniques. My day currently starts with a "cupping" which is a special tasting of the beans we've roasted in the previous days to see what we can learn. Then later in the day, It's my job to execute more roasting experiments for the future days and capture all of our highly secret data in spreadsheets and tasting sheets so we can keep track. Then there's some time building the website or setting up e-commerce, looking for supplies etc. My friend and business partner is on the coffee brewing and retail equipment side and he's consuming knowledge and content like it's going out of fashion.
Needless to say, we knew nothing about coffee and a couple of months on, we still know nothing but we know a lot more than the average coffee drinker and whilst we've got a hill to climb, we have some coffee that we prefer over the mass production beans we've been drinking every day for the last few years so I think they call that progress.
We haven't sold a bean yet and I doubt we will in 2023 but we've finally got something we can get excited about and while I suspect it won't make me rich, I think we can have a lot of fun and make a few rand as we go, and that sounds good to me.
Tribal Fi Stock Picking Competition - 2023
To quote the great Mathew McConaughey: Alright, alright alright, what have we got here?
We are sorting the wheat from the chaff, the men from the boys and picking off the weak from the herd! I don't think we've ever had a spread this wide in this competition and as we're nearing the home straight, there's going to need to be some pretty major events for this line-up to change massively.
Lawrence remains out front although he's dropped around 15% from last outing. Spike has held position whilst my EV batteries seem to be out of juice and Reef and Charlie are looking like they're on the precipice of doom but could still seize victory from the jaws of defeat. Unlike Stuffy and Shane who seem to have been chewed up and spat out by the jaws of defeat.
I think the top half of the table might still have a shot at a podium position but anyone over 50% down has to be ready to throw in the towel with 4 months to go.
Great foresight Lawrence (Totally pun intended.)
In Summary
I feel like I have a bit of a renewed sense of hope after a dark couple of months this winter when things were looking tougher than they should. I'm looking forward to being less busy after this onslaught of consulting gigs dies down around January/February and I'm looking forward to becoming a coffee magnate and travelling the world looking for the ultimate beans but I expect that might take a few weeks to achieve.
While the spending of cash remains a tough area, the making and investing feels easier than it was so I'm happy to ride the wave. A couple of weeks holiday in the UK with Mrs H to take us into Christmas feels like a good way to end the year and having kicked all of the "advisers" out of the camp now, I have the peace that we're not being ripped off by anyone, at least for now. I'm sure there'll be another special human in my life again soon.
Summer is coming fast and judging by winter, it's going to be a cracker so whilst I'll be busy for most of it with consulting, the braai is back in full use, I'm back in shorts and flip-flops 90% of my awake time and there still appears to be beer in the fridge so all in all, things ain't so bad.
Until next time, keep living.