Investing in the stock market can be daunting so actively managed mutual funds has traditionally been the go-to vehicle for the average Joe who wants an easy peasy investing solution. Index funds (passive funds and ETFs) have however become very popular in the recent years due to their lower costs (read more about the impact of fees here) and their simplicity and transparency. Some people however still think the costs are too high and some nationalities are restricted due to unavailability of funds or unfavourable taxation. A way around these issues is to buy the stocks yourself and invest like an index fund.
Are you afraid of buying your stocks when the market is at its highest? If you are a longterm investor, that mostly buy stocks, our perspective at stock buying might inspire you.
The market goes up and down all the time, but in the long run (let’s say 10-20 years) the market has historically always increased. As an investor you will not have the ability to forecast how the market will move tomorrow or in the future (and if you can, stop reading this blog and invest some money instead), which is why you will never have a chance to know whether you buy a stock when the market is at its highest or lowest. Our strategy to overcome this issue is to buy our stocks with a somewhat fixed frequency. At the moment we aim for buying approx. one new stock per month, instead of buying five new stocks in one month and then wait maybe half a year before investing again. By doing so, we do not risk investing in five stocks just before a large drop in the market. By investing in only one stock each month we might have invested once when the market was at its highest but would maybe have gotten the four other ones cheaper. Off course this also goes the other way around, so that you find out you should have bought all five stocks in the same month because it was the cheapest time to buy. But if you want to eliminate some risk, you can do as we do.
We said it before, but we gladly repeat it: We love dividends 🙂
And now it is time for a new dividend update for the last quarter of 2017. This quarter we received twice as much as in Q3, which was primarily due to the high dividend paid out by Fortescue Metals Group. When we bought the stock the price was pressured by high debt in the company, but it quickly managed to bring down the debt, which caused the price to recover and made the cash generation available for payouts. Hurray for buying a stock at the right time and for debt restructuring cases that goes right!
December update! – Did we get rich this month?
Maybe not rich, but for the first time we did better than both of our benchmarks. We actually did almost 2% better than the MSCI Europe index, which makes up for some of our underperformance the last months:
In December we once again made two investments. We bought stocks in the automotive company Daimler AG (we now feel we own part of a Mercedes 😉 ) and stocks in Reckitt Benckiser Group.
Our portfolio now looks like this:
To dig into the performance of the single stocks, you can get an overview here: