The weather was really great this weekend! Definitely not weather to stay inside and write a blog. Hence why you are receiving today’s post in the evening. I hope you don’t mind 😉
Enjoy this week’s 5-Bullet Sunday!
#Investing #EveryStartIsDifficult #MyYoungerSelf #EuropeanEarnings #StakeholderCapitalism #EconomyVsStockMarket
5-Bullet Sunday is a weekly blog post with 5 topics that were on my mind this week related to Financial Independence and Dividend Growth Investing or something that just fed my curiosity. An overview of other earlier posts can be found here
🌟 Investing conversation with an engaged reader
I had the pleasure to talk for an hour with TJ last Friday. TJ reached out to me with several questions on which he wanted to pick my brains. I must say, I really enjoyed it 😄. It gets me away from my keyboard and really exchange some thoughts with a like minded person whom is pursuing the same thing.
TJ is a starting investor and he had some questions about my approach, i.e.: how do I value companies, which data sources do I use and where do I find the time to do all of this (👉 no Netflix for me ;-))
Another theme he brought up was the fear of missing out. That was a very interesting topic, because it really reminded me about the early days back in 2014 when I started investing.
I remember that I was actually quite afraid to make my first purchase. My first purchase was around 500 Euro and it was the only one in the first 3 months (if I remember correctly). I really needed that time from a psychological point of view to get comfort in the fact that I might lose money, but also to reduce the fear of missing out regarding purchases that I didn’t make.
At the same time those 3 months where of tremendous value to me! It allowed me to check the stock price every day and after a while I just noticed that it didn’t really make sense to do that. The changes were so little and if I lost 5 euros then that would’ve been the equivalent of a lunch meal. Then I asked myself: why bother so much about that? Focus your time on things that give the highest return on effort.
I then quickly went back to my strategy, refined it a bit here and there and then in the fall of 2014 I really started to deploy money in the stock market on a monthly basis. Since then I never looked back.
This leads me to the next bullet
🌟 Recommendation to my younger self just before starting the journey
If I would give a few recommendations to myself at that moment that I started investing, then it would be the following:
- Don’t overthink when starting. No need to spend weeks on calculations regarding my strategy. Have the strategy conceptually designed with few basic calculations (i.e. how much money should I deploy on a monthly basis to retire at date x)
- To avoid getting stressed:
- invest only your first monthly saving based on your savings rate in the first month
- just make several small purchases to spread the risk of losing something
- in the almost impossible circumstance that you would lose everything (down to ZERO) from that first investment, then it would only take a month to get to the same starting point. A cheap learning!
- Allow yourself the first half year to get familiar with investing according to your conceptual strategy. Nibble in into some stocks that you think are great stocks for your portfolio. It allows you to start getting familiar with those companies.
- Once you feel comfortable and got some feeling for it: self-reflect, write down your lessons learnt, refine your strategy and execute accordingly using a dollar cost averaging approach.
- Time in the market is more valuable than timing the market.
🌟 Last week’s European earnings
Hereby a summary of my Twitter Feed regarding last week’s earnings (apologies upfront for the scrolling, there were quite some earnings!)
This week I really enjoyed a short but powerful article: COVID-19 is a litmus test for stakeholder capitalism
“let’s recall what stakeholder capitalism is about: ensuring the long-term preservation and resilience of the company, and embedding a company in society.”
I recommend reading the article yourself, but I truly believe in Stakeholder Capitalism as an improved model from “Shareholder value”. Purely focusing on shareholders creates a strong incentive for short term thinking. Examples of those are leveraging debt for share buybacks and unsustainable dividends.
On the other end, putting shareholders last is neither something that I believe in. It’s one of the main reasons why I sold all my Disney shares this week after they announced a dividend cut.
Former Unilever CEO Paul Polman is a thought- leader for me regarding this topic. He has created a truly global company that is strongly engaged with all its stakeholders across the spectrum. At the same time he has been rewarding shareholders with sustainable and ever increasing dividends. That’s one of the reasons why I believe Unilever has been a better investment for dividend growth investors compared to Nestle:
- Nestle 10yr dividend growth %: 3.85%
- Unilever 10yr dividend growth %: 7.03%
This while their EPS payout ratio stayed pretty much the same over time (recent fluctuations due to some volatility in EPS)
I know that I can’t claim this argument academically due to a lack of data and empirical research, so let’s just call this my opinion based on my gut feel which I developed over the years 😜
🌟 Recommended Video
There are two pundits that I like to follow to get my inspiration. Firstly Dave Ramsey, because he keeps me focused on the savings rate and avoiding debt. Secondly Jim Cramer. He interviews a lot of CEO’s so that gives usually a pretty good insight in how the economy is doing.
But Jim Cramer is actually quite clever himself as well and often spots the next secular growth/decline trends (in hindsight). He was the inventor of FANG, saw the issue with owning Oil stocks already several months ago and now invented the “COVID-19 index”.
Anyway, I found the below video from him again a very good quality piece.
That was it for 5-Bullet Sunday, edition #19 😎
Have a good remainder of the Sunday!
European Dividend Growth Investor