The following is an interview with me done by Pengeblogg which is one of Norway’s most famous financial blogs. I’m honered that Pengeblogg wanted to interview me and very eager to read your comments. For readers who can read or understand norwegian, click here to enter interview
Can you tell me about yourself?
I am a man, 25-30 years old, who was born and raised in Stockholm, and lived there for 10 years before my family moved to Norway. My parents are architects, but don’t conclude that I’ve grown up in any luxury home. By the end of the 1980s and early 1990s, there was a huge housing crisis in Norway, and therefore no new construction projects were started. Such is bad news for architects, and my parents had to seek the luck in Sweden. My mother was lucky and got a job, while my dad didn’t find any job during my entire childhood. I have been told later that we had a tight budget, but went by me. As a child, one is only interested in attention, care and the opportunity to sometimes kick a ball with your friends.
I remember that some of the most exciting from my childhood was when my father and I used to go treasure hunting in the garbage room in the apartment block. There was always a lot of exciting findings: antique furniture, colorful glass-balls and frying pans that only needed some care before being fully restored. In retrospect, I see that this experience was two-sided – on the one hand, it became a healthy focus that sometimes it’s unnecessary to buy new things when you can get the same for free. On the other hand, dangerous habits were created by not fully understanding that money exists because they are going to be used. Thus, money in itself has no value before they are used. Much of my childhood was spent on saveing just about every penny, but looking back I did not save for anything other than just to accumulate more money.
Many have been curious about why I’m so interested in savings and money, as well as how I’ve been traveling and experiencing so much at a young age. I will now try to explain this in the following sections:
In my teens I experienced a lot, both positive and negative happenings. Like many rather unemotional people, I have never had a great need to share my inner life with others, and I’ve known that need, so it’s been difficult to share. Fortunately, I received a diary and that was my rescue, and the book played a long way in my young life. But one day I got a phone and the man at the other said that there had been a fire in our house. We lost everything, even our pets. However, my only thought went to the diary, the one who was my soulmate. Afterwards, I have been very careful to put too much of myself into objects. Objects may be lost and they may be damaged and what happens then to you as a person? Are you less whole? Have you lost a part of yourself? And if so, do you spend the rest of your life trying to find this thing?
As a result of this experience, I’ve decided that things can have a nice and important role in life, but I do not want to define my happiness with what I own. The money should be used for activities that provide long-term joy, and preferably, enhancing my friendship with others.
My wish was never to be a financial man. No, the big plan was to become a Special Soldier, as my personality fits well with the qualities you need in such a profession. If we rolled forward, I was in the military, but was exposed to a bad injury where the next 3 years was used for surgery and rehabilitation. This period was completely crazy and heavy, but even if I had been there, something was positive. No matter how tough or strong you feel, you become humble when you’ve been to the bottom, and you get a strength and self-awareness that’s hard to get anywhere else. It is especially important that we who have had the ability to take good education and occupation do not get flattery and forget to care about others. Nevertheless, the pleasure was very big when, after the fourth year, I could rotate my arm so much that cycling or typing on keyboard was possible. Hip hooray!
The total lesson from these difficult periods is that I now have a stronger focus on my life being about activities and memorable moments, and I hope I became more open to that being weak, at times, is okay and an indelible part of life.
What is the idea behind and the goal of your stockles.com website?
Stockles was started because I wanted to combine two things: The first is the importance of having a diary where you are forced to write down what you think and do. That it became a blog and not just a private book was because I wanted to know the effect it has to do something public. You feel a much stronger duty to be true to yourself, but also to your readers.
Furthermore, I wanted to offer a different perspective on stocks than is often the case in the media. Many people look at stocks like gambling, and that the whole game is only about buying low and selling high. Although I have had subjects such as Trading, Advanced Finance and Applied Finance, I would like to show a more sober and humble way of holding stocks. My mind is that shares are an investment object that you are paid in terms of return to take on additional risk in relation to fixed income securities and other safer investment objects. A stock symbolizes a business and if your business is good and grows over time, yes, you will be paid as a shareholder sooner or later.
Do you have a long-term financial goal and what is your motivation to achieve this goal?
My ambitious goal on the blog is that I will be financially independent before 2040. And here I have said that I want to receive a passive income from my dividend shares, which corresponds to a normal Norwegian salary. Obviously, the goal is very ambitious, as it is needed 12,500,000 NOK to earn a normal annual salary if we assume a 4% yield.
The more down-to-earth goal is to continouesly get dividend income which again can be placed in enjoyment or other activities. For me, it is difficult to spend money, and the proceeds allow me to have a consumption without being ashamed. I do not like the idea that my net worth decreases whenever I do something fun or spend money, and the goal of dividend shares is that they will make up for this difference.
In addition, it’s about my desire to have a life where most of my decisions are made because I want to do it and not because it will give me a lot of money. I belong to the finance and consulting industry, and there are many who work for the money, and not the pleasure of working with something you like.
Many talk about early retirement or “FIRE – Financial independence and retire early”. For me, who needs a dynamic life, retirement at an early age will be the worst thing that can happen. But I think that if you can focus less on the need for money, you will increase the chance of correct, tough and healthy choices.
I tend to say that practical property building is about increasing three sizes – income, savings and return on capital. Do you share this overall picture and what is your focus most about?
Well, in parts. The grand picture is about the relationship between income or budget and how to balance the consumption of cheap and normal goods. Standard microeconomics explains that even if you get more income, it does not mean that you get more consumption. Many will only switch consumption from cheaper goods to more expensive goods, thus eliminating wage increases. In order to build wealth, one must be conscious of increasing income, but not increasing the consumption of normal goods or luxury goods. If you avoid it, the wealth will increase by itself.
Moreover, of course, you have to increase your income and save a lot more if you only place the money under the mattress where inflation spreads a little bit, rather than putting them into a high-income account or in shares.
A trap we financial bloggers often fell into is that we believe everyone can increase their income or increase their savings. Many have jobs where the salary is fairly fixed and there is not enough time a day to do other jobs to increase the wealth. In terms of savings, the diversity of the audience is so big that you have to be careful, but the main rule is that you should first save, then consume. It’s that simple.You can save by getting an employer to deduct extra tax, by deducting fixed amounts from a payroll account or saving in mutual funds. The most important thing is to first set an amount, then spend the remaining money on exactly what you want . That way, saving is profitable, but also nice and you live while saving.
What is your point of view in the debate about index funds versus actively managed funds?
The debate here has many sides because funds are quite complex. Some index funds are highly concentrated with more than 50% of the fund in 3-5 shares, and the index focuses on a single industry. Other index funds have several thousand shares and are spread across many regions. Do I think any active fund takes significantly less risk and gets the same or better earnings as any index fund? Yes I believe so. I think the question goes more on investment style and that most active funds are judged to lose as customers always favor those funds as investments similar to the trend in the market.
But overall, I think the story of Skagen Kon-Tiki explains why active management funds are mostly sentenced to lose:
The reason that capital flowed from Skagen Kon-Tiki (the fund that worked best for many, many years) is that the market currently favors growth over value. Thus, small savers move money out of the fund, capital reduces, the fund becomes less popular, maybe even a change in strategy or managers get replace, and the end of the show is that customers themselves make focused funds condemned to lose.
Bogle explains the phenomenon like this:
«While only 20 percent of their money went into risky aggressive growth funds in 1990, they poured fully 95 percent into such funds when they peaked during 1999 and 2000. After the fall, when it was too late, investor purchases dried up to as little as $50 billion in 2002, when the market hit bottom. They also pulled their money out of growth funds and turned, too late, to value funds»
Do you have income sources other than your income?
Yes, I have the following alternative sources of income: Dividend income from my shares, blogs from stockles.com, freelance work in the evening, ranging from marketing to finance, as well as writing investment-related articles for different websites. Overall, this gives me an alternative income of around 100,000 kr.
You invest yourself in single shares and like dividends. Is this a strategy you would recommend to others?
The dividend strategy is probably one of the most popular and most misunderstood investment strategies, precisely because the principle of a dividend is so easy to understand. If you go do your due digiligence and work through the material, I think the strategy can be very profitable, and you can hold stocks while enjoying a good night’s sleep regardless of the stock market climate. But the strategy involes a few problems. The first is that many people use the strategy without knowing what dividends are. The second is that you will, naturally, be eager to chace high divdiends as it is better to get 10000 kr than 4000 kr. But dividends are nothing magical. When a company earns money, it can choose to invest in itself, repay debt or give money to shareholders or a combination of these. When you begin to understand that a company with very high debt and uncertain future prospects maybe shoudn’t pay big checks, one has taken an important step as a dividend investor.
What are your thoughts about investing in rental housing?
I think that even though homeowners have experienced exceptionally good times for their homes, there will always be a need forshelter. Students flock to student towns and young adults need a place to live. Right now we have a very special situation where young people buy apartments for several million in the early 20’s based their parent’s assets or loans. This is an unhealthy market because the buyers can’t really afford the product, and one buys in the belief that the next man will buy the house at an even higher price.
A more healthy attitude towards rental housing is to look at it as a compounding machine, where you buy the home to receive a monthly sum of money, but generally neglect the actual price of the property. Then we get a market where people who can buy homes do so and those who can not afford will find other more natural alternatives, such as. to rent.
You like to travel and have visited many countries. What do you like best about traveling, and do you have any favorite country or favorite place?
For me, there is no better feeling than the first two days when you come to a new place. The body is ecstatic, the mind is on and the impressions are strong. You walk in streets you have never walked in before and experience new flavors for each bite. In addition, it’s very good to only drive with the flow without a plan. When I travel to a city or country, I rarely have a detailed plan beyond just a few things that would have been fun to see. Often I just stumble around and take what it means to live on the spot. I think too many worry about things going smoothly. Some of the most special moments have been where I just surrender to the situation. For example, when I worked as an English teacher in a tiny village north of Vietnam and had to take the local bus. The bus driver cried out through the door while the passengers threw themselves at full speed, hens and pigs were tied to the roof and back of the bus, and on my lap I had two elderly farmers sitting in the wild sky.
When it comes to a favorite country, I think Indonesia has the most to offer because the country is still unpublished, the food is good and you can do yoga, go volcano safari, surf, climb mountains or just enjoy the sun on the beach. A little tip, however, is that you should get away from the airport and the Kuta area (which has been called living hell). Both south, east and west of Indonesia offer memorable adventures and you are well received as a tourist.
Which books, websites or other resources would you recommend for those who wish to enhance their personal business skills or want to become financially independent?
Those who buy shares must learn basic accounting, at least what dividends and debts have to say for a company. Common to those who buy stocks and funds is that they should spend most of their time on books on human behavior and psychology. There is much wisdom in the notion that you are your worst enemy.
The book that meant me the most was “Single best investment” by Lowell Miller. I would strongly discourage starting with the well-known and more academic books such as Intelligent Investor of Benjamin Graham. I tried to read the book the first time when I was 15 years old and since I found it very boring, I started to speculate in stocks (which of course did not become profitable)
That’s it. Did you like the interview? Do you agree or disagree? Please drop a comment bellow.