It’s been 4 months since I’ve written new content but when you read through this post, you will understand everything. 2018 was one hell of a ride for investors, and also for me personally. Let’s kick this off by letting you know the reason I went public after anonymously blogging for more than two years. Then we’ll go over the investment returns, portfolio transactions, and how I plan to achieve similar or better returns in the future.

 

Going Public

The reason I went public was that I wanted to create stronger connections to the people I often communicate with. It also feels better as I’m not just one voice out of the thousands of anonymous investment bloggers. Having a face attached to the tips gives me more credibility and authenticity.

This time, even more than before, I have to write in an understandable manner while being able to prove why I act the way I do. As I have said before, writing publicly why you sell or buy an asset is one of the strongest benefits by blogging.

It’s very embarrassing telling people that you sold a firm just because you got a bit scared or excited about some news. Rather, you stay more frosty and calm, which is exactly what drives good investment returns.

 

Taken at Okinawa in Japan

So this is me. Arne Magnus, turning 27 soon and eager to learn more about investing, and how to balance wealth and happiness. I’ve learned a great deal by being active on investment forums; it has made it possible for me to show a thorough understanding of finance at school.

We learn so much about the world, firms, and how businesses actually operate by analyzing and talking about dividends, growth potential, and so on. See my recommendation from the Dean of Finance from Tokyo.

“Most notably, his interest in current topics in finance as well as his knowledge of international business affairs and finance were exceptional. 

This was even more remarkable given the fact that the class at Keio University was attended by talented students not only from Keio but by students from Keio’s various partner universities.

Arne performed outstandingly in all areas and I am confident that he will continue to develop his skills and knowledge in the future”

XXXXXX, Dean of Finance

None of the true knowledge I’ve gained is from academia. Most of the practical information I learned, I got from reading investment books and from talking with you guys. Keep asking questions and seeking knowledge! Feel free to interact or connect with me on LinkedIn.

Life Changes and Investment Performance –

Summary of 2018

To make you understand why I acted the way I did, You need to understand my situation. While I was living in Tokyo I met a girl and we are now semi-engaged (I have no clue what that really means, but that is what she tells her friend so I just follow along).

Pro tip: Buying a Promise Ring is romantic but very confusing. A ring is a ring is a ring. When you have a ring on your finger, you feel either engaged or married. I have no clue what I am, but I have a ring and it kind of feels okay. Anyhow, having a long distance relationship between Japan and Norway is really expensive, but totally doable if you just accept the cost.

Berkeley and Silicon Valley

A few weeks ago I received news I was accepted in an Entrepreneur program at Berkeley and from 07.06.2019 until 19.08.2019 will work for a FinTech firm at Silicon Valley*

*I’m working for free. I suspect that this experience will compound into something really cool, but the short-term cost is naturally high. Hence, building the stock machine has been neglected for a while.

I realize that my capital would decrease rather fast. So I made the heartbreaking decision last November of selling a few of my favorite firms in order to secure the financial future. Once I was done I had 150,000 NOK or $17,350 in my account

*blue means buy, read means sold; click on the images to see a larger version

While all of the firms were sold at a profit of around 10,000 NOK or $1,300, I was naturally quite sad. Selling equities that you plan to hold for a long time is never fun, but then again, I needed to be sure that I could A) afford to keep my relationship with my girlfriend in Japan, and B) afford to stay in SF and pay tuition to Berkeley.

The Market Crash and Performance

What happened a month later made everything so much more complex. Hence, I wrote this on another investment forum:

As the market is falling and your account is getting smaller, I’d like to remind you of something: In the military academy, each student is taught to not make impulsive, long-lasting decisions while they feel low/uncertain/bad/tired.

Far too many candidates quit because they make decisions in the moment, when they feel like shit and can’t see any positive outcomes.

Same goes for investing (and almost every aspect of life), make choices when your brain has cooled and you are calm.

If you want to sell, then that’s okay, but make sure your decisions are based on rational arguments, not feelings (btw, you could save a few relationships by following the same rules).

Little did I know how hard the market would fall. Within 3 weeks, Nasdaq fell 16.46% and dragged the market down. Suddenly, I saw cheap high-quality stocks everywhere so I sat down and wrote a list of the possible results of my actions if I started buying equities again (after my November selling).

My portfolio did not take such a beating because I was not heavy in tech, but it was time to add to tech after the crash

First, many of my equities were up during the market crash due to people moving capital to safer assets. Second, I could probably, by working hard, get close to that capital before flying to SF and I would not buy very risky assets. So I went ahead and started shopping for cheap stocks.

Purchases

I bought 7 shares of Apple at $156, 20 shares of Altria at $49, 15 shares of Philip Morris at $69, 1060 shares of Elkem at 2,373 NOK (still hadn’t recovered), 42 shares of Kopparbergs at 149 SEK, and again at 77 shares at 164 SEK, and 60 shares of Nolato at 408 SEK. I also did an arbitrage trade between Investor AB B to Investor AB A and got 500 NOK from that.

Furthermore, I also moved some capital to crowdfunding platforms and invested in 5 loans with a yield ranging from 7.9% to 11.5% and the capital is locked from 12 months to 60 months.

The loans are very safe with a grade rating at B and A, and I expect to move more fixed income capital to such platforms. As of now, I’ve invested 70,000 NOK and will earn about $800 from those investments.

Right now, it seems like this was it and I am once again beating the very concentrated Nasdaq Index. My risk-adjusted return is good and my sharp ratio is 1.22

The Conclusion From The Market Crash

The conclusion from the market crash is I did, as intended, have a portfolio which was suitable for bear markets, and this time it performed well. I can admit though, that I want a bit more volatility in my portfolio; I’ve added a heavy position of Apple to the portfolio with a cost basis at $189. If one ignores the down-trending news from Asia right now, I think Apple will be a very rewarding holding for a long time.

Dividend Income

The total dividend income for 2018 landed in 21,550 NOK or $2,504. All months grew from 2016 and I hope to see the same trend in 2019. I finally passed the accumulated $4,000 dividend income mark which means I have received $4,000 in income from stocks.

The yield in the portfolio is around 4%, but what’s impressive is that the CAGR is 9.6%. That means a lot because I’m a dividend GROWTH investor looking for firms with GROWING dividends. While this table is not 100% accurate, it doesn’t include my Nordic firms and starts at $1,700, it surely gives you an idea of the power behind compounding.

Concluding The Summary Of 2018

The goal for 2018 was to get $2,500 in income and I managed to beat that goal. For 2019, I’m not going to make any goal because it is possible that I will sell equities should it turn out that San Francisco is more expensive than what I thought.

Even more, having a girlfriend on the opposite side of the world is more expensive than what I have experienced so far. These factors are too uncertain right now, so I guess I’ll just say what happens happens. I think I will find capital to deploy in either the stock market or to life anyhow.

Looking Forward

When looking forward, I see that I will continue with the Dividend Growth Strategy but 2019 might not be my best year in terms of getting richer (in money that is). For the smaller portfolio, which is my index portfolio, I will stay cold and I’ve added a small Africa ETF after reading the book Factfullness because it truly seems like Africa is a place to invest when thinking long-term.

I will also let the emerging market position be the largest in my portfolio, simply because I believe that’s where the greatest returns are in the future (morningstar also agrees here).

Conclusion

For me, 2019 will be challenging and rewarding in many ways. I will get experience in Silicon Valley, will be apart from my girlfriend for more than 5 months and will need to stay true to the strategy that I’ve chosen. Despite this, even though it is especially hard when life gives you so many other things to think about, I hope to stay calm and reasonable.

That’s all for now. Take care and expect volatility in 2019.

Stockles

Feel free to connect with me here.


26 Comments

Team CF · February 26, 2019 at 9:41 am

Well Arne, congrats and good luck in 2019. Whatever you do, do it well 🙂

    Stockles · March 1, 2019 at 11:32 am

    Hi Team CF,

    Thanks for stopping by and I will currently at least try!

Stockles · February 26, 2019 at 5:47 pm

Comment from Investacus:

Awesome year! Life is so much more than just making the portfolio increase in value 🙂

Couldn’t stop myself from laughing about the semi-engagement seems so Japanese to be semi something and so typical us Nordics to play along

If you are in Tokyo in May tell me!
https://investacus.com/

European Dividend Blog · February 27, 2019 at 8:23 am

WOW!!
This must be the best personal finance blog post of 2019! You are very brave to tell your honest story and now by your name. Love and education are far more important than net worth. But seems to me you are able to balance all three.
I have followed your blog for some time and where hoping that you soon got time to update the blog – thanks for that.
Best wishes from Denmark.

    Stockles · March 1, 2019 at 11:33 am

    Hi,

    What a comment. Thank you!!!

Stockles · February 27, 2019 at 8:46 am

Question from a reader:

All the best for your nice challenges this year. One thing I missed – What Africa ETF did you choose and why?

Hi , Thank you!

About the Africa ETF, I think it is best that I write a post about this. However, I can say that I have started monthly saving in the ETF: Xtrackers MSCI Africa Top 50.

Why? Well, you almost need to read the book Facfullness to fully understand as well as maybe take a course in Macroeconomics, but this is the investment thesis:

The whole reason for increasing stock prices, in the long run, is that we continue or become better at producing stuff (anything). Economics call this GDP, which is basically value creation for a nation, based on productivity (and you create this with a mix of capital and workforce).

Some countries have really high value creating and high GDP, take Norway and China. Norway has a ton of capital and China has a ton of workforce. Then, if we get a bit more capital, or if China gets a bit more workforce, not many changes because our marginal use of one more unit of capital or workforce does not change much. But for a country in Africa, a small add-on on capital greatly improves the GDP.

The Key is that there is a thing called Total Factor Productivity Parameter which is denoted by A or TFP, which basically is technology. The best way to understand this is that countries such as the US, Japan and Norway are really good at using the technology, hence we get high GDP. In total, about 70% of the value-creating process is from TFP, which is kinda a mix of everything you can’t fully put into capital or workforce as an explanation of GDP.

Okay, so to conclude this part, before adding the rest, let’s just state that Africa is not using their technology as efficient as us, and therefore, there is a potential for more value creation, and thus, increased GDP or wealth (wealth is good for businesses).

Then, In the book Factfullness, Hans Rosling asks 10 fundamental questions about how the world is evolving, and it turns out that most people get 1/10 or 2/10 right. In a world summit with 100 extremely powerful people, they got about 3/10 right, which is the same as chimpanzees scored.

So, my thesis is that if the world most resources people and powerful academics don’t even know that Africa is improving greatly, there is no way that Wall Street does. Also, look at any global index fund. There is a ton of improvements happening in Africa, but they weight about 6% in global index funds. Does that max the potential and the number of people living in Africa? In my view no.

Naturally, this will take time, which is why I save just a bit every month to the top 50 midcap and large-cap in Africa.

Stockles · February 27, 2019 at 9:05 am

Another point is that the whole reason for Trump’s war on China is that when two nations have a lot of capital and workforce, they will trade this until to maximize it’s potential. For the USA, this means they trade capital with workforce and increase profitability, but as you get a ton of cheap labor the average salary for an industrial worker goes down. For China it is the opposite, they get lower profitability, but again higher salary, so they trade until they both are equal in terms of what they can offer.

The problem is naturally that A) It is the poor people that are competing with Chinese workers, B) Now, due to international trading, Chinese salaries are way higher than before, so one has to find the workforce elsewhere, mid-east Asia and Vietnam, but soon I suspect they move it to Africa and that’s when they get higher salaries and improved life quality.

Håkon · February 27, 2019 at 5:32 pm

Hi!

First of all you have a really nice blog! I enjoy reading your posts, although mostly on Shareville! Best of luck, with everything, in the future!

As an economist at your age I am not convinced with your thesis on Africa, and in fact I must say I am a bit skeptical to overweight it. Sure, in theory, countries in Africa should grow faster than developed economies as they catch up and start utilizing existing technology, but that simply hasn’t been the case so far if you take a look at GDP growth for the last 10-20-30-40-50 years. So therefore I ask: why is this, in practice, going to change right now? I have no knowledge of how African stocks have performed historically, but the GDP growth simply hasn’t been there. So my question is this: why bet on a (so far) losing horse?

Ps: I agree with you in that I believe that emerging markets will be the big winners in the coming years.

Cheers!

Best regards
Håkon / Hkon90

    Stockles · March 1, 2019 at 11:30 am

    Hi Håkon,

    Thank you! Glad to hear that you enjoy the blog.

    Just so you know, I am not by any means overweighting Africa.

    I manage two portfolios, one focused on DGI and one index portfolio. Here, EM weights around 30-50%, and I also have a global index fund at around 30% too.

    In essence, I believe that Hans Rosling clearly demonstrates, in the book, the enormous process being done in Africa. Africa now and even just 20 years ago is totally different.

    However, Africa is not just Africa. Hans says:
    “Ghana, Nigeria, and Kenya are where some of the best investment opportunities can be found today”

    Hence, I’ve started monthly saving in Xtrackers MSCI Africa Top 50 Swap UCITS ETF 1C where south Africa weights 57%, Marocco 18%, Kenia 8%, Egypt 8%, and Nigeria 5%.

    You can read more here
    https://etf.dws.com/LUX/ENG/Download/Factsheet/LU0592217524/-/MSCI-Africa-Top-50-Swap-UCITS-ETF

Jake · March 1, 2019 at 2:27 am

Welcome back!

I was afraid you had dissapeared there for a second. I have also been interested in the African market for some time now, but have not yet invested (except indirectly through Global and Emerging Market indexes). As I see it, it has the potential that you speak of, but when the gun goes off nobody can really tell. It could be within a few years or ten or more. What is interesting is like Håkon says, that historically they have underperformed, and other countries has had a knack of taking value from Africa without adding significantly to domestic GDP’s.

Welcome back !

– Jake

Jens · March 11, 2019 at 8:51 pm

Hei Stockles!

Flott blogg, alltid god lesning og gratulerer med et godt gjennomført 2019. Bare et kjapt spørsmål, hvor handler du dine Afrika-ETFs og resten av dine indeksfond? Får du dem på ASK?

Jens · March 11, 2019 at 8:54 pm

Hei Stockles!

Flott blogg, alltid god lesning og gratulerer med et godt gjennomført 2018! Bare et kort spørsmål, hvor handler du dine Afrika-ETFs? Får du dem på ASK?

    Stockles · March 11, 2019 at 10:33 pm

    Hei Jens,

    Takk for det! Afrika ETFen handles på Aksje-og fondskonto hos Nordnet og der har jeg måndelig sparing i Xtrackers MSCI Africa Top 50 Swap

      Jens · March 12, 2019 at 10:07 am

      Hjertelig takk! Et lite spørsmål til, hvordan forholder du deg til at dividend fra dine amerikanske selskaper blir spist opp av skatt og ikke kan compounde like sterkt, hvorav dividend fra norske selskaper kan forbli på ASK-kontoen? Vil det ikke i enkelt tilfeller være bedre å investere i norske selskaper istedenfor eller synes du de ikke er like attraktive?

        Stockles · March 12, 2019 at 11:53 am

        Jeg bruker investeringskonto Zero hos Nordnet hvor da kildeskatten, altså skatten på utbytte, blir refundert ved ca mai påfølgende år. Så selv om jeg blir trukket det nåværende året for skatt, så får jeg det tilbake og kan sette det inn i maskinen slik at pengene jobber for meg!

          Jens · March 16, 2019 at 9:02 pm

          Tusen hjertelig takk for tipset! Skal fikse meg Zero sporenstriks. Blir skatten automatisk refundert det påfølgende året eller trenger man å gjøre noe ekstra papirarbeid? Om jeg tør spørre, hva er vektingen din mellom dividend-porteføljen og ETF-kontoen?

          Har også lest mye om simply safe dividends, virker som en kjempeside og vurderer selv å investere i et medlemskap der.

          Stockles · March 16, 2019 at 10:50 pm

          Den blir refundert uten at du trenger å gjøre noe som helst. Når det gjelder vekting så er det nok ca 15% indeks, 20% kapitalmarked (ikke aksjer, men lån via crowdfunding platform, og 65% utbytte). SSD er bra! Verdt å bruke for 14 dager iallefall (gratis)

DivvyDad · March 12, 2019 at 3:30 pm

Great hearing from you Arne, and congrats on the decision to go public and on all of the developments in your life. I’ve kicked around the idea of going public as well, but for now can tell you that I am in at least one Facebook group with you! =)

The opportunity in SV sounds exciting, and while it won’t pay you I do think what you learn and the contacts that you will make should serve you well into the future. The comment about semi-engaged made me laugh as well, and reminded me of a discussion I once had with my Japanese colleagues when they were trying to explain how they wanted something to be semi-automatic.

Wish you all the best with the adventures in 2019!

    Stockles · March 16, 2019 at 1:15 pm

    Hi DD,

    Thank you for your comment and your kinds words. I am really curious though, is it the dgi group or the fundamental group? Hmm. Maybe we have been talking together without knowing it?

    Yes, SV is interesting. I learned a lot from it.

    Good luck to you too, I am sure you will stay the course and keep getting those dividends! 🙂

      DivvyDad · March 16, 2019 at 5:08 pm

      The DGI group is the one that we share in common, or at least the one where I recall seeing posts from you. 🙂

        Stockles · March 16, 2019 at 5:11 pm

        Hmmmmm very interesting. Are you active on the group? 🙂 I am quite curious now!

Jens · March 22, 2019 at 7:48 am

Takk for hjelpen, høres ut som en fin blanding du har der også! Vet du om Nordnet tar noen gebyrer på utenlandske utbytter?

    Stockles · March 22, 2019 at 8:12 am

    Det gjør de ikke. Kun kildeskatt.

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