Going Public, Summary Of 2018 And Strategy Going Forward

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Includes: AAPL, ELKEF, MO, NLTBF, PM
by: Stockles
Summary

I took the heartbreaking decision and sold, in November, a few of my favorite firms in order to secure my financial future.

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.

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.

It's been 4 months since I've written any blog post, but once you read through this post, you will understand everything. 2018 was one hell of a ride, for investors, but also for me personally. Let's kick it off by explaining why I went public after blogging anonymously for more than two years before checking 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 now because I'm now not just one out of the thousands of anonymous investment bloggers.

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.

So this is me. Arne Magnus, soon 27 years old 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 and it has made it possible for me to show a profound understanding of finance at school.

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

None of the true knowledge I've gained is from academia. Mostly investment books and talking with you guys. Keep asking questions and seek knowledge! Feel free to interact or become "friend" with me on LinkedIn.

"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

Summary of 2018 - Life Changes and Investment Performance

To make you understand why I have acted the way I have, 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 she tells her friend that we are, so I just follow along).

Pro tip: Buying a Promise Ring is romantic but very confusing. A ring is a ring and 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 kinda 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 got the news that 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 *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 is neglected now for a while.

I started to understand that my capital would decrease rather fast. Thus, I took the heartbreaking decision and sold, in November, a few of my favorite firms in order to secure my financial future. Once I was done I had 150,000 NOK or $17,350 in my account *blue means buy, red means sold*.

While all of the firms were sold with a profit at 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 then happened one 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 shit and can't see any positive outlooks.

Same goes for investing (and almost every aspect of life). Make choices when your brain is cool and 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 just 3 weeks, Nasdaq fell 16.46% and it dragged the market down. Suddenly, I saw cheap high-quality stocks everywhere so I sat down and wrote on a list what the result of my actions would be 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 was that many of my equities were up during the market crash due to people moving capital to safer assets. Secondly, I could probably, by working hard, get close to that capital before departure to SF and I would not buy very risky assets, so I went ahead and started shopping for cheap stocks.

Purchases

So I bought 7 shares of Apple (NASDAQ:AAPL) at $156, 20 shares of Altria (NYSE:MO) at $49, 15 shares of Philip Morris (NYSE:PM) at $69, 1,060 shares of Elkem (OTC:ELKEF) at 23.73 NOK (still hadn't recovered), 42 shares of Kopparbergs at 149 SEK and again 77 shares at 164 SEK, and 60 shares of Nolato (OTC:NLTBF) 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 being beaten by 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 that 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, and hence, I've added a heavy position of Apple to the portfolio with a cost basis at $189. If one ignores the downtrending 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 awesome is that the CAGR is 9.6%. That means a lot because I'm a dividend GROWTH investor looking for firms with GROWING dividends.

The yield in the portfolio is around 4%, but what's awesome 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 because 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 even 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 Factfulness 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.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.