Financial Review 2020

Posted on January 30, 2021 in Investing, Personal Finance

The start of a NEW YEAR is always a great opportunity to look back and make new plans.

Our family of four is well on the way towards Financial Independence by 2024, but 2020 put us back in terms of building reliable and ever growing Passive Income Streams which are supposed to sustain our living costs in future.

A Big Earning Miss

The COVID-19 pandemic clearly had a strong impact on cash revenues from our investments.

While in 2019, our Dividend Paying Stock Portfolio plus our Peer to Peer and Crowdlending investments (P2P/CL) through plaforms like Mintos, Bondora, TWINO etc. generated over USD 14’000 in passive income, 2020 showed a different picture: in fact, Total Passive Income has been significantly lower with under USD 10’000. Initially, my wife and I had targeted USD 20’000 in passive income for 2020.

So, which factors led to that Huge Earning Miss of over 50 %?

  • Amid the COVID-19 pandemic and the economic effects of lockdowns worldwide, several company elimintaed their dividend payments in order to preserve cash (e.g. in the case of The Walt Disney Company, HSBC, GLENCORE etc.). Other businesses reduced their shareholder distributions signifcantly (e.g. in the case of UK soft drink producers Nichols, BRITVIC, AG Barr). So, dividend eliminations and cuts led to a 13 % lower total Net Dividend Income compared to the previous year DESPITE the fact that in March and April 2020 we had added several strong dividend payers such as Swiss Life, Fevertree etc.
  • The largest adverse impact came tho from our P2P and Crowlending investments. These generated roughly USD 3’500 in interest income through 2020, but on the other hand, an equal amount had to be written down due to the collapse of the two platforms Kuetzal and Envestio early in 2020, as well as due the failure of Grupeer. So, in 2020, all in all a zero sum game in terms of Passive Income Generation.
  • Another factor was the adaption of our investment strategy. We made significant cash withdrawals (more than USD 40’000 in the last few months alone) from our P2P/CL platforms and invested these funds into Tech Companies such us Amazon, Apple, Facebook, Fiverr, Etsy etc. In terms of wealth building, this has shown to be a good move, looking at very nice book gains of almost 30 % in total, but on the other hand withdrawals weakened interest generating capabilites of our P2P/CL platforms (by beginning of 2020, more than USD 60’000 were invested, by the end of that year, this has been reduced to less than USD 20’000).

Financial priority shift amid the pandemic

We made several changes in 2020, a year full of uncertainties.

We took the decision to boost our cash pile and slash spendings in order to increase our savings rate .
We also wanted to become more diversified in terms of investments, that’s also one reason, why we built our Tech Portfolio while reducing P2P/CL investments.
Initially, we had planned to buy real estates in France, we would then rent out and generate passive income. Well, COVID-19 put that plan on a hold. We will of course stick to our plan to buy properties abroad and are quite confident that 2021 we will be successful.


So, a lot of things going on in terms of our financials and there were definitively a couple of bright spots:

Our Savings Rate trough 2020 was very robust. In fact, we went through the year on a Savings Rate of 66 % on average. That’s a very nice chunk of cash we have been able to extract from our salaries and income streams in form of savings.

Despite the fact, that our dividend stock portfolio generated 13 % less in 2020 compared to 2019, the book value of these investments recoverd from a huge fall in March 2020. It had fallen from USD 310’000 to USD 220’000 in a couple of just a few weeks and steadily climbed back to around USD 275’000 by the end of 2020. Still a book loss of over 10 %, but in combination with nice book gains of over 30 % on our Tech Portfolio, the overall result is quite acceptable. In particual considering the fact, that still, almost USD 10’000 in Passive Income had been generated on top of that book value performance.

So, all in all, we came through the pandemic financially stronger and more flexible, with almost USD 400’000 in investments (dividend stocks, tech holdings, Peer to Peer lending etc.), which represents around 40 % of our total wealth.

Roughly 60 % of our total wealth is kept in cash (in Swiss francs) to remain flexible to seize interesting investment opportunities anytime they arise. A big chunk will be used to acquire real estates abroad, once we can travel again.

A brief look at December 2020 Passive Income

December performed poorly on a Year over Year basis with Passive Income roughly two third lower than in the same month in 2019 (2020: 358 versus 2019: 1’242).

Several changes in terms of dividend payment dates make it hard to compare with December 2019, e.g. the traditionally strong dividend payer Imperial Brands transferred its shareholder payments in January instead of December.

P2P/ CLinvestments generated USD 116 which is a quite decent monthly income from the roughly USD 20’000 but still, if you compare with USD 727 in December 2019, significantly lower. But again, the P2P and Crowdlending Porfolio is now much smaller (20’000 versus almost 70’000 by end 2019).

Looking ahead to 2021

So, all in all 2020 hit our Passive Income Generators quite hard. But the world economy will recover from the COVID-10 pandemic, and so will our Dividend Stock Portfolio.

We withdrew tens of thousands from P2P and Crowdlending platforms, so clearly this Passive Income Machine will generate reduced revenues, and our Tech Portfolio consists of businesses which don’t pay any dividends (with the exemption of Microsoft, Apple and Prosus).

But we will continue adding Dividend Paying Stocks here and there and several traditionally strong Contributors will resume their shareholder distributions this year.

So, we plan for Total Passive Income for 2021 to be at least USD 15’000 in total, which is roughly 50 % higher than in 2020, and roughly 7 % on top of what our total investments generated in 2019.

What about you, fellow Reader, how was your 2020 in terms of passive income? Which goals did you set for the New Year?

Thanks for reading my post and for sharing your thoughts.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

November 2020 Passive Income

Posted on December 29, 2020 in Investing, Personal Finance

WOW! 2020 is almost over! It has been a very tough and challenging year.

It’s just amazing how time’s been running super fast, and my monthly passive income update is more than due.

Let’s get very briefly into the numbers, shall we?

Compared to November 2019, there has been a hefty passive income slump of roughly 50 %. Ouch! 🙂

Dividend income in November was more or less in the same range as in the previous year (2019: CHF 379 vs. CHF 346). Two dividend cancellations – one of the world largest beer producer AB Inv and the other one of UK bank giant HSBC – have almost been offset by new Passive Income Contributors Tate & Lyle, British Petroleum, Apple and Prosus. Banco Santander has resumed shareholder distributions after having stopped them for several quarters, but dividends are still significantly lower than in the previous year.

Cash flows from Peer to Peer and Crowdlending Platforms came in 70 % lower than in November 2019 which was due to my significant cash withdrawals over the last months in order to make investments into Tech Companies and diversify our portfolio further.

How was your November in terms of Passive Income?

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

October and November Tech Stock Buys

Posted on December 5, 2020 in Investing

The COVID-19 pandemic brought huge health, social and economic challenges to the whole world and has a deep impact on our daily lives.

The pandemic also made businesses, educational institutions (schools, universities etc.) and other organizations all around the world more than ever depending on communication systems like Windows Teams, ZOOM or Slack. The pandemic also changed our buying behaviour, bringing consumers to e-commerce platforms provided by Amazon or Shopify. These developments have accelerated the shift to the cloud with services like Amazon Web Services (AWS), Google Cloud or Microsoft Azure which all led to a hue spike in internet traffic. This consequently has put content delivery network and edge computing companies like Cloudflare and Fastly in the forefront of a paradigm shift.

Amid all these huge shifts, my wife and I have been constructing a Tech Portfolio since April 2020. We want to buy winners, companies that are at the right time at the right place with superior long term growth prospects.

To be clear: we want of course continue holding our dividend paying value stocks like Nestlé, Coca Cola, Mc Cormick, Diageo, Heineken, Roche, GlaxoSmithKline, Allianz Insurance etc.

But we want to ensure to be well positioned by having a nice combination of Growth Stocks and Dividend Paying Holdings (whereas the ideal of course is the combination of both aspects in the same stocks such as the ones of Microsoft, Apple or Prosus).

All right, let’s have a look at our latest stock buys we made in the last two months in the total amount of USD 1’802 (this is inclusive commissions/fees):

  • Pinterest (10 shares for USD 45.54 resp. a total of roughly USD 450)
  • Fastly (5 shares for USD 86 resp. a total of roughly USD 430)
  • Etsy (4 shares for USD 123 resp. a total of roughly USD 492)
  • Draftkings (10 shares for USD 43 resp. a total of roughly USD 430)

Some background information on these four businesses.

Pinterest is creatively building a unique business platform

Pinterest is an image sharing and social media service designed to enable saving and discovery of ideas and information. If you want to find some inspiring images and creative ideas, Pinterest is definitively the place to go.

Pinterest also belongs to the largest and best known social media platforms among Facebook, Twitter, Instagram, Snapchat, Linked-In etc.

But with Pinterest, it’s much much mor than a social platform. It’s about connecting and sharing IDEAS. It’s about creativity and inspiration.

I cannot think of another platform that works the same way and therefore, I cannot think of any real competitor for Pinterest.

When users find something they like on Pinterest, they can pin those images to specific boards. The platforms’ algorithms then suggest more new pins based on the user’s interest and previous activities. And here lies the huge business potential because some of those suggestions can be advertising.

Pinterest as a company is relatively young, founded in 2010, the growth story has just begun. It’s operating in a huge and thriving market such as online advertising, and what we can be see is that Pinterest is increasingly venturing into e-commerce.

Fastly – a super fast growing content delivery, compute and security edge platform

Fastly is a competitor Cloudflare where we have initiated a position some months ago.

Fastly is smaller than Cloudflare, operating an innovative content delivery, compute and security edge platform. The company was founded in 2011 and has very strong partners and clients. That list includes names like Google, Shopify, Etsy, Pinterest, Slack, Microsoft, Vimeo, The ew York Times, Reddit, Stripe … and TikToc.

In fact, TikToc the Chinese video-sharing social network service (which is owned by ByteDance) is Fastly’s largest single customer, accounting for 12 % of revenues. Amid a looming ban from U.S. app stores, Fastly’s stock price got hammered in October.

When a businesses of the quality and potential of Fastly get’s 30 to 40 % “cheaper” due to rather temporary setbacks and uncertainties, well that catches my attention. I am more than happy to having initiated a small position and will buy more over time.

Fastly provides an edge cloud platform which is designed to help developers extend their core cloud infrastructure to the edge of the network and consequently closer to users. Fastly’s technology is essential for customers around the world, its edge cloud platform includes their content delivery network, image optimization, video and streaming, cloud security, and load balancing services. Fastly’s cloud security services include denial-of service attac protection protection, bot mitigation, and a web application firewall.

Etsy – a wonderful niche e-commerce website

Etsy is an American e-commerce website focusing on handmade and vintage items as well as craft supplies. You can find a wide category range, it includes bags, clothing, jewelry, furniture, toys, art items and alsow craft tools and supplies.

All vintage items must be at least 20 years old. The site follows in the tradition of open craft fairse, giving sellers personal storefronts where they list their goods for a fee per item.

What’s very obvious when going through the financial statements of the cmpany is that Etsy has found ways to effectively monetising its market place and that it has a very capital light business model. It’s operating in a niche, growing very fast, giving the company economies of scale and margin expansion.

When people sell on Etsy, there are various fees like listing fees, transaction fees, payment processing fees (if Etsy Payment is used) etc..

Draftkings, the largest fantasy sports and mobile sports betting operator

DraftKings is an American daily fantasy sports contest and sports betting operator.

It’s quite an interesting concept and business model. DraftKings allows users to enter daily and weekly fantasy sports-related contests. The users can win money based on individual player performances in sports (baseball, football, hockey, basketball, golf, tennis, martial arts, auto racing etc.).

So how does fantasy sports work?

In fantasy sports, users can create their own teams which are real players of a professional sport like tennis, football or basketball. Players may be from existing leagues (NFL, NBA, NHL, MBA etc.) or even college teams.

And how does DraftKings make money?

The company makes money off player entrance fees. For example, DraftKings may collect a fee resp. a percentage from users who pay for league buy-ins. The main amount from each user is placed into the pool, which is paid out to the winner at the end. DraftKings also makes money by selling ads on their sites and partnering with other big names like NBC, Sports Illustrated, Comcast, and Sporting News.

DraftKings is the clear leader in an interesting, growing niche and the platform is a beneficiary from economies of scale and network effects.

Several U.S. states consider fantasy sports (including daily fantasy sports) a game of skill and not gambling. There are some risks as well as opportunities from changes of regulations resp. legislative requirements.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

October 2020 Passive Income

Posted on November 22, 2020 in Investing

Wow! Time’s really flying by, and my passive income review with cash flows from dividend paying stocks and received interests from Peer to Peer and Crowlending Platforms is more than due.

Let’s quickly get into the numbers.

Note: all numbers are in Swiss francs (CHF). CHF 1 corresponds to around USD 1.10.

5.5 % higher dividend income but more than 70 % lower cash flows from Peer to Peer lending

While October 2019 showed total Passive Income of Swiss francs 880 (USD 968), we now see a lower total amount of roughly CHF 580 (resp. USD 640).

This was solely due to withdrawals from Peer to Peer platforms I made over the past months. Last year, we had almost USD 60’000 invested on different P2P/CL platforms. I’ve reduced these investments by almost two third. The cash withdrawals have been used to build a very nice Tech Portfolio by investing around USD 40’000. I’ll post a separate article about my four latest stock acquisitions in the Tech sector. So stay tuned.

Dividend income was slightly higher this month compared to October in the previous year (CHF 377 in October 2019 versus CHF 389).

It’s difficult to compare the different Dividend Income Updates of this year with the numbers in 2019 amid the challenges caused by the COVID-19 pandemic. I’ve seen several dividend cancellations, some cuts as well as some deferred payouts.

But it’s also interesting to see huges differences how the businesses are affected. For instance, while British tonic maker Fevertree navigates smoothly through the crisis and managed to increase its shareholder payout, Scottish soft drink producer Ag Barr sees huge challenges to remain profitable amid closures of bars etc. One would think that Fevertree would have been hit harder than Ag Barr whose drinks can be found in many Scottish households whereas Fevertree’s tonic is mostly consumed in bars which have been hugely impacted by lockdowns.

Marlboro maker Altria hiked its dividend a bit (+2.4 %) as did Coca Cola (+2.5 %).

Spirit and beer maker Diageo maintained its payout despite shutdowns of pubs and restaurants around the world have been hammering its business.

British pharma company GlaxoSmithKline maintained its payout stable compared to the previous year as did Porsche Automobil Holding SE and British car insurer Admiral Group (the company pays out a higher ordinary dividend but also lowered the special dividend compared to the previous year).

South32 is a spin-off of mining giant BHP Group and has reduced its shareholder distribution. I am fine with that, it’s a tiny position and when the world economy will recover frome the pandemic, mining companies such as GLENCORE, Rio Tinto, BHP etc. will benefit as well as cyclicals and many consumer staples that have been hit from closures of restaurants and pubs.

How was your October in terms of Passive Income?

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

Passive Income Update September 2020

Posted on October 17, 2020 in Investing, Personal Finance
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Shifting our financial priorities amid the Global Pandemic

It’s just amazing, how time passes fast. We are already going through the last quarter of the year which amid the COVID-19 pandemic is extremely challenging, dynamic and unusual.

The pandemic changed a lot in our societies, our economies and has huge implications for people and businesses around the world.

My wife and I remain committed our Journey towards our Big Goal of Achievieving Financial Independence by the End of 2024 by establishing and growing passive income streams which are true compounding machines and will cover 100 % of all the spendings of our family of four in a matter of just a few years.

In the short run though (with regard to the next couple of months), we have taken a much more careful investment approach than usual (compared to the years before) with a very strong focus on preserving cash, continuously working on a very robust savings rate and keeping as much as possible from our day job incomes as possible.

We have postponed larger projects such as the acquisition of rental properties in France (Haute Saône, near the Swiss border) to 2021. We had initially reserved a big chunk of our cash pile to buy several studios and one larger object in Mulhouse and Luxeuil-les Bains in France.

But the pandemic has changed a lot. For instance, it’s complicated – to some extent merely impossible – to travel and meet people and visit buildings abroad. Our investment case also changed completely amid huge business pressure, demand disruptions and uncertainties.

So, as the pandemic just “froze” or even smashed millions of projects around the world, so it did with some of our plans.

We are okay and very fortunate. We keep patient and will preserve our financial flexibility.

What we are doing meanwhile in terms of investing is setting our focus on building and strengthening our Tech Portfolio while at the same time selectively adding positions to our Dividend Stock Portfolio.

An overall strong September with USD 1’200 in cash income from investments

Let’s dive into some numbers.

The total amount of CHF 1’205 (USD 1’325) was received in September. As you can see above, the main contributor have been dividend paying stocks with also nice inflows from Peer to Peer and Clowdlending investments.

Note: all numbers are in Swiss francs (CHF). One Swiss francs (CHF 1) corresponds to around CHF 1.10. The numbers are net after taxes (e.g. dividends are AFTER the deduction of witholding taxes etc.)!

Compared to September 2019, our total passive Income has been roughly 20 % lower (CHF 1’459 in September 2019 vs. CHF 1’205 September 2020).

While dividend income from our stock holdings (despite a few dividend cuts) was pretty the same amount as in the same month of the previous year (CHF 1’085 in September 2019 vs. CHF 1’001 in September 2020), interest income from our P2P and Crowdlending Investments was 50 % lower than in the previous year.

This was due to cash withdrawals from our P2P and CL platforms.

As I’ve shared in previous blog posts, we withdrew significant amounts from our P2P/CL platforms to become more diversified and use the funds to take stakes in growth companies by investing quite heavily into our “Mini Tech Portfolio” we started to build in April this year. We have so far invested more than USD 30’000 into fifteen Tech companies such as Amazon, Alphabet, Facebook, Shopify, Microsoft, Netflix etc..

Early in September, we bought shares of Apple for the amount of roughly CHF 2’000 (USD 2’200) and also took a stake in fitness equipment maker Peloton for around CHF 400 (USD 440).

You can find all our Tech Holdings, a Snapshot on these businesses and a list with buying time and invested amounts on the Tech Portfolio site.

The market value of our Tech Stocks has grown quite nicely by 30 % to well over CHF 40’000 in the last few months.

Currently, we have three kind of investments:

  • First comes our dividend portolio (market value over CHF 260’000) with around 80 positions such as Nestlé, Coca Cola, PepsiCo, Altria, Unilever etc. This portfolio is set to churn out at least USD 16’000 annually in form of dividends and mainly grows through dividend reinvestments (into existing or new positions), while from time to time, we make selective additions. In September for instance, we added rougly CHF 1’500 by investing into Mc Cormick (a US food company producing spices, seasoning mixes, condiments and other flavoured products).
  • Second comes our P2P/CL portfolio where around CHF 20’000 are put into following six platforms: Mintos, Bondora, TWINO and Iuvo, which all four focus on consumer loans and EvoEstate as well as Crowdestate which both letting you investing into loans in connection with real estate projects.
  • Then comes our new Tech Portfolio. Our holding in growth stocks don’t pay dividends with a few exceptions like Microsoft and Apple. These fiften companies in our Tech Portfolio have each the potential to be true sector disruptors with massive growth potential. As long term oriented investors, we want to have stakes in these companies that are having a huge influence on our way of life.

What about you, fellow reader, how was your September in terms of Passive Income? Did you buy some interesting new stocks or other income producing assets?

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.