EN #6: Just keep going – A sideways trading stock market
Hi Investors. With this issue of the newsletter we’re going to throw away our typical format and the typical promotional fluff, and dive straight into the habits of good investors, their life choices and how their little, everyday choices have a massive impact on their ability to save money, invest and become financially independent. I focused so much on the companies you should invest in – but there is just as much to be said about the mindset of a long term investor.
And before you ask me where I was for the past 3 months – there was simply nothing not much new to say but some things did change:
- Bitcoin has traded sideways after Bitcoin mining was banned in China and Elon musk helped push it further down with some unfortunate tweets. Many, including Plan B believe Bitcoin will bounce off the lower end and continue into a second bull run just like in 2013 :


As you might suspect, in the Investment Club we would never sell and so we just keep on dollar cost averaging as the price fluctuates. I started having doubts about the Stock2Flow model, it may be off by a couple of years and this also contributed to my decision to return back to work for a while. In case the stock market crashes and Bitcoin goes down with it – I’m ready to buy my favorite assets at bargain prices.
2. Tesla and Apple reported blowout quarters – please click on the links and make yourself familiar with their awesome investor portals. Tesla reported +980% Q3 2021 profits increase Year over Year, and Apple is about to report +68% 2021 profit growth over 2020 (which was already 10% higher than the 2019 profits). I’m incredibly excited about their potential – Apple as an undervalued value stock and Tesla as a hyper growth company.
3. The stock market continues reaching new highs, the U.S. needs to keep issuing debt to prop up the stock market, the bond market, the treasury market and keep interest rates low. This lead to 4.7% official inflation which benefits hard assets like Bitcoin, Real Estate which just shot through the roof but also the stock market. Many are worried about a potential correction or even crash in what they think is an artificially helped stock market. Warren Buffet always said it would be really useful to know what’s going to happen next year or in the next 5 years but the reality is nobody knows. It’s impossible to predict. Just keep dollar cost averaging great companies for the long term and everything will be great. Here’s a video from Peter Lynch about how people always worry about the stock market from 30 years ago.
So while the world is growing increasingly volatile and worried about everything here’s a couple of tips to get further ahead in your investing and personal finances:
First, it’s a great idea to have an emergency fund of a couple of months of expenses – Ideally 3-6 months of expenses set aside . Dave Ramsey speaks about this frequently.
The general idea is that you want to always have some extra cash sitting around in an envelope to face life’s challenges. Bad things happen unexpectedly and the last thing you want to do is to have to sell your stock at a loss or take loans to solve a car breakdown or medical emergency. I think we all fundamentally understand the concept of having a rainy day fund. This helps calm our primal fears and keeps us focused on the long term decisions by giving us the ability to navigate any crisis with ease. Investing with no emergency fund is like asking for trouble – you will have to sell your stocks or take loans to fund other expenses very quickly.
Once you have an emergency fund, you want to look at your monthly expenses and savings rate. In our household, like many others that are on the financial independence journey, we are very careful about what we spend money on. I can tell you off the top of my head how much we pay for utilities, mortgages, phone subscriptions, insurances and travel for every month of the past 6 months. Subscriptions are a big part of our expenses and we always try to pick the subscription that gives us best value for money.
We pay 20E for water, 40E for Internet, 25E per phone subscription with unlimited internet, 100E for electricity and gas combined, 13.99E for Netflix, 14.99E for Spotify, 2.99E for iCloud and I can go on. Most of them are the cheapest in our city or cheapest for the value they offer us. Every subscription that we have is intentional and anything that we signed up for accidentally is quickly cancelled. We recently reduced the monthly car insurance by more than half – very happy with that. We don’t have a cable TV subscription. This is a lot of text just to get to the main point: Your Savings Rate.
The savings rate is nothing else than how much of your monthly income you can save every month after expenses. You save 40% of your salary? Amazing! You put away 20% every month after careful budgeting? You rock! Every bit helps and the more you save the faster you can retire. Intuitively this should come naturally: The more you save the faster you can invest and grow your investments so you can reach financial independence. Even people with very high incomes of +10.000E a month tend to live month to month when they don’t look at their expenses .This may seem crazy to you – but I know of such instances first hand. Life style inflation is a real thing – your life style tends to expand to consume all the available money you have. Without a plan of what to do with the money – you spend it all as there is an infinite number of cool things to purchase. So the first thing to do, Dave Ramsey would say, is to keep expenses in check and save a little for yourself every month – that is your savings rate. People who save money know bad times will come and life isn’t always easy.
Another common trait of people who reach financial independence are alternative sources of income no matter how small. It may be a little hobby, a small business or being an Airbnb host like we were. As you go through life, you come across opportunities of making extra money (all of which should go straight into your savings) and you need to recognize them and hold on to them for as long as possible. This can be the difference between not saving money at all or saving a little bit.
Once you reach a good savings rate percentage – you need to convince yourself to invest and not keep it in cash like many people do. Through thick and thin, just like Peter Lynch says, just keep going. Find a few great companies, read a couple investment newsletters, do your research and keep investing. Or throw it all into an S&P500 ETF every month. Hope for a market crash and keep buying even more!
Now this is a very folksy tale, and you may ask – well when do you get to relax and enjoy life or is it about counting every penny? For us, for many years we saved more than 50% of our income, only purchased the bare minimum for our house and ourselves and kept a moderate life style, enjoying life’s pleasures but careful not to waste money – buying things as necessary but never allowing our life style to inflate to consume all our income. As our 50% savings rate, now invested, created good profits, we took the last few months to upgrade our house and improve the quality of our life from a budget friendly lifestyle to a moderately premium life. However our income has also grown substantially so we took this step knowing full well that we will be able to maintain a very high savings rate. We always want to grow the income first, before expanding the lifestyle. This because you and your family will not be able to go back in lifestyle – you just get used to good things. It’s important when taking on more expenses to be able to do it sustainably over the long term.
As is customary at the end I will tell you one more humbling story – without making fun of anyone this time as I know people on both sides of this tale. It’s good to remember that someone making 300E a month and saving just 50E every month, dollar cost averaging into Bitcoin and stocks would outperform:
- People who make 10.000E every month and save nothing or save just to spend later
- People who use leverage to invest upfront instead of dollar cost averaging with their own money
- People who trade frequently chasing trends in stocks instead of long term(5+ years) buy and hold
As I said, I know people on both ends of this story. People with thousands of dollars in losses who keep trying to break even. And people that have 10 or 20% profits – sometimes not more than a couple hundred dollars who took the safe route. The only way to grow wealth is slow and steady. Warren Buffet said it, Peter Lynch said it, and I just keep repeating what they said . I’m very proud of the people who take the boring, tried and tested approach and outperformed others who were in a rush. It’s never too late to do the right thing, and start doing slow and steady long term investing. I’m always happy to hear I impacted people’s lives in a positive way – so reach out to me with your personal story if that’s you(my email is in the title) and just keep going.
PS: I share what I buy on Patreon as well as in-between newsletters. Currently purchasing Apple stock as fast as I can, preferably under 140$.