I am joined again by a personal friend and the very savvy investor Andrew who is clearly FI whatever path he takes next (if not already)!
When I asked Andy to send me a recent photo to share on the post he kindly shared the below photo of his duck pond with solar panels in the backdrop. I have personally seen that pond and the solar panels first hand and was amazed to see how sustainable Andy’s lifestyle really is.
One of key elements that often draws people into the FIRE movement is a desire to be self-sufficient, independent and sustainable thus not requiring external support. This is one genius example of sustainable living, the rest of the humble abode showcases similar features by design.
Anyways, on with today’s interview and back in December 2020 when I first had the pleasure of interviewing Andrew, he said:
“Over the last twelve months, I have also been working to build up my holding of Investment Trusts, from a growth perspective these closed ended investment companies, are very suitable for Irish investors, there is of course the currency risk to factor in, as most investment trusts are traded on the London stock exchange”
So let’s see how he has been getting on since and how his ETF and Investment Trusts portfolio have been performing to date.
Sharing a similar interest in property (real estate) as my own preferred source of income for financial independence; I regularly pick up tips and tricks for spotting value from Andy and similar investors in Ireland.
I must note that I have linked to DEGIRO in this post as I am an affiliated partner and may receive a commission for anyone who opens an investment account.
Disclaimer: Any advise or suggestions given by Andy are for educational purposes only and you are encouraged to do your own research.
My current drink of choice this evening is a whole nutmeg, crushed and brewed in very hot water for 5 minutes, and sweetened with Manuka honey. So make your own beverage of choice, kick off the shoes and enjoy this latest read..
Andy, How are you getting on with your FIRE journey now since the last interview?
Things are progressing well. The last year has been extremely challenging from a personal and professional level, especially for people with a FIRE mindset, because as a group I think we enjoy an environment which is uniform and predicable, therefore allowing us to plan and forecast for our future financial selves. Given the turbulent nature of the last 12 months, it has called such predictions and plans into question at times. It has demanded that we become more flexible and willing to adapt to our changing environment, and once this mindset is fully embraced, these changes move from being challenges to opportunities. I believe I have effectively maximised these opportunities over the preceding 12 months and it has paid off handsomely.
I have been of the belief that the markets are extremely over valued over the last few years, but as I’m no stock market expert and have no talent towards market timing I had been “Euro Cost Averaging ECA” into the market. Although as I believed that markets were overpriced, I had only been applying 50% of my allowable monthly investment money into the markets and the remainder was simply placed in a deposit account. This deposited sum was building up over the preceding years on the basis that I was looking for a suitable other better diversified higher yielding investment, such as a property, a share in a private business or some other opportunity. So, when the markets started to drastically fall from the end of February 2020, I increased my monthly ECA into the market by a factor of 5 times my normal amount over a period of around 6 months and then slowly started to taper it back to normal, by January 2021 I was back to my normal monthly ECA. This was more a lucky strategy than anything else, as the markets could have continued to fall for a substantially longer period. Although as a longer-term (income focused) investor I has happy that my investment would pay off eventually. I had not expected that the markets would have turned around as quickly as they did. At present I am showing a result of approximately 45% increase in the last twelve months.
Some of the main investments I focused on are (note this is not a recommendation to buy or sell these securities):
ETFs (60% Dividend & 40% Growth)
• HSBC MSCI WORLD UCITS ETF (Lowest Fees of any All-World ETF)
• Vanguard FTSE All-World UCITS ETF
• SPDR S&P GLOB.DIV.ARISTOCR.ETF (Dividend Paying Fund)
• ISHARES ASIA PACIF DIVID UCITS ETF DIST (Dividend Paying Fund)
• ISHARES EURO DIVIDEND UCITS ETF (Dividend Paying Fund)
Investment Trusts (60% Dividend & 40% Growth)
• City of London Investment Trusts (Purchased at a 6.5% Div Yield)
• Henderson Far East Income Ltd
• JP Morgan Japanese Smaller Com Growth & Income Inv Trust.
• JP Morgan Global Growth & Income Inv Trust
• Scottish Mortgage Investment Trust
I have other open positions in individual shares, ETFs and ITs but those listed above are my largest positions. Interestingly the JP Morgan Investment trusts have adopted the 3.5% rule themselves as a method of paying out dividends. They pay out 3.5% of there Net Asset Values (NAV) annually to their investors as a dividend, while investing in growth companies. So, they really have the best of both worlds, high growth, and high dividends, hence they attract allot of money. They generate the dividends from the profits of shares sales / capital growth. The majority of investment trusts maintain capital reserves to ensure their dividends are covered for lean years, City of London investment trust has increased its Dividend for 54 years continuously, including 2020. Read here
Are you still set for your FI position within two years and has anything changed?
As I mention in our last discussion, “My FIRE strategy is based on 80% income from rental property and 20% income from Share Dividends”, this has not changed. In reality the 80% rental income will more than cover my monthly expenses and the 20% dividend income will act as a buffer. The rental income is based on two houses being fully owned. I currently fully own one and am working towards finishing paying off the mortgage on the other house in the next 18months, after which all the rent shall become income, rather than acting to service a mortgage. I am self employed so the rental income will act to replace the income I take from Ltd company, this will allow me to offset my income tax credits against my rental income.
An unusual thing has occurred over the last twelve months, which I had not previously considered and that is my stocks portfolio has grown so quickly, that it has now larger than my rental property mortgage liability. Therefore, if I was to sell out off the stock portfolio and pay all relevant CGT, I could in principle be FI today.
I have decided not to take this route and to continue to overpay this mortgage as per my original plan. Still leaving me “income FI” by Christmas 2022, and also with a good dividend income portfolio as a supplementary income to be used as and when required.
Have you reflected anymore on what you will do once FI?
I have decided to continue working to some degree, well for the moment. I enjoy the self-employed lifestyle, and I think being FI will bring a further element of enjoyment to this as, it gives greater level of flexibility when it comes to deciding on which project to accept and which to pass on. I.e. its gives the ability to pick and choose.
Have you picked up any ideas, strategies or tips?
Nothing that springs to mind. Although I do think that if the last year has thought us anything it is that remaining flexible and being able to adapt our long-term plans (assuming you have one), is the key to success. Being able to spot an opportunity when they arrive and having the conviction and self belief to go with that thesis. Of course this approach may not suit everyone, although I have found it has worked for me.
On the long term plan front, the old adage comes to mind “Fail to Plan, Plan to Fail”. For normal people such as myself of normal means, time and a good plan is our best asset. My plan is simple, it is to acquire income producing assets which appreciate in value over the long term.
That is all my pearls of wisdom Dave, take from if what you will.
What are some books, podcasts or YouTube channels you recommend?
Vicki Robbins book, “Your Money or Your Life”,
John Barons book, “The Financial Times Guide to Investment Trusts: Unlocking the City’s Best Kept Secret”,
The AIC Dividend Heroes (investment trusts)
Dividend Investing Engineer My Freedom –
David Sawyer Reset