Shifting priorities

When we started the journey, we were so focused on getting to financial freedom. We put our eyes on the money, and we didn't expect superior results if we behaved normal.

We still don't behave normal, and we still have our eyes on the money.

Yet, there is a shift in our priorities. It is as if we start to settle in, realizing that we have enough and will soon have abundance.

And now, other things come back to our cone of light. 

Friends. But not the friends from before. Instead our friends have grown closer. It's not the ones we want to hang with, like one would hang with a bottle of beer. Instead our friends are those we care about, who don't compare themselves with us, that don't give much for the normal, that inspire us and attract us, that we can spend a night and a day chatting with. 

Family. But not the struggles of the past, but the appreciation of in-laws, the happiness of our nieces and nephews, a good hour spent with an old grandpa or aunt.

Art. Art is developing as a concept for us a little as well. But here we are still searching. We have some enterprises that reach out, and we feel that art wants to reach out. We still don't know everything that hides here.

Travel? Not so much. Even though we realize that with tons of bonus points piling up it's basically free for us to go where ever we want. But we still can't think that much of where that would be. We start to realize that there are other factors that are important to us. We don't want to travel for the same reasons as before, with the emptiness of escaping, for we have nothing to escape from anymore. 

That doesn't mean that we're never going to change the scenery around us. But then travel is more a background, and not actually of much importance.

We start to realize that most important for us might be to help the sun wander over the sky; helping ourselves, helping those we care about, and helping humanity to be a little better. 

Hermes, messenger from the Gods and wanderer of light over the skies.

And in the end, when the sun settles in the west, we know that the most important thing for us might be too be able to say; it was a good day.

Farewell

//antinous&lucilius

What we wish we knew about finance when we were 20

Lucilius recall when he was really young, how he could dream about having a big money bin not unlike Scrooge McDuck and how he was playing around with Excel (or something alike, on his Commodore Amiga 500) and did the 'rich by Excel' exercise. The young Lucilius somehow understood that if one just keep compounding with 10 percent annually, one could get into high numbers quite quickly.

Antinous once won a bunch of money at the age of 12, and he went to buy index funds and stocks for it.

So there was some interests in investing. 

But then we lost all interested in it. 

At 20, none of us had connected the dots of investing and financial freedom yet.

A clueless Antinous
By Ricardo André Frantz, CC BY-SA 3.0

What was it that we didn't understand?

Here are three things we wish we knew back then.

1. Fair investment doesn't require unacceptable risk

One can become financially independent as normal, working people without taking crazy risks (such as starting a company based on a wild idea, hitting gold with a film or book contract, the odd aunt that dies leaving a huge estate, or wild speculation on the moods of the stock market or even riskier schemes). 

In other words, there's a way to become financially independent that is methodical and will get anyone who has the right dedication to the goal. We had no clue about that.

A part from the more crazy ideas, we also looked at the stock market, not to mention, stock picking, as way too risky. 

And not without reason. We're still not convinced that the stock market alone, by default, is the right place to be to get a good return on risk.

The biggest hurdle with investing, and especially with stocks, we felt, was timing issues. Timing would make us always prone to question if it was the right time to buy, or if we should wait. 

We also recall from our youth how stock picking seemed to be some kind of social signalling among middle-brow realtives, and the whole affair just smelled stupid to us.

We were partly right. But we draw the wrong conclusions, and stopped caring about investments all together.

But then, we found that there are ways of investing that has a fair price on risk (around 7% after inflation), and where the historical drawdowns have been much more acceptable (3-5 years until recovery) and faires well in most economic conditions. 

Our solution to getting a fair (and good) price on risk, and to reach financial independence, that met the criteria above was the permanent portfolio. 

There are other strategies, but our portfolio for accumulation was our way to wrestle volatility, and it got us the goal both quickly AND safely.

And it worked.

So there was a way for us to get into investing without feeling that we did something akin to go to the horse track and bet all our earnings on Thunder.

2. Money is worth attention

When we got into our careers, we felt that this money thing was something for people occupied with buying big houses, fancy cars, a new pool to aforementioned house, and so on.

Nothing for us. Both of us where bewildered with work itself at that stage, and we didn't feel like we participated in the social game. 

It might be that being gay helps in questioning the social norms, but we guess that the questioning of norms is not limited to that.

Granted, we were always somewhat frugal, but we didn't know exactly why. It just felt like a reasonable thing to be.

So while we were frugal, we kind of felt that the pursuit of money was somehow beneath us. 

Money flowed in and we put it in a bank account and that was that, and we didn't pay any extra attention to the whole affair. 

We didn't understand that it's worth paying attention to money. Because the bewilderment about work is standing on a more shaky foundation than our 20-25-years selves understood.

That brings us to the last point.

3. Financial Independence Is Achievable Quickly

As many a 25-years-old, we liked our careers. 

We didn't have in our minds that there could be issues with having our careers as our financial security. 

But, we suspect, there is a built-in identity crisis and false security in work-life. Things weren't as rosy and safe as we thought. In a way, we were lucky enough to discover in time that a career was not quite that reliable. Just hope that the paycheck would come rolling in the whole life is not the same thing as financial safety.

Something more was needed. And that 'something' was second-level-stuff. Like a big money-bin, which in a way is the second level thing to a paycheck. And better values and virtues, which are second-level-stuff to a work identity. 

And freedom in early middle age, which is a second level thing to the slavery of work life.

Connecting the dots

And that was when the equation started to make sense.

We were back to where we started, with that Excel sheet and the investments. But this time we had learnt what to do.  

So to our 20-year old selves we would say; 

• invest with a good price on risk, 
• pay attention to money and save up and put them to work,
• and the path to independence will be much shorter than one might think

Farewell,

//antinous&lucilius

Time for rebalancing and avoiding the herd

We rebalance at 6 month intervals now, as we are still in the accumulation phase, so we never have too much cash laying aroundd.

And as it will take some days to move the money around we started today.

It's been a good 6 months. The portfolio is up 6 percent since the beginning of the year, so slightly above expectations, perhaps driven by some inflation also in SEK. Let's remember that any real return will need to have the inflation deducted at the end of the year.

Herd

Swedish small cap and investment companies are up 20+.  US stock market is not quite as impressive with + 13 percent from a SEK vantage point.

Gold is right plus minus zero in SEK.

Long term bonds are down much, around 20 down.

And as usual we bet on every future climate. Except that we don't bet. We behave more like robots.

So most of our money will go into long term bonds and gold. Feels strange to buy into a losing asset. But that's part of our strategy.

That is what it is to have a contrarian strategy and not follow the herd.

Volatility from a 5 year perspective: Welcome to the 1825 days year

Once upon a time, at the birth of our solar system, the time for the earth to spin around the sun became the 365 1/4 days we are used to.

It was a God given, a necessity, perhaps, and of course entirely out of human control.

Those 365 days has some impacts on our life, and certainly our evolution. For the two of us, the arctic summer and winter are a stark reminder of the solar year, on other places closer to the equator the climate will be more stable year round. 

The Arctic Sun

In the heated, air-conditioned, civilized life of today, the impact of earth's rotation on everyday life is smaller. The time it takes for earth to orbit the sun would seem even more arbitrary if one lived outside our frame of reference, let's say on one of the moons of Jupiter. 

From a more elevated perspective, an earth year is a seemingly randomly set constant.

Yet, we tend to give this period an out-of-proportion importance. We count our age in it, we celebrate the summer and winter solstice and equinoxes with rites and feasts. 

In finance the year has significance as well; as if the returns of our investments where a crop to be harvested every year. The year is the basis for what we understand with returns; if we see the number 7% it's assumed that it's the annual return that is meant. 

What is the impact of this metaphor on our thinking about investments? Investments that might not really care about the arctic sun, the moons of Jupiter or the passing of midsummer? 

What if we measured returns in another constant? 

Let's say that we just as arbitrarily instead measured a new unit that we set at 43 800 earth hours, or 1825 earth days, corresponding to 5 earth years. 

A unit, as if earth was spinning five years slower than we are used to. Or as if one only can be bothered to have a look at the planet every five year and wouldn't notice that it's actually spinning faster. Or as if we saw that grand red dot in the clouds of the gas giant Jupiter from our moon every five years, and measured the passing of time in red-dot-revolutions and not earth years.

What would we think of our investments then? How would volatility look with our new, more relaxed, slower 1825 days year's perspective? What decisions would we make?

Let's plot our pathfinder portfolio's return excluding inflation in a logarithmic diagram, with our normal earth years and our new, 1825-days-years. 

A thin red thread that always strives upwards

And voilà. An almost straight, red line that always marshes on upwards and never ever turns the other way. It's the same return, just with a lower resolution.

Our way of looking at things are bound by conventions that might be out of place. This hints on what volatility looks like for the Gods. 

And perhaps, it could for us too.

Farewell,

//antinous&lucilius