Building blocks in my portfolio strategy

As I told you in the last post that I have been working on a new strategy, which will be a mix between stocks and index funds. This post will be dedicated to describe the portfolio and the reason why I believe this is the best way to go.

From my experience in Vardia I reliazed the importance of diversification; the portfolio down 25% in one day is pretty bad when believing in value investment and that day got me to re-consider my diversification strategy and in the end my whole portfolio strategy. 

If you don't have a clear strategy for diversification and hiding behind Warren buffets strategy that is that if you know your companies you don't need to have to many in the portfolio (good article why Warren Buffet doesnt diversify here). I truly recommend you to re-consider your exposure to a few assets and think about all factors that could impact returns, everything from fraud to hackers gather all their data (think about Ashley Madison).

The new portfolio strategy will be built like this (percentage);

Stocks: 35%

Swedish index funds: 35%

Global index funds: 15%

U.S. index funds: 15%

This setup will be the building blocks in my portfolio, there will in most cases also be around 5% cash for unexpected opportunities. This 5% cash will be smaller as the portfolio grows and when it gets bigger there will be more monthly purchases. Why did I go for this strategy? Time.. Since I started to work I didn't reliaze how much time I spend on the work and how tired I am when I come home. In other words, I don't really believe I have the time to have 100% stocks in my portfolio, just because there's not enough time to analyse them and find the risks involved with them, therefore the diversification.

At the moment I'm 50% invested, and this will be the case for a while, since I believe we have pretty high valuations on the markets. This will change as soon as the market conditions are better, i got some this week; MasterCard (MA), Starbucks (SBUX) and DNB Global Indeks fund.

Now I'm off to a pool party, take care!

Eighth wonder investing

What did go wrong in Vardia and The portfolio status

Vardia Insurance has been on my mind for a long time, lost 50K SEK (approx. 5400 euros) in one day.
Rough day? Yes, was a used Rolex Submariner which went away over a night..

Mad? No, could only blame myself..

Before writing what did go wrong maybe it's better to say how the days went when Vardia went through Armageddon and until now.

26th February 2015, Vardia is trade stopped from request from the company and postponing the announcement of the fourth quarter earnings.

26th Feb - 4th March, a lot of speculations is going around on blogs, newspapers, forum etc. I have a really bad feeling but couldn't imagine what were to come.

3rd March 2015, due to an accounting principle which has to do with booking of sales costs makes Vardia show a loss at 219 million NOK (approx. 25 million EUR). The stock is dropping 50 percent in the opening. 

4th March, I'm liquidating my whole portfolio, including Vardia and is back to zero from my gains in Protector. 

4th March - until June 2015, my trust for the stock market is zero, lost money on Tesco on accounting principles and now this in Vardia. Have still saved a lot of money during the months, but mentally I'm not ready to go into the stock market again. 

Thinking about other investments, properties etc. but know that the stock market is where you should be to make the real money with as little risk as possible.

Deciding to take some vacation from work and really rest, get my mind together and continue the thinking. Going to Hawaii for two weeks on my saved money, to start over when I come back with a new strategy (will come back to that in a later post, but shortly a mix of index funds with stocks). 

Over to what really went wrong in Vardia and in my analysis;

As stated above, Vardias accountants had a different view on how to accrual costs, sales costs. Accordingly to Vardia they were not allowed to do accrual the sales costs anymore and had to back-calculate everything and take it as a cost, 219 million NOK was gone over a night. 

They launched a new shares issue on 275 million NOK and with an interim loan to meet the solvency requirements in Norway. This together with massive cost reductions would make them profitable..Already here I knew these money will not be enough to make them profitable. Cost reductions take at least 3-6 months before you see any impact, it's not like you stop paying your employees the next day.

Last thing I read was that they will now do a management buy out (MBO) of the sales organization to bridge until they are profitable for 30 million NOK (?). Maybe that will be enough, didn't pay that much attention but it seems it's only good for management and not for the shareholders. 

What did go wrong in my analysis? Mostly a lack of time and limited knowledge in insurance accounting. In other words, I could only blame myself..

Portfolio status today;

50 000 SEK (buy price) in Avanza Zero (bought the last month)

10 000 SEK (buy price) in DNB global index

6282 SEK per share (buy price) - 3 shares of Chipotle Mexican Grill (CMG)

745 SEK per share (buy price) - 16 shares of MasterCard (MA)

430 SEK per share (buy price) - 36 shares of Starbucks (SBUX)

Hopefully I will be posting some more now, when I'm back on my trip to financial independence! 

Will update the portfolio and trades and also get back with a post on my new strategy.

Best regards,
EWI

This should not be taken as advise as always and all the numbers on this blog could be wrong and I am not taking responsibility for anyone who uses this information.