Recent Buy: Vanguard Total Stock Market ETF (VTI)

I just bought an ETF. When I began my journey back in the beginning of 2013, I considered if I should invest into ETF or individual stocks and I decided for investing in individual stocks. From my point of view it was the better option for me, because a. I don’t have to buy fees for something, I can do on my own (having stocks in my portfolio) b. I can choose or avoid the stocks, which I want to hold or which I don’t want to have in my portfolio (e.g. tobacco companies or armament manufacturers) c. I think I can learn more, when I have to look for individual stocks and observe the figures of companies. On the other hand, it’s almost impossible for a stock picker, to outperform an index. And even the great Warren Buffett recommends to invest cheap index funds.

So why did I invest into the Vanguard Total Stock Market ETF?

Couple of days ago, I received a bank’s statement, that they ‘unfortunately’ have to reduce my savings account’s interest rate by 0.2 %-points from 1.4 % to 1.2 %. That’s a ridiculous low interest rate! I decided to cash out a certain amount from my “emergency funds” and invest it into a secure alternative investment vehicle. And for me, this ETF is such a safe vehicle. Sure, this ETF also has its volatility, but I guess the money put in there is secured at a certain level. I’m in the lucky situation, that I have nothing expensive which could get broken and needs expensive repairs (like a car). If my fridge, washing machine and bathtub will be broken at the same day, I’m in the lucky situation to pay for it cash from my monthly salary. And I still have some money left on this emergency funds (something like 2.000 Euro) and I also want to increase it until the end of year to somewhere around 5.000 Euro again. But at the moment I think it makes more sense to invest this money in the sense of “I want that this money increase its worth”.

What is this Vanguard Total Stock ETF actually?

Vanguard is an investment management company, founded by John C. Bogle, who is the inventor of index funds actually, in 1975. Vanguard creates and manages a dozen of different funds and ETFs. The ETF I invested recently is called Total Stock Market ETF and this ETF invests in 3.798 individual American companies (so “Total Stock Market” perhaps is a little bit misleading, because one could assume it’s an ETF invested world-wide). I chose this option, as it is the ETF version of John Collins favourite investment tool, the VTSAX (Admiral Shares Vanguard Total Stock Market Index Funds) — it’s very well diversified and the absolutely cheapest product I could find.

How does my plan, shifting money from my emergency funds into stocks, look like?

I already have a plan because I want to stick to a certain routine and don’t want to be tempted, to try to time the market. That’s the reason why I set a fixed date (always the 8th of a month) and certain quantity of shares (25) I’ll buy each time. That’s because 25 shares equal to something around 2.500 Euro (I don’t expect that the price of the ETF skyrockets or tanks in the upcoming months) and within four months, I should have invested roughly 10.000 Euros in the ETF. It also helps me to avoid going crazy when the ETF price is cheaper (“I have to invest 6.000 Euros now”) or a little bit higher (“I just buy 15 shares and wait for a decline”).  Simultaneously I transfer 200 Euros per month to my emergency account, which leads to approx. 2.000 Euro that are going to flow to the savings account, so the account balance will be 5.000 Euro at the end of the year. I also have some money left each month I could invest into individual stocks. The last weeks I was very busy and didn’t find so much time to look for stocks I want to invest in, so it might be possible that at least in April I won’t buy any individual stocks anymore. But maybe in May some opportunities occur (I’m curious if the markets decline a little bit in the “sell in May and go away”-month).

Bought 25 shares of Vanguard Total Stock Market ETF (VTI) @ 99,88 Euros.

*Dividends March 2015*

Whoa! What a fantastic month it was. I received more than 200 Euros in dividends, which marks an all-time-high. Not less than 13 individual companies paid some dividends in March.

The overview:

Wells Fargo € 12,51
Pfizer € 19,54
Johnson & Johnson € 13,09
Chevron € 18,56
IBM € 11,43
Roche € 40,61
Unilever € 17,03
Microsoft € 13,65
DuPont € 16,59
McDonald’s € 17,83
Eaton Corp. € 14,06
Total SA € 18,21
Coach € 17,29

Totals dividends received: € 230,40

YOY: +458 %
March-to-December: +58 %

My passive income for March marked an absolutely record. Driven by the strong US-Dollar, my dividends increased by more than 450 % compared to March ’14 and almost 60 % compared to December, where more or less all the same companies paid out their dividends. Roche’s dividend payout is just annually, so the dividends in June should be a little bit less (as long as the amount of companies stays the same, as well the FX rate)

Income & Expenses March 2015

The first quarter of the year is over and so I’m going to publish my last month’s income and expenses as usual.

Rent (incl. groceries): -€ 700,00
Gym membership: -€ 109,00
Health insurance: -€77,30
LC insurance: -€ 16,57
Food@work: -€ 112,00
Restaurants: -€ 151,00
Entertainment: -€ 133,95
Food: -€ 19,35
Household: -€ 9,00
Doctor: -€ 140,00
Shoes: -247,00
Charity: -€ 70,00
Total expenses: -€ 1.785,17

Income: € 3.134,49

Savings rate: 56,95 %

All in all I’m not that unhappy with my expenses in March. I still had to visit my physiotherapist twice and bought three pairs of shoes which totalled to roughly 400 Euro, which is more than 20 % of my total expenses last month. My food-related expenses were a little bit higher than usually, but nothing to freak out. I hope that my expenses in April will go below 1.700 Euro.

The joy and burden of living in a central european country

I like living where I live because it’s a safe and stable country, no dickhead of one of our neighbouring country thinks about or even attends to invade us. It’s also good to live here because you can go to a doctor without paying anything, if you have a serious disease you get the full treatment to recover soon — without paying any additional Euro. You can send your kids to all kind of schools and universities, where they could make their degree without having a shitload of tuition and working the next 10 years just to pay back their fucking university debts. I don’t need a car because we have a thousands of kilometres of public transportation network here, connecting busses with trams, and metros with trains. I have access to that wonderful service by just paying € 1 per day. If I’d lose my job, I’d get € 1.400 per month for a couple of months as an allowance. Even if you don’t find a job for ages, you’d get at least “a little anything” (I think that needs oriented guaranteed minimum is something around 800 Euros per month you’ll receiving from state). If you’re 65 years old you could retire today and receive for the rest of your lifetime an amount, depending on your last income and the amount you paid during your working life — that should also be applicable for future-me, but it’s not really hard to see the fact, that this could not work. Less babies + longer life expectancy = bad pension outlook for everyone who is younger than 40 years old.

Therefore, I and every single Austrian (respectively persons, who live here even when they’re not of Austrian citizenship), living in that country, pay taxes. Last year, for example, I earned close to 81.000 Euro pre-tax, I cost my employer 100.000 Euro, because roughly 1/3 of my salary has to be paid by my employer for payroll taxes. Me personally I had to pay roughly 31.000 Euros in taxes and social security fees. And of course I also pay taxes when I buy food, go to the cinema, visit the hairdresser, pay my rent, get some dividends, etc. I don’t know exactly how much, but I guess that I had to pay at least 10.000 Euro in taxes for products, services and goods for which I paid 25.000 Euros in total. Summing up that figures, “my” share on the government’s tax-income was (maybe) 60.000 Euros. Not peanuts, but you cannot construct a single kilometre of a highway with that amount or treat a cancer patient with a 2-year chemotherapy.

I have no problem with paying taxes, because I think it’s a really good thing if a country has a solid infrastructure, a social reliable structure and can provide all kind of good things like medical treatments and schools to people who earn not enough money to pay for that on their own.

But from time to time I feel kidded. Like these days.

The two governing parties decided to make a tax reform. They want to save 5 billion Euros and distribute that amount through less income tax to us people. Not a bad approach acutally. Unfortunately they didn’t decide to make a reform of governmental administration (e.g. evaluate if Austria really like a dozen of public health insurances, or nine federal states with nine governments and hundreds of districts which also have a local government, etc.)

One of the points financing that tax reform is the increase of taxes on dividends and capital gains tax by 2.5 % basis points from 25 % to 27.5 %. I don’t have a big problem with the fact that the government is trying to make it harder for individuals to create wealth. It’s the plain ignorance that this tax increase is “a part of the rich people to realize that tax reform”. In such discussions the phrase “middle class” is often used. According to our politicans, owning stocks is just for rich people. Instead of incentivise and encourage people to take care of their financial future, they penalize this middles class people and stigmate them as “rich” and doing politics with that. Yes I earn a good chunk of money and I am in the lucky situation that at the end of month I still have some money remaining which I could invest. And yes, single moms, earning 1.100 Euros after-tax are not able to invest in stocks because they couldn’t barely live on their income. The government doesn’t have the foresight that the state cannot take care of all people’s pensions in the next decades. And the government doesn’t manage to create circumstances for people — all people: rich people, the ones who earn good money, the ones who earn less money — to invest in stocks. And that sucks! Because in the end the really rich people receiving millions in dividends pay – theoretically – the same tax rate as I do with an income from dividens of € 2.000. In reality someone who’s really rich and earning millions (or even some hundred thousands) through dividends has probably his own trust and pays just the half in taxes (now: 13.75 %).

I’ll invest my money in future as well, even if the taxes on dividends and capital gains would increase to 30 % or 35 %, which was a first proposal from the reigning parties. But it really makes me sad that nobody in that country is able to understand, that this is obviously the wrong way.

Income & Expenses February 2015

Also a little bit later than usually, my income and expenses for the month of February:

Rent (incl. groceries): -€ 800,000
Gym membership: -€ 109,00
Health insurance: -€77,30
LC insurance: -€ 16,57
Food@work: -€ 90,20
Restaurants: -€ 151,00
Food: -€ 14,75
Doctor: -€ 210,00
Hairdresser: -€ 45,00
Total expenses: -€ 1.513,82

Income: € 3.450,41

Saving rate: 56,13 %

Expenses were very okay last month! I had to pay a lot for physiotherapy (the back still hurts and some expenses also relevant in March) but I can apply for a refund of my expenses in this case, but I guess it will take some weeks/months. My expenses for lunch at work are a little bit higher the last months than usual, I guess the restaurants increased their prices in December and January. ;-) I also needed a haircut so bad and therefore I visited a haircutter which was not the cheapest in my city, but I guess that once-a-year expense is still reasonable. :D

I’m afraid that my expenses in March are a lot higher because I had to buy some bike related stuff and three pair of new shoes (after a colleague confonted me with the really bad shape of a pair of shoes I wore at work – not a big deal but I think also time to buy some new ones, even if I keep in mind that they are four or five years old).

Recent Buy: Roche (a little bit delayed…)

Sorry for the late update on this but at the moment I haven’t enough time to updated the blog properly…

On Monday, 3 March, I bought 10 shares at € 244,00 of swiss based healthcare giant Roche. I wanted to extend my stake in healthcare companies a little bit and since I already own a few of the biggest and best healthcare companies, not so many were on my shortlist. The timing regarding the ex-date was also quite good because I bought a couple of days before the general meeting where a dividend of CHF 8,00 has been announced. I already received the Roche dividend of € 40,61 after tax, which is unfortunately 45 %.

Dividend Income February

A bit earlier than usual I can report on my dividends of February because I already received my last dividend payment today. And what shall I say… the whole thing starts to make more and more fun right now. I received dividend payments from six individual companies, totalling € 116 which is a record for a “middle of the quarter”-month.

From now on I’m going to receive more than 100 Euros each February, May and August and November. All I have to do is to keep the stocks I’m currently invested in. As my plan is to even invest in more stocks, I can’t await to see my dividend income in one, five, ten or twenty years because it’ll be more than this 116 Euros for sure.

Here’s the overview:

AT&T € 24,64
Verizon € 19,80
Toronto Dominion € 11,15
AbbVie € 15,90
Kinder Morgan € 29,32
Procter & Gamble € 15,50

Compared to last year’s February it’s an increase of 261 %; compared to November 2014 it’s a 36 % increase.

I also reached a milestone which will be nice to track in future — with the AT&T dividend I received my first 1.000 Euros in dividends solely (including passive income from interest I received my first 1.000 “passive” Euros already a bit earlier). It took exactly 728 days to receive that amount – and if I could invest as I did the last 728 days, the second thousand Euros in dividends will find their way to my account even faster (I guess less than 365 days which would be half of the time for the same amount of money). Is that the snowball effect? I guess I started to roll a little ball two years ago which could be a nice, big, handsome snowball in one year. :-)

Recent Buy: Johnson & Johnson

I’m happy to announce that my portfolio consists of one further high quality company: Johnson & Johnson. I think I don’t need to explain what this company is doing and nobody needs stories about that 1886 founded company. I made a limit order couple of weeks ago because I wanted that stock in my portfolio and now I own it. :-) Didn’t take care a lot of numbers and figures, I just want to own it forever so I don’t really care if the P/E ratio is a little bit higher or lower than the last ten years.

Bought 27 shares @87,05 Euros.

Income & Expenses January 2015

First month of the year is over — I received my first dividends of the year and so I publish my income and expenses overview for this month as well. January’s expenses were higher than normally due to some health issues (my back… I’m getting old) as well as a nice dinner with a couple of friends at home (but with a lot of excellent food, drinks and more drinks :) ). Also some one time expenses for the houshold occured so January is typically a “bad month” regarding my expenses. The overview:

Rent (incl. groceries): -€ 800,000
Gym membership: -€ 109,00
Health insurance: -€77,30
LC insurance: -€ 16,57
Food@work: -€ 82,60
Restaurants: -€ 132,00
Sports: -€ 20,00
Entertainment: -€ 45,00
Food: -€ 14,85
Household: -€ 95,00
Drugstore: -€ 31,55
Doctor: -€ 140,00
Misc. memberships: -€ 52,20
VISA: -€ 249,60
Charity: -€ 36,00
Total expenses: -€ 1.901,85

Income: € 2.687,25

Saving rate: 29,23 %

Looks not pretty good at first sight, but I’m not totally unhappy with my expenses here. There are a lot of one-time expenses (doctor, drug store, the above mentioned expenses for groceries and household, VISA is the billing from December when I had to buy some gifts…) so I am very confident, that my saving rate will go up next months.

Recent Buy: Microsoft

Today I purchased 63 shares of a tech giant and a kind of legend within this sector — Microsoft Corp.

I think Microsoft is very well known to people who are running or working on a computer system. 90 % in Germany are using a computer with one of Microsoft’s operating systems installed. Microsoft Office, including MS Word, MS Outlook, MS Excel, MS Powerpoint…, is used by more than 1 billion people all over the world. Microsoft also wants to participate in the mobile sector, dominated by Google and Apple. At the moment, Microsoft does not play a relevant part in that business with a marketshare of less than 3 % (Google’s Android: 85 %, Apple’s iOS: 12 %). Despite that, I think Microsoft still has some room for general growth and looks into a bright future. The annual dividend of $1,24 (yielding 3 %) doesn’t hurt either.

(2005: 3,40 $ special dividend)