The pain continues… for some

We are now in the middle of the third quarter of 2020. August. And the world doesn’t look much better than it looked in the second quarter. In fact, despite all the happy talk that you might hear occasionally on some news, data points increasingly towards a bad fourth and final quarter as well.

So the pain will continue and might even increase. More companies will close their doors. More people might lose their jobs, or endure salary cuts. Many people will remain dependent on the support from governments, friends, families, or charitable institutions… and sometimes strangers.

The suffering is not equal

But some suffer more than others, and guess who is suffering the least? Well, from what I see, income investors have suffered very little in comparison to regular folks.

When I look at my income portfolio, it looks as bad as it gets with current total performance in value development of -29%. Almost a third of the money I invested has disappeared. On paper. In reality, it doesn’t disappear until I sell the shares – which I have no intention to do within the next 20 years or so.

But interestingly, my dividends for this year will be holding up much more stable. According to my most recent forecast, my dividend income for this year will fall only about -8%.

Cash is king

In a crisis like this, income investors have the advantage that most of their investments are/were around financially strong companies, which generate either strong cash flows or which are simply rich.

In addition to this, many dividend-paying companies tend to offer essential services. Whether it’s water, energy, food, or our most addictive tech-entertainment. Those companies keep earning money no matter what and can largely sustain their dividends even in a global crisis.

Having strong cash flows and/or a well-prepared emergency fund, those companies can navigate through the storm, and even use their strong cash position to grow and expand their business. One should not get surprised if the strongest among them come out even stronger after the crisis.

Technology is unstoppable

I have this year so far only added money to my speculative portfolio which has several technology titles in it that either benefit from the pandemic, or which are simply not relevant to the pandemic at all. And while my income portfolio shows a -29% performance, my speculative tech portfolio is already back up with double-digits and +25% in market value.

Some people are wondering why the technology sector keeps rising despite the harsh reality that we experience across the globe right now. But in fact, it’s not surprising. Technology will be moving forward no matter what, and being invested in a few solid technology-focused companies will probably serve as a great diversification to any portfolio for the foreseeable future to come.

Keep investing

So yes, I keep investing. I am currently not adding money to my dividend income portfolio, but plan to do so around October. August and September look still awfully bleak and we might see more bankruptcies, more unemployment, and more suffering. But the longer it will be going on, the closer we will get to a solution. I am, however, putting money into my speculative portfolio.

History has taught us, that after every crisis the market recovers. As a young investor, you should therefore not hesitate. Whether you go in with an ETF or individual stocks. Crisis or not, keep investing regularly, and diligently, and as we get closer to a solution to this awful pandemic, your efforts and trust in the market will very likely plan out according to similar events of the past and reward you in the long run.

There are of course no guarantees, but what is guaranteed these days anyway?

About multiple income streams

People all around the globe face unprecedented challenges. Well, at least it’s unprecedented for my generation (Gen X), and certainly for Millenials and anyone younger than them. Millions are losing jobs, are forced into quarantine. Many are in dire need of some kind of assistance, whether it’s cash, food, or both.

Here in Thailand, we just passed through the first month of the lockdown. When I drive through the streets of Bangkok or Pattaya where I am currently working, I see people lining up (with social distancing) for food support from the government and from some private institutions.

The Thai government is issuing cash support of THB 5.000 per month to those who need it most. It’s not much, but it’s enough to survive on a very low bar. Together with the support from private institutions, NGOs, and hundreds of those who are more fortunate and who are volunteering to support, I have no doubt that the country will get through the event.

I am also always astonished by the amount of support among Thais in times of crisis. My wife is getting postal packages from friends and family with food, face masks, and snacks. We pass on the favor by sending things to others who need it more than us. I am fortunate enough to still have my job and my monthly salary intact, albeit slightly reduced.

About income and unexpected situations

But not everyone is lucky. Similar to other places around the globe, unemployment in Thailand is on the rise on a massive scale. This is dire in a country with very limited governmental social protection in place, and where most people live paycheck to paycheck.

Which brings me to the main point: Unemployment means for many people to lose their only source of income. And we can see right now more clear than ever, how many people’s lives really depend on their job. Being without work and without an opportunity to find new employment within a short time has now turned into an existential threat for millions of people.

Also, only very few of them could have even imagined such a situation two or three months ago. Yes, some might have an emergency fund and savings to ride out bad times. But would they have expected that they can lose their job, their income, and their benefits within such a short period of time? Hardly.

Building up multiple income streams

This is where the lessons of FIRE become such a powerful reminder, because having multiple, passive income streams is what FIRE is all about! The whole point of becoming financially independent means not being dependent on your job.

Building up passive income streams is best done by investments. Sure, the stock market is crashing and we are sliding into a recession. But out of the 33 companies in my income portfolio, so far only one of them has canceled the dividend, and only two announced to reduce it for this year.

Thanks to this, I am never worried about losing my job. Sure, my monthly dividends can’t compare with my salary, but that’s not the point. The important part for me is that I won’t need to rely on government support and on charities. I will be able to fulfill my main responsibility of providing shelter, medical protection, and food to me and my family on my own.

Personally, this is a very important factor to me, as this defines my perception of freedom and independence.

Who gets the money

And just to add another layer of understanding of why investing is a safer bet than your job, let me explain here one thing. While our savings and jobs are being destroyed, a crisis like this also generates unimaginable amounts of money. While stock valuations may be nosediving right now, governments all across the globe are printing cash like there is no tomorrow.

And where does this cash go to?

In the US, every US national is receiving a one time check of USD 1.200. There are 328,8 Million people in the US, so this sums up to roughly 395 Billion USD. Yes, it’s a lot of money.

But you know who gets more? Companies. Especially the big ones. They get bailed out when they get in trouble, they receive grants, and the FED is reducing interest rates so they can borrow money almost for free. This may sound very negative, but I don’t mean it that way. That’s just how it works for plenty and a variety of reasons.

The important thing is that you have a choice to make. Do you stick to your job and when you lose it, wait for your one-time check of USD 1.200? Or do you invest, and build up multiple and passive sources of income?

Having the knowledge that governments across the globe will put significantly more effort into protecting your investments and your sources of passive income (in comparison with taking care of you directly), this shouldn’t be a complicated choice to make.

Monthly Dividends

Looking forward to the year ahead, I have summarized my expected dividend payments and put it together in a nice, motivational format. What do I mean by that? Being a numbers guy, I crunched the numbers. Let me summarize the highlights:

On average, I will receive 8 dividend payments per month. 3 of those are coming from monthly dividend-paying companies. 5 are from quarterly, semi-annual or annually paying corporations.

This also means that, on average, I receive a dividend payment every 4 days. In reality though, due to the payment structure of most companies, it’s rather every 2 weeks.

The total expected dividend growth for the year 2020 is anywhere between 15% (conservative assumption) to 40% (optimistic assumption). I put the pessimistic one in my budget first, better to be positively surprised later.

My annual yield on the currently invested amount will come up to 4,53% – after taxes. This might go down if I add more capital to the portfolio, and it will increase if my dividend estimates should move higher than expected. As I do have some plans to balance my portfolio and to do some adjustments, I am pretty confident that my dividend yield might reach over 5% by the end of 2020.

Compounding interests and monthly dividends

Now, in the 4th year of investing, I start to see and feel the power of compound interests. It’s just growing. Some shares rise, some fall. But the more I diversify, the more the portfolio can balance and bounce in the right direction.

And then, all paid-out dividends are being re-invested and create just more income.

This becomes especially obvious with companies that pay monthly dividends. These few cents, that come up on top every few months when I re-invest into an existing or in a new position, really start adding up.

By 2021, and with adding 3 more monthly dividend payers, I should receive a dividend payment every 3 days. Every single one of these dividends will be, on average, a double-digit one, enough to potentially cover all my regular daily and monthly expenses. Even without living too frugally.

Not enough yet to cover the rent, but enough for everything else.
A major step closer to FIRE.

The markets are not ready to stop

Of course, this is also due to the fact that we have a robust economy and the Wall Street party didn’t stop yet. Most experts out there and I, don’t think that there is a high risk of recession in the US at the moment.

But at the same time, I am hesitant to deploy more cash into US-Dollar-based companies. There are just too many uncertainties with the impeachment, the drama with Iran and the rising tensions with China and Russia to keep a very high level of confidence.

So instead, and with the exception of the 3 monthly dividend payers, I will go for European stocks. Mainly the UK and the Netherlands, as many of them pay quarterly dividends. Regarding the UK, I have the suspicion that BREXIT might turn out not as bad as expected, which would push the British Pound back on track. The UK also doesn’t have a withholding tax on dividends, which is a great bonus.

The Netherlands charge me a 15% withholding tax, but it’s still moderate and given the highly innovative nature and sharp business acumen of this small but scenic country, I see some opportunities to invest there.

The 3 monthly dividend payers that I am looking at are by the way the following ones:

  • STAG Industrial (STAG)
  • Gladstone Commercial Corporation (GOOD)
  • Realty Income (O)

Disclosure: This article may feel, sound and be interpreted as financial advice, but it’s not. Investors are required to do their own due diligence, and accept risks that are associated with stocks and market investments.

Can I earn money with ads on my blog?

Among the many jobs that emerged popular in recent years are those of the so-called influencers. Individuals who can motivate others through engaging online content. They encourage others to visit destinations, and to purchase products or services. As an influencer you can either get paid directly by the party which engages you in promoting their service or product, or passively, via ads and commercials. This is how Instagram and YouTube capitalize the content.

Blogs have something almost ancient in the technological world about them. They have been around for a while. In the beginning it was all only about sharing ideas, knowledge, or just about keeping public diaries. However, they can also be used to generate earnings.

Earning with ads

My blog is mainly about motivating people to develop better financial understanding. It’s a niche topic that some may consider a little “dry”. Certainly not sexy. I am hardly posting any pictures, except for the occasional infographic. I don’t promote any specific products or services. Not yet anyway. But even for this kind of blogs there is an option to collect some cash, and to get rewarded for all the effort that is being put into writing all the articles. Online advertising by placing banners in the articles.

I was curious how this could work out and have activated on my WordPress blog the option of the so-called WordAds. It’s basically an automated integration of commercials into the blog based on it’s content and visitors. It is the easiest way with WordPress to setup this kind of service as it can be activated with two clicks on the wordpress website.

Without further adue, I like to share with you the results of my ad-integration:

Screenshot 2019-11-18 at 14.14.51

Low effort equals low results

I admit, I put the lowest possible effort into it. I didn’t put up banners and ads on my main website. I just don’t want to do that. I hate clutter, so you see the banners only if you actually really read a full article. I also didn’t look for any specific partners or looked at affiliate marketing options which are more targeted and specific and which pay significantly better. I seriously just did the bare minimum. And yes, the result speaks for itself.

So if you intend to earn money with you blog or website, I am afraid you should put much more effort into it than I did. Otherwise you might get just this: A mere 0,13 $ for almost an entire year of writing.

Why investing in Pharma makes sense

Today, let me dive a little into the topic of income-investment and why I believe that every income-focused investor should have some pharma stocks in his or her portfolio.

As my readers know, my goal is to escape the rat race with the help of investments in the stock market. With my eyes targeting financial independence, having a passive stream of income is crucial. One way to get it is to invest in dividend-paying companies. The strategy is called income-investing and it is a reliable strategy of building up passive income, large enough to be able paying bills (and more) once the decision to retire has been made.

When it comes to income-investing ideas, how to pick a stock, and what one needs to be aware of, the pharma industry emerges quickly as a good direction to look at.

Profits for years to come

My personal portfolio contains shares of two pharmaceutical companies: AbbVie (ABBV) and GlaxoSmithKline (GSK). They are not THE biggest in the industry, but large enough to reward their shareholders with frequent dividends for many years now. And chances are good that this won’t change anytime soon.

Big Pharma is a term that is being used in a mostly negative manner. Overcharging customers, abusing their power, and either way, health should be free for all, shouldn’t it? Maybe. Maybe not. But what is pretty certain is that this industry has a tremendous cash-flow that is only increasing with a growing and ageing population.

People get sick. It’s how humans work. We get sick, we get better. For most of the time anyway. But the part of getting better for most of the time involves medications, treatments, surgeries, vaccines, anti-biotics, hospital stays. It’s a never-ending battle that will always require someone to develop, produce and distribute all those essential products that help us to have a long and healthy life.

They can do what no one else can

Some people may think that supporting Big Pharma can’t be the only way to get things done. Some smaller companies should be able to pull it off as well, right? Research, development, production, distribution. Well, the bad news is, that smaller companies simply can’t do all this. And even if they try to share the work process with other companies, chances are that they either fail or can’t make enough profit for a sustainable contribution.

There was a recent story about a company called Achaogen that comes to my mind. The company was working on a new type of antibiotics. The scientists and researchers were looking for a way to develop a new type of antibiotics, as the currently widely available versions are becoming increasingly less effective. They were largely successful in the beginning but failed after a very short time in operation. The business was just not profitable enough to sustain.

This case highlights the need for some for really large economies of scale, cross-incentives among products, and distribution scale that a small company simply can’t sustain. And we are talking only about antibiotics. How about those much larger and even more cost-intensive projects. Cancer, HIV, dementia. There are so many challenges in front of us. They require the right people, with the right education and research experience, the right equipment, sufficient funding, the right connections for distribution and the stamina to dive through ups and downs of the world without going bankrupt.

Bill Gates, for example, is working closely with many companies including GlaxoSmithKline through his Gates Foundation. When asked about the reason for this collaboration instead of just using his immense wealth to simply find solutions on his own, he said it very simply: These companies can do things that no one else can do.

This is a powerful statement for any investor out there. It says that, to a large part, there are not many alternatives. That’s a big moat to cross and perfect protection for any long-term investor.

The risks are limited

Unsurprisingly, AbbVie and GlaxoSmithKline are both considered to be rewarding long-term investments for income investors not only by me but by pretty much every analyst out there. The combination of the long-term focus, available resources, knowledge and power of distribution, together with a reliable and stable cash-flow give pharma companies excellent risk/reward ratios.

Some analysts point out that the big cash-cows might at some point disappear, especially when cheaper alternatives come to market. When patents run out. When the competition catches up. These concerns are legit. It will happen. But unlike some electronic toys or tools, health is a different story with plenty of areas that are still under development and which are almost impossible to copy in a simple and cost-efficient process. The electronic cycle for product improvement is only roughly 1 year and has very limited regulations in place. Health related products take 10-15 years to develop and are subjected to heavy approval processes and regulations. This will always keep the competition at pace, even if some profit margins might occasionally suffer or take a blow.

Disclosure: I own all stocks mentioned in this article.

Thinking about inflation

Today is the 12th of May, which means that today is the last day of the 19th week of this year. This, in turn, means that we have only 33 weeks left until it’s New Year’s Eve again. Time is short.

I have fulfilled one of my targets for 2019 and took a break in-between jobs for a total of 6 weeks. Frankly, I could use another 2 weeks. I spent 3 weeks in Thailand relaxing in and working a little on our house in the beautiful north-east province of Isaarn. After that, we visited my parents in Poland for a week and spent another 2 weeks together in our main home in Berlin. Those 3 weeks in Europe just passed by like nothing.

It’s funny because every time I visit Europe I feel different about it. Last year I was feeling great and was actually really thinking about moving back to Berlin. The summer was nice and hot, people were smiling and my daughter had the best time with my parents. This year, while it all also felt good, I took another perspective. One thing I noticed was that the city is getting pretty expensive.

Inflation is just part of the deal

When I moved out of my parents’ place at the age of 21, I had a super tight budget and was only able to spend approx. 20 Euros a week. My rent was roughly 400 Euros a month, which was equal to my income from my civil-service job (instead of going to the army I was doing civil service and working in a kindergarten). While working there from 6 AM to 3 PM every day, I took on a 2nd job for 3 hours daily at some local office. It would pay me 6 Euros an hour, and cover my expenses for utilities, telephone and whatever was required to ensure I don’t end up on the street. Additionally, in the evening, I would give Karate-lessons to children once a week in my local dojo which paid me 20 Euros. This was the money that I used to buy food/groceries for me and my girlfriend at that time, as we moved in together. It was tough but do-able.

Today, it’s impossible to find a 70 sqm 2-bedroom roof-apartment anywhere in Berlin for the same price of 400 Euros. Prices have doubled and tripled. It would also be very hard to get through the week on 20 Euros, even if that 20 Euros would be only for myself.

We all know that things change and that prices go up, one way or another. It’s just how it is and part of the game. Going deeper into this topic one might argue that today we receive much better value, despite paying a higher price. Apartments are in better conditions, with central heating systems, clean drinking water from the tap and better-insulated buildings to protect us and reduce heating costs during winter. Computers got actually cheaper while offering a performance that we could only dream of 20 years ago. Food… well this one is probably arguable. I don’t think food got better over the years.

But still, we really need to think about it and what it means for our personal situation.

Future prospects

This all happened in less than 20 years. I am now 39 years old so chances are, that I got at least another 20 years ahead of me. Probably more. It could be another 40 years. Or even 60. Could prices double and triple again?

Well, yes they could. In fact, I am pretty sure they will.

That’s why it is so important that your savings grow at a similar or larger pace. We cannot rely on things remaining similar in pricing in 10, 20 or 30 years from now. What we think will be enough to live on today, may be very different from the reality in the future. That’s why keeping money on a savings account over long periods of time is probably not the right thing to do. This money is losing value day by day.

Investing in stocks that consistently grow dividends, on the other hand, seems like a much smarter way to go. Even if those increases are marginal, like 2 % or 3 % a year, it beats every savings account out there not only by percentage but more importantly by its long-term value.

Obviously, if those increases can go up to 7 % or 10 % or even more, then there is really not much to complain about. And, this is not the case only for some rare-super-stocks. It’s pretty common for many companies out there. Plenty of companies increase their payouts on an even much larger scale, like 15 % or 20 %!

It does also make sense for a few simple reasons. As prices go up, so do revenues and profits. If companies manage on top to improve their margins and grow market shares, the growth becomes exponential. As an investor, you are poised to participate in this process.

This is why investing is such a powerful tool to increase wealth and this is why in my opinion, everyone who plans for FIRE needs to be invested one way or another.

Dividend Stocks make your worries go away

Over the last couple of months, I have started to reduce my social media presence and to close many of my online accounts. My Facebook account has been deleted (I seriously didn’t miss it a single day), and the same thing happened to my Twitter account and AirBnB. As I move closer towards my goal of FIRE, I plan to reduce my social media presence to a bare minimum. In the end, this blog… and possibly also my LinkedIn account for business purposes shall remain. Most others will be got to go.

But speaking of LinkedIn, I have recently noted a larger amount of posts where people are actively and openly seeking jobs, while also publicly stating that they have been unemployed for a couple of months. Some of them even go as far as to explain that they can’t pay for their children’s schools anymore, or to pay rent and needed to sell their house or downsize their condos.

Some of those CVs out there that I took a look at are actually quite impressive. From experienced, well-traveled professionals who reached tremendous success over the years, to aspiring intellectuals who surely made an impact in their previous organizations. And yet it seems that while they grew older, their age outweighs their experience. It just gets tougher to get hired, especially when you reach your 50s.

Prepare yourself

There are tons of situations why and how you might lose your job. You could debate on what is right or wrong, whether something is fair or not, and who to blame for what happens. Or you can prepare yourself. I like to prepare myself because blaming and guessing or discussing the issue at hand will probably not solve my problem. At least not as fast as I need it to get solved.

For me, investing in dividend-paying stocks is one pillar that I use to build my protection on. Due to the nature of my job, I grew with this challenge in mind since the beginning of my career. Every year or two I have to find a new hotel to work for, or worry whether my contract gets extended. Working as an expat in Asia comes with tremendous benefits and financial advantages, but the price to pay is a huge lack of security. Because every contract is limited to only 1 or 2 years and most come without any retirement pre-cautions, one can never truly relax and consider things to go well forever.

This is why securing several independent streams of income is crucial, and why the idea of financial freedom has been engraved in my DNA. I got to prepare myself for the worst-case scenario. I am 39 years old now and just signed another 2-year contract. Looking at my colleagues and other professionals in my industry, I know that 45 is the magic number when things will start to get really tough for me. Therefore I need to be ready for that before this challenge kicks in.

Dividend-paying stocks are a great source of income

It takes some time to play out well, but dividend-paying stocks are an amazing opportunity to benefit from our financial system. Buying the right stocks can result in tremendous advantages and a strong, re-occurring source of income.

When I was significantly younger, I didn’t really understand the power of what appeared to me “small yields”. 2% or 3%… this means that when I put 1.000 Euros into some company shares, I will get only 20-30 Euros back every year? Laughable.

What I didn’t appreciate at that time, was that not only do these amounts compound over a long period but also that those well-run companies tend to increase their payouts year-on-year.

Why is this important? Let me give you an amazing example. Warren Buffett is invested in Coca-Cola for a very long period through his company, Berkshire Hathaway. Over the years, Coca-Cola kept increasing its dividend payout. Year on year. The result: The yield on cost for Warren Buffett is now a stunning 62%!

This means that every year the stock returns him 62% of his initial investment. Getting back to our investment thesis of 1.000 Euros, this means that every year now he gets 620 Euros back in dividend payments for every 1.000 Euros that have been invested.

There is no hocus-pocus there, it’s just very basic and simple mathematics. And coca-cola is not the only company out there with such stunning results. Look no further than the brands you know well: Apple, Starbucks, Microsoft, Daimler, Shell… the opportunities are endless.

Start investing and stop worrying

No matter what your job or your business is, setting up a solid stock portfolio with dividend-paying stocks is a smart thing to do. While you are still working, it will increase your income. When you have no job, it will secure your most urgent needs. And when you plan to retire, you might be able to do so without even touching your savings.

But even more importantly, having another stream of income will put your mind at ease. Because even if you should lose your job, you will still have cash coming in. You will be able to buy food, and if you invested enough even pay your rent or your children’s school.

What happens if there is a crash in the stock market? Keep your cool, lean back and wait. The most reliable dividend stocks continued paying dividends even during the worst time on the stock market. Shell i.e. never lowered their dividend since the II. World War! Of course, there is some risk to every company and every stock, but that is why you need to diversify and purchase several stocks of different companies.

Do this especially when times are good, so you worry less when times turn bad.

Disclosure: I own shares of Apple, Daimler, and Shell at the time of writing. This article doesn’t represent investment advice. Please ensure to do your own due diligence before making any investment decisions.

Freelancing is the future – and so is investing

Many things have changed since I finished high school. Some for good. Some for bad. Some for… it’s hard to tell yet. For example, my parents used to tell me that if I wanted to be successful, I had to finish high school, then graduate, and if I really wanted to become the best I would have to go for a DR. title.

Well… that didn’t happen. I finished high school with mediocre grades. I started to study Chinese and East Asian Arts but dropped out after a few months. Then I went for a vocational education program in banking and after 2 years of suffering through it, I decided that a bank was too boring and went back to studies again. It turned out that I got real talent for the Korean language, and so I got a bachelors degree in Korean studies in record time and with excellent grades, but that was as far as my aspirations had taken me. Then I started to work in hotels in Asia… and I got stuck with it.

It was not a bad career. After 8 years of hard work, out of which 6 years were with a 6-days-work-week and shifts of 12 hours a day, I became a General Manager in a hotel at the still young age of 37. Now I am looking for my next assignment and there seems to be a glance of opportunity ahead to become an Area GM (in charge of several hotels) with a long-term prospect of even moving up to the rank of a Vice President at some point. Yes, I could do worse.

But I didn’t need a Dr. title for that. I didn’t need a masters degree. My bachelor degree did open some doors and it’s hard to tell if I would have gotten where I am without it, but I can frankly say that I am using hardly more than 5-10 % of what I learned during my studies for my job routine.

I also know that I am not alone with this experience.

It is no secret that most college students hardly use anything of what they learned during studies in their regular jobs. If you ask me, that is also not the point of visiting a university or college. The main point is rather to broaden our horizons and to bring some methodology into our brains to understand critical thinking, decision making, research and techniques to evaluate whatever problem we are confronted with. We learn how to handle ourselves and how to develop further knowledge. It is not really meant to prepare us for a specific job. Well. There are a few exceptions. For doctors or lawyers for example. But I think my observation is pretty accurate for many fields of studies out there. Not all, but many.

People adjust as work environments create new patterns

So basically we know by now that what our parents were telling us was a bunch of crap. It’s not their fault, they grew up in a different world. A world without the internet, a world where working conditions were miserable but still better than what the 1st and 2nd World War left over for them. They were willing to work 7-days a week to help rebuild their country and to make sure their family has food on the table when they came back home.

Millennials don’t know any of that. While the parents of my generation were worried about an electric outage for their house or condo, Gen Y and Z are worried about empty phone batteries.

With the ever-increasing demand for Fussball-tables, free coffees and bean bags in office, with the rise of social welfare benefits, 5-day-workweeks (or even less) and countless other ways how the lives of employees need to be improved, companies have found a new method to strike back. Freelancing. And people are embracing it in the masses.

Freedom – not more and not less

Whether it’s driving for Uber or doing a quick translation job on Fiverr or Upwork. Freelancers are now everywhere. Some do it as a side-gig. Others turn to do it full-time. There are countless jobs available online that can be taken on by anybody who got the right skills at the right time. Rather than a diploma, the only thing you really need to take off is references. The more jobs you get done, the stronger your profile gets and the easier the earning becomes.

You are free to choose your place of work (as long as there is some wi-fi around), you can negotiate your salary. Nobody cares who you actually are, as long as you can get the job done. It’s a great opportunity for anyone with a certain skill-set to get into the market and simply start working.

But freedom obviously has its price. There is no security. If you get sick, you got no income. If your equipment brakes, you have to get a new one on your own. Retirement? Nope. Medical insurance? Dental? Nope to that too. Vacations? Paid Holidays? Don’t even dream about it.

Freelancing is not as free as we want to believe. 

When you decide to become a freelancer, you need to bear this in mind. While with certain skills you are able to actually make a good living, you need to think about all those eventualities and how you can protect yourself in case of misfortune.

Also, believe it or not, even you might enjoy what you are doing as a freelancer at this very moment. But things can turn around and there is a high chance that you will start to hate your freelance job at some point. You will find out, that while you are free to set your terms, you are still not out of the rat race – because you still need to trade your time for money, to work relentlessly to ensure you can bring food to your table!

Protecting yourself through investments

Therefore, freelancers are actually even more exposed to financial dependence as they age compared with regular employees, and they should start investing very early on and learn all there is to learn about passive income.

Working for yourself on your own terms is a great and amazing opportunity. Make sure it doesn’t become a nightmare once you’re out of luck, when times turn tough, or simply when you get old – by building up streams of passive income. As my readers know well, investing in stocks is, in my opinion, a great way to do just that.

Trading stocks in Thailand

I decided a few months back to open a stock account for my wife. I am not a big fan of shared or joined accounts and prefer if everyone has his/her own fair share of independence. Therefore, while we keep our bank accounts separate, it only makes sense that she also has her own source of wealth and income for her future plans, ideas, and dreams – which may or may not align with mine. Another reason is also that it’s always better to have a 2nd income under another name within the family. Saving taxes and reducing complications.

Taxes

But speaking of taxes, Thailand is a great destination for investors. There is no capital gain tax in place, so any profits collected from stock trading are completely tax-free. That is if you are living in Thailand of course. On top of that, dividend payouts are taxed at very reasonable 10 %. Therefore, no matter whether you are a trader or a long-term investor, Thailand is an attractive place to invest.

Account

I opened a securities account with the Bangkok Bank. It’s a fairly simple process, all you need to do is to go to a branch, sign some documents, show your passport and after a few days you will receive a username, password and the instruction to install an APP on your phone called STREAMING. It’s actually not easy to find information about it online so you can get a peek at how it looks HERE. The app can access your securities account with the username and password details.

There are different types of accounts. The most simple one is cash-based, meaning that you can only buy stocks with the money you put on it. If you like to have an overdraft in place or plan to short stocks, it is possible but further documents such as a work permit in Thailand or another person to guarantee for you, and/or a security deposit might be required.

I opened the account with Bangkok Bank because my main salary account is also there. Banks in Thailand are quite modern and advanced and offer much smarter solutions compared with i.e. German banks. One such function is “bill payment” which can be used to pay electric bills, water, telephone etc. in an instant. Transferring money to the securities account is also being done via this function and once the account has been verified, money will be deposited within milliseconds.

Transaction costs are extremely low, you can see the commission rates HERE. Usually, your cost will be less than 0,5% even with a very low trading volume. The system to calculate the commission is a little bit complicated because it is based on volume not only per transaction, but on your actual total daily traded volume, but from my point of view its a waste of time to elaborate on it. The cost is so low that it’s completely negligible.

Last but not least, what you also might want to do is to declare your main bank account (which must be a Thai bank) as your payout account for dividends. The service is called e-dividend and will ensure that any dividend payment will be transferred immediately to your main account. 10% in taxes are being deducted without any further action required from your side, so there is also no hassle about this later with any authorities.

You will need to do a tax declaration by the end of the year where your dividends need to be listed, but doing taxes in Thailand is amazingly simple. You do it completely online and it’s literally one A4 page that contains all the information.

Stocks & Information

The first source for information about Thai stocks should be the SET website (Stock Exchange of Thailand). It’s pretty comprehensive and full of information about every single listed stock. I encourage you to explore this site in detail. It has a dividend calendar, detailed company information, daily news updates and more.

The 2nd source of information is the Streaming App. It has plenty of built-in evaluation tools, to quickly identify stocks according to your preferred investment strategy. Dividend Growth, Small Caps, Value Stocks… the integrated stock screener is extremely useful to quickly identify companies that are worth a second look.

Probably the only and biggest restriction is, that you can trade only Thai stocks and Thai ETFs. I would have loved to add some US stocks or REITs but that’s unfortunately not possible for now.

Dividends

There are plenty of successful, dividend-paying companies in Thailand and yields are great. My wife’s account will probably reach a yield of 4,5 % this year and dividend growth is also a thing here. Most companies pay dividends only once or twice a year. The main dividend season is around April / May and then later again around September / October. However, as an income investor, you can find companies that pay out a dividend on different months as well. My target is to create a monthly-income portfolio and I think I can have it up and running within a year.

…. and go!

This is almost everything you need to know to get started. Happy investing!

FIRE – It’s about time, not money

Financial. Independence. Retire. Early.
F.I.R.E.

If you are interested in financial freedom, sooner rather than later you will stumble upon this term. While reaching financial independence and being able to retire early is not a new concept, it seems that these days it got plenty of steam, and there certainly is a very good reason for it. Probably more than one.

One of the main reasons I could think of would probably be the ever-increasing lack of job security, and the increased amount of options to travel and to explore the world.

Job security is becoming a relict of the past

As far back as I can remember, I was being told that to make a career one has to be flexible, adaptable and independent. While I got no problem with this and actually very much embrace the idea, one needs to realize that with more flexibility, we are also talking about more freelance jobs and short-term contracts. The traditional life-long assignment with one company has not become a rarity just yet, but it is becoming less common.

Don’t get me wrong, I don’t want to blame the industry or politics for this though. Frankly, I couldn’t imagine and wouldn’t even want to work for the same company all my life. Even 4 or 5 years would feel like an eternity to me. I rather believe that this is pretty much a reciprocal alignment of interests from both, the modern employee and employer’s side.

Working in hotels, I usually receive a contract for 1 or 2 years for each property. It happened only once, that I received an unlimited contract as a manager, but in most cases, it’s a limited offer. It’s a common standard in international hospitality so I don’t spend too many thoughts on this, but for most of my friends, family, and colleagues from my home area of Germany, there is not much understanding why anyone would agree to work on terms like this.

It all comes down to security, or does it?

Of course, the main idea behind the thinking of my family, friends, and colleagues is about the job and pension security. While schools and universities are preaching independence and flexibility, parents and politics are trying to push us into “stable” careers where you don’t need to worry about growing old – and receiving a sustainable and handy pension. This might be less common in the US, but it is pretty much the idea on which Europe has been built on.

I am traveling for a long time now, and my personal attitude was to always put freedom ahead of security. I hated the over-regulated German system and always wanted to get out of it. So, talking about security was always just some annoying concept to me. Being young, educated and in a booming industry, I was feeling like I could take on the world and handle everything by myself, while having much more fun, traveling and exploring the world along the way.

But things change, and you surely start to think differently when you turn 35 and got a family to support. For me, something happened around that time, when my daughter was born.

If you got no kids, you won’t be able to understand the fundamental change in your attitude that just comes naturally shortly after your kid is born. Your thoughts and priorities will slowly start to shift, towards wanting to make sure that you can care not only for yourself but also for your loved ones – no matter what. You might be a master in survival, but your significant other and your little ones might be much more vulnerable and you might start taking this into account at some point.

Many people start then to think about security for their family. As for my case, while security is a part of it, my worries shifted not towards security, but even more towards freedom. Freedom for myself, for my wife and for my daughter.

It’s all about time and what we do with it

I mentioned it over and over again and I will not get tired of repeating it: A successful career is the single, most important piece of the puzzle that you need to work on to reach your target of financial independence as early on as possible. The logic is simple: The more you earn, the more you can save, invest and the earlier you can start living off your investments and your savings.

A successful career has also plenty of other benefits, namely opportunities to gather experience and to face challenges in areas which you might not be able to have access to as a regular rank & file employee. Every experience helps us to develop further, to learn more and to understand the world, people and everything around it a little better. Therefore, I absolutely think that one should aim high and try to move up the career ranks quickly and with a high motivation to learn and to develop.

But having said all that, there is really no reason to do it for all your life. Especially when you have a family, spending 60-70 hours a week in an office becomes less and less desirable. You want to have more time, and you want to have the freedom to use this time the way that it will benefit you and your family the most.

Now here is the single most important realization about any job:

To work means to trade time for money. Your time is limited. Money is not.

You can only have more time if you have sufficient money to support yourself. If you don’t have money, you need to trade your time for money. You need to work. The more you have to work, the less time you have for anything else.

It’s simple, but yet only a few people truly recognize the significance of this logic.

Thus, the ultimate goal is actually not really about money. It’s about time. It’s about the freedom not to need to trade your time for money. This means that we have to use our careers, our income, and our skills to invest in assets and to set up businesses, that will allow us, step by step, to reduce the amount of time that we would normally need to trade for money.

Once we reach the point that we don’t need to trade time for money anymore, then FIRE becomes a reality. Or, whatever you would prefer to call it.

On a final note

There is one more thing that I will dedicate a separate post later on, but that I would like to shortly bring up today. If you truly understood the point above, then you will also realize another fact. Since your time is limited – on a daily basis – there is also a limit on how much you can earn by trading your time for money – on a daily basis.

Think about this: Let’s say you are a barber. It doesn’t matter how good you are and how much you charge for a hair-cut, there is a time limit as to how many haircuts you can perform per day. Meaning, there is a limit to how much you can earn.

Becoming independent also means that you remove this natural barrier, by focusing on money earning methods that are scalable. Meaning: They have no time limit attached to them and can produce higher results, without trading in additional time.

This might sound a little bit more complicated, but I will get on this topic in detail at another time soon.