My ‘end of the year’ review

Let’s take a look back at 2018, a volatile year for the financial markets and also for my portfolio to be honest. I’ve changed from a Dividend Growth Investor into a sort of hybrid. I took quite a lot of gains of the table and redistributed them into ETF’s, bonds and a few specific shares of companies I believe in for the long term. I’ve made promotion at work to become a junior broker, which in turn led me to learn a lot about options and these are now a part of portfolio too.

As I stated above I’ve sold quite a few of my positions already and I’m still looking to sell some companies, when the price is right. Long term these companies are more than solid so I’m not willing to throw away my shares for a bad price. The stocks that I’ve sold are:

Stocks

Stocks sold in 2018.

Some names that I still want to sell, but not for the current price are:

Securities that I’ve bought during 2018 which are to stay are:

And of course there is the entire list of ETF’s I buy every month. For an actual overview of my portfolio you can click here.

Chapter Two

During my transition phase, from dividend stocks to ETF’s, named Chapter Two, I kept looking for the best mix of ETF’s available in The Netherlands, providing me great exposure and diversification. I went with 10 funds/ETF’s, the following names are my ‘Chapter Two Portfolio’.

Total allocation in ETF’s/funds                                 76,50% 

The following positions will fill up the remaining 23,50%:

The only position I have yet to start is Royal Dutch Shell.

Options

I’ve always thought options were ‘not for me’, to speculative. After learning a lot about them through internal study program at work, I realised that they can be used in quite the passive and defensive manner. And that’s exactly what I started doing. The idea is that I want certain quality stock and I wouldn’t mind buying them with a discount. For example; Royal Dutch Shell, I need to get my hands on some shares, I could do it through a long standing limit order, or I could sell a put option. It gives me the obligation to buy a certain amount of shares, on a certain date, for a certain amount of money. If the share price is above the agreed upon price (or; strike) you keep the premium from selling the option and you won’t have to buy the underlying shares. This is one of my current plays. Another one of my plays is selling short strangles, here you sell a put and a call. In my case it’s on Unilever, and basically I’m saying: I don’t mind buying 100 shares of Unilever next month if the price is at €44, and I also wouldn’t mind selling my current shares if the price hits €52. In this way I get option premium on both sides of the stock price, and I have the ability to sell shares for a profit, or to buy extra shares for a price I would love.

This simple strategy will also be used on Royal Dutch Shell as soon as I get my hands on a few shares. This provides me with an extra monthly income, next to the quarterly dividends from the companies themselves.

It sounds like a good way to make some extra money, and it really is, BUT: Options are highly volatile products and should only be used when you fully understand the risks that comes with them.

Work

This year I’ve started working in the financial sector around April, I’ve been a customer service employee and it’s been great to start working in this field without any previous study in finance. Recently I’ve took a sort of course and I’ve made promotion to the order desk. It basicly means I still help customers, but I’m also able to help them with their orders and I should be able to explain them everything about the securities they invest in. This step up came with an additional few 100 euro’s in salary, which in turn will be added to my ETF portfolio every month. Every step towards FIRE is huge, and I’m really happy with how 2018 has turned out.

I’ve progressed in my job, I’ve come to learn way more about the financial markets due to my new job and colleagues, the new information has leaked through into my personal portfolio. I’ve turned my portfolio around into an ETF based portfolio, combined with a few singular stocks which I tend to keep for the long term, while I can sell a few options on these stocks.

The year 2018 has been a year full of volatility, I’ve seen massive gains in the beginning, but all these gains have been erased later on in the year, but the choices I’ve made are for the long term and I remain fully committed to them. Good companies don’t become 50% worse when the stock price falls 50%. I want to end this post with a great quote:

People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.

Peter Lynch, author of ‘One Up On Wall Street’.

I hope you all had a great year in your personal and investing life. Happy christmas and see you next year!

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2 Comments

  1. Hi DI,

    It seems like you had a really busy year!

    Congrats to your promotion at work! I like the way your employer cares for the development of its employees. It sounds like you found a good place for yourself there.

    Portfolio-wise it will be interesting to watch, if you‘ll really stick to your current plan for the long-term. To be honest, I was a little bit surprised that you sold shares of quite a few noncyclical businesses, considering that we probably just saw the peak of the current cycle.

    I also have one question concerning your ETF choice. I see that you now own 4 US focused ETFs plus the MSCI World, which has a strong US bias, too. Isn’t the overlap between those investment vehicles quite huge? Or was this your intention from the beginning?

    – David

    • DutchIndependence

      Hey JiR, first of all thank you for your comment! It’s true that my employer offers a lot of opportunities to grow, which is exactly why I chose to work there as I have no finance degree.

      Changing my portfolio was quite the radical change and I’d be lying if I’d say that I never think back on the decision to see if I could’ve done something different. But so far it gives me a bit more of an ‘easy’ feeling. I keep looking at individual stocks though as it’s still a big hobby of mine, I wouldn’t mind if I did that a bit less haha.

      The overlap is quite evident, it’s been the plan from the beginning as historically the US market has trashed the Dutch one if compared on gains. I believe that it will continue on like this for quite a while. It’s a big market and that’s why I don’t mind focusing quite a few ETF’s on America, as the country itself is already nice diversified.

      Thank you for the questions, I really think that from debating we all learn a bit, and writing down my reasoning helps with that as well!

      Have a great christmas and new year, see you in 2019!

      DI

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