Month: July 2014

Put money in thy purse – Compound Interest is sexier than Porches

I could never better stead thee than now. Put money in thy purse.

One year ago I was on the verge of semi-retirement. I had just finished a contract in South London. I had the summer ahead of me, travelling across Europe, I’d saved a pile of money in the bank, I had the ability to win short term contracts to pump my bank account if I ever needed it in the future and I had my own automated business which was about to generate a good income for me when I didn’t want to work. I didn’t know at that point that I was a few weeks away from a terrible turn of misfortune, serious illness in my family, that would cost me all my liquid cash, a sizeable chunk of my ISAs and set me back years.

That’s by the by. At that time, that June afternoon in 2013, I didn’t know the future. As far as I knew, I was cashed up. I had money to burn and a summer ahead of me.

So I set out to buy myself a car. I was looking at classic Porsches or unusual American cars like classic Mustangs or Corvettes. I was very serious about making that purchase and I easily had the money. 35 years of age and cruising across Europe in a bright red corvette. Not a bad way to spend the summer.

I am in a rush to get to the tapas bar.

I am in a rush to get to the tapas bar.

Reality bit and in the time I had to arrange my trip, I couldn’t possibly do all the due diligence on an expensive purchase like that, so I bought a very simple car. I drove into town to the nearest garage and saw a Renault Megane convertible. It took no thought or worry. I saw it on Saturday morning, I owned it about 20 minutes later. I left for Europe the next day. If I were to shell out money, I’d  have to take a few months to look into what I wanted and I’d need background checks done on the car and the seller, I’d have to work out insurance payments, how to store the care, consider maintenance, even research where the closest garages were which could maintain that kind of machine.

This is all by the by. The point is that I was for the first time in my life in a position to spend a fair chunk of coin on a car. Not off a credit card. Not on a loan. In cash. Money I had in my bank. I had the spare money, to do with as I pleased.

However, as I bought the Megane I knew I was happy with it. I knew, unless I was ever stupidly rich, I will be very reluctant to spend serious money on luxury goods until I am much older, even though I had it – at that time. I’ll be reticent to spend big money on a watch, or even on a suit from Saville Row. My luxury is travel.

The reason why is pretty simple. I have experienced the power of invested money. I have seen what £1 invested can return and with that experience I would have to be insane to spend £15,000 on a car when I could invest £15,000 and have it work for me over the next 30 years. £15,000 today will return me about £150 a month in my retirement.

If I didn’t have 30 years of interest growth to work it’s magic, then sure. That would be very different. Hence why I would happily spend money in my 60s.

I have literally hundreds of examples of the power of invested money. I’ll give you two. (indicative figures)

1)      In my younger days, several years ago, when banks still gave interest, I had £1 invested in a high interest account. I think I got about 30 pence a year in interest. At the same time, I had £1 in shares in Diageo.  Over the year the shares went up in value to about £1.10p and I also received dividends of around 60 pence. The dividends alone exceeded the bank account by a power of two, forget the capital gain.

2)      Around 6 months ago, Vodafone sold it’s stake in Verizon. I had around £1 of stock in Vodafone. When they sold Verizon I received a payment of around £1 and my Vodafone shares were still worth around £1. I doubled my money.

I didn’t anticipate the Vodafone thing. It’s just that I have around 20 different holdings and across those holdings, from time to time, a nice little bonus is going to happen.

So it happens that I have just finished two months of this contract and at the end of it, after all my bills, taxes, expenses, etc, I have spare money to spend. I could go and buy a new laptop, or an iPhone, or a better car, or throw a party. I could rent a better apartment. There is a whole range of tasty things I can do but there is only really one thing I get enjoyment from buying and that is stocks.

People I meet in life seem to buy things, gadgets, toys, necklaces, watches, furniture and the like as some form of enjoyment. They love getting the new phone. They get enjoyment from playing with it. It’s exciting to walk into the store, look at the new toy, buy it, get it home, unwrap it and start using it. It’s £1 well spent.

For me, I get that enjoyment once a month when I come to spend my spare cash on some stocks. I salivate over what company I am going to become part owner in. I read about the company, think about what they are doing and what value they contribute to the world. I am going to become a small part of that. Then I buy the shiny new stock and it becomes part of the figures on my online portal, an extra portion of asset on my balance sheets and an extra £10 a month in my old age.

So last week I did my annual deep appraisal on my holdings and the stock I am going for tomorrow is GlaxoSmithKline. I know it has some current problems but as a long term bet it’s still a good stock, and it’s currently a bit cheap. That’s largely irrelevant though because It’s more of a dividend stock for me than a growth stock, and while it’s only my 5th best dividend return, I like to have some redundancy across holdings, sector, business, location, etc. Glaxo is under represented, so I will put my money there.

Tomorrow my portal will look a little tidier. I still have a lot of money to fill my ISA for this year. I am hoping in the next few months to get a little more Vodafone and then some HSBC. At that point my ISA is going to look very balanced and I’ll be pretty happy with it. This ISA year I am ofcussing on boosting my dividend stocks, next year I will focus on my growth stocks.

This is top of the range kit, you LOSER!

This is top of the range kit, you LOSER!

My work colleague just bought an iPhone. A couple of hundred quid and £50 per month for the 18 months contract. He laughs at my very simple phone, £50 and a simple £10 per month rolling contract on Giff Gaff. In 20 years his iPhone will be gone, but my £1400 saved could be worth £10,000 if it performs at my current 5 year average (10% over 5 years across all my investments. 19% the first 2 years, but the last 3 have pulled the average down).

He laughs at my phone every day and I laugh along. He’s deluded but he doesn’t know it. I don’t dislike the guy, I like him, but I can see his blindfold. My phone may be simple but as long as the address book on it is filled with good people, I’m happy.

Jolia is in Switzerland and texts me every day. She is a stunning and sweet young lady. I can’t wait to take her for dinner and find out what has been going on in her life since I last saw her.

Carrot’s 21st birthday in Seville

The tapas bar at the end of my street.

The tapas bar at the end of my street.

My current contract plods along, putting money in my purse, swelling the pension pot. The days are hot and slow in the summer in London and the work being at a Government agency, well, no one is actually doing any work. Usually on a contract I am diligent and I work non stop, but my heads of department here are so incompetent, I’ve more or less given up on getting the job done.

So I booked a weekend to Seville, in Spain. A girlfriend of mine, Carrot, is studying alone over there right now and it was due to be her birthday, so I had a choice of rotting away at work, surrounded by middle aged women eating cakes and chocolate and constantly being angry, complaining there are no good men on Plenty of Fish…. Or going to Spain eating tapas and drinking wine with my super cute Croatian carrot.

This, or a load of Government workers in a sweaty office?

This, or a load of Government workers in a sweaty office?

It was hot when I touched down in Seville and the taxi from the airport was death cab. It dropped me near the place I booked on airbnb and as luck would have it, there was a good tapas bar called La Sontanta right next door to me. I texted Carrot, she was in her lecture, so I drank coffee, beer, ate Solomillo con Whisky and read James Joyce in the shade while I waited for her to finish.

When we met it was like a ray of joy came over me. She is such a wonderful girl, she is gentle, mild mannered and very beautiful. Her burnt orange hair had lightened in the sun and she was going blonde, her hair was almost see through.

Carrot was excited to be in Seville but warned the town was a little dull. We hit the streets and sank few Sangrias. On Wednesday I’d been stuck in work, on Thursday I was with my good friend in the Sevillian sunshine knocking back the Sangria. We hit the bars and night found one place, Abades de Triana, with a live pianist which poured enormous drinks (for £10 a head). It was right up our street, Audrey Carrot and Cary Layabout, sipping drinks against the river.

It’s a good town for a weekend break, the food is great, the town is pretty with Moorish themes and some pretty wild buildings.

We stayed in an area called Triana, it’s a 5 minute walk from the centre and really, it’s central Seville. Just because it’s over the river it’s seen as not central.

It was a great recharge and I’m not that happy to be back. I’m already missing my Carroty companion. Since things finished last month with my girlfriend of three years, Mousie, I was thinking of having some time alone and playing the field, but I did like having someone to look after. I still love Mousie, but it was time to let her go.

I’ll see the Carrot again in September when I spend a week in Croatia and see how it goes. She may be a longer term girlfriend for me, but at the moment she is happy to do the open relationship thing.

Anyway, pay day tomorrow and I have some money to buy some more shares. My mouth is salivating at the array of delicious companies I could be buying into.

If I had a wife and a mortgage and a kid, I’d not be able to just swan around the world at will and spend all my excess cash on shares. I can see why men settle down though; it’s great to be in the company of a nice woman. It’s quite amazing when you think about it, that a woman has the ability to be so charming and so wonderful to be with, that it can convince me to surrender my freedoms and wealth when I meet a great one.

Seville (18)

It’s the sangria talking. Back to work for me.