Would-be investor in the EU seeking some advice.

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
vladivanov
Posts: 4
Joined: Thu Jun 24, 2021 4:29 am

Would-be investor in the EU seeking some advice.

Post by vladivanov »

Hello World, and apologies for the very, very long first post, but please bear with me.

First of all, I would like to outline my situation.

Early 30s, not married, no children or other dependents, working in the tech sector, zero debt, income much higher than the average salary for my location.
My primary hobbies are of the time intensive, but otherwise cheap variety.That, and the occasional drink.
I keep my expenses low, I do not purchase Veblen goods for the sake of impressing random people I don't know or care about.
I neither want to, nor do I need to purchase any extra real estate, my work permits me to operate fully remote, and I hate cars and travel, so burning money for expensive vacations is most definitely out of the question.

My goal is to utilize my money in a way that provides me with passive, low-risk income.

I know enough about the tech sector and the financing around it to keep away from it and view most startups and unicorns with a lot of skepticism, some certainly have good ideas, but I am very skeptical of their ability to monetize said ideas and grow their user bases to a point where their crazy valuations are justified.
Furthermore, I think that most sectors and stocks are massively overvalued on account of things like thee Buffett indicator, insane P/E ratios, political risks, and numerous structural problems that haven't been addressed ever since the first Tech Bubble and the Subprime Mortgage crisis, and that have only become more severe with the COVID situation.

I think that a market correction is extremely likely, but I still feel a lot of FoMo, and I would prefer to minimize any and all damage to my savings.

I am working to educate myself about the stock market and investing, chiefly by reading Philip Fisher(Common Stocks and Uncommon Profit), Benjamin Graham(The Intelligent Investor), Howard Marks(The Most Important Thing, Mastering the Market Cycle), Peter Lynch(One up on Wall Street) and of course The Boglehead's guide to Investing.

While I love the idea of buying the whole haystack instead of looking for a needle I think that unprecedented low interest rates and other de facto subsidies ever since 2007 have clogged much of the system with structurally unsound companies that have grown complacent, and that have started to push inferior products, a downturn IMHO usually liquidates such companies outright or forces them to downsize, restructure, and shape up, thus paving the way for new entrants and improved performance down the line.

My goals with this thread are as follows:

1. I would certainly love to hear any and all opinions on my analysis, especially ones that punch holes in it(Yes, I have read some Dalio, too).

2. I am interested in practical recommendations regarding investment in the EU or Switzerland, in particular, good brokers

3. As the literature I listed is written by Americans and deals with the american situation in its more practical sections, like the ones discussing tax laws and filings I would appreciate any and all recommendations related to articles and books that deal with the situation in the EU and Asia.

4. Recommendations regarding furthering my education - books, articles and online courses.

5. How do I go about finding stocks to begin with? Do you think Lynch's "if you like the product you will love the stock" is good, or does a macro analysis and research into specific sectors/industries sound more logical?

Thank you for reading!
Valuethinker
Posts: 48954
Joined: Fri May 11, 2007 11:07 am

Re: Would-be investor in the EU seeking some advice.

Post by Valuethinker »

Just some general advice.

You will not be able to beat the professionals at stock picking.

Tesla was a "Sell" to me at a quarter of the current share price. The market does what the market wants to do.

Stick with broadly based index funds.
Topic Author
vladivanov
Posts: 4
Joined: Thu Jun 24, 2021 4:29 am

Re: Would-be investor in the EU seeking some advice.

Post by vladivanov »

I understand, I do plan to put some of my money into indices, however I wish to see the current bull market end beforehand, so a lot of the dead wood in the forest gets cleared out.

Would you recommend a decent EU-based broker?

Tesla was frankly never even a buy for me, at the moment Mr. Market is on a sugar high though, and I would rather look into value investing instead of hype buying.

Your opinion is perfectly valid, however in my view "professional" stock pickers have a number of downsides as well, most of which have been outlined by Lynch and Malkiel in the respective books I mentioned, so putting at least some of my value in individual picks might be beneficial.
ZenInside
Posts: 8
Joined: Mon Jul 19, 2021 1:40 pm

Re: Would-be investor in the EU seeking some advice.

Post by ZenInside »

Hi,

First you need to enter some very secure positions that will give you decent cash-flow while your principal is secured, the best that comes into my mind are utilities and reits. These two sectors took quite a beat post-covid because US pumped so much fiat in the market that made them kind of old school as most of the people went for fast growing companies, like Tesla.

So you can spot 4-5 companies in that field that can give you a decent cashflow in dividends that should cover the inflation as well, companies that I have in mind are: EPD (gas is needed everywhere in US), DUK, STOR, VICI (a medium risk REIT).

What you need to pay attention is that in a serious economic churn many companies will burn fast so you want to go for ones that have a large moat. Growing companies that have the quality to become well in bear markets are companies like Microsoft (MSFT) because these companies transform brainpower into cash most of the times which means that they are not affected by inflation or increased cost of materials, at least not in a large extent.

While I do have a position in O, i would not recommend that to someone that is in their entry, that company portfolio may not behave as expected in an economic downturn.
Topic Author
vladivanov
Posts: 4
Joined: Thu Jun 24, 2021 4:29 am

Re: Would-be investor in the EU seeking some advice.

Post by vladivanov »

ZenInside wrote: Mon Aug 02, 2021 11:54 am Hi,

First you need to enter some very secure positions that will give you decent cash-flow while your principal is secured, the best that comes into my mind are utilities and reits. These two sectors took quite a beat post-covid because US pumped so much fiat in the market that made them kind of old school as most of the people went for fast growing companies, like Tesla.

So you can spot 4-5 companies in that field that can give you a decent cashflow in dividends that should cover the inflation as well, companies that I have in mind are: EPD (gas is needed everywhere in US), DUK, STOR, VICI (a medium risk REIT).

What you need to pay attention is that in a serious economic churn many companies will burn fast so you want to go for ones that have a large moat. Growing companies that have the quality to become well in bear markets are companies like Microsoft (MSFT) because these companies transform brainpower into cash most of the times which means that they are not affected by inflation or increased cost of materials, at least not in a large extent.

While I do have a position in O, i would not recommend that to someone that is in their entry, that company portfolio may not behave as expected in an economic downturn.
Utilities are something that did cross my mind, especially companies that provide internet.

My thoughts on downturns and inflation boild down to "everyone needs to eat", as such I am thinking of looking into companies that produce farming equipment and fertilizer, since that is a force multiplier for farmers, and any increases in inflation and prices will quickly go to the pockets of the likes of Syngenta and Monsanto, as bad as the last few years were, world population is still growing and becoming more affluent, and those people need to eat.

Also, fertilizer and pesticides sound like the least-sexy, least hype-prone sector I can think about, which probably keeps a few of the speculators away.

Any thoughts on that?

Now, onto tech.

To sum up my thoughts: Too Damned Expensive!

While MSFT has a strong mote and a large and well connected eco system it is very much overvalued and I hate with their products.

Moreover, Google readily beats them where mass market consumer products are concerned, namely android and chromebooks.

Much of their moat where things like office productivity suites is being eaten up by cloud-based offerings such as Google Workspace and the need to use their OS to run their software is also eroding because of stuff like Office 365 and Dynamics, those offer web interfaces that you can access from any OS that can run a modern browser.

Their attempts to compete with Google in Search, Maps and even Edge were a real joke.

They also managed to destroy Skype and Teams is pretty lackluster, most people use Slack or Zoom, instead.

On the gaming front, they have some advantages, but they are far from beating Steam, and there are other new entrants in the field, like GoG and Epic.

They did mange to buy a number of major gaming companies, but those weren't performing all that well beforehand, and the price tag MS paid for them was, IMO quite steep.

Furthermore, gaming, as opposed to the film and television industry, has lower barriers to entry and some of the biggest studios and bestselling games are not American.

Then we have the OS itself, which will be under more and more pressure by the likes of Chrome OS(From what I hear, Chromebooks dominate US schools,and IMO hook em while they are young works even better for software than it does for cigarettes), and furthermore, a number of governments have launched projects to replace foreign-maid proprietary operating systems with ones based on opensource and put together locally, China, Russia and Turkey are just a few examples of that.

Very few things beat free, and Linux and FreeBSD are free, with some companies offering commercial support, AWS, for example has its own Linux distro, and most of the biggest innovations on the cloud/server side/machine learning/distributed data storage and processing come from the FOSS community and Google, not Microsoft.

Next, we have developer tools.Visual Studio is a nice IDE and still locks you into WIndows, however there are alternatives, ranging from JetBrains's various product through stuff like NetBeans and Eclipse all the way to VS Code, which while sponsored by Microsoft is still a free product and its development is driven by the community, and it is formally an advanced text editor, but the lines between an IDE and an editor are quite blurry.

On the language side, Golang is IMO superior to C#, and Java has a much larger user and application base, there are some design decisions in C# that are quite awful, IMO, with the java ecosystem and the various JVM languages being far bigger than anything running on the CLR, that thing doesn't even have a platform-agnostic GUI library/toolkit.

On the cloud front, I doubt they will ever come close to AWS, and after having to deal with both I am firmly in the AWS camp, and the GCP camp.

Azure has a few advantages, like very good integration with other MS products and legacy infrastructure, but AWS offers a lot more where services and experience are concerned.

Databases-wise, I would prefer Oracle, hands down, if a commercial product is required, or just use PostgreSQL or MariaDB instead, both of those last two have options for paid support and are much more modern than MS SQL Server, which MS bought from Sybase.

There is also the massive joker in the DB deck, two jokers, in fact, those being Google's Spanner and AWS's Aurora.

And, of course, there are all of the fancy-shmancy Big Data NoSQL databases we have nowadays, those blow plain old SQL Server out of the water where analytics are concerned,especially the Cloud-based ones.

I might be tempted to buy MSFT, but the P/E has to be a hell of a lot lower than what we have now.
Personal outlook: mostly bearish, I would rank MS on an equal footing with Oracle, since Oracle is not doing all that well in the Cloud, but did manage to gobble up a ton of ERP companies.I am somewhat more bullish on AWS and Google, tbh, tech is just too overpriced at the moment.
Valuethinker
Posts: 48954
Joined: Fri May 11, 2007 11:07 am

Re: Would-be investor in the EU seeking some advice.

Post by Valuethinker »

vladivanov wrote: Mon Aug 02, 2021 8:59 am I understand, I do plan to put some of my money into indices, however I wish to see the current bull market end beforehand, so a lot of the dead wood in the forest gets cleared out.

Would you recommend a decent EU-based broker?

Tesla was frankly never even a buy for me, at the moment Mr. Market is on a sugar high though, and I would rather look into value investing instead of hype buying.

Your opinion is perfectly valid, however in my view "professional" stock pickers have a number of downsides as well, most of which have been outlined by Lynch and Malkiel in the respective books I mentioned, so putting at least some of my value in individual picks might be beneficial.
People use IB, here. UK situation is different, of course, even pre Brexit.

I wasn't suggesting people use active fund managers. What I was pointing out is that an individual, picking stocks, is competing against people who think 24-7 about stocks, and have their ideas tested to destruction by their peers and by the market.

These people have access to the best experts and best technology that money can buy. They have close relationships with the senior managers of these companies -- meeting with them regularly to discuss market conditions & strategy etc.

Also you are competing against flash traders, who can extract value from naive retail trades. (Read Michael Lewis The Flash Boys for an introduction).

There is an unbelievable amount of academic research which shows that active stock picking underperforms index investing.

Burton Malkiel takes you through it. In more recent years, though, he has become a huge China bull, and you have to be a little careful of that. The political risks of stocks in China have become very clear of late.

Lynch makes it look easy. But he gave up managing money in 1989, and Fidelity Magellan has underperformed ever since. So if there was a secret special sauce, then Lynch had it, and his successors did not. See also the fate of Bill Miller of Legg Mason. Or Bill Gross "the bond market king". Or Neil Woodford in the UK.

It is not easy to pick stocks just by buying a company's products or seeing how busy their stores are. It is not easy to guess whether the next generation Apple phone will be as successful as its predecessors. It is not easy to guess whether Facebook or Google is winning the advertising wars.

What we do here is set a bond-equity weighting appropriate to our risk tolerance, and then buy the index. Let the market sort out which companies will be winners and losers. We focus, laser-like, on reducing costs and maximizing diversification.
jg12345
Posts: 421
Joined: Fri Dec 11, 2020 12:03 pm

Re: Would-be investor in the EU seeking some advice.

Post by jg12345 »

What Valuethinker said.

Only one little thing to add: you may want to look elsewhere.

There must be plenty of forums that discuss stockpicking (I say there must be because I do not know them). I think Reddit has been mentioned on this forum, but there are definitely plenty of other forums/discussion board.
T-Square Gal
Posts: 2
Joined: Thu Oct 22, 2015 4:32 pm

Re: Would-be investor in the EU seeking some advice.

Post by T-Square Gal »

Have you read @ the FIRE movement?
“Financial Independence Retire Early”
Millennials doing—- saving large amounts, living cheaply and accumulating early, to grow… & Vguard & Bogleheads’ approach is a perfect fit for these kids… !
Valuethinker
Posts: 48954
Joined: Fri May 11, 2007 11:07 am

Re: Would-be investor in the EU seeking some advice.

Post by Valuethinker »

T-Square Gal wrote: Tue Oct 11, 2022 3:49 pm Have you read @ the FIRE movement?
“Financial Independence Retire Early”
Millennials doing—- saving large amounts, living cheaply and accumulating early, to grow… & Vguard & Bogleheads’ approach is a perfect fit for these kids… !
Warning. Restarted thread from 2021.
Kendall
Moderator
Posts: 1414
Joined: Tue Apr 30, 2019 8:10 pm

Re: Would-be investor in the EU seeking some advice.

Post by Kendall »

To reinforce what Valuethinker and jg12345 said, have a look at the description of Bogleheads´ investment philosophy on the wiki. https://www.bogleheads.org/wiki/The_Bogleheads%C2%AE
Investing philosophy
The Bogleheads approach begins with an investor deciding on percentage allocations to various asset classes, such as U.S. stocks, international stocks, U.S. bonds, etc. The desired allocations are then implemented using low-cost vehicles which are true to the targeted asset classes. Tax costs are carefully considered, influencing decisions as to what investments to place in taxable versus tax-advantaged accounts.

Bogleheads emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions.
For suggested reading materials on investing, see https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Because our general approach is to buy and hold low cost, diversified investment products, you won’t find encouragement here if you are looking for hot tips on actively trading individual stocks. Feel free to post any particular questions you may have about your overall portfolio, strategies to manage existing individual stock holdings, or general investment guidance. But first, do take a look at our wiki.

Good luck with your investing journey!
Gráinne
DJN
Posts: 996
Joined: Sun Nov 19, 2017 11:30 pm

Re: Would-be investor in the EU seeking some advice.

Post by DJN »

Hi,
I read your long post and I wasn't able to find a location for you, the EU is not a country and you would be better served to name your place of tax residency. Across Europe there are many variables with regards to tax which may or may not affect your approach especially when implementing your plan. You will need a plan.
Apologies in advance if I missed mention of your country for tax purposes. Perhaps Switzerland?
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Post Reply