My 11 year old daughter buys her first stock.

So out of the blue one of my daughter (the youngest one) asks if she can buy some stock.

Where do i start?

Shes only 11 but my eyes lite up when she asked but i was more worried in how to go about it without it sounding too boring or complicated. How could i making investing in stocks sound exciting to a 11 year old child? Fortunately for me she was pretty excited and i pointed her in the direction to look up Warren Buffet. She soon picked up on the fact that hes the worlds second richest man.

"At the age of 11, Buffet went into the stock trading business with his sister, Doris, buying six shares of Cities Service, an oil service company, at $38 a share. Buffett had identified Cities as an undervalued stock and was confident of making a nice profit for himself and his sister. Unfortunately, the stock lost almost a third of its value within just a few weeks of Buffett purchasing it.

Despite his sister berating him continually about their dwindling fortune, Warren held onto the stock until it rebounded to $40 a share, when he closed the trade for a $2 per share profit. After cashing in, he then had the unpleasant experience of watching the stock rise to over $200 a share without him" 

I explained to her about price to earnings, debt ratios, company size, future growth and finally the dividend. I know ive not explained everything but we all have to start somewhere and after all that  i was exhausted, though pleased she managed to grasp it , maybe not fully but enough to start looking at stocks.She's still hungry for more information.

Looking at stocks

There are three stocks she has put in her watchlist they are: Barret Developments  LSE:BDEV , Secure Trust Bank LSE: STB and Taylor Wimpey LSE:TW. The nice thing about these stocks is that none of them came on my radar before but now i'm also interested. The one though that she wanted to invest in initially was Hays LSE:HAS . This company is trading at a yearly low, undervalued by around 18%, 13.7 PE, 9.3% expected annual growth, Past earnings growth over the last 5 years has been 15.8%. No debt, dividend payout ratio at 33% with the dividend at 5.6%. Dividends have increased over the past 10 years.

Well that stock sounded fair enough for me to invest in so now it was time to find a trading account for her. 

Ideally i wanted one like the US Robinhood but unfortunately the UK does not have it so i had to do some digging around. In the end i found a site called trading212, it has free commission and you can purchase as low as just one stock. The downside though is that no drip option is available. The maximum account size is 30K so i think that's quite big enough for the moment :). 

We've decided to give our daughter initially £10 per month to invest , so we've credited her account with £120.

Hays LSE:HAS was her stock purchase for November . She's already looking forward to this Monday so she can buy another. Currently she's thinking of buying Taylor Wimpey LSE:TW.  

Where is the money coming from?

My children all have bank accounts since they were born. Money has been deposited over the years from birthdays etc. The interest rates are really poor so i'm happy to take money out on their behalf for them to put into stocks instead. We''ll see how it goes first but if all is well and the enthusiasm stays then we could increase their allowance in the markets to £20/£30 month. 

Conclusion:

Looking back i wish i had done this as a child but unfortunately my parents weren't in the position to understand markets let alone invest in them.As parents we try to raise our children to a better standard that we ourselves were raised (i think that's natural parenting)and hopefully my daughter will stick at it. There's nothing holding her back except the willing to do or not to do it.

Do any of your children invest and whats your experience?

 What could I do to maintain her interest?

Is timing everything a good idea?

I was walking home with my dad one evening and he said he was feeling peckish and said he fancied cooking himself a boiled egg when he got home. I asked him how does he get it right so its not  hard boiled  and yet not under cooked. How do you get it right, how do you time it  perfect?

He explained that its extremely easy and anyone can do it. First you need a metal saucepan and you fill 3/4 with water. You then switch on your microwave. Once the water is boiling you add the egg and let it boil for 2 1/2 minutes. You get a perfect egg every time. 

So now im puzzled and i confirm with my dad that he uses a metal saucepan and the microwave! "yes" he answered " how else would i get it perfect every time?" . "Dad" I say, and i go on again to repeat the whole process just to confirm a third time. He says "Surly you know how to cook an egg and i don't have to keep explaining how to boil an egg?" . I'm like Um yes dad you do, "please can you explain the saucepan and microwave bit" He goes on say in a bit of a huff. "look once the water is boiling on the stove you turn the microwave on for 2 1/2 minutes and when the bell tings you take the saucepan off the stove and take the egg out" . "Oh bloody hell dad that's ok then ,  you use the microwave as a timer and you don't put the saucepan in it!" He goes on to say "No that would be stupid who would put metal in a microwave?". I replied "yes your right dad , use a timer to cook and time the perfect egg and yes a microwave is a perfect timer".

Timing  the market and is it as important as timing a boiled egg?

If your a day trader then its all about timing no matter the method used whether it be trend lines, patterns or cycles: its all timing. Time scales can be from 1 minute ,1 hour to yearly charts . Normally though they are scalping if they are under 8hrs and and day traders normally work using the daily  and larger charts (but using the lower frames for a more precise entry). Some people are really good at market timing but personally im pretty poor at it.

 Currently there is talk about the S&P and its going into a bear market with a possible recession to follow, I have have no idea what will happen except one thing. That one thing is the way i will trade for my passive income dividends. While i might have a couple of £K to invest  i can certainly say its far more important to time the boiled egg correctly than to time the market.

Source: SchwabCenter for Financial Research

Figure 1: Range of S&P 500 returns, 1926-2011

From the chart the 1 year period can produce some fantastic results of  54% gains but also some huge losses at -43.3%.  But the longer your in the market and holding then the losses are decreased to the point of where no one loses once 20 year holding periods are reached.

How I'm timing the market

The simple answer to this is that im not. Im just buying dividend paying companies on a regular basis and while the markets drop then im buying them at cheaper prices. Im not really bothered that some of my stocks are deep in the red with the worst at -25% (5% of my portfolio) , because the companies are sound and pay me to hold. Its all about the income , the passive income, to keep the passive income growing no matter the market position.

Conclusion:

Every month i add around £500 minimum to my account and i add to old positions if they are looking cheap or buy new ones. I look for companies undervalued no matter the position of the overall market. I'm simply not skilled enough to time things perfect except maybe now a boiled egg. 

As Dory would say in the film Nemo " just keep adding , just keep adding". She never looked back and succeeded in the end; though she could not see the light straight away.

Did / do you ever day trade to boost your portfolio and have you had long term success?

Do you worry about market news?

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How much money is F--- You Money?

F You Money

The first time I  heard  this it just struck home as a profound statement. To me it was like the ultimate financial achievement that is possibly to anyone. I remember my dad using once when i was little child. At the time there was a long recession and there was no work and my dad was a plumber. To keep the money coming in my dad took a job as a postman. He did the job for three weeks and was completely bored; his quote to his boss was "a well trained monkey could do this this job, F this". The problem here was that my dad done it out of weakness and it put stress on my mum with the household bills. Secondly he did not say it to a person but rather used  it to say it to a job.

How much money is it?

I think this depends on person to person , their expectations and their lifestyle. Some people might throw lump sums out there and say its a million £  or £250K. For me i think its different, its a position of no more thinking of reaching a certain age for retirement  , no more im going to make a million. Its just a simple sum for me in where all my bills are covered and i never have to worry. The amount of money you would need to not have a care in the world and just be able to say fuck you to everyone.

This could be a very low figure.

                              Lets say you earn $500 a week as this covers all your bills.

                              = your F you money is $500 a week from passive income.

This does not have to be  a lump some but more of a weekly/ monthly figure that is achieved through passive income; this sounds much more realistic to the average Joe Bloggs .

Where did it come from?

I first heard it on the film by actor John Goodman in the 2014 film The Gambler, Where he explains that if you ever get a large lump sum you should buy a nice small house with a good roof. Clear your debts and put the rest into a 3-5% savings account and that should last you the rest of your life. You are now in the position to say F You. 

But once you are in that position hell it would be nice to one day to actually use it. I think i'm too polite but i think that if im sat on my death bed and im thinking about the fact that i never used it then it might be something i regret.

My F You position / Goal:

The ultimate position i would like to be in is to earn £2500  (£576 Week) per month from pure passive income. That would give me  a very strong F You weapon. While i could do it from £1300 a month this would be weak in that i would be short on funds to go on lavish holidays and be free on my spending.

My goal this year on the road to hit the F You was  £382 a month. By the end of last October i had already exceed this target and averaged out at £522 (£120 week) a month from passive income. But im not relying on anyone to provide me with a needed wage as most of my income is from my businesses.

Conclusion:

Some peoples F You money is a pure lump sum, for me its a monthly wage that is inflationary. Im not at the the position yet. I will be close to my 'weak' position of £1300 very soon but the position of strength will take a little longer.

What is your position and do you think you will ever use it? 

Have you ever used it?

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To buy a new car or not?

Yes thats our family car that we've had for many years, this picture was taken when i dumped it in the yard and the last one of it looking nice.
I was driving to our local scout hut and as we went round a slight bend i noticed the oil light came on very briefly. This rang alarm bells in my head but i said nothing and carried on driving to the hut which was only another 3 miles.
2 hours later as we went back to the car i flipped the bonnet to check the levels. The water bottle was not how it should be; it was full to the brim of oil. Yes you've guessed it the head gasket had gone and the car engine is soon to be knackered. I know the engine will run, but the issue in getting back home which is 12 miles is going to be keeping the engine cool with very low oil, and the water coolant will be sluggish moving round the engine. So i disconnected the water coolant hose and drained 2/3 rds of the very thick oily water bottle in some old coke cans from a local bin (this will give the expansion needed in the tank as everything warms up).

I get the kids to jump in the car (my own of course) start the engine and put the heater on maximum and on full blast , all in aid to keep the engine cool. I drive back to my yard 45 mph nice and steady, and we made it thankfully. Above is the picture of when i dumped the car.

Now what do i do?

I have a budget set aside of 7k for a replacement vehicle and what do i do about the broken down car?

I phoned our local scrapped dealer and i would get £100 and they would clear it away for me. Well i was tempted but i did say no as i could see a money making project coming along. 

I decided to strip it and sell the parts.

I have time to do it though i have zero experience. I would strip a part , google what it was and then list on Ebay. I even got 1/2 tank of free diesel for my truck :) and the battery i sold locally on Facebook market place. I would list an item for 30days as its free. i would also reduce the price. If it did not sell then i either binned it or took it to the local scarp metal yard.

The result was i made £1810. The final picture above (i did not remove the engine or gear box ) went to the scrap man as he came along picked it up and gave me £20.

7K for a new car

Im in a dilemma now for do i spend the whole 7k, do i buy a brand new one on very low finance and keep the 7k ? One good friend of mine always drives nice cars so i started asking him about payments etc and he explains his costs just £250 a month.I have to admit it sounds cheap and it would be nice to have something new. But my mind says not to take on debt when you don't need to. I currently have zero debt (i pay my credit card off every month).

A friend from a local garage rang me up and says there's a bargain volvo coming up for 7k and it would suit me perfect. I make contact with the seller on a Sunday morning and we go and have a chat, kick the tyres and have test drive. ( Ive got the 7k in my truck glove box). I'm thinking i could knock this guy down to 6.5 k.

So i ask him (just for confirmation) "how much do you want for this?" he replies "Oooow I'm thinking of around 8.5 - 9 K". 

WTF!!!! im thinking. Now i cannot even be bothered to haggle , so i just say i'll think about it and walk away.

So im chatting to another friend who owns a local garage and im telling him my stories and he turns around "That cars for sale". I look and he tells me its a great car and i can have it for 2.5K . Needless to say we agreed on 2.3K. 

Not taking on debt

 The car has been great and i have £1810 in the bank from my old car plus £4.7 K available left over out of the  7K also now sat in the bank

Conclusion

Im actually in a better position than when i had the first car and the second car really only cost £490 (2.3K -  £1810). My insurance and tax also went down and this new car does alot more miles per a gallon. Im also glad i did not finance a car as the 'good feel' factor is only temporary but the debt would have lasted years. It was well worth stripping the car and the price of scrap metal is very good (£130 ton). I learnt alot about cars doing this and a few tricks of the trade.

I am thinking and i mean just currently thinking of doing a side hustle in spending £400 of the £1810 to buy a car and strip it, im not sure yet.

Isn't there some motto about turning a negative into a positive or something like that?

What car do you drive and why? Have you ever stripped a car before and what was your experience?

Quick side note:
While im putting this post together my wife sends me this:

Buying a company that has roots back to 1516 AD

Royal Mail plc (RMG.L)

Who are they:

Royal Mail  is a postal service and courier company in the United Kingdom, originally established in 1516. The company's subsidiary, Royal Mail Group Limited, operates the brands Royal Mail (letters) and Parcelforce Worldwide (parcels). General Logistics Systems, an international logistics company, is a wholly owned subsidiary of Royal Mail Group.

The company provides mail collection and delivery services throughout the UK. Letters are deposited in a pillar or wall box, taken to a post office, or collected in bulk from businesses. Deliveries are made at least once every day except Sundays and bank holidays at uniform charges for all UK destinations. Royal Mail generally aims to make first class deliveries the next business day throughout the nation.

For most of its history, Royal Mail has been a public service, operating as a government department or public corporation. However, following the Postal Services Act 2011, a majority of the shares in Royal Mail were floated on the London Stock Exchange in 2013. The UK government initially retained a 30% stake in Royal Mail, but sold its remaining shares in 2015, ending 499 years of public ownership. It is a constituent of the FTSE 100 Index.

How did i find them?

I was chatting to my postman the other day and he was mentioning that he was buying some more shares as the price is so low. I asked why they were so low and he explained about the company floating 5 years ago and all employees got free shares . But they could not cash in the shares until they have held them for a least 5 years to avoid tax. "Some 145,000 postal workers have waited five years to sell the free shares they were given at the time of privatisation without being taxed" - BBC.  Now the five years is up employees were selling when the price was at the top and now its dropping they are panicking as they think they are losing money so they are also cashing in. 

I asked how he felt about the company. He explained that everything seems really good, plenty of work, good working conditions and they are getting a new vehicle roll out. Thats another reason why he was adding to the low price shares. The company peaked in May this year at 632p and has nearly halved at 336p.

Company downside:

One of the main factors that puts it at a disadvantage to other couriers is that it there is alot of manhandling and alot of people on the payroll. They also have a duty to visit every house in the UK at no additional costs  on a letter price if its a letter. All this makes Royal mail one of the most , if not the most expensive ways of sending a parcel.

Royal mails core revenue used to be the delivery of letters but this is and has been diminishing over the years. 

With these high running costs the lastest earnings have tumbled. Pre-tax profit more than halved to £33m for the six months to 23 September despite a 1% rise in revenues to just over £4.9bn.

Revenue from its GLS European parcel operations was up 9%, offsetting a 1% fall in the UK parcels and letters. While this does not initially look good most of the downside was due to the fall in letter deliveries. Other sub core areas have been expanding.Growth in online shopping helped drive a 6% rise in revenues for the UK parcels business, but total revenue from letters was down 7%. Adjusted pre-tax profit was down 27% to £183m.

The Numbers:

Market Cap : £3B     

Current Market Value: £3.27  Future cash flow value: £4.49

P/E :34.6                                Expected annual growth in earnings : 15.2%

Debt : 16.7% (and is well covered by operating cash flow)

Dividend :7.33%

Whilst this is a very old company the dividend have only been paid out for the last 4 years and the dividends have been increasing. This short period is because that the company only fully floated 5 years ago.

Reasons for buying:

This is a very well established company with an amazing brand  and an ever increasing market. While letters used to be their core component the future is in parcels and counter services (money transfers, important document transfers eg driving license, passports. ) plus its expansion of  General Logistics Systems (GLS) across Germany and Europe . Not only does this company have the edge in providing a 100% UK coverage but it also provides a face to face counter service, last minute delivery and an expanding services growth sector both in the UK and other countries. 

This is a one of a kind company in the UK that has held back its competitors. The dividend has been increasing YOY  .The expansion of Royal Mail’s GLS division looks set to continue over the medium term. It seems to be gaining traction in existing markets and could help to offset the decline in Letters volumes in the UK.

Conclusion:

For me this has long term growth potential with a steady dividend income stream that is at a 5 year low in over sold conditions.

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Upping my game

Upping my game

Ive been looking at some of my past posts and i think i really need to do more to express whats stocks Im purchasing or what other passive income models i'm thinking of employing or currently doing. Im also now thinking of starting a Facebook and twitter feed to help link this blog; though that will mean i will have to change this blog from private to public.

Things i could do with doing :

•  Open a Facebook and twitter feed.
• Talk about what stocks I have and why.
• Talk about what other passive income im using.
• What and how am i contributing to my account every month.
• About history on how i got into this and about my history as a day trading.

Heres the new Facebook link:

https://www.facebook.com/The-Simple-Minded-Investor-588601821570572/?modal=admin_todo_tour

Well there's the link and now i'll have to put some content to it.

And here's my twitter feed: 

https://twitter.com/Mindedinvestor

Well that's two off the list ticked off :) (just have to add content). 

My daughter is asking questions:

Earlier in the month my 11 year who often asks questions about my charts etc, finally wanted me to drill down to her exactly what I am doing. Now she wants in on the game.

I decided to give her £10 a month to invest and have opened her a trading account with trading212.com. This site offers the same benefits as robinhood except its for the UK but does not drip the dividends. She understands about dividends and overbought ,  oversold, 52 week lows and highs, insider trading. She also checks debt ratios and price earnings. Using thesimplywallstreet site shes also setup her own watch list. 

I actually bought a company she found and recommended.  It's is on the LSE: RMG Royal mail group.

I'll write a post about the purchase and reasons tomorrow, but it's getting late here now ( 23.58) and my eyes are closing.

Good night.

October 2018 just lovin it !

October 2018

Lets get straight to the figures:
Passive income total for the month was an amazing £775.21.
As written previously the monthly target is £382.
The overall income so far this year is £5226.28 and the target for the whole year has been smashed as it is £4587. That means the next two months are a complete bonus and gets me closer earlier to retirement for 50.

Ok lets look at the dividends:
Total for the month including the bonds was £224.70. This is just amazing and a all new record.

These are the stocks that i currently own:

Things ive adapted: 
I've started checking the stock prices on charts to see how maybe they could be over bought. From this i have sold two stocks and bought some more. Im slowly converting the portfolio to a more undervalued dividend growth.

Account Value:
The current portfolio value now stands at £17, 561.

How do i feel:
There has been a major stock market correction , but i added more stocks in at the low. I dont think its time for the crash and am looking for around end of 2019 or 2020 for the crash. Everything is going very well and better than i would have guessed at the start of the year. Im hitting new records every month. Its all very exciting.