Sep 2019/Q3 review

Well, September was fun wasn’t it.  Proroguing is now A Thing.  Impeachment is back.  The r word is in the media.  

From a markets point of view, nothing dramatic happened in September. Currency movements hit my GBP-denominated portfolio by about 1% in September, as the GBP gained a little against the other major currencies. Equities were pretty strongly up – 2.4% across my mix. Fixed income fell a little off recent highs. My portfolio tracked these market movements closely, rising 1.3% in total.

Returns by asset class/geography, Sep 2019
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Announcing the FIRE v London blog

‎Welcome to the inaugural blog post of FIRE v London. As an avid audience member of financial independence / retirement / dividend investing blogs over the years, I’m belatedly joining the orchestra myself. In this, my first, post I’ll lay out my perspective so far and objectives for this blog.

I’m a self-made high net worth investor in London, UK. I regard investing as a hobby. As such, I am enormously grateful to a variety of existing blogs for helping to illuminate / define my journey:

  • Monevator – a must-read for any serious UK investors. He combines best practice advice with a glimpse of the deviant wild side. His blog mixes various excellent authors’ opinions with thorough detailed reference material such as an online broker comparison guide. And he lays out the best of the week’s reading, every Saturday, neatly organised between passive investing and active investing. I am a big fan.
  • Dividend Mantra. A warts and all look at one man’s journey. Jason started with nothing, aside from a car dealership job paying less than GBP30k, and is well on (the way to) FIRE.
  • Retirement Investing Today.  Excellent role model for FIRE; after almost 400 posts he is months away from achieving FIRE, through Saving Hard and Investing Wisely.
  • DIY Income Investor.   Excellent income-orientated UK blog.
  • Financially Free By Forty.  A relative newcomer on the PF scene, Huw is proactively trying to organise the UK blogger PF community – which is great to see.
  • Simple Living in Suffolk. Ermine’s wonderful blog is a great advertisement for FI. He is a great advocate for Suffolk too.
  • No More Waffles.  Another relative newbie, NMW brings a very welcome Continental European perspective to the English-language PF community.
  • Many other blogs across the world.  Mr Money Mustache, The Escape Artist, Dividend Growth Investor, Dividend Hawk, and many other excellent blogs are all helping me on a regular basis.

These excellent blogs bring out some consistent themes:

  • Reduce costs. Numerous bloggers have costs of under USD20k per year.  This is less than the UK’s national minimum wage, and is a long way away from the upscale lifestyle that I am lucky enough to find familiar in London.
  • Save hard. The benchmark in the PF community appears to be saving over 50% of income (variously defined).  The irony here is that many FIRE people define FI as the level of assets needed to reliably produce an income which covers their ongoing expenses and thus will leave their savings rate dropping to 0% the moment they Escape the Firm.  Neither of these yardsticks resonates with me.
  • Minimise taxes. Most bloggers face at least 20% and often 40%+ marginal tax rates, and all draw attention to just how impactful avoiding these taxes is over the long term.  7% gross income doubles in 10 years; at 40% tax rate, the 4% net income doubles in 17 years.  Over a 40 year investing horizon this amounts to almost a 3-fold difference.
  • Minimise fees. The logic here is also unarguable, but lost (in my experience) on many of those same people who fight tooth and nail to minimise taxes.  This impact is particularly acute in the world of low interest rates; annual fees of 1.5% are equivalent to twice the tax you pay on a decent high interest cash account.

Up to a point, so far so good. As a UK investor, I love dividends already. I am already a saver, not a spender. I have reasonable access to low-fee investments, and I live in a relatively benign tax regime.  But where I start to diverge from the script is the cost reduction part – which can be the most important lever to pull. When I look at cost reduction, I see ‎dramatic lifestyle trade-offs:

  • Leave London. Sure, this saves money. But at the extreme this means moving somewhere where land is worthless, and building a hut. This is by definition a major compromise, and one I’m not prepared to make.
  • Have no kids. It’s notable how many of the frugal living bloggers don’t have kids, or not yet at least. But having no kids isn’t a policy choice driven by finances. And for those of us with kids what does it suggest for us?
  • Use state schools. As this is a Londoner’s blog, school fees are an issue. I won’t dwell on them here but I want to make two points: London’s fee-paying schools include some of the best anywhere in the world. And having the opportunity to use them can be a massive privilege. So assuming you put your kids’ education above other things, as I do, then you may well regard school fees as one of the last things you’d want to cut. Which puts your annual cost of living, with 2.2 kids, on a multiple of eg Jason’s.
  • Forgo some of London’s best features. One ex pat I know regards London’s only good feature as Heathrow airport. London’s airports, and the access to international travel that they afford Londoners, are certainly a key positive about living in London. I’m up for as much of this as I can get. And this is before we get to London’s own treats; London is a global dining out capital, has amazing cultural treasures, and is a great base for driving out of town for the weekend. It is also where a lot of my friends and acquaintances live, who I like socialising with as much as I can, which usually involves food, drink and transport – all of which cost money. All of these pleasures can be cut. But how short is life?

So, in short I am the sort of high income Londoner who doesn’t want to leave London, give up on any of London’s offer, ‎but wants financial independence as early as possible. I haven’t mentioned having somewhere to live, no small matter in this expensive city. I believe this outlook is underrepresented by current PF blogs, and so I’m aiming to help to redress the balance.

What I’d like this blog to accomplish:

  1. To explore the issues around enjoying financial independence from a Londoner’s perspective
  2. To seek wisdom and comment, but not judgement or advice;
  3. To share my experiences and opinions, but not provide answers or personal advice. I hope to be able to track my progress to my financial goals, with hard data.
  4. To spread the word – but not preach – that financial independence is achievable by the many, not the few, and how.

What would you like to hear from me?  What is missing for London/UK-based investors?  Anything I should avoid writing about? You can find me on twitter as @firevlondon or email me on mail at firevlondon.com.