Where's the beef?
OK, let’s get specific. If you’ve read my blog article about the basics, you now know how to become financially free in theory. Here I’ll show you that this is not just some abstract theory. I will introduce you to my personal investment portfolio. With that, I was able to reach my own financial freedom.
On this page, I’ll show you the individual components of this portfolio. If you’re really crazy about the specifics, I don’t want to hold you back any longer with a lengthy introduction. But if you want to know more about my motivation, what I did, and why, you can …
One of my coaches, I think it was T. Harv Eker, once said: “If someone tells you that he can make you rich, make him show you his bank account. If he can prove to you that he is rich already, then you know that his method has worked in the past.”
This thought kept stuck in my mind for quite some time and I was about to do exactly that here, and show you a few numbers about the assets that I currently live on. The first question that would come to my mind as a reader of such a page is: How do you know that the data is genuine?
A big part of my assets are Bitcoin. Here, too, it would be easy to show a few links to my crypto wallets on this page. After all, the blockchain is publicly available on the Internet, and so would be my “account statements”. Same question – and even more difficult to prove (because of the pseudonymity of common crypto currencies): How do you, the reader, know that these are really my wallets?
So I decided to take a different approach, which I hope will be as convincing as to reveal my bank account. I’ll show you the principle how I made my money. For everyone to reproduce. For free. No expensive online course. No advertising. No affiliate marketing. This site is not monetized. Why? Because I don’t want to spend the effort to set up everything which is necessary. The daily fluctuation in the Bitcoin price causes my net assets to sway by a greater amount than my previous annual income as a well-paid software architect and project manager. Why should I mess around because of a few cents which I could earn by advertising – and probably scare away a large part of the readership in the process? I hope that doesn’t sound braggy right now, but it’s just the way it is: thanks to the investments I’ve made, my assets grow on their own fast enough. The calculated wage rate per hour of that growth is higher than if I would still do some manual labor. After all, that is the goal of financial freedom. And so I can fully concentrate on what I enjoy: writing, passing on my knowledge and building a community of like-minded people.
But let’s get back to the principle of my own financial freedom. I didn’t do anything else than I wrote down in the “basics” article series of this blog:
- I have consciously set the goal of becoming financially free.
- I became aware of my lifestyle by keeping track of my income and expenses until I got a feeling for them. With that, I know how much I need.
- I reflected how much money I want to spend freely each year. So I know how much I want.
- I had a look at the return on invest of possible assets. Then, I calculated how much money I need in total to finance my dream lifestyle with this return.
- I started to save money and invest into the appropriate assets. Then, I rinsed and repeated. Until it worked. That was not without setbacks. But if you stick with it and don’t give up, sooner or later you will be successful.
All of that you may have already read in my blog articles. Now the big question is, which investments did I do specifically? For the rest of this page, I’d like to show you exactly those building blocks.
My own financial freedom is divided into …
Three Basic Building Blocks
This is the most important of my three main pillars. It provides liquidity. The money is invested in stocks. The market return and dividends are responsible for the yield and cover my costs of living. Thereby, I follow a precise plan.
In the beginning, ludic drive led me to the stock markets. Of course I wanted to get rich with stocks, but I also had a lot of fun analyzing companies, trading and watching my assets grow. Needless to say, they didn’t just grow. On the contrary. I had some heavy losses in my career as an investor. But a few years later I had paid my tuition and got better at evaluating. Finally, I was on the right track making steady profits as a trader. However, in that phase I realized that I didn’t want to spend endless time in front of computer monitors and stare at colorful charts until the end of my life. As a trader, I still had to invest time regularly to make money. But I wanted to have passive income. So I started pouring the most important trading rules into an algorithm. A computer program that handles all the dull work. The programming took me a couple of years, but in the long run, every second was well spent. Nowadays, this algorithm works so well that it realizes an average return of roughly 8-10% per year. With this ROI and my current savings rate, I was able to calculate exactly how many more years I would need before I can chuck in making money manually.
And then came Wikifolio. I’m not sure if it is the first social trading platform which came into life. However, it was the only one where you could invest in stocks – and not in CFDs or other “financial weapons of mass destruction“, as Warren Buffett refers to the various derivatives. Wikifolio was the perfect playground for me to show the world what I can do and to present the performance of my algorithm — until I realized that there are tons of other traders who are way better than those few hundred thousand lines of code I plugged together in my free time. At first I thought “What the heck. I’m just somewhere in between with my ROI on this platform, but that’s better than not having an algorithm that will lead me to financial freedom.” But then it hit me like a flash of lightning. The portfolios of other traders are also only charts that can be traded, just like stocks – but with better performance. So I unleashed my algorithm onto Wikifolio and selected the best of the best Wikifolio traders. In the long term, they generate a return of 20% and more per year. And out of that I created an umbrella wikifolio which helped me achieve what I have today.
Theoretically, this last step would not have been necessary. I would have achieved my goals with my stock portfolio. But things evolved a lot faster that way. At the moment I’m running both depots in parallel, but I’ve invested the majority of my money in the umbrella wikifolio because it clearly yields the better return. If you want to take a look, you can find it here:
Initially, my investment in Bitcoin was motivated mainly by speculation and ludic drive. I didn’t think that it would become a sturdy pillar of financial freedom. But in the meantime, the very first and still leading crypto currency has developed into an asset to be taken seriously. Most probably, it will not disappear from this world anytime soon. At least I believe and hope that.
I’m essentially an early adopter here. I experimented with Bitcoin mining out of curiosity, at a time when you could still do it in your own garage. At some point I realized that this is also a business, with all the risks and the corresponding time and effort involved. The bulk work is done by machines, but you have to buy these machines, install the necessary software, maintain them, replace them when they become too old, pay for the electricity, make sure everything pays off, etc. You can still generate a steady income with mining today, but it’s not that passive as it might sound at first.
After I was done with my mining experiments, I moved over to buy the coins directly. I invested a relatively small sum. Some money I felt comfortable losing if the investment should backfire (according to the second golden rule of investing). From then on I hodl‘d. Through all crises and bubbles. And as long as nothing changes fundamentally, I will continue to do so. Bitcoin has massive potential to eventually become a currency that could be as important for the world’s economy as the euro or the dollar. If that happens, the price of a Bitcoin will be a lot higher than it is today. If not, then not. That’s why investing in Bitcoin back then was like buying a lottery ticket for me, with unusually high chances of winning. If the coins vanish over time, my stake is gone and I have to look for other investments. If not, I’ll get rich. And until today, everything looks like it will be the latter.
In fact, over time Bitcoin has developed into my biggest mainstay. I’ve even sold a few of them here and there in order to redeploy into other assets or to just buy something nice for myself. But I will keep the bulk of the coins, simply because I believe that there is still a lot of potential in this cryptocurrency. There’s a high chance that we might use them as world-wide means of payment one day.
My Self-Founded Company
The idea to found a startup arose after I had worked a few years in self-employment. There was more than enough work to do and my hourly wage rate was OK – but I noticed that this type of self-employment is similar to the work of an employee. It’s an exchange of time for money. Maybe with more money and more freedom as the average employee has. But I’m still the one who has to keep the wheel spinning. If I stop working, the flow of money will run dry. I wanted to take it to the next level and build an engine that would spin the wheel on it’s own, without me being involved all the time.
One book which pointed me into this direction was “The 4-Hour Work Week” by Tim Ferriss. In his book, Tim describes how he was able to unglue himself from his own company. He was trapped in the belief that his business would fail without him. According to this, he felt compelled to do more and more in the company. By changing his beliefs, relinquishing responsibility to his executives and trying new management methods, he has managed to withdraw himself bit by bit until he only needed four hours a week to manage the business.
For me, that sounded awesome. I wanted that, too. However, I did not have a well-running company from which I could break free in order to live from it’s profits for the rest of my life. So I decided to found one and started looking for partners. I didn’t want to found by myself only, because back then, I was afraid of overrating myself with such a big project. And in retrospect that has turned out to be a good decision. Four eyes (or six, as in our case) see more than two. And there were quite a few fruitful discussions with excellent results – far better than if I had made all the decisions on my own.
In the meantime I actually managed to leave this company – even though it is not yet generating any profits from which I could live. There are several reasons for this. It would go beyond the scope of this page to discuss all of them here. But the most relevant reason is: my other pillars, especially the Bitcoins, had developed so well over time that I no longer needed my salary as managing director to cover my cost of living.
Was the formation of this startup unnecessary in the end? I do not think so. Three pillars are better than two (even if it is up to you how many pillars you feel comfortable with) and I’ve learned an incredible amount about economy in general, and about investing, holding and managing money. Today, I know much more about how the world operates, especially beyond the rim of an employment contract. And this knowledge helps me to make good decisions about what to do with my money, where to store it, how to transfer it, to whom to entrust it, etc.
And who knows, maybe in a few years the current management will do exactly the billion-dollar exit that we dreamed about when we founded the company. I will not give up my shares anytime soon.
So now you know how financial freedom can work and what did the job in my case. Sometimes I get asked whether I would do everything in the same way if I had the opportunity to start all over again with what I know now. Certainly not. If, 20 years ago, I had the knowledge and experience that I have today, I would probably focus fully on the stock markets and on finding other successful traders who will work for me – just like in my Wikifolio. This has proven to be by far the method with the best time-to-return ratio.
I would probably also buy some bitcoins and watch them grow. But even if this crypto currency is by far the most profitable investment I’ve ever seen – I wouldn’t feel comfortable with Bitcoins alone in the long run. With all the potential that they have, the downside risk of this asset is way higher than with a well-functioning and highly optimized trading strategy with stocks. The stock exchange exists since several hundred years and there always were companies that have grown above the ordinary. Everyone can participate in this growth through the shares of those companies. And if you manage to find them, buy them in time and exit with sufficient profit, you will not only beat the markets in the long term – you will also have the perfect engine that produces the money for your own financial freedom.
So far so good. Do you have any questions about my portfolio?
That’s a good question. I think that depends on what number you are comfortable with. Some people are already satisfied with one single source of money. Others just have fun building a second, third or fourth after the first is up and running. And the next ones only feel comfortable when they have a backup that they can rely on, should another investment fail. The point is, any source of income can (but not necessarily will) fail at any time. In theory, the probability of total failure increases with the time the investment is running. It can’t hurt to build up a second or third pillar. Just to avoid having all your eggs in one single basket.
On the other hand, with each other supporting leg you build up, you start more or less from scratch. Usually it’s a new business. So you must learn how things work there. And you have to build up more motivation in order to sweat it out until you reach the goal. Establishing a second or third pillar is certainly faster than the first one, because you already have made certain learnings. But even with this advantage, it will certainly not work overnight.
As you can see, the question is not that easy to answer. Multiple main legs are more stable than just one. That is for sure. With two or three, most people may be comfortable. But I guess, everyone has to figure that out for themselves.
The answer to this question is best told in a short story:
The first civil jet planes were built in the middle of the last century. Many of them crashed after a relatively short time. Engineers found out that lots of small hairline cracks have formed in the outer skin, right around the windows. In the long run, those cracks broke the whole plane. Back then the windows were still square, constructed with right angles. Just like in houses. After that, the engineers moved on to integrate windows with round edges in airplanes.
In trading, there also can be hairline cracks. They are called human emotions. If they are not brought under control, the performance crashes in the long run. I claim that every successful trader has learned to control his emotions. If he doesn’t, he will not be successful. Any good beginner’s book on trading devotes about a third of its length to this subject.
An algorithm has no emotions. It does what it is programmed to do. If the programming is correct, the algorithm is successful and the performance does not crash. Just like the round windows in the plane.
Wikifolio is a platform for social trading. Here, traders can try out new strategies, collect followers and even have a certificate issued so that others can participate in their performance. The trader also earns money with investment of others, but only if he makes a profit himself in his portfolio. And those are the best conditions for a win-win situation between trader and investor.
All in all, Wikifolio is the best platform I know to implement the strategy for my own trading portfolio.
If you want to know more about Wikifolio, have a look at their FAQ. There you will find all the information you need about this platform.
So you’ve read everything on this site and now you’re wondering: this guy has found a method to let other traders work for him. With that, he has a return of more than 20% per year. If I understand correctly, he has had a certificate issued via this platform, Wikifolio. There, others can also invest money and participate in his returns. That’s great. Why the hell doesn’t he shout that from the rooftops? So many other people could be interested in and want to join.
The short answer: I am not allowed to. The BaFin, the German agency for financial regulation, forbids me to do so. Yes, that’s the law in Germany … 🙄
The long answer: I’m allowed to refer to my model stock portfolio at Wikifolio and I also may link it. I can write about it, mention the performance and explain the investment strategy. It’s also permitted to describe the Wikifolio business model in general, namely that a trader can have a secured certificate issued for his model portfolio that replicates his performance and that anyone can buy this certificate via a regular brokerage account. It’s like buying a fund or an ETF.
But I am not a BaFin-certified investment advisor (and I do not want to be that – it’s way too much effort…). Therefore, in particular, I am not allowed to make any offers, recommendations or requests to buy investment products. Not even for my own certificate. This article also does not constitute such an offer or solicitation and is intended for information only. My entire website does not provide investment advice and does not replace it. Please decide on your own wether my Wikifolio can be a suitable building block for your financial freedom. As always, the two golden basic rules of investing apply:
- Never put all eggs into one single basket – not even if you are thinking about investing in my certificate. There are also some risks involved in it.
- Only invest money you can afford to loose. Money you don’t need tomorrow for some important things.
Still have questions? Then write them to me – and if the question is good enough I’ll include it here in the FAQ.