Let's Talk About Meat and Potatoes!
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 the investment portfolio that enabled me to reach my own financial freedom.
On this page, I’ll show you the individual components of this portfolio. If you’re 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 replaying in my mind and it occurred to me that I could do exactly that here and show you numbers about the assets I currently live on. But the first question that would come to my mind as a reader would be: “How do I 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 are my account statements. Same question – and, because of the pseudonymity of common crypto currencies, even more difficult to prove: How do you know that these are my wallets?
So I decided to take a different approach, which I hope will be as convincing as revealing my bank accounts. I’ll show you the principle of 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? 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 bother with the effort to set up advertising and monetization to earn a few cents – and risk scaring away a large part of the readership in the process? I hope that doesn’t sound arrogant, but that’s the truth. Thanks to the investments I’ve made, my assets grow on their own to keep up with my spending. The calculated wage rate per hour of that growth is way higher than if I were to work my previous job. After all, this growth the core engine of financial freedom. It allows me to 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 financial freedom. I didn’t do anything other than what I explained in the “basics” article series of this blog:
- I consciously set the goal to become financially free.
- I became aware of my lifestyle by keeping track of my income and expenses until I could determine 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 was necessary to finance my dream lifestyle.
- I began saving money and investing in the appropriate assets. Then, I rinsed and repeated. Until it worked. This process was not without setbacks. But if you stick with it and don’t give up, sooner or later you will be successful.
You may have already read all of this 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 the building blocks.
My 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 cover my cost of living. Thereby, I follow a precise plan.
In the beginning, childlike curiosity led me to the stock market. 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 only grow. On the contrary. I had some heavy losses in my career as an investor. But a few years later I had learned my lessons and got better at evaluating. Finally, I was on the right track, making steady profits as a trader.
However, I realized that I didn’t want to spend endless time in front of computer monitors and stare at 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 could quit my job.
And then came Wikifolio. I’m not sure if it was the first social trading platform but, 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 present the performance of my algorithm — until I realized that tons of other traders were way better than those few hundred thousand lines of code I wrote in my free time.
At first, I thought, “What the heck. On this platform, my ROI is just somewhere in between, 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. Other trader’s portfolios do also have charts that can be traded, just like stocks – but with better performance. So I unleashed my algorithm onto the Wikifolio portfolios and selected the best of the best of the traders there. In the long term, they generate a return of 20% and more per year. This led to an umbrella wikifolio which helped me obtain 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 this way. At the moment, I’m running both wikifolios in parallel, but I’ve invested the majority of my money in the umbrella wikifolio because it clearly yields a 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 curiosity. I didn’t think that it would become a sturdy pillar of financial freedom. However, the very first and still leading crypto-currency has developed into an asset to be taken seriously. Most likely, it will not disappear anytime soon. At least I believe and hope that.
Regarding Bitcoin, I’m an early adopter. 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 mining is also a business, with all the risks and the corresponding time and effort involved. Machines do the the bulk of the work, 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 as 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; 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 become a currency as important for the world’s economy as the euro or the dollar. If that happens, the price of a Bitcoin will be dramatically higher than it is today. If not, then not. That’s why investing in Bitcoin when I did was like buying a lottery ticket, with unusually high chances of winning. If the coins vanish again in the future, my stake is gone, and I have to look for other investments. If not, I’ll get rich. And so far, everything indicates it will be the latter.
Over time, Bitcoin has become my biggest mainstay. I’ve even sold a few of them here and there to redeploy into other assets or just buy something nice for myself. But I will keep the bulk of the coins simply because I believe 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 working for an employer. 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 independently without my involvement.
One book which pointed me in 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. So, 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 managed to withdraw himself bit by bit until he only needed four hours a week to manage the business.
To me, that sounded awesome. I wanted that, too. However, I did not have a well-running company to break free from or live from its profits for the rest of my life. So I decided to found one and started looking for partners. I didn’t want to launch a company by myself, because I was afraid of overextending myself with such a big project. In retrospect that was 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.
A few years ago, I managed to leave this company – even though it was not yet generating any profits from which I could live. There are several reasons for this decision, but it’s beyond the scope of this page to discuss all of them. But the most relevant reason is: my other pillars, especially the Bitcoins, 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. And I’ve learned an incredible amount about the economy in general and how to invest, hold and manage money. Today, I know much more about how the world operates, especially beyond the scope of an employment contract. This knowledge helped me making good decisions about what to do with money, where to store it, how to transfer it, and with whom to entrust the money.
And who knows, maybe in a few years the current management will achieve the billion-dollar exit we dreamed of when we founded the company. I will not give up my shares anytime soon.
So now you know how financial freedom can work. Sometimes I am 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 the most profitable investment I’ve ever seen – I wouldn’t feel comfortable with bitcoins only in the long run. With all the potential 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 has existed for several hundred years and there always were companies that grew 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. It depends on what you are comfortable with. Some people are satisfied with a single source of money. Others 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 basket.
On the other hand, with each additional supporting leg you build, 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 learned from experience. But even with this advantage, it will not work overnight.
As you can see, the question is not that easy to answer. Multiple pillars are more stable than just one. 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 that many hairline cracks had formed in the outer skin around the windows. Over time, those hairline cracks broke the whole plane. Back then, the windows were still square, constructed with 90 degree angles, just like in houses. Engineers learned 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 the investment of others, but only if he makes a profit in his own portfolio. This are the best conditions one can get for a win-win situation between trader and investor.
All in all, Wikifolio is the best platform I know of 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 maybe you’ve read everything on this site, and now you’re wondering: this guy has a method to let other traders work for him, resulting in 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, 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 whether 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 basket – not even if you are consider investing in my certificate. There are also some risks involved in it.
- Only invest money you can afford to lose. Money you don’t need tomorrow.
Still have questions? Write to me – and if the question is good enough, I’ll include it in the FAQ.