My investment strategy (2021)

Financial Independence Feb 05, 2021

I learned everything I know about investing in the last 4 years – so this article is not investment advice and more a post for myself and to hold myself accountable.

Financial education is Germany means getting a regular job at a huge corporation and believe in official pension from the government. The stock market is for gambling and has no value at all. So go to school, learn something, ideally, go to university and get a 9-5 job.

My path is different, and so are my retirement plans.

After school, I went to university, but dropped out without a degree two years later to work as a web developer in a new agency. A few years later, I left that agency and became a freelancer – in this year as freelancer I made twice as much money as my previous year as employee. My cost of living did not increase and so I ended up with more cash than I ever owned (like 40k€ – eventually I spend them on my wedding, founding of Beyond Code and my investment career)

My investment career started 2017 when Bitcoin became visible to the public. At that time, I thought this is what investing is and in a gold rush, I bought Bitcoin and several alt coins. Driven by chats with friends who also got into the game, I eventually spent 8k€ until early December of that year – then it went to the moon and I tripled my investment. When it started dropping, I got greedy. Driven by greed, I thought that it will eventually start going up again tomorrow – but it did not. My friends tried to buy with leverage and most of them lost all of their investments. I kept holding and at some point, my portfolio hit 2k€. At that point I decided to keep my Bitcoin basically forever and got interested in the stock market.

Before I got my first stock, I started reading many books and the one that stick most was  "The simple path to Wealth". Simply buy index funds every month over 30 years and you are done. This is boring but it works. I still think that this is the best thing that one can do if one is not really into specific stocks and their companies.

So I got some world index ETFs, but also some on information technology – I believe that IT will outperform everything else for the foreseeable future and for the last 3 years I'm happy with this decision as this ETF is 40% up while the broader ones are 10-17% (still strong during a pandemic!)

Aside from these general investments with relatively low risk – as low as it gets on the stock market – I also bought some shares from companies I like. Apple, Amazon, Microsoft, and TESLA. For the first 2 years, my Tesla stock performed horrible and it was down 30% or more most of the time. Then 2020 happened.

I am really into electric cars, sustainable energy and everything that Tesla does. So I realized that this company will be the leading provider for transportation and energy within a few years and has the potential to completely disrupt all existing auto makers until 2030. So I started buying in 2019 and did this until a few months ago. It turns out that this was a good decision for now (the company is absolutely overvalued for their current state!) and my Tesla investment is 200% up.

So what changed in my thinking from index funds to buying a single stock? It's basically the opposite of the simple path to wealth advice.

I believe that it is possible to care so much about a topic and learn so much about it, that you can invest into single stocks and beat the market by a lot. I also think that this likely only happens by accident. It's very unlikely that you can guess which company will have the same growth or just pick it from a list or based on some articles. I have invested at least 1000 hours of research of Tesla topics and how the company works to see that early – this was luck and not driven by the goal to invest in the company. If you care about a topic and there is a company that does exactly that, it might be your chance too. If not, you'll likely lose your money and that's pure gambling – like my Crypto phase.

One other thing has changed in my thinking about investing. I think that we live in an age of disruption. Disruption changes the market in years and so investing in disruption gives great returns, if you pick the right companies. It also means that index fund won't perform as good as in the last 40 years. They are still ok, but I believe that I'll be able to beat them by a lot by investing into disruption.

All my investment decisions of my main portfolio are long-term and I don't have plans to sell any of the stock or ETFs in the next 10 years. It is very likely that I keep them forever. This is also driven by the idea that I am running my own software company and believe that I am such a clever guy that I will hit financial freedom when I turn 40 (4 1/2 years to go!) Running a software company can be a very profitable business and so I think that this will make so much money that I don't need to work anymore in a few years – but likely keep doing it because it's what I love.

In 2020, I sold my remaining Bitcoin at roughly the same price that I got it. So I did not gain any of the latest rally but I invested the money in Tesla, so I still have a 100% return on the investment for now.

Financial Independence, Money, Life

Sebastian Schlein

I’m Sebastian, Managing Partner, Developer and Consultant at Beyond Code. I write about entrepreneurial topics for freelancer, agency owners and people who want to become either of these.