Net Net Portfolio April: Get Rich Slow, Fast!

How do you really get rich fast? This question seems to evade many and is often confused with success. If you are able to save money, you have succeeded, feel good about that. But, what does it mean to get rich slow, fast?

The idea of compounding is touted as the way to eventually get rich. It can often feel like a slog, especially when just starting out. But trust me it’s worth it.

When your 20% return on investment goes from $2,000 to $20,000 with a $10,000 and a $100,000 respectively, you will begin to realize what I mean when I say get rich slow, fast. Suddenly you will feel the effects of compounding in a very real way.

Pushing those returns even higher, even if by just a single percent will bring very meaningful returns.

Increase Your Compounding Efforts with Knowledge

A high return on a small sum of money seems almost pointless, this is why investing should never be your main concern when you have small sums of cash.

Contrary to popular belief your earning power comes from your ability to gain knowledge as quickly as possible. This can mean acquiring skills for a high paying job or it can mean learning how to increase your return on investment from the measly 8% average market return to a more eye watering 50%.

Remember nothing nets a higher return than knowledge, as it cannot be taken from you and is only limited by time.

It’s best to learn both hourly earning skills and investing skills alongside each other, so that when you are ready for your investments to take the wheel you don’t fail miserably. This means failing early and often.

Methods for Fast Compounding

The time value of money is a very important concept to learn, when you are young it is obviously best to sell your time if you have no money. You eventually need to learn how to shift this mindset over time.

While investing in stocks is obviously a very passive way to invest, there are more active ways that can net higher returns. These include:

  • Invest in your education to get a high paying job.
  • Start or buy a website that you can put time into or hire others to help.
  • Investing in real estate where you can add sweat equity.

It’s all about spending time in areas that have the most impact on your financial life. The hard part is knowing what will have the highest amount of impact.

It can seem like going to college for 4 years is a waste, but when you look at earning power it takes only a short time for those college educated to overtake those who are not.

Just remember investing in your education is the same as value investing. Find cheap degrees that have the most upside.

Acquiring knowledge as quickly as possible is the fastest way to compound. This is why reading quickly or listening to YouTube videos on 2x speed are great ways to speed up your development.

Living Within Your Cash Flow

Just like stocks household finances are dependent upon cash flow. Living within your means is the first step to success in life. Reducing household expenses below your cash flow is the only measure of success. No matter how much you make.

If for whatever reason your earnings cannot keep pace which your expenses you need to evaluate whether or not you need to make more, or spend less. It could even mean relocating, however how hard it may be.

Adjusting your cash flow dial is the first step to controlling your future, if you save more of your cash flow you may achieve financial independence sooner, but its always a trade off. If you love your job, it may not be as important how quickly you achieve it.

April 2022 Net Net Portfolio Returns

And so it continues…

The Yen selloff has been especially painful for the portfolio. It has tested my patience and nerves when investing internationally. Oddly, I take solace in the fact that the Yen is at 20 year lows. When you look at the bargains on the Japanese market, its obvious overvaluation and a popping bubble is not the cause.

Returns for April were -3.53%

World equities suffered throughout April as all of my benchmarks were negative, but it seems Japan is beginning to turn a corner.

Neuberger Berman noted something I had not thought of: Japanese owned US bonds. Japanese money managers are sitting on a mountain of cash gains as they sell US denominated government bonds to buy the cheap Yen.

All of these Japanese investors can’t just sit on idle cash, so it is very likely they will buy cheap Japanese assets like stocks with them, pushing up these valuations. It may very well kickstart a Japanese bull market.

2022 YTD Net Net Portfolio Returns

Over the past year gains have not changed much by comparison with last month. So I though I would revert to a YTD overall percentage gain/loss. As we move into a new earnings season for equities, May should be very interesting.

YTD Returns are -5.63%

The SPY benchmark had a rebound in early March and then quickly dipped again in April to new lows. Even amid Yen weakness the SkyTech portfolio retains the lead in wealth preservation, which actually surprised me.

The stocks in Japan are gaining slowly and enough to make up for the drop in currency values. It will be interesting to see what this earnings season brings. Japanese money managers may choose some of the many undervalued stocks to buy shortly after.

Polish Stocks are Interesting

Over the last month I delved deep into the Polish markets and discovered its a hot bed of tech innovation and fast growing stocks. These companies grow and are of a decent valuation according to their balance sheets.

I have yet to find a company I like as much as Japan, but this is mainly due to the geopolitical events in the region. I feel there may be some more pain that could open up some compelling opportunities.

May Goals: Research and Waiting

There are just so many good stocks to buy, the problem is researching the best ones for the highest probability of gain. This is why I am trying to pull as many levers as possible to gain as much assurance as I can.

  • Cheap from a book valuation standpoint.
  • Earnings growth Exceeds PE.
  • Company specific catalysts for share price movement.

In today’s current market you can find a company with all of the above. Shockingly my view on American stocks is slowly changing as many become more attractive on a earnings standpoint.

They are not yet attractive on a book valuation but could soon get there, at which case I will be a net buyer.

Bryan Shealy

Bryan Shealy is an active value investor. He currently focuses on the small and micro cap stock market looking for bargains. He has written content for Seeking Alpha, Net Net Hunter and Broken Leg Investing.

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