Give your kids a head start in life by investing with reduced tax

Give your kids a great start with financial stability

Everyone wants to give their kids a good start in life, one big part is financial stability. With some capital your kids might be able to buy their first resident or in some other way take their first step towards independence.

I save SEK 1,000 per month for each child which I invest in preference shares with fixed dividend through Untie Group where I also obtain monthly payouts. I am using the return to buy more preference shares and throughout time this produces compounded interest.

The minimum investment for these preference shares is SEK 2,000 so every other month I can buy new shares. After about two years the monthly payout is enough to purchase more preference shares and it accelerates from there.

The cash return gets larger and larger and the pace of re-investment increases as well. After 18 years the amount is larger than SEK 350,000 after tax with the reduced Swedish tax rate of 25 % instead of the regular 30 % on capital gains.

The total amount is now SEK 355,078 which is made up of SEK 216,000 of deposits and the remaining SEK 139,078 is pure return after tax.

The chart below shows the relationship between the capital deposited and the generated return, notice how the return accelerates over time.

It is never to late to start investing for your kids, through smart investments you can almost double the invested capital during a period of 18 years.

You can find more information at www.untiegroup.se and www.konsumenternas.se.

Good luck with your investments!

Invest the dividends from your small business with 0 % tax and secure your pension

Small businesses in Sweden can take advantage of an annual amount of SEK 171,875 (2019) which can be paid out as dividends with a tax rate of 20 % instead of the regular +50 % that you get charged from the 3:12 regulations. Any amount that you don’t pay out can be saved for the future and also transferred to another family member.

I have given a lot of thought to weather I should keep capital in my company and receive returns there or if I should issue dividends and invest the money privately.

I now think that I have found the solution and it is called unlisted preference shares!

If I invest in unlisted preference shares through my company the received interest will be tax free, the tax has already been paid by the company that issued the preference shares. This means that my actual received interest will be higher than the terms of the shares states.

If I invest in unlisted preference shares that pays 7 % interest it means that my actual return is 8.8 % which has a huge effect for a long term investment.

The frequency of payments also matters a lot, if the issuing company pays out the interest monthly it means that I can re-invest the cash and quickly compound my interest.

In our company, Untie Group, we are launching our own unlisted preference shares in 15 hours which features all of the properties mentioned above.

Let’s say that we invest our SEK 171,875 that we make in profits each year , meaning an investment of SEK 14,323 per month with an interest of 7 % and 0 % tax, what would the result be over a period of 20 years?

After 20 years we have obtained more than SEK 7,500,000 and each month we are going to receive a payment of SEK 43,500 which we can issue in dividends against our saved annual amount or use in another way.

Best regards,
Stefan

Two potential outcomes for S&P 500

A quick market update for you today. I am tracking two viable wave counts in the S&P 500. My primary long term count is shown below.

This is a very negative count and labels the drop that recently bottomed as a first wave of a larger 5 wave decline. On the short term chart it looks like this.

I can definitely see a five wave decline here and I played the last parts of wave (v) by buying some credit bull spreads in the S&P 500 futures since volatility was priced up and expensive. This has now contracted thanks to the bounce and profits are booked so now I am only watching to see how this plays out. If the primary count is correct then the bounce should fail very shortly.

The alternative count is much more bullish and shows that we could just have finished the large wave IV and that wave V just began.

In the short term chart it looks like this.

If this is going to be valid then S&P 500 cannot drop below the bottom at 2603 so that is a good level for a stop.

Have a great day!

Comparing investments in loans with the stock market

With all types of long term investments the compounding interest effect is the one that determines how value will develop over time. Have a look at the video below.

This is the reason why I have a very hard time finding an investment that generates better returns then investments in loans. The chart below shows the projected return at Kreditborsen (the credit exchange) compared to the Swedish general stock index called OMX during the past 20 years.

The chart above shows the return of 50,000 invested 20 years ago, in 1998, without any additional investments.

Having some fun at Untie Group!

 

Getting ready for investments this autumn

The most important decision I can make as a trader is to decide when not to trade.

Unfortunately, this spring and summer have been plagued by tragedies which were private in nature. Early on I decided not to trade while this was going on. First and foremost trading is a psychological challenge. If I have another issue that puts a psychological toll on me I should not trade.

During this time it has been awesome to have other investments that have generated passive income for me. I mostly use the peer-to-peer lending service called Kreditbörsen (Credit Exchange) which I founded a while back.

At Kreditbörsen I receive constant returns of around 10 % per year without having to get engaged in any daily decisions. I simply enter how much I want to lend to each individual borrower to control my risk and then Kreditbörsen does the rest.

The chart above is copied from one of my accounts with Kreditbörsen. Since May 2017 I have kept 45,000 in my account and since then I have received 12 % return after tax which I think is a great base income.

I also have accounts with Toborrow but unfortunately, Toborrow only issues corporate loans while Kreditbörsen caters to private borrowers as well.

I draw from my experience as having operated a private lending business to individuals in Sweden since 2011 when I say that the risks with private debt in Sweden is much lower than corporate debt. The system that Sweden has implemented works and offers great protection for lenders using services like Kreditbörsen to issue loans.

How should capital be allocated? Obviously, this comes down to your goals and your level of commitment. I myself is placing 40 – 50 % of my capital in passive income services that generates between 8 – 15 % per year, this gives me a very strong base.

I am now using this warm summer to prepare for more trading activity during autumn!

Video market update 2018-05-08

I have just posted a quick market update on YouTube!

Doing some work on our business dashboards

I just posted a quick video with some thoughts about a business dashboard that I am doing.

Taking some profits

That Bear Put Debit Spread which I wrote about a few days ago really worked out well. I bought the 2630/2610 spread for 4.15 and took my profits today at 8.00.

I am now watching two valid wave counts and the next few days will be very interesting. The bullish count is the triangle shown below which now should be in its final wave down before a big break to the upside.

The alternative wave count says that the big top is in and that the market now should accelerate to the downside.

For the triangle count to work, the market must not break below 2553 so that is the line in the sand for me.

Right now I am watching the market without having any swing trades on and just continuing to day trade!

Have a great day!

Office move and bear spreads

We have been moving into a new office for the last week and a half and I have not had any time for my writing 🙂

I have been day trading the S&P 500 and was very lucky in my IBM position which became very profitable in the end.

A quick update on the S&P.

I am currently tracking two counts where both of them are pointing to a top around where it is now. The first count is the triangle shown below.

And the second count is the more bearish one below.

Yesterday was not a very strong down day so I am still considering the possibility for the markets to move a little bit higher. I established a small Bear Put Debit Spread yesterday in the May 18th puts of the S&P 500 mini from 2630 to 2610.

Happy trading!