Today’s Friday episode is the second part of our case study with Nicolas! A Romanian living in the Netherlands who wants help figuring out investing 💪 This time we tackle the subject of property investing, passive income, P2P lending and foreign exchange trading!
What we also talk about:
- Investing in stocks vs real estate
- When is property investing worth it
- Getting started with P2P investing
- Timing the market with foreign exchange rates
Is property investing worth it?
Nicolas owns the house he is currently living in, but says that it’s not worth buying a second one in the Netherlands because of the high tax rates. We compare between investing in dividend stocks and investing with real estate.
This table of course is a summary and not very detailed, but it’s pretty much what we talk about in the episode. We agree that to make property investing worthwhile, you need to find a property that meets the 1% rule (meaning you get 1% of total property value in net monthly income), so you get a healthy 12% per year.
If you have enough money for a down payment and the taxes aren’t too high, it’s a good investment especially long term. However, we agree that finding a property that meets the 1% rule in Europe is not very easy in this overvalued market. Your best bet is investing in other countries in the south of Europe like Spain or Portugal, where you would likely need to buy all in cash.
Other options with real estate are REITs (real estate companies that have shares on the market) and crowdfunding (giving your money to an expert and letting them do the work in exchange for a return). For more info on crowdfunding check out our episode with Christoph, a German investing through a crowdfunding company in Spain.
Where do all these percentages come from?
We talk a lot about the 7% rule, which comes from an average of over the past 100 years of the stock market. Every year the stock market fluctuates, it could be 20% this year and -5% next year. However, on an average of 20 years +, the stock market returns 7%.
The most important is to realise that the economy works in cycles and that the trick is to buy and hold. Remember you only lose money when you sell, not when the stock market drops in value.
It’s called economics 😉
We discuss how Nicolas could invest as a company and how to manage his tax in the best way possible.
P2P investing and FX
Peer to peer investing is an interesting way to invest your money – we discuss that some platforms offer a 12% return, although they are slightly riskier.
Nicolas then asks us if it’s worth to consider investing in FX movements. We call FX trading timing the market, which is always risky and I find personally, stressful as hell.
However, Alvar explains a situation where he was able to take advantage of the FX system by waiting a few years to withdraw his bonds in New Zealand. He calls it playing the market instead of timing it. Nice.
As usual, we recommend keeping it simple and only doing something you feel you understand and know how to manage.
Another very interesting case study episode with Nicolas 👌 We hope you learnt something from it!
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