This article is a website version of our weekly FREE Best Ideas Newsletter sent on 18.07.2023. Sign up here to get it in your inbox every Tuesday.
You may remember at the end of May I told you how my bank was exploiting me! Paying me basically no interest despite rated increasing SUBSTANTIALLY!
This week you can read how I increased my interest income at least 4.5 times, and how you can do it as well.
I went from earning no interest on one account and 0.75% per year in the other to earning an average of 3.5% per year. I know these amounts are not going to make me retire in six months but it’s over 4.5 times more interest.
The real reason I write you these emails
Before I tell you exactly what I did, here is the REAL reason I write you these emails:
“First, the Quant Value newsletter has given me many profitable investment ideas like: DELFI LTD. +76% in 8 months, JUMBO S.A. +51% in 7 months and NIPPON PILLAR +59% in 9 months. You just have to follow the instructions in the newsletter. Very simple.
Second, if you want to become a better investor, the newsletter serves you with financial knowledge regularly (very important aspect for me).”
This great testimonial makes all the time I spend reading, researching, and writing worthwhile.
As you know my sole aim with Quant Investing is to share my investment experience and help you to increase your returns along with mine. I use all the tools and strategies I write to you about.
Why I started the screening service
That's the reason why I started the Screener.
When I left my banking job after 16 years, I was looking for a screener to invest my own money and could not find one that met all my requirements, so I set out to build one. The newsletter was added later as subscribers asked about investment ideas.
As you know the newsletter is the strategy I use in my portfolio. If you are new to the newsletter, you can read more about the newsletter here: Get Investment Ideas from ONLY the Best Strategies.
We even started a second newsletter to help subscribers invest in their tax free accounts as it recommends large companies that are easy to buy in most countries worldwide. You can read more about the second newsletter here: The best large cap investment strategy ever
How I got rid of my bank and started earning interest
Back to how I got rid of my bank and started earning interest again.
As I needed a place to park cash before it is invested, it had to be a solution where:
- Buying and selling costs were low and
- It was easy to get in and out
- Fund management fees were low, 0.1% in the funds below
Ended with two alternatives
All my searching led to two alternatives.
Option #1 was an ultra-short ETF bond fund.
This means a fund that buys bonds shortly before they mature (even long-term bonds) but because the fund only buys them six months to a year before they are repaid it does not have interest rate risk. This means when interest rates change the price of the bond may change substantially.
Option #2 was an ETF that duplicates the interest rate that banks lend to each other overnight.
Both have about the same interest rate.
The main difference is that the ultra-short bond fund has price risk. For example, in the financial crisis and the COVID crash the price of the fund fell as the price of the underlying bonds dropped.
This does not happen to an ETF that duplicates interbank interest rates.
Pay-out or accumulation
Another thing to think of. Should you buy a bond where the interest is added to the bond, in other words capitalised. Or invest in a fund where the interest is paid out on a regular basis.
The tax system here in Germany makes these two alternatives the same. If the interest is capitalised, I pay tax on it even though I haven't received anything. If the interest is paid out it is taxed as interest income.
I decided to buy the bonds that pay interest so that I can then decide what I want to do with the money.
Also, if the interest is paid out the tax situation is clear whereas if the interest is capitalised and the ETF does not report it you have to calculate the interest you received and declare that in your tax return.
I just thought it would be easier if I received the interest then it can be no question as to how much and what should be taxed.
Here are the two examples – This is NOT advice
Here are the two examples that I bought.
Please note that this is not individual investment advice. PLEASE do your own research to find out if they are right for you. It is just an example of what I did to help you in your process.
The ultra short bond ETF I bought was: iShares € Ultrashort Bond UCITS ETF
The European short term interbank swap rate fund I bought was: EUR Overnight Rate Swap UCITS ETF
I hope this gives you some idea of what you can do with your cash.
These are two examples of European funds in Euro, I am sure you can find similar funds in your home currency.
Quant Value newsletter update
The six ideas in the North America portfolio are up an average of +15.7% with Celestica up 42.4%.
The 12 ideas in the European portfolio are up an average of +13% with Carlo Gavazzi the top performer up 51.9%.
The 22 ideas in the Asia portfolio are up an average of +20.2% with SAN Holdings the top performer up 96.2% over nearly three years.
Shareholder Yield Letter update
All the ideas are new as the first ideas were added in May this year. So far, all 12 ideas are up an average of +2% with HP Inc. the top performer up 14.4%.
Your, helping you get the highest return analyst
PS To find great companies that exactly meet your investment strategy right now click here.
PPS It is so easy to forget, why not sign up now before you get distracted?
PPPS Here are the links to the two newsletters again in case you missed them earlier:
Smaller companies = Get Investment Ideas from ONLY the Best Strategies.
Large companies = The best large cap investment strategy ever