Plan for Early Retirement and Life - Part 2 The Investments

   The fight is about it to get underway
 
REFEREE: Right guys, I am expecting a clean fight. Keep the gloves up, anything dirty I will be onto you. Back to your corners.
 
The two fighters stand face to face before heading back to their corners.
  THE FUTURE (Hooded all in black): Lesson time MUFF! You're past it and are stepping into the unknown.   MUFF (Pink dressing gown with frills): turns with a rye grin on his face; what THE FUTURE doesn't know is that MUFF is well prepared for the fight and has a new tool in his armory. "FUTURE" you are full of it! You cannot fly by the seat of your pants all the time with your surprises; you need a plan, man." 
 
The bell rings for the first round  
  THE FUTURE: Walks to the center of the ring infuriated by MUFF. "I have too many surprises for him. My speed and change of direction will catch him off guard, he will be unable to adapt his style to me in time. I will take him to pieces bit by bit until he has no protection left - I am going to enjoy this!"
MUFF: "Riled him up - check, nice pink frilly shorts to distract him - check, time to soften the body before playing the ropes..." 
 
The fighters tap gloves - lets get on with this! 
Investment Plan Objectives
Here are a look at the key objectives of the MUFF tribe investment plan:

1. Contribute as much money as your employer does in your employment pension scheme - for instance if your employer contributes 5% of your salary, do the same. In the UK your 5% is tax- free.
2. Get an investment income that will pay the living costs and leave a bit more for fun or safety spending
3. Aim for an investment return of 10% each year
4. Invest in real assets that should hold their value over time (e.g. provide goods that people need such as water, consumer goods, food, healthcare etc.)
5. Choose long term investment themes (such as aging population will increase healthcare expenditures). The investment themes are discussed in more detail here.
6. Keep a "safety account" = 6 months of expenses
7. Learn how to manage investments and money
8. Have some fun trying :)

MUFF Investment portfolio overall performance
We have been aiming for a 10% compounded investment return over the 7 years. We have been averaging 12%. Our outgoings have fluctuated around the £2K per month level and we have been adding to our savings at an average rate of around £3K per month over this time a very healthy 60% saving rate (see10 Rules of Extreme Saving is a 50% saving rate possible for more information).

• The investment portfolio is up to a very healthy capital and is meeting our personal target for the move to France. 
• We are saving enough to buy a property in France in 2014. 
• We have two full pensions contributed to by both me and my wife which we have been contributing to as soon as we started working.

We have achieved this return after making some serious investment blunders along the way. Fortunately the MUFF Tribe novice investment portfolio overall has been able to beat the market. This has been done by spotting some opportunities and cutting out dealing costs. Perhaps we just got lucky but MUFF believes we achieved it through hard work and cutting out the middle men fees!
In my opinion if you can find stocks that pay high dividends and these dividend are sustained you have an exceptionally good chance to beat the market and get that 7% + return you are looking for. If like some other people on the net you speculate and get that 10 bagger, good on you. Unfortunately MUFF has not been able to bag one of those yet;)
MUFF's Portfolio individual investments
What follows are some examples of the investments that MUFF owns - please see the inevitable big fat disclaimer in the right tool bar. MUFF is not an investment expert and has lost money investing in the past. The investment themes and portfolio approach has worked for us in the past but may not work in the future - who knows?
 
Income Portfolio
 (MUFF is using Top Yields as a source of information)

United Utilities - Solid utility high debt but well financed at a low rate, considered safe and boring by MUFF...
GDF Suez - Euro woes have been hitting this utility giant from France. Recently purchased International Power and have significant water interests as well. Good dividend payout (part owned by the French government)
Penn West Petroleum - Very high dividend payout ratio that could easily change bought for the very high quarterly dividends but as a result is a higher risk. + it is based in Canada
Vangard Natural Resources - another high income play on this oil producer based in the USA - lower payout ration than Penn West.
Vodafone - It's good to talk especially with good rising dividends and customer base.GlaxoSmithkline - Healthcare play projecting for the dividend to grow for the next 3 years.
Growth Portfolio
(MUFF has been using free and paid newsletters)

Cenovus Energy - New technology play for extracting hydrocarbons - established business and pays a small dividend

Blackrock Gold and General Fund - Has not performed as well as the underlying metal. MUFF hopes the miners catch up (see zeal article) 
China Equity Fund - China may have a difficult period after stellar growth but it is still running at 7%+ per year)
First Majestic Silver Miners - David Morgan from the www.silver-investor.com  has convinced me. MUFF is a convert to the silver demand versus supply story:

Protect Portfolio
(MUFF has been reading about the history of money)
Central Fund of Canada - 50:50 split of physical gold and silver holdings in the Canadian Vault (the video below is about bubbles and the importance of holding some gold in these turbulent times).

Swiss Francs - Some currency diversification

So MUFF likes to be an investment themed stock picker.
I have added these investments into the latest version of MERP (MUFF Early Retirement Planner V2.0) with 100 shares of each security added as an example investment. This is using the free office suite Open Office http://www.openoffice.org version 3.4.1 (it is slow to load compared to excel but free and works very well) and automatic stock and fund quotes from Yahoo! finance http://getquote-tedsoft.blogspot.co.uk/p/about.html and Java JRE.
MUFF's approach is one of many ways to invest. In order for a balanced opinion please have a look at some other approaches. Some of these are listed here:
Other sources of information for us
We have access to a vast amount of financial information from the press and on the web. We can get overwhelmed by the sheer volume of this information. In MUFF's opinion (and it has happened to him) it is easy to be sold a financial product or idea. Here are selected sources of information that all have different approaches and ideas which MUFF has found useful down the years. They provide the alternative views that MUFF has been looking for. MUFF would like to think that several of the FREE sources of information listed below are not biased or trying to sell you a product.
Blogs

1. The Smoother Path To Wealth - JLCOLLINSNH
2. StocksP1, StocksP2, StocksP3, StocksP4, StocksP5,StocksP6, StocksP7..... JLCOLLINSNH excellent series on stock investing. A very reasoned approach to all of the pros and cons of investing in them.
3. The One Number To beat if You Want to Retire Early - Monevator
4. UK ETF Ivy League Fund - Monevator
5. Seven psychological quirks that destroy investment returns - Monevator

Books

1. Free Capital: How 12 private investors made millions in the stock market - Guy Thomas
2. Red Alert: How China's Growing Prosperity Will Strangle World Growth - Stephen Leeb and Gregory Dorsey
3. The Real Crash: America's Coming Bankruptcy--How to Save Yourself and Your Country: America's Coming Bankruptcy -- and How to Protect Yourself from the Collapse, Peter D. Schiff
4. Rich Dad, Poor Dad 2: Cash Flow Quadrant - Rich Dad's Guide to Financial Freedom - Robert T. Kiyosaki
5. The Intelligent Investor - Benjamin Graham
6. The Little Book of Value Investing (Little Books. Big Profits) - Roger Lowenstein and Christopher H. Browne

How often do you discuss your finances with your friends to find out what they are doing? Do you take rigorous control over your finances or use a financial adviser and fund managers to do it for you? Do you have financial and life goals and are you working towards them or are you enjoying your happiness in the moment? Do you invest your wealth in productive assets or do you acquire worldly goods?
All of these questions MUFF has asked himself, friends and family over the last few years as he is an inquisitive so and so. This has helped MUFF move on the path to early retirement by actively managing our families finances into productive assets and avoiding the consume today mentality.
Our finances are such an important part of our lives (unless you have a lot of wealth already - even though you might still think this way). We owe it to ourselves to place as much importance and time on them as our careers. If we invest for the future we will be stronger to survive shocks such as; the financial crisis, loosing a job, health issue or other unexpected expense. We will be able to avoid debt slavery to be a freer person. 
Invest today and reap the rewards in the future!
Buy productive investments instead of stuff. Financial freedom here we come!

MUFF looks to break all records
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