I love buying premium products. I buy everything I need and I afford any hobbies I want. But I don’t become poor after purchasing all of this stuff. And most of the time I only pay 20-30% of the item’s price. How can I afford to buy an iPhone for 300€? How do I get money after buying an expensive camera? Let’s learn about depreciation.

When you buy stuff, look at 3 things: a lifetime of a product, It is hard to break, for how much will I be able to sell this stuff in the future?

Buy 1-year-old stuff

I don’t buy new iPhones, Macbooks, cameras, or bikes (i hope soon I will add cars here). Instead, I buy 1-year-old items. For example, I bought iPhone 11 pro 256 GB just for 600€, while the 12th was priced at 1200€. This iPhone was in perfect condition and was just 6 months old. I keep it already for 2 years and I can sell it for 450€ (Sep 2022). However, I broke Face-Id while swimming and now I have to give a discount and sell it for 300€. The total cost of an iPhone usage was 300€, or 150€ per year or 12.5€ per month.

Some people sell their 1-year-old phones to buy new ones. They sell it for 50%-70% of the price. That means, that to have a new iPhone each year, a person should pay a difference of 600€ between the initial price and selling price, or 50€ per month. But if you wanna have the previous model and keep it for 2 years, the monthly payment is just 12.5€. It is 4 times cheaper to have the previous model. If you keep the old model for a longer time, maybe you can even pay 10€ per month. To clarify, it does not mean that you pay someone € each month, it just shows how much value the phone loses every month.

Depreciation is the value, that an item loses each month or year. It is also treated as the real cost of usage of a good. In theory, you should take the price of a good when you bought it and the selling price after the expected time of usage. Then you subtract these prices and divide them by the number of years or months that you plan to use that stuff. For an iPhone 14, it will be (1200-600)/3 = 200€ per year if we assume that we use a 1200€ iPhone for 3 years and sell it for 600€.

Depreciation can be counted linearly, or more complicated. For easiness, assume that in the first year the item loses the same cost as in the next 2 years combined.

Used items are Inflation-free. That means if the price for new models goes up, the used items will cost the same as before. It is just a rule. For example, in Russia, there is huge inflation in cars. The previous models of a car cost 100k€ 1 year ago, the new model cost 300k€ due to the import restrictions. We could imagine, that if these cars still have the same engine and interior, the price for the one-year-old car should also rise dramatically. However, it is not the case. For example, the used Audi Q7 of 2020 with 50k km costs 70k€, while the new one of 2022 costs 250k€. The only difference between them is the small adjustment in the exterior and interior.

Different countries have different prices. For example, I bought a used camera, Sony a7 II for just 570€. When I came to Russia, it appeared that I can sell it for 1.2k€. So, I can sell it here and get a 600€ profit. It is known as Arbitrage. It is when you profit from the difference in prices without risk.

Buy high quality

Don’t buy low quality. Such items are easy to break, and their lifetime is short. You will not be able to sell it, so you just throw it in the rubbish bin after some time. Keep in mind that cheap low quality items are sometimes made with the child force and in poor worker conditions. And by buying and throwing the bad quality items in the rubbish bin, you are polluting nature.

High-quality items last long, show prestige and are beautiful and comfortable.

Also buy new

Not every item can be bought or used. Don’t buy used headphones, parachutes, or stuff you know nothing about. For example, I want to buy a bike for 2.8k€. It is expensive. I could probably find the one-year-old bike, but I don’t know how to check the bike for quality, or I don’t want to change the details. In such situations, I can either hire a professional or ask a friend for help. Or just buy a new one. The bike, for example, has a lifetime of 7 years on average, and then the depreciation will be 2800/7 = 400€. Of course, a bike can be sold even for 1000€ in 7 years, because we can change details and make repairments each year, but let’s assume that we do nothing. So, the cost of a bike will be 33€ per month. It is not too much for high quality.

What about fashion

Fashion is complicated. The fashion houses know that people want to be trendy, and the style changes each half a year. I don’t know if it is a good idea to buy used clothes, but it is a good idea to buy expensive classical outfits. For men it is easy – just buy suits for 2k€ each and use them for a decade. Buy good shirts, t-shirts, and 8 pairs of shoes for different events. The men’s classics change too slowly. There are also trendy casual outfits that should be changed more often.

For women, it does not work. Fashion for women is much more important. It is a way to show her status and prove to herself that she is the most beautiful. However, some brands like Burberry don’t change their fashion style too often. Gucci can also be worn for a quite long time. I recommend not buying the brand stuff, but quality stuff. Don’t be a crank and don’t buy an item with huge brand logos. Instead, buy something attractive. You will never find a brand on a 5k€ dress and suit.

When buying new clothes, remember how can you combine them with other clothes or whether you already have enough outfits for some occasions. Maybe you just need to buy high-quality t-shirts instead of 20 t-shirts with cheap prints. I have an excel file, where I put all the wardrobe items in my Austrian house. It appeared that I have items, that costs 6000€ in total. But I have only a few things that cost more than 100€. I understood that I have too many cheap clothes up to 25€. And the thing is that I wear such clothes for 1 or 2 years. The expensive items, however, I wear for a much longer time. I also found out that I have 5 suits, and 4 of them cost less than 200€ each.

I hope, after reading this article, you will buy quality stuff for lower prices and will afford anything you want.

Dow Jones Industrial Average (DJIA) is the most important index of American companies. DJIA index includes 30 companies, chosen by Wall Street Journal editors. These 30 companies are large and the most influential companies. The index includes Apple, Boeing IBM, McDonald’s, Disney, and Walmart.

History

In 1896 Charles H. Dow created the Dow Jones index. He included 12 industrial corporations. General Electric was one of these 12 companies and the only company that remained in the Dow Jones Index for 120 years and was removed in 2018 due to the 55% annual loss. In 1929 the list included 30 companies, such as U.S. Steel, General Motors Corporation, Wright Aeronautical, and Standard Oil.

Charles H. Dow published his index in “Customers’ Afternoon Letter”, now known as the Wall Street Journal.
All of the companies are treated as blue chips (the most expensive chip in poker) – the most trustworthy, influential, and expensive companies, that are traded on the New York Stock Exchange.

Today, Dow Jones Industrial Average includes not only industrial but any sector – Salesforce, Apple, Microsoft, Visa, Mcdonald’s, Goldman Sachs and United Health are all parts of the DJIA. In the previous 10 years, 10 companies replaced the old corporations.

How is Dow Jones index counted

Dow Jones index is harder than the S&P 500, where the market cap of the companies is summed up. DJIA takes the share price of each company, sums
them up, and divides the sum by the Dow Divisor. Initially, the Dow Divisor was equal to the number of companies in an index, but then the problem happened: some companies decided to split shares. The companies split because the price of one share is too high, so that investors can’t afford such shares anymore. The Dow Jones adjusts to such situations to keep the index on the same level after such an operation.

Some people think that points in Dow Jones are equal to the dollar. It is not right. Each point is a dollar divided by the Dow Divisor. Let’s see how we count the points.

As of February 2021, the Dow Divisor was equal to 0.152. Basically, 1 dollar equals 1/0.152 = 6.5 points.

Let’s sum up the share prices of each company, we get 4001$. After dividing it by 0.152 we get 26322 points. This is the Dow Jones Index.

You may ask: why the heck do we need that index if it is so complicated with points? Because it shows well the situation in the country as well as in the stock market. It shows well the times of recession, stagnation, and growth.

How to buy

Dow Jones is just an index, but you can buy exchange-traded funds (ETFs), that copy the Dow Jones Index portfolio.

Learn more about other indexes: S&P 500, Russel 2000, Nasdaq 100, and Wilshire 5000.
Source: Investopedia and “Stock market 101” written by Michele Cagan.

To invest in wine, you should learn about the different types of wine. It is simple after reading a book and degustating wine in winery shops. Usually, it is not expensive, and there is even a festival, where you can try wine for free. But first, read the book.

Wine Folly, Essential wine guide.

photos are fairly used, the information is given for describing purposes. Learn more about the fair use

240-pages book with illustrations. it describes how to keep the wine, to open it, how to drink it, what food is suitable for each type of wine, how to taste wine, and how to define the origin, age, and quality of the wine.

The book shows the characteristics of each type of wine, for example Chardonnay, or  Sauvignon Blanc, or Nebbiolo. The Book provides a bit more information.

Wine Folly, The master guide

It is an alternative to the previous book made by the same authors. The book contains more information and describes each country deeply, starting with characteristics of temperatures, a dictionary of wine names, and characteristics of each vine in such region.

WSET collection

Attention. I did not read these books, just looked through them. After careful reading, I will delete this line and write more about the following books.

This is a collection of 7 books that are used to get a diploma in the wine industry. It explains all the processes to create and keep wine. You don’t need to read all of them, but these 2: “Wines: Looking behind the label”, and “Understanding Wines: Explaining Style and Quality”.

wine-searcher.com

Wine searcher explains in a blog the difference between regions, grapes, and aging.

The website has a database of the quality of a wine based on a region and the year produced for different price categories of wine. This is essential information.

If you want to keep your wine safe, I provide a service of keeping wine in the wine fridge, where I manage the temperature, humidity, and the position of a bottle based on the knowledge I have got after reading a book. The fridge is located in Vienna, Austria.

I usually publish lists of books about architecture that I recommend to read. All of them are important to understand the value of a house. This article suggest books, minimally required to understand value of a house.

A Pattern Lnaguage, Kristopher Alexander

read it before investing or buying a house. This book describes how the space affects our way of living: how each type of city should look like, how the houses in the neighborhood should be placed and how it affects the ways people behave with each other. Even how the shadows, floor level, density of people, age difference and green parking affects the living in a house and society.

I read the Russian translated version of the book made by ArtLebedev Studio with great illustrations. If you speak Russian, I insist reading this book. This is my favorite book that I recommend to everyone.

Real estate investing 101, Michele Cagan

A dictionary that explains most of the termins and concepts you should know to master in the real estate.

All other books will be added soon. To learn more about the architecture and real estate, read my blog. Write a keyword by clicking on a search button and find “real estate‘, ‘architecture‘, investment‘ or other tags that you are interested in.

Remember, I can’t explain in a blog the same information that is written in huge books – the books I share are written by professionals and scientists who spent years for each book – they provided as much knowledge as they could in the best way. I can only share their knowledge by sharing the book or by taking the main ideas from it. Some books cost 100$, but after reading such books you will learn everything you should know about this theme.

I love alternative investments – they are inflation-free and are increasing in price due to scarcity and age premium. Alternative investments are more than just looking at different numbers in financial reports, using, and analyzing macroeconomics. It is a hobby.

lifestyle

When you make alternative investments, you invest in the stuff you like or something about that you want to know more about. People invest in art not only because the picture can cost 3 times more in 10 years, but because they learned that this author made a masterpiece. They read books, go to art galleries and exhibitions, and told to people who are also interested in it.

People did not just get value from keeping the picture in the collection, they have got fun. They were traveling, meeting people, who became friends. They became a part of the art society.

Any type of thing can be an alternative investment – people buy rights for the music, gemstones, houses, wine, violins, and cellos (that are rented out, after which the price and the quality of sound get higher), exotic cars, books with signatures or even boots.

How to learn

Get knowledge by reading books, journals, and blogs. I am interested in wine, art, and real estate, and I give tips about them. All of them are interesting differently: wine is the most profitable, art is the most inspiring and risky, residential real estate is the safest, and, commercial real estate is the most expensive, but profitable and slightly riskier than residential real estate.

books to read

• Real estate
• Wine
• Art

Risks

During the recession, fewer people are ready to spend money because they need first all solve problems with business and a family budget. Some people must sell their investments, just because they don’t have enough money to pay for the bills. Therefore, the demand falls, and the amount of people willing to sell grows. Then the price also falls.

Investors say that stable cash is the most expensive stuff at this time because you get less money after selling your investment (image the price of the stocks in a crisis). Fortunately, it does not last long – the government makes huge inflation so that people buy more because later everything will be more expensive. If there is deflation, people keep cash, companies sell much less. Companies become bankrupt, the market fails and the currency gets to 0 due to the printing of cash for the social and governmental sector and payments for the state debts.

The commercial real estate investment in such times may lose the renters because some companies close. Then you should find new renters and give them 2 months for free. These are renting holidays, that are given to make renovations and to find employees. In Russia renting holidays is not obligatory, but it is a common practice. There are ways to lower the risks: For example, my family rents out an office to the municipal administration – they are not subject to bankruptcy and they stay in one place for decades. Therefore, you don’t need to have an administrator, who does HR, PR, and finances, because you have a constant client.

When to invest

The recession is also the best time to invest. If you have enough cash, just buy as much as you want. Usually, alternative investments weigh 5-15% of an investor’s portfolio (excluding real estate). I don’t recommend investing more if you don’t know too much about the sector and the item you invest in.

For example, if you invest in wine, you may be deceived about the quality. You can also spoil wine by keeping it at the wrong temperature and in the sun. If you invest in art, the seller can sell a picture for double a fair price. The author of a picture may become less interesting to the public. That is why you should know the sector by reading books and consulting with professionals. And don’t keep all eggs in one basket – diversify.

If you are interested in art investment, or real estate investment, write me at daniil@koveh.com, and I will help you to make the right decision, buy the art in the EU and help with legal stuff. I will find the best real estate investment in Russia and Austria based on my experience, and the experience of my family, who through 4 generations were constructing real estate all over Russia.

The Stock market is a place of gambling and investing. You don’t get rich without risks, but you may save money for your future and get passive income. But how to invest effectively and what mistakes you should not do? Let’s read:

You won’t get more than 10% in $ per year in the long run. Even s&p500 grows 6-8% p.a. on average. Once Warren Buffet said that just a few funds will be more effective than s&p500. To prove it, he argued with fund managers that they will not gain more than S&P500 in 10 years. At a point in time, the funds had higher returns. But there was a crisis, and most of the funds lost all the profit that they made in previous years. Only 2 funds, as i remembered, outperformed S&500.

Don’t panic. We are all people: we have emotions and biases. When the stock falls, we start a panic, we think that it continues falling or that we must buy more because the stock is cheaper. That is our human nature. We think that the status quo, the one which was before the current events, will stay forever, but it does not always work this way.

There were nearly two hundred large companies that became bankrupt after the 2008-2009th crash, and if it was true for the index that time, then nowadays, with the risk of recession, the index may fall for a decade, who knows.

Buy when there is uncertainty and sell when there is euphoria. It works, but mostly if you stick to 2 types of assets: index or shares of stable companies that are not seriously affected. When you invest in an index, you lower the risk of bankruptcy of a given company. If the index is on historical (or 10 years) minimum or maximum, that is too different from reality, or if the

Markets fall every 6-8 years. Charles Kindleberger analyzed 400 years of the stock market. He found that each 6-8 years there was a crisis, with only some exceptions. Interestingly, each time people were sure that this time the situation is different from previous ones: new technologies or that people already learned previous mistakes. No, there is always a new problem, that leads to that. Did we have a market crash in 2020? No, we didn’t, but it will be soon – thanks to the Russian government, EU, and American politicians. The supply chains are broken, and the prices for production rise. Then the final prices rise. The demand falls. How can then companies generate huge profits? Think rational.

Don’t care about your losses. You will lose money on some stock, no one knows when, but you will. When you lose e. g., 10% of your portfolio, you would like to get money back, usually, you want it fast. As you may imagine, getting 10% of your portfolio fast, e. g., in one week is extremely risky:

weekly_rate = 100%/90% # 11.1% weekly  to cover losses  
annual_rate = (weekly_rate)^(365/7)*100
# it is 24317% annually

As you remember, the average annual rate of s&p 500 is 6-8% annually, and not a lot of investment houses can outperform S&P500 in a long run.

Macroeconomics first. The political situation in a country affects all of the companies. Look at Russia in February-March 2022. All companies, that had huge potential crashed in one day 30% to 70%. Russian addressed depository receipts have dropped to 0.01$. All of that happened not because of bad business decisions, but politics. When you invest in a developing country, you buy shares and bonds with discounts. These discounts are given because of such risks, as in the Russian case (I can’t say the word “War” by a law).

Political factors are harder than economic. Economic processes are well explained, for example in Pearsons’ books. We have enough data to expect prices for grains, raw materials inc the calm times. Therefore, in such times, the stock market trades not today’s value, but future value. Usually 6 months in advance. So, market lives in the future, that can be accurately predicted.

When unexpected things happen, the stock market players are uncertain about the future. Usually, players need 2-3 days to understand the future situation. Within these 3 days, there is uncertainty and the volatility (standard deviation, or simply, range of prices) is high. After, the market finds a fair price and predicts the future just 1 week in advance. Why 1 week? On Saturdays (or rarely on weekdays after market closing), politicians make speeches and announce new information and plans. Market players try to predict the announcements and set a fair price. So, if e. g., If J. Powell says that the inflation will be 10% (dramatic for the IT sector), but market players predicted that, then American IT companies will not lose too much equity after the speech. The chance of this event was already discounted.

Politicians are people and sometimes their decisions are not optimal, unpredictable. Let’s take the Russian president. He made the worst, unlogical decision – he attacked Ukraine. After, he lost connections with developed countries. Moreover, the Central Bank of Russia lost access to gold and dollar reserves worth $500bn. Only a few people could predict such an event.

Always have cash. You must have cash for at least some months to live (in my case, 6 months). Liquid instruments (EUR, USD, for example) are easy to withdraw, and you can buy whatever you need without a premium (commission).
When the war in Ukraine started, I had 25% of the cash. The following day I sold some shares and ETFs with a loss of 20-40% and withdrew all my cash (50% of a portfolio) to my Austrian account. Later, Moscow Stock Exchange stopped the trades. All my bonds and shares became untradable. If I did not withdraw money, I would have lost much more and would not have had any money to live in Austria.

both technical and fundamental analyses are important.

Most of the risks and opportunities are already in a share price. You may think that some companies have a bad future, based on something that you have read in some articles. But investors already know about this risk and have lowered the fair value even before reading the article. You may win in this strategy if you use your thoughts and calculations, or if you know insider information or any kind of information that only a few people know. Imagine, you are a telecommunications engineer and you know that Nokia makes good 5g transmitters, that are easy to use, and you know that Qualcomm (i just made up the assumption) makes worse 5g transmitters. Then, you, as an engineer assume that Nokia will take over the market. You look at newspapers and you see that there are just a few unpopular articles about that. Here you have a jackpot, and with a high probability, you will earn some money.

Bonds are good, even if they don’t cover inflation

Don’t use futures, options, and other instruments if you have not read books about that.

Never gamble. The stock market is not a place to try your luck. I, an investor, will be very pleased if you will gamble because you lose your capital, and probably I will own the money you lost.

Instead of Casino, in the stock market, you can lower your risks without losing returns. In the long run you will be profitable

The stock market is about psychology in the short run, and about numbers in the long run. It is hard to predict the stock price within a quarter or half of a year. You don’t know what happens in such a period of time. You may learn about the situation in a company by reading the company’s reports or news. Reports are usually shown each quarter and annuity. they represent the real situation in a company with all numbers etc. I recommend reading Global financial accounting and reporting to be a pro in analyzing the company’s reports.

News show the situation in a company in real-time, and each information affects the cost of a share. I used before this short-term strategy, and I was always stressed:

Invest for the long-time and don’t read news. You don’t want to spend your time

10% change in the company’s cost is not important. Don’t care about fluctuations of the stock. It can rise, fall tens of times per annuity. If you will take each fall into account, you will be stressed. You will get a habit to check the news about the market and each company all day long. And you have tens of companies in a portfolio. You will loose the ability to analyze the stocks and will only rely on news and graphs. If don’t want to have such problems, invest in ETF.

Invest in ETF. Exchange-Traded Funds are managing the capital, that investors bring to them. They decide on which stock (or other instruments) to hold, buy, sell. The Funds take a commission for the service in exchange for you patience. The Funds don’t guarantee a profit, therefore you need to know to whom to give your money. You may do it the same way as with companies, by analyzing their reports. Don’t forget, that the huge returns in the past don’t guarantee profit in future. Take an example of Cathie Wood, the manager of Ark Innovation ETF. She went from 50 in 2019, to 100 in 2020, to 130 in 2021, and to 60 in 2022. As you see, if you invested even in 2020, you would have lost 40% of investments, even though she had 30-100% of annual returns in the past.

Expect an unexpected. Humans make decisions in politics and business. Sometimes, people take wrong decisions and do stuff that they were not supposed to. Even a small thought or event, like a traffic jam, may affect the final decision. You cannot predict such events. But they happen often. That is why the even the algorithms can’t get huge profit

Power and information are compensated with a size. Big investment funds and banks know much more about investing: they have educated employees, networking, fast processors, and data. However, the investment banks are huge and they invest billions of dollars. But how do they invest?

As you know, on the stock market, people put their request to buy or sell a defined amount of stock for the exact price. If the requests to buy and sell are identical, the exchange happens. You see all of the available requests for exact stock in a “bucket”.

As you see, there are not so many offers, it is rarely bigger than 1 million dollars. If you are a small investor, it is easy to buy stock for the market price. But what if you are a big company and you need to invest 100 million dollars for that price? Obviously, the demand will be so huge, and the supply will be low, so the price must go up. A dumb manager will try to sell the stock for higher and higher prices because he has to invest fast. That is why price

What services to use

SimplyWall.St gives basic information of any company from reports. SimplyWall.St also compares a company with competitors and the market. It even shows the fair value of a company, that I don’t recommend to take seriously into account.

Wolfstreet.pro is similar to SimplyWall.St, but provides more information with beautiful minimalist design.

Yahoo Finance provides all the graphs of the cost of companies. I download CSV file with prices of stocks to use it with my code, that I write on R or Python.

Statista provides statistics about anything you want. It is free for students as far as I know.

Bloomberg terminal is a powerful tool to analyze companies that cost nearly 5000€ per year. But if you a student, you may ask your university whether they have this subscription. For example, the Vienna University of Economics has such a subscription.