How would you invest 10.000 Euro in 2017?

At the end of 2016, “Financial expert” Paul D’Hoore gives his advice on what people should do with 10.000 Euro on Belgium TV channel VTM. He is regarded as a stock market guru and employed as financial expert for a big Belgian TV station VTM.

His advice to invest your money in 2017 is as follows.

Review of Paul D’Hoore Financial Advice

Now I will provide you with my comments and personal opinion to this portfolio advice of “financial expert” Paul D’Hoore.

I created the same table with the expected returns and the percentage allocation. The two biggest categories are bonds and stocks which count for 85% of the portfolio.

The first remark and problem with this advice is the fact that the advised investment do not generate cash flow nor generate profit bigger than the (Belgian) inflation. The Belgian inflation is expected to be 2%. So any investment in the advice which is below the 2% I regard as BAD ADVICE. So the 33% money allocation at bonds at a return of 0,5% is a bad choice as it doesn’t give you more money than 2%. You still get poorer…

The second remark is that the 5% money allocation at Gold, Real Estate, Basic Materials and Leveraged Funds are too small to generate profit. Gold is on a downwards trend as the dollar gets stronger. Never buy gold when the dollar gets stronger in value. Leveraged funds at the bank come at a purchase cost of 3% on top of the inflation 2%. You must generate a return of 5% to make break even to make any money. Use this 5% money allocation differently and save yourself the complexity. Keep it simple!

The third and last remark is 9% money allocation for the savings account. If you don’t have a financial buffer between 6 – 18 months of your current salary, you should first invest in your financial buffer. Look at the financial pyramid of our Financial Strategy.

If you haven’t invested in your Pension plan, start doing it NOW! Start a Pension Fund plan as early as possible but don’t invest more than the amount than 10%. In Belgium the tax deductible amount is 960 Euro. You can also put money aside for your kids or a dream you want to do or experience.

Our Advice and Personal Opinion on how to invest 10.000 Euro

First of all I want to stress out, that this is our personal opinion. Read our disclaimer first if you don’t know what you are doing. What we are doing is NOT complex, it is a simple approach to the stock market. But the majority of people have no financial education, so they don’t want to learn, nor want to be informed. I can assure you that it takes less than 10 hours of education to learn all this! Invest in your Financial Education!

So what would we do with 10k Euro?

We would only use 3 categories of money allocation. First of all we would put 10% of the 10k Euro on a savings account. Why would you think? Well…I would put 1000 euro aside for possible stock market dips purchases. In 2016 we have seen major corrections in January and in June (Brexit) where we can buy stocks at a cheaper price. Those stocks provide the same dividend but if you can buy them at a cheap price, you need to have the cash to do so. We only use this 10% cash for this purpose. We have an automatic saving scheme in place to save for our layer 2 (Pension plan) and layer 3 (kids & travel).

The other two categories are ETF’s with low cost ratio (below 0,5%) and stocks that pay at least 6% dividend. Personally we only invest in stocks or ETF’s with a dividend higher than 8%. Those stocks or ETF’s have a guaranteed return of 6% after taxes. This means also that we convert our EURO in Dollars as you won’t find any monthly or quarterly paying stocks in Europe. Banks will advise you funds with a cost ratio higher than 2% and they don’t pay you any cash. I prefer money being paid on my bank account each month, and each quarter. Wouldn’t you?

I prefer to keep it simple with 3 categories with guaranteed 6% return higher than the inflation instead of 8 categories with no guaranteed return and a lot of complexity that people don’t understand anyways.

There are three lessons you need to remember from this blogpost

1. Always invest in something which gives you MORE cash flow money than the current inflation in your country + cost of your investment
2. Keep it simple and don’t invest in things you don’t understand
3. Invest in the four layers of your Financial Piramid at the same time. Always keep cash at hand to invest in opportunities!

Please be aware that our kids portfolio will start in 2017 with 10.000 Euro. We have purchased our first monthly and quarterly stocks and ETF’s for the portfolio of our kids. We kept 10% cash at hand for dips of the stock market where we look for cheap buy’s of high dividend paying stocks. Every 3 – 4 months we will report out on the progress of our kids portfolio.

Well, good luck with your financial strategy and watch out when you follow the advice a “financial expert”!