How do you invest the money you make?

[firlandsfarm]

As a tangent .. how often do Financial Advisers carry the can for 'what turns out to be' - 'bad advice'

Its impossible to measure, so, expect its close to zero.

So, u are paying someone for advice, which may be world-class or not .. and have no recourse.

Its all bollox.

I have paid advisors 400 quid an hr, and all they do is get rich. They can all burn - diversification in shares should be achieved by buying half a dozen of the top 100 companies almost at random. Or, better still, as Buffet says, just put a regular chunk into the S&P 500. U won't go far wrong.

Megrain, you are clearly knowledgeable about such matters so you will know that investments can go up as well as down! Managing a portfolio takes time and knowledge, things many do not have in abundance so they need to go somewhere. I would never pay any advisor £400ph. I recently told a professional where to go because he wanted to charge me £100ph just to tell me if he can help! No way Jose. Even solicitors give you the first hour free so that they can ascertain if they can help.

It's impossible to measure any advice unless you know more about the subject than the person giving the advice in which case why seek the advice? How do you know that your solicitor gave you good advice over that property purchase? You don't know and you may never find out for 20 or more years until you come to sell it and you discover the purchaser's solicitor has found a gap in the provenance of the title! Did the accountant give the best tax planning advice? Did your doctor correctly diagnose your illness? Did the dentist really have to extract that tooth? Did your builder build your house within building regs. (and more so post Grenfell, are the building regs. right!)? The possibilities are endless and you only find out the advice you received was faulty when it goes tits up. The pressure on the investment manager and indirectly the financial advisor by way of recommending him is that the correctness of that advice is measurable every second of every day. Is there another area where that is possible.

You have obviously had a bad experience but you cannot tar all with the same brush. You could say the same about any service. I repeat what I said before, a financial advisor's job is not to invest the money, it is to advise who they think should invest it, they are macro advisers. They do not make the investment decisions at a micro level, that is for the investment manager. Obviously if the recommended investment manager has performed at the bottom of the league tables then the advice is questionable but if the recommended investment manager has been consistently in the upper quartile of the league table can you fairly blame the financial advisor if that investment manager suddenly goes shit? The advice at the time given was good advice, it only looks bad with the benefit of hindsight.

Let he who can predict the market become the first trillionaire!

[Euler]

I've invested most of the money I've made into financial markets, generally on a long term basis.

I've been around in financials since I was first allowed to buy a share, but my style changed over time to a much longer term horizon and value-based approach. I just wait for companies to trade where I feel there is reasonable downside if I cock up and wait. It's worked a treat.

Dividends provide income to diversify into new opportunities while lowering my original purchase price over time. As long as I pick a company with reasonable prospects I generally see decent returns.

[Lizzie]

At the moment I am just starting to make money from trading. I was lucky enough to start myself off with a decent bank and now can enjoy paying debts and then look towards investing.

[megarain]

Some fair comments.

I am sleep deprived, and grumpy.

The industry seems layered with people who want to take 1-3%, and do v little for it.

Buying some darts and a dartboard would be more cost-efficient if all shares are currently fairly priced. They are clearly not.

There are lots of traps you can fall into .. one is being advised to buy a company which only quotes once a week, or has poor liquidity.

I would encourage everyone to only invest in proper companies, which u can buy/sell in a heartbeat. The rest, I would really swerve, unless u really understand the company.

Comm free brokerages are widely available in the US. Stockbrokers who used to charge xx for a share buy/sell are finding clients don't see
the added value in getting them to buy 100 Apple when they can execute it themselves. In 2018,(Uk) there were 50k authorized advisors, no doubt
taking their slice. It must b a great game.

Investing is time distracting and frustrating. It definitely deserves more of one's time, but life gets in the way.

[firlandsfarm]

Some fair comments.

I am sleep deprived, and grumpy.

The industry seems layered with people who want to take 1-3%, and do v little for it.

Buying some darts and a dartboard would be more cost-efficient if all shares are currently fairly priced. They are clearly not.

There are lots of traps you can fall into .. one is being advised to buy a company which only quotes once a week, or has poor liquidity.

I would encourage everyone to only invest in proper companies, which u can buy/sell in a heartbeat. The rest, I would really swerve, unless u really understand the company.

Comm free brokerages are widely available in the US. Stockbrokers who used to charge xx for a share buy/sell are finding clients don't see
the added value in getting them to buy 100 Apple when they can execute it themselves. In 2018,(Uk) there were 50k authorized advisors, no doubt
taking their slice. It must b a great game.

Investing is time distracting and frustrating. It definitely deserves more of one's time, but life gets in the way.

Not much I disagree with there Megarain Only real experts should think of shares outside the FTSE350 and even then most should stick to the FTSE100. Quoting once a week makes it sound like the shares have come from a 'boiler room' and/or the directors/shareholders meet in the pub every Friday night and agree a quote for the following week! I would say that if you want to be in equities then unless you have the time and knowledge to look into individual companies you stick to tracker type funds and ... manage those holdings. Be prepared to sell when it looks bearish and buy back when it looks bullish and get diversification by looking for general funds in specialised markets. Follow Peter's line and use charts with one week or even one month candles.

[marksmeets302]

Haven't been on this forum in a while, but this thread caught my eye. I think I'm qualified to give some advice (and it is free!). If you don't like meddling a lot with your investments do this: take a bag of money and divide it in 4 parts. Allocate a quarter to each of the following asset classes: stocks, long term treasury bonds, precious metals, cash. This can easily be achieved with ETFs. If your portfolio gets a little bit bigger use futures if you don't mind the 5 minutes it takes for rolling them every few months. Rebalance every year, or when the allocations get out of whack by more than 20%. This is what I do for my children and it is really safe. At first glance it won't make you rich, but the compounding effect will take care of that. In fact it is so boring that most people can't stick with it, even if they know they should.
This approach is known as the permanent portfolio. If you google it you will get several articles.

[weemac]

Something important to bear in mind is that with overseas low cost brokers your money probably won't be protected by the FSCS as they're usually not covered by the UK's FCA regulations, so if there's a financial catastrophe you could potentially lose (almost) everything.

https://www.moneysavingexpert.com/savings/safe-savings/

[PDC]

I've invested most of the money I've made into financial markets, generally on a long term basis.
....
Dividends provide income to diversify into new opportunities while lowering my original purchase price over time. As long as I pick a company with reasonable prospects I generally see decent returns.

Do you benchmark your performance (net of costs and taxes and exchange rate etc) against anything? If so what out of interest? And if willing to share how do you compare in percentage terms and does the returns justify your time on it v a passive approach?

Be prepared to sell when it looks bearish and buy back when it looks bullish and get diversification by looking for general funds in specialised markets. Follow Peter's line and use charts with one week or even one month candles.

Trying to market time is one of the most destructive things to an individual's returns in the long term. Trying to judge when to buy and sell is neigh on impossible over the long run unless doing it in hindsight.

How many times has it been said in the last decade or so that the market can't keep on going higher and yet it has, it has pushed and continues to push to new all time highs. Is it over valued now and is now the time to exit the market? I will tell you in 6 months.

Missing just a few key days can have a huge impact on your long term performance.

Just keep on ploughing your money into the market as often as you can and if you come into a windfall just put it to work as soon as possible.

If you don't like meddling a lot with your investments do this: take a bag of money and divide it in 4 parts. Allocate a quarter to each of the following asset classes: stocks, long term treasury bonds, precious metals, cash.
...
Rebalance every year, or when the allocations get out of whack by more than 20%. This is what I do for my children and it is really safe.

People should avoid meddling with their investments, they feel the need to but you want to make it as boring and as simple as possible and as automated as possible. Set and forget!

What is the time horizon of you kids? IMO you are giving up huge potential returns if you are looking at decades for the time horizon. The younger you are the higher your risk appetite should be, having just 25% in equities seems madness. The allocation you have seems extremely defensive, I would say too defensive even for someone in retirement even late retirment.

What is the logic of holding each of cash, bonds and metals?

[firlandsfarm]

Trying to market time is one of the most destructive things to an individual's returns in the long term. Trying to judge when to buy and sell is neigh on impossible over the long run unless doing it in hindsight.

Well as you know PDC it can't be done with hindsight! I know what you mean but the FTSE100 hit 7,000 in May 2015 so that's 5 years with little growth … yes people have been saying it can't carry on and it hasn't! To grow by 5% in 5 years is hardly a bull market. I did refer to weekly and monthly candles so you would know I'm not referring to short term management. Would you have sat in the FT30 when it LOST 73% of it's value to it's low at the end of 1974?!

[PDC]

I know what you mean but the FTSE100 hit 7,000 in May 2015 so that's 5 years with little growth … yes people have been saying it can't carry on and it hasn't! To grow by 5% in 5 years is hardly a bull market.

You are making a fundamental mistake in your figures that people often make.

You are just looking at the headline FTSE 100 figure and disregarding the fact that if you hold it as a fund you would also receive dividends which are then reinvested.

In your quoted period it has actually returned over 26%, not your quoted 5%.

I personally would not suggest holding just the FTSE 100, it is a pretty poor indices to hold. I prefer the Vanguard Lifestrategy funds in particular a mixture of the 100% and 80% funds held in a ratio of 1:1 to achieve 90%. But I prefer to go to 2:1.

I did refer to weekly and monthly candles so you would know I'm not referring to short term management.

Weekly and monthly aren't short term Really?

Would you have sat in the FT30 when it LOST 73% of it's value to it's low at the end of 1974?!

Yes, as I said before, just keeping dollar cost averaging no matter what the market does. Don't even look at your returns (if you can manage that).

Fidelity did a study, guess which class of people did the best? Dead people, because they just held on whatever the market was doing.

Something else that hasn't been mentioned so far is home bias. Think about how exposed you already are to your countries performance. Most people are hugely over weight with regards to their home country, they own a home, they earn a living and then often invest in their own country ahead of other countries. Less of an issue if you are American due to the nature of there economy, more of an issue if you are in the UK.

[invisiblelayer]

Some excellent posts on here, been looking over the last few weeks at a stocks and shares junior isa for my baby daughter to dump some cash in regualary. Still undecided on the Vanguard S&P 500 or lifestrategy 100, more than happy to go with either.

[rik]

Anyone tried apps like wealthify, moneybox?
Seems easy and low fees, if you dont want to put too much effort into it, you can select your risk level, seems to be popular and good reviews, maybe a good solution.
Overall im down 30% on stocks, so been a waste of time for me

[PDC]

...been looking over the last few weeks at a stocks and shares junior isa for my baby daughter to dump some cash in regualary. Still undecided on the Vanguard S&P 500 or lifestrategy 100, more than happy to go with either.

What is the purpose of the money being saved? If it is for pension savings consider a SIPP for the below reasons of free money:

No one has yet mentioned SIPP's?

Vanguard launched their one this week. SIPP's make for a great investment vehicle given the tax rebates, especially if putting savings aside for family members, in particular children.

Many people don't know about the fact that non earners can get a "free" £720 each tax year as a top up from the Government if they pay in £2,880 into a SIPP. This can be done from the day someone (or your (grand)child) is born until the age of 75.

(I should have added a note to this in the original post, that this applies to all full time traders as well who have no recognised earned income)

Don't forget that the ISA is legally their money come 16. They can spend it on whatever they want, you have no control. Though hopefully they will have learned about money by then and appreciate it.

I think investing for children is more about what they learn and setting the mindset than the returns (obviously the returns are nice on top).

Being able to talk them through it, show them the impact of compounding and leaving the money untouched.

I personally would go for the VGLS100% over the S&P500. I prefer the diversification.

Overall im down 30% on stocks, so been a waste of time for me

Not to rub salt into the wounds but you are down a whole lot more IMO (in the way I calculate such things). You should compare your performance against a benchmark. Something like the S&P500, or say the VGLS100% fund would be a decent comparison to make.

Opportunity cost is more often than not overlooked.

I had a "discussion" recently about an investment I had. They were arguing my yield over the next year should be compared against the initial investment cost. Lets say the initial investment cost £100,000 and the yield in the next year was going to be £10,000. So they argued I was getting a 10% return.

The fact the investment is now worth lets say £200,000 if I were to sell it imo means my £10,000 yield represents a return in the next year of 5%.

They were adamant that they were right with the 10%.

100% wrong imo, the opportunity cost is what you could do with the money right now.

[marksmeets302]

What is the time horizon of you kids? IMO you are giving up huge potential returns if you are looking at decades for the time horizon. The younger you are the higher your risk appetite should be, having just 25% in equities seems madness. The allocation you have seems extremely defensive, I would say too defensive even for someone in retirement even late retirment.

The approach yields about 4% over the inflation rate and has very short drawdowns. Historically, you will be in the black after at most 3 years, no matter which time you start. As a father I don't want to gamble with my kids money.
About retirement: I am retired. Since I was 43 My main portfolios are a souped up version of this, but still not one of them has more than 35% equities in them. I sailed through 2008.

What is the logic of holding each of cash, bonds and metals?

Since you can't predict the future, it makes sense to prepare for any kind of economic environment. I consider the main characteristics to be whether we're in a situation where inflation rises or decreases, and if there is economic growth or contraction. In the four combinations you can make each typically has one or two asset classes that do really well (and one that kind of sucks). By making equal weighted bets you will make money from dividends and interest payments and and at the same time you are hedged such that really bad things don't happen to your portfolio.

That is not to say you can't improve on this. By adding other asset classes such as vola-long and vola-short, tricks like exploiting the momentum anomaly you can get beautiful portfolios with returns that even exceed all-stock portfolios but with a much, much better risk profile. Unfortunately this requires a bit more activity and a decent size portfolio.

[invisiblelayer]

...been looking over the last few weeks at a stocks and shares junior isa for my baby daughter to dump some cash in regualary. Still undecided on the Vanguard S&P 500 or lifestrategy 100, more than happy to go with either.

What is the purpose of the money being saved? If it is for pension savings consider a SIPP for the below reasons of free money:

No one has yet mentioned SIPP's?

Vanguard launched their one this week. SIPP's make for a great investment vehicle given the tax rebates, especially if putting savings aside for family members, in particular children.

Many people don't know about the fact that non earners can get a "free" £720 each tax year as a top up from the Government if they pay in £2,880 into a SIPP. This can be done from the day someone (or your (grand)child) is born until the age of 75.

(I should have added a note to this in the original post, that this applies to all full time traders as well who have no recognised earned income)

Don't forget that the ISA is legally their money come 16. They can spend it on whatever they want, you have no control. Though hopefully they will have learned about money by then and appreciate it.

I think investing for children is more about what they learn and setting the mindset than the returns (obviously the returns are nice on top).

Being able to talk them through it, show them the impact of compounding and leaving the money untouched.

I personally would go for the VGLS100% over the S&P500. I prefer the diversification.

Overall im down 30% on stocks, so been a waste of time for me

Not to rub salt into the wounds but you are down a whole lot more IMO (in the way I calculate such things). You should compare your performance against a benchmark. Something like the S&P500, or say the VGLS100% fund would be a decent comparison to make.

Opportunity cost is more often than not overlooked.

I had a "discussion" recently about an investment I had. They were arguing my yield over the next year should be compared against the initial investment cost. Lets say the initial investment cost £100,000 and the yield in the next year was going to be £10,000. So they argued I was getting a 10% return.

The fact the investment is now worth lets say £200,000 if I were to sell it imo means my £10,000 yield represents a return in the next year of 5%.

They were adamant that they were right with the 10%.

100% wrong imo, the opportunity cost is what you could do with the money right now.

Thanks, and agree with setting a good mindest hopefully learning from young. It's for when she's 18 but Ideally she'll spend/invest wisely unlike her dad at that age where everything was beer money