Trading 212 Invest App Review

Trading 212 is one of the new zero fee free trading apps in the UK revolutionising how investors buy stocks and shares.

It has certainly changed our investing strategy with regard to how we buy shares – fees meant buying small amounts of a stock were far too costly before – now that’s simply not the case.

The cost of buying and selling shares has fallen over time, but remains sizeable on popular platforms Interactive Investor charging £8, AJ Bell £10 and Hargreaves Lansdown charging £12 per trade.

Also, we have a sweet Trading 212 bonus offer where you’ll be gifted a free stock to the value of £100 that you can snap up if you sign up through our link on the offers page here.

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Trading 212 – Where to Start

Ben has been using the app for the last several weeks and loves it – he’s set up an ISA account for his baby daughter, and uses the Invest account to invest small amounts into ETFs.

This is a review of the Trading 212 Invest account – the other account types available to you are Trading 212 ISA and Trading 212 CFD.

The CFD area is not covered in this review – we do not invest in CFDs due to the huge risk involved – we see it akin to gambling. After all, almost 80% of retail investor’s lose money with CFDs

Briefly, one use of CFD’s is to use leverage to make money on short selling, but beware – leveraged gains mean there’s a chance of leveraged, or magnified, losses.

You are also charged for overnight positions, so they’re no good for long term investing. We say stay away! Now, back to the review…

Trading 212 is free because it hopes to make its money from other fancier products like Robo

Trading 212 Invest – Is It Really Free?

Yes! Well, nearly. There are certainly no trading or platform fees, but surely there must be some hidden fees? How else do they make their money?

This is the first question we ask when confronted with a free offer – what’s the other side getting out of it?

Well, Trading 212 are indeed offering a free service on their Invest platform, with the hope that you will use the CFD area of the site as well, and other future products such as robo investing, for which they intend to charge.

It’s a classic freemium model – the parts that most people will want to use (the stocks and ETF markets) are offered for free, with their profits coming from more niche developments.

Sort of how banking works in the UK. Most people get a free current account, paid for by those that use the banks debt facilities such as overdrafts. Basically, someone else overpaying so that YOU get a free service.

It’s worth noting that even the ISA is fee free – Freetrade, another free stock trading platform that we reviewed recently, plans to charge £3 per month to use their ISA, but Trading 212 does not charge for this – a win for Trading 212 against the competition.

Hidden Fees?

Hidden Costs?

So come on, what are the hidden costs. There are always hidden costs with investing and Trading 212 is no exception – though these are not the fault of the platform, and it seems Trading 212 really have done their best to be cost free.

1)         Stamp Duty

You will pay stamp duty taxes on the purchase of UK shares, but nothing for funds. UK Stamp duty is 0.5%, which is an immediate hit to your portfolio when you buy a share. But in all fairness, this is a tax and not a fee for Trading 212.

The share price would have to move up by this amount just to break even. And that is before considering:

2)         The Bid Offer Spread

Trading 212 is a stock trading floor like any other in that shares and ETFs have 2 prices: a buy price, and a sell price.

The difference is called the spread, and this is the amount of money you would lose if you bought a share and immediately sold it.

A typical spread on a share in Tesco is around 0.04% on the platform.

It’s the kind of cost you should be aware of if you trade frequently, but most long term investors will not notice such small amounts.

You will barely notice the bid offer spread if you trade long term

3)         Foreign Exchange Spot Price

Not a concern on Trading 212 Invest – When buying foreign shares, of which there are 1,093 at time of filming, you would usually be charged a foreign exchange fee on most platforms – Trading 212 doesn’t and translates at the spot rate.

It’s worth noting that competitor platforms do charge a fee – for example, Freetrade adds a 0.45% charge on top of the spot rate; but Trading 212 does not.

Another reason why Trading 212 is currently the superior platform in terms of price in our opinion.

Example Purchase – British Tobacco

Ben used the app to buy shares in British Tobacco. Again, Trading 212 was superior to the Freetrade app as the trade was carried out instantly without paying extra. See how the price was 3,040 just before he clicked the Buy button.

Buying British American Tobacco shares

The competitor platform Freetrade batches trades together and executes at 4pm, so prices can move during the day but Trading 212 traded at such a current price that it had moved to 3,042 in the fraction of a second it took to load the next screen. Note that the minimum number of shares you are allowed to buy in a stock is 2 shares. Also note that stamp duty is already hitting this portfolio by 30 pence.

Ben locked in the price and executed the purchase at 3,042. What started as £100 went down to £99.69. Why? Two things happened in the intervening seconds. One was he’d been taxed stamp duty of 30 pence, and the other is the market had moved down by a penny. These price updates are lightning fast!

The aftermath, and later selling at 3,070

Later that week, he took advantage of a rise in the share price to sell the shares and test how well the app handles sales. He sold the 2 shares in British Tobacco at a price of 3,070, just by clicking sell, and confirming the sale.

Seconds later, the portfolio value was confirmed as £100.28 in Free Funds, a.k.a cash; therefore the sale had been instantaneous. He’d made a profit of 58 pence, after the 30p stamp duty, in a week.

Interesting sidenote: If we could replicate that return every week, that would £30 a year return on £100, or 30% rate of return. There’s definitely value to be found by having this app in your pocket, though we encourage long term investing over trading.

What Funds and Shares Does Trading 212 Invest Offer?

At time of filming there are over 1,500 stocks (of which 450 are UK stocks) and 223 ETFs on the app to choose from.

This is quite a decent range in our opinion for a free app.

It doesn’t offer nearly the wide range that a big platform like AJ Bell or Interactive Investor offers, but it offers enough for you to dabble in many interesting markets.

Want to invest in cannabis, healthcare, automotive, tech, finance, America, Europe? You’re covered.

Receiving our free share, and the Vanguard range of ETFs

What we love more than anything else is that Trading 212 has some of the main ETFs from the Vanguard family, including the FTSE 100, FTSE 250 and S&P 500 ETFs. These funds are perfect for beginners and pros alike, and would be what we would be investing in first.

Do you Want Some Free Stuff?

It’s bonus time! Sign up to Trading 212 Invest through our offers page here and you will be given a randomly selected free share by the app, which could be worth up to £100.

You just need to open an account, deposit £30 and you’ll get your free share within days.

(Probably best to deposit a little more than the minimum as the stock market can move down as well as up, and you don’t want to miss out on your bonus on a technicality!)

So – do you think Trading 212 is the future of stock market trading? Are you happy with the trade-off of less choice for lower fees? Let us know in the comments below.

Sin Investing for Better Returns – or Socially Responsible Investing?

Is it OK to invest in sin stocks? Sin stocks include companies who deal in gambling, alcohol, tobacco, firearms – basically anything immoral.

Any companies that make a profit are OK in a sin stock portfolio, regardless of whether they are a cigarette company selling addictive or harmful products, firearms dealer, or a financial giant encouraging the vulnerable into bankruptcy for their own profit.

But shouldn’t investing just be about the returns? Are we trying to set ourselves financially free at any cost? And how do sin stocks compare against the returns found in socially responsible funds?

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Why Investors Buy Sin Stocks

The reason investors buy stocks and funds of companies that act immorally is because the returns are thought to be much higher, and more consistent, than other stocks.

Take tobacco for example. Despite public smoking bans in the UK, British Tobacco has cornered the market on an addictive product that consumers the world over see as essential – revenues are practically guaranteed, as are the dividends to investors.

Things like tobacco, alcohol and war are not going away anytime soon, and the profit margins there can be huge.

For investors just wanting to retire rich, the argument goes “why wouldn’t I buy the best stocks to achieve that target”, when the world’s problems aren’t going away by choosing not to buy those stocks.

One could argue that these products are only fulfilling someone’s desire, so perhaps are not even immoral in the first place.

Sin stocks trade in things like guns that are seen as unethical

Socially Responsible Investing (SRI)

At the other end of the spectrum are funds that specialise in Socially Responsible Investing.

SRI fans prefer an investment strategy that promotes responsible, liberal, green and cuddly corporate behaviour with a feel-good factor above investment returns.

Such funds could make phenomenal returns – but it would be a coincidence, as the main criteria for companies to be in these funds is meeting some fund manager’s definition of “socially responsible”. Token KPIs such as having more women than men on the board of directors could be a qualifier.

More women on the board of directors is a fantastic objective, and one that we fully support, but focusing on who is employed on a board is not the same thing as having a solid investment strategy for the shareholders.

While it is undoubtedly a good thing to promote equality, your retirement strategy should not be dependent on funds whose primary purpose isn’t making you money.

Socially Responsible is a way of life to many

Sin Investing vs Socially Responsible Investing – The Returns

Let’s look at a couple of US funds as examples. The Pax Balanced fund, launched in 1971, is the oldest operating SRI fund in the business.

The Barrier (or Vice) Fund, launched in 2002, is the industry’s oldest sin fund. Let’s compare the two.

The first table shows that the sin fund has done better, smashing market averages, probably because it focuses on making money instead of identity politics:

SRI fund (Pax) vs Sin fund (Vice)
How each compares against its closest index

However, comparing the funds to their respective indexes tells a different story. The socially responsible fund performed a little under the market index, but the vice fund fell short by quite a way. Maybe it doesn’t pay to sin after all.

These numbers suggest to us that cuddly SRI funds can perform to around the market average, though we suspect that is due to diversification and good management – SRI companies do a tend to have well-formed management structures.

While, it might actually be better to invest in the Russell 1000 and track this index, rather than invest in the sin funds that single out specific companies.

But history can’t tell us the future, and the sin stocks were still performing well above the 7% or so that is usual for markets more generally.

So Which Is Best? Or Neither?

Based on the history, there isn’t a conclusive win for either camp – and it was a limited comparison anyway between 2 funds, so isn’t definitive.

It comes down in part to your own moral code. We would suggest avoiding both extremes, and settle in the middle with top rated companies who make good money for their investors and will allow you to retire comfortably.

One thing to note is that many of the so called Socially Responsible funds invest heavily in big technology, pharmaceutical and financial services – probably why they are able to get returns that are almost as good as the market!

Also, as SRI is the in-thing at the moment this might be elevating valuations – People are prepared to pay more for an ethical stock. Likewise, this could be suppressing sin stocks.

Many SRI funds have also dropped their exclusion of alcohol and gambling – we can’t see the logic as to why these are not unethical but other things are, though it at least gives them a chance to make some decent money for their investors!

We can only know the past - the future remains uncertain

Where Can I Invest?

Likely a result of the breakout of snowflakery across the western world, SRI funds vastly outnumber sin funds.

There are dozens of SRI funds, including a number of exchange-traded funds (ETFs).

On the sin stock side, there are only enough to count on one hand, even with ETFs included, although there are plenty of individual stocks to choose from.

So you can easily (if not necessarily cheaply) construct your own portfolio of sin stocks.

Saint, Sinner, or Middle-Ground?

If you’re just looking to make a solid investment, political views aside, a diversified portfolio that focuses on its shareholders will serve your financial interests better.

We don’t specifically target Sin Stocks, but we both happily invest in something like British American Tobacco.

Are the companies you invest in seeking a profit? Or a political agenda?

We would not invest in any companies who were overtly immoral in their practises and these companies would not likely survive anyway.

Likewise, we would not invest in companies who prefer to make a political point with their shareholders’ investments, rather than profits – it’s all about balance.

Would you invest in sin stocks? Let us know in the comments below.

Freetrade Review – Best UK Investment App – Zero Fees

If you’re not careful your investment pot can be decimated by platform fees and trading fees amongst other charges. But with the launch of the Freetrade platform, we’ve got some exciting news for UK and even European investors – a shift that will hopefully change the investment world forever.

One of the biggest barriers to investing for young people or even people of all ages for that matter, is the cost of investing. Well, all that is beginning to change with the introduction of zero-fee, that’s right, zero-fee investment platforms such as Freetrade, Trading 212 and there’s even more on the way.

You can now invest for completely free!

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The US has been the leader in this market disruption when Robinhood entered the scene in 2013 but us UK investors were still left paying sky-high platform and trading fees until relatively recently.

Is Freetrade the revolutionary investment app that we’ve all been waiting for?

 

The Freetrade App In Action

What Is Freetrade?

According to Freetrade themselves, they are a challenger stockbroker providing free stock trading. There are no fees on basic trading, and they are able to do this by driving down their own costs and charging small amounts for “premium services.”

Freetrade is available on both Android and iPhone and with Andy having personally tried and tested the app with a small amount of his own money, we can vouch that it is very easy to use.

Looking at the key points:

  • You can indeed trade and hold investments for free.
  • You can invest in an ISA but this comes at a cost, which we’ll get to shortly.
  • They are FCA regulated, which means you will be covered by the Financial Services Compensation Scheme up to £85,000 – FYI, as with any other platform this does not protect your money from poor investments.
  • Wide range of funds – this is quite an exaggeration, which again, we’ll get to shortly.
  • US and UK stocks – You can indeed buy many popular stocks but not all.
  • Fast, friendly Support

What Is The Pricing?

Free isn’t it? Well, not exactly. It could be completely free for some but for most investors it will come with a very small fee.

The (Almost) Free Pricing Plan

Normally when you buy shares you get a live price and you execute the trade there and then. But Freetrade are collating all the trades and executing them all together at 4pm daily to cut their admin costs. This does mean that you won’t actually know the price before you buy which could be dangerous. On a normal day the price won’t change much but on occasion prices can skyrocket.

Imagine if there had been a takeover announcement and the share price had rocketed up 30%. You now would be paying way more than you had expected.

We actually really like this feature as it’s a way to cut trading fees, but we would like the option to set a maximum price just in case the situation changes. Let’s hope Freetrade are listening to this video.

Alternatively you can place an Instant order where you can execute the trade immediately, but they will charge £1 for this service. Our rule of thumb is to try and keep our trading costs below 1%, so we would make sure we at least invested £100 per trade but there is no actual minimum set by Freetrade.

The use of an ISA will cost £3 per month but you may not even need an ISA. We personally would always try and use an ISA as we plan on having huge sums of wealth.

But because UK residents get a generous capital gains allowance and a £2,000 dividend tax allowance, then many investors won’t ever pay tax anyway, so don’t need an ISA. Think about your own circumstances and act accordingly.

And finally there is a reasonable – but note – not free FX fee of 0.45%. Don’t forget that you could be trading in US stocks priced in dollars and even many UK companies pay dividends in dollars, so you will incur this small fee.

What Are The Available Investments?

So far, we are very impressed with the price, but this is where things begin to unravel. We have previously been spoilt for choice by more traditional platforms where you can invest in practically everything you can think of.

The most notable absence is funds such as OEICs and Unit Trusts.

There Are Currently Not Enough ETFs and Funds For Our Liking

They do offer a small number of ETFs, but we would expect traditional funds to also be available. The good thing about Freetrade is their transparency and they do provide a spreadsheet listing what is available but sadly at the time of writing this only contains 358 stocks and ETFs. In fact, they offer only 43 ETFs.

Now, they are updating this all the time and you can request they add something but there’s no guarantee you’ll get what you want.

One of the biggest absentees in our opinion is the family of Vanguard LifeStrategy funds. We believe these are great for beginners. Considering Freetrade is aimed at new investors we feel these should at least be included.

The App Itself

It’s fast, streamlined and not cluttered but doesn’t really offer too much. It would be nice to see some Stock or ETF information such as dividend history, yield and stock allocation.

Even when clicking on the max price graph, it doesn’t even indicate what time period it is for. You do get a brief description of the stock or ETF, which is nice and of course the key investor document.

There was so little information it means that you must go online to research everything first and can only really make the trade on the app itself. But perhaps this is a price worth paying in order to get zero-fee trading.

One major flaw is the lack of a trading website. We like having the option to download or even just view my portfolio on a desktop, so we can carry out some serious analysis on our portfolios. This isn’t possible on the small screen.

Is the Freetrade App a Game-Changer?

Customer Service

Whenever we have spoken to them, they have been helpful and quick to respond but the only way to contact them is with online chat. If you have a lot of money invested, you may feel you want to speak to a real person but will be unable to. We suppose this a key way to keep the cost down.

Conclusion – Is It A Game-Changer?

You bet it is, but we won’t be moving our investments to the platform just yet as we want wider choice and additional service that we feel is worth paying for. Also, as your pot grows the cost of investing comes down as a percentage of your pot, so personally the general cost of investing isn’t too much of a problem for us.

But for those with little money or those that don’t want any bells and whistles, Freetrade might be perfect for you. In fact, it is now truly possible to invest with just a few quid.

We also see or at least hope that traditional platforms will have to adapt, to prevent a huge exodus to these challenger brokers. As a result of these apps, we expect prices to come down across the industry in time.

What do you think of Freetrade and will it change the investment game forever? Let us know in the comments section.

Wombat Invest Review – New UK Investment App – Ideal for Beginners?

We’re proud to bring to your attention a brand-new investment app which could be ideal for beginner investors in the UK. We know that one of the biggest barriers to investing is the perceived complexity, and perhaps the opinion from most people that it’s just not cool.

The Wombat Invest App plans to change all that by “empowering generations to manage, save and grow their money” in their words.

This app has some cool features that we think that many young people and beginners are going to love!

Editors note: Don’t forget to check the Offers Page and grab free shares worth up to £200, plus £50/£75 cash backs when you open new investment accounts through the affiliate links there!

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In order to bring you this hot-off-the-press information and be amongst the first to review this app, Wombat gave us a small amount of credit to thoroughly test the app, on the condition that we had the freedom to provide an unbiased review.

We have remained impartial we will be covering the things we love and things we don’t love.

The Wombat Invest App

What Is Wombat Invest?

Wombat is a brand-new investment app available on Android and Apple devices that is making investing accessible to the masses. One of most commonly discussed problems with investing is the cost but it can also be very complex.

Even if you spend enough time learning the basics of investing it can still be needlessly complicated.

For instance, let’s take this ETF as example:

Ishares Dow Jones Global Sustainability Screened UCITS ETF

Most people will have no idea what that means, making it very difficult for beginners to even start.

It might as well be written in a foreign language.

Investing Language Can Make as Little Sense to Most People

Wombat will simplify all this for you as they have packaged investments into themes. Each theme invests in an ETF and we think the snappy names and description are far easier to understand for the average person than the complicated investment product names found elsewhere.

That ETF we just looked at by the way is actually the underlying fund that ‘The Goodies’ Theme invests in. We think you’ll agree that ‘The Goodies’ is far easier way to say that that the fund invests in socially responsible businesses.

A great thing about Wombat is it makes it simple for the novice but gives you enough detail for those that desire to know more. On the app you can easily view the fund fact sheet, KIID and prospectus.

It’s worth noting that Wombat does not currently offer investments in individual stocks.

What Are the Fees?

For those with small pots, fees can often decimate returns and we think that Wombat have been fairly competitive.

The Pricing Options - It's Free Under £1000

Usually the worst time for fees with many platforms is when you have a small pot. Wombat have amazingly [to find axe image maybe] taken an axe to all their fees when your investment pot is below £1,000.

We can’t stress enough what great news this is for those just starting out!

For those with pot sizes over £1,000 the prices are roughly in line with other platforms; but you need to be careful.

They’ve gone for a fixed monthly fee of £1 and a platform fee of 0.45%.

The 0.45% is perhaps a little high and they may struggle to attract investors with large pot sizes.

Having said this, this fee includes the use of an ISA, which you often must pay extra for on other apps, such as what Freetrade intend to do.

Unlike other platforms however you don’t need to pay extra for additional features.

As for the £1 monthly fee, this is practically nothing for those with a larger pot but if you have a small pot it can be on the rather steep side as a percentage of your pot – but of course it’s waived below £1000.

The Main Dashboard

You’ll want to grow your pot quickly to minimise the impact of this fixed fee.

In fairness though, if people start investing because of this app we feel that it’s a price worth paying. You will almost certainly be better off financially by investing than never investing at all.

Round Ups

Here at Money Unshackled we have longed encouraged the behaviour of paying yourself first, which means you either save or invest money as soon as you get paid.

Although this is best practice most people don’t or won’t always do this. So, a nice little feature Wombat offer is called ‘Round Ups’.

Invest While You Spend?

What this does is round up your purchases and every 2 weeks it will pay the accumulated ‘Round Ups’ into your Wombat Account.

Hopefully you’ll build up a nice little investment pot without really noticing.

Obviously for this feature to work they will need access to your banking details, so they can securely access your transaction history, so they can calculate the required ‘Round ups’.

We expect this is no problem for the tech-savvy youth of today.

Different Screens in the App

The App

The app is slick and easy to use. You can buy into a fund with just a few taps and set up auto invest. They have some nice charts, enabling you to track your portfolio size and see projections way into the future.

The app even has a Learning Hub where you can find interesting and very helpful articles that should hopefully improve your investing knowledge, so we encourage you to check that out.

Fractional Investing

Sometimes you want to buy into an investment, but the ETF price is way too high, which may mean you can’t buy it at all, or you can’t get your desired allocation percentage.

This isn’t a problem with Wombat as they offer a very cool feature known as Fractional Investing.

Instead of having to wait until you have enough money for 1 fund you can invest in a fraction, meaning you can invest no matter how little money you have.

This again is unusual for an investing platform, and welcome. Some funds can be priced at hundreds of pounds just for 1 share.

On another platform this might be too much for you and may prevent you from diversifying properly – not the case on Wombat thanks to fractional investing.

Cool Stuff is Coming Down the Track

Cool Stuff in The Pipeline

As we’ve been in touch with Wombat, we’re very pleased to share with you some of the great features on the horizon, which we think will really enhance the app.

This includes individual stocks, so people will be further able to customise and tailor their experience. We always think new investors need to tread carefully around stocks, but there’s no doubt that they’re in demand by most new investors.

They’re also working on a “Wombat Junior” App, which will allow those under 18 to invest and “Wombat Gift”, which will allow people to offer investments as a gift.

They mentioned a lot more, which we’re not at liberty to say just yet for confidentiality reasons but it must be really exciting times at Wombat HQ.

A Great App for Beginner Investors?

To summarise, you can find cheaper ways to invest but we feel that its prices are competitive enough and combined with its great app and simple themes-based approach the Wombat Invest App will prove very popular.

Of particular interest to us were the Round-Up feature and the Fractional Investing feature.

We’re disappointed that we can’t buy individual stocks, but we’re told will be possible soon. If you want to invest in diversified funds this is a top-notch app. When the word gets out, we can see this being very popular amongst new investors.

What do you think of the Wombat App and will you be checking it out? Let us know in the comments section.

How to Reduce P2P Lending Risk and Maximise Returns?

With any investment we’re taught to diversify to reduce risk and hopefully maximise returns. But most people fail to do this with P2P Lending.

Perhaps they feel that because they are diversified across many loans on their chosen platform, they are safe.

The recent collapse of Peer-to-peer provider Lendy has demonstrated that P2P Lending is not free from risk and you could potentially lose all your money.

As advocates of P2P Lending we feel this is unlikely, and Lendy was a platform that we have not endorsed, but there are some things you can do to minimise this risk.

So, how do you Reduce P2P Lending Risk and Maximise Returns?

YouTube Video > > >

What Happens When a P2P Lending Platform Goes Bust?

Let’s look at the case of Lendy. Lendy was a P2P provider that spectacularly went into administration with lenders now wondering if they will receive anything of their investment back.

In the words of their administrators “a key part of their role is to safeguard the loans made through the company to the various borrowers.”

This sounds moderately positive, but it is unclear what each investor will get back.

No Need to Worry When You're Risk Is Spread

As the loans are between the lender and the borrower one would hope they would get the majority back but only time will tell.

How to Stop This Happening To You?

Firstly, you need to consider the returns that the platform is offering. It’s our understanding that Lendy was offering 12%, which is absurd as we’re in an era of record low interest rates.

Contrast that with the more realistic P2P returns of 5-6% that we talk about regularly.

If the lender is receiving 12%, the borrower must be paying even more. These were clearly very high-risk borrowers.

So, RULE #1 – Don’t chase ridiculously high interest rates – if something looks too good to be true then it probably is.

Don’t Invest What You Can’t Afford to Lose

To us this is obvious but time and time again people continuously do this.

If You Can't Stand to Lose Money - You Shouldn't Invest

We came across a comment on Trustpilot in regard to Lendy, where the person is criticising the lack of warnings and says he can’t afford to lose the money.

We don’t mean to rub salt in his wounds but why has this person invested money he can’t afford to lose in a high-risk investment platform?

We hope that the lesson he learns is not that investing or P2P is bad, but instead:

RULE #2 – Only invest what you can afford to lose.

And RULE #3 – Only invest in what you understand.

Diversification

Every P2P platform we have come across encourages you to invest enough in their platform to ensure you are invested across multiple loans. This is usually at least 50 or 100+ loans.

This is critical, and we suggest you make sure you do this. In our opinion you want your maximum exposure to any one loan to be no more than 2% and ideally much, much lower.

An Individual Platform Could Invest In Complete Garbage

In fact, Funding Circle says they suggest you invest at least £2,000, so you achieve diversification across 200 businesses and have exposure to any one business of less than 0.5%

Diversification Does Not Stop There

What they don’t really tell you and neither will any P2P platform for that matter is that you’re still exposed to the platform itself.

Perhaps your chosen platform is a terrible business and cannot carry out proper risk assessment of loans. The loans that you invest in could potentially all be rubbish.

Therefore, it is also critical to invest across multiple P2P platforms. This way you are spreading your risk.

Come Out Fighting and Beat the Risk

This is also a fantastic way to boost your returns because the P2P Lending market is very competitive, and they are all offering very generous referral bonuses to obtain new customers.

If you’re interested in taking advantage of such referral bonuses, we have loads listed on our website here where you can earn several hundred pounds in bonuses from very popular (and in our opinion, responsible) P2P platforms. We will be adding lots more over time.

We have also reviewed the platforms and you can find the videos on here and of course on our YouTube channel.

How many platforms you choose to invest across is up to you but a balance between practicality and risk seems like the best approach.

We like the idea of about 5 platforms, but this totally needs to be based on your comfort level. Might as well get the referral bonus from each platform too!

The ISA Problem

A major problem is you can only deposit into 1 Innovative Finance ISA per tax year.

We believe this to a be stupid and dangerous limitation set by the government as it encourages people to under-diversify.

It’s worth noting that if you are basic rate taxpayer you can earn £1,000 before paying tax on interest, so you might not even be concerned about this.

In any case, it’s probably better to go for safety first and use multiple general accounts in addition to using your one ISA.

Better to be Safe than Sorry

Better to be safe than sorry. One technique we use is to open a different ISA each year.

Of course, those juicy referral bonuses will help to soften the blow of any potential tax.

New FCA Rules

It goes without saying that you should also have investments across different asset classes.

Well the FCA is placing a limit on investments in P2P agreements for retail customers new to the sector of 10 per cent of investable assets.

It’s difficult to see how this could be enforced in practise. We don’t see how a platform can know other than if you give a declaration what other investments you have.

We understand why the FCA might want to implement this though because P2P Lending looks at first glance to be like saving in a bank, but the risks are very different.

By knowing the risks and how best to protect yourself, you will not go far wrong.

Will you be investing across multiple P2P platforms, to spread risk and take advantage of those sweet bonuses? Let us know in the comments section.

Work Once Get Paid Forever

Work once, get paid forever. These are the words of millionaire’s the world over, and by following this simple mantra we can all be in with a shot of the big time.

A mix of passive income philosophy and good old hard graft, there is no simpler route to becoming wealthy than those 5, simple words – Work once, get paid forever.

So how is it done? Let’s check it out…

YouTube Video > > >

The Problem with Pure Passive Income

The purest form of passive income is earning interest from a bank savings account. It requires the least amount of work on your part, and consequently gives a pathetic return.

On this channel, we Money Unshackled boys advocate passive income in the form of high cash returns on investments, but these sweet returns are not 100% passive. We say that you need to put some effort in to get the best mix of returns and lifestyle.

Share portfolios need to be regularly rebalanced; rental property needs to be found, renovated, and managed even if you let your agent do the heavy lifting; and you should always invest time into understanding an investment before it is made.

Portfolios Need To Be Rebalanced Regularly

But investments don’t require you to get up at 7am each morning and put in a 9 hour session in someone else’s office working on someone else’s dreams – so are infinitely more passive than the alternative – trading time for money.

Targeted Work – An Example

Instead of spending your efforts working hard and getting paid once for that time, what if you only invested your time into efforts that paid off forever?

In 2017, Ben worked hard for 5 weeks in his spare time doing up a large city Victorian townhouse, transforming it from a run-down family home into a 5 bedroom multi-let HMO.

With his business partner and some builders, his hard work resulted in a second bathroom, fire-doors throughout, and a high standard of finish in each room – in essence, an amazing investment asset.

Work like that pays nothing while you’re doing it but promises to pay handsomely forever.

Transform Your Assets Into Better Assets!

Enhancing a property from a standard house to a pay-by-the-room model can double your future monthly income.

This was a result of a small extra upfront investment, and a few weeks of targeted work. Should he have paid professionals to do all the work for him?

He would now, but the first time you do something it’s usually good to get involved yourself, so that you have the knowledge to manage future similar projects.

Time spent – 5 weeks of weekends and evenings. Increase to future monthly income – about £300 extra per month per business partner. Work once, get paid forever.

The 70:20:10 Rule

Charles Jennings, a workplace performance guru, told businesses to live by the 70:20:10 rule to power growth.

It is a rule that we all can and should be applying to our personal finances as well.

The philosophy, translated into home finance terms, tells us that 70% of our time should be given to what makes us the most money currently.

For most this will be your job.

Then 20% of your time should be spent on building up your next great income stream (a side hustle business that has the potential to be passive) – leaving 10% of your time to research and think about future, as yet undeveloped projects.

The idea is that you ditch working on your primary income stream as soon as your second stream is large enough to benefit from extra effort and once your first stream is passive.

Unfortunately, if your first stream is a job, it can never be passive, so if passive income is important to you, it would have to be ditched entirely.

You’d want to end up in a position where you work hard on a side hustle business idea until it can run itself and pay you money forever with minimal further input; thereby allowing you to upgrade the time spent on Project 2 from 20% to 70%.

Over the years you’d want to end up with multiple established income streams for which you worked on in the past but get paid in perpetuity. If you can make even a few hundred pounds a month from each stream, you’re going to end up being very rich once a few are established.

Good Marketing Is Essential To Getting Paid Forever

Marketing and Working Smart

We both recently went to a SUM41 gig in Manchester which got us thinking about passive income.

We thought that the support act that played before SUM41 was great; they worked really hard on stage to put on a performance and they were playing to the right audience for their genre. But their marketing was terrible.

We never learned their name. There were no banners on stage. The tickets didn’t mention them as the support band, nor did an internet search.

As audience members, we should have had the name of this band shoved down our throats so we could find them later on Spotify and potentially generate them royalties forever. They were working hard but not working smart – they were missing an obvious opportunity to build a passive income stream.

Marketing is an essential part of Work Once Get Paid Forever. Once you’ve put in the hard work of building your asset, whether that’s a music album, website, book or whatever; tell people about it.

Work Hard - But Work Smart

Who Wants to Be A Millionaire?

Very few people become millionaires through a salary. That is, by trading time directly for money.

By far and away the easiest way to become wealthy is by building up multiple passive or semi passive income streams, which build up and can be reinvested into the markets or other business ventures.

Most entrepreneurs work hard, but only on tasks that grow their income streams and that they enjoy – rarely to be paid directly for their time.

We can’t relate to those corporate CEOs who get paid 6 figure salaries, who are obviously millionaires, but continue to trade 70 or 80 hours a week of their time directly for money. Just invest your salary and retire already!

Investing For Success - It's In Your Control

What Can You Do? – Investing for Success

If you don’t have a side hustle idea or aren’t confident to start a business, you can still stick to the Work Once Get Paid Forever mantra by investing as much of your salary as possible into the stock market or other investments.

By building up a substantial investment portfolio from your slave wages, you are getting paid an income forever in the form of dividends, rent, interest and royalties.

By reinvesting everything you earn from your investments, your income will grow. Soon, your efforts will pay off and you’ll be getting paid forever for work that you did in the past. That’s Work Once, Get Paid Forever!

Are you stuck trading your time directly for money? What are you doing about it? Tell us about your side hustles and investments in the comments below.

How WE Would Invest £1000 UK

Updated: 27th November 2020

How would you invest £1000? We get asked this a lot. Should you invest in stocks and shares, equity funds, gold, property, exchange traded funds, peer to peer lending? And how much should you hold in cash?

In this article we’re looking at some of the best options for investing £1000; including what we would do.

For a more recent discussion on how we’d invest £10,000, check out this video next:

YouTube Video > > >

There are a lot of investment options available to you with £1,000, but if you only have £1,000, you should make sure that your money is accessible, in case of emergency.

Safety First

The only truly liquid asset is cash – we’re saying that you should have an emergency fund of cash saved in a bank to fight financial fires with, and if you only have £1,000 in the world, a cash account would be the place to start.

Unfortunately, one of the main rules of investing is that liquidity is best when return is worst. But some banks offer Regular Saving accounts with decent interest rates, even in this post-crash era.

£1,000 - But Where Should It Go?

Stock Market

£1000 is more than enough money to invest in stocks and shares, funds and ETFs.

Many platforms including AJ Bell allow you to invest from as little as £25.This is one of our favourite all-purpose platforms, with amongst the best fees for small pot sizes.

1) Shares

So you can buy shares with £1000, but should you? Unless you just want to practise investing and don’t mind losing your money, avoid buying shares at such low amounts.

We’ve said elsewhere that we think the minimum pot size needed to buy shares is more like £6,000 than £1,000 – unless you’re using a commission-free platform.

The problem with buying only £1000 of shares is that you are unlikely to be diversified enough, unless your platform offers fractional shares.

Due to crippling trading fees on the standard trading platforms, we would spend a minimum of £1000 on each stock to get decent value; so it’s almost like you are gambling rather than investing, as you would only hold one card in your hand. Maybe it does well – maybe it doesn’t.

However; there are now some new “free” platforms get around the problem of fees, making buying small amounts of shares more realistic platforms such as Trading 212 and Freetrade, but are limited in the number of companies and funds on offer. Shares and Funds alike can now be bought fee free! – amazing.

CASHBACK OFFER for our readers: if you want a free share worth up to £200, simply sign up to Freetrade through the link on the Offers page.

2) Exchange Traded Funds (ETFs)

ETFs are amazing because they track stock market indices without needing expensive fund managers, have very limited fees and can have very high diversification.

One great place to buy ETFs is on the Vanguard Platform. Their FTSE 100 and S&P 500 ETFs are ridiculously cheap in terms of fees, and track the market almost perfectly. Some of our all-time favourite investment products.

3) Managed Funds

Managed investment funds are certainly a respectable place to invest your thousand pounds. They are often well diversified across many companies, sectors and geographies.

The problem we have with managed funds are the management fees. Fees on actively managed funds can be quite damaging to long term returns. Sometimes that fee might be worth paying.

And even then, not all funds are expensive. Vanguard also offer funds, including funds of funds!

Vanguard LifeStrategy Funds are collections of other funds and ETFs in one package – a one stop shop for access to a significant chunk of the world markets in one ultra-diversified investment.

The fees are ridiculously low too which we love. If we were starting out in the stock market, we would either start here, or with S&P 500 and FTSE 100 ETFs.

So how can we invest and diversify in the stock market with limited knowledge?

Robo Platforms

Do you want to invest your wealth without having to think too hard, for minimal fees, and with some investment advice thrown in? Then try a robo investing platform.

We would use an established platform like Nutmeg. With even small amounts of money, you get access to basic investment advice, which otherwise would have been unaffordable, and Nutmeg will make the investment decisions for you based on how you answer their questions.

You can even get 6 months without fees if you use the referral link on the Offers page – remember, fees should be avoided at all costs!

Peer to Peer (P2P) Lending

Peer to Peer Lending is a good mix of decent returns, lower risk, and increased liquidity compared to the stock market. Since the coronavirus pandemic strated however, P2P platforms have mostly put themselves on freeze to new investors.

Some are still accepting new customers though, including Loanpad and easyMoney – again, cashback offers are available for these on the Offers page.

Gold Is A Defensive Investment

What About Commodities? Gold, Oil, etc

Only buying commodities with £1000 wouldn’t give you much diversification.

You could buy some physical gold bullion or invest through an ETF, but gold doesn’t pay a dividend. It is a defensive asset though that could be useful in a downturn, but not essential when you’re first starting out small amounts of money.

What about Property?

For £1000? No chance. You can invest in funds that invest in commercial and residential property, but to buy an actual buy-to-let rental property with the leveraged returns that come with it requires a cash outlay of £30k upwards. Keep this one on the back burner for when your pot is bigger!

Where will you be investing next? Let us know in the comments below.