Checklist For Financial Freedom!

“Let me tell you something. There’s no nobility in poverty. I’ve been a poor man, and I’ve been a rich man. And I choose rich every f***ing time.” ~ Jordan Belfort: Wolf of Wall Street.

We hear you Jordan. We’re working our butts off towards financial freedom, but how can we measure whether we’re making that dream a reality? What needs to be done between now and that magical financial freedom date?

Everyone loves a good checklist – a set of actionable steps that can be ticked off once complete. With each small accomplishment you’re a step closer to achieving your wider goal.

That’s why we’ve compiled for you this checklist for financial freedom!

Alternatively Watch The YouTube Video > > >

Clear Your Bad Debt

Let’s keep this one brief as it’s the most overly preached rule in wealth building.

The borrower is slave to the lender. We’re not religious but this is a valuable lesson straight from the bible.

If you are indebted, then you have an obligation to the lender to pay it back, plus interest. Bad debt includes short-term loans, overdrafts and credit cards with a high interest rate.

However, we draw the line at paying down all debt right now because GOOD debt is a tool that when used correctly can help to set you free. This is low interest, long term debt like mortgages and UK student loans.

We agree that the borrower is slave to the lender, but we also acknowledge that most people will be a slave to money until they become financially free, which sadly is at old age retirement for most people, as they are bailed out by state pensions.

We ourselves hope to become financially free in our 30s but until then we are money slaves.

Therefore, while we are enslaved, we will utilise good debt to help us achieve freedom faster. Good debt can be cleared later if you wish.

Checklist action point: if you’ve paid off all your bad debts, give yourself a tick!

Maximise Savings-Per-Month (SPM)

The most important aspect of wealth building for financial freedom is your savings-per-month. In the short to medium term the amount you can save is more important that your return on investment.

Your return on investment becomes the key factor later when your pot begins to swell. As an illustration, an 8% return on a £10k pot is just £800, but 8% on a £300k pot is £24k.

This goal can be broken down into multiple smaller goals, which can be ticked off as you progress:

  • Save £100 a month.
  • Save £300 a month.
  • Save £800 a month.
  • And so on…

If you’re happy that your level of SPMs will get you to your endgame, tick it off the list!

For most people who have predictable incomes from a job and if you’re budgeting correctly, then you should be able to save roughly the same amount each and every month.

If you’re wondering how on earth this can be achieved when you have things like Christmas or an annual holiday in some months, then you might get something from our Lazy Guide To Budgeting.

Although we call it savings-per-month, a more appropriate name would be investments-per-month. Any financial freedom or retirement money, or indeed any long-term savings, should be invested.

If you save in cash, you are likely never going to achieve freedom because inflation will decimate the pot.

Secondly, it would be extremely difficult to build wealth based on your work alone. The compounding effect of money invested will supercharge your wealth building ability.

Master Investing

This leads us nicely into the next goal, which is to master investing. If you’re new to investing or don’t have any interest in the subject, then don’t worry. This might even be an advantage for you.

Constant meddling and trying to beat the market are usually the reasons why people suck at investing. We ourselves are aware of this and are conscious that our own involvement could damage us.

Hence why the vast majority of our investments follow our strict rules-based approach, which you can follow or use as inspiration.

We both invest into what we call the Ultimate Portfolio.

It’s a portfolio consisting of 5 funds, getting positions in stocks from both developed and emerging economies, and also adds in smaller companies as they tend to grow faster.

The portfolio is finished off with some gold and silver to hedge against economic disaster.

We love this portfolio because it allows us to invest with conviction.

We don’t need to worry about short-term crashes in the market because it tracks a series of indexes that are essentially tracking global prosperity.

If mastering your own portfolio seems to be too daunting or you really can’t be bothered, then as an alternative check out robo-investing. Robo-investors quiz you and then build a suitable portfolio for you on your behalf.

One platform we’ve tried and tested and were really impressed with was Nutmeg. They even have a great welcome offer for customers who use our link. Use the link on the Money Unshackled Offers page and you’ll get 6 months with no management fees.

Whether you go down the robo-investing route or build your own portfolio, make sure you invest every month indiscriminately. It’s what’s known as pound cost averaging.

The idea is that by investing regularly, some months you will happen to buy when stock markets are expensive and other times you will happen to buy when they’re cheap.

By buying consistently, these highs and lows are averaged out.

And to tick this checkbox, you need to be able to say with conviction that you can ignore the news.

Every year there is a major event that screams “panic, sell your investments!”. But doing so would cost you dearly.

For as far back as the data goes, we have seen stock markets continue to climb upwards over the long-term. Selling and trying to time your re-entry is an awful idea.

Most people cannot do this and oftentimes they end up watching from the sidelines as everyone else gets rich around them.

Congratulations, you have now mastered investing. Check!

Hey, wait a minute, what about stocks? Stocks can be fun, and we do invest a little into individual stocks.

The problem with stocks is you could end up rich but equally you could end up poor.

We are confident that with index investing you will become rich one day, although of course there is no guarantee.

Insure Against Disaster

There’s probably a long time between now and your freedom date in which many things can go wrong. We know that insurance can feel like a waste of money but if the risk is too great, then insure against it.

That’s exactly what we’ve done. Ben (MU co-founder) has life insurance, which ensures his wife and child are okay if he was to die.

And Andy (MU co-founder) has income protection insurance that guarantees him an income if he is unable to do his job here at Money Unshackled. We see this as locking in your financial freedom today.

With insurance it’s best to speak to an expert and we’ve tried and tested Assured Futures who specialise in the field.

If you are considering insuring against disaster, check out our Lifestyle Insurance page and lock in your financial freedom. Peace of mind is a lot cheaper than you think.

Establish Multiple Streams Of Income

Ideally this would be to establish multiple streams of passive income. This should definitely be a longer-term goal but more imminently you need to establish any streams of income that you can.

Each income stream needs to be sizable enough that it makes a meaningful contribution to your monthly income.

Having 1 stream that provides 99% of your income and another just 1% doesn’t give you good enough diversification in your income sources.

Your first target for example might be to establish 2 income streams of at least £500 each.

One of these could be through Matched Betting, which can be easily done in your spare time to earn £500 or more. Here’s our simple guide on how to do this.

The next goal might be to establish 4 income streams of at least £600 each.

We have a built a business with over 20 income streams and counting, which ensures that the loss of any one stream wouldn’t put us on the streets.

Most people have one income source, which is their job. Having one source of income makes you a slave to your job master. They know that you are dependent on their crumbs and that is all you will ever get.

Do you have an adequate number of backup income streams? If so, check this one off the list!

Be Prepared For The Unexpected

No matter how much you plan, life will throw some curveballs. Maybe an unexpected breakup will shatter your finances, or you underestimated the cost of having children, or maybe a contagious disease will devastate the economy.

Whether the next curveball is specific to you or a wider event, you need to be prepared for it.

You’ll never predict exactly what the next problem will be but if your finances are in good shape then you will survive it. In part this means you will have built up an emergency fund that will see you through.

If you’ve built up a substantial emergency fund that will see you through a few months of hardship, then feel free to tick this one off the list too.

Diversify Your Skills

If you do depend on one job, then you might also want to diversify your skillset. You need to work on improving your transferrable skills.

Today you might be a taxi driver by trade but when autonomous cars ultimately replace you, can you easily apply yourself to something else without taking a devastating and unexpected blow to your income?

The unexpected isn’t necessarily out of your control either. It could well be that you’ve been doing your well-paid but boring job for far too long and need to try something different.

Remember that financial freedom is likely years, even decades away. You’ll probably need extra skills to fall back on over that turbulent time horizon.

Tick this off your checklist if you’ve learnt something new and useful that can be drawn on in the future, like a second language or computer programming.

Having a diversified skillset means you don’t have to feel like you have to stay in a high stress job even if it means financial freedom is more quickly achievable.

Going from a lawyer to an entry level job as a website designer is likely to begin with a huge pay cut. Although in the short term this will harm your financial freedom plans, it’s better to do something you enjoy.

No matter how much you want financial freedom, if you’re waking up in bad mood for too many days in a row, then something needs to change.

It could well be that you’re trying to save too much per month. In which case, loosen up the budget and retire a little later than originally planned. At least you’ll have fun on the way.

What are your significant income streams? Let us know in the comments below.


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ISA Year End Coming! Will You Join The 3%?

The tax year in the UK doesn’t run from January to December like a normal year. Instead, for arcane reasons, it starts on the 6th April.

The ISA year is the same, since the purpose of holding an ISA is to shield your savings and investments from the greedy taxman.

Every year you are given an ISA allowance, which you must either use, or discard – you can’t carry it forward into future tax years.

You will want to make the most of your ISA allowance before it’s too late.

We’re going to tell you what you need to be doing with your savings and investments before the end of the ISA year, your options for the new ISA year, what we’ve done to get prepared, and answer some common questions our viewers regularly have about using their ISAs correctly.

Alternatively Watch The YouTube Video > > >

Why An ISA?

An ISA (individual savings account) is a type of savings account where you don’t pay any tax on interest, dividends or capital gains. Over the years, this tax benefit can save you tens or even hundreds of thousands of pounds.

The maximum amount you can deposit into an ISA each year is £20,000, and as your ISA balance grows it remains free from tax year after year.

You could in theory, and some people have done exactly this, build your ISA to in excess of £1m and there would still never be any tax on it.

Who’s Taking Advantage Of Their ISA Allowance?

The most recently released HMRC ISA statistics shows a downward trend in people taking advantage of ISA accounts since the financial crash of 2008, when interest rates were slashed:

The fall is mostly in Cash ISAs, probably for this reason of falling interest rates. But 11.2m people were still choosing to protect their wealth from HMRC as of April 2019 – roughly 17% of the population.

But of the 17% of the UK using an ISA, only around 20% of them use their full allowance, so are receiving the full benefit – this tiny band therefore reflects just over 3% of the UK population.

We did a full study on ISA statistics in this video here, including splits by gender, income, and average savings per year, so check that out next if you love statistics as much as we do!

Do You Even Need An ISA?

The general publics’ view on ISAs seems to be that they are pretty much pointless.

If they are only offering 0.5% interest rates, you may as well just have a savings account, or even a high interest current account, right?

This is sort of true for Cash ISAs – not so for other types. Let’s look at Cash ISAs first.

For most people, any interest they will likely receive these days in a savings account will be so small as to be untaxable anyway – whether that’s in an ISA, or not.

Most people in the UK get a personal savings allowance (PSA), separate to any ISA accounts, which means all interest you make on savings are likely to be tax-free.

Basic 20% rate taxpayers can earn up to £1,000 interest a year without needing to pay tax on it, meaning you’d need £200,000 of cash earning 0.5% interest before you’d begin to be taxed.

Higher 40% rate taxpayers get an allowance too, but it is lower at £500.

So, Cash ISAs do look pretty pointless. What about Stocks & Shares ISAs?

Again, there is limited benefit to be gained from an ISA if you only have a small amount invested in the stock market, since everybody gets dividend and capital gains allowances too.

The dividend allowance of £2,000 means you’d need £50,000 in stocks earning a 4% yield before dividends became taxable.

You would likely be safe too from capital gains tax at this level, since you can sell stocks for profits of £12,300 in any one year before tax is due.

In many cases a general account may be better if your provider charges you to use an ISA.

But if your goal is to grow your wealth over the years, we think an ISA is almost essential. Part of the strategy of long-term wealth building via ISAs is getting your money into it each year while you can, up to the full ISA allowance.

You can’t just drop £50,000 into an ISA – you have to add it in gradually over a number of years.

And if you can’t think of anything to invest in right now, that’s fine – you can deposit into a Stocks & Shares ISA and hold that money in there as cash for as long as you want.

When you’re ready, which might even be in a future tax year, you can use the cash that you previously deposited into your ISA to buy investments with.

Just make sure you use up your allowance, and you can worry about investing later!

Do You Need To Inform The Tax-Man?

Also, using an ISA avoids the need to declare your dividends and capital gains on a self-assessment tax form at the end of the tax year.

Any profits made in an ISA have a privileged status in that the tax man legally doesn’t need to know anything about them.

You only need to tell HMRC about dividends and capital gains on shares made outside of ISAs if they are above the relevant allowance thresholds.

How Does The Allowance Work?

As we said earlier, none of your £20,000 allowance rolls over, so for example if you only put £15,000 into an ISA, you can’t carry the remaining allowance of £5,000 into the following year.

Basically, it’s use it, or lose it.

Amounts that are deposited and then withdrawn in the same tax year still usually count towards your allowance.

Say you deposit £15,000, then a couple of months later withdraw £10,000, leaving you with £5,000. The most you could then top your ISA up by in this same tax year would be a further £5,000.

In total HMRC says you have saved £20,000 and used your full allowance, even though in reality you’ve only saved £10,000.

Some providers do offer flexible ISAs allowing withdrawing and redepositing, but these are less common.

Finally, any dividends, capital gains and interest you make in the ISA don’t count towards your allowance, so don’t worry about profits holding you back – they won’t.

What Are My ISA Options?

#1 – Cash ISAs

So, there’s Cash ISAs – for the reasons already mentioned, we personally don’t see much point in these.

A further (and we think the main) point against them is that the returns are lower than inflation, making them terrible as a means of growing wealth.

The top Cash ISAs currently available offer between 0.4% and 0.62% – find these on – and remember while you do so that inflation is typically 2-3%!

Premium bonds currently average a better return than cash ISAs and are also tax-free, so for whatever cash you have to hold, premium bonds might be a better place to store it.

#2 – Stocks & Shares ISAs

Your next, and in our view, best option is a Stocks & Shares ISA. You can invest in the stock market while being protected from capital gains tax, dividend tax, and tax on interest from bonds and cash.

That’s all the major taxes covered, but you’ll still receive some foreign dividends after the deduction of foreign dividend withholding tax.

The stock market has returned around 8% annually on average over the last 120 years or so – quite a bit more than inflation. The downside is that this has to be seen as a long-term commitment, since some years will see your money go down, alongside the good years.

The main thing to watch out for in a Stocks & Shares ISA is fees – the main ones on your radar should be the platform charge, any management fees on funds, and trading and FX fees when you buy and sell investments within your ISA.

We’ll soon mention some investment platforms that offer low fee ISAs, which have minimised or removed trading fees entirely.

#3 – Lifetime ISAs (LISAs)

First-time homebuyers saving into a Lifetime ISA can save up to £4,000 into this account each year tax-free, and the government will top it up by 25% – up to an extra £1,000.

They come in both Cash and Stock Market varieties.

They are also seen as an alternative to a pension, since they are designed for the dual purposes of house purchases and retirement planning. Withdrawals for any other purpose will be penalised.

We think on balance a pension is still the best place to hold your old age retirement pot for most people.

#4 – Innovative Finance ISAs

The Peer-to-Peer Lending market is slowly opening up again after the pandemic, and we still have several welcome offers for free cash rewards on the Offers page from Peer-to-Peer providers, most of which offer Innovative Finance ISAs.

This ISA type protects your Peer-to-Peer Lending investments from tax.

An important point on ISA types is that you can deposit into multiple ISAs each tax year, but only into one from each type.

And your total deposits must not exceed £20,000 a year across all of them combined.

Time To Switch ISA Provider

The start of the ISA year is a great time to switch ISA provider. If you’re in the market for a new, better ISA, there’s one thing you should never do.

NEVER withdraw money from your ISA account to put it into your new one. If you do, you’ll immediately lose its tax-free status and waste your new year’s allowance by redepositing money that was already sheltered.

Instead, you need to follow the simple transfer process. Make sure that the new provider you want to use accepts transfers – not all do – and then fill in the ISA transfer form with the new provider.

ISA transfers should take no longer than 15 working days for transfers between cash ISAs and 30 calendar days for other types of transfer.

Top Stocks & Shares ISA Providers

Stocks & Shares ISAs come in different flavours, the main difference being between “Do-It-For-Me” providers and “Do-It-Yourself” providers.

If you want an easy life or don’t know enough to feel confident about investing, Nutmeg are our favourite “Do-It-For-Me” platform.

Check out our Nutmeg overview at the Best Investment Platforms page, and if you sign up via the MoneyUnshackled website, they’ll knock your management fees down to 0% for the first 6 months as a special offer.

If you want to manage what goes into your ISA by yourself, on this page you’ll also find overviews of our favourite “Do-It-Yourself” ISA providers – some of which also have welcome offers. There’s also a comprehensive cost comparison table.

Don’t Forget The Kids

Junior ISAs, known as JISAs for short, are tax-free havens for kids that work in a similar way as the adult versions of Cash ISAs and Stocks & Shares ISAs.

But the amount you can save into one tax-free each year is less at £9,000, and you or they can’t withdraw from the account until the child is 18. And the money is legally theirs – no take backs!

We can’t give you advice, but we would only consider a Junior Stocks & Shares ISA for a child. Nothing else makes sense.

Over the long-time frame of 18 years, the stock market will almost certainly reap huge returns for your kid, while cash is almost guaranteed to lose value to inflation.

We’re Ready For The New ISA Year

We're ISA Ready!

We’ve already deposited our full ISA allowances, so we’re now waiting eagerly for the new ISA year to kick start on the 6th April.

In doing so, we happily join the 3% of Brits who are taking advantage of this sweet incentive to grow wealth. Will you be among them too?

What are you doing to prepare for the ISA deadline? Join the conversation in the comments below!


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Should You Invest in Alternatives In 2021?

Stocks are expensive, property is expensive, bonds are expensive, and so is gold. Where else can investors turn to in the pursuit of good investment returns?

Not only that, but what else can we invest in to further diversify and decouple our dependency on these traditional assets and the wider economy?

These questions have led us down the path of alternatives.

For whatever reason, these alternative investments don’t get anywhere near the attention of traditional investments like stocks, and in this article, we aim to correct this injustice.

We guarantee that many reading will never have even imagined that some of these investments exist, let alone considered investing in them.

Today, we’re looking at 6 alternative investments that could supercharge your investments returns. Let’s check it out…

Alternatively Watch The YouTube Video > > >

What Are Alternatives

In a nutshell, an alternative investment is any investment that isn’t any of the conventional assets – these being stocks, bonds and cash.

The term is relatively loose, and for the sake of this video we will throw in property and precious metals into the conventional asset basket as these are well recognised as investments, and there are a tonne of ways to get exposure to them.

So, why might you invest in alternatives? Other than seeking higher returns, the idea is that they display different return characteristics to equities and bonds.

If markets start downward trending, then you want something in your portfolio that can potentially act as a buffer.

As these investments are unusual, we urge you to do your research before buying.

Let’s take a look at some alternatives in no particular order:

#1 – Royalties

In good times and bad people love listening to music, and growth in streaming apps will only boost the value of song royalties.

But unless you’re Susan Boyle and have been hiding your music talents from the world all these years, then you have probably written off your chances of profiting from a hit song.

Well, don’t write off anything just yet as there are 2 investment companies listed in the UK that specialise in song royalties. These companies buy the intellectual rights to music catalogues.

These two investment companies are:

  • Hipgnosis Songs (SONG); and
  • Round Hill Music Royalty (RHM)

Both of these funds have sizable fees. Hipgnosis Songs comes in at 2.18% and Round Hill Music comes in at 2.4%. With funds like this it really is more about what you get than what you pay.

Taking a quick look at Hipgnosis to get a flavour of what they do, they have a catalogue of over 60,000 songs including over 3,000 number 1 songs and almost 12,000 top 10 songs. In 2021 they’ve made some massive acquisitions including Neil Young, Shakira, Jimmy Iovine, Joel Little, and more.

Download the Freetrade app to invest in Hipgnosis (or even just fund your account with £1) and you’ll be given a free stock worth up to £200. The link to this offer is on the Money Unshackled Offers page.

#2 – Art

According to Deloitte, art investments are: “high-risk, illiquid, opaque, unregulated, with high transaction costs, and at the mercy of erratic public taste and short-lived trends”.

Sounds like a compelling investment case!

However, that doesn’t necessarily make art a bad investment. The prices that some people will pay for an art piece is staggering. The Salvator Mundi by Leonardo da Vinci for instance sold for $450m.

According to Knight Frank, who track the performance of art, they say the asset class has risen by 134% over the last decade.

One way to invest in art is to buy contemporary art. You can visit art galleries and see what they have to offer, or you can buy it online.

Unless the artist is completely unheard of it can get very expensive, very fast. We must admit we personally would never go down that avenue… we don’t know a Leonardo Picasso from an Andy Warhol.

If you’re like us or perhaps you don’t want the cost or hassle of owning art outright, you can use sites like Masterworks to buy shares in art. For a relatively small fee, they will do all the work for you. Now we’re talking!

Art is considered a long-term investment, so don’t expect to get your money back for several years, when the painting is sold by Masterworks.

Masterworks does operate a secondary market for selling your art shares to other investors but unfortunately this is not currently available to non-US residents.

If you’re considering investing in art, then it makes sense to check Masterworks out.

#3 – Infrastructure

Have you ever considered investing in core infrastructure? Core infrastructure is the facilities, services, and installations considered essential to the functioning and economic productivity of a society.

They tend to deliver predictable and dependable cash flows.

They are typically very visible in communities and include assets such as water, electricity and gas transmission and distribution, regulated airports and rail networks, to name just a few.

Characteristics of core infrastructure include quality cashflow, limited competition, and being critical to their community.

One such company operating in the field is HICL Infrastructure (HICL), valued at £2.9 billion, again available on apps like Freetrade.

The AIC website, which is the trade body for investment companies, lists 7 investment companies within the infrastructure sector, so if this alternative asset takes your fancy, then checking out those would be a good place to start.

This is a listing of the top 10 largest investments for HICL:

The top 10 investments in HICL

Affinity Water is the UK’s largest water-only company and serves the South East of England. Affinity Water maintains 95 water treatment works and over 100 reservoirs.

The next largest is the A63 Motorway in France. We’ve never heard of this but it sounds incredible. There is technology in the road surface that generates electricity from solar energy, known as ‘Wattway’.

The A63 is a toll road, which always seem like money making machines. HICL must seem to think so, as their 4th largest investment is Northwest Parkway, another toll road, this time in the US.

HICL’s third largest investment is High Speed 1. High Speed 2 gets a lot of the media focus but as it stands currently, High Speed 1 is the UK’s only high-speed rail line.

It runs 109km from St Pancras International to the Channel Tunnel.

The historic returns of HICL have been awesome, averaging 9% per year since its IPO in 2006.

If you love your dividends this investment company should definitely be considered as it yields 5% and has a sweet record of increasing year after year.

#4 – Wines, Whisky and Spirits

Booze as an investment is probably not the first thing that comes to mind, but some drinks do go up in value.

Take wine for example. Fine wine matures once bottled and improves with age. Every year some of it is consumed causing the supply to get smaller. Supply goes down and demand goes up as the wine matures, leading to higher prices.

According to, wine as an investment has returned 247% since 2004, which beats an index of European stocks, with returns of just 129%.

Wine must be stored correctly in a temperature-controlled facility and “under bond”, which means the owner hasn’t taken delivery, so avoids paying excise duty and VAT on the wine (which cannot be reclaimed). Therefore, it’s best to use a professional service.

One such site is Berry Bros. & Rudd. According to them, you don’t need much knowledge to invest in wine as you can get expert advice from the merchant.

Berry Bros. & Rudd has been trading for more than 310 years and they can make investing recommendations to you. If you invest via their cellar plan option, they suggest investing at least £250 per month.

Not only can you store your wine with them, but they also operate a marketplace, which has 240,000 visitors a month, so presumably you should have little problem selling the wine.

We’ve never personally invested in wine, so cannot vouch for the service.

As for Whisky, the historical returns between 2010-2019 was 15.4% per annum. After the deduction of storage costs this comes down to still a very impressive 11.7% per annum.

This is according to, a site that you can buy and sell whisky through. They will store it for a small fee, and facilitate trading of the whisky, allowing you to realise your investment at any time.

The company was founded by the same company who owns BullionVault, which provides a similar service for the buying, storing and selling of gold and silver bullion.

You can actually grab some free silver when using the welcome offer for BullionVault on the MU Offers page.

#5 – Private Equity

Private Equity refers to investments made into companies that are not publicly traded.

According to, roughly $3.9 trillion in assets were held by private-equity firms as of 2019, and that was up 12.2 percent from the year before.

The reason an investor might want to invest in private equity is that they are seeking better returns than what can be achieved in publicly traded stocks.

Traditionally this asset class has been off limits for ordinary investors, and the potential high profits have been unfairly in the sole domain of institutional investors such as pension funds, and high net-worth investors.

The good news is that there are some investment companies operating in the space, which give us ordinary folk a chance to benefit from unlisted companies.

According to the AIC these are the investment companies to choose from. Some of them are funds of funds, which are a great source of diversified private equity exposure. But some investment companies also invest directly in unlisted companies.

One such example is HgCapital Trust (HGT).

Based on HGT’s share price at 30 September 2020 and allowing for all historic dividends to be reinvested, an investment of £1,000 twenty years ago would now be worth £13,095, a total return of +1,210%. An equivalent investment in the FTSE All-Share Index would be worth just £2,162.

This investment company primarily invests in software and service businesses across Europe. Even if you can afford to invest in private equity directly yourself, we’re not sure you should as it’s a highly specialised field.

Hg’s top 20 underlying investments make up 73% of the portfolio. Being unlisted companies, most people have probably never heard of them but Hg itself is valued at £1.2 billion, so collectively they’re no small-fry.

#6 – Buy A Cow

Here’s one for the more adventurous of you who like to have a bit of fun while they’re making money. There’s a South African company called Livestock Wealth that are in the crowdfarming business.

You essentially buy a cow, the farmer looks after the cow for several months, and then buys it back off you for more than you paid.

Surprisingly, there is really good profit to be made. You can buy a Free Range Ox for the equivalent of £540 and make between 5-7% in just 6 months. That’s an annual return of 10-14%, which compares very favourably to stocks and other investments.

Although the minimum return is in theory guaranteed, one has to wonder what would happen if the farmer or Livestock Wealth went out of business.

The company isn’t regulated by any financial body as it isn’t by definition a financial services institution, so we presume in this scenario you would lose all your money.

If you can stomach the risk and want to be able to brag that you own some cows, then check them out.

How many cows are in your portfolio? Let us know in the comments below.


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Tax Dodging Strategy – No Dividend Stock Portfolio

These days everyone raves about index investing because it’s thought that fees are the deciding factor in how big your investment gains are.

What doesn’t get enough attention is tax and how it drags on your profits. Many investors will scrutinise the smallest of fees but turn a blind eye to crippling taxes.

In some cases, this will be because the taxes are taken unknowingly, and other times it might be that people feel they have no way to avoid them.

On this site we aim to arm our viewers with the knowledge to defend themselves from unwanted taxes and ultimately boost your wealth.

The main way governments are swiping at your invested money is by taxing dividends.

If you have a small investment pot, you’ve probably not even noticed – but for larger pots we would go as far as to say that these dividend taxes are an outrageous assault on your wealth.

We’re going to show you a way to combine index investing with building a portfolio of stocks that uses our new tax dodging strategy. Let’s check it out…

Alternatively Watch The YouTube Video > > >

We think the most cost-effective way to build this tax dodging portfolio is with Stake. Stake specialises in US stocks for UK investors, and offers 3,000 of them. Stake is FCA regulated and has fractional trading and has no FX fees when you trade. We’ll get to why this is so crucial later.

And Stake are giving away a free US stock worth up to $100 to everyone who signs up via the link on the Offers page.

The Dividend Tax Problem

First, we need to explain what the dividend tax problem is, because we think most investors have no idea what the issue is.

We can hear a few cynical know-it-alls sniggering that all you need to do is use an ISA and there’s no tax.

But this isn’t quite true, and it also doesn’t deal with the issue of what to do after you’ve used your ISA allowance.

The first problem is dividend withholding tax (WHT). This is a tax that international governments withhold from any dividend paid from companies based in that country.

An ISA does not guard you from this assault on your wealth.

The US withholding tax is not the worst, but it’s the most important due to the size and significance of the US stock market.  A UK investor who has completed a W8-BEN form will pay 15% US WHT.

The next problem is the outrageous dividend tax applied by our own UK government.

It starts at 7.5% for basic rate taxpayers, climbs to 32.5% for those on the higher rate, and for those on the additional rate, they will have to stomach a 38.1% hit to their dividends.

There is currently a notional £2k allowance where no tax is paid but this used to be £5k and was reduced. The direction of travel suggests this will be removed entirely in the future.

Official government figures say that around 20% of ISA subscribers use the full allowance, and with many of these people having decent salaries or businesses, they will become victim to this nasty tax at probably the higher or additional rates.

We are happy… well, content… with paying taxes when they are on real profits. Dividend taxes, however, are taxes on cashflow.

If a company pays you a £1,000 dividend, the company’s market value falls by £1,000. You may have received cash, but your total wealth has not changed.

It’s really unfair to tax this. As a result, when companies pay dividends your wealth actually goes down due to the tax – paying dividends makes you poorer.

The FX Fee Problem

A big issue with ISAs is you can’t store foreign currency in them. This means every time you buy and sell a stock listed in dollars for example, you incur the platform’s FX fee.

Many UK platforms are taking advantage of this to hoodwink their customers. They like to pretend that their trading fees are low but hit you with an FX fee.

Trading 212 have begun to use this technique themselves by introducing a 0.15% fee.

It’s nonsensical to use an ISA to avoid one kind of fee i.e. tax, to then have to pay another in its place i.e. FX trading fees.

Since T212 have introduced these fees, it has elevated Stake’s competitiveness in the market and has potentially made Stake the go-to app for trading US stocks.

Stake charge 0.5% FX fees on deposits and withdrawals but nothing on trades. This allows you to buy and sell as frequently as you want without incurring additional fees.

As most other platforms charge FX fees on trades, the total cost can escalate fast.

The Solution: A No-Dividend Stock Portfolio

Investing for dividends is super popular, with many people loving this strategy of passive cashflow, and there are many funds available that invest for dividends as their objective.

But what we want is the option to eliminate dividend paying stocks from a portfolio entirely.

An alternative to dividend investing is picking growth stocks, which are companies that increase their revenue and earnings faster than the average business.

Growth stocks tend to pay low or no dividends, but we want to be as confident as we can possibly be that we won’t receive any dividend, as it would be taxed.

Unfortunately, there is no index that we could find that tracks the stocks in the S&P 500 that pay no dividends. But you can create your own, and that is exactly what we have done.

It probably shouldn’t need mentioning but to be clear, the main goal of any investment strategy should be to maximise after-tax profits.

There’s no point in investing in a portfolio of crappy stocks just to avoid some tax.

But with that in mind, we fully expect this home-made index of stocks to deliver phenomenal returns if it continues to perform anything like it has done over the past 5 years.

We have never seen any study into non-dividend paying stocks, so we’re very keen to see how this portfolio does.

The List of Stocks

There are currently 72 stocks within the S&P 500 that meet our no-dividend criteria. This will change on occasion as companies enter and leave the index, and as companies change their dividend policy.

We’ll take a look how we got the data in a minute, which will be useful to those of you who want to run with this themselves.

Here’s a link to a pdf of the full listing of 72 stocks that made the cut: Listing download

The top 20 are shown below:

The top 20 stocks in our "index" - full listing at the link above

We sorted it by market cap and no doubt you’ll recognise many of the names at the top.

First, we have Amazon. Then there’s Google’s parent company Alphabet. Facebook is there too. Fanboy favourite Tesla gets a mention. And Buffetts’ own Berkshire Hathaway. And on it goes.

The 72 stocks make up almost 22% of the S&P 500. That’s quite a sizable chunk, but don’t expect it to mirror the index’s performance closely.

As the majority of these stocks could be considered growth stocks, we would actually expect them to outperform the S&P 500. Only time will tell.

As a benchmark for comparison, over the last 5 years Vanguard’s S&P 500 ETF has returned 114%, which is 16.4% per year.

If you invested an equal amount into these 72 stocks, by our calculation they returned 26.9% per year, smashing the S&P average.

We doubt that overperformance of that magnitude can go on forever, but it gives us some faith that we can avoid dividend tax and still earn incredible returns.

The compound annual growth rate on these stocks is enormous. As a rule, we don’t tend to pay too much attention to past performance of just a few years, but with so many of the stocks delivering standout returns it’s difficult not to be impressed.

Amazon has returned 40% per year; Tesla 70% per year; AMD 97% per year; and so on.


Although this list of stocks is just a small selection of the S&P 500, there is still a hell of a lot there if you were planning to invest in all of them.

Some of you might want to take advantage of the analysis tools within the Stake app to fine-tune the stock list further. The Stake app has some awesome inbuilt analyst ratings, which you could use to narrow down on the best stocks.

How Much To Invest In Each Stock?

You have a few options. The easiest would be to invest an equal amount into each stock. Most indexes don’t do this, however.

The S&P 500 is free-float market capitalization weighted. This typically means the biggest companies make up the majority of the index.

Amazon comprises 4% of the S&P. If we were to use the same methodology as the index that would mean Amazon makes up 18.3% of this portfolio. This would absolutely terrify us – so we’d probably stick to the equal weighting method.

Facebook, the third biggest stock here, makes up 2% of the S&P, so would translate to 9.1% of the market-cap weighted version of this portfolio.

As you go down the list the weighting of each stock becomes less and less significant. At the bottom of the list these stocks are merely making up the numbers, rather than having any meaningful impact on it.

Rather than investing in all 72 stocks, you could just invest in the top 20 or so. These top 20 would cover 83% of our stock list, or 18% of the full S&P 500.

How We Built This Home-Made Index

Using Stockopedia’s stock screener tools, we were able to identify S&P 500 stocks and then filter down only on those that haven’t paid a dividend in any of the last 5 years.

For this portfolio we only want companies that are committed to increasing shareholder wealth by any means, other than dividends.

This usually means by reinvesting profits back into the business such as by expanding into new markets or buying new machinery, but it can also include share buybacks. These are great as it avoids that pesky dividend tax.

It’s not enough to exclude companies that didn’t pay a dividend in the last year alone because in many cases this was a temporary reaction to having a bad trading year.

And finally, we ranked the stocks by their S&P 500 constituent weightings.

What About Capital Gains Tax?

As it stands, we get a far more generous capital gains allowance than dividend allowance. The Capital Gains tax-free allowance is currently £12,300 per year.

This means you can sell stocks to realise a profit up to this amount every year and not pay tax.

For example, say that you bought 2,000 shares in company X at £10 each (totalling £20k). If the shares increased in value to £25 (totalling £50k), you could sell 820 shares at £25 and pay no tax.

In doing so, you would have sold £20,500 worth of shares, realising £12,300 profit, which falls within your tax-free allowance.

You just need to be smart and try and use this allowance to its full potential. Many investors will choose to voluntarily realise gains in a tax year up to the value of £12,300, and then reinvest their money back into the market, rather than taking all the profit in one go and getting a massive but unnecessary tax bill.

Have you been allowing governments to put their hands in your pocket? What do you plan to do about it? Let us know in the comments below.


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Don’t Invest Like Warren Buffett. Here’s Why

Warren Buffett needs no introduction. He has led the company Berkshire Hathaway for several decades now and turned it into a multinational conglomerate owning or having significant stakes in some of the biggest companies in the world. Today Berkshire is worth $577 billion.

Buffett is up there amongst the richest people in the world and he himself is estimated to be worth $95 billion. We don’t think we’d be out of place to call him the greatest investor on the planet.

He’s so good in fact that millions of investors hang on every word he says. We think you’d be hard pressed to find an investor that doesn’t at least pay attention when Buffett opens his mouth.

But despite all these incredible accolades does that mean you should try and emulate his success by doing what he does? Here we’re looking at 6 reasons why you shouldn’t invest like Warren Buffett!

It’s highly unlikely that Warren uses an investing platform, but you need one! If you need help choosing, then check out the Best Investment Platforms page.

We’ve handpicked some of our favourite places to invest and some are even giving away free stocks when you sign up.

Alternatively Watch The YouTube Video > > >

Buffett’s Investment Style

Many investors have tried to replicate his investing style or at least something that they think resembles it.

Buffett follows the value-based investing model. Essentially this where you only buy stocks in companies that exhibit solid fundamentals, strong earnings power, and the potential for continued growth.

But crucially, Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic value – basically trading less than what a stock is really worth.

He’s also famous for not investing in anything he doesn’t understand. This might mean he misses out on some big gains, but it also ensures that he doesn’t suffer significant losses such as when the dot-com bubble burst.

At the time most technology plays were new and unproven, causing Buffett to avoid these stocks.

Buffet favours companies that distribute profits to shareholders but perhaps hypocritically, Berkshire Hathaway does not pay dividends to its own shareholders.

Buffett feels that investing back into the business provides more long-term value to shareholders than paying them directly, because the company’s financial success rewards shareholders with increasing higher stock values.

While learning as much as you can from great investors like Buffett is certainly recommended, here’s why you shouldn’t try to invest like him yourself:

#1 – You Can’t Buy Entire Companies

A lot of the attention on Berkshire is on its portfolio of public stocks that they own a percentage in. The big ones currently include the likes of Apple, Bank of America, American Express, and Coca-Cola.

This table produced by CNBC excellently breaks down all the publicly traded stocks that Buffett’s company currently has a stake in:

Berkshire Hathaway's publicly traded investments

Notice that the total adds up to $268 bn. As we mentioned earlier the total value of Berkshire is $577 bn, which would suggest that Berkshire owns other companies worth hundreds of billions of dollars’ that are wholly owned and so are not included in this list.

One example of a wholly owned subsidiary is BNSF Railway, which is the largest freight railroad network in North America. That deal was completed in 2009 and was worth $44 billion, so presumably is worth a lot more today.

Another example is Precision Castparts Corp. This company became a subsidiary of Berkshire in 2016 in a $37 billion deal.

Owning companies in their entirety gives Buffett control over how the business is run. Although the subsidiaries get unparalleled autonomy, if performance is disappointing, Buffett could get involved.

Owning subsidiaries in full allows any excess cash to be redirected to the other parts of the Berkshire empire or to make new acquisitions.

Being able to take full ownership of companies gives Buffett advantages that you do not have.

#2 – You Don’t Have The Skills

That’s not meant to be a criticism. We’re comparing you with one of, if not the greatest investor of all time.

Anecdotally, we think the extent of most peoples’ investing efforts is to look at a share price chart and come to the conclusion that a stock is worth buying if the price is lower now that what it was in the past.

Perhaps some people go a bit further and look at earnings-per-share, the price earnings ratio, and the dividend yield. Not many people go further than this.

Have you ever looked at an annual report or other company filings, especially one from a US company? They are the longest and most boring documents that you can imagine.

No normal person in their right mind wants to read one of these. By the time you’ve finished reading next year’s report would have already been published.

And yet Buffett relishes the chance to flick through the pages. He has even said, and we paraphrase, “if you are invested in a business, it is your duty to know everything about its competition. Therefore, it’s not enough to just read the annual report of your business; you need to read all your competitors’ filings too”.

How did you learn to invest? Buffett was a student of Benjamin Graham, who is widely regarded as the father of value investing.

Most investors today have watched 5 minutes of Mad Money with Jim Cramer on CNBC and are following wallstreetbets on Reddit. That is the extent of their investing prowess.

#3 – You Don’t Need To Beat The Market

Buffett himself says the average investor should be tracking an index. This is a guy who has smashed the S&P 500 over several decades and yet he still encourages everyone else to track the market.

He believes this so vehemently that he has instructed the trustees of his estate to invest it in index funds after he’s gone.

In a 2014 letter to his shareholders Buffett said,

“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund (I suggest Vanguard’s). I believe the trust’s long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions, or individuals—who employ high-fee managers.”

There is a great deal of evidence that shows that passive investing beats active investing after the high fees and taxes.

In 2008 Buffett made a $1m bet that an S&P 500 index fund would outperform a hand-picked portfolio of hedge funds over 10 years. In year 9 the hedge funds conceded after the S&P 500 had taken an unassailable lead:

Buffett won his bet...

What’s more, spending the time researching, analysing, and monitoring stocks is very time consuming when done properly.

A well-diversified portfolio is likely to have 20 or more stocks, so even if you have exceptional investing skills you still need to ask yourself whether picking stocks is worthwhile.

Let’s say you were managing your own portfolio that was valued at £100k. Most young people don’t even have this.

If you were to add 2% extra value to your returns over the index, that’s still only £2,000 a year. Your time would have been better spent increasing your income elsewhere and increasing your investing contributions.

#4 – He’s Not Saving For Retirement

Buffett is said to have the majority of his own personal wealth in Berkshire Hathaway, but he is not saving for retirement (because he’s already minted), and Berkshire is not a retirement fund.

Investing should always be personal because everyone’s situation is different, but with absolute certainty your situation is different to Buffett’s.

Most of us have to grow a portfolio during our working years and then the stash has to produce reliable income during our later years.

Broadly speaking, that means we can gear our investments towards high growth assets while we’re younger are forced to shift towards safer investments as we age.

Historically, during the retirement years the assets would need to pay an income but a reduction in trading fees may have lessened this need slightly, as you can gradually sell out of your growing positions instead.

Although we personally are not keen on bonds, you can understand why so many retirees feel comfortable holding these in their portfolios. They are nowhere near as volatile as stocks and help to preserve the capital value of the portfolio at the expense of lower expected returns.

Berkshire and Buffett have none of these concerns and can stick to the stock market.

#5 – He’s American, You’re Not

If you’re indeed American, you can ignore this but for the majority of our viewers who are British, your residence lowers your chances of success.

Most of the companies Buffett invests in are global but their roots and the majority of their revenues come from the US market.

When picking stocks, you have an advantage when you are familiar with the market they operate in. You can get a better feel for a company when you’re able to walk through the doors and experience it for yourself.

Also, you have to worry more about exchange rates than he does. Most of the profits his stocks make will be in dollars, which is exactly how he wants it.

For all of us in the UK, however, changes in the exchange rate can wipe out all of your returns or even amplify losses. We personally only see this as a short term-term worry, which is ironed out over the longer term, but many British investors are so concerned with this that they neglect their international holdings and choose to have too much UK bias.

However you choose to manage FX risk, this is a much smaller issue for Buffett!

Another problem us non-US investors have is dividend withholding tax. We get stung with a 15% tax on any dividends paid by US companies.

If you’re investing in US stocks that pay good dividends, Uncle Sam is going to take a slice off the top. Don’t underestimate the effect of small fees and taxes on the long-term performance of a portfolio.

#6 – You Can Invest In Small Companies

The first 5 reasons are all ways in which Buffett kicks your ass, the little guy, so let’s reverse that and look at 1 big area you can beat him in.

Buffett is managing hundreds of billions of dollars.

Although that sounds awesome, it comes with a major problem: There are not enough good companies out there trading at reasonable prices to invest in.

Unless the company is worth at least a few billion dollars, then it’s likely to be off limits for Berkshire because any purchase would likely result in owning the entire company. Owning too many tiny subsidiaries would clearly be too much of an administrative burden.

What’s more, even if a $50m stock doubled in value it would have a negligible effect on Berkshires profits, so it’s not worth their management time.

You on the other hand can literally invest in any public stock that’s available to you. This is awesome because it’s the smaller companies where the bargains can be found.

Large companies tend to be over analysed and are more likely to trade at their intrinsic value.

Small-cap stocks are more likely to go unnoticed and sometimes can trade at knockdown prices. It’s highly unlikely that you spot something in Apple’s product design or supply chain that a full-time analyst doesn’t already know.

But this is very possible when you look at your local chain of corner shops, which is floated on AIM!

Buffett’s inability to buy small companies puts Berkshire at a major disadvantage.

He told Berkshire’s investors not to expect the same type of returns the company has produced over the past 55 years.

What’s your investment style and why? Let us know in the comments below.


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Millionaires Invest In These Funds – Top Investment Trusts

If we want to become millionaires, then surely it makes a lot of sense to do what they do.

Recently we learnt that ISA millionaires invest overwhelmingly in investment trusts, which the average non-millionaire seldomly uses.

Armed with this knowledge, should we all be thinking about adding at least some investment trusts, or investment companies as they’re also known, into our portfolios?

And how much of your portfolio should you allocate to investment trusts?

If we’re following the well-trodden path of the ISA millionaires on Interactive Investor, then around 54% should be in investment trusts:

How People Invest On The Interactive Investor Platform

According to the Association of Investment Companies, who are the trade body for closed-ended investment companies, there are 391 of them to choose from.

So, this begs the question; which investment trusts should you be investing in?

Here we’ll explain what an investment trust is and the pros and cons of investing in them.

We’ll also look at the most popular investment companies that millionaires are buying, and crucially we’ll show you how you can research and analyse them for yourself!

The 5 Investment trusts in this article can all be found on Freetrade. If you’re looking for a new investment platform and are considering Freetrade, then make sure to grab your free stock worth up to £200 when using the link found on the Money Unshackled offers page.

Alternatively Watch The YouTube Video > > >

What Is An Investment Trust?

Investment trusts are collective investment funds, which allow investors to pool their money together.

In doing so, investors are able to invest in a range of assets, such as stocks, that otherwise may not be possible on their own. This pooled money will be managed by a professional who in theory should be able to provide better returns than an individual.

The name, investment trust, is somewhat misleading, given that it is not in fact a “trust” in the legal sense at all, but a separate legal company.

Investment trusts are ‘closed-ended’, meaning they have a fixed number of shares like other public companies such as Tesco or BP.

But instead of being involved in the buying, manufacturing, and sale of food or Oil, they specialise in the management of financial assets – usually other public companies.

The Investment trust model is well-tested having been around since the 1860s, whereas ETFs and OEICs have only been around since the 1990s.

But despite investment trusts’ long history, they are often regarded as the investment world’s best kept secret. This might be because investment platforms actively promote other types of funds, particularly OEICs, which feature in many of the best buy tables.

A sceptic might say that this reflects the fact that platforms can make more money if their clients buy and sell these other fund types.

Why Investment Trusts Kick Ass!

Investment trusts have a superior performance record compared to their better-known cousins – unit trusts and OEICs. But why might this be?

Investment trusts, unlike unit trusts and OEICs, can borrow money to invest, which when done right will magnify returns.

Another massive advantage over OEICs and Unit trusts is the fact that the investment manager of the investment trust can concentrate on generating returns, rather than have to worry about liquidity.

In other fund types, investors are able to withdraw money directly from the fund at any point, meaning they have to hold excess money to deal with the day-to-day withdrawals.

When this happens OEICs and unit trusts may be forced to sell some assets, at what could be knockdown prices, to deal with these unhelpful fund flows.

Investment trusts, however, are traded on an exchange. This means the shares are bought and sold just like any other company and doesn’t directly affect the daily operations of the investment trust.

Another benefit is they can also use derivative securities such as futures and options for investment purposes. These might be risky in the hands of an inexperienced investor but can be incredible tools to enhance or protect returns.

Investment trusts also have advantages when it comes to dividend payments, as they are able to retain 15% of the income they receive each year. In leaner years they can then dig into these reserves to maintain dividends.

According to the book “Investment Trusts Handbook 2021”, which is worth reading by the way, these advantages show up regularly in comparisons between the long-term performance of investment trusts and that of open-ended funds.

Where trusts and similar funds can be directly compared, trusts typically show up with superior performance records.

Where an investment trust and an open-ended fund with the same mandate are managed by the same individual, it is rare for the trust not to do better over the longer term.

What Are The Drawbacks?

As investment trusts trade on an exchange like other companies, their share price can and does deviate from the net asset value, which is the value of its underlying investments. This difference is known as the discount or premium.

This isn’t necessarily a bad thing and is in fact a characteristic that you should take full advantage of… but it does add more complexity and risk.

For example, the underlying investments could perform badly, and market sentiment could also decline, causing the discount to widen. This would be a double whammy!

Likewise, the opposite could happen. Underlying investments could do well, and market sentiment could improve, causing a double benefit to overall returns.

We personally see the option to use gearing as a positive but if the underlying investments do poorly, then gearing will amplify those losses. Though to be fair most investment trusts use gearing sparingly, and we’ll soon show you where to find this out.

The Management Problem

The biggest potential drawback of all could well be the management problem.

By buying into an actively managed fund, you are depending on one guy or a small team to deliver exceptional results.

But just look at what happened with Neil Woodford. When you pick an investment trust you could end up with one of these duds. Past performance doesn’t guarantee future results!

There is some very convincing evidence out there that says index investing, such as through an ETF, is the best way to invest, because it removes the human element of a fund manager.

Which Investment Trusts are Millionaires Buying?

Interactive Investor shared the top 10 holdings for the ISA millionaires on their platform (see below). 5 of them were Investment trusts, with the most popular being Scottish Mortgage which we’ll explore shortly.

In second place was Alliance Trust, followed by Witan, then RIT Capital Partners, and finally City of London.

Top 10 Holdings Of ISA Millionaires

How To Research And Analyse Investment Trusts

Earlier we name dropped the Association of Investment Companies, and their website is in our view the single best place for information on investment trusts. But what’s better than a good site? A free good site. That’s right – the AIC site won’t cost you a thing to use.

Another useful site is but that’s got too many ads for our liking.

How To Navigate The AIC Website

On the AIC website, you’ll be able to search for a specific company from the homepage if you already know what you want to check out.

Alternatively, head over to ‘Find and compare investment companies’ at the top and click ‘compare companies’. On this page you’ll be able to look at all the investment trusts and view a wide range of data for each.

The “AIC sector” column gives you a rough idea of what they invest in.

Some of the things you might want to review include:

  • What does the trust invest in?
  • Who manages the trust and what is their past performance record?
  • How has the trust performed?
  • What is the dividend history?
  • What is the yield?
  • What is its dividend cover? This is based on its revenue reserves, which we talked about earlier.
  • Compare it to other funds in the sector.
  • Download and read the fact sheet and reports.
  • Search the internet for news on the fund and the fund manager.

As with any investment the extent of your research will improve the likelihood of getting returns. Let’s take a quick look at Scottish Mortgage, which was the most popular trust amongst ISA millionaires.

Scottish Mortgage

Scottish Mortgage is the largest trust and has £18 billion of assets. Its 10-year total return is insane at 820%.

You have to wonder whether the millionaires own this trust because of their foresight or whether they are millionaires just because they happen to have been invested in this trust!

The management group is Baillie Gifford and it’s part of the ‘Global’ AIC sector.

The trust clearly doesn’t focus on paying dividends as it has a very low yield. The dividend cover ratio is a useful indicator of health if the trust is focussing on dividends.

This cover has allowed many trusts to continue paying out huge dividends even through the Covid pandemic.

It has a very low charge of just 0.36%. That’s lower than some ETFs! And the current gearing and the range of gearing over 3 years.

The interesting part is what the trust actually invests in. This trust is predominantly invested in the US and China at 47% and 26% respectively.

The US seems very expensive right now and there is always geopolitical risk with China, but evidently Baillie Gifford who are managing the trust are bullish about stocks in these regions.

The top holdings include huge positions in Tesla and Amazon, and a biotech company called Illumina. The top 10 make up 49% of the entire trust, so it is highly concentrated.

Out of the 96 holdings, 30 make up 78.1%, and interestingly the portfolio holds 50 private companies, which together account for 16.1% of the assets.

Is There An Easier Way?

Fans of this site will know we always try to maximise returns based on effort exerted on our end. Some might be call it laziness – we call it efficiency.

Anyway, picking the best investment trusts looks to be as difficult as picking winning stocks. The FTSE All-Share Equity Investment Trust Index kicks ass, so is there an ETF that simply tracks this?

Well, we couldn’t find one but if anyone knows differently then please let us know. Instead, we could effectively build our own or at least emulate something close to it.

If you look at the fact sheet for the index (below), there you’ll find the top 10 constituents, which you could easily invest in yourself directly using a commission-free app. These 10 companies make up 31% of the weighting of the index, which is pretty good in the absence of an ETF.

Top 10 Index Constituents

How Has The Investment Trust Index Fared?

Over 5 years the FTSE All-Share Equity Investment Trust Index has returned 99%, which is an awesome 14.8% per year after fees:

Index Returns versus Industry Benchmarks

To put that into context the Vanguard FTSE All-World ETF, VWRL, has returned 88%, which is 13.5% per year after fees.

So even though investment trusts will have higher fees, over the past 5 years these actively managed investment trusts have been the greater investment.

Don’t underestimate that seemingly small performance difference. It really adds up over time!

We don’t know anymore than you whether this story will continue into the next 5 years, but an annual performance difference of 1.3% would be enormous over the long-term due to compounding.

It could be worth hundreds of thousands of pounds over a course of an investing lifetime. That might explain why the ISA millionaires use them whereas ordinary investors do not.

Will you be adding investment trusts to your portfolio and how will you go about it? Let us know in the comments below.


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Top UK, US & EU Dividend Stocks For 2021 (With Trading 212 Pie)

If you want to invest in the very best dividend stocks in the world, you wouldn’t go far wrong by investing in stocks on the S&P Global Dividend Aristocrats Quality Income Index.

This is an index that brutally screens for stocks with incredible records as dividend payers. In fact, of the tens of thousands of stocks in the world, only around 100 make the cut.

But as stock pickers, can we do even better? Who wants to invest in 100 dividend stocks, when you could invest in the best 20 on a commission-free trading app?

We think investing in the top 20 dividend stocks in the world will still give you sufficient diversification, while also giving you a better income than spreading your money more thinly over 100 stocks.

I’m going to put this theory to the test by adding to my portfolio the best 20 dividend stocks from the UK, US and Europe. Watch the video to find out what they are and to follow along with how I picked them. Let’s check it out!

YouTube Video > > >

The link to the Pie on Trading 212 is here so you can copy this portfolio for yourself.

Will you be investing in the MU Dividend Aristocrats Pie? What do you think of it? Join the conversation in the comments below, and don’t forget to give Stockopedia a free try using the offer here.

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

How To Become An ISA Millionaire

Surely everyone’s dream is to be an ISA millionaire – to have built up £1m in your ISA. Not only are you rich, but your income comes from a tax-shielded ISA – meaning you’ve opted out of the tax system for good. No more greedy HMRC groping around in your bank account!

Saving and investing enough money to become a millionaire is quite an achievement.

But these days, thanks to Individual Savings Accounts – known as ISAs – it is possible to build up £1million much more easily than it used to be, because there is no tax to pay on income or capital gains while you’re building your pot.

Despite this, shockingly few people have taken up the opportunity to have their income paid in tax-exempt dividends and capital gains.

You don’t need to be a high roller with a trust fund to be part of the elite ISA millionaire club.

In this article we’re going to show you how anyone can build up £1m in their ISA, on any budget.

But we’ll also show you how to do it quickly, we’ll address the roadblocks in your path, and tell you how to turbocharge your compound returns by cutting costs and doubling up your contributions.

And best of all, we’re going to look at the data on real-life ISA millionaires, and crucially, what they invested in to become ISA millionaires. It turns out they invest very differently to most investors!

Alternatively Watch The YouTube Video > > >

The Main Obstacle

The ISA is one of the most generous financial products in the world, so thumbs up to the UK government for this rare acknowledgement that saving for your future is a good thing.

But of course, they don’t make it easy.

You are only allowed to deposit a maximum of £20,000 a year into an ISA, and you can only deposit into one of each type per tax year – which runs from the 6th April to the 5th of April the following year.

£20,000 may sound a lot of money – but if your goal is to become an ISA millionaire, this is quite a hindrance.

In a previous video where we looked at official ISA statistics we learnt that a large number of people either use all of their annual allowance or barely use any.

Back to the £20k allowance, if we assumed zero returns, for instance by using a Cash ISA, then it would take 50 years to save £1m by depositing the maximum £20k each year.

But nobody in their right minds would attempt that. Luckily, Cash ISAs aren’t the only game in town.

Basic Timeline To ISA Millionaire Using A Stocks & Shares ISA

Stocks & Shares ISA investors could become millionaires in just 20 years based on historic returns for world stock markets, by making the maximum ISA contribution.

The below analysis from Schroders shows this nicely. ‘20 years’ is based on the average annual return of 8.3% that was achieved for the MSCI World Index over the 25-year period 1993-2018, with all dividends reinvested.

This is before inflation, so they also looked at a 5% real return, which would take 25 years, and a pessimistic 4% real return, which takes 28 years.

We almost take that 4% as a worst-case scenario, knowing what we do about the performance of the stock market over the last 100 years. It’s the best place to hold your money long-term, in our opinion.

Say you were able to start depositing £1,667 a month – £20k divided by 12 – at age 40. Not unrealistic if you work your way up the greasy pole in your career, or start a business.

That would make you an ISA millionaire in your 60s. And any contributions you make while you’re younger will drag that date significantly closer due to the power of compounding returns.

Also, it’s possible that a future government will raise the ISA limit further – after all, it’s been climbing since 1999 when the limit was only £7k.

Who’s to say you won’t be able to deposit £30k, or £40k in future years? Of course, it could just as likely be cut too, so it’s a good idea to use the current allowance in full while you can!

Keep Costs Low

If you’re serious about being an ISA millionaire then you must keep your investing fees down. That’s because compounding works in reverse when it comes to your costs.

he below study by Vanguard shows the difference between investing the £20k maximum into your ISA each year at a 0.37% fee (which is Vanguard’s platform fee plus an average fund fee), and a hypothetical ISA with total fees of 1.75%.

Both these numbers sound small. But the difference on a 6% return meant that Investor A reaches millionaire status 3 years before Investor B, with Investor B being behind by around £180,000!

The moral? Get fees right from the start, and the journey will be a lot smoother.

Avoid Other Taxes

An ISA doesn’t protect you from all taxes, and you’ll want to minimise them all if you’re going to be an ISA millionaire.

If you’re investing in stocks from outside of the UK – which you probably should be if you want to be diversified and get the best returns – you’ll likely be getting stung by dividend withholding tax.

The US is a big culprit for this, and we estimate the drag on your returns from withholding tax to be around 0.3% – based on a 2% typical US dividend yield multiplied by the 0.15% tax.

We’ve found a way around this by packing your portfolio with synthetic ETFs – for more info on saving tax in this way, check out this article next.

Perfect Strategy vs Keeping It Simple

There’s getting there quickly as an experienced investor, and then there’s getting there at all regardless of your investing skills.

As we said, anyone can become an ISA millionaire – you don’t need to be interested in the nuts and bolts of investing.

For this reason, opening a Stocks & Shares ISA on a robo investing app like Nutmeg might be best suited to the average person.

Nutmeg has a history of consistent high returns and they do it all for you, using globally diversified ETFs. You can literally open an account, set up your monthly deposit payment, and forget about it.

If you find your way to Nutmeg via the link on the Money Unshackled Offers page, your account fees will be reduced to zero for your first 6 months.

How Many ISA Millionaires Are There?

Research by the Telegraph in 2015 suggested there were only around 200 ISA millionaires. In 2018 they updated that number to 1,000.

As of February 2021, there are 731 ISA millionaires on the Interactive Investor platform alone (a third of which are women), so presumably the total number in the UK now runs into the several thousand. The average age of an ISA millionaire on Interactive Investor is 71.

Even though the number of ISA millionaires is increasing, it’s still shockingly low, though granted ISAs and their predecessors PEPs have only been around since 1987 – and deposit allowances were miniscule back then.

But with 1 million people using Interactive Investor, just 731 of them being ISA millionaires is a weak effort by the British public.

We believe achieving ISA millionaire status by age 71 is achievable for anyone due to compounding returns, as all you really need is patience, whatever your budget.

Really, getting there at age 71 should be your worst-case scenario, as you should be able to get there far earlier than this, now that ISA allowances are £20k.

Just think about this – you could have had a 50-year run at being an ISA millionaire by age 71, by saving only £380 a month, at an 8% average stock market return.

What Do ISA Millionaires Invest In?

Sticking with Interactive Investor data – because they’re so open with it – here’s what the average ISA millionaire’s account looks like compared to an average user:

Interestingly, they invest quite differently to the average Joe, with 53.8% of their portfolios made up of Investment Trusts.

They don’t care about bonds, despite being the target audience in their 70s, nor do they bother much with ETFs (included in the ETP bucket), which are our bread and butter.

This is probably because ETFs are modern products and these investors are well into their retirements, and people tend to stick with what they know.

The top stocks among the ISA millionaires are Royal Dutch Shell and GlaxoSmithKline, and the top Investment Trusts are Alliance Trust and Scottish Mortgage:

But what is it about their love of Investment Trusts?

Investments Trusts are the oldest type of fund – around for over 150 years – so older investors will have grown up with them.

Investment Trusts have tended to outperform other fund types over the long term, but that’s not to say they’ll continue to do so in the future.

2020 saw the largest-ever outperformance of the FTSE All-Share by investment trusts, with the FTSE Equity Investment Instruments Index (FTSE EII) producing a total return for the year of 17.8% compared to a negative 9.8% for the FTSE All-Share.

Finally, their ability to borrow to enhance returns means they can give a portfolio a boost over the long term.

How ISA Millionaires Trade

Interactive Investor ISA millionaires make 24 trades in a year on average, compared to 9 for the average ISA customer.

And the average ISA millionaire has 28 stocks versus just 8 for the average ISA account, despite trading fees encouraging fewer holdings.

This somewhat goes against the ‘buy-and-hold’ philosophy and suggests a slightly more active approach might pay off.

That’s How Today’s Pensioners Did It – Should Our Generation Be Doing The Same?

Given your target is long-term growth, we agree that it’s worth avoiding bonds and sticking predominantly, if not exclusively, to equities.

By all means do this by using Investment Trusts, if you’re able to pick the winners from the losers.

But ETFs are so diverse, flexible and cheap that they will likely always form the core of our ISAs.

Want to invest in BioTech? Silver? Artificial Intelligence? China? There’s an ETF for pretty much every theme that you could want to invest in.

Double It Up With Your Spouse

Are you married? Couples get a £20,000 annual ISA allowance each, so between you, you could be saving £40,000 a year.

Recalculating the compounding based on £40k, £1m could be achieved in 14 years rather than 20 at that pace. That’s ISA millionaire status in just a over a decade from now.

Downside Of Being An ISA Millionaire – Inheritance Tax

We can’t think of many downsides to being an ISA millionaire, but the big one is what happens to your money on your deathbed.

In a pension, your wealth can get passed on tax-free to your heirs depending on the age you go. But an ISA is subject to inheritance tax.

So, the taxman catches up with you eventually – just when it’s no longer your problem.

But there are clever tax strategies to reduce or avoid IHT even with your ISA that you can look into later, so don’t let this put you off reaching for your dream.

The ISA Year End Is Coming!

The ISA year end is fast approaching – if you have £20k in cash, get it into a Stocks & Shares ISA now!

The annual allowance for how much can be put into an ISA cannot be carried over into future years, so for the current year’s allowance, it’s now or never.

And if you’re looking for the best Stocks & Shares ISA, check out our guide here next.

Are you planning on becoming an ISA millionaire? What are you investing in? Let us know in the comments below!


Feature image credit: Gustavo Frazao/

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Quitting Our Jobs, Best Decision Ever – Why You Should Too!

6 months ago, we quit our jobs for the final time. No more staring at the clock waiting for 5pm. No more Sunday night dread. We’d had enough. Haven’t you?

Since then, we’ve been turning the stories from all the financial freedom books into real life, making our own money on our own terms.

But this isn’t about us – it’s about you. With this article, we hope to get you thinking too about whether you’ve chosen the right path as a wage-slave, or if you wouldn’t rather join the scary but infinitely more rewarding and profitable path of working for yourself.

We’re never going back! Once you make the leap, we’re betting you wouldn’t want to either.

Alternatively Watch The YouTube Video > > >

We would never have had the confidence to make the jump if we didn’t have some investment assets to fall back on. Start building your Freedom Fund by checking out the offers and freebies on the Offers page, which includes a free stock giveaway from investment platform Stake, amongst others.

How The Money Situation Improved

As wage slaves, we could expect to get a 2% inflationary pay rise once a year, if we were lucky. As freedom fighters, we engineer a pay rise for ourselves every month.

We laid out how much we’re making now from our YouTube business in this recent article and video. Current income is actually a pay cut for us, compared to what we were getting from a job.

But our income trend over the last year is on average a 7% pay rise every month – at that rate, pay doubles every 10 months.

Anakin: “Is it possible to learn this power?” Palpatine: “Not from a job.”

A job trains you to think small, to be satisfied with a few crumbs from the boss’s table.

Do you think the founder of the company you work for was happy with a 2% annual pay rise? No – they decided to reach for the millions, by not having a job.

Does Quitting Your Job Free Up Your Time?

Not really! At least, not if you want to improve your lot in life. We actually spend more time working on our own thing now than we ever spent sitting at a desk in a job.

Some notable entrepreneurs like Grant Cardone believe you should work 95 hours per week, or 14 hours per day, to become a millionaire.

Gary Vaynerchuk, another successful entrepreneur, recommends spending about 18 hours a day working on your start-up for the first year of your business’s existence.

We don’t spend anything like the time that these winners spend making money.

But whereas in our jobs we would have spent 40 unproductive hours a week staring into space, now we might spend 50-60 hours building a business that helps people and provides for our future.

Playing The Time Game At Work

The absolute worst thing you can do as an employee is show up late, or leave early – it’s the #1 crime, far more likely to raise eyebrows than whether you’re doing the job right or not.

The #2 crime of course is not “appearing” engaged while you’re doing it.

We work in the information age, but the regimented daily grind for employees hasn’t changed much since the industrial age. You continue to play the game of 9-5, even though it feels wrong.

In the 21st century you should be able to work whenever you want, and leave when you’re finished, without having to ask anyone’s permission or tell anyone you’re doing it.

Childhood Regression

We went from managing our own work hours at Uni, to regressing back to a school-style setup where your time-in and time-out is recorded by a watchful overseer.

Isn’t being able to manage your own time part of what makes you an adult?

Employers and middle-management think it is their role is be the adult in the room, assuming you’ll slack off if unsupervised – which makes you a child to be monitored.

MU co-founder Ben once got told off like a child for taking a call about his rental properties during slave hours. But everyone should have some leeway to take the odd personal call. The problem was “appearances” he was told.

It rarely ever occurs to a boss to focus on the work output. No, they’ll judge you by the hours it took, and the more the better. Do you do a better job if it takes you 8 hours rather than 5?

Here’s a controversial thought: it doesn’t matter when you did the work, or where you were sat when you did it, as long as it got done!

The Con Of Flexi-Time

The biggest con trick introduced by the corporate world to keep modern staff in line is flexi-time.

Designed to make you think you’re getting a work-life-balance, it makes the focus be on logging your hours (again, not your output), and reinforces that you owe your boss a full 40 of them each week.

Sure, you could leave 2 hours early, having finished your task. But you’ll owe your employer 2 hours of bum-on-seat clockwatching to pay for it.

How Working For Yourself Beats Having A Job

#1 – No More Hanging Around With Undriven Wage-Slaves

Are you tired of being told what to do by people who aren’t very good at their jobs, and got promoted seemingly just by arriving early and staying late?

Their route to promotion was to act like a nodding dog to whatever nonsense their boss came out with.

They say you should spend the majority of your time with people who think like you do, and that you are the product of the 5 people you spend most of your time with.

The gap between our view of employment compared with those of the people we worked with in every job was so wide, it often felt like we were talking to an alien species. Why didn’t these people want to escape too? Where was their ambition?

Our circle has vastly improved since we stopped having to spend our daylight hours with committed employees 5 days out of every 7.

Now the people we talk to the most are all like-minded, with ambition, pursuing wealth and financial freedom, rather than just pursuing a pay check. 

And thank god we no longer have those regular hour-long team meetings much loved by office managers. You know the ones. The ones where you want to kill yourself. The ones that could last 5 minutes, but don’t.

People’s views on meetings tend to fall into 2 camps:

Either you love meetings because they give you an excuse to avoid work, or you hate them because they are a total waste of time. Either way, time is probably being wasted.

#2 – Days Of The Week Become Meaningless

Now that we’re free from office drudgery, it’s not unusual to go off on a 2-hour afternoon walk and think, “oh right, it’s Monday”. Saturday and Sunday are no longer about cramming a weeks’ worth of chores into 2 days.

If you’re invited along to Go-Karting on a Wednesday morning, you just go. Your time is your own.

#3 – The Focus Is Changed From Hours To Outcomes

Now, we might work long hours on one project, while another might just involve firing off an email. Either one could make us a few hundred quid.

When you work for yourself, work starts when you want it to, and it’s finished when your task is done.

When we were wage slaves, if we finished our day’s work at 2pm, 3 hours of clock watching would follow.

While if the boss wanted us in until 7pm, there would be no extra reward, no paid overtime – just an evening ruined.

Freedom fighters stop doing any activity that wastes time.

We reckon our jobs were at least 30% pointless activities. Sure, we added some value. But did we need to be there for 40 hours a week to achieve the same goals? Absolutely not.

Estimated Breakdown Of Activity In Most Jobs

When you’re working on your own dreams, a meeting with a client or supplier is always in some way about making money for each other. There’s no reason to have the meeting otherwise.

It lasts as long as it needs to, and when the call ends, your business has moved forwards.

How Successful Are People After Leaving Wage Slavery?

According to the Telegraph, 660,000 new start-ups are registered in the UK every year.

These are mostly people like us and probably you, eager to escape the drudgery of the 9-5 and try to do something different with their lives.

Unfortunately, the same research says that 60% of them fail in their first 3 years. The reasons most quoted as to why the failure rate is so high are as follows:

#1 – No Business Plan

They have a dream without a plan. Of course, you dream of wanting to exit the work force, but you need to know what you’d be doing for the first year or so if you did.

#2 – Cash Flow Problems

Your biggest worry keeping you in a job is probably that you would run out of cash. We prevented this by saving up a disaster fund of cash, enough to support us for our first year if we completely failed.

If you want to know more about this subject, our video “Why You Need An F-Off Fund” should give you some inspiration!

#3 – Their Skillset Is Too Narrow

To run your own money-making operation, money legend Robert Kiyosaki tells us you need a basic understanding of the 4 basic skills of financial intelligence: accounting, investing, marketing and law (or the rules of business).

In this context, Accounting is a basic grasp of business numberwork like revenue and profits. Investing is knowing when to back yourself by reinvesting into your business. Marketing is how to present yourself to potential business partners and to your customers. A good knowledge of the rules will keep you from falling foul of the taxman, or saying something that could get you into legal trouble.

#4 – They Leapt Into The Dark

The main way that we avoided failure was by starting our business over 2 years before we quit our jobs.

The protection of a steady wage more than anything takes the risk out of a new venture.

It doesn’t matter so much if you fail if you’ve not yet left your job. We’d advise anyone wanting to escape the rat race to do it gradually where possible.

Give yourself multiple chances to succeed, rather than placing all hopes (and your emergency fund) into a single attempt.

Don’t Let The News Change Your Plans

We quit our jobs during the early phases of the Covid pandemic in 2020. Switch on the news, and the world was falling apart around us.

“You’re lucky to have a job” was the message from the media and from those around us, “especially in this economy”.

But we had our plan, which was to quit in Summer 2020, and that was that. There’s always some crisis going on – some reason not to take the leap.

Before Covid the news was telling us that Brexit was going to ruin the jobs market. And that Trump was going to start World War 3.

Looking back further, this graphic covers 78 years, with 1 big reason every year not to take any risks:

78 Scary Reasons Not To Take Risks

We’ve found it’s best to just turn off the TV and do what you want to do. Waiting patiently for years for something good to happen is an employee mindset.

For you freedom-fighters out there, it’s about what you can do today to change your life.

Do you dream of leaving the rat race behind you? Are you already walking your path to financial freedom? Let us know in the comments below.


Featured image credit: Koldunova Anna/

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Only Buy Your Home If You Answer ‘Yes’ To These 6 Questions | Rent vs Buying UK

Is buying a property always better than renting? In the UK we’re obsessed with home ownership, and you’ll have heard people say that renting is just throwing money away. But is this really the case?

Because of this belief many young people stay living within their childhood bedroom well into their late 20s because they can’t afford to buy and yet refuse to rent.

Owning your own home is both very exciting and scary at the same time.

You have the freedom to live how you like, can decorate it how you please, and can get a furry companion to keep you company, but every little problem is now your problem to deal with.

Saving for a house deposit is a tall order but let’s assume you have been saving diligently and have managed to put aside enough to secure a home.

Before taking the leap into home ownership you need to answer ‘yes’ to the questions in this article. Plus, we’ll finish up with our best less-talked-about financial tips for when buying a home. Let’s check it out…

Alternatively Watch The YouTube Video > > >

If you’re looking to bring in some extra money alongside your day job to build up your house deposit then check out our guide to matched betting, along with free trials and discounts to the software that walks you through the entire process. Despite the name it isn’t gambling and can be a great way to bring in an extra £500 a month!

Question 1: Do You Plan To Live There At Least 5 Years?

Buying a home is a huge commitment and the running costs can often be far steeper than people expect. But before you even get your hands on the keys, you will have to pay all manner of fees and taxes. There’s always someone with their hand in your pocket!

If you’re intending to live in this property for years – we suggest it has to be 5 years minimum to warrant these high upfront costs – then they become less and less important.

So, what upfront costs can you expect to pay? You’ll have surveyor fees, legal fees, mortgage arrangement fees, and the savings-destroyer: stamp duty. Then you’ll have to furnish the house and bring it up your standard.

You’ll even be stung for little things that you would never expect. When I (MU co-founder Andy) bought my last house, I had to pay the council £50 just to get some wheelie bins – ridiculous.

You can expect all this to add up to thousands and thousands of pounds, and this will vary hugely based on the value of the home you’re buying, the state it’s in, and what furniture you already own.

For those interested here’s an article with some estimates of what this may cost.

Some of these costs don’t affect the buy or rent decision because you can still keep whatever it was you bought.

For example, if you buy a sofa you will very likely be able to take this with you should you move elsewhere.

Unfortunately, a boat load of those fees are expenses that once spent is lost money. It’s gone forever.

For example, and ignoring the temporary stamp duty holiday, stamp duty will cost thousands. On a £400k house you are charged £10k in stamp duty alone. Ouch!

Many people are so desperate to own their own home they buy based on their current lifestyle, but a lot changes in life, especially in your 20s.

That 1-bedroom studio apartment in the city centre might be perfect for you now when all you want to do is party all the time, but will it be suitable when you’ve met someone and now want a bigger house or to live in a better area?

You also probably bought the best property you could afford at the time and sacrificed a great deal because the budget wouldn’t stretch that far.

Within a few years you could potentially have doubled your income and that small and dingy apartment will no longer be good enough.

Question 2: Do You Expect House Prices To Keep Going Up?

There’s a widespread belief that house prices only go upwards, so you should get on the property ladder asap and ride the property wave to a wealthy retirement!

We get why people think this. This is a trend that has been mostly true for the last 3 generations. All we have ever known is increasing house prices. published a really powerful chart showing house prices vs average earnings over the last 174 years:

For the first 70 years they just kept getting cheaper. So maybe we’re due a spell where house prices at the very least stagnate.

House prices are already over 8 times the average wage, and if we combine that with current economic stagnation, rock bottom interest rates which long-term can only go up, and massive unemployment being masked by government job retention policies, then one does have to question whether house prices can continue to rise.

Arguably one reason for such epic house price increases over the last few decades has been due to high immigration and not enough houses being built to meet the demand.

We have no idea what immigration policies the UK will implement now that we’ve Brexited but with the UK fertility rate per woman at just 1.7, there could now be a shrinking population, which isn’t good for house prices.

Question 3: Is A House Deposit And Associated Expenses The Best Use Of Your Money?

If we assume that house prices do continue to rise, that doesn’t automatically mean that home ownership is a must.

Right from the outset there is a massive opportunity cost that comes from having to pay a big deposit and all the associated expenses. Over time as you pay down the mortgage you will end up with equity of hundreds of thousands of pounds just sitting there doing nothing.

For those of you who aren’t boring accountants, an opportunity cost is the forgone benefit that you would have received if you’d chosen to spend your money differently.

For example; if you don’t tie your money up in property, you could instead use it to invest in the stock market – or boost your employment prospects with an expensive professional qualification.

Better yet, could that capital be used to start a business instead? The stock market can be very lucrative but there’s no better route to wealth than to cast your employment shackles to the ground and go into business on your own.

Most businesses require some upfront capital, and with most young people struggling to gather enough money for a house purchase, there is slim chance of there being any left over to start building the business empire.

In other words, that mortgage is just another set of chains preventing you from achieving your ambition.

Question 4: Are You Willing To Sacrifice Your Current Lifestyle?

As a finance channel we typically encourage delayed gratification. Any small amount of money saved and invested today could be worth 10 times that amount in the future.

Nevertheless, what you do with your money is up to you, and renting can give you access to a better-quality home than you could afford to buy.

You might not be able to afford to buy in the trendy part of town where you have great access to the best bars and restaurants, or fantastic public transport connections, or a good local school. However, you might be able to afford to rent there.

If we wind the clock back to the good old days when we were at University, we had a big house in the centre of the main student area surrounded by everything a 20-year-old would want.

There was no way a bunch of poverty-stricken students could have afforded that house, but by renting we could live the high life!

Question 5: Do You Know The Area You Are Buying In?

Never buy a property in an area you don’t know. As we’ve already mentioned, buying a house is a medium to long-term purchase. If you don’t know the area… how do you know if you like it?

You can do all the research but some things you won’t know until you actually live there.

On paper the area might have everything that you want, but the commute to work could be a nightmare or maybe the mobile signal is non-existent.

You’ll likely never find the perfect home, but renting in an area first before buying can help you get a little closer to perfection.

Question 6: Are You Good At Budgeting?

One of the best things about renting is you know with a degree of certainty what your housing costs are each month.

Rent will be the same each month, so will council tax, and utility bills will be roughly the same month in, month out. So, if you suck at budgeting, then renting will make it as easy as it can possibly get.

For homeowners, however, it’s not quite so simple. While the mortgage payments often stay consistent in the short-term (if you’re on a fixed-rate mortgage), there could be any number of unexpected costs.

From boiler breakdowns, to clogged guttering, to leaky pipes, to birds living in the roof – there is an infinite number of potential faults that can occur at any time that must be paid for by the homeowner.

If You Are Buying…Consider These First

Don’t Buy The Most Expensive Home You Can Afford

It’s a common belief that you should buy the most expensive house that a bank will allow you to, because property only ever goes up and therefore you will get the maximum returns possible.

We’ve already busted the myth that property only ever goes up but let’s also consider 2 other reasons why buying the most expensive house is a bad idea.

  • Being crippled by mortgage payments is no way to live and it can tie you to a career and life you hate. If you want to gain extra exposure to the property market it can be done with a BTL property. It doesn’t have to be done with your own home; and
  • Buying an expensive property which you can barely afford now leaves no wiggle room if interest rates go up, you lose your job, or your partner decides to pack up and leave you.

Only Buy A Property Others Would Want To Buy

From a financial perspective never ever buy a property that has some unusual feature or is of a Non-Standard Construction.

A Non-Standard Construction uses materials that don’t conform to the ‘standard’ definition, which means brick or stone walls with a roof made of slate or tile. A Non-Standard Construction is basically anything that falls outside of this definition and can include thatched roofs, or walls constructed from concrete or wood to name just a few.

A Non-Standard Construction can cause a property to have increased costs to maintain and insure. In fact, potential buyers may even struggle to secure a mortgage on such a property.

Even though you may think it’s your dream home now, there’s a high chance that you will want to move in the future and selling might be problematic. Our tip is to always think of selling even when you’re buying.

Beware Of The New Build Premium

New build homes are awesome. Everything is in a perfect unspoiled condition and any issues that arise within 2 years will be fixed by the builders as part of the guarantee.

But these positives don’t come for free. According to Zoopla and data from the Land Registry, in 2019 the average new home sold for £290k, compared to a typical sales price of £225k for older properties – that puts the new build premium at £65k or +29%.

Does that mean from a financial perspective that you should never buy a new build property? We don’t think so.

Older properties tend to need a lot of work to bring them to a condition that you’re happy with. You might need to install new bathrooms, a new kitchen, rewire the house, and so on. All this costs a substantial amount of money and has to be 100% paid for today.

A new build, however, doesn’t need any major work for several years, so you have essentially been able to pay for all the renovation work to be done with a mortgage instead.

Although the new build property is more expensive, it is better for your cashflow. A fixer-upper on the other hand costs far more in cashflow and time – but you do have a significantly higher chance of increasing the value.

Have we changed your views on the Rent vs Buy debate? Let us know in the comments below.


Features image credit: Keith Ryall/

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