What We Discovered When We Analysed The S&P 500.

We all hear a lot of so-called facts that we just accept as gospel. Things like it takes seven years to digest chewing gum or that goldfish have three-second memories.

While these and other so-called facts don’t affect your life in any meaningful way, we also hear loads of “facts” about investing that could prove dangerous if we rely on them when building our portfolios but are then later proven to be incorrect.

There are hundreds of these so-called facts that we just accept because some faceless analyst or reporter says so. We personally like to verify as much as we can, but we’re often hamstrung by our lack of accessibility to good data. Detailed financial data seems to be only available to the billion-dollar financial institutions.

In this video we’re deep diving into the last 33 years of S&P 500 total return data to find out the real facts.

We’ll learn what the overall returns were, the impact of exchange rates, the frequency of corrections and crashes, the effect of missing the best trading days, how long it takes to recover from a crash, and more. Let’s check it out…

Keeping your investment fees down is vitally important. Make sure you have the best investment platform for your circumstances. Don’t forget to check out the curated list of the best Stocks and Shares ISAs, along with free stocks and other discounts.

Watch The Video Here > > >

Are you comfortable investing when the stock market is historically high? Join the conversation in the comments below.

Written by Andy


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Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

How To Reduce Your FIRE Number Or Bring Your FIRE Date Forward – Financial Independence

Ok so the plan is to become financially free asap. It’s what’s known as FIRE – financial independence, retire early.

You’ve already covered all the basics. You’ve cleared your bad debt – check; you’re earning more than you spend – check; you’re investing the difference – check; and now you have to rinse and repeat for what seems like an ungodly amount of time, while your investments slowly grow to your FIRE number, which is the amount of money that you need to retire early.

It’s a long and perilous journey between now and your FIRE date – the date at which you can break life’s chains and become financially independent. Your FIRE date could be many decades away, so naturally this might feel demoralising.

In this post we’ll show you how to easily calculate your own FIRE number and FIRE date, and then we’ll look at some ideas for how you can REDUCE your FIRE number, so you can retire much sooner. Maybe there’s even a way to retire earlier without reducing your FIRE number at all, so you can live a life of luxury. Let’s check it out…

Alternatively Watch The YouTube Video > > >


A major reason for wanting to FIRE for many people is that feeling of emptiness. Working a job long-term that isn’t fulfilling is no way to live, and FIRE is a genuine and achievable escape plan. You don’t even have to hate your job but knowing that you could do so much more with your life is all the motivation you should need.

Once you have achieved FIRE, what you do with your newfound freedom is completely up to you. The freedom to do as you please, rather than what you must, is liberating. Many people choose to travel. Others do volunteer work. Some start a business once there’s no pressure to succeed, and some even CHOOSE to continue working – quite often on a part-time basis or doing something more enjoyable.

What Is Your FIRE Number?

Financial independence is achieved by building up a large investment pot that produces an income which covers your living expenses from now until your death. The 4% safe withdrawal rate (SWR) tells you how big that pot needs to be although some people choose to use a slightly different percentage.

Say that your living expenses are £20,000 a year. The 4% SWR therefore says your FIRE number is £500,000. The maths behind that is £20,000 divided by 0.04. Note that the £20,000 used in our example is not your income but your living expenses. Once you have retired you can stop saving, so the goal is for your FIRE number to cover your living expenses – not your current income.

If your living expenses were £40k a year you would need an investment pot of £1m.

What Is Your FIRE Date?

Calculating your FIRE number is pretty straightforward but calculating your FIRE or retirement date is a little more complicated. We’ve put together a FIRE calculator for this, which is free to use.

Bang in some numbers and tweak your withdrawal rate and this handy tool will chuck out your coveted FIRE date, as well as your FIRE number, and some other handy stats.

Let’s work through an example. Chris is 30 years old. He currently earns £30,000 after tax and lives on £22,000 meaning the difference is invested. One way this particular calculator stands out from similar tools found elsewhere is it allows you to set different annual expenses in retirement to what you currently spend.

You might have paid off your mortgage in 5 years’ time; maybe the kids will have grown up and flown the nest; or perhaps you plan to cancel some life insurance policies that are no longer needed.

Let’s say Chris will have paid down the mortgage, and so will only need £16,000 once retired. He’s also been saving diligently in his youth and has already built up a tidy nest egg of £100,000.

We can then bang in Chris’s asset allocation (Stocks: 70%, Commodities: 10%, Cash:10%, Other: 10%) and the expected real rate of return (that’s after inflation) (average 3.8%), and finally set his withdrawal rate (4%). The calculator will instantly crunch the numbers and spit out your FIRE date. In Chris’ case it was in 18 years’ time.

Hopefully your date is not too far in the future – but most likely it might as well be a million years away.

How To Reduce Your FIRE Number Or Bring Your FIRE Date Forward?

If your FIRE date was too depressing, let’s look at some ideas of how we can bring it forward.

Don’t Be Single

If you’re living alone your living costs are going to be much higher than for those in a couple. A couple gets to split all the major living expenses such as mortgage or rental costs, gas, electric, broadband and tv subscriptions. All the major appliances that you need can be also shared – ovens, washing machines, dish washers, TVs, laptops, and so on.

Not to mention the tax advantages of having a spouse’s personal allowances to play with for investing. One study (Good Housekeeping Institute) says the cost saving for a couple, per person, is £2,000 a year but we’d say that was a conservative measure.

“Don’t be single” doesn’t have to mean settling down with a partner. An alternative to this is getting a housemate to split all the bills with. The extent you do this could really help to bring forward your FIRE date. We heard a story about a guy that literally rented out every room in his house and he himself slept on the couch.

Such extreme sacrifices are probably not for everyone but for those that want FIRE asap, it’s a possibility. You could at least settle with one housemate, right?


Geoarbitrage is a fancy word with a simple meaning. It simply means to move in order to lower your cost of living.

“Geo” means geography, and “arbitrage” involves taking advantage of a price difference between two or more markets.

Broadly speaking, you can apply geoarbitrage in two ways.

Firstly, if you are able to maintain a higher income during your working years but live in a low-cost city or country, then you will be able to save and invest more – allowing you to achieve FIRE faster or a better-quality FIRE.

If this isn’t possible or desirable, then a second option is to relocate to a cheaper city or country once you’ve ACHIEVED FIRE – meaning your required FIRE number could be smaller as a result.

In most cases relocating to cheaper cities or countries will also result in a fall in your income, which is why most people would be reluctant to do this until they’ve achieved their FIRE number and ready to retire.

If you do plan to move abroad during your working years to make the most of geoarbitrage, ideally you want to continue to earn your income in a strong currency like Dollars, Euros, or British Pounds as these currencies will go a long way when converted to weaker currencies like Thai Bhat.

We run a financial website and YouTube business that targets a UK audience and so primarily earn in British pounds. We could in theory do this work from anywhere in the world and still continue to earn the same income but unfortunately like most people we’re both creatures of habit and stuck in our ways.

If you’re a little more open minded than us, then consider geoarbitrage to reduce your FIRE number!

Reconsider Your Lifestyle Cost

We’ll keep this brief as cutting costs is such a FIRE cliché. Do you need to spend as much as you do? Do you really need that four-bedroom house when there’s just two of you? Do you need a new car every few years? Do you need to holiday in Florida, or would Spain be more than enough?

What about your hobbies? Horse riding, go-karting and scuba diving are all great fun, but would you be equally as happy with a bike ride and swimming in the sea that cost nothing, or close to nothing?

Also, the permanent cost savings from adapting your lifestyle has a double impact on your FIRE number and date. Cutting costs allows you to invest more and simultaneously lowers the size of the required retirement pot.

Boost Income

If cutting costs is the sword in your sheath, then boosting income is the bazooka in your arsenal. Cutting costs can only go so far but boosting income is limitless.

For most people already in their careers the fastest way to earn a small boost to income is to switch jobs. Earning a promotion internally is a long and risky, not to mention boring, process. Much easier and faster to go elsewhere.

We call this ‘self-promoting’ and during our employment years we did this throughout – earning a promotion and a significant pay rise every couple of years. No brown nosing required!

However, there are too many downsides to working a job, including a ceiling on the amount you can earn without selling your soul to your wage master. Instead, we always encourage people to start working on a side hustle that you control, that will bring in a small income, and that will hopefully eventually replace the job when it has had enough time to flourish.

While you’re building that side hustle you can channel all the profits into the stock market, which will get you to your FIRE number much sooner.

Increase Rate Of Return

While your investment pot is small, your contributions are the most important element driving the growth. Once the pot begins to grow the focus shifts towards your return on investment.

If you have a play with the FIRE calculator, change the rate of return to see what impact it has. Changing it from 5% to 8% for example would shave years off your retirement date.

So, what does this mean? It means you need to take some “risk” with your investments. Not doing so is the RISKIEST thing you can do financially as it puts an end to your retirement dreams.

What does ‘taking investment risk’ mean? It doesn’t necessarily mean pouring all your money into bitcoin – although it could. For us it means we invest in small cap equities and emerging markets, alongside our exposure to developed markets like the US.

For us it also means sacking off low performing assets like bonds. Bonds are good for stabilising portfolio returns but not so great for epic, long-term returns. We accept that volatility risk in order to maximise our chances of FIRE.

Should You Extend Your FIRE Date Instead?

In this post we’ve been looking at getting to FIRE faster, but maybe that’s not in your best interest.

A potentially better idea would be to go part-time immediately and push back your FIRE date. It could well be that you don’t hate work (if that was your main driver for FIRE) but instead hate the amount of time working. Man was not born to slave 5 days a week.

Interestingly, cutting down on your workdays has less impact on your take home pay than you might think. The way our tax system works is it punishes those who work more. You could cut down 1 working day and therefore increase your free time by 50% – that’s 2 free weekend days turning into 3. But the effect on your take home pay might be a loss of just 15%.

You can have an immediate boost to your happiness without waiting to FIRE completely.

Another positive of this is that it gives more time for your existing investments to grow and compound because you don’t need to drawdown on them.

Say that your pot is currently £250k and due to going part-time you can no longer contribute. Earning a 5% real return, after 10 years the pot is worth £407k. But after 15 years it’s £520k. You can now FIRE in full and getting there was not the torture it would have been.

To what lengths do YOU go to achieve FIRE? Join the conversation in the comments below.

Written By Andy


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Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Future Investment Returns Are Expected To Be Dismal

How big will your investment returns be over the years ahead? We’ve seen some huge gains recently despite wider economic concerns, but can this continue? There is a foul smell in the air and there are reasons to believe that future investment returns will not be as good as they once were.

Today’s post is jam packed – we’re looking at investor expectations, historic returns, a worrying forecast by Credit Suisse, why young people are potentially screwed, reasons to be optimistic, and what you need to do.

Keeping your investment fees down is vitally important. Make sure you have the best investment platform for your circumstances. Don’t forget to check out the curated list of the best Stocks and Shares ISAs, along with free stocks and other discounts.

Alternatively Watch The YouTube Video > > >

Investors’ Expectations: Are Investors Living In Cloud Cuckoo Land?

In April 2020 Schroders commissioned an independent online survey of over 23,000 people who invest from 32 locations around the globe. From this we learnt that investors on average expect to pocket returns of 10.9% a year over the next five years.

Oddly, this was 1.0% higher than what was expected 2 years prior. Bear in mind that this study was being carried out around the time when Covid was kicking off and we would have thought this would have sent everyone into panic mode.

Winding the clock back, we recall mass hysteria and panic-buying leading to not just some empty shelves but literally empty supermarkets. Based on this you wouldn’t have thought that there was too much optimism in regard to stock market returns. Maybe the average investor is more positive than the average member of the public.

Although the average investor expects 10.9% annual returns it does vary based on region.

Most optimistic are those from the US. Our American friends are well-known for their confidence and in this case, they expect 15.4% annual returns. Let’s hope they’re right – but something tells us this is a fantasy. Some way behind but still massively hopeful are UK investors who expect 11.1% returns annually.

To quote the study, “People have an over-optimistic outlook on their total investment returns.”

Why Are Expectations So Unrealistic?

The Schroders study only briefly touches on why they think investor’s expectations are so high. They conclude that the majority of people are basing their predictions on the returns they received in the past. With huge returns in recent years, especially in the US stock market, you can easily see why this might be the case. Most people have a tendency to show Recency bias.

Recency bias is where someone gives greater importance to more recent events. History tells us that economies and stock markets move in cycles, but it’s easy to forget that when you have 10 years of solid investment gains. Instead, people begin to believe this will continue, especially if they’re new to the game and it is all they’ve ever known.

We also think that the industry and the media like to portray the stock market as a place to get rich quick. It’s the standout performers that make all the headlines. In the UK, Scottish Mortgage has returned around 742% in just 10 years. While over in the US, Tesla has grown over 1,200% in 5 years.

We all want these standout returns but sadly, these aren’t the norm.

Historic Returns

Each year Credit Suisse publish the Global Investment Returns Yearbook – a detailed analysis on investment returns going back over a hundred years.

According to the study, over the last 40 years the World bond index has provided an annualized real return of 6.2%, only marginally below the 6.8% from world equities.

The authors go on to say that “extrapolating these bond returns would be foolish as it was the golden age for bonds, just as the 1980s and 1990s were a golden age for equities.”

Although 40 years seems like a long enough period to form a solid conclusion about returns, unfortunately it isn’t. Stocks and bonds are volatile, which leads to major variation in returns. Fortunately, the study goes back 121 years and they found that US equities returned 9.7% before inflation and 6.6% in real terms. Whereas US Treasury Bills only provided 0.8% real returns.

With the power of compounding and 121 years these differences are enormous. With stocks the purchasing power has grown by 2,291 times but only 2.6 times with treasury bills. If you were thinking about investing in short-term bonds that might make you think twice.

Other stock market studies will vary slightly, and we have long held the belief that stock markets have returned around 8% before inflation and 5% after inflation as a conservative measure. So, with the world’s biggest market delivering stellar results in excess of our expectations it gives us a reason to be optimistic.

The US has been the major success story though throughout the 20th century and the beginning of the 21st, so focussing on its performance might not be a fair representation of the overall stock market.

Over the same 121 years UK equity returned 5.4% in real terms. Not bad and on an annual basis not too far behind the US powerhouse. However, compounded over 121 years, a small difference like that makes a huge impact.

Where US equities’ purchasing power has grown by 2,291 times, UK equity has grown by just 572 times.

The study carried out this exercise for 26 countries and found that real equity returns were typically between 3% to 6% per year.

Dismal Returns Forecast

So far we’ve seen that most investors have unrealistic return expectations, while our own are more in line with historical averages, but maybe this is where things are about to get ugly.

According to the same Credit Suisse study, the authors are forecasting an enormous drop in expected returns over the coming decades, which could devastate all our plans to grow wealth and shatter our retirement dreams.

Their method takes current bond yields to indicate future bond returns. Then using this figure, they have forecasted equity returns by adding on their estimated equity risk premium. The result is that they are expecting bonds to have a negative real return of -0.5% and equities to return just +3% after inflation. Just 3%!

If that wasn’t depressing enough, when you run those returns through a 70:30 equity/bond blend as a typical portfolio might look like, the portfolio real returns are a horrifying 2%.

This same blended portfolio would have returned in real terms roughly 6% for previous generations, meaning future returns could be two thirds smaller than what our parents and grandparents’ generations could have earned.

Gen Z & Millennials Are Screwed

If the investment forecasts in the Credit Suisse report turn out to be true, this paints a very dire picture, especially for young people. But this isn’t the only way in which young people are being screwed.

Young people are already having to contend with a property market where house prices have reached what can only be described as ridiculous. Official data says the average UK house is now valued at £267,000, which is a 7.6% annual price rise. We’re betting that most of you haven’t had a 7.6% pay rise this year.

Next, Youth unemployment is already unacceptably high at 14.3%. Young people who find themselves lucky enough to have a job are being thanked for their services with meagre wages. ONS data says the average income for a 20–24-year-old is just £18,400 and only £23,900 for a 25–29-year-old.

Further, Government debt is at eyewatering levels at around £2 trillion. Although high earners are likely to bear the brunt of this in the form of increased taxes, it is the young who will suffer the most. The country will have less money sloshing around that otherwise would have been spent on boosting education, job prospects, and ultimately creating better opportunities.

Also, most people under the age of 40 probably haven’t given too much thought to state pensions but this could prove to be a big mistake.

It’s widely believed that the UK government will not be able to sustain the state pension due to the enormous running costs, which are currently estimated to be around £100 billion a year and climbing. It’s highly likely that it won’t exist in its current form for our generation and those younger.

Reasons To Be Optimistic

Going back to investing returns, there have always been reasons not to invest.

Considering the economic state we find ourselves in it is difficult to disagree with the forecasts put forward in the Credit Suisse report. However, the world moves so fast that we wouldn’t pay too much attention to forecasts that look much further than just a few years.

Would someone in 1950 have predicted the moon landing? Would someone in the 60s have foreseen the internet? Would a 1980s forecaster have predicted that everyone would carry a supercomputer in their trouser pockets within just a couple of decades?

But if these forecasts turned out to be true, a period of low investment returns COULD prove to be a blessing in disguise. When you are young and buying into the stock market it is better when prices are low. Low returns over the next decade would suggest stocks will become better value than what they are today.

Ideally you would want the stock market to go nowhere or even fall while you in the accumulation stage, and then surge right before you wish to start drawing on that retirement pot.

Everyone knows the phrase buy low, sell high, but why does everyone cheer every time the stock market goes up? Unless they’re selling and never buying again it doesn’t make any sense.

Another reason to be optimistic is the reduction in investment fees and improvement in accessibility to the stock market. Past generations may indeed have had much better returns, but they also suffered punishing fees, which would have severely dented any gains. Today we can eliminate fees almost entirely. We can invest in stocks from all over the world for less than one tenth of a percent.

What To Do If Returns Are Dismal?

In terms of our investing style, what we’re doing is accepting more risk, and by that we mean more volatility. The days of getting sweet returns with zero risk are gone. That means we will allocate more of our portfolios to “riskier” assets such as stocks instead of bonds. Bonds provide stability but not the required gains that we need.

Next, we are already allocating a big chunk of our portfolios to emerging markets and small-cap stocks. We’re hoping these themes perform better than larger caps from developed economies and might give our portfolios the boost we need.

It’s essential to keep investing – even at the point of maximum pessimism. Next time the stock market is making the front pages with tales of doom and gloom – buy, buy, buy!

Unfortunately, if returns are going to be dismal, then it’s so important to invest more. If your pot is going to be hampered by low returns, to counter this you can either invest for longer and/or increase contributions.

Our chosen route is to build multiple streams of scalable income, which is where the output reaches a growing audience. As a result, the income is effectively unlimited. We are building scalable income alongside investing, but in theory if you can build this large enough you may not even need to rely on investing to set you free, and so low returns shouldn’t matter too much.

The best thing you can do is concentrate on building that income and channelling it into the stock market.

What do you think investment returns will be? Are we about to have a decade of dismal returns? Join the conversation in the comments below.

Written by Andy


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Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Reviewing My Property Empire – Is Buy-To-Let Still Valid In 2021?

Written by Ben

I’ve been reviewing my property portfolio recently, in light of the covid pandemic.

Over the last year, landlords have endured loss of rents, illiquid markets and rising prices stopping them from expanding their portfolios.

Rishi’s stamp duty holiday has been of little use at the lower end of the market where the 3% Buy-To-Let surcharge still applies.

There was SOME help, like the mortgage payment holiday which I personally took full advantage of, as so many landlords did, and the furlough scheme to help struggling tenants pay rent.

But of the damage done by the lockdowns, how much is reversible with the reopening of society, and how much represents a true body blow to property investing?

Luckily, Paragon Bank have done some detailed analysis of the market which we’ll draw on as we go, for those of you who love a good chart.

We’ll briefly look at how my properties have fared since I started down the Buy-To-Let path, plus we’ve packed in a boat-load of statistics to show what the outlook is like going forwards for British landlords.

In doing so, we’ll find out whether Buy-To-Let is still valid as an investment in 2021. Let’s check it out!

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Watch The Video Here > > >

Do you still see Buy-To-Let rental property as a valid investment in 2021? Join the conversation in the comments below!


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Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

How To Build The Perfect Vanguard Portfolio

Vanguard is one of the best providers of index funds and ETFs. So much so, that Vanguard seems to have built up a cult following.

Pick up any investment book, watch any YouTube video, or submerge yourself into any online investment article and more times than not, Vanguard will be touted as the go to place to build your wealth.

And to be fair, this is probably justified. We have always felt that Vanguard has the customers best interest at heart, which is extremely rare for a corporation.

Call us cynical but other corporations, no matter what industry they’re in, seem to pretend to care for the customer and then pull the rug out from under their feet.

In this article we’ll briefly look at why we think Vanguard funds and the Vanguard investment platform are great places to invest.

We’ll also consider some of the key areas where we think Vanguard are underdelivering and why you might want to go elsewhere for certain investing objectives.

And we’ll also suggest 6 portfolios built exclusively from Vanguard funds, to use as inspiration for your own portfolio.

You might find that it’s cheaper to buy Vanguard ETFs on a free trading platform like Freetrade, than on Vanguard’s own platform. Check out Freetrade’s welcome offer of a free stock worth up to £200 on the Money Unshackled Offers Page.

Alternatively Watch The YouTube Video > > >

Why Invest In Vanguard Funds?

Let’s first consider Vanguard’s funds and ETFs. Their fees are amongst the lowest in the industry and their funds some of the most popular – which means you should have no problem buying and selling, as they are what the industry call very liquid.

In the past we have referred to Vanguard as the Amazon of the index investing world.

When you shop at Amazon you know that you will get a good price. It may not always be the very best, but you can shop with confidence without having to do any price comparisons.

Vanguard is exactly the same. Across their entire range you will always get a competitively priced fund or ETF.

Not only that but in the UK, Vanguard has a very streamlined range, focussing on simplicity, which we feel are specifically targeted at the most important investment markets such as the whole-world and key geographical regions.

What Are The Problems With Vanguard Funds?

The simplicity of the range is a blessing for beginners who might otherwise drown in some of the choice offered by competing Fund and ETF providers.

However, for those a little more experienced, this smaller range really limits what you can invest in.

The most notable absences are a lack of precious metals, sector-based ETFs, currency hedged equity ETFs, synthetic ETFs, small-cap ETFs, and the absence of a dedicated global government bonds ETF.

That is quite a long list of omissions, but you don’t have to exclusively invest in Vanguard funds. You can easily invest primarily in Vanguard funds and then supplement them with investments from other fund providers.

The exception to this is if you invest via Vanguard’s own investment platform.

The Vanguard Investment Platform

When Vanguard launched its UK investor platform in 2017, at the time it was a game changer. They allowed investors to invest with platform fees of just 0.15% and no trading fees. For investors who were only interested in investing in a few Vanguard index funds and ETFs there was no better place to invest.

Since then, they have introduced Self Invested Personal Pensions, and now offer 4 account types in total: ISAs, Junior ISAs, General Accounts, and SIPPs.

Today, however, commission free trading apps are also providing some much-needed competition. Even if you are only interested in investing in Vanguard funds, in some cases it would be better to use a third-party platform.

Trading 212 and Freetrade both offer a wide range of Vanguard ETFs but with zero account fees, so might be more cost-effective ways to invest in Vanguard ETFs.

Freetrade do charge a flat ISA and SIPP account fee though so don’t forget to factor that in.

Strangely, Vanguard’s own platform doesn’t offer the full range of Vanguard funds, which is SO annoying!

For example, the FTSE All-World ETF (VWRL) is only available as a distributing ETF, but on third party platforms such as Interactive Investor you will have the option to choose the accumulation variety (VWRP) as well.

Portfolio Models

There’s lot of theory around building the perfect portfolio and the one we subscribe to is owning the entire world.

Vanguard clearly agree with this as their fund range is mostly broken down into regions, which makes building a global portfolio super easy.

Portfolio 1: Global Tracker

There’s a good argument that an investor’s biggest enemy is themselves. The vast majority of investors underperform because they can’t help but meddle.

They listen to the news, they buy into the fear mongering, they try and predict what will and won’t do well, and on and on the portfolio damage goes.

Instead of this doing all of this, it might be better to just pick one fund and leave it at that. Our favourite Vanguard funds for doing this are: the Vanguard FTSE All-World ETF (VWRL/VWRP); or Vanguard FTSE Global All Cap Index Fund.

The All-World ETF costs just 0.22% and covers over 3,500 stocks across the globe.

The US makes up the bulk of the fund with 56% of the allocation, Japan makes up 7.3%, China 5.3%, and the UK 4.1%.

Over the last 5 years the ETF has returned 94%, which is neck and neck with the benchmark. The ETF has not yet existed for 10 years, but the benchmark’s 10-year return is 133%.

This index and ETF tracks both large and mid-cap stocks and covers around 90% of the investable market capitalisation.

The Vanguard FTSE Global All Cap Index Fund is very similar but also includes small-cap stocks, which takes the stocks in the fund to over 6,800.

Although this sounds like a lot more stocks than the ETF contains, these will make up such a tiny allocation of the fund that they will only make a small difference to performance.

As it happens, over 5 years the benchmark return for the All-World ETF is 94.1% compared to 96.3% for the Global All Cap Index Fund.

Portfolio 2: Developed And Emerging Market Tracker

This is probably our favourite Vanguard portfolio. It takes all the good points from the previous portfolio and adds in a little more control and even lowers the fee. The ETFs to use are: Vanguard FTSE Developed World ETF (VEVE/ VHVG); and Vanguard FTSE Emerging Markets ETF (VFEM / VFEG).

The FTSE All-World index effectively contains both the FTSE Developed and the FTSE Emerging Indexes at about 88% and 12% respectively.

If you buy these ETFs in these allocations, you would in theory beat the FTSE All-World ETF because the combined weighted fee is cheaper.

The Developed World ETF costs just 0.12% and the Emerging Market ETF is 0.22%. Together that comes in at 0.132%.

However, we would choose to invest slightly more into the Emerging Markets – maybe taking the weighting from 12% to 20% – because we think the emerging markets will deliver stronger returns over the next few years. Doing this would change the total portfolio fee to 0.14%

Over the last 5 years both of these ETFs have performed similarly.

The Developed World ETF has returned 94.6% and the EM ETF has returned 97.1%.

The Developed World ETF is dominated by the US, followed by Japan and then the major European countries. The EM ETF is weighted heavily towards China and followed by large positions in Taiwan and India.

Portfolio 3: Regional ETFs

Another portfolio we like is one that’s built using individual regional-based ETFs. Something like:

  • S&P 500 ETF (VUSA)
  • FTSE Developed Europe ex UK ETF (VERX)
  • FTSE 100 ETF (VUKE)
  • FTSE Japan ETF (VJPN)
  • FTSE Developed Asia Pacific ex Japan ETF (VAPX)
  • FTSE Emerging Markets ETF (VFEM)

The fees for each ETF are dirt cheap. The beauty of this setup is you can put as much or as little as you like into each region. If you think Japan is cheap, buy more. If you think the US has silly valuations, buy less. You have so much control.

Portfolios 4 & 5: Ready-Made Portfolios

Vanguard has some wonderful funds of funds that are essentially one-stop-shops. They have built a range of low-cost, ready-made portfolios that will make your life a breeze.

The first set of ready-made portfolios is known as their LifeStrategy Range and each one costs just 0.22%. There are 5 different funds: LifeStrategy 20% Equity Fund, 40%, 60%, 80%, and 100%. The number indicates what percentage of the fund is in equity, with the remainder being in bonds.

Let’s look at LifeStrategy 60 as an example. Within the fund there are loads of other Vanguard funds. If you were to tally up all the bond funds in there it would add up to around 40%. The other 60% is in Vanguard equity funds.

One important thing to point out with this fund range is the UK bias. The funds are built roughly to follow global market capitalisation weightings but are distorted in favour of the UK.

We personally don’t care for this, but many UK investors do want some UK home bias.

The next set of ready-made funds are the Vanguard Target Retirement Funds, which all cost 0.24%. There’s a whole bunch of these and you choose the one with the name closest to your retirement date. For example, say you were planning to retire in 20 years’ time you would choose the Target Retirement 2040 Fund.

A traditional investing path is to de-risk your portfolio as you age. These funds achieve this by gradually moving your invested money away from equities and towards bonds – Vanguard does everything for you.

The Target Retirement 2040 Fund is still 19 years from its target date, so at this point it holds 74% equity and 26% bonds.

In exactly the same way as the LifeStrategy funds, the Target Retirement Funds are also weighted with UK bias.

Portfolio 6: ESG Fund

This is for the investors that want awesome returns but wish to do it responsibly. This portfolio consists of a single global ETF that tracks the FTSE Global All Cap Choice Index.

The Vanguard ESG Global All Cap ETF (V3AM) has literally just launched at the end of March 2021 and costs just 0.24%.

There is little info about the ETF listed on Vanguard’s own site – presumably because it’s so new.

But taking a look at the index factsheet tells us everything we need to know.  The index contains around 7,500 stocks with big allocations to all the usual countries in a global index.

The index applies rules-based criteria to screen out non-renewable energy companies, makers of weapons, and vice products such as alcohol, gambling, and tobacco, amongst other things. Companies are also excluded based on Controversial Conduct.

Its 5-year return is 110.5% – even beating the 99.5% from the FTSE Global All Cap.


Other than the ready-made portfolios you may have noticed that we have neglected to include any bonds. That’s because we don’t think young people need them in their portfolios, and also because we feel that bonds are not good investments right now.

Bond prices are linked to interest rates, which are already at or below zero globally, and we can’t imagine there being any major drop in interest rates that would cause bond prices to go up. So, it seems that investing in bonds now would be the worst time to invest in this asset class.

Having said that, there’s nothing stopping you from adding some bonds to any of these portfolios. If you’re adding bonds in order to maximise portfolio stability, then we would stick to government bonds and avoid corporate bonds.

Corporate bonds tend to move in a similar way to equities and so offer little protection in a downturn. Government bonds, however, tend to be a good hedge against equities.

Unfortunately, Vanguard doesn’t offer a dedicated global government bond ETF. But they do have these more targeted ETFs which could be used instead:

  • USD Treasury Bond UCITS ETF (VUTY)
  • K. Gilt UCITS ETF (VGOV)
  • EUR Eurozone Government Bond UCITS ETF (VETY)
  • USD Emerging Markets Government Bond UCITS ETF (VEMT)

Similarly, you might want to tack on other ETFs to increase or decrease your exposure to certain areas.

For example, you could also invest in the Vanguard FTSE 250 ETF if you wanted more exposure to UK mid-cap equities.

Do Vanguard products make up the bulk of your portfolio? If not, what does? Join the conversation in the comments below.


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Want To Retire Early? Pick Your FIRE Strategy (FAT/LEAN/COAST/BARISTA)

The Financial Independence and Retire Early movement is not very old but it has gained a lot of traction in the investing community.

If you’re a financial freedom enthusiast, you’ll have probably heard of FIRE. But have you heard of Lean FIRE, or Fat FIRE, or the other types?

We can all focus too hard on retirement and forget that the journey is supposed to be enjoyable too.

The method of FIRE you apply will require sacrifices, whether that be in time, effort or luxuries, so it’s good to know that a number of options are available for you to choose from which all arrive at some variation of the same end destination – financial freedom.

By the time you’ve read this post, you will know what kind of FIRE plan is right for you.

Commission-free trading platform Stake are giving away a free US stock worth up to $100 to everyone who signs up via the link on the Money Unshackled Offers page, so be sure to check that out!

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Many Routes – Same Dream

Freedom means different things to different people. For some it is the freedom to leave a high stress career in favour of doing something you’d enjoy, but which doesn’t necessarily pay well.

For others it means nothing less than the jet-set celebrity lifestyle starting ASAP, and never having to do a day’s work again.

Others still crave the end of employment but don’t need the fancy car or the big house and can find happiness on a campsite or on the road.

There’s a FIRE solution for each and every one of them. So, what are the main broad paths you can take to financial freedom?

#1 – Barista FIRE

Barista FIRE is FIRE at its most basic – it doesn’t even necessarily end in you leaving the rat race.

All it buys you is semi-retirement, but it is much more achievable because of that.

The idea is simple. You accumulate your freedom fund to cover some of your expenses, but not all.

This might involve setting a target retirement fund size of say £250,000 to pay you a £10,000 a year income in retirement at the 4% safe withdrawal rate. And you make up the difference between your investment income and your outgoings with part-time or enjoyable work.

For many, nothing short of full financial freedom will be good enough. But for those who don’t hate work, Barista FIRE offers a sensible half-way-house approach to freedom that’s doable for everyone.

In practise, it would work like this – any money you invested during your life up until the age of, say, 50, would be working for you and paying you out a small income thereafter.

If you need £20,000 to survive on in your early retirement, and your investments are giving you an income of £10,000, you only need to earn a further £10,000 from employment once you leave your main career behind you.

The effect this could have on your lifestyle is massive – the difference in happiness between a high powered corporate career and a £10k job can be worlds apart.

A job that brings in just £10k might involve 3 days a week doing something less pressured, or even enjoyable.

Or for those of you making the big bucks, making up a £10k shortfall might involve putting on that business suit for just a few weeks in the year as a contractor, and living the retired lifestyle for the rest of the year.

The second way to Barista FIRE is to let your spouse continue working while you put your feet up, though it would take a special kind of partner to tolerate that set-up!

But as long as SOME money is trickling in from employment to supplement your small investment income, you would technically be doing Barista FIRE.

And FYI: the name “Barista FIRE” comes from Starbucks – one of the original US companies to offer part-time workers health insurance, which makes this strategy possible in America!

#2 – Coast FIRE

Coast FIRE is best described as investing enough money at a young enough age so that you can stop contributions mid-career, live affluently for the second half of your working life, and still achieve financial independence sometime in the future just by “coasting” along.

The goal behind Coast FIRE is to massively increase your savings rate early on in your investing journey by piling money into your portfolio.

There is a mathematical tipping point where the money invested is enough to grow with compounding returns to an amount big enough for early retirement without needing any additional contributions.

If you start early enough, and are in no great rush, you don’t need that much invested because you have decades worth of time for it to grow without further effort on your part.

For instance, both of us at Money Unshackled could switch to Coast FIRE fairly soon and it would be job-done.

Our existing portfolios are almost big enough that they would grow over the next 20 or 30 years so that we would be able to retire with a basic lifestyle.

Someone aged 20 could spend 10 years squirrelling away £150k and then stop worrying about investing – 25 years later they could be retiring in their mid-50s with the equivalent of £500k at today’s value of money, factoring in inflation.

By choosing Coast FIRE, they could then massively increase their standard of living in their 30s and 40s by not needing to invest further.

So, Coast FIRE is for investors who are happy to buckle down and scrimp-and-save hard in their 20s, and then forget about their investment pot and live life to the max while remaining in work.

In a way, it’s the middle-class dream, but without the poverty in retirement that comes from spending all your wages on conservatories and BMWs and forgetting to invest. And all it costs you is a few years of initial financial responsibility.

#3 – Lean FIRE

Lean FIRE is for people who prioritize leaving the workplace over a comfortable retirement. You want to retire in full, asap, and are prepared to live a minimalist lifestyle in retirement as a consequence.

For this kind of FIRE you probably need a pot of around £300k – what is probably the baseline to survive in retirement, which provides a small income but with practically zero home comforts.

For investors on the Lean FIRE path, the baseline is also their finish line.

The principles remain the same as other FIRE types. You save enough money to cover your expenses in your retirement using the 4% safe withdrawal rate.

The main difference is that you have to save much less than people on other forms of FIRE who are going for full early retirement with a good standard of living after the magical retirement day.

The defining characteristic of the Lean FIRE approach is frugality. People that reach for Lean FIRE tend to get there by being very careful with their outgoings and by pinching pennies.

Achieving Lean FIRE is generally well within the means of people with medium incomes.

A 20-year-old Lean FIRE investor aiming to retire at 50 would only need to regularly invest 36% of their required retirement income over the 30-year time frame to reach their goals.

That would be £600 a month for a £20,000 required retirement income, using average stock market compounded returns.

But there are also people with very high incomes that seek to achieve this goal who can be happy with a basic lifestyle in retirement. For them, it might be a case of saving 50%+ of their salaries and FIREing in just a decade or less.

Other solutions involve driving your required early retirement income down by planning to move somewhere cheap, like a Northern town or even another country.

Or sack off the main cost of living – housing – entirely, and live life on the road in a campervan, Scooby-Doo style.

However, for most people, Lean FIRE probably means sacrificing too many things. Is it possible to retire early and not live on the breadline?

#4 – Fat FIRE

If Lean FIRE is the frugal path, then Fat FIRE is the polar opposite. This is the plan you should be following if you plan on being a big spender in retirement.

Fat FIRE allows you to live in the most expensive cities in the world, retire with a big house, give your kids and grandkids lavish private educations, travel when and where you want to, drive a nice car, dine out at nice restaurants, and support your parents or your kids if they ever need help. In short: proper, fulfilling retirement.

Once again, the basic FIRE principles apply – the difference being that you will need a much bigger net worth to be able to retire.

If you’re planning on spending £100,000 a year or more in retirement and living a full and activity packed life, you’d need at least £2.5m stashed away to be able to retire on the 4% safe withdrawal rate. That is a lot of money you’d need to accumulate.

If you feel you need a lavish retirement, you’re probably not the type to penny-pinch and clip coupons for 30 years in order to get there.

For this reason – coupled with the fact that spending cuts can only go so deep before hitting bone – you will need to focus on growing your income instead.

To get there fast, a normal job isn’t going to cut it – for Fat FIRE, you’d need to be a highly paid professional or business owner (or have several lucrative side hustles).

As for how much of your income you’d need to set aside to Fat FIRE: to live a lifestyle based around your current income level, investing around 30-40 percent of your current income over 30 years, or 70 percent over 20 years, should be enough as a general rule of thumb. These are big numbers – if you want to live more lavishly in retirement than your current income would allow (if you stopped saving), you’re probably being unrealistic!

You can get to Fat FIRE faster if your business or side hustles will continue to make you money after you’ve retired.

It might be that you don’t need to bother with investing at all – just focusing all efforts on building up a successful business to be your legacy might be a faster (if riskier) solution.

Alternatively, you can get to Fat FIRE the slow way by first getting to Lean FIRE, and then continuing to work and invest for another couple of decades.

Say that Lean FIRE to you is £500k, and Fat FIRE is £1.5m. The first £500k will be by far the hardest part of the journey.

Money breeds money and turning £500k into £1.5m CAN be done, for those willing to wait.

By this point, your monthly contributions will likely pale in comparison to the huge, compounded returns you’re getting from the invested funds, and you may decide to stop making contributions at this point and just let the market take care of your pot’s growth, Coast FIRE style.

£500k turns into £1.5m in just over 20 years at an 8% annual rate of return, assuming inflation of 3%.

Maybe you aim for Lean FIRE, but keep open the option to switch to Coast FIRE mode and enjoy a semi-retirement with a more laid-back part-time role for 20 years before retiring in full Fat FIRE glory.

#5 – The Middle Ground – Regular FIRE

We’re aiming for a middle ground – regular FIRE, somewhere between Lean and Fat. We aint living like paupers in retirement, but nor do we feel the need to work our butts off to get to multimillionaire status.

Though if Fat FIRE were to come within our reach, we may decide to go grab it.

For now, we’re aiming for the middle ground by first securing that Lean FIRE baseline and then building from there for a few more years to make our early retirements comfortable and fun.

FIRE to us is full retirement before 50 at the latest, so Barista and Coast FIRE are not ideal for us.

We want our freedoms ASAP, but we’re willing to work a little longer to get a freedom that involves a few home comforts!

Which FIRE route are you taking? Join the conversation in the comments below!


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What Percent Of Your Income Should You Invest For Financial Freedom? | Planning For FIRE

What percentage of your income are you saving or investing each month? If you’re like most Brits, it won’t be anywhere near enough.

We know this because the average Brit retires at age 64. If they were saving properly for retirement, we’re betting FEW would willingly choose to limp on into their mid-60s.

But how much of your income do you need to be saving each month to reach your goals?

In this article we’ll assume that your goals are a comfortable retirement, on your terms, starting sometime in your 40s or 50s.

We’ll look at what the financial gurus recommend, we’ll look at what most normal people are doing, and finally what you need to do to set yourself apart from the slow-laners who follow the mainstream media narrative.

It might even be that the whole notion of saving a percentage of your income is flawed. Maybe there’s a better way?

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What Percent Of Their Income Do Other People Set Aside?

The average UK citizen saved just £2,292 in 2020, according to Charter Savings Bank.

The average salary in 2020 was just under £26k, so from this we can calculate that the average person saves around 11% of their job income, after taxes and other pay-slip deductions.

We also know that the average person retires at 64 – the average retirement age is expected to keep climbing, and will probably be well into the 70s by the time our generation gets to retire.

If we know the average person currently retires at 64 and the average person saves 11% of their income, it seems that saving 11% is not going to be good enough for you.

For you to reach financial freedom before your 70s, you’re going to need to be putting aside more than the average Joe.

Though to be fair, the majority of these savings will not be invested in wealth building assets – instead, they will have been left to fester in a low interest bank savings account.

But as we’ll soon calculate, even when properly invested, 11% is still far too low.

We’re also very sceptical of these savings statistics – far too often, what people describe as their “savings” are really “delayed spendings”.

What they count as savings today goes on fixing the car tomorrow. Our definition of saving is putting that money aside and never touching it again until retirement.

Savings % By Age

You’d think that when you’re younger it would be harder to save or invest a high percentage of your income, because you probably don’t have much of it. Any money you bring IN goes straight OUT again on rent.

There’s some truth in that – but people in their 20s actually save above the national average, probably because they don’t have families to pay for:

Savings % By Age (Sources: ONS, & Charter Savings Bank)

People in their 30s are able to save the most, as most people are established in their careers by this point and raking in the big bucks.

For whatever reason, saving tails off once people pass the age of 50 – perhaps they are putting money into pension accounts as well that is not reported in this data. But still, these numbers are very low.

Is Anyone Investing Their Savings?

Of course, to get anywhere in this world, you need to be INVESTING your savings, not stashing them in a bank account.

Cash accounts earn less than nothing due to inflation and low interest rates. The stock market on the other hand is widely quoted as having an average return of 8% since records began.

A person who saves 10% of their after-tax income in a Cash ISA will fare FAR worse over time than a person who invests 10% each month into a Stocks & Shares ISA.

But the most recent data tells us that for the tax year ending April 2019, just 22% of ISA subscriptions were Stocks & Shares ISAs, compared to 76% for Cash ISAs.

What Do The Financial Gurus Say?

JL Collins, author of The Simple Path To Wealth, recommends you aim to save or invest a full 50% of your income.

While he admits that he hasn’t always been able to do this himself, he credits the setting of this target as having been essential with helping him to become financially independent while still young.

Andrew Craig, author of Live on Less Invest The Rest, suggests people should invest 10% of their income as a minimum, and anything over and beyond that will also be beneficial.

We find this a bit unambitious personally, though we do respect most of what this guy says. 10% is simply no good for retiring before your 60s. But it’s better than nothing.

Most commentators agree that the answer lies somewhere between 10 and 50 percent. Some in the FIRE community take it to the extremes and invest over 70 percent of their incomes.

Some are doing this by living like tramps, while others are able to set aside so much by pursuing a higher income. Let’s now look at how hard it is to increase your savings percentage.

Is Saving X% Really So Hard?

The average UK citizen who earns £26k is in the top 3%, richer than 97% of the people on Earth. So in theory, saving money really shouldn’t be that hard.

The reason you may not feel this well-off is though is because you are used to a certain lifestyle and standard of living.

You choose to live in expensive accommodation. You choose to have the big TV, ten monthly subscriptions and a new car on finance.

We’re not saying any of this is a bad thing – we’re just pointing out that in this country, saving for our futures is often a choice that comes second place behind our lifestyle priorities.

Saving a higher percentage gets far, far easier the higher your income is. This is because the range of money that most people need to live on is quite similar, while incomes can vary wildly.

You probably only need around £20,000 after tax income to live a moderate lifestyle in most cities – anything earned over this could in theory go straight into your early retirement fund.

You’d probably find that moving from saving 10% of your income to 20% is easily done if you were to get a promotion or move jobs.

Assuming these numbers are all after tax: 10% of a £25,000 income is £2,500. 20% of a £30,000 income is £6,000.

If you’d just moved up the career ladder from £25k to £30k, your salary would be up by £5,000k. But your savings per month only need to go up by £3,500 to double your percentage of income saved.

You just got an extra £5k of income, so doubling your savings rate in this scenario is EASILY achieved. So long as you don’t succumb to too much lifestyle inflation!

But if you are not able to increase your income, the only option left to you if you want to increase your savings percentage is to cut back.

But to reach anything like 50%+ and join the top ranks of the FIRE community by only cutting your outgoings, you’d have to make some radical lifestyle changes.

But let’s assume you don’t want to live on rice and beans for the rest of your working life. What’s a more realistic amount to be saving each month?

How Much We Think You Should Invest Each Month

The correct answer is, you need to work backwards from your target wealth goal, choose a timeframe that you can stomach, and aim to save and invest at least the percentage that this calculation tells you to.

For both of us, the goal is a minimum £500,000 per person in a household.

This would bring in an annual income per person of £20,000, using the famous 4% Safe Withdrawal Rate rule – what we think is enough for one person to live a basic lifestyle.

Say you start investing at age 25 and your salary is £30,000 after tax.

Let’s further assume that the absolute maximum you’re willing to tolerate slaving away for would be 15 years, gaining financial independence at age 40:

Example Scenario: Required Savings % To Retire Either 15 Or 25 Years From Now

You would have to invest 57% of your income over this timeframe to reach this goal, with compounded average stock market returns.

While the same person allowing themselves an extra decade to reach their goal, with a target freedom date at age 50, need only save 21% of their income.

Alternatively, the correct answer is as simple as; “if your goal is financial freedom, you need to save as much as you possibly can, because freedom ain’t cheap”.

As a footnote to this rule, you may believe you are already saving and investing as much as you possibly can. But are you really? Or are you in fact just investing as much as your lifestyle allows you to?

The Slow Lane Mindset

Unfortunately, the rot of “the 10% savings rule” has spread widely across the mainstream media.

Next time you see a financial expert on the BBC they’ll likely quote this number like it’s some kind of gospel truth.

This doesn’t help anyone though and is just a form of talking down to the audience.

Quite a number of other outlets including Experian are now citing the 50/30/20 rule, which is an improvement.

It suggests spending 50% of after-tax income on essentials, 30% on non-essentials, and leaving 20% aside for your savings pot.

But to us this still lacks aspiration. Especially while you are in the first half of your investment journey, how much you can save each month is far more important than your return on investment.

And yet we see investors worrying about the difference between an 8% and an 8.5% return, who are only depositing a few quid a month.

As we showed before, investing around 20% of your after-tax income is probably OK if you want to retire in 25 years’ time.

But who wants to be forced to work for 25 years?

25 years is long time. Every percentage that you can edge that savings rate higher will shave years off your career.

Switch To The Fast Lane Now

Also common in the mainstream media is a total disregard for investing.

Newspaper articles about home finances will only quote the latest Cash ISA interest rates; the BBC’s coverage of individual investors paints us all as uninformed chancers who jump onto bandwagons like GameStop and Crypto.

But most of the viewers of these shows and readers of these magazines are stuck in the slow lane of cash savings – the media are just talking to their audience.

You need to switch into the fast lane of investing, and we’re not talking about some scary Wild West where you gamble your savings on a single stock or the latest fad.

A “Do-It-For-Me” investing platform like InvestEngine invests into diversified funds FOR you. It’s as simple as answering a few questions about your risk tolerance and target time period, and hey presto – you’re delivered a portfolio of diversified funds covering stocks from around the world, both big and small, with some precious metals for protection against downturns. And the total fees are tiny at just 0.25%!

Find your way to InvestEngine via the link on the Offers Page and they’ll give you a £50 bonus upfront!

What percentage of your income do you set aside for early retirement? Join the conversation in the comments below!


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Why Every Takeaway Costs You £1000 | The Huge Retirement Cost Of Spending Decisions Now

Today we want to get you thinking about the opportunity cost of your outgoings. The difference between a rich person and a poor person usually lies in the life decisions they make.

Over the lockdown, it’s said that half the country got fit with Joe Wicks, while the other half got fat with Ronald McDonald.

We ourselves have racked up significant takeaway bills during this pandemic, with the main culprit being Dominoes at around £25 a pop.

Added up, the nations’ newfound love of takeout comes to a hefty cost, probably a few hundred quid every month on average. But that’s not the real cost.

As investors, we know that this money could have been put to work for us in stocks or the property market.

The returns we’re missing out on as a result adds up to a mighty opportunity cost over a lifetime.

In this post we’ll show you the real cost of a takeaway, amongst other things, and how much you could be better off in retirement if you made different life choices today.

And if you think this number is scary, you won’t want to know the real cost of that new car you bought last year!

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The Opportunity Cost

A common term in accountancy, which might be why most normal people have never heard of the concept.

After all, any conversation with an accountant usually ends in a boredom-induced coma.

And yet, if everyone learned about opportunity cost in school, we believe we’d have a nation of dedicated savers.

The opportunity cost casts a light on what could have been, by magnifying the effect of spending decisions over time.

At its core, it compares the return you get by spending money one way, such as the return of a full and satisfied stomach from a takeaway, versus the return you get on the best available investment opportunity, such as 8% in the stock market.

Why A Takeaway Costs You £1,000

To work out the real cost of a purchase, you need 3 ingredients: the price, a rate of return, and time. Let’s look at a Joe’s most recent order from Dominoes:

Dominoes wanted £25 out of Joe’s freedom fund in exchange for their product. The historical rate of return in the stock market is 8%.

Joe is 20, and plans to hold his investment portfolio to retirement, so let’s say he lives at least into his 70s and regrets his decision to buy that pizza for the next 50 years.

£25 compounded at an 8% return over 50 years is a total cost of £1,173. That’s one expensive pizza! Nice, though.Is 8% Compound Growth Realistic?

Absolutely. The stock market is widely quoted as returning around 8% per year on average as a whole. However, some investments can do even better!

Since America’s S&P500 opened as an index in 1926 when it had 90 stocks, it has returned on average 10-11% per year.

And US Small Cap stocks had an average annualized return of 11.9% from 1972 to 2020, while US Large Caps returned 10.8% over the same period.

Over long periods of time, the stock market performs better than property, bonds and commodities.

And since you can easily invest in stocks from as little as £1 from the same sofa that you would annihilate that pizza, it’s an appropriate alternative to a Dominoes pizza box as a place to store your wealth.

Other Scary Numbers

Obviously, it’s not just takeaways – that’s just a silly but illustrative example that we chose. Even scarier is the full opportunity cost from life’s big decisions, such as buying a new car.

Millions of office workers choose to buy new cars with their middle-class salaries, believing themselves to be rich as a result. The opposite is true.

By the same logic as the Dominoes pizza purchase, a new car worth £25,000 could set you back by £1.1m over your working life.

British holiday makers choosing the Bahamas over somewhere closer to home like Portugal could easily burn an extra 3 or 4 grand – which may add up to over a £160,000 loss in retirement.

Here’s those same numbers over some different retirement timeframes:

Opportunity Costs Of Various Activities

One takeaway doesn’t really make a difference – yes, you’re £1,000 poorer in retirement, but for a 20 year old retiring at 70 that translates to just £4 a month lower income using the 4% safe withdrawal rule.

One takeaway every week for one year could set you back by over £60k in retirement, which translates to £200 a month less income during retirement. And that’s just if you do it for 1 year.

The number that makes us blink most though is the loss to future potential income that comes from buying a single new car while you’re young. And not even a particularly expensive new car.

You could be nearly £4,000 a month worse off! Maybe instead, get that money invested, drive an old banger for a few years, and THEN buy a decent motor.

We want to stress that we’re not saying there’s anything wrong with spending your money on new cars or pizza. You can do what you like with your money.

All we want to do is open your eyes to your options.

You need to know that by deciding to make a purchase now, you’re effectively choosing to forgo big increases to your income in the future.

The Flip-Side – Anyone Can Be A Millionaire

Over a career, anyone who passed on the chance to buy a new car in favour of stashing that cash into the stock market could very likely be a millionaire in retirement.

We just showed that buying a new £25,000 car really costs you £1.1m on average over 50 years. Over 40 years the cost is still £540,000.

And of course, if you’re buying new depreciating cars every few years, that could easily add up to multiple millions of pounds of sacrificed investment growth.

The point is, becoming a millionaire in the future can be as simple as making the right choices in your 20s and 30s.

Maybe that involves stashing a potential house deposit for a first home instead into BTL investment property, or whacking a big bonus you got from work straight into the stock market.

Time will work in your favour to set you financially free later.

Should You Live On Rice And Beans?

Some money savers do take the theory of compounding to the extremes. Stories abound in the FIRE community of people saving 75%, even 90% of their salaries to invest for retirement.

FIRE stands for Financial Independence, Retire Early, and for many, Early means within the decade.

You can bet THEY won’t be buying takeaways!

Followers of FIRE mostly get to retire young by penny-pinching their way through their 20s and 30s, but this lifestyle isn’t for everyone.

It certainly isn’t for us. Try as we might to resist the fast-food industry, or the delights of a 65-inch 4k TV, we are only human.

Surely there’s a better solution to scrimping and saving that allows you to buy whatever you want, and still build up a mighty Financial Freedom Fund?

Don’t Cut Back – Make More Instead

We’re firm believers in the abundance mindset, which is making the choice to make more money rather than cutting back. So, we’ll have the takeaway – so long as we’re making good money elsewhere.

The choice doesn’t need to be between having fun now and having fun later.

Just adding a side hustle to your main income stream could easily fund your chosen lifestyle, while allowing you to invest more of what you make from your job.

Here’s our most recent post about top side hustle ideas for inspiration.

Quickly, though, here are 3 of our favourite ways to make more money to fund a better lifestyle.

#1 – Invest First, Treat Yourself Later

As we alluded to earlier, you could get your money working for you first and pumping out returns, and then focus on saving up money to buy your lifestyle choices with.

MU’s Ben drove a smelly old 2003 reg Ford Focus for years before buying his awesome current car. That meant he could get thousands and thousands of pounds working for him during his 20s.

Basically, it’s delayed gratification. Which for all you investors out there, should come as second nature!

#2 – Side Hustle

A great side hustle open to anyone to make a bit of extra cash is matched betting, which we’ve both tried out and made a decent bit of regular money from.

We have a handy guide on how to milk this income stream, linked here: Guide To Matched Betting.

#3 – Start A Business

The best way to improve your income is to not have it be filtered through your employer’s organisation, losing a slice here to shareholders, a slice there to fund your boss’s promotion, and so on.

When you own your means of income, i.e. by owning and operating your own business, you keep all the profits.

You should make it your medium-term goal to move away from being an employee working for someone else for crumbs, and work for yourself, so you get the whole pie.

Or should that be, the whole pizza?

Are you getting a takeaway tonight? Join the conversation in the comments below!


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Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Which Stocks & Shares ISA I’m Using In 2021/22

Written by Andy: 

How do you choose the best Stock & Shares ISA for 2021? Whether you’re a seasoned pro or an investing noob, each year we should all consider what options we have when it comes to choosing the investment ISA that we’re going to use for the year ahead.

If you’ve never carried out this exercise, there’s a high chance that you’re massively overpaying.

If you already have a Stocks & Shares ISA from previous years you don’t need to continue using the same one. And in many cases, it would be best not to.

A lot changes in a year, so what was once the best investment platform for you a year ago may no longer be.

We regularly get asked which is the best investment platform, and we would love it if there was a simple answer but unfortunately there is not a one size fits all approach.

As the new 2021/2022 ISA season draws closer, I’ve been evaluating my options. So, rather than take you through a big list of different investment platforms and compare them, we think it would be more beneficial to take you through my thought process and show you how I came to decide on which investment ISA I will use next. Let’s check it out…

Alternatively Watch The YouTube Video > > >

Best Investment Platforms For Your ISA

Before we get into the mechanics of the decision-making process, a great resource that we’ve put together is a curated list of the top investment platforms, including a comprehensive fee comparison table.

Naturally, a comparison table like this can be completely overwhelming for all but the most experienced investors, so we’ve also handpicked our favourites and categorised them into hopefully more understandable groups.

For example, Interactive Investor is our favourite Fixed Fee platform. As the account fee they charge stays the same no matter how big your pot grows, it’s great for investors who have or plan to grow substantial wealth.

Another of the categories is Commission-Free apps and our favourites here that offer an ISA are Freetrade and Trading 212.

These two investment apps are in a league of their own for anyone who wants to trade even semi frequently. Neither of them charge any trading fees, which can really rack up fast with the platforms that do charge them.

My Current Investment ISA Provider

Many of you will know that I’ve been using Interactive Investor over the last few years as my current ISA provider because it has almost suited my needs perfectly.

The way I like to do the bulk of my investing is to invest monthly into a few low-cost ETFs. I don’t want to incur any growing account fees, trading fees, FX fees, or any other type of sneaky fee that the platform can conceive.

Invest wrongly with Interactive Investor and you’ll have your pocket picked but do it right and they are one of the cheapest platforms around.

Both of our core portfolios contain just 5 ETFs. If you’ve seen our blog or the YouTube channel before you’ll know that we bang on about these all the time, but if you’re new to Money Unshackled, check out this post on the Ultimate Portfolio next.

As Interactive Investor’s monthly investing service is free, investors can build this 5 ETF portfolio with no trading fees.

All of these 5 ETFs are priced in pounds, so I avoid their nasty FX fee, and it is VERY nasty, so be warned. This IS NOT the platform for trading directly in international stocks in our humble opinion.

But for my portfolio their pricing structure means I only ever incur their monthly account fee of £10, which works out at just 0.14% of my ISA annually at its current size, and that percentage will reduce as my investments grow.

Naturally, you might be wondering why I’m thinking about using an alternative investment platform for my ISA considering there would be no additional charges for new money. Well, the reason is diversification across platforms. Your money is only protected by the FSCS up to £85k per firm.

Is Your Money Safe?

When you make any investment, you need to first consider the risk of losing your money due to platform failure. If the platform were to go bust, is your money safe?

While the FSCS protects up to £85K per firm, in practice the level of financial protection is much higher. Your investment platform must segregate your investments from their own business capital.

If this segregation of client assets fails in any way, then the FSCS protection can pick up the slack up to £85k.

In practice this means that your investments are likely to be safe well into the several hundreds of thousands but pinpointing an exact number would be impossible.

With my ISA sitting currently around £87k that puts me right on the limit of what is effectively full protection. I’d be very comfortable with a lot more than this with one platform but even if I don’t add more money to my pot it should grow to £875k in 30 years’ time with average compounded returns. That’s more than enough to get me worried about protection, so in my eyes it makes sense to start using another ISA provider now for new money invested.

Having multiple ISAs would be a pain in the backside to manage, so when the time comes, I’ll probably draw a line at two ISAs, as long as any other wealth such as SIPPs, property, and so on are invested elsewhere.

The size of the platform also makes a difference. Hargreaves Lansdown has assets under management of over £100 billion and is top dog. We feel that there is strength in numbers, and the FCA is far more likely to regulate the major players more stringently as they pose a greater risk to the financial system should they collapse.

For comparison purposes Trading 212 only has £2.7b of assets, but they are growing fast.

Before you invest a penny, you should first check that the platform is FCA regulated and protected by the FSCS.

All platforms worth their salt will have all the relevant info clearly visible on their website.


We think the next most important consideration when choosing a platform is fees. So much so that fees will influence how you invest. Don’t underestimate the seemingly small fees that you incur like FX and trading commissions.

Investing £500 a month for 30 years at 8% returns would get you a £709k portfolio. However, lose 2% of that to fees and the pot is just £490k – a whopping £219k smaller.

Different fees will affect investors in different ways depending on how and what they invest in.

We’d both love to trade more frequently and have more fun with our portfolios but we know that due to the nature of fees this is detrimental to our portfolios.

Account fees should never be more than 0.25% in our opinion if they also charge trading fees on top, which most do.

Vanguard’s own platform charges just 0.15%, AJ Bell’s is 0.25%, and Interactive Investor is a flat £10 monthly fee. Whereas Freetrade charge just £3 monthly for an ISA and Trading 212 is completely free.

The next fee to watch closely is trading fees. In all honesty, anything costing more than free is too much.

Some of the major platforms have discounted monthly investing services, which charge around £1.50. This is just about acceptable.

However, with the likes of Freetrade and Trading 212 charging nothing to trade, we think the days of paying to trade should be left in the past where it belongs.

The final major fee, which seems to be less understood and overlooked by investors, is FX fees.

We think a lot of platforms are taking advantage of investors’ ignorance here to hammer them with a nasty currency conversion markup.

Trading 212 were industry leading until recently when they decided to implement a 0.15% FX fee.

This is still tiny relative to many of the more established platforms but for anyone who trades frequently in any stock or ETF listed in a foreign currency this will quickly add up.

Trade in and out of a stock 6 times in a year and that small inconspicuous FX fee would add up to 1.65% (that’s 11 trades at 0.15% each).

On some platforms it might be 10x that, making trading practically impossible.

Investment Range

You need to make sure that your chosen investment platform has a good investment range.

Trading 212 and Freetrade have grown their range considerably over the last year or so. However, the more expensive traditional platforms have far superior ranges and we’d be surprised if they didn’t have what you were looking for.

It boils down to whether it’s worth paying more for this better range. We’re not sure that it is.

The commission-free apps now offer enough to make do, and when you factor in the lower fees it’s probably more than enough.

Unfortunately, some of the ETFs I want to invest in on Trading 212 are stupidly only available in dollars, including the largest component of the Ultimate Portfolio (available as US Dollar version MXWO on Trading 212), despite GBP versions being available elsewhere like on Interactive Investor.

Looks like I will have to incur this small FX fee or invest in something else.

One similar portfolio to the Money Unshackled Ultimate Portfolio would be to switch out the Invesco and iShares ETFs and bring in the Vanguard FTSE Developed World and Vanguard FTSE Emerging Markets ETFs instead. These cost just 0.12% and 0.22% respectively.

The Ultimate Portfolio and a Vanguard-based alternative

We personally don’t think these ETFs are quite as good as the Ultimate Portfolio for our purposes but should perform similarly. The Ultimate Portfolio funds avoid some dividend withholding taxes by being partly synthetic, which the Vanguard funds fail to match. This might be one of those occasions where you let fees influence how and what you invest in.

I have also been considering Vanguard’s own platform because it is well priced. The problem is Vanguard only offers Vanguard’s own products and strangely, you actually get a better choice of Vanguard funds elsewhere.

For people who are just interested in getting a decent range of funds at rock bottom prices, Vanguard’s platform might be for them.

Customer Service

You might be able to tolerate bad customer service at Burger King but when it comes to your money, the service better be top notch.

It goes without saying to check out reviews before committing. Trust pilot is your main port of call here of course.

When we’ve spoken to Interactive Investor, we’ve generally had great service.

We’ve requested ETFs and had them promptly added to the available range and even had some added to their regular investing service on our request – but not all.

The commission free apps do consider requests, but I was essentially pied-off (in a polite way of course) by Trading 212 when I asked.


There’s an endless list of possible features that investment platforms could offer. You need to choose a platform that offers the ones that are most important to you.

The capability to place limit orders might be essential for you, whereas we are happy to invest using market orders.

You might insist on having detailed analysis of the available stocks including revenue and earnings, and portfolio analysis. You might also want guidance and suggestions about what to invest it.

Some platforms also produce best-buy tables, and others produce large volumes of content to read. Other platforms have built up incredible communities.

All of that is great, but one feature that we think stands head and shoulders above everything else is Trading 212’s Autoinvest and Pies feature. The Pie feature is brilliant and we reviewed it here, but as it stands, Trading 212 performed an act of self-sabotage by introducing a card fee to Autoinvest.

This fee at 0.7% can be avoided by not using Autoinvest, and instead manually adding funds to the Pie using a bank transfer.

Which Platform For 2021/2022?

On balance, the best ISA for me in this upcoming tax year will be Trading 212 – though if I didn’t have so much money in Interactive Investor already, I would have leaned towards them again.

Although the introduction of some fees on Trading 212 is an unwelcome irritation, these can be avoided by jumping through a few hoops and avoiding certain investments.

What ISA will you be subscribing to this tax year? Join the conversation in the comments below.


Featured image credit: Aaban/Shutterstock

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