My Plan To Grow My £200k Portfolio To £1m In Under 10 Years

In a post back in May, I showed how my portfolio had grown to £200k over 5 years, starting from almost nothing.

Now I want to talk about my plan to grow that £200k to £1m over the next 10 years or less. It’s already up to £254k since that last article, thanks to the property market – a good start!

This won’t just be about what I’m doing. It will be packed full of tips and key steps to take that you can apply to your own financial journey.

There are a lot of ways to get to £1m in 10 years, but the plan outlined here is one that literally anyone can do if you’re willing to take your investments to the next level.

That’s right – a super high salary isn’t required, nor do you need to wait a lifetime for compounding returns of 4 or 5% to take their course.

This is a fast, sensible route to riches that I’m taking, and that you might want to consider taking too. Let’s check it out!

ETFs are the bedrock of my stocks portfolio. With InvestEngine you can build a portfolio of fractional ETFs for free. Just set the percentage allocation for each ETF and you’re done – say goodbye to spreadsheets! And rebalancing your portfolio is as simple as couple of clicks. New users to the platform will receive a £50 welcome bonus if you use this offer link.

Alternatively Watch The YouTube Video > > >

Getting To £200k – A Recap

The first £200k of my Freedom Fund was built over 5 years mostly from cash contributions from salary savings, and from home equity release on my house. Together that made up around 2/3rds of the portfolio’s value.

Actual returns from my investments contributed the other 1/3rd of the value to that initial portfolio.

In the early stages of your Freedom Fund’s life, your contributions from your salary will have far more of an impact than your returns on investment.

Enormous percentage returns don’t really matter all that much at this stage: a 20% return on £1 is still just 20p. You will be able to grow your portfolio at a steady rate just by adding new cash.

Why The Next £800k Needs A New Approach

Soon, those monthly contributions from work will become almost inconsequential. In fact, right now I’m adding barely anything from my salary from Money Unshackled, and my portfolio is still growing fast under its own weight, simply from compounding.

Cashflow from rent payments on my properties goes into the stock market, and the market values of the properties and the shares are growing like mushrooms.

New money from your salary will be a nice little extra boost at this stage in a portfolio’s life, but it’s not a requirement if your investing returns are high enough. We can demonstrate this nicely using the Money Unshackled Early Retirement (FIRE) calculator.

The blue cumulative contributions bars are quickly outstripped by compounding returns as the years go on.

Left to grow in index funds or ETFs without any further contributions or effort, £200k would still get to £1m, but over a couple of decades. ETFs will always be a major part of my portfolio, but I will need to pull all the levers that I’ve learned about during my investing career to maximise my returns to get me to £1m in under 10 years.

What’s In Our Toolkit?

There are 4 main components that we consider appropriate for building a Freedom Fund. These are:

  1. Contributions from salary or other earned income;
  2. Cash from extracting equity from your own home;
  3. Index investing in the stock market – this is our bread and butter, and will use ETFs held in Stocks & Shares ISAs and SIPPs; and
  4. Leveraged investments in both stocks and property.

To grow rockstar wealth in under 10 years I’ll need my salary contributions, ISAs and SIPPs to be supported by the power of home equity release and, very importantly, by leveraging.

Leveraged investment property already makes up a significant chunk of my portfolio – going forwards, leveraged stock market indexes will do too.

The Plan

The following is based on real numbers from Ben’s current and forecast future portfolio. The Returns On Investment are based on the following assumptions:

  • Inflation of 3%: all numbers are after deducting inflation.
  • 5% pre-inflation annual growth in the property markets, which is at the low end of historical average UK house price rises going back to 1952. Adding in leverage from mortgages, capital growth ROI is increased in this portfolio to 17% pre-inflation.
  • Rental income is based on what I actually receive now.
  • Investments in Stocks & Shares ISAs and S IPPs will grow by 8% pre-inflation.
  • Leveraged stocks, bonds, and gold in the portfolio will grow by 18% pre-inflation.

We also assume a smooth ride in the markets, for ease. In reality, it’s more likely there will be really good years and some bad years, maybe even a crash followed by a recovery.

So, here’s my smoothed-out forecast route to £1 million:

The orange headed columns are all property related. We don’t want to bog you guys down in too many numbers, so we’ll just point out the interesting things. There’s the opening and closing sizes of the Freedom Fund each year, while the numbers in-between are the various additions to the pot each year.

There’s Cash From Savings, which starts off at zero and assumes monthly salary will grow by a moderate £300 each year. As we are business owners rather than employees, this is a very conservative assumption. It should easily grow faster than this. That’s lesson #1 – work for yourself!

Now let’s talk about what’s happening with property investments in the middle there. My eventual goal is to have the option of selling my properties in the final years of the plan if, as I suspect, government meddling makes it more and more tiresome to operate as a landlord.

In the final years, property is gradually sold off rather than all at once, to take full advantage of the annual capital gains allowance. Rental income and capital growth go down as a result.

You get stung by capital gains tax on rental property, because HMRC fail to account for inflation. So even if you had only made an inflationary gain each year – and hence nothing in real terms – you’d still be taxed as though you had made a big gain when you eventually sell the property.

Cash is funnelled from the sales into other assets, which has a net zero overall impact on the value of the portfolio since I’m already accruing for capital gains tax. In the earlier years, I’m able to take cash out of the properties by remortgaging them. In one case, I plan to remortgage my own home and injecting that cash as fresh money into the Freedom Fund.

I don’t mind having a slightly higher mortgage as a result, if it means I can buy investments that pay me an annual double-digit rate of return.

We don’t include the values of our own homes in our Freedom Funds, as they can’t be spent. But if you extract cash from your home in a remortgage, that cash is fair game to be invested and then included here.

So, where’s that cash from the property equity release going? It’s primarily going into ETFs in my Stocks & Shares ISAs, and into Spread Betting.

For a full introduction to our method of doing spread betting check out this article/video next, where we explain what we’ve been doing to make killer returns!

Here’s why this portfolio grows so quickly over the next 10 years, from August 2021 to August 2031:

The light and dark green segments are the leveraged assets; light green for rental properties, and dark green for spread betting (which is leveraged stock, bond and gold market indexes). As I sell off the properties, they are being replaced with spread betting investments. This keeps leverage in the portfolio throughout.

The leverage, and hence the risk, is intentionally decreased though as a proportion of the overall portfolio over the period. The unleveraged ISAs and SIPPs right now make up 31% of the portfolio, while by the end they make up 45%.

The leveraged assets start out at 4x leverage as they are almost all mortgaged properties with 25% deposits, but leverage falls to 3x by the end – our current preference for spread betting.

In practice, I will be reducing my leverage much further than this towards the end if I’m doing well – volatility should ideally be reduced when you reach your goals. I almost certainly will reduce my leveraged assets to around 1.5x or less when the portfolio hits £1m, making the overall portfolio around just 1.25x leveraged.

As well as reducing leverage as I go, I’m also reducing effort. By the end, all my portfolio will be manageable from a web browser, at just a few clicks per month – no more tenants; no more calls from agents; no more mortgages to manage.

Of course, I always do have the option to just keep the properties, but I don’t need to.

Andy’s (MU co-founder) plans are similar to mine, but he’s using spread betting from the outset as his source of leverage, instead of investment property. The returns are expected to be not too dissimilar, but could be considered higher risk, since there’s a chance the debt could be called in if it’s managed poorly – in what’s known as a margin call. Crucially though, it’s almost completely passive to manage.

How Pensions (SIPPs) and ISAs Slot Into This Plan

I’ll still be building up my Stocks & Shares ISAs – the holdings won’t be leveraged but they’ll be safe. No matter how much the market falls (outside of all-out nuclear war), I will always own these positions as the market can’t fall to zero. Despite the magic touch that leverage provides, an ISA is still my favourite tool for growing and holding wealth for this reason.

The ISA is the reliable base layer of the portfolio, that I will feed with cash from elsewhere in the portfolio until it matches the size of the leveraged assets (see right-hand side of bar chart above).

Our SIPPs hold all the pension money from our previous jobs, and neither of us are touching our SIPPs for now, until it becomes advantageous in the future to filter money from our business holdings through a pension.

For our age group, the likely age at which we could access our private pensions is 58. As we’re planning to retire a decade or two before this, the question must be asked whether we should be including SIPPs in our Freedom Funds at all.

In both our cases, it can – if you’re young, a pension should only be considered part of your current wealth if it is a relatively small-to-medium sized chunk of your overall net worth, such that you have other pots to draw an income from between now and retirement.

If a pension is where you’re holding most of your wealth, it can’t help you much while you’re young!

Also see this article for a much more in-depth analysis of how Stocks & Shares ISAs work alongside pensions to allow you to retire at any age.

Will you speed up your own investment journey to riches, or are you content to wait it out? Join the conversation in the comments below!

Written by Ben


Featured image credit: Andrey_Popov/

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

How We’re Making 33% Annual Returns With Long-Term Spread Betting

Since 1978 – that’s 43 years – US stocks have returned roughly 12% per year. Not bad, but future returns are expected to be lower than this – maybe around 8%, maybe less. We here at Money Unshackled are not content with measly returns. No way! And if you’re like us you’re going to love what we’ve got in store for you today.

**EDIT 29th Sep 2021: The Step-By-Step Guide for putting the below into practise is now live! Read it here.

In this post we’re going to show you what we’re doing to make huge returns in the stock market with minimal effort. Our strategy is to take index investing to the next level, by investing in a portfolio of index futures using spread betting.

Don’t worry if you’ve no idea what any of that means, we’ll explain all the key things over the next few minutes.

Seriously, stick with us on this one – this is a lifechanging long-term investing strategy that might sound complicated at first, but give it a chance and it might just make you a millionaire in a fraction of the time that normal index investing can. Let’s check it out…

If spread betting isn’t for you but you still want to invest in indexes the good old-fashioned way, check out our handpicked favourite investment platforms here.

Alternatively Watch The YouTube Video > > >

Why We Started Spread Betting

If you want to get rich in the stock market you only have a few different levers you can pull:

(1) Wait longer for compounding to work its magic – This is not an option for us as we want financial freedom now. Retirement at old age is unacceptable to us and probably for you as well.

(2) Cut back and invest more – Again, not something we’re prepared do any further. We’ve already got well streamlined budgets and don’t waste that much money anyway.

(3) Earn more money elsewhere so you can invest more – Yes, we’re trying to do that within reason but achieving this is obviously not easy and we refuse to work all hours under the sun.

And (4) Earn a higher Return on Investment (ROI) – Most people cannot beat the market by stock picking, and so aiming to track the market using index funds is likely to give us the highest return we can get. We’re already doing this.

However, if we were to use leverage, we could amplify our ROI. The problem is that in the UK you can’t easily borrow money to invest in the stock market. But borrowing to buy property is both expected and relatively accessible for all. Whenever leverage is mentioned in the context of the stock market, it is almost always talked about negatively and you’ll be discouraged from using it. We think the naysayers are wrong!

Here in the UK the main ways to invest in stocks with leverage is with CFDs and spread betting but you only have to visit a brokers site and you’ll see that around 70% of investors lose money. Not very favourable odds!

The main reason people get burnt using leverage is because they have no idea what they’re doing and get too greedy. Done properly though there are big profits to be made!

And better still, spread betting is exempt from both capital gains tax and stamp duty. CFD’s are similar but any gains are however subject to capital gains tax. Therefore, we see no reason why anybody in the UK would trade CFDs when spread betting is available.

What Is Spread Betting?

Spread betting is a popular derivative product you can use to speculate on financial markets – such as forex, indexes, commodities, or shares – without taking ownership of the underlying asset. Instead, you’d be placing a bet on whether you think the price will rise or fall.

Spread betting is generally referred to as a short-term way to trade but if you look beneath the surface, it provides an excellent means for long-term investing. This is literally a hidden gem as nobody is talking about spread betting in this way.

With normal investing you buy a set number of shares, but with spread betting you bet an amount per point. Say you bet £10 per point on the S&P 500, and it was currently at 4000. If the index rose to 4400 it has gained 400 points. You bet £10 per point, so your profit would be £4,000.

When spread betting it’s really important that you understand the notional value or exposure of that investment. In this example we may have placed a bet of £10 per point but the value of our investment was £40,000 (£10 x 4000 index value). If we’d started with £40,000 cash in the platform, our £4,000 profit would be a 10% ROI.

Other than its tax-efficient status, spread betting can be used to invest using leverage, which means you only need to deposit cash equal to a small percentage of the full value of the position. Each platform and instrument will have different margin requirements but typically for the S&P 500 it is 5%. This means that you only have to deposit 5% of the value of the open position, allowing you to trade with 20x leverage.

In our example, the notional value was £40,000, so the minimum deposit is just £2,000. So, we could have used leverage to get the same £4,000 profit as before but from just a £2,000 investment – a 200% return.

In practice, for what we’re doing, we won’t be using anything like this level of leverage. Using this amount will almost certainly put you on the fast path to being broke, as any fall in the index value will put you below the margin requirement – leading to a margin call.

A margin call is the term for when the equity on your account – the total capital you have deposited plus or minus any profits or losses – drops below your margin requirement. You will either have to deposit more cash, or risk your positions being automatically closed.

One fantastic feature of spread betting is that there is no exchange rate risk. With a normal investment in an S&P 500 ETF, it could go up 10% from 4000 to 4400 but if the exchange rate moved against you by 11% you would still lose money. Not so with spread betting.

It doesn’t matter because you are placing a bet per point. Regardless of what exchange rates have done, the index has gone up 400 points. Hopefully that makes sense but if not just trust us.

The Money Unshackled Spread Betting Portfolio

At first, we considered solely investing in the S&P 500 index, but volatility and investing on margin do not play nicely together.

Fig.1: Portfolio returns backtest

We ran some back tests for the past 43 years. The max drawdown was 51%. Ouch! A max drawdown is the maximum observed loss from a peak to a trough, before a new peak is attained.

Assuming that history will repeat, a huge drawdown like this means that we can’t use much leverage – not even 2x before getting wiped out. Even when we don’t get wiped out it will be a hell of a roller coaster – one we could do without!

So, we had to do something that was even surprising to us – we have built a portfolio of stocks, gold and bonds, that significantly reduce volatility and the maximum drawdown.

The target portfolio is 60% S&P 500, 30% long-term US treasury bonds, and 10% gold. A traditional 60% stocks / 40% bonds portfolio would historically have provided a similar return, so it’s not a bad alternative.

However, with all the money printing that’s going on and enormous national debts that countries are drowning in we personally think the portfolio will benefit from a touch of gold.

The stocks, bonds and gold portfolio has a max drawdown of just less than 27%, which means we could use 3x leverage and never have to worry about a margin call: 3 x 27% gives an 81% worst case historical fall, which keeps us safely out of the danger zone, which is around 95%.

Let’s stop there for one moment to remind everyone that this is based on 43 years of data. Future results could be worse than this, and if you copy what we’re doing you do so at your own risk!!!

If that concerned you, one way to reduce risk significantly is of course to just drop that 3x leverage to 2.5x, or 2x, or even less, but potential returns would fall too. Over time and as we age, we see ourselves reducing our use of leverage to less than 2.

The 100% S&P 500 portfolio does have the best compound annual growth rate of just under 12% but our more balanced portfolios have compound annual growth rates of around 11% but crucially with less risk.

The Sharpe ratio is a genius metric that shows the additional amount of return that an investor receives per unit of risk. As you can see in the table, the balanced portfolios have much better Sharpe ratios.

If history does repeat itself this 3x leveraged portfolio would return around 33% less any costs, which on our portfolio are negligible. If we invested £10k over 10 years earning 33% our portfolio would be worth £173k. Or unleveraged, earning just 11% the portfolio would be worth just £28k – a massive £145k difference!

That’s why we’re so keen to increase our return on investment. A good return can literally be life changing!

How To Start Investing

The mechanics of spread betting are ridiculously complicated and if you don’t have solid investing experience and the patience to learn you should avoid doing this. Period! With that said, I picked it up within about a week of making my first deposit. As with anything I find it best to learn by doing.

The first thing you will want to do is choose a spread betting platform. All the comparison guides online are of barely any use because they’re all geared towards short-term speculating and often compare platforms based on factors that aren’t relevant to this long-term investing strategy.

We will be investing in Financial Futures and two platforms we have found to be excellent for this purpose are CMC Markets and IG. I have used both and find them great for what we need. Their spreads on the instruments we’re buying are wafer-thin, which means it will barely cost anything at all.

We have found IG to be ever so slightly easier for beginners, but CMC Markets is our preferred choice as they give us more leverage on US treasuries. This is handy as it gives us a little more beathing space, so we can better avoid a margin call if the market tanked.

With typical spread betting strategies, you don’t need much money to get started, but to follow our long-term investment strategy you will need at least £2-3 grand.

Fig.2: Minimum portfolio on day of writing

Unfortunately, each instrument has quite a high minimum bet size and we’re trying to build a diversified portfolio. So, to invest in each of our assets with the right allocation we end up with a portfolio with a notional value of around £9.0k. At 3x leverage we need to deposit a third of that – so £3k.

This particular post is not meant to be a tutorial in how to actually place your spread bets but we’re working on a step-by-step guide, so keep your eyes peeled for that.

How To Manage The Leverage Properly

As we touched on earlier, we suspect that most people lose money spread betting because they don’t understand or underestimate how even a small swing in the stock market can wipe out a portfolio when it’s leveraged.

We’ve demonstrated that with our strategy, 3x leverage is about the most that should be used when making that initial investment. However, as the portfolio grows in value your leverage is reduced, and similarly if the portfolio falls in value your leverage is increased.

For example, say the notional value of your portfolio is £9,000 and you originally deposited £3,000, and so were 3x leveraged. If the portfolio doubled in value from £9k to £18k your equity is now worth £12k (£3k + £9k profit). Now your portfolio is only 1.5x leveraged (£18k/£12k).

Instead, if the portfolio had fallen by 20% from £9k to £7.2k which is a loss of £1.8k, your equity would now only be worth £1.2k (£3k minus a £1.8k loss). Now your portfolio is 6x leveraged (£7.2k/£1.2k).

Each time we invest, new contributions will be at 3x leverage. As the portfolio grows and our leverage falls, we will reset the leverage back towards 3x by investing some of the gains.

However, if and when the portfolio falls in value, we will not reset the leverage. This means that at certain times we might find ourselves at 5x, 10x or even 15x leveraged, while we wait for the market to recover and spring us back to our starting leverage. That’s the plan anyway. My heart will be in my mouth I’m sure if this happens.

Invest In Index Futures Contracts – Not Daily Rolling Cash Bets

When investing in an index via a spread betting platform you will typically have the choice between two different products: a daily rolling cash bet or a futures contract. In general, rolling daily cash bets tend to be used by traders looking for short term positions, and the futures contracts by those looking to take a longer-term view.

With the daily cash bets, you have to pay a financing charge for holding it overnight. Most spread betting platforms charge around 2.5%+LIBOR. However, for what we’re doing paying this is unnecessary. Long-term investors should use futures contracts because you don’t pay overnight charges with them.

Instead, futures contracts have an interest charge baked into the price but crucially it’s incredibly cheap and far cheaper than what you could get yourself anywhere else such as a loan. The embedded interest charge is known as the implied interest rate and will be close to the risk-free rate. The risk-free rate is assumed to be equal to the interest rate paid on a three-month government Treasury bill, which is currently near 0%.

If you’re new to Futures contracts this is probably super confusing. There’s no way we can explain everything you might want to know in this post, so we recommend doing some of the free courses on A good place to start would be their Introduction to Futures course, linked to here.

One thing you do need to understand about futures is they have expiry dates – normally quarterly. As they approach expiry, we’ll be automatically rolling them over to the next contract, and your spread betting platform can do this for you automatically.

Do You Receive Dividends?

When you invest in futures you won’t physically receive a dividend payment, but the expected dividend is factored into the price. Because you don’t receive the dividend the futures are priced under the current index price.

As the futures contract gets closer to the expiry date, the value of the index and the futures contract converge on one another.

We hope you’ve found this post useful and hopefully we’ve clearly demonstrated how we’re making bank using spread betting. If there’s anything that you want us to expand on let us know down in the comments and we’ll do our best to help.

What do you think about investing with leverage? Join the conversation in the comments below.

Written by Andy


Featured image credit:

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

6 CRITICAL Mistakes You’re Making With Your Stocks & Shares ISA

So you’ve got an Stocks & Shares ISA or are thinking of opening one. It can be tempting to just crack on, build a portfolio of reasonable looking stocks and funds, and not put too much thought into what’s going on behind the scenes.

Did you know your ISA investments are probably still paying over the odds in tax? That’s because your investment choices play a large role in how much tax you ultimately pay.

You’re probably also paying over the odds in fees – particularly FX fees. Again, this can be easily avoided if you know how.

People are mismanaging their ISAs in all sorts of ways, including misunderstanding the £20k limit and even cutting their potential portfolio size in half due to dividend complacency.

In this article we’re looking at 6 common but critical mistakes people are making with their Stocks & Shares ISAs, along with what to do to avoid them!

If you’re looking for a new ISA provider, a great option for hands-off investors is to open an ISA with Nutmeg. Just deposit your money and Nutmeg does the rest for you – no investing knowledge required.

New customers who use this offer link will also get the first 6 months with ZERO management fees. If you’d rather manage your investments yourself, check out our hand-picked range of ‘do-it-yourself’ Stocks & Shares ISAs here.

Alternatively Watch The YouTube Video > > >

#1 – You Still Have To Pay Some Taxes

Let’s kick off with the elephant in the room; tax. It’s what ISAs are for, to make your money invisible to HMRC. But ISAs do not make your investments completely tax free. They do protect you from the main ones of capital gains tax and dividend income tax, so are important to have, BUT there are some sneaky taxes that are still able to creep in.

If you make yourself aware of these, then you can make better investing decisions about what you’re buying within your ISA.

If you’re buying UK shares you will be stung by a 0.5% stamp duty tax with every purchase. This is a transaction tax, so one way to limit the impact of this is to hold your shares for the long-term, instead of trading in and out of your position. If you’re buying and selling frequently, each time you BUY it’s another 0.5% hit to your returns. If you’re only making, say, 8% growth in a year, that’s a significant tax.

Another way around stamp duty is to buy some international stocks instead. But these attract other taxes, such as the dividend withholding tax.

Many countries including the US and most European countries impose this tax on your dividends, which is taken before you’ve even received them.

We use synthetic ETFs like the Invesco S&P 500 ETF (SPXP) to avoid US dividend withholding taxes, and if you’re buying US stocks directly these don’t attract stamp duty either. US stocks still attract sales taxes, the largest being the Section 31 Fee or SEC fee, but you might say this is negligible at just 0.00051%.

But all of the companies you are investing in are paying corporation tax. So, you can’t avoid all tax – you can just try to make decisions that limit it. Remember, tax is just ONE element of portfolio planning, as part of your overall consideration of Total Return.

#2 – A Global Approach Might Mean High Foreign Exchange (FX) Fees

We always say to take a global approach to investing, but there are ways to do this which have no FX fees, and other ways which can have quite nasty FX fees.

What you probably shouldn’t be doing is frequently trading international stocks, such as US stocks, in your ISA.

Freetrade charges a 0.45% FX fee on stocks listed in foreign currency, i.e. not in pounds. Hargreaves Lansdown charges 1%. Interactive Investor charges 1.5%. Trading 212 charges 0.15%.

For the full listing of how much each of the most popular platforms charge for FX and all other fees, follow the link to the table on the Best Investment Platforms page.

The way we get around FX fees is to buy the bulk of our portfolios in ETFs, which we make sure are listed in pounds. Regardless of an ETF’s quoted currency, the underlying stocks in it can be from anywhere; for instance, S&P 500 ETFs listed in pounds invest in the top 500 US companies without you being charged an FX fee.

Note, we’re currently only talking about FX fees – you’re still exposed to exchange rate risk.

If you want to frequently buy and sell US stocks, you shouldn’t have to change your behaviour just because of silly FX fees. The answer might be to use a specialist app like Stake, which is designed to trade US stocks from the UK and solves the FX problem.

With Stake, your pounds are converted to dollars once at the point that you deposit cash into the app, rather than every time you make a trade.

This should save you a fortune in FX fees if you trade frequently. The app has no trading fees either, so you can buy and sell US stocks to your heart’s content.

Stake have a sign up offer for those interested, where new users will be given a free stock worth up to $150 when you use this offer link.

Stake doesn’t offer ISAs, so you can have a Stake account for trading US stocks, as well as an ISA elsewhere for your other investments. Just make sure the FX benefit outweighs any possible tax hit.

#3 – Don’t Fall Foul Of Capital Gains Tax (CGT)

It’s possible that you also hold investments outside of your ISA. These will be liable for capital gains tax if they exceed the annual allowance, currently £12,300. There is a clever tax strategy called Bed & ISA which means you can use your capital gains allowance on non-ISA investments without having to sit out of the market for 30 days.

The strategy involves selling your non-ISA investments, and buying the same investments again but within your ISA. Normally you’d have to wait 30 days before you could buy the investment back, otherwise it doesn’t count as an official sale in the eyes of HMRC, but using an ISA dodges this rule.

Investors with a large position in a stock or fund might choose to sell part of it to realise gains up to the capital gains allowance limit, so they are benefitting from their annual tax-free allowance.

If you don’t use the CGT allowance, you lose it, and you might otherwise end up being stuck with a larger gain in the future that’s above the tax-free limit.

#4 – Don’t Stop At £20k

ISAs have a £20,000 deposit limit each tax year, but there’s no reason to let this number dictate your investment goals. There are other ways to avoid paying tax on your investments even after you’ve hit the £20k limit.

The first is to ensure you are using your whole family’s allowances. This includes your spouse, and maybe your kids.

Your spouse also has a £20,000 allowance, and each kid gets £9,000. An average 2 child household therefore qualifies for £58,000 a year of ISA allowances.

Beyond this, each adult gets a £12,300 capital gains allowance and just a £2,000 dividend allowance. Because the dividend allowance is much smaller, it makes sense to put all of your high-dividend stocks and funds in the ISA and allow your growth stocks to be the ones that fall outside of your ISA limit.

Assuming annual growth of 8% on your non-ISA investments, you’d need over £150k before it even became an issue, or £300k as a couple.

Beyond THIS, tax can be avoided on investments by using spread betting, which can be used like an unlimited ISA for long-term investing if you know what you’re doing.

So an ISA is only one tool in your tax-fighting arsenal. But do make sure you are using your full £20k allowance if you can – if you don’t use it each year, it’s gone.

#5 – Don’t Follow The Herd: Portfolio Balance Is Everything

All the free trading apps are geared towards individual stocks. So is the media – look at any finance news and it will be about how Apple has done this, or how Gamestop has done that.

Rarely will you hear that the MSCI World Total Return Index has climbed by 26% in the last year, even though it has.

You could be investing in an ETF that tracks this index, or a collection of ETFs like the offering on Nutmeg which tracks the world in a similar way, instead of messing around trying to beat the market by building a portfolio of trendy stocks.

Make sure your ISA investment platform offers the range of assets that you need. Have you considered if you want to invest in REITs, which hold commercial property? Some ISAs offer these, others don’t.

Or investment trusts like Scottish Mortgage, which have an excellent history of outperformance – again, some ISAs offers these, and some don’t.

Do you care about actively managed funds? You won’t find these on the free trading apps.

Whatever you invest in, you need to consider how everything in the ISA comes together to create a balance of risk, return, diversification and perhaps a little fun.

You can be too cautious by over-investing in bonds, just because many investing gurus say you should have a load in your portfolio. But in this age of super low interest rates should bonds really be in your portfolio? Is the 60/40 portfolio outdated?

Likewise, you can be too risky if you only invest in individual stocks, or if your stocks are all in similar industries.

Remember your Pokemon training: a team of Fire types is useless if you come up against a Blastoise. And a portfolio of tech stocks is useless if tech crashes.

“Don’t follow the herd” also means “switch off the news”. Making investment decisions around events like Brexit and Covid might be too short-term, unless you’re picking stocks with the intention of making short term gains.

#6 – Don’t Let Cash Fester In Your Account

Some investors might intentionally choose to hold some cash in their ISA to max out their £20k allowance, even if they are not yet ready to invest it. That’s not what we’re talking about here. That’s a smart strategy.

What you should avoid is allowing your ISA’s dividends to remain stagnating as cash while you’re trying to grow your wealth.

Many ISAs will have the option to reinvest your dividends automatically into the markets. Robo investors like Nutmeg will just do it for you as part of the service.

Reinvesting all dividends will let compounding get to work for you properly. You’re really shooting yourself in the foot if you’re withdrawing your dividends before you’re ready to live off them, as it massively hinders growth.

The difference between an 8% return with reinvested dividends and a 6% return without them is enormous over 30 years. Starting with £100k, it’s the difference between a £600k final portfolio and a £1.1m portfolio.

Are you using your ISA to its full potential? How much will you be paying into it this ISA year? Join the conversation in the comments below!

Written by Ben


Features image credit: Zastolskiy Victor/

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

You Won’t Believe What New Investors Are Doing!

Hi guys, here at Money Unshackled we love investor surveys. We’ll take any chance we get to delve into the mindsets and behaviours of fellow investors, and Freetrade recently carried out just such a survey. In this video we’re looking at the responses from over 2,000 investors.

We’re particularly interested in this set of data because, as we’ll soon show you, Freetrade’s userbase are similar in age to us and our YouTube audience.

Also, this is hot-off-the-press information and includes the opinions of both experienced and first-time investors – many of whom have had incredibly good fortune to start investing since those March 2020 Covid lows. Without further ado, let’s check it out…

First, we want to give a big shout out to Freetrade who carried out the survey and sponsored the video version of this post. Freetrade doesn’t charge any commissions when you trade, and has thousands of stocks and ETFs available, including the FTSE 100, S&P 500, and so many more.

Sign up from as little as £2 using this special link and you’ll be given a free share worth up to £200!

Remember, as with all investments, your capital is at risk – the value of your portfolio can go down as well as up and you may get back less than what you invest.

Alternatively Watch The YouTube Video > > >

First-Time Investors Or Experienced?

Until the dawn of commission-free trading apps like Freetrade investing was seen as an activity that was mostly for the wealthy. It was too cost prohibitive to begin building a diversified portfolio of stocks, and it astounds us that in the UK the old heritage platforms still continue to stick to their outdated business model of charging on a per-trade basis.

So, with this said it comes as no surprise that Freetrade has amassed an army of 800,000 customers, up from 600,000 in March 2021. This is phenomenal growth for a company that only launched its first app at the end of 2018.

According to the respondents in the survey, a whopping 59% are first-time investors and have joined Freetrade to kick off their investing journey. Just 41% are joining Freetrade with existing experience.

When you think about it this statistic is insanely high. With a typical investor likely to be investing for decades throughout their life, in normal times you would expect these percentages to be the opposite and overwhelmingly in favour of those with previous experience.

Our hunch is that while the old heritage platforms continue to grow their users slowly, the commission-free apps are hoovering up the new generation of investors in their droves. Users of the heritage platforms may be stuck in their ways.

UK Retail Investors – Who Are They?

Here are the age ranges and the overall gender split. It comes as no surprise to us that men make up the vast majority of investors, consisting of over 76% vs 23% for women.

Freetrade state that the reason fewer women are investing is partially caused by the inequalities in pay between men and women. We disagree!

Investing apps like Freetrade have all but eliminated fees, so if the take-up of investing still remains low amongst women, then we suspect it is something more innate than just a difference in salaries. Freetrade is proof that anyone can invest from as little as £2, without fees. So why should size of salary cause a significant difference?

If we look at a study like this one of YouTube video categories it is clear that some subjects are favoured by either men or women. Men and women simply have different interests.

Anecdotally, out in the real world we meet loads of guys who have a keen interest in talking about the stock market, but personally have found women as a whole are far less interested.

Next, on to age. 61% of the surveyed users are under 35 years old, with 40% being between 26 and 35 years old. This is probably to be expected and comes as no surprise to us. That age group have started to make some good money from their jobs and so have more disposable income to invest. They are probably also keener to invest through an app than perhaps older generations who might prefer a web-based interface.

One interesting point was the living situation of the respondents. 45% of respondents are owners of their property, 24% rent, and 20% live with parents.

Considering the young ages of Freetrade’s investors and the fact that home ownership is known to be shrinking in that demographic, we’re surprised that almost half of the survey respondents own their own home.

Unfortunately, the survey results do not mention investors’ employment earnings. But if 45% own their home we suspect that many of their customers are doing rather well financially.

Freetrade’s mission is to get everyone investing and there’s no doubt they are doing a great job but based on this statistic it would seem they might be helping more middle earners than those right at the bottom. Perhaps the message that anyone can invest from as little as just £2 needs more time to filter through.

Key Reasons Why UK Investors Start Investing

45% want long-term financial stability and the key reason was wanting peace of mind knowing they were building their savings, and another 30% wanted to retire early. Respondents were able to choose more than one answer, so there will be some crossover.

We don’t think there is any better reason than these to start investing. It’s not a coincidence that wealthy people take deliberate action to grow wealth and end up wealthy.

In 20 years or so, their peers who didn’t invest will no doubt claim that these investors got lucky or have some excuse why they didn’t get started themselves. But the reality is these investors took deliberate action today to invest to take care of their futures!

A worrying number of people – 19% – said they invested because they were bored in lockdown.

These sound like the sort of people who see investing as akin to gambling and are looking for a thrill. We can imagine that these guys are probably the sort investing in meme stocks and looking for that quick win.

The markets have been very kind to all investors since the Covid crash and delivered unprecedented growth. Therefore, even those who have had no idea what they’re doing have come out the other side smelling of roses.

Warren Buffett famously said, “Only when the tide goes out do you discover who’s been swimming naked.”

What Are The Main Goals For UK Retail Investors

49% want more disposable income to support their lifestyle. This is a great reason to invest but we reckon that many people have unrealistic expectations. Building up a portfolio that supports a lifestyle, or at least partially, takes a lot of money and a lot of time. When we say this, we absolutely don’t want to deter people from investing because every little bit put aside helps.

The 4% rule gives you an idea of what you can withdraw each year without running down your pot. So, for every £10,000 invested you could withdraw £400 per year. On its own this won’t change your life but build that investment pot over time and that 4% can you set you free.

36% said they were investing for fun and had no goals. To be fair we also partially invest for fun. Who doesn’t like making money? 34% said they were investing for a property. We’re not sure this is a good idea unless the property purchase was many, many years in the future or they don’t mind waiting longer if the stock market fell. Stock market investing is way too volatile for money that is needed in the short-term.

How Do DIY Investors Research What To Invest In?

46% spend a couple of days researching an investment before pulling the trigger, 32% spend less than a day, 19% spend more than a week, and 3% spend months researching.

This is probably a little simplistic because if we look at our own behaviours, we spend no time thinking about investing when its business as usual. For instance, our monthly investments into ETFs take no consideration time whatsoever. We know exactly what we’re buying, when we’re buying, and how much we’re buying!

On the other hand, when it’s a new investment strategy, like when we first started investing in synthetic ETFs, or using leverage to enhance returns, it took us weeks of detailed research.

46% were investing with Freetrade at least once per month. Most people are paid their wages monthly, so we would have assumed this was the most popular response. 22% said once every few months.

16% said they have only invested once or twice. These don’t sound like the type of people who are prioritising their wealth building. 14% said they invest at least once per week. We don’t think many people can successfully day trade, so long-term we’d expect this group of traders to lose money.

Here are the research channels being used and the percentage of people who use each channel. Unsurprisingly, Google is the most popular with 78% of people using it to get their information. Next up is the financial media at 48%.

Generally, the financial media can be a great source of information. But you also need to be wary of sensationalist and fear mongering stories. If you believed all the hype in the media, you would be selling everything due to an imminent crash caused by future inflation, a tech bubble, and tensions between the US and China. The next day you would be throwing everything at GameStop as it’s going to the moon.

Social media comes in at 40%. It’s interesting that they’ve grouped Reddit with useless social media sites Twitter and Tiktok. Reddit may indeed have idiotic subreddits but there’s also some brilliant ones, so we won’t tar them all with the same brush.

Data services and research services come in at 36% and 23% respectively. Data services includes sites like Yahoo! Finance and Stockopedia, and research services includes the likes of Seeking Alpha. Every investor who is investing in stocks should be using these kinds of sites. The sheer amount of quality data and research that you get is incredible and we highly recommend them.

And finally, YouTube comes in at just 3.5%. Shocking! As we primarily deliver our content through YouTube our audience are part of this elite group and obviously know where the best content is!

A Senior Analyst at Freetrade said, “Social media can make the headlines for the strangest of reasons but dismissing these platforms means ignoring the truly valuable educational content young people are finding on them.” He must watch Money Unshackled!

What Do Retail Investors Have In Their Portfolios?

We’ve saved the best until last. 95% said they invest in individual companies and only 50% own ETFs. While this doesn’t surprise us, we don’t think most investors should be buying stocks directly. Or at least they should limit it to a small part of their overall portfolio, which is what we do. We’re not told what their portfolio allocations are so there’s no way of knowing but my gut feeling is these investors are too exposed to some of the so-called trendy stocks.

We have long banged the drum that ETFs should make up the core of every investor’s portfolio. If you watch our videos, you probably own ETFs yourself. A shocking number of people – 45% – own Crypto. Freetrade doesn’t offer crypto, so presumably this is bought elsewhere, but this is a very speculative asset that most normal people probably shouldn’t own due to the real risk of losing a tonne of money.

If you do invest in Crypto it’s probably best to limit your exposure to a small part of your overall portfolio. Also, this volatile asset contradicts the main goals for retail investors that we looked at earlier. 34% were saving towards a property purchase and 24% to help raise a family.

As always, we hope you found this post interesting and don’t forget to go grab your free share on Freetrade using this link.

Where do you do your investing research and why? Join the conversation in the comments below.

Written by Andy

Featured image credit: Prostock-studio/

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

Earn 7.5% Interest From Crypto, And 5 Other Crypto Tricks!

One of the biggest issues with cryptocurrency investments like Bitcoin and Ethereum is that they don’t pay you a dividend or interest.

Dividends and interest are good to have – they are a regular payment of cash into your pocket, separate from the ups and downs of often volatile market prices.

Stocks and shares get the dual benefits of capital growth from increasing market prices and dividends from company profits. Property is similar, with gains made from increasing prices and cash flow from rental profits.

But crypto only has the capital growth side – the lack of regular cash flow being an accepted trade-off for their perceived extreme capital growth potential.

But it doesn’t have to be this way. The crypto market is constantly evolving, and recent innovations have been tossing up solutions to solve the lack of income problem.

There are now multiple tools to get an income out of your crypto. In this article we’ll be exploring several tricks and money hacks that do just that. Let’s check it out!

Alternatively Watch The YouTube Video > > >

Make Your Crypto Pay You Interest

With a current yield of 4% on Bitcoin and Ethereum, and 7.5% on Tether, BlockFi is one of the most competitive cryptocurrency interest accounts on the market.

BlockFi is a crypto platform and wallet which effectively pays you a dividend on your crypto.

It’s an attractive option for investors with a beginner-to-moderate level of crypto investing experience, as once the money is on the platform, all you need to do is leave it there.

I’ve recently dropped £500 worth of Bitcoin into BlockFi to test it, and have been making a steady 4% on it. For the best way to walk along with us, see the video version of this article above.

At the same time, I’ve been riding the market upwards – that’s right, your crypto is still subject to market price changes, so you get all the benefits and downsides of a normal crypto investment from the market price movements.

There is a cost to pay for having your cake and eating it too, but the cost isn’t in fees – it’s a free service, other than the usual blockchain network transfer fees.

The cost you pay is in accepting a higher level of risk, above and beyond that of normal crypto investing. That’s because you have the usual risk of owning crypto, combined with the additional risk of loss from holding it in a crypto interest platform. Let us explain.

The interest that you get paid on your crypto comes from lending your crypto to institutional counterparties – big players in the fintech industry like investment trusts and market makers who need quick and easy short-term access to crypto.

When you deposit your coins into your BlockFi wallet, they join a pool of such coins that BlockFi lends out en-masse.

In return, these institutions pay BlockFi a rate of interest, and BlockFi passes most of that on to you, after taking a slice for themselves. That’s how BlockFi makes their money, and why you are not charged a platform fee.

So how safe is it? There are 3 main things to consider here.

[1] It’s an online wallet, much like any other, so has the usual risks involved with holding your crypto online, rather than on an offline hardware wallet. But BlockFi is currently running a clean sheet, with no instances of client funds being hacked.

[2] Crypto is not covered by the Financial Services Compensation Scheme. This applies to all the methods in this video. But, BlockFi has a custodian, Gemini, who keeps the vast majority of BlockFi’s digital assets in cold storage and is insured by Aon. Gemini is a licensed custodian, regulated by the New York State Department of Financial Services, and audited by Deloitte.

[3] BlockFi has the additional risk of lending your money out to those financial institutions. To address this risk, BlockFi takes a huge amount of collateral from them and can demand the money back at a moment’s notice, known as a margin call. A loan of $1m of Bitcoin to a firm may require $1.2m of collateral, which BlockFi would use to buy crypto on your behalf if the firm defaulted on their loan.

If you want to join me on BlockFi, this is what you need to do.

Deposits by cash into BlockFi are not straightforward, as it’s designed for American users, and cash deposits will attract an unspecified fee.

The easy workaround is to buy your crypto first on a market leading platform like Coinbase, and transfer it over to BlockFi.

That’s exactly what I did – I was charged £7 to buy £500 of Bitcoin, which is a 1.5% buying fee – pretty cheap compared to other crypto platforms. I then sent the coins to my wallet on BlockFi, and was charged £0.44. And that was it! My Bitcoin is still moving with the market, AND now also paying me an income.

We have sign up offers for both Coinbase AND BlockFi, each of which will give you $10 of Bitcoin when you buy or deposit $100 worth of any crypto. The links to these offers are here: Coinbase Offer / BlockFi Offer, or read more about both on the Offers page. You can even use the same $100 to bag both offers. Start with the Coinbase offer by depositing cash and buying crypto, then transfer your crypto over to BlockFi!

Other Cool Stuff You Can Do With Crypto To Make An Income

#1 – Earn A “Dividend” On Gold

This is another cool use of the BlockFi platform. Now you can make a dividend on gold!

There is a cryptocurrency called PAX Gold (PAXG), available on BlockFi. You would access it by trading another crypto for it, such as Bitcoin. Each PAX Gold coin is backed by one fine troy ounce of a real physical gold bar, stored in Brink’s vaults. If you own PAX Gold, you own the underlying physical gold.

But as this gold token is held on the BlockFi platform, it also pays you a dividend, currently 2%.

It’s worth noting that the yield rates on BlockFi are variable and can change monthly.

For instance, back in March 2021, an article on Forbes by the CEO of ADVFN claimed to be making a 5% yield on PAX Gold. So the current 2% is not set in stone by any means, and could easily move back up again.

#2 – Crypto Credit Cards

Crypto credit cards are another cutting edge innovation that are starting to become a reality, if slowly.

BlockFi have a crypto VISA credit card in the pipeline, but it looks like it will initially only be available to those in the US when it launches later this year. Hopefully over the next year or so this will become available internationally. Where the US fintech industry leads, the UK often swiftly follows.

This card offers 1.5% back in Bitcoin on every purchase, which gets added to your wallet, which also then starts earning you interest. Pretty sweet – if only it was available now!

And… Coinbase are also working on a crypto VISA credit card, which claims to offer up to 4% rewards paid in crypto. This is one to just keep an eye on for now.

#3 – Mining

Check out this article we wrote for a more in depth look at mining. We go into some detail about how it can work to make you a passive income of several hundred pounds a month.

In brief, to mine crypto, you don’t invest in crypto at all – rather, you buy computer equipment that you leave switched on all day and it creates cryptocurrency for you, by running equations via a site such as

Most cryptos come into existence by being mined in this way. If equations are run for long enough, a new coin will come into existence.

By pooling your computing power with a network of miners, you can group together to mine Bitcoin and other cryptos. You can either be paid just to provide the processing power to the network, or go it alone and keep the mined coins yourself.

#4 – Staking

Staking involves locking your cryptocurrencies in a smart contract to receive rewards for participating in the network ecosystem, which means you’re being paid for helping the blockchain system to function.

As smart contracts are automated, they will pay out as per the contract’s terms and conditions. There’s no person or company involved.

Staking is a means of verifying transactions on a blockchain. Investors deposit, or “stake,” cryptocurrency to confirm transactions. This makes it an innovative alternative to mining, which needs mass computing power and has an environmental impact.

Here’s a link to a Coinbase help center article explaining how you can start earning rewards by staking on Coinbase.

#5 – Yield Farming

Yield farming is another way of earning a return on crypto by putting it to productive use, but not one we’ve tried.

Also known as liquidity mining, it involves an investor moving their cryptocurrencies into a pool on compatible DeFi or Decentralised Finance platforms. One of the biggest is the Aave Protocol, Aave being the Finnish word for Ghost. Read more at the FAQ link here.

Economies of scale means your pooled coins can be lent out or otherwise put to work better than small amounts. In return for pooling your cryptocurrency you can earn tokens, interest, or rewards.

It can get very complex, is certainly not for beginners. Playing around with it with a few hundred pounds worth of crypto will probably result in a loss. By all means, learn by doing, but we’ve heard the strategy isn’t profitable with small amounts.

Should You Trust These Platforms With Your Money?

Don’t invest a significant portion of your money into any of these services until you understand what you’re doing and understand the risks.

Even then, many of these platforms are unregulated, and all of them are operating at the wild frontier of finance and technology.

With many of these methods, you’re basically taking a risky asset (crypto), and injecting it with an additional layer of risk to make it bleed out an income for you.

Even to use the BlockFi or Coinbase credit cards, it looks like you will need to own at least some crypto on their platforms.

Mining is by far the least risky crypto hack, as the only upfront investment is into computer technology that you keep in your home office. That’s something physical, with an easily understood resale value. You’re not buying crypto directly.

Of the interest producing methods, the one I put the most faith in is the BlockFi interest account – I’m actually using it myself, if only for a small portion of my overall portfolio.

As with anything to do with crypto, you just can’t know how safe it ultimately is. The whole crypto experiment could end in a bang if people lost confidence in it.

We’ve seen Bitcoin prices increase 1,000-fold – what’s to stop it from decreasing 1,000-fold?

Until it can be used properly as a currency, crypto will continue to be a largely speculative corner of the investing market – for good and bad.

What do you think? What do you think about crypto investing? Join the conversation in the comments below!

Written by Ben


Featured image credit: Jorge Puente Palacios/

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

Buy These 5 Super Stocks Now! (August 2021)

We’ve got 5 new Super Stocks to talk to you about today, which we’re adding to our Super Stocks portfolio that you can follow along with on the Trading 212 app.

About 6 months ago we built a portfolio of stocks which were automatically picked for us using Stockopedia’s Super Stock algorithm. We took the list of the best stocks and then applied a set of rules to whittle it down to the top 20 stocks.

It was an experimental portfolio to see if we can beat the market by building a diversified portfolio with no human judgement and without poring through financial data, without reading the financial news, and without spending any time stressing over whether to buy or sell.

In this video we’ll give a quick recap on the strategy, we’ll take a look at how the portfolio has performed so far, what stocks need to be dropped and which Super Stocks need to be added. We’re going to be looking at the new stocks in a little more detail, so even if you’re not taking part in the experiment yourself you can consider whether you want to add them to your own portfolio. Let’s check it out…

Follow the SuperStock Pie on Trading 212 here.

Get a free 14-day trial and 25% discount on the first year to Stockopedia here. All offers on the Offers page.

Alternatively Watch The YouTube Video > > >

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

The 5 Best Income & Cash Flow Investments

We’re living in an age of rock-bottom interest rates, where investors have largely given up on cash flow in favour of capital growth, both in the stock market and even in high-stakes new markets like crypto.

My investing journey started with the wise words of Robert Kiyosaki in his book Rich Dad Poor Dad, that “wealth is the measure of the cash flow from [your] asset column”.

For Rich Dad, physical cash in your hand from interest, dividends or rental income is real, and can pay the bills – while holding an asset purely for its growth potential is just placing your hopes in the market.

While we at Money Unshackled are happy to place our trust in the market to go up long-term, we also like at least part of our portfolios to be diversified amongst cash-flowing assets, for the stability and liquidity they provide.

But good quality income generating assets are getting harder and harder to come by. It used to be that you’d just buy some bonds, or even just whack your money in a high-interest savings account.

Now you need to be far more astute – there are still investments with good income returns to be found, but these usually come with a trade-off of higher risk. You need to do your homework to avoid putting your precious money to work for you in the wrong place.

Today we’ve pulled together our favourite collection of income generating, cash flowing investments that are best placed to provide you with a good, consistent income, without the need to take on excessive risk. Let’s check it out!

We’ll be mentioning a few ETFs in this article, and all those mentioned can be bought on Freetrade and Trading 212 – pick up free shares when you sign up to either using the links on the Offers Page.

Alternatively Watch The YouTube Video > > >

#1 – High-Yield Bond ETFs

First up, there’s bonds. Bonds are the stereotypical fixed-income investment class, known for paying out a steady rate of interest to the bond holder.

The problem is that since the financial crisis of 2008, bonds have been known for their incredibly low yields that have kept getting gradually worse.

The interest rate you get from bonds is linked quite closely to the interest rates set by central banks, which as we know is close to zero in the UK and elsewhere.

Not all bonds are alike though. One option is to buy Government Bonds, which from developed countries are super safe but currently pay out typically less than 1% in interest.

Another option is Inflation-Linked Bonds, which claim to offer some protection against inflation, but still may fail to even provide an above-inflation yield.

The option with the highest yields is High-Yield Corporate Bonds, such as what’s offered by the iShares Global High Yield Corp Bond ETF (GHYS). It’s a distributing GBP-hedged ETF with a yield of 3.9%, which is incredible for bonds in today’s climate, but it does have a high fee of 0.55%.

Alternatively, have a portfolio of bond ETFs built for you by opening a Managed Income account on InvestEngine. Choosing the Enhanced risk level will build you a portfolio that is 75% high-yield bonds and 25% dividend equities, with an estimated 4.1% income.

That’s on InvestEngine’s robo-investing area of the platform, meaning they do the portfolio building for you. They also offer growth portfolios that focus on equities. It’s the cheapest service on the market that we’ve seen, with a platform fee of just 0.25%.

But InvestEngine are now ALSO offering a Do-It-Yourself service which lets you trade ETFs for free! That’s NO dealing fees, NO account fees, NO FX fees… nothing! This could be the lowest priced investment platform there is for ETFs.

Use this link to join the InvestEngine platform and you’ll also get a £50 welcome bonus. Or read our full written review of InvestEngine here.

#2 – Peer To Peer Lending

The Peer-To-Peer Lending market is slowly coming back to life after the pandemic, during which most of them went into hiding and stopped new investors from signing up.

But Loanpad, my favourite P2P Lending platform, stayed active throughout and continued to deliver a great return. Loanpad works operationally like a savings account – the main difference being that this is an investment and therefore your capital is NOT risk-free. Unlike bonds, the value of your investment doesn’t change with the market.

Your money is lent out evenly across a portfolio of secured property loans. Your investment is secured against commercial property values, with 2 layers of protection between your money and the risk of capital loss from falling property values.

They offer an interest rate of 4% on a 60-day access account, with interest paid daily. If your income investments are supporting your day-to-day lifestyle, that daily payment of interest really comes into its own.

Also, if you invest £5,000 or more using the offer link here you’ll be given £50 cashback for free from these guys too.

#3 – Dividends… From Crypto!?

Cryptocurrencies like Bitcoin notoriously do NOT pay a dividend.

That’s because they are what’s known as an unproductive asset – they do not generate cash like a business or a loan does, which is how stocks, bonds and P2P lending are able to pay you an income.

But new technologies have been springing up which means that now, cryptos CAN pay you an income.

BlockFi is a bitcoin wallet that works like a P2P Lending site, in that it lends your money out to – in their words – “trusted institutional and corporate borrowers”.

Fig.1: Current interest rates on coins at BlockFi

Above are the interest rates on offer: at time of writing you could get a 5% rate of interest on your Bitcoin, and 9.3% for your Tether. Rates are variable from month to month.

We’re just scratching the surface of this innovation and will be sharing OUR experiences in a future article – stay tuned. Let us know in the comments below if you’ve found a better way to earn money on your crypto outside of normal price growth.

#4 – High-Yield Dividend Stocks and ETFs

The stock market isn’t just for growing wealth – it can also be a great source of income. We cover dividends all the time on this channel, and for our latest thoughts on the very best dividend stocks to own right now, check out this article next.

In it we build a portfolio of the best 20 dividend stocks on Trading 212 using a blend of data from stock picking tool Stockopedia and the Dividend Aristocrats global index. Here’s a link to the Trading 212 pie.

If you just wanted to invest using an ETF, one of our favourites is the SPDR S&P Global Dividend Aristocrats ETF (GBDV). All the stocks on the index have a 10-year track record of maintaining or increasing their dividend. The index dividend yield is currently 4.72%.

Another route to dividend success in the stock market is with investment trusts. Investment trusts have special rules that allow them to hold back cash, to be distributed out to shareholders in bad years – this helps to ensure a constant, steady flow of cash to the investor.

Fig.2: Dividend Hero investment trusts

The industry-standard investment trusts for income are those marked with the Dividend Heroes stamp of approval. The numbers are the number of years that each fund has consistently increased their dividends.

None of these trusts would want to risk their status as a member of this coveted league table by failing to provide you with an annual pay-rise, but you should check the basics like their dividend cover and revenue reserves first.

#5 – Cash-Flowing Property & REITs

You don’t need to part with tens of thousands of pounds to invest in property – you can do it on most investment platforms by investing in a type of fund called a REIT, which stands for Real Estate Investment Trust.

REITs are famous for paying dividends. With property as the underlying investments, there is always a lot of cash flowing in from property rents, and REITs have a rule that at least 90% of rental profits MUST be distributed out to shareholders.

We like to get a broad basket of properties in our REIT investments – the iShares Developed Markets Property Yield ETF (IWDP), with a Total Expense Ratio of 0.59%, does this by investing in 333 separate REITs. Each of these invest into multiple properties in the developed markets and must each have a dividend yield of at least 2%.

Fig.3: Reit Yield history

Here’s the dividend history of the index the ETF tracks, in blue – the FTSE Nareit Developed Dividend+ Index. It typically hangs around 4% but got a little erratic during the pandemic. It’s yield significantly outperforms the yield from the developed world stock markets, in red.

A note of caution against REITs: commercial property is going through a rollercoaster period of change right now, with office culture and working practices in the midst of a fast-paced work-from-home revolution.

What are now offi ce buildings might soon become residential flats. City centres will be fundamentally different.

What about residential? The residential sector is doing very well recently, with house prices AND rents soaring.

There ARE some REITs that focus on residential properties like apartment blocks, but these are few and far between: Equity Residential (EQR) is one example and has a 3% yield, which is forecast to grow.

We still think the best way to invest in property is by buying a few Buy-To-Let rentals in the UK.

Regular viewers will know that most of my wealth in is property, as we showed in this article. My cash-flow rental profits are about 9% – the capital growth is another matter, which because of mortgage leverage is around an additional 12%.

That 9% income is a significant game changer – I use the income from my properties as a base layer of income to support my lifestyle, meaning I can invest more of what I make elsewhere.

The higher income return of BTL reflects the increased effort involved – it’s the only investment we’ve covered today that can’t just be managed by a few button-taps on an app.

When To Avoid Income Generating Assets

Income generating assets are great for portfolio diversification as an add-on to your growth assets, or for people who have reached the point that they can retire on their investments.

If you’re still on the journey to financial freedom and want to build your wealth further, assets which focus on capital growth typically have better total returns than cash-flowing assets.

Using the stock market as an example, we would prefer for most of our portfolios to be invested in stocks with low dividends, as the act of paying a dividend (a) provides opportunities for the taxman to take a slice of your money, and (b) means the company cannot reinvest that cash in its operations.

Part of the reason why tech stocks have experienced a boom over the last decade is that they generally don’t pay any dividends – all that cash goes into product development instead. They can invest shareholder’s profits better than the shareholders could themselves.

When Income Is Essential

That said, I wouldn’t be without my investment property income. It has provided a safety cushion of monthly cashflow which has meant I could safely leave a job I hated, could start a business without needing it to pay out profits straight away, and now means I could survive even the rockiest patches of self-employment.

Would I have the same stability from a portfolio of growth stocks?

The eventual goal of most people in the Financial Independence community is to build an investment pot of many hundreds of thousands of pounds worth of stocks.

A small portion of their stocks can then be sold each year to provide an income, without upsetting the overall portfolio’s growth by too much.

We both intend to follow this plan too. But that is years away. Having extra income streams NOW oils the gears, and improves your ability to grab life opportunities.

What do you think about income generating assets, and what do you have in your portfolio? Join the conversation in the comments below!

Written by Ben


Featured image credit: ESB Professional/

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