Step-By-Step Guide To Our Spread Betting Futures Strategy With CMC Markets

Hey guys, we recently created a blog post and video showing how we’re using spread betting to invest in a portfolio of financial futures with 3x leverage, so that in theory we make killer tax-free returns over the long-term.

Our strategy essentially applies all the basics of long-term index investing that we know historically has produced an 11% return and leverages the portfolio to maximise our profits – theoretically making 33% annually less any financing costs.

The response to that first video has been amazing, with so many of you pleading for a step-by-step guide to our spread betting strategy. Well, we don’t like to disappoint, so in this post we’re thrilled to be sharing with you exactly how we’re spread betting with financial futures.

There are several spread betting platforms you could use but we’ll be using CMC Markets to demonstrate exactly what we’re doing. Throughout this guide we’ll be using the term “bet” as this is the industry language, but this is really a misnomer for our strategy as we’re actually making an investment.

If spread betting isn’t for you but you still want to invest in indexes the good old-fashioned way, on our site we have handpicked our favourite investment platforms, linked here. Plus, don’t forget to grab your free stocks, which can be found on the Money Unshackled offers page, linked here.

Alternatively Watch The YouTube Video > > >

Let’s kick off by highlighting the dangers of spread betting. As per the warning on CMC Markets’ website: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Honestly, we think most people lose because they haven’t got the foggiest what they’re doing. Even with the help of this guide we don’t think any novice investor should be doing what we’re about to show but if you understand the risks and want to make big potential profits let’s dive right in.

Step 1 – Decide What You’re Investing In

We’re building a portfolio that is weighted 60% S&P 500, 30% US Treasury Bonds, and 10% Gold. In the last post we discussed why we’re doing this; in short, this will significantly reduce volatility compared to a leveraged 100% S&P 500 portfolio. This is super important as volatility is the enemy when using leverage.

If you’ve not seen the first spread betting post, linked here, you might want to read that next as it will explain the reasons why we’re doing all this in more detail.

Our method of spread betting disregards most of the available instruments on spread betting platforms, most of which are more suited to day trading and have high fees. The 3 instruments we are investing in are amongst the few that are suitable for long-term leveraged investing, due to their incredibly low spreads, and because they are futures there are no overnight fees, common on other spread betting instruments.

Step 2 – Choose Your Platform

The next thing you guys will want to do is to choose your spread betting platform. You want to make sure that they at least offer each of the instruments that we’ll be investing in; equity index futures, bond futures, and commodity futures, or more precisely the S&P 500, US Treasury Bonds, and Gold.

You’ll also want to make sure that the spreads are super tight. Each instrument will have different size spreads, so comparing platforms can be extremely difficult.

Unlike an ISA you can have as many spread betting accounts as you like, so if you later change your mind, it’s no problem.

And lastly, you’ll want to make sure that the margin required for each instrument is as low as possible. For example, most platforms will give you 5% margin for S&P 500 futures. This means you can take out a position 20x bigger than the amount of cash you deposited. For US treasuries CMC Markets will offer 3.34% or 30x leverage, whereas many other platforms only offer 20% or 5x leverage.

We did not scour the entire market in meticulous detail but from the research we did carry out we found CMC Markets to provide the best service and the lowest costs for what we need.

Step 3 – Calculate How Much To Bet

With normal investing you can simply key in the amount of money you want to invest, and it will buy the required number of shares automatically. However, with spread betting you need to place a bet per point movement – you’ll then need to work out what notional value or exposure this is.

Unlike other spread betting brokers we’ve used, CMC helpfully displays this in the order ticket, so you can use trial and error to calculate the right bet size if that makes it easier for you, but we think it’s important to understand the mechanics of what is going on.

CMC bet size examples

In this example, we’re placing a bet of £0.20 per point on the S&P 500. The value of the point is indicated by the last large number on the order ticket– so in this case it’s the first decimal place. This is not intuitive at all but unfortunately that’s the way it is. This bet has a notional value of £8,947.

The maths is as follows:

Take your bet of £0.20 and divide by 0.1. Remember 0.1 is the value of each point for this instrument. Then multiply it by the value of the index. Currently the S&P 500 is 4,473.68, so we get a notional value of £8,947.

This is quite complicated so let’s look at doing the same for US Treasury Bonds. In this case let’s place a bet of £0.30 per point. The last large number is to two decimal places, so we divide £0.30 by 0.01. Then you multiply this by the instruments value, which is currently 165.783. This gives a notional value of £4,973.

We might as well go for the hat-trick and show gold as well. Here we’ve got a bet of £0.50 on gold. The last large number is a whole number, so we take £0.50 divide by 1 and multiply by 1,803.35, which is the current price of gold. This gives us a notional value of £902.

A challenge with our spread betting strategy is building a diversified portfolio because of the relatively high minimum bets. On CMC Markets, the minimum bets are:

  • S&P 500 – £0.10 per point, which is currently a notional value of £4,475.
  • US T-Bond – £0.10 per point, which is currently a notional value of £1,657.
  • Gold – £0.50 per point, which is currently a notional value of £903.

Remember these figures don’t represent the amount of cash you need to deposit, because we’re going to get to these large amounts using leverage.

You can see the minimum bet size and notional values for yourself for any instrument on CMC by opening an order ticket for the relevant instrument and keying in the number 0 into the £/pt box and hitting enter. It will default to the lowest allowed bet size, which is a neat little trick.

We’ve created an excel spreadsheet that will help you work out the right asset allocation, linked here. To make it as simple as possible the only cells you should change are those highlighted in yellow.

Allocation in spreadsheet

You can keep changing the size of the bet for each instrument until you get the right allocation. If your leveraged pot is less than £9,000 (so £3,000 of your own money if you’re using 3x leverage) you might struggle to get the exact target allocation. In this example we’ve got it close enough. The more you invest the less of an issue this becomes.

Step 4 – Deposit Some Money

You now need to fund your account, and this could not be any easier. Click the big blue button at the top that says ‘Add funds’ and follow the prompts. Deposit by card and the funds will be available in an instant.

To reiterate in case you’re not absolutely clear yet, this cash will sit in your account as collateral, and won’t physically be used to “buy” any investments with. You can place bets more or less regardless of how much cash collateral you have on account, but to do it as per our strategy you will want to calculate the correct cash amounts for your bets.

With a £8k to £9k notional position being about the smallest amount needed for our portfolio allocation you’ll need to deposit just £3k of cash to be around 3x leveraged.

Step 5 – Place Your Bets

Auto Roll-Over setting

Before placing your first investment first check the order settings for futures are set to automatically roll your contracts onto the next quarter, otherwise they’ll get closed out. We’re investing for the long-term, not just one quarter. It should be set to Auto Roll-Over’ by default but to check go to ‘Settings’ and then ‘Order Settings’. Make sure ‘Forwards Settlement Behaviour’ is set to Auto Roll-Over.

To place your bet you need to open up an order ticket for each instrument. You can do this by clicking products, then selecting whichever one you want. We’ll click ‘Indices’ and then search for SPX 500. For some reason when spread betting the index is often called ‘SPX’, ‘US 500’ or ‘USA 500’.

SPX 500 search list

Notice that one of the search results is a cash bet – we don’t want that. We’re investing in futures – in this case the September contract. Whenever you’re placing your bet, the contract will be dated for an upcoming month, so the fact we’re buying the September contract isn’t important. Click on the ‘Buy’ price and this will open the order ticket.

Order ticket

Double check the name in the ticket is the right instrument, and if you’re happy enter your bet amount. Make sure ‘Market’ order is selected, and then click ‘Place Buy Market Order’. A warning message should appear. Click ‘Place Buy Market Order’ again to complete. You can then repeat this exact same process for T-bonds and gold.


You can view your open positions by clicking on ‘Account’ near the top and then ‘Positions’. Here you’ll be able to see the stakes you have bet, the notional value at the time of placing the bet, your minimum margin requirement, and your unrealised profit. Each time a futures contract is rolled over, or whenever you sell and rebuy, this profit or loss will be realised, so rather than show as profit here it will instead be reflected in your cash position.

Step 6 – Record What You’ve Just Done & Monitor Leverage

We like to keep a transaction log of what money we’ve deposited, our profit, and the amount of leverage we’re using. You’ll find this in the same Excel file we mentioned earlier, linked to here.

Each month, we intend to invest new money but even if for whatever reason we don’t, we will record something on this log because as a minimum we want to monitor our use of leverage. If the leverage falls below our intended amount (in our case 3x) due to market movements, we will place more bets to bring that leverage back in line. We are probably happy to allow leverage to hover between 2.5x and 3.0x.

Instructions in how to complete this log can be found within the spreadsheet.

Step 7 – Invest Monthly (Optional)

We’re using the same principles with spread betting as if we were buying ETFs. By this, we mean we’re not trying to time the market and instead we’re just regularly investing into our portfolios.

Earlier we mentioned that you would need about £3k to start. If you were to bet the minimum each month you technically would need £3k every month. Most people obviously don’t have this kind of money on an ongoing basis, but we have a little workaround.

Close ticket

All you need to do is close your existing position by clicking the cross next to the instrument in the ‘Positions’ window, and then click ‘Close Buy Position’ from the order ticket that pops up. Once closed, you can then place a new buy order. By doing this you rebuy whatever you just sold plus a little extra. The spreads on these instruments are so thin that this workaround will only cost you a few pence each time you do it.

As your portfolio grows in value you might not even need to do this workaround as new bets placed will begin to have a smaller and smaller impact on the overall allocation. For instance, rather than having to buy all 3 instruments each month in the 60/30/10 allocation you might only have to top up gold for example, which only needs a few hundred quid.

Final Points

That’s all the steps you need to get started spread betting using our long-term leveraged index strategy, and we hope you found this post useful.

Do bear in mind that this strategy is extremely risky because of the amount of leverage we’re using. If you want to implement it yourself but with less risk, you can scale back the amount of leverage used to maybe 2x or less, or allocate even more to bonds than stocks for example.

What do you think of using leverage? Are the scare stories worth listening to or are they overdone? Join the conversation in the comments below.

Written by Andy


Featured image credit: Andrey_Popov/

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

What Net Worth Do You Need To Be In The Top 10% In The UK

Hey guys – I don’t know about you, but when I’m adding up my finances each month, I like to think that I’m probably doing OK versus the average dude in the street. The problem is that the bar has been set so low.

What we should all be wondering is how we compare against the highest net worth savers in the UK – what are they doing differently to us?

Today we’re deep diving into some fascinating data on the net worth of people in the UK, focusing on those in the top 40% of the population by wealth, taken from some analysis done by the Resolution Foundation.

Not only will you see how you compare to others on the wealth scale, but there are also lessons to be learned here from how those with a high net worth have structured their finances.

  • We’ll look at how wealth breaks down into main residence, pensions, investments and so on at each level of net worth.
  • We’ll look at the level of risk being taken by the rich versus those in the middle.
  • We’ll also look at the rates of return the wealthy are getting compared to those of the Average Joe.
  • And, we’ll find out the main reason why the wealth of the middle classes has shot up in the last decade.

All this, and so much more, in the video below. It’s jam packed full of charts and analysis (that we know you’ll love)! Check it out 😊

First, an offer: commission-free trading platform Stake are giving away a free US stock worth up to $150 to everyone who signs up via this link. Stake are the go-to investing app to buy and sell US stocks – there are thousands of stocks to choose from, and they charge zero trading fees, and zero FX fees when you trade.

Watch The Video Here > > >

How do you compare to high net worth savers, and what are you doing to advance up the ranks? Join the conversation in the comments below!

Written by Ben


Featured image credit: iQoncept/

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

Runaway Inflation – Will The ‘New Normal’ Ravage Your Portfolio

Since 2008, major central banks have pumped over $25 trillion into the global economy, with over $9 trillion in response to Covid-19 alone. Around half of that has come from an America that is addicted to money printing, doubling their magic money tree from $4trn to $8trn during the pandemic.

These are astonishingly huge sums. The thinking goes that all that extra money sloshing around, along with record low interest rates, may have already pushed stocks to unsustainable highs. But is this the calm before the storm?

The UK consumer price index, which measures the cost of a typical basket of goods and services, flew up from 2% in July to 3.2% in August, and it’s forecasted to keep climbing.

In America, the Biden money-printing could “set off inflationary pressures of a kind we have not seen in a generation,” wrote a prominent figure in Biden’s own party. Bank of America estimates that the U.S. government will have spent $879m every hour in 2021. The results could be devastating.

The shut-down of the global economy and subsequent policy responses have us teetering on the brink of a period of runaway inflation. Whether or not it happens will depend on the competency of Western politicians to fight it – the same politicians, incidentally, who got us into this mess in the first place.

So, assuming they cock it up, what impact will runaway inflation have on your investments and home finances? Let’s check it out…

And the end of the article we cover the best investments to defend against runaway inflation, along with the best places to buy them. Offers for all of these investing platforms are available on the Money Unshackled Offers page.

Alternatively Watch The YouTube Video > > >

Panic In The UK

There are lots of reasons to be startled by the latest inflation figures. A CPI of 3.2% in August not only puts it at the highest level in nearly a decade, but the month-on-month change from July to August is the biggest increase since the CPI was introduced as a measure of prices in 1997.

That’s high, but fine if it’s a temporary thing. We know the world has gone mental recently, and crazy economic statistics are becoming the norm in 2021.

But what if it’s not temporary? There are still inflationary pressures heading down the tracks, including a massive shortage of truck drivers set to result in food shortages and increased prices over winter. There’s even talk of Christmas dinner being cancelled for all but the wealthiest of families due to the shortages. All this continuing pressure on prices may cause high inflation to become “sticky” – meaning it hangs around for the long-term.

It’s now looking like the best outcome would be inflation rising to just 4% by the end of 2021. And that’s double the target rate of inflation desired by the UK’s central bank.

Across the board, prices are rising far faster than usual. In the past few months, the wholesale price of electricity in the UK has almost quadrupled from £40 to £160 per Mwh, spiking in the past fortnight to the highest level on record.

It is widely predicted that due to a shortage of gas and greater reliance on expensive green energy that we are facing further sharp increases in both electricity and gas bills in the coming months.

The Bank of England warned earlier this year about a “nasty surprise” coming our way. They’re right to be worried. An inflationary spiral, where prices rise ever higher, is what inflamed the economic instability and high unemployment in the 1970s, an ordeal which took many years, if not decades, to recover from.

House Prices Through The Roof!

The CPI measure of inflation doesn’t include the cost of buying homes. If it did, we would see a far higher figure for inflation.

The latest house price inflation data runs to July 2021, and shows house prices up a massive 8% annually, reported as a good thing by the press because that’s down from an even higher 13% in June.

“Ah, but this is due to the meddling of the UK government in temporarily relaxing stamp duty”, I hear you say. But that’s not the whole story.

Over in America, the median sale price of a home rose 22.9% in the year from June 2020 to June 2021, smashing all records. And this obviously has nothing to do with relaxing stamp duty in the UK.

The so called ‘new normal’ of home working, combined with low interest rates, has massively increased the demand for homes.

Where before 3 or 4 people would be content in a house share, they all now want their own space. But new houses are not being built fast enough.

These same economic forces are at play in the UK. House prices are creeping up, and up, and up, stamp duty holiday or not.

Is Inflation Good Or Bad For Investors?

Inflation means the prices of things go up… so good if you own assets… right? Well, inflation typically refers to the price of consumer goods, not investment assets, and is in fact one of the main reasons you need to invest – to try and beat inflation. A higher rate of inflation makes that task more difficult.

There is inflation itself; and then there is the government response to it.

If inflation gets too high, governments will try to squash it back down. This could include raising interest rates or cutting back on the money printing… or both. Doing either is bad for investors.

Increased Interest Rate

Increased interest rates are bad for leveraged investors, such as landlords with mortgaged properties, because their loan interest costs go up, and there are fewer people in the market who are able to afford to take on debt to buy your assets from you, reducing their market prices.

Increased interest rates are bad for owners of stocks too, because the businesses they are invested in have increased costs of borrowing, reducing profits, and with them, dividends and stock prices.

Cutting QE

It’s widely accepted that ridiculous levels of quantitative easing are responsible for record high prices in the stock and other asset markets.

Pumping cash into the economy makes cash less attractive, and pushes up the prices of assets like stocks, bonds, property, gold, crypto, and so on.

To fight inflation, central banks could claw back some of their money printing. When they magic money from thin air, central banks like the Fed typically lend it to the government in return for government bonds. In 2019, the Fed was selling down their holdings of these securities, reducing the amount of cash in the economy. They would need to try doing something similar now if inflation got out of hand.

Taking cash out of the economy would make cash more attractive again, moving money out of stocks and other investments and reducing their market prices.

High Inflation Impact On Stocks

High inflation itself also drives down the profitability and growth potential of companies, and hence share prices. Fewer customers can afford to buy products, and the costs of materials and labour go up.

And if inflation suddenly goes from 2% to, say, 4% very quickly, investors will want a higher return to compensate. The stock market will likely drop as a result to give investors that extra value.

Is Inflation Ever Good For Stocks?

Inflation is not all bad. Some inflation can be beneficial. Mild inflation is generally good, because it’s a sign the economy is growing, and businesses can raise prices.

“When examining S&P 500 returns by decade and adjusting for inflation, the results show the highest real returns occur when inflation is 2% to 3%,” says Investopedia. That’s about where we are now. So, a modest amount of inflation is in fact a good thing.

High Inflation Impact On Investment Property

We’ve mentioned how a government response to inflation could push up interest rates, putting the boot into the ribs of hard-pressed property investors and homeowners alike.

But the run-up period of inflation before this will likely send your properties’ prices soaring.

As an owner of multiple properties, I’ve been rather enjoying the recent double-digit inflation in the housing market. But it must be a bitter pill to swallow for new investors.

This initial inflationary boost to your equity may provide a cushion that helps to counteract any negative fallout if interest rates do go up.

Savers May Be Glad… At First

Savers may initially rejoice at a raising of interest rates, as they watch their high street savings account go from a 0.5% rate of interest to perhaps a 2% rate of interest.

That joy will turn to ash though when they realise that inflation in the shops has gone up by more than this, meaning their actual real returns are EVEN MORE negative than they were before. No matter how high inflation gets, central banks can only increase interest a LITTLE, or risk collapsing the economy.

Presumably cash savers are 100% reliant on their job for their income too, as opposed to investors who may own passive income generating assets.

We are all familiar with the pathetic 1% annual pay rises in the UK. When inflation is 5%+, but wages are stagnant, how will cash savers be able to keep building their wealth?

High Inflation Impact On Bonds

Holders of fixed income securities like bonds do poorly in a high inflation environment, because that fixed income has less and less purchasing power, driving down the price of bonds. Higher interest rates on newly issued bonds drives down the value of existing bonds as their lower coupons are less attractive.

How To Defend Against Rampant Inflation

So, stocks overall do poorly in a high inflation world, as do bonds, as does cash, as does property. So where exactly can we store some of our wealth to help defend against runaway inflation?

Many investors, including us, believe gold offers protection from long-term inflation. Gold is a store of value: its supply is limited, unlike cash which can be magicked in and out of existence.

Also, its history doesn’t lie. We see below how the gold price shot up in response to inflation in the 1970s, then loosely tracked it. In 2008 there was a massive correction in gold’s favour when people lost all faith in cash following the 2008 crisis and the resultant quantitative easing. During the pandemic, gold has shot up again when the banks once more fired up the printing presses, ahead of the inevitable inflation wave that is now hitting us.

We buy gold through the iShares Physical Gold ETC, and it’s free to trade on platforms like Freetrade, Trading 212 and InvestEngine. If you buy your gold through any of these platforms, new customers will get free shares worth up to £200 or a £50 welcome bonus.

Cryptocurrencies like Bitcoin, in theory, should do the same job as gold. They have similar qualities to gold in that there is a limited supply, and they are beyond the reach of meddling central bankers. But unlike gold, we can’t prove this hunch with a nice historical graph because, well, there is no history!

New users to Coinbase, one of the most popular crypto trading platforms, will get some free Bitcoin when you sign up using this offer link.

You can also hedge against rampant inflation by investing in certain stocks that benefit, or at least are not disadvantaged, by a high interest, high inflation environment.

These include:

  • banks like HSBC and Lloyds (who love it when interest rates on their loans can go up);
  • big blue-chip stocks like Coca Cola that sell everyday essential products and have little in the way of debt;
  • quality high-dividend stocks like British American Tobacco, who have a history of growing their dividend in real terms.

Grab a free trial subscription to Stockopedia here to get a full analysis of these stocks, and thousands more. The link also gets you a 25% discount on a paid subscription.

Are you worried about runaway inflation? Or are you upbeat about the economy? Join the conversation in the comments below!

Written by Ben


Featured image credit: Brian A Jackson/

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

How To Release Equity From Your Home To Get £50k+ In Cash

Imagine transferring £50k of extra cash into your bank account, without having to work to get it. Think what you could do with that money. The world would be your playground. This is what I did in my late twenties, and by investing the cash wisely, it transformed my life.

The way I did this was with equity release. Equity release is the popular name for products that provide homeowners with a way of releasing wealth tied up in their property, without having to downsize and move house. I got £50,000 out, but you might be able to get much more.

Your ‘equity’ is the difference between the value of your home and any mortgage you might owe. Equity release can give you access to some of this money, which would otherwise stay tied up in the value of your property.

If you’ve owned your home for even a handful of years, it’s likely that the property may be worth considerably more than what you first paid for it. On average, UK house prices increased by 17% in the five years to 2020, and are up a further 6% in the first half of 2021 alone! This could mean that you have an enormous sum of money locked away waiting to be accessed.

Here we’ll explain how equity release works and show you the different options available to do it no matter your age.

Maybe you dream of home improvements or a holiday, or maybe you intend to live off the money. For us, we’d use the cash to buy some income generating investments. Whatever you’d like to use the money for, equity release will help get you there. Let’s check it out!

Another way to make easy money for minimal effort is with Matched Betting, a step-by-step technique to profit from the free bets and incentives offered by bookmakers. It can make you £500+ every month for less than an hour a day of effort.

Go to the Matched Betting guides to find out more, and for all the latest offers.

Alternatively Watch The YouTube Video > > >

A Plan For Any Age

Traditionally, equity release products are aimed at the over 55s. A specialist industry has grown in this space, with a very interesting range of products aimed at lump sum and regular income withdrawals.

But if you’re younger than 55, fear not: I just told you that I’ve already done this, and I’m 33. But if you’re over 55, or you can wait until then, the specialist products for this age group – known as Lifetime Mortgages – are tailor made for this job, so are worth prioritising.

For Lifetime Mortgages, the most common qualifying criteria are:

  • The youngest homeowner is 55 or over;
  • You own the property, either outright OR with a mortgage;
  • The property is worth more than £70,000;
  • If you have a mortgage, you will have to pay this off with the money you receive from the equity release.

If you’re under 55 this option is closed to you – to release equity, you’ll just need to be able to qualify for a regular mortgage on your house’s current market value.

How Much Equity Can You Release?

This comes down to your property’s value, and if you’re under 55, your income. For Lifetime Mortgages, your age is also factored in, and with some providers, your health.

The two times I have released equity, the gap had widened between my mortgage amount and the value of my home. This is due both to monthly mortgage repayments reducing the size of the loan, and to market prices pushing up the property value.

With the specialist products for the over 55s, the amounts you can release are much more clearly defined.

For Lifetime Mortgages, typically you can release between 20-50% of your property’s value. The older you are, the more you can release. You can withdraw even more than this with a product called a Home Reversion Plan: more on this soon.

In terms of timeframe, most equity releases take between six to eight weeks to complete.

What It Costs

Let’s be clear: most equity releases result in an increased mortgage amount against your property. As such, there is a cost. The main cost is the annual interest on the loan, currently around 2.5% on Lifetime Mortgages, fixed for the rest of your life.

If you’re averse to debt, this might sound expensive, especially the “for the rest of your life” part, but consider that 2.5% is essentially the same as inflation. Your property is likely to grow even faster than this, based on historic property growth rates of 5-7% annually.

And it depends on what you are using the cash for. If you choose to invest it over the long-term, 2.5% is perhaps a small price to pay for the rate of return you could get from the stock market for example, typically between 8-11% historically.

There will be some other upfront costs, including loan arrangement fees typically in the region of £1,000 which can be added to the amount you’re borrowing, and any brokers and solicitors’ fees for sorting this all out, which will typically add up to another grand or so.

The Specialist Products: How Lifetime Mortgages Work

Lifetime Mortgages are a growing but relatively unheard-of industry, serving only 500,000 UK homeowners since 1991. Barely anyone has taken advantage of these life-changing products!

If you take one on, you have the right to remain in your property for life, or until you need to move into long-term care: you can’t be evicted by the bank. You also have the right to move to another property so long as your new home is suitable collateral for continuing the arrangement.

With equity release, monthly repayments aren’t necessary. You can choose to enjoy the money now, and let the interest be taken from your estate upon the sale of your property, typically after you and your partner have passed away.

Alternatively, if you decide to pay the interest each month, your loan balance remains static.

Finally, with a Lifetime Mortgage you get an amazing feature called a “no negative equity guarantee”. You don’t get this with a normal mortgage.

A “no negative equity guarantee” means that when the property is sold and all selling fees paid from the proceeds, EVEN IF the amount left over is not enough to fully repay the loan, the difference will be written off. Sweet!

The Different Types Of Equity Release Products

First let’s look at the different products available in the equity release market for the over 55s, and then we’ll look at how you can manufacture your own equity release by using normal mortgages, regardless of your age.

#1 – Lifetime Mortgage

If you want to release a lump sum of cash up to 50% of the house’s value, a Lifetime Mortgage could be for you.

There is no requirement to make monthly repayments, as the amount you release, plus any interest, is repaid from the proceeds when the property is eventually sold. You can choose to pay towards the interest if you like, for those worried about leaving a more intact inheritance to their heirs.

#2 – Income Lifetime Mortgage

This one is really interesting because it allows you to turn your home into an income stream! An Income Lifetime Mortgage gives you flexible access to your equity. Rather than releasing a lump sum upfront, you can release your cash over time as a regular income.

If the value of your house is expected to go up by X amount each year, you might decide to withdraw that amount, less the interest cost and perhaps less inflation too, as an income each year.

Think about it! You can add an extra income stream to your other retirement incomes, without depleting your home equity!

#3 – Home Reversion Plan

This is an option for those who really need the cash. With these, you can take out even more equity than with a Lifetime Mortgage, typically up to around 60%. But it comes at a terrible price.

In exchange for a lump sum worth 60% of the value of your home, you would be signing over the entire ownership of your house to the product provider. Not the best of deals. But, you would not be taking on any debt, and you would get the right to stay living in the property for your lifetime, so this will no doubt appeal to some people.

How To Do It Yourself If You Are Under 55

If you are under 55, the only way to release equity from your home – other than moving house – is to get clever with how you use normal mortgages.

I’ve done 2 equity releases on my house over the years. Here’s what I did the first time. I ran a quick calculation to make sure that the finances worked, which was as follows:

  • I got my house valued for free by Yopa at £230,000. I was confident then to start the formal remortgaging process, as you need the bank to agree with your desired valuation. They did, and also valued it at £230,000.
  • I knew the new mortgage would be around £207,000 at a 90% LTV. The bank would pay this amount to my solicitors, who were provided by the bank as part of the service.
  • My old mortgage would need to be paid off by the solicitors, at £179,000. This would leave the solicitors holding nearly £28,000, payable to my bank account.

So I pushed ahead with the plan, and received nearly £28,000 in my bank account a few weeks later.

Was It Worth It?

We’re not suggesting you release equity to squander the money on frivolous things like holidays or fast cars. Although you could.

I put the released equity into a buy-to-let property, the expected investment returns on which were 20% annually. Minus the additional interest payments from the equity release, the net annual benefit was £3,600.

If you ever plan to release equity, you want to be able to do so on your schedule and at the opportune moment. If there is an Early Repayment Charge on your existing mortgage, you would either have to wait to be clear of the fixed-term period, or pay the price. I had to pay an ERC to break contract when I did this, but it would have been unnecessary if I had avoided a long fixed period in the first place.

Things To Consider

The new lender may ask you what you plan to do with the money. While we think it’s really none of their business, it’s best to be honest.

Banks are usually uncomfortable with the thought of you investing your borrowed money, when you could be spending it all on a holiday like a normal person. It’s a strange world we live in.

Here’s where using an independent mortgage broker comes in handy, as they will know how best to circumnavigate any uncomfortable questions in the application process.

And if you’re going for a Lifetime Mortgage, a chat with a financial advisor who specialises in these products would be sensible too.

It’s also worth remembering that just selling up and moving to a cheaper property could be a simple alternative to equity release, resulting in a similarly large lump sum of cash. This might be done through downsizing, or by moving to a part of the country with lower house prices.

For Lifetime Mortgages, releasing funds in your lifetime that would otherwise stay tied up in your home until you pass away will reduce the size of your estate for inheritance purposes. Lifetime Mortgages aren’t designed to be repaid in your lifetime.

Finally, consider what your life could be like with a huge injection of cash at just the right time.

Equity release changed my life: it bought me a couple of extra sources of income from investment properties; as a cash buffer, it gave me the confidence to quit jobs with nothing else lined up; and it eventually let me quit my career altogether and go full time on YouTube. What will it do for you?

Have you ever considered releasing equity? And when you’re over 55, would you draw an income from your home? Join the conversation in the comments below!

Written by Ben


Featured image credit: Dean Clarke/

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

Saving A House Deposit Or Building Your Investment Portfolio: Which Comes First?

Getting onto the housing ladder is becoming increasingly difficult. In fact, latest figures show only 50% of all 35-44 year olds had a mortgage, down significantly from 68% in 1997. When this dataset is next updated by the ONS, the decline will no doubt be even worse.

At the same time, people in their 20s and 30s are becoming more aware than ever of the importance of investing for their futures.

Unfortunately, the state pension is unlikely to exist in its current form for them, and gone are the days of final salary pensions. If you’re not investing from a young age, your future is looking grim.

Investing and home ownership are both worthy financial challenges to tackle, but the 2 goals are conflicting. How can you save up for a house deposit, AND invest adequately for your future?

Which target should you prioritise first? The roof over your head, or avoiding a miserable retirement?

Today we’re going to try to solve this problem facing the majority of young people, on which goal to tackle first from a financial perspective. Should you save for a house or invest in the stock market?

And if you’ve already saved up for a home, has the missed opportunity of many extra years of compounding investment returns done irreparable damage to your investing potential?

If you’re new to investing and want the professionals to manage your money, a great option for hands-off investors is to open a Stocks & Shares ISA with Nutmeg. They also offer Lifetime ISAs to help with saving for a house deposit.

New customers who use this special 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 > > >

A Growing Problem

The dilemma facing young people about whether they should start investing or save for a house deposit is getting more obvious with each passing year.

Firstly, investing is now more accessible than ever. You can now invest on many platforms without fees, and with minimum investments as little as £1. Information about the stock market is plentiful, is easily accessible and is free on places like YouTube.

Investing has been made omnipresent and accessible to the point that anyone can pick up a phone and buy some stocks.

This openness has removed a barrier that previously would have stopped most people from even considering investing, and made young savers think that maybe they should be abandoning the decades long attempt to build a house deposit and build a financial future through stocks instead.

However, at the same time, the prospect of ever owning a house is receding into the distance. House prices have gone up by an average of 5.2% over the last 20 years.

Why is this a problem? Because that is MUCH higher than wage inflation, which has averaged just 2.8% a year over the last 20 years. Incomes are not keeping up with the rate that house prices are increasing.

While you’re saving, house prices are going up in real terms. So more and more it feels like if you don’t try and buy a house right now, you’ll never get a better chance.

Why Not Do Both? Couldn’t You Whack Your House Deposit In The Stock Market?

Seems reasonable right? You’ve got a lump sum of cash just sat there idling in the bank while it slowly gets added to from your saved wages. Why not take it out, invest it, and get to your goal quicker?

Many people do this, and there are certainly success stories – but the same can be said of people who put it all on black on the roulette wheel.

The stock market can go up as well as down in the short to medium term, so we would not advise anyone to put their house deposit into the stock market unless you don’t plan to buy a home for at least 5 years, and preferably longer.

Otherwise, there’s a good chance you could have lost money on your house deposit at the point when it’s needed. It’s therefore usually best to keep the 2 goals separate.

3 Reasons To Save For The House Deposit First

#1 – A House Can Be An Investment

Your home is not an investment in the traditional sense of the word – a house costs the owner a fortune to maintain, and any capital growth can’t easily be accessed unless you decide to sell up and live on the streets.

But there ARE ways you can make the house turn a profit, by charging other people for the use of your assets.

The usual thing to do is to get a live-in lodger or two, or do Airbnb. A couple of lodgers paying rent could easily cover the cost of your mortgage and eliminate your biggest cost of living – a great investment.

But you can also rent out your driveway for day commuters; let someone park a mobile home or trailer on your land; or lease out your garage, attic, and spare room for storage space.

A house can also be a great investment if you geo-arbitrage it. This is when you intend to sell up the house in the future and move to a less expensive area.

Maybe you’ve managed to get on the housing ladder in London and can afford it due to your high London banker’s salary, but could see yourself retiring to Yorkshire. You might one day liquidate a £1m townhouse to buy an equivalent sized semi in Leeds for £300k.

#2 – The Emotional/Cultural Need

For most people in this country, home ownership is a defining feature of whether or not you’re a proper adult. This is an aspect of British culture, where 63% own their homes. This is down from 71% in 2004, when buying a house was much easier.

On the continent they are not as fussed as we are about this. The Germans and Austrians quite like to rent, with only 51% and 55% respectively owning homes. The Swiss care even less about home equity, with just a 42% rate of home ownership.

On this channel we don’t think whether you own a home or not defines you as an adult – having an investment portfolio and choosing to rent is just as valid a life-choice. Nor do we buy into the myth that renting is dead money: check out this article next on the merits of buying vs those of renting.

But if you’d sleep better at night by keeping up with the Joneses, then buying your home first is the right choice for you.

#3 – Investment Returns Don’t Matter So Much Initially

If you’ve got 2 or 3 grand and you’re stressing about where to put it… don’t. Your investing returns are likely to be miniscule in terms of pounds and pence, compared to what you’ll be able to make one day when your pot is much larger.

When you’ve got a decent sized house deposit built up, this might be a different story. If you’re enjoying this content, give us a big like to let the YouTube algorithm know that this video rocks! You can also show us some appreciation with the new Super Thanks button below.

1 Big Reason To Focus On Investing: The Compounding Boost Is Insane

First-time buyers now need an average of £59,000 to get on the property ladder, a 2021 report by Halifax bank has revealed.

That’s up £12,000 from the previous year. This is the national average: in London, first time buyers need an average deposit of £133,000!

Those numbers are huge, and represent many years of saving hard. How many years? A lot. ONS data tells us that of people between the age of 22 and 29 years, about 40% have not yet managed to save anything at all, while around 10% have savings of between £2,000 and £3,000. Only around 25% have saved more than £6,000.

And £6,000 is the also average savings for people aged between 35 and 44. Clearly saving for a house deposit is now a decades long task for most people.

These are decades that you can’t afford to be wasting sitting out of the stock market. Let’s assume money flows naturally to you, and it takes you only 10 years to save for a house deposit, from age 20 to age 30. You save £6,000 a year towards a £60,000 deposit.

Example 1 – Buy House First (Save During 20s)

Here’s how much money you could have when you retire at age 60 if you only started investing into the stock market at age 30, once you’d sorted the house deposit. Keeping it simple we’ll assume you continue to be able to invest £6k a year, or £500 a month, at 6% after-inflation returns. This gives you £500k at retirement, enough to draw an income from.

Example 2 – Invest Instead & Never Buy A House

Now here’s what happens if you choose never to buy a house, and you’d been able to start investing in the stock market from age 20, with an extra 10 years of compounding: you retire with £1m at age 60. The money you had put away in your 20s accounts for HALF of your ENTIRE retirement wealth. That’s the power of compounding over time.

Example 3 – Invest First (Invest During 20s, Save For House During 30s)

If you instead decided to delay buying your first home until you were 40, what effect would that have on your investment pot? Well, you’d be able to invest for that important first decade, which following on with our example provides £494k of after-inflation net worth to your retirement funds.

You then take a decade off from investing between age 30 and 40 to save for a house deposit. Your initial investments are cooking away merrily during this time.

Bear in mind that your required house deposit will likely be higher by then. If houses increase in value by 3% above inflation annually over 10 years, your required house deposit would move from an average £59,000 to £80,000 in REAL terms; a third higher. And a higher house price likely means higher mortgage payments and a reduced ability to invest.

Then you resume investing at age 40, and are able to build up to a further £231k over the next 20 years from your contributions plus growth. This assumes your mortgage repayments didn’t increase.

This amount takes you twice as long to attain, for half the end value of the money you invested in your 20s, again demonstrating the importance of investing early in life. You could end up with £725k, much higher than the £500k you would have got by saving for a house first. But even though your investments are larger, you’d still have a small outstanding mortgage at age 60.

But It’s Good To Own Property, Right?

Unless you’re planning to access the equity in your home by moving to a cheaper city or downsizing later in life – most people don’t – the growth in your house’s market value doesn’t really matter for your finances. Only the size of your initial deposit matters.

You’ll always need a roof over your head – you can sell your house for more, but your next house will cost more too as a result of the whole property market going up together.

Our Preferred Order

Before you set money aside each month for your house deposit, earmark some for investing on a small scale. If you can afford to save £500 each month in total, maybe you just invest £100 of that.

The goal is to learn while the stakes are low, with a large enough amount for you to care about how the investments perform, but not enough to get in the way of your other objectives.

You should always have an investment account even if it only holds a few hundred quid, so you can spend your formative years figuring out the stock market. Like anything worth doing, investing takes experience and time to perfect.

Ramping up your commitment to investing earlier means you get to experiment and make mistakes while your pot is small and it matters less. Once you’re older with a family, a mortgage, and responsibilities, you’ll be too scared to start once you have more to lose.

With your remaining savings you can save for the house deposit if that goal is on your dream-list. When the house is bought, every spare bit of cash you have should be going into building your investments. Nobody cares more than you do about your retirement, least of all the government. Your future finances have to be YOUR priority.

Which do you think should take priority – saving for a house, or building a freedom fund? Join the conversation in the comments below!

Written by Ben


Featured image credit: Dean Clarke/

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

Boris Delivers Tax Blow | House Prices Going Mental | Brits Are Unprepared For Next Crisis

Welcome to MU News. Today’s financial headlines:

  • Boris Johnson U-turns again by breaking Conservative manifesto pledge not to increase national insurance, income tax or VAT.
  • Average UK house price hits eye-watering eight times average salary.
  • Mortgage price war ramps up as Nationwide offers record breaking sub 1% five-year fixed rate deal.
  • Lloyds Bank plans big move into the UK rental market by becoming the UK’s biggest landlord with 50,000 homes.
  • Contactless card payment limit to increase to £100 from October. Expect it to be a ‘thief’s dream’.
  • James Dyson is telling you to get back to work. Dyson says that working from home makes firms less competitive.
  • The UK’s finance watchdog declares Binance is ‘not capable’ of being supervised.
  • The Royal Mint has recorded a fivefold rise in young adults taking a stake in Gold. Is it time to protect yourself against inflation?
  • Interactive Investor lines up banks for blockbuster London flotation.
  • And finally, the UK faces a £371bn savings shortfall.

In today’s episode we’re trying something new. We’ve gathered all the latest money news from the past few weeks that matter most to your finances. If you find this financial news bulletin useful then hit that like button and let us know down in the comments. Let’s check it out…

Don’t forget to check out the Money Unshackled Offers page where you’ll find free stocks, hundreds of pounds of free cash in welcome offers, and discounted memberships to stock analysis tools like Stockopedia.

Stockopedia will help you pick stocks like a pro, and with this offer link you’ll get a free 14-day trial followed by a 25% discount.

Watch The Video Here > > >

Written by Andy


Featured image credit: andrewvect/

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

Best Money Decisions We Ever Made!

In a recent post we looked at our biggest money regrets and we thought rather than just dwell on the stuff we got wrong, let’s also look at the stuff we got right. So, in this post we’re looking at our 5 best money decisions ever!

Hopefully these inspire you with your own money decisions. Now, let’s check it out…

Today’s offer: New users to Genuine Impact, the research and analysis tool, will receive 1 month’s PREMIUM access for free when you sign up via the link on the Offers Page. Be sure to check them out!

Alternatively Watch The YouTube Video > > >

#1 – Quit Job, After Job, After Job!

This applies no matter what age you are but it’s particularly important if you’re young. The fastest way to increase your salary is to job-hop and that is exactly what we both did, earning big pay rises each time. Job loyalty will cost you a fortune in missed promotions and pay rises!

When you first set out and enter the workforce as a bright-eyed and bushy-tailed graduate or school leaver you will be paid a pittance – and rightly so because you have no experience. You need to get experience pronto.

After Uni – so we were 22 – we both got jobs earning around £23k but we were both able to double that by the time we were 30. We didn’t do this by working ridiculous hours, being the best, or kissing the boss’s ass. Hell no!

Unless you’re a massive overachiever who is able to fly up the ranks within one company – which is rare – we find that most people who stick to one job end up getting stagnated.

They find themselves doing the same crappy job for way too many years and learning nothing new. You pretty much learn the entire role within a few months and then only gain additional experience in very small increments, over years. An employer will not pay you more unless you offer more.

To offer more, you need experience, which you get by changing jobs. Even if you end up doing the exact same job at a different company your CV or profile is boosted because of it.

Don’t believe us? Put yourself in the shoes of an employer who is interviewing candidates for a job. Who are you more likely to hire? The candidate who has been doing the same job for the past 10 years, learning nothing new, or the candidate who has worked at multiple companies and gained a wealth of knowledge?

My first ever full-time job was at IBM. I don’t know the exact reason how I got the job, but I do remember seeing the interviewer’s eyes light up when he heard I had previously worked for their direct competitor.

#2 – Lifetime Tracker Mortgage

Most companies like to lock you in to whatever service they provide. Take out a Sim-only phone contract and you’ll get a better deal if you agree to a 12-month or longer contract compared with a monthly rolling contract. It’s the same with Sky TV. Agree to an extended contract and you only need pay 8 kajillions each month instead of 10 kajillions!

A similar pricing strategy is used by the banks when providing mortgages. These days most people end up taking out fixed-term mortgages for 2-5 years. The bank hopes that you:

  1. a) roll onto the much more expensive standard variable rate; or
  2. b) remortgage with them, so you’re locked in once again; or
  3. c) pay off the mortgage early and thus incur rip-off early repayment charges.

I have always hated being tied down and tend to avoid any company that tries to lock me in, even if I have to pay more for the added flexibility. My first ever mortgage had a 3% early repayment charge, which would have cost me £11,000 if for whatever reason I needed to sell the house.

When it was time to remortgage I vowed to myself that I would never do that again, so when the time came, I opted for a lifetime tracker mortgage. The monthly repayments were slightly more expensive than the alternatives, but you can’t put a price on freedom.

It turned out to be one of the best financial decisions I ever made. My girlfriend and I ended up breaking up and selling the house. Thankfully, we could walk away with no financial penalties.

Strangely, we don’t get that many people asking us for help about which mortgage to pick, even though it’s one of the biggest financial decisions of your life. Life is too unpredictable to be locked into a mortgage for several years, so if we can provide any assistance with choosing a mortgage it would be this: think twice before accepting any mortgage with early repayment charges. If you are forced to sell it could be a financial disaster.

It might be a relationship breakup, redundancy, or worse – a debilitating illness. Sadly, all these things are more common than you think and could quite easily happen to you.

#3 – Financial Freedom Insurance

Half of you might be thinking, “Wow, financial freedom insurance. That sounds cool, what’s that?” The other half will be thinking, “Yawn, insurance is for mugs.” But don’t scoff just yet: hear us out.

Financial Freedom Insurance is the cool name we call Income Protection Insurance, because that’s what it is to us. It’s insurance that we’re taking out to cover us while we’re on the path to freedom, between now and the time our investment pots grow big enough to pay us our forever-incomes.

We are both on the path to financial freedom and one of the biggest risks that could derail these awesome plans is a debilitating illness or accident leaving us unable to work. It needn’t even be anything that major – just enough to stop us from producing videos. Losing the use of our hands or voice for example.

After reading about a voice actor who suffered a stroke and was left unable to speak and so sadly would likely never be able to do voiceover work again, we decided we couldn’t let something similar happen to us.

By taking out Income Protection Insurance we have effectively guaranteed our financial futures today. Either we become financially free through illness, or we achieve it the good old-fashioned way – by grafting and investing as much money as we can.

Income Protection Insurance comes in many forms but we both chose policies that will pay us an income right up until we’re 68. Surprisingly, attaining this peace of mind is far cheaper than you would ever imagine – for Ben (MU co-founder) it’s just £17 a month.

If securing your financial future is something you’re interested in, then check out this page and you can get a no obligation quote from the same broker that we both used.

This might sound like we’re trying to entice you into using one of our referral links, but it’s really not the case. We both took out Income Protection Insurance and consider it essential for any sound financial freedom plan.

#4 – Decided To Go Into Business

Changing jobs regularly was the best thing we did to boost our salaries but the decision to abandon servitude and go it alone was the action that had the most far-reaching impact on our lives.

The story is Money Unshackled legend. We both knew that slaving away for somebody else was never going to give us the money or freedom that we longed for.

In January 2018, we met up at a hotel bar on the side of the M62 motorway to brainstorm business ideas. Days later Money Unshackled was born, the company registered, and website domains and social media tags claimed.

As inspiration for you guys, we’d like to say that we became millionaires soon after this as all that internet money came flowing in but that wouldn’t be entirely truthful. The truth is we’re not there yet and it’s been a grind, but we do get paid to do what we love – which is talking about money and investing.

In terms of income, to date, we would have been better-off financially to have stayed working a high salary, long-hours job, but as Money Unshackled continues to grow and other businesses are spun-off they will hopefully overshadow anything that we might have earned working a job. That’s the way it’s looking at least. As Del Boy says, “This time next year we’ll be millionaires.”

An added benefit of starting this particular business is we literally get paid to think about money 24/7. Our investing strategies have been massively improved because we’ve had more time to learn the best ways to invest and manage money.

One such example is that we recently put together a long-term spread betting strategy that should comfortably amplify our investment returns into the double digits. We’re so excited to see how this plays out and the returns promise to be life changing. You can read about it here. It’s definitely worth checking out if you too want to supercharge your investment gains.

The best feeling you get from starting a business is when that first bit of income comes in, because it’s money you’ve made for yourself from nothing. Our first £50 earned from Money Unshackled means way more to us than all the money earned from a job.

#5 – Make Short-Term Sacrifices

This last one is a catch-all point. It covers all the sacrifices that we make and continue to make to achieve our financial goals. Dave Ramsey says it best when he says, “If you live like no one else, later you can live like no one else.”

Everything worthwhile in life can only be earned by paying the price. If you want to be the next Ronaldo, you have to eat the right food and train day and night. If you want to get the best grades and get into the best University, you need to put in the time and study hard. Those are the sacrifices required. There are no shortcuts.

If you want to get ahead financially you need to cut expenses and maximise income.

In my early twenties I was prepared to sacrifice my independence by living with my parents for a few years, and doing so allowed me to save and, crucially, invest a small fortune.

Forget the stigma about not flying the nest. Nobody will be laughing at you when you’re financially free while they’re still toiling in the mine.  On reflection this might have been my best ever financial decision.

Most young people will do the same but blow all their money on toys, holidays, and cars – completely squandering the opportunity to build wealth. They have sacrificed their independence and have nothing to show for it. Even on minimum wage if you live practically rent-free you should be able to put aside several thousand pounds a year.

Disposable income in your twenties is worth way more than disposable income later in life because the sooner you earn it, the sooner it can be invested, and the sooner it can begin to compound.

Ben too sacrificed his personal living space by getting a lodger for the best part of 2 years. He was able to earn around £8,000 at a crucial juncture in his 20s, when a few grand at the right time can be the difference between life success and life failure.

This additional cash buffer enabled him to feel comfortable jumping jobs frequently without having to have the next job lined up, leading to better choice of opportunities and more cash!

#6 – Live Plan B

We said 5 but here’s a bonus. Like most young people I didn’t know what I wanted to do career-wise. But I did know I couldn’t sit around waiting to figure it out. Weeks turn into months, months turn into years, and before you know it you’ve wasted the best years of your life working for peanuts.

Like most people I never had a solid Plan A… so I got to work on Plan B. I ended up pursuing a career in financial analysis and becoming a Chartered Management Accountant.

Ben too became Chartered. Working in accounting and finance may not have been a dream job but it was relatively well paid and allowed us the time to work on Money Unshackled in the evenings and at weekends.

There’s a fantastic YouTuber called Sean Cannell, who helps people grow their influence on social media. One thing he said really resonates with us: “I worked a day job at a restaurant for 10 years while working on my dream job on the side… keep grinding.”

Worst case we have a solid career to fall back on. The point we’re trying to make is: a good plan B is better than no plan at all. You can figure out Plan A later.

What are the best money decisions that you’ve made? Join the conversation in the comments below.

Written by Andy


Featured image credit: diy13/

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

The 3 Essential UK Dividend Stocks For Any Retirement Portfolio

You guys know we spend a lot of time searching for the perfect investment portfolio that will get us to retirement, but also keep us there. There’s only space for quality here – all killer, no filler.

We want the best index funds, the best properties, and… the best individual stocks. This article is looking at the stocks that we think are suitable for holding from today right through to retirement, whenever that might be for you.

These stocks need to be evergreen – they need to be companies with strong roots and staying power. But they also need to be powerful dividend stocks for the stability and cash flow they provide – UK dividend stocks specifically so we can avoid nasty foreign dividend withholding taxes.

And ideally, they’ll be in essential industries – even better, near monopolies with impenetrable barriers to entry for potential competitors.

We think we’ve found 3 such stocks that fit the bill. Let’s check it out…

Much of the research for this article was made possible due to our subscription to Stockopedia, the premium stock picking research and analysis tool for investors. Try Stockopedia for yourself with a free 14-day trial at the special offer link here, which also gives you a 25% discount off your membership if you decide it’s for you.

Alternatively Watch The YouTube Video > > >

Essential Retirement Stock #1 – British American Tobacco (BATS)

Tobacco, you say? No way! That’s a dead industry! Hear us out.

This company is one of the best we’ve seen in a long time and has been top of our list for a while now. Its finances are killer, and we’ll get to those in a bit. Spoiler alert: it has a sustainable 8% dividend!

But its current finances mean nothing if it’s not going to be around for your retirement. Let’s address those concerns first.

At the start of this piece we hinted at 4 criteria for any retirement stock. These are:

  1. Essential Industry;
  2. Barriers To Entry and an Economic Moat;
  3. Strong Roots – a large cap stock with staying power;
  4. and Kick-Ass Dividends!

Ideally the stock will be reasonably priced too, but that’s not so much of a concern if you’re holding it forever and it pays a good dividend.

So does BAT tick all the criteria boxes? The first one was Essential Industry, and it is indeed essential to the many tobacco addicts around the world! Its customers are physically compelled to keep buying its products.

There is a reasonable worry for shareholders that the number of smokers is declining globally.

This chart from the World Health Organisation shows that more countries are in the “declining usage” side at the top of the chart, than the “increasing usage” side at the bottom. Note that these are percentages of adults in each nation, but population sizes are forever expanding which will offset this decline to some degree.

They are already diversified as one of the world’s leading vaping and e-cigarettes producers as an alternative to tobacco, which is maybe the future of the company long-term. There also exist opportunities to expand into cannabis in the countries which it becomes legal in, which we expect will be a fair few over the coming decades. BAT have indeed just acquired a £126m stake in Canadian cannabis firm OrganiGram.

As for Barriers To Entry, who else could possibly compete with BAT? It’s illegal or difficult to advertise smoking products in most of the big markets BAT sells in including the UK, USA, Europe, Australia and NZ and much of Asia, which means this already established giant can exist unopposed by new entrants to the market.

BAT doesn’t need to advertise anyway – their brands are well established in their markets and saving all that money on marketing means they can pay out a bigger dividend. They rake in money, and they pay it straight out to you.

It has Strong Roots, present in 180 markets with 150 million daily consumer interactions from a dedicated pool of customers providing steady cashflow. BAT has been around since 1902 and has a market cap of £61bn.

Looking more closely at its finances now, its dividend yield is around 8% and forecast to grow, but we can see that this is not an anomaly – it’s actually at a sustainable level.

That’s because its dividend cover is consistently over 1 – anything over 1 means it can easily afford the dividend, and is the case for at least each of the past 6 years, with this forecast to continue.

The dividend yield looks overly inflated because the shares look oversold, which we’ll take a look at in a sec.

In 2017, it bought out the second largest tobacco company in the US, Reynolds American, a major landgrab invasion to grab an even higher stake of the American market. BAT have taken what is theirs, as global tobacco kings.

This left them a load of debt – but they are committed to paying this down a bit every year and have been doing so. Their revenue and profits are massively up since the acquisition.

BATs finances look so solid it appears they haven’t even realised that there’s a pandemic going on – profits just keep on growing!

Despite all this positivity, the price of BAT is ridiculously cheap. Its 12-month future forecast PE ratio is 7.8, Stockopedia showing us that this compares very favourably with the industry and with the wider market.

The EV to EBITDA, which is a slightly more accurate indicator of price as it factors in debt, is 9.6 – still very cheap. BAT is clearly under-priced when you add in the sustainable dividend.

The market has decided it doesn’t like BAT – its share price has plummeted over the last 5 years – probably due to overdone fears haunting the tobacco industry. Despite these fears, 21 institutional analysts are saying it’s a Buy.

We think this jewel of the British crown has been overlooked in favour of trendy new socially responsible stocks and green technologies. But don’t write tobacco off if you want to earn big, long-term dividends.

Essential Retirement Stock #2 – BAE Systems (BA.)

OK, we’ve invested in lung cancer with a tobacco company, now let’s buy some guns and bombs…

Seriously we didn’t plan it like this, but it seems to be that the so-called Sin Stocks are the ones to buy for long-term dividend success.

If we’re talking morality though, we like to remind ourselves that smoking tobacco is a personal choice, and without a well provisioned military to defend us we’d all be speaking German.

BAE Systems is one of the UK’s main arms, security, and aerospace companies, but it’s reach is much bigger than Britain. It has a global presence, being the largest defence contractor in Europe and ranked third-largest in the world based on 2017 revenues.

When China starts raining fire down on the West, we’ll be glad that BAE is there to have our backs.

BAE’s customers are national governments, supplying the essential bits and bobs for their armies, navies and airforce.

They’re also heavily involved in cyber defence for nations, which is going to be a growing problem for the world to deal with as advances like quantum computing come into play.

They have a big Barrier To Entry in they are practically a monopoly provider for some of the world’s richest countries. Let’s look at their finances to see if they have staying power.

Stockopedia was red-flagging a potential liquidity risk for us to research further. On inspection, it’s because its debt has shot up in the last couple of years.

This is fine because we know that its revenue comes from governments, most of which are able to magic money out of thin air from their central banks. They won’t be defaulting on their contracts. Total debt is only 2x annual profits – not high by any standard.

BAE has been supplying governments with weapons since 1902, surviving much worse than a bit of covid related liquidity worries.

Their revenue is growing consistently, as is net profit. As are dividends, and dividend cover. A yield of 4% and forecast to grow is good, and it is sustainable. This is company that’s not going anywhere, other than up.

And like BAT, they have an incredible Stock Rank in the 90s (of 100), cheap PE ratio for their industry and a cheap EV to EDIBTA ratio. In fact, BAE is more cheaply valued than all but one of its international peers in the defence sector.

Essential Retirement Stock #3 – National Grid (NG.)

National Grid is the definition of a stock with an Economic Moat. How could it have any competitors? It owns pretty much all of the electricity delivery networks in the UK.

Its cables, pipes and pylons criss-cross across the country, an essential part of the system that delivers power to all our houses and businesses: from power source, to lightbulb.

National Grid enables our economy to function. We’d go so far as to say that without the assets it owns, there is no economy. That’s a big tick for Essential Industry.

Its cables do not discriminate between green power and dirty power either – it is transporting electricity, which makes your TV work the same no matter the source. This means dependable revenue and stability for its share price.

That said, work is constantly ongoing to keep the network fit for purpose in a cleaner energy future, and to keep expanding the grid. It’s selling off its gas pipelines and buying up more electricity assets in recognition of the move away from fossil fuels.

Projects include 24 miles of new tunnels deep under London to ensure reliable electricity supplies for the next 120 years; it’s also just finished a new 3-mile tunnel under the River Humber to transport 25% of Britain’s remaining gas needs.

They’re also building the world’s longest undersea electricity cable to connect the UK to clean hydro power direct from Norway’s fjords, and a boat load of new revenue for its shareholders.

It has operations in the US too in New York and New England to diversify its income streams – in fact 45% of its operating profits came from its US operations in the year to March 2021.

On the face of it, National Grid has ridiculous levels of debt, at 18x its net profits. But it’s not a normal business model – its revenue is completely steady and predictable, and the company’s services will be required for many decades, even centuries to come. It has no liquidity problems as a result of its debt, with average current and quick ratios and a decent interest cover.

Dividend yield is rock solid at over 5% and forecast to grow, with dividend per share creeping up and forecast dividend cover expected to be comfortable.

It’s probably not a great time historically to buy into this stock, with an average PE ratio, and a really bad EV to EBITDA ratio relative to its industry.

But can we really compare National Grid to any other company? It’s got a monopoly in the UK – and there’s nothing else quite like it.

Frankly, this is one of those times when the price shouldn’t really matter too much, as long as the dividend yield is acceptable to you, which at 5%+ it likely will be. This stock is one to hold forever and grow fat on the dividends.

Who Wants More Stocks?

If you liked this post and want even more stocks, then let us know down in the comments here or over on YouTube. There were too many stocks to cover here and give proper justice to them all.

Or, filter for the best stocks using the tools on Stockopedia. If you want to expand your portfolio of UK dividend stocks, go grab yourself a Stockopedia subscription and start digging. Remember, the first 14-days are free with our special link and it’s 25%-off thereafter.

What do think are the best stocks to retire on and why? Join the conversation in the comments below!

Written by Ben


Featured image credit: Matt Gibson/

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