An 8-Step Plan For Surviving A Crash (& Making Huge Profits From It!)

Whether or not the next big crash is just around the corner, is years away, or is happening right now, you can’t do much about it. You can’t prevent it; you can’t predict when it will happen, or by how much the markets will fall.

All you can do is take steps to ensure your portfolio survives; and thrives.

In this post, we want to share with you our 8-step plan for surviving a market crash, that we’ll be following. Not only should you survive it, but come out far richer than you were before. Let’s check it out!

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Pre-Crash Step 1: Portfolio Health Check

This step involves getting your house in order as much as you can before the proverbial hits the fan. First, check your holdings are not too heavily weighted towards any one industry or worse, one company. In 2008, the banking sector’s neck was on the line. In 2020, it was hospitality and travel.

Maybe the next crash will be tech. Or energy. No-one can know beforehand, so you just need to be well diversified.

If you can’t withstand a downturn because maybe you’re approaching retirement, you can even build a portfolio that is designed to weather bear markets. You can buy defensive stocks, many of which pay dividends; hold more government bonds; own gold; or buy an annuity. The trade-off for this safety is that these portfolios are likely to underperform in bull markets.

You could for instance hold a chunk of your portfolio in the Xtrackers MSCI World Consumer Staples ETF (XDWS), with an OCF of 0.25%. This filters for large & mid cap developed world companies which provide goods and services considered essential. Look at the top holdings: these guys aren’t going anywhere in a recession. People still need to eat, wash, and smoke regardless of the economy.

It’s common amongst stock investors to apply stop-losses to their shares. A stop-loss will automatically sell your shares if the market price falls below the stop-loss price you set.

But when the market crashes, all of your stocks will likely go down regardless of their individual fundamentals, including your defensive stocks like food companies, and broad geographical ETFs that you’d never want to sell. We would not use stop-losses on these investments.

Pre-Crash Step 2: Plug The Holes In Your Home Finances

Be sure you are comfortable enough with your home finances that you wouldn’t feel the need to have to sell your investments during a crash to pay the bills.

If that sounds like you, maybe sell some positions while the sun is shining, so you don’t have to do it mid-storm.

Or better still, long-term you could even structure your career so as to have a recession proof income, such as by becoming a doctor or a teacher. A stock market crash often comes hand in hand with recessions and job losses, so consider if your job is essential.

Step 3: When The Crash Comes, Do Nothing.

So, you turn on the news, and the markets are crashing. Everyone is selling, banks are withholding credit, and companies are going bust left, right and centre.

The best thing you can do (other than breathing into a paper bag) is nothing. At least not immediately.

Crashes typically take months to hit the bottom – you have lots of time to think before you act. The stock market crash of 2020 took 33 days to fall by 34% from the all-time-high to the bottom. Plenty of time to come up with a plan of attack.

But the Corona Crash was a flash-in-the-pan compared to the much more serious stock market crashes of the modern era. The Dotcom Crash took two years to climb down from the pre-crash high to the bottom, from Aug 2000 to Sep 2002. And the Subprime Mortgage Crisis took one and a half years from Oct 2007 to Feb 2009.

If you’ve been building up a large investment pot over many years, a hasty decision to sell when the markets are down could set your portfolio back by years or even decades. There are some events that you just can’t come back from. So, take your time, do nothing in haste, and move on to Step 4.

Step 4: See Through The Noise

The grim-faced commentators on the news will be reporting the crash from the assumption that their viewers have just lost a lot of money, and many will have done, because in a panic they foolishly sold their investments, even their diversified ETFs, and realised their losses. They saw the market plummeting and thought they’d better do something.

But you chose to do nothing. You held the line. You realise that you own just as much of the world economy with your global ETFs now as you did the day before the crash – it’s simply that the world is now temporarily worth less. All is well. You can move on to Step 5.

Step 5: Manage Leverage On The Way Down (If Applicable)

If you’re using any leverage to invest, you’ll no doubt have been making epic returns during the good times, but when the market is crashing we’re willing to bet your fingernails get bitten almost to the bone with panic.

If you are using leverage to invest, keep a close eye on it during a downturn that it doesn’t balloon out of control, and be ready to deleverage if need be. Adding new money monthly as you earn it during a lengthy recession is one way to do this.

Selling leveraged positions in a downturn is usually an extremely costly decision because you’re selling at a magnified low. Leverage enhances price movements in both directions.

Step 6: Buy, Buy, Buy!

Once you’ve composed yourself, you need to try and see the crash as we do, which is as a major opportunity. Unless you’re about to retire or are really highly leveraged, a stock market crash is about the best thing that could happen to you.

A young investor who sees their £10,000 portfolio slashed to a £5,000 portfolio in the mother of all crashes should pop open the champagne – so long as they did their prep. £10k is also largely irrelevant in the grand scheme of things, as one day presumably you’ll be counting your portfolio in the hundreds of thousands, and the buying opportunity is more important.

A falling portfolio doesn’t matter if you’re not about to retire.

That’s stuff which you bought in the past, and as long as the investments were high quality and well diversified it should one day recover back to its pre-crash price and then some. What matters is what you do now, and with prices at irresistible lows, it’s time to go all-in and buy up as much of the world’s assets as you can while they’re on a fire sale.

You likely won’t ever get a better buying opportunity in your lifetime.

We drip-feed any spare cash into the market as it’s earned monthly, called pound-cost averaging. It’s the right thing to do since trying to time the market means cash lies around potentially for years making no returns – but pound-cost averaging means there’s unlikely to be any spare cash available for investing when a market crash comes along.

We know this isn’t everyone’s cup of tea, but we’ll be better prepared for the next crash now because we know a lot more about available sources of credit for investing – in other words, using leverage.

Any new leverage that you take out while prices are cheap is a potential opportunity to make some killer returns, as and when the markets recover. This is not an excuse to overstretch yourself – only use leverage if you understand the risk.

Step 7: Rebalance

If you invest in a range of asset classes like stocks, bonds, gold, property and so on, a significant crash in the stock market is a good time to rebalance your portfolio.

In a crash, bonds and gold are likely to have shot up in value, while your stocks and property will be valued very cheaply.

Let’s keep it simple and say your portfolio was made up of 70% stocks and 30% bonds before the crash. Market values may well have shifted such that your stocks now make up 40% of the value of your portfolio and bonds 60%.

In this case, it’s logical to sell half your bonds, and use the proceeds to buy stocks. You now have many more stocks to take advantage of the market climbing up again. The bonds have already done their job on the way down.

Step 8: Don’t Worry About Missing The Bottom

If you missed out on the bottom and have spare cash to drop into the market, don’t fall into the trap of thinking you’ve missed your chance, hoping for a double-dip that never comes.

It’s guaranteed that many of your mates down the pub will be doing just this.

They think it’s only worth investing at the very bottom, and since they missed their chance, they’re now waiting for it to happen again. But it probably won’t. Don’t worry about not getting the perfect price – a good price will more than do.

Don’t Be Like Everyone Else

The reason people lose money when the market crashes is that they panic and sell. If you’re investing in highly diversified index funds or similar, all you really need to do is hold your nerve and do nothing, and you won’t lose money long-term.

But we intend to do better than that and use crashes as springboards to bounce our portfolios to new heights, and to do that all we need are these 8 steps.

How are you preparing for the next crash, or are you just ploughing on regardless? Join the conversation in the comments below!

Written by Ben


Featured image credit: TeodorLazarev/

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9 Things Idiots Do With Money. Don’t Do This.

We’re looking at 9 things idiots do with money. By avoiding these blunders, you will be more financially comfortable, in control of your financial life, and dare we say it – happier.

Please don’t hate on us if you’re doing many of these yourself. We’re obviously using the word idiot in a light-hearted sense, and rest assured that we ourselves have done some of these foolish things with our own money.

There’s a wide range of silly things that people do with their money and in this post we’ve got many different angles covered – from terrible spending habits, saving and investing fails, general finance mistakes, and property mishaps. Let’s check it out…

As always don’t forget to grab your free stocks and free money when you sign up to a number of investing platforms and financial services. Check out the Money Unshackled Offers page, linked to here.

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#1 – All-In On Bitcoin, Tech Or A Single Stock

Although diversification must be one of the most talked about investing concepts, it amazes us just how few people actually diversify properly. Our guess is it’s because diversification is totally misunderstood.

These people tend to throw way too much of their money into Bitcoin, Tesla, or the tech industry, or whatever else has done well recently and give no second thought to a properly diversified portfolio. We know people that are 100% invested in Bitcoin – which is utter madness.

FYI, we’re not hating on Bitcoin. But this seems to be the one asset that even your typical “average” person seems to be investing in, with no knowledge of portfolio diversification, nor of investing generally. The same can be said for anyone who is only invested in a handful of stocks.

Many people hate on diversification believing it lowers returns. Do diversification incorrectly and yes, you will get a worse return – often called diworsifcation!

Diworsification occurs from investing in too many assets with similar correlations that add unnecessary risk to a portfolio without the benefit of higher returns. However, diversifying properly has been said to be “the only free lunch in investing” because an investor can potentially achieve greater risk-adjusted returns.

#2 – Paying Off Their Student Loans (UK Only)

This point only relates to UK student loans as the student loan system here is very unique in that what you pay on a monthly basis is determined by your earnings, not the amount of debt you have. Only in a few specific circumstances is it worth paying off your student loans early.

Most student loans get written off after 25 or 30 years depending on the plan, and most graduates who started uni in or after 2012 will never pay off the debt before it gets written off, so paying off early could be a costly mistake.

Secondly, most people borrow money throughout the course of their lives. They might borrow with a mortgage to buy a house, a loan to buy a car, a business loan to start working on their dreams, and in too many cases they carry very expensive credit card, store card and overdraft debt. It doesn’t make sense to overpay cheap student loan debt, to then have to take out other debt on normal commercial terms later.

#3 – Overpaying Their Mortgage

A mortgage is amongst the best type of debt you can ever have, as it has a relatively low interest rate, and is super long-term (meaning your monthly capital repayments are small compared to the size of the debt). When you overpay your mortgage, you can’t easily get that money back.

Paying down the mortgage early might knock some time off the length of your mortgage-term and the total spent on interest but that’s money that could have been invested and making even more money. For instance, it could be invested in the stock market at an 8% average annual return. You can always overpay your mortgage in later life, if you really wanted to, after you’ve built up some sizeable wealth first.

Ben once whacked £1,000 into his mortgage as an overpayment when he was 27. He’d just bought his first home, and thought it was the right thing to do. Luckily, he soon realised the error of his ways before he sunk any more cash into what is effectively a glorified no-withdrawal savings account.

#4 – Fail To Insure Their Biggest Asset

Insurance always feels like a waste of money when you don’t ever claim on the policy but when the unthinkable happens, you’ll be glad that you were pro-active with your emergency planning.

Financial idiots think that it will never happen to them. They will never get a debilitating illness leaving them unable to work. They will never die at a relatively young age leaving their loved ones unable to cope financially.

Risk statistics - Income Protection Insurance

Here are the risk statistics for a 25-year-old male during their working life. Effectively 1 in 2 people will face a disaster!

We don’t think it’s smart to insure low ticket items like mobile phones but for the big stuff that would shatter your finances if they were to occur, it’s only logical to take out a policy. Everyone rightly does this with house insurance and car insurance. But why not insure your biggest asset? You!

We both have income protection insurance – with Ben’s costing just £17 per month – and he also has life insurance to help his wife and child in case he was to die prematurely.

A while back we did an entire video on income protection insurance specifically aimed at those who want to lock-in their financial freedom today, linked to here – it’s definitely worth checking out!

We also have a little more info on lifestyle insurance here, and you can get a quote from the same company we use ourselves, here.

#5 – Unintentional Saving

A fairly new saving technique that is popular with younger people and many innovative finance apps have introduced is a feature known as round-ups. This is where every time you buy something, the app will round up the price to the nearest pound and automatically save or invest the change.

Savvy savers and investors do not use gimmicky services like this because they know exactly what they can save each month from day 1 as they have budgeted for it – their saving is planned for and intentional.

Secondly, the act of saving should not be linked to how much you spend. A service that encourages you to spend more is not good for your wallet.

And thirdly, from the round-up services we’ve seen, they don’t collect the spare change as and when the transaction happens. Instead, the money is collected weekly or every 2 weeks, so you will have random amounts of money leaving your account when you’re not expecting it – obviously not good for sensible budgeting.

If you are incapable of saving anything and this is the only way that you can put money aside, then don’t let us talk you out of it, but just know it’s far from a sensible saving plan.

#6 – Don’t Prioritise Spending Where It Matters Most

We’re probably all guilty of this at times – I know I certainly am. The fact of the matter is that for the majority of us money is a limited resource, so we need to allocate it to the parts of our life that is most important and where we get the most value. Essentially, don’t spend a lot of money on stuff that you will barely use.

People spend about 8 hours a day or a third of their life in bed, so it makes financial sense to spend money on a good mattress and a good pillow. Recently, I bought an expensive pillow made from Nordic Chill fabric. God knows what this is but now I’m more likely to get frost bite than I am to get hot and bothered in the night. That’s a good thing by the way: I was previously always flipping the pillow over looking for the cold side!

Conversely, Ben may as well have thrown money down the drain when he bought some expensive outdoor furniture, that he almost never uses. Foolishly (his words), he spent more on this than he did on his sofa which he probably sits on every day, compared with the outdoor furniture that he sits on just a handful of times a year in the UK’s glorious weather.

A common money saving tip is to cancel your gym membership, but for some people this could be some of their most worthwhile spending. A gym membership allows them to stay fit and healthy, and for some is a great way to socialise with likeminded people.

How many people are working from home and still sitting on that backbreaking kitchen chair? For them it would probably be a good idea to open the wallet and buy a comfortable office chair. This is somewhere you’re sitting for 8-hour days after all – you only live once, and you may as well be comfortable.

Generally, you want to spend good money on stuff you will use extensively except when cheaper alternatives will offer a similar experience like a used car, rather than a brand new one. And don’t spend much on the stuff that doesn’t matter to you. Sounds obvious but everyone seems to be spending in the wrong places.

#7 – Buy The Biggest House They Can “Afford”

Financial idiots buy the most expensive house they can afford, and to be clear we’re not talking about someone who earns an average salary or less and is forced to buy an expensive house. For low earners they may have little choice – it’s either an expensive slum (as is the state of the sorry UK housing market) or it’s never getting on the housing ladder.

We’re saying that higher earners who chose to cripple themselves with mortgage debt in order to buy the most expensive house they can afford is idiotic. They believe (and are probably right to) that the housing market will continue to rise, and they will benefit from huge leveraged gains.

But your home is not really an asset like an investment is, as your home takes cash out of your pocket. It would make far more financial sense to buy the house they want that is comfortably within their means, and use what’s left of their cash to invest elsewhere.

For example, if these people want to benefit from the housing market, then with the extra money they now have they could invest in BTL property, which has the benefit of putting cash into your pocket and still benefiting from the same leveraged house price appreciation.

#8 – Long-Term Mortgage Fixes

It amazes us that nobody seems to be critical of long-term mortgage fixes such as 5 or 10 years except us. In some rare cases it might make sense, but we can’t think of any. Long-term mortgage deals are a bad idea because life is too unpredictable. These products usually come with higher interest rates than short-term fixes, and with early repayment charges of around 5%. For example, that’s a £15,000 fee on a £300,000 mortgage. Outrageous!

With a timeframe of 5 years anything could happen that forces you to sell the property and incur the wrath of the Early Repayment Charge. You might break up with your partner, you might lose your high paying job, you might want to move up the property ladder, you might want to relocate, you might want to release equity… it could be any reason.

It might seem like locking in the interest rate is a good idea right now but that’s only true if somehow you’re immune to all of life’s curve balls.

If you’re concerned about sudden interest rate hikes, we don’t think this is likely. The Bank of England, who sets the base rate, knows that any sudden large increase would destroy the economy as millions of homeowners would be in deep water. We expect interest rates to rise slowly, giving homeowners chance to circumnavigate any problems.

#9 – Don’t Save Enough For Retirement

The UK’s private retirement savings are in crisis. A few years back the government did a great service and introduced auto-enrolment for pensions. Many good companies were already offering pension plans to their staff, but many weren’t, so auto-enrolment forced these disgraceful companies to do the same.

The problem is auto-enrolment is extremely misleading and even on the government’s own site we didn’t find the truth. Everyone believes that they pay in 4% of their earnings but the hidden truth is that only 4% of qualifying earnings is paid into a pension. This is topped up to 5% with tax relief.

Qualifying earnings is the name given to a band of earnings that are used to calculate contributions for auto-enrolment. For the 2021/22 tax year this is between £6,240 and £50,270 a year. This means on a £25,000 salary you only make pension contributions based on £18,760.

Earning £25k, you would only save £62 a month with a 4% contribution, your employer would only pay in £47, and you get less than £16 tax-relief, giving a total of just £125 per month. According to that would give an inflation adjusted pension pot of just £100k after 47 years.

That’s better than nothing but not much for a lifetime when you thought you had been saving diligently. You would burn through £100,000 in no time. Most studies suggest you need closer to £400,000 to live a £25,000 per year lifestyle in retirement, and that is assuming the state pension still exists to top it up, which is a big if!

Things get far worse when we consider other savings. According to, the current average savings pot of someone in the UK is £9,633. Those in the younger age brackets have considerably less savings. One shocking figure is that 42% of those aged between 25-34 have stored away less than £1,000. This is financially irresponsible and a ticking time-bomb.

What else do financial idiots do with their money? And be honest – which of these have you done? Join the conversation in the comments below.

Written by Andy


Featured image credit: photoschmidt/

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Why Stocks Soared While The World Burned | The Covid Bull Market

For a couple of years that have been so bad, it’s hard not to wonder why the stock market has been so good.

As lives were lost around the world, and millions of people were put on the unemployment list due to actions taken to tackle Covid-19, the global stock markets soared – none more so than the S&P 500, which for the last year has acted as though it is immune to bad news.

Everywhere, there is chaos.

  • On the streets, tensions about race are boiling over.
  • On the M25, selfish eco-protesters bring Greater London to a halt in an ever-escalating war on climate change.
  • Australians are beaten by police for leaving their homes and shot at with rubber bullets.
  • In the White House, Biden schemes to raise the corporation tax rates not just in the US, but on companies around the world in a G7 deal.
  • And lockdowns everywhere have inflicted irreparable damage to businesses.

Meanwhile, millions of investors continue to plough money into stocks because the charts keep moving higher and higher. The difference between the actions of the stock market and the reality of real life has rarely been starker than in 2020 and 2021.

Today we’re looking at the various reasons why the stock market continues to soar in bad times, and the lessons we can learn from some of the stocks with the most interesting stories to tell from the pandemic.

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The Bulletproof S&P 500

The market was rocked in March 2020, as stocks plunged for about a month, but then something strange happened.

Even as the media was losing its head over the covid-19 virus (and this has not changed 18 months later), and as America burned from street protests, and as millions of people were laid off and businesses shuttered due to government lockdown policies – the market just recovered and then boomed as though nothing had changed

An outgoing president seemingly refusing to accept the outcome of an election (supposedly the market’s nightmare scenario), and then the Capitol building being stormed in what the media reported as a “coup”, did not stop the S&P from soaring. At time of filming, it’s just below an all-time-high at around 4,500, well off the top of this chart

It’s a far cry from the start of the pandemic, when billionaire hedge fund manager Bill Ackman went on the airwaves to warn that “hell is coming”. Maybe it did for many – but not for him, nor for investors generally.

How can it be that food banks are overwhelmed and people can’t afford heating or even housing, while stocks are hitting all-time highs? Let’s now look at what can be learned from the bull market of the last 18 months.

Lesson 1: What Goes Down Doesn’t Always Bounce Back

Investors, like everyone else, were initially in denial about the realities of Covid-19 when it first began to take hold globally in early 2020. Indeed, in Jan and Feb 2020, the market continued to record all-time highs.

What we saw then was that while stocks often rise slowly, they also fall fast. Once the world caught on to what Covid-19 might bring as countries like Italy were ravaged, stock prices collapsed, wiping off 34% percent of the value of the S&P 500 from mid-February to mid-March.

We’re all familiar with the sudden rebound that then happened for most stocks, but some were not so lucky. Exxon Mobil is an example of a stock that fell, and stayed down.

While the stock market as a whole enjoyed a bull run in the second half of 2020, fossil-fuel energy companies floundered, after a brief hopeful recovery that I took full advantage of at the time, telling investors to Buy, Buy, Buy!

The woes of Exxon and the Oil & Gas industry teach us the importance of not holding faith in a commodity or industry just because it’s previously always done well.

A unique unforeseen event like a global lockdown can change everything. People didn’t need Oil & Gas when they were not travelling to work or going on holiday, but the resulting fall in share prices were perhaps short-sighted –  oil prices are slowly coming back, though they have not yet reached their pre-crash peak.

Lesson 2: Central Bankers Wield God-Like Power Over Stock Markets

At the start of the crash, no-one had any idea of what the future looked like, how deep the crash would be, or how long it would last for.

But extraordinary measures taken by America’s Federal Reserve and similar central banks in the UK and elsewhere reassured financial markets and investors that major corporations would not be allowed to fall apart.

Most analysts point to the actions of the Fed in the US as being the most important factor in restoring confidence during market turmoil, since America holds around 55% of the value of the world’s companies and many economies around the world are impacted by the success or failure of America.

In March 2020 they announced a series of big support packages, including saying they would buy both investment-grade and high-yield corporate bonds (basically, it would lend to businesses, whether they were risky or not). Stock prices immediately about-turned and started marching upwards.

In the words of Invesco’s chief global market strategist, “The Fed can be very, very powerful, almost omnipotent, when it comes to the stock market.” Some companies were able to capitalise on the soothing words of the Fed more than others.

Boeing stock didn’t recover at first, as questions still hung over the viability of its operations, but with the markets in a giddy ecstasy over the Fed’s interventions, Boeing was able raise $25bn of cash from the markets in a corporate bonds issue, allowing it to avoid the need for government help.

Boeing’s smashing success in getting itself out of a hole financially, and the resulting rise in its share price, was mirrored by a few other companies including Nike, who’s stock price gained 35% in a week following a $6bn bond issue. Its stock price has not stopped climbing since.

Stake, an app that specialises in trading US stocks, are giving away free stocks to new customers – including Nike stocks, which are currently trading at around $150 each. If you want to invest in US stocks and pick up a free share in one of Americas great companies, just follow the link here and fund your account within 24 hours.

Lesson 3: Some Bulls Run Faster Than Others

The S&P 500 bottomed out 33 days after the crash started, and since then has continued to climb, powering ahead of its pre-crash highs.

While growth was mostly strong across the board, some industries did much, much better than others. Technology companies – which make up a significant chunk of the value of the stock market – soared on the back of remote working and the need for better entertainment and communication tech in the home.

A representative stock of the tech boom is Apple. It’s responsible by itself for much of the growth of the S&P 500, since Apple makes up 6% of the value of the index and has itself grown by 156% since the bottom of the crash.

The point here is to be highly diversified, so you own the industries of the future, whichever they turn out to be. You can’t know before a major economic event what the specific circumstances behind it will be.

This time it was a virus, which killed oil and promoted tech. The next one could be a war that promotes defense stocks like Boeing, or a shortage of an essential raw material that promotes mining stocks. Or an event we can’t even imagine.

Lesson 4: ‘Temporary’ Keeps Being Redefined

Back in spring of 2020, the markets were confident that within a year, the pandemic would be over. Of course, it wasn’t.

But the general attitude remains that within months, life will be back to normal. People who believe the pandemic will be over within 12 months have been in a majority throughout the pandemic (which has in fact been ongoing for well over a year), other than a brief couple of months of pessimism prior to the vaccines being announced.

Even in June 2021, more than half the UK population believed everything will be back to normal within the next 12 months.

This optimism for a speedy return to normal has run throughout the pandemic.

American Airlines, representing the struggling aviation industry, fell and flatlined after early signs of recovery when it became obvious in early Summer 2020 that summer holidays would, after all, be cancelled.

But the vaccines, announced in November 2020, led to a steady climb of recovery, until Spring 2021, when the markets were faced with the cold hard reality of another summer without travel.

What the story of the airlines underlines is that stock prices swing on human emotion – when things looked hopeful prices rose, and when looked bleak they stagnated or fell.

No doubt if there are lockdowns in 2022 people would be hailing 2023 as the year when things get back to normal!

Lesson 5: 2021 Could Have Looked Very Different

The lucky timing of the vaccine announcements in late 2020 gave the stock market a booster shot of confidence that 2021 would be an incredible year of reopening and growth, with markets going into overdrive again from that point onwards.

The company responsible was Pfizer, the pharmaceutical giant that released the first covid vaccine. Interestingly, the news in November 2020 that Pfizer had come along to save the world only resulted in a temporary increase to its share price. It’s only now, in late 2021, that Pfizer’s share price is benefiting from its ongoing role in the pandemic.

Companies that provide the people with what they want tend to be rewarded with share price growth. And in a world where viruses may now cause more havoc, the desire to own big healthcare companies in your portfolio has surely grown.

Lesson 6: Where America Leads, The World Follows

It looks like the US is poised to emerge from the pandemic before much of the rest of the world, by spending its way to an economic recovery that many less affluent countries cannot afford. But opportunities remain for economic growth longer-term in the emerging markets, which right now are being ravaged by the pandemic.

Stocks like Nvidia, whose revenues come predominantly from emerging economies, may benefit from an economic recovery in those regions. The emerging markets have faltered in 2021 while the developed world led by the US has seen runaway growth.

With vaccines becoming more and more available, we think emerging markets will catch back up with the developed world, and companies with strong exposure to the emerging markets may stand to do rather well in the coming years.

Lesson 7: Where Else Could Investor Money Go, Anyway?

With interest rates, and hence bond yields, so low, investors don’t really have a more lucrative alternative asset class to put their money in. This is helping to keep the stock market buoyant.

As long as interest rates stay low, it’s stocks all the way!

It’s Hard To Think What, If Anything, Will Spook Investors

A big one could be when taxes are inevitably raised both in America and in the UK. Increasingly our governments are going after investors’ wealth. Biden in the US is keen to tax capital gains and corporate profits to the hilt, and Boris in the UK has recently increased dividend taxes, and said corporation taxes will increase to 25%.

Invesco comments again, that they “think on a short-term basis, we could see a sell-off if there is a risk [of a tax rise] that appears imminent, but we have to recognize that all current risks are being cushioned by this incredibly accommodating Fed. … It’s a powerful upward force on stocks that can counteract the downward forces.”

The Stock Market Is Not The World

The past 18 months have been a wild ride for both the economy and the stock market, but in different directions.

It’s clear that the stock market is not representative of the whole economy, much less society. The stock market represents one piece of the economy — long-term future corporate profits — and so long as there is confidence in those being high, the stock market will be too.

What’s your view on the rising markets, and will stocks continue soaring? Join the conversation in the comments below, and don’t forget to bag that free stock with Stake, worth up to $150!

Written by Ben


Featured image credit: Adirach Toumlamoon/

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The News: EFFing Crisis | Shrinking Rental Market | Student Loan Repayments To Increase

Hello and welcome to Money Unshackled News. The headlines:

  • EFFing Crisis: Energy bills set to rise by £400, empty shelves at the supermarkets set to ruin Christmas, and no fuel at the pumps.
  • 15% global minimum corporation tax rate to be imposed. Are consumer prices set to rise as a result?
  • US bank JPMorgan Chase launches in Britain offering 5% interest on savings.
  • Average salary per head at Vanguard is revealed as a whopping £195k.
  • Crypto-trading hamster is now beating world’s top investor Warren Buffett and the S&P 500.
  • Deutsche Bank predicts a 5-10% stock market correction before the year end. Are you prepared?
  • Britain’s total rent bill falls by £5bn despite rising rents as more young people stay living with parents.
  • Twitch hack has revealed how much revenue the platform’s biggest streamers make.
  • And finally, Rishi Sunak reportedly plans to slash student loan repayment threshold, costing graduates billions.

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 the like button and let us know down in the comments. Let’s check it out…

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‘EFFing crisis’

Brace yourself for the ‘EFFing crisis’ this winter – that’s “E F F”, for energy, fuel and food. Energy bills set to rise by £400 for millions of households in the spring as gas price soar to record highs!

Food and fuel shortages are set to continue for months ahead with prices skyrocketing. There are rumours circulating that Christmas will be cancelled due to an escalating food crisis with many families having to go without Turkey or pigs in blankets this year.

More serious than that though is the surging cost of wholesale gas, which is pushing up gas and electricity prices across the country. According to the wholesale gas price is up by 300% year-on-year.

Consumers have been somewhat protected from an immediate serious price hike due to the energy price cap. The cap was increased on 1 October, meaning about 15 million households face a 12% rise in energy bills. However, the Energy regulator, Ofgem said the cap will go up again in April, the next time it is reviewed. The Independent are reporting that bills will be going up by a further £400!

The energy price cap is another failed model by the UK government. It is designed to control the amount that suppliers can charge customers for each unit of energy, making sure prices are fair and reasonable.

This sounds good in theory but it’s destroying the entire business model of energy companies who are now being forced to sell energy at a cheaper rate to their customers than what they can buy it for themselves in the wholesale market.

Energy companies have been dropping like flies and Omni Energy predicts it will be the 13th UK provider to go bust. The Lancashire post reports that as many as 60 energy companies could collapse before the year is over, reducing the number of suppliers to as few as 10. And then the government will no doubt allow the prices to increase when it’s too late, by raising the cap after these companies have gone bust.

Martin Lewis, consumer champion, has criticised the government calling them short sighted. Allowing the energy sector to be decimated in this way will have long-term effects on the cost of energy, since good competition drives down prices.

Global Minimum Corporation Tax Imposed

Ireland scraps low corporation tax to fall in line with global peers according to City A.M. Ireland is set to hike its competitive corporate tax rate from 12.5% to 15%, as the country signs up to the global tax reform. The G-7 and G-20 nations agreed earlier this summer to join forces to tackle tax avoidance and harmonize rules across the globe.

Almost 140 countries have taken a decisive step towards forcing the world’s biggest companies to pay more tax, with plans for a global minimum corporate tax rate of 15% to be imposed by 2023.

While many will rejoice, this is bad news for the consumer as price rises will surely follow.

The Republic of Ireland had one of the most attractive rates for corporations in the world at 12.5% and had, until now, refused to join the plan. Its low tax rate had previously drawn in tech giants like Apple and Facebook, who both centre their European operations there. Despite the tax hike in Ireland, it still leaves their tax rate significantly better than in the UK, which is set to rise to 25%.

We here at Money Unshackled have long campaigned for low corporation tax here in the UK, arguing that it attracts the biggest and best companies and encourages entrepreneurship. Ireland has been a shining example of this. As an outsider looking in it would seem that Ireland has been coerced by more powerful countries to conform to their will.

If this was a company working with another company in cahoots to set prices it would be labelled as collusion and would be illegal. Seems like collusion isn’t criminal when it’s between governments.

JPMorgan Chase Launches In Britain

In less depressing news, US bank JPMorgan Chase has just launched in Britain with an online current account. According to CNBC, it marks the first international expansion of JPMorgan’s consumer bank brand in its 222-year history.

It offers customers 1% cashback on most spending for a year, 5% interest on savings made when you round-up purchases, and fee-free debit card use abroad. Although 5% interest sounds epic don’t get too excited about this particular feature. The fact that it only applies to round-ups means you’ll be getting 5% on next to nothing, not your entire savings.

It’s hard to care about current accounts as they are all so similar, but at launch, JPMorgan Chase do seem to be attempting to disrupt the market with some industry leading features. It’s fee-free debit card use abroad will be much appreciated now that travel is opening up again, and it also gives you the ability to split your current account cash into different ‘jars’, which we think is an awesome feature.

These jars have their own separate current account number, and you can use your debit card to spend from the account of your choice by selecting which account to use via the app when you make payments. The idea is to help people with budgeting and saving. We both currently use spreadsheets, and this might be perhaps the first time we can close the spreadsheet for good.

Average Salary at Vanguard Revealed

If you’ve been thinking of a career change recently then you might want to consider applying for a job at Vanguard. According to efinancialcareers, the average pay per head for the 510 employees in Vanguard’s European business is £195k. This was an increase on the £160k average per head that Vanguard paid in the previous year. If anyone from Vanguard is watching, note we are both available… part time only of course.

Crypto Hamster Beats The World’s Top Investor

A crypto-trading HAMSTER is now beating the world’s top investor Warren Buffett and the S&P 500. Since June, the hamster is up by about 20%. The Germany-based anonymous owner of the furry investor describes him as the “world’s first crypto hamster”.

The hamster runs on an “intention wheel” that chooses one of 30 different cryptocurrencies to trade, and the buy or sell decision is determined when the hamster runs through one of two “decision tunnels”. Special thanks to The Sun for this important news.

Stock Market To Fall 5-10%

In stock market news, Deutsche Bank predicts a 5-10% stock market correction before the year end, reports Yahoo Finance. In the lender’s latest survey of more than 550 market professionals, it found that 58% of respondents forecast a change of up to 10%, a cautious sign that the bull run could come to an end.

The survey, which was conducted between 7 and 9 September, found that the biggest risk to the current relative market stability was new variants of COVID-19 that bypass vaccines, with 53% of those surveyed most concerned about this factor. This was followed by concerns over higher-than-expected inflation, weaker-than-expected economic growth, a central bank policy error, and waning vaccine efficacy.

Other causes for concern included geopolitics, fiscal policy being tightened too quickly, a tech bubble bursting and worries about the debt burden. In short, there seems to be a hell of lot to be worried about right now, but as always, we will be continuing to drip feed as much as we can into the market and riding out any temporary declines.

Britain’s Rental Sector Shrinks By £5bn

In property news, Britain’s total rent bill falls by £5bn despite rising rental prices, as millennials jump on the housing ladder… and Gen Z stays at home with Mum and Dad, reports thisismoney.

As everyone is already aware, individual rents have been massively increasing, but in what is some very surprising news, the total rental market across Great Britain fell by 8% to £57.3billion in 2021, down from a peak of £62.4billion in 2018, according to new research by Hamptons International.

This chart shows the total amount of rent paid by each generation by year. Millennials (that’s those born between 1980 and 1996) dominate the rental market right now but is dropping sharply as they start to buy their own homes. However, the problem is that Generation Z (that’s those born between 1997-2012) are not replacing them fast enough causing the rental market to shrink. Generation Z may skip renting altogether and only fly the nest to buy. The rental sector is likely to continue shrinking as a result.

We’re both shocked by this shrinking rental market as we had just assumed that it must be growing due to an increasing population and extreme difficulty of buying. What doesn’t come as a surprise though is that individual rents continue to rise, increasing 7.4% in August compared to the same month in 2020.

Twitch Hack Reveals Earnings Of Streamers

A recent Twitch hack has revealed how much revenue the platform’s biggest streamers make. Twitch, the videogame streaming platform owned by Amazon suffered a data breach, with information leaked online.

Streamers on Twitch typically generate revenue through advertising, sponsorships and tips from viewers upon achieving certain viewership metrics. Twitch also cuts special deals with its most popular streamers for additional income.

It has been revealed that a Twitch channel called Critical Role is the service’s number one earner, raking in $9.6m (£7.1m). Not bad for playing some computer games.

However, don’t quit your day job just yet. According to the Washington Post, many of the listed top streamers make less than minimum wage. While the big names do indeed make millions of dollars, further down the list of Twitch’s top 10,000 highest paid streamers, payouts drop off steeply, to the point that many are not even making a liveable wage off Twitch alone.

10,000 streamers might sound like a big list and something that you could break into but there are around 9 million streamers on Twitch, so your chances of breaking into the very top ranks are slim at best.

Rishi Sunak Plans To Lower Student Loan Repayment Threshold

Students face huge loan repayments as Rishi Sunak is considering plans to slash the salary threshold for when repayments begin, reports the Daily Mail. Repayments would change from the current £27,295 to £23,000. The National Union of Students said it would be ‘totally opposed’ to such a reduction.

The current student loan system is a farce. Most former students who started uni after 2012 will never pay back their loans due to low earnings and the fact that the average student now graduates owing in the region of £45,000. The government estimates that more than half of the loans will never be paid back. As such, student loans should be considered a tax on education rather than a normal loan.

However, a retrospective alteration to the terms of the repayment threshold would save the Treasury as much as £2billion a year and would cost graduates an additional £386 per year. The NUS said to the Financial Times, ‘The injustice is simply astounding.’

We can’t see how such action can even be legal. Millions of students have taken out student loans based on a set of agreed-upon terms. In no other commercial arrangement can the terms be changed at a later date, so why on earth do the government think this is even a possibility?

How do you plan to make your millions? Will you be following the Crypto Hamster, streaming games on Twitch, or getting a job at Vanguard? Join the conversation in the comments below.

Written by Andy


Featured image credit: Dmitry Nikolaev/

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Best S&P 500 ETF For UK Investors (And How To Choose Yourself)

Hey guys, in today’s post we’re going to help you pick the best S&P 500 ETF to invest in for UK investors. There are many different ETF providers (such as Vanguard, iShares, Invesco, plus many more) each offering multiple S&P 500 ETFs. With so much choice, how do you know which is best?

Should you be investing in accumulation or distributing ETFs? Which fund domicile should you pick? Why does this S&P 500 ETF have a vastly different price to another similarly named one? What’s the difference between physical and synthetic replication? Should you choose a hedged ETF or not? Where do you go to research ETFs?

We’re not just going to tell you what our favourite S&P 500 ETF is because what’s right for us might not be right for you. We’re going to answer all these questions and more to give you the knowledge to pick the right S&P 500 ETF for your portfolio. Let’s check it out…

Alternatively Watch The YouTube Video > > >

To invest in any ETF, you’re going to need an investment platform. If you head over to the Best Investment Platforms page, there we have hand-picked our favourite investing platforms and put together a comprehensive cost comparison table.

Also check out the Offers page to get free stocks worth up to £200 with investing apps like Freetrade and cash welcome bonuses of £50 when new customers sign up to investing platforms like InvestEngine.

Why You Need An S&P 500 ETF

The S&P 500 is the leading index of US companies, making up about 80% of the market cap of the US and about 47% of the world’s market cap. Or in other words the constituents of the index are vital to every investor’s portfolio.

The S&P 500’s popularity as an index also means that there is huge demand by investors, which has led to a price war amongst the companies producing index trackers. As a result, you can invest in an S&P 500 ETF for almost free of charge.

Which S&P 500 ETF Is Best?

Our favourite is the Invesco S&P 500 ETF (SPXP), because it has excellent performance, is enormous with £8bn in assets, and has a rock bottom fee of just 0.05%, tight spreads, is listed in London, trades in GBP, is accumulating – and is synthetic.

This is a very popular ETF, so it is likely that it’s available on most investment platforms. The one downside to this ETF though is the market price, with each share currently priced at around £600.

In these circumstances it can very handy if your investment platform offers fractional investing. InvestEngine is one such app and as mentioned they are currently giving new customers a £50 welcome bonus when you sign up via this link.

Where To Begin Your Research?

First things first, we pretty much start all our ETF research using the ETF screener at It’s a super powerful tool that’s free to use and allows you to filter down on different criteria to find ETFs you can then research further. In this case we’re looking for S&P 500 ETFs, so we can select that index from the dropdown. Bear in mind if you’re looking for a hedged version or an equal weight version these will be listed as a separate index.

There’s big list of ETFs available and actually there’s even more than what is initially shown in the ETF screener because each of these will have multiple listings with different listed currencies and on different exchanges. We exclusively stick to those on the London Stock Exchange and stick to those traded in GBP where we can.

Which Currency Should You Choose?

Each ETF can have several currencies associated with them. Many people are exposed to currency risk without realising it because of confusion when it comes to the currency labels applied to ETFs. Just because an S&P 500 ETF is listed in pounds does not mean you have avoided exchange rate risk between pounds and dollars. This is about to get complicated, but we’ll do our best to clear this up.

Fund currency or base currency refers to the currency that an ETF reports in and distributes income in, which for most S&P 500 ETFs will be in USD. Your investment platform will convert any income you receive into pounds but will likely charge you an exchange rate fee for doing so. More on this shortly.

IUSA listings

Then there is the Trading Currency. Looking at the IUSA ETF as an example, if we look at the Listings section, we can see a bunch of listings on different exchanges and the currency of each. For this particular ETF there are two listed on The London Stock Exchange – one in dollars and one in pounds.

Because your investment platform will likely charge you FX fees you want to go for the one in pounds to avoid that fee. The trading currency has no impact on the returns of the ETF once they have been converted back into pounds.

And finally, there are currency hedged ETFs. These are designed to eliminate (as much as possible) currency risk. Hedged ETFs will normally have the term ‘GBP Hedged’ in their names, but always check the product’s factsheet or webpage to make sure.

Personally, we don’t use hedged ETFs because we think over the long-term currency movements don’t really matter too much. Hedged ETFs are often a little more expensive than their unhedged counterparts but for S&P 500 hedged ETFs they are still excellently priced.

Fund Domicile

Where your ETF is domiciled is super important. Typically, ETFs are domiciled in Ireland or Luxembourg due to tax reasons. Where possible we almost always pick ETFs domiciled in Ireland because Ireland has a tax treaty with the US whereby the dividends paid by US companies are only taxed 15% rather than 30%. But pick a synthetic ETF and that tax comes down to 0%.

Replication Method: Physical vs Synthetic ETFs

Okay so that last point was probably very clear until we mentioned the word synthetic. The goal of each ETF is to replicate its index as closely and as cost-effectively as possible and there are a few different methods that an ETF can use to achieve this.

The first and most straightforward is physical full replication. These literally buy all the stocks in the index, and hence it’s fully replicated.

Another method is Physical Optimised Sampling. This is where an ETF only invests in some of the stocks in the index as they determine this is all it takes to replicate the performance. This might be done to lower costs. In most cases we’ve seen these ETFs will buy the majority of the stocks in the index and sometimes even all of them. They may miss some of the tiny ones that have almost zero impact on the index.

We’re not big fans of Optimised Sampling because you don’t really know what and why certain stocks are missing. Before investing in this type of ETF do check that the past returns are in line with the index by looking at the tracking difference. Any major difference or wild yearly swings should be a red flag. It’s also worth checking the number of holdings in the index by downloading the index factsheet (search google for this) and comparing it to the number of holdings in the ETF. The closer the better.

And finally, there is Synthetic or Swap based replication. The ETF doesn’t buy the exact stocks within the index, instead it owns a different basket of stocks or securities and swaps the return of this basket with an investment bank or banks for the return of the index.

The advantages of doing this is it can be cheaper, and it avoids certain dividend withholding taxes such as those collected by the US. So, in the case of an S&P 500 synthetic ETF, they have a performance enhancement over their physical counterparts.

Typically, the S&P 500 yields 2% and the tax is 15%, so the improvement is 30 basis points every year. That is in our opinion not to be sniffed at and is why this is our favourite method of replication whenever it enhances performance as in the case of US stocks.

However, not all synthetic ETFs are created equal, and they do carry more risk than a physically replicated ETF. If you don’t understand them, we suggest you avoid them. If you’re interested in learning about how synthetic ETFs reduce counterparty risk, here is some bedtime reading.

Distribution vs Accumulation

Either you choose an ETF that distributes the dividend to you or one that automatically reinvests the cash within the fund. With accumulation funds you don’t receive more shares but instead the value (and the share price) of the ETF increases.

If your intention is to reinvest the dividend into the same fund and you’re investing within an ISA, then it makes financial sense to opt for an accumulation fund. S&P 500 funds are very likely to have their fund currency in US dollars and so will distribute their dividends in dollars. Your platform will convert this to pounds and will likely charge you an FX Fee for the privilege.

Moreover, if you have to manually reinvest the income yourself, then you will have to pay the bid offer spread and possibly trading commissions. Long story short, accumulation funds will save you money.

Despite the small savings, if you’re investing outside of an ISA we suggest going with the distributing type because otherwise it can get very complicated for tax purposes. You could end up paying tax twice with accumulation funds. Dividends rolled up into accumulation units are known as a ‘notional distribution’. They are taxable in exactly the same way as income units.

As we invest in ETFs primarily through an ISA, the only time we’d want the dividend paid out is if we needed to live on that income.

UK Reporting Status

You want to make sure your ETF has UK Reporting Fund Status otherwise you will have to pay up to 45% tax on the gains. You can check this on the ETF factsheet and webpage. As we only ever invest in London listed ETFs, all the ETFs we have ever looked at have had UK reporting status but it’s worth double checking.

OCFs, Tracking Difference, And Spreads

ETFs should be very cheap because you’re not paying for an expert fund manager, and S&P 500 ETFs are especially cheap. A good place to start for the least amount of effort is to choose an ETF with a low Ongoing Charges Figure (OCF).

However, it’s important to note that the quoted fee is not necessarily what you pay. ETFs will not match the index return exactly and the difference is known as the tracking difference. The difference between the index return and the ETF return is the real cost that you incur.

That’s the theory. In practice, what we do to find the best performing ETF is to sort them by their 3-year performance on Towards the top happens to be our favourite, the Invesco S&P 500 ETF.

Another thing investors want to keep an eye out for is the size of the spread when you buy and sell. A big spread is bad. A general rule of thumb is that the larger the fund size, the lower the spread due to increased trading volume. Most of the S&P 500 ETFs have billions of dollars of assets under management, so this is probably not a major concern, but it’s definitely something you might want to check for any other ETF.

We check spreads using Hargreaves Lansdown’s website for free and you don’t need to be a customer. Bang in the ticker in the search box and scroll down to the Costs section. The indicative spread is listed here. For our favourite, it is tiny at just 0.03%.

Does The Price Of An ETF Matter?

This is a common question we get asked. The market price of an ETF is not important. What matters, is the percentage change in the ETF price. If the index goes up 10%, you want your ETF to also go up by 10%.

The price of an ETF will usually correspond to its Net Asset Value (NAV). The NAV equals the value of the ETF’s securities and other assets, minus its liabilities, divided by its number of shares.

There’s a great article on that explains it very well, linked to here.

Finding The Best S&P 500 ETF For You

Now that you’re armed with the necessary knowledge you can use the ETF screener on to find the best S&P 500 ETF for you.

The best S&P500 ETFs

Some of you may still feel you need your hand holding, so to finish off we’ve put together this table with our favourite S&P 500 ETFs for various circumstances. The tickers are all for the GBP versions listed in London.

If you’re new to investing and are not 100% sure what you’re doing, we think you won’t go far wrong with Vanguard and iShares. Most of their funds are huge, competitively priced, and are in most cases physically replicated, which many investors feel more comfortable with. The last 2 in the table are hedged ETFs.

What’s your favourite S&P 500 ETF and why? Join the conversation in the comments below.

Written by Andy


Featured image credit: Imagentle/

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

Big NI Tax Rise Rant: How Much Poorer Will You Be?

The UK government is out of money. They’ve borrowed to the hilt to pay for irresponsible spending over the past few decades and more recently to pay for the economically ruinous lockdowns, and with inflation looking to hit over 4% by the end of 2021, interest rate rises are sure to follow.

This terrifies the government: every 1% rise in interest rates would increase the UK’s debt financing costs by another £25bn every year, and it’s already eyewatering at a budgeted £45bn.

With debt exhausted, Boris now turns to taxes to pick up the slack in his ambitious spending plans.

National Insurance is being raised to 13.25% from 12% in just one of many planned tax rises, which the government promised NOT to do in the 2019 election.

It’s a direct tax on workers’ incomes, reducing your monthly take home pay and effecting all families, especially those with smaller disposable incomes.

Raising taxes just as a cost-of-living crisis is taking off must be a bad joke – it will result in the loss of a few extra hundred quid each year that you already don’t have to spare, which you’ll now have to hand over to HMRC.

Just how badly will the tax rises affect you? Let’s check it out!

Console yourself against the upcoming tax grabs with some free goodies from investment platforms on the Money Unshackled Offers page, including free £50 cash rewards for opening an account with easyMoney or Loanpad, and free stocks from Freetrade, Trading 212 and Stake worth up to £200.

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The Timing Of This Tax Rise Couldn’t Be Worse

Britain is heading into winter in a bad shape economically. Runaway inflation is dragging us into a cost-of-living crisis.

Drivers will be painfully familiar with the petrol shortages caused by a lack of truck drivers. Especially if you rely on being able to drive to get paid.

Food shortages, again due to us not having enough lorry drivers, are expected to push up food prices over Christmas. And the furlough scheme having ended at the start of October means there could be up to a million redundant jobs and incomes.

The cost of wholesale gas has increased 6-fold and electricity 4-fold, and it is yet to be seen how much of this will be passed on to customers this winter.

The price rises are due to lockdowns messing with supply and demand, and outlawing cheap and readily available coal to rely on wind farms that haven’t been spinning because apparently, it’s not been windy.

As these price hikes are passed on to consumers, experts say many will have to even sacrifice meals to keep the heating on this winter – a dire state of affairs for modern Britain.

Regardless of where the blame lies for these price rises, the economically literate thing to do when people can’t afford to buy food and fuel is to immediately lower income taxes. This gives people that little extra money in their pockets to be able to struggle on as normal.

Alternatively, they might lower VAT, to bring down the prices of goods. Either way – the answer is to lower tax.

Instead, they are choosing this moment of national crisis to announce the opposite – that everyone will be given a kicking when they’re already down.

What It Will Cost You

Paying National Insurance is mandatory if you’re 16 or over, and either an employee earning above £184 a week, or self-employed making a profit above £125 a week.

From April 2022:

  • the current 12% rate on earnings between £9,564 and £50,268 will rise to 13.25%
  • the current 2% rate on earnings over £50,268 will rise to 3.25%
  • employers will also have to pay more, contributing 15.05% in National Insurance on employees’ earnings over £170 per week, up from 13.8% now. Expect these costs to be passed on to you, the worker, in lower future pay rises.

Here’s how much extra tax you’ll have to pay as a result of this tax rise, depending on your salary:

  • £20,000 salary: £130 extra each year
  • £30,000 salary: £255 extra each year
  • £40,000 salary: £380 extra each year
  • £50,000 salary: £505 extra each year
  • £80,000 salary: £880 extra each year
  • £100,000 salary: £1,130 extra each year

Those on a higher salary pay more in actual pound terms, but remember that people tend to live within their means, and have houses and other living expenses to pay for that are proportional to their salaries.

Also, realise that employers NI is going up too by the same amount, which is tax they have to pay on your salary as your employer. That is money that could otherwise be spent on giving you a better pay rise or bonus. Look at these numbers, and double them. That’s likely the true cost you’ll have to bear.

Promises Broken

In the election of 2019, Boris promised not to raise National Insurance. Here’s the manifesto pledge, signed by Boris himself. Iron-clad, some might say.

The Conservative party is no longer the party of Low Taxes; in fact, they are the party of the highest taxes in UK peacetime history. But if you’re not happy with that fact, what can you do about it?

The UK is a 2 party system, where either Labour or the Conservatives have been in power since 1915, and our first-past-the-post method of elections makes it almost impossible to change this.

Both Labour and the Conservatives are in favour of big tax rises, and of massive borrowing. If they say they’re not, look at their actions; not their words.

Whether it’s stamp duty, corporation tax, dividend tax, council tax, national insurance, capital gains tax – all the main parties are keen to raise them, or at best keep them as they are. No one is talking about lowering any taxes.

There is no established party to the economic right of the Conservatives: no party in favour of lower taxes, lower borrowing and lower government spending. Vote for any party right now and under our system you will get a high spending, high borrowing, high taxing government.

A Record High Tax Burden

After the income tax and corporation tax increases in the March Budget, the government had already raised the burden of taxation to 35% of GDP, the highest since 1969. GDP is the value of all the goods and services that we as a country are able to create in a year by working, so the government was already planning to take 35% of our earnings through all taxes combined.

The new tax rises will increase the tax burden to about 35.5% of GDP, the highest since the second world war.

Voters Are Gullible When It Comes To NI

Voters prefer an NI hike to an Income Tax hike, because they wrongly think that NI is set aside for the NHS. It isn’t. It all goes into the central pot.

This delusion is helpful to the government, and is probably why they raised NI, not Income Tax – even though it amounts to the same thing. They can also raise NI more stealthily than Income Tax because Income Tax gets headlines, while NI is generally ignored.

A Third Income Tax

The NI tax rise will start out as an increase to the NI line on your payslip by 1.25%. But from April 2023, this will be split out into 2 taxes: National Insurance will go back to 12% and 2%, and there will be a new tax on your payslip called a Health and Social Care Levy, at 1.25%.

That’s right: as if the tax system wasn’t baffling enough, you will now have 3 income taxes on your payslip, all going into the same central pot.

You might assume that something called the ‘Health and Social Care Levy’ would definitely be spent on Health and Social Care, but remember that National Insurance started out as being money earmarked for ‘insuring the nation’ against illness and unemployment. Its original purpose has been forgotten. It’s now just the 2nd income tax on your payslip. Now there is a 3rd, it gives future governments more options to increase income taxes sneakily over the years.

Where Will Your Money Go?

The tax rise will reportedly raise £12bn per year, which is supposedly earmarked for the NHS, specifically for reforming the social care system. But will it make much of a difference? The NHS already costs £230bn a year. It’s hard to believe that voters will see results for the extra tax they’ll be charged.

But the Treasury has many ways to get around the earmarking of funds – all the money effectively goes into the same central pot. So is this tax really being used to fund the NHS?

The UK’s addiction to debt costs us £45bn a year, according to the UK’s budget for 2021-22. But this figure is already out of date – in June 2021 alone, according to Bloomberg we spent £8.7bn on debt interest, due to inflation pushing up the cost of servicing index-linked gilts.

That works out at a £104bn annualised cost, an extra £59bn above budget. Is this the true reason we are being taxed more?

Or is it green energy? At the COP26 climate change event that the UK is hosting in November, the UK will announce it will start paying £12bn a year in “Climate Finance” to developing nations, the same amount incidentally as will be raised by this NI increase.

Social Care: What’s All The Fuss About?

A common argument from the pro-high-tax side of the argument is that tax rises are needed to pay for the damage caused by the response to covid. Maybe so. But the NI tax rise has specifically been justified as being to pay for a social care reform, NOT covid. So, why is social care an issue?

Social care is a political hot potato dodged by government after government over the decades. It was the topic that destroyed Theresa May’s election campaign in 2017.

Social care is a really important problem to solve, to make sure that we all get treated with the best health care and with dignity in our old age. Apparently, the system is falling apart at the seams.

Theresa May’s answer was for the rich to sell their assets to pay for their own social care. Boris is raising taxes on everyone as an alternative. There’s a good argument that this is fairer, as everyone uses the system.

But is now the right time to be splashing the cash on a mega-project like this at the expense of the workforce when we’re coming out of an economic disaster? Maybe there never will be a good time, and we just need to bite the bullet?

Other Tax Rises Heading Your Way

If you’re an investor or you are a self-employed small business owner, your income is being taxed more from April 2022. The tax rate on dividends is increasing from 7.5% to 8.75% for basic rate taxpayers, and from 32.5% to 33.75% for higher rate taxpayers.

For an entrepreneur on £40k a year who takes his pay in dividends, his tax bill is about to go up by £320 a year. If you are an investor and get paid dividends, make sure you’re shielding your assets in an ISA.

The government is also ramping up corporation tax to ridiculous proportions – up from 19% to 25%, effective April 2023.

This effects employees, business owners, investors, pensioners and consumers – basically, anyone who relies on companies to do well in order to be paid an income and/or have access to cheap products.

Employees can expect this tax on companies to be partially offset in their future pay rises, or lack thereof. Consumers can expect the tax increase to be partially passed on to the price of products in the shops.

Business owners are being taxed directly. Investors and pensioners are being taxed indirectly, as the stocks that make up their portfolios and pensions become less profitable and are less able to grow or to pay dividends.

Find out more about this insidious tax rise and many others not covered here in our video on tax rises announced at the last Budget, linked here.

The Future Of Tax In The UK

We are now stuck in a cycle of bigger spending, funded by bigger borrowing and bigger tax burdens, to offset problems in the economy – many of which were caused by over-borrowing and over-taxing to fund over-spending.

Companies and people are taxed too much which leads to low productivity, which means less tax is created, which then leads naïve governments to increase the tax rate. And also, to pay for the ever increasing cost of borrowing, the government also has to either borrow more or tax more. And on it goes.

The future of the UK – and sad to say of much of the developed world too – is unfortunately towards an ever bigger state, with an ever higher tax burden.

What do you think about the tax rise, and is it the right thing to do? Join the conversation in the comments below!

Written by Ben


Featured image credit: Simev/

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

Best ETF Portfolio: Now You Can Invest In The Ultimate Portfolio For Free

Back in late 2020 we designed a portfolio that we called The Ultimate Portfolio. As the name suggests it was a portfolio that would passively beat the global market and be easily managed. It was built for our purposes, but it was also put together in such a way that anybody could take it and adjust the allocations to fit their own view of how the world economy would develop.

The Ultimate Portfolio was built with simplicity in mind, but more than that – it was built to avoid nasty dividend withholding taxes as much as reasonably possible.

In this post we’re going to give a recap of what the Ultimate Portfolio is and look at how it has performed. We’re going to look at why you should be investing in this portfolio, the best platform to invest through, and lots more.

The response to the first video was so enthusiastic that we’ll also dedicate some time at the end of this post to answer many of the questions that we’ve received about the portfolio since the original video. Let’s check it out…

Alternatively Watch The YouTube Video > > >

What Is The Ultimate Portfolio?

For a full rundown be sure to watch the original video or read the article after this one, which we’ll link to in the description below. In that video/post we really deep dive into the portfolio and look at country and sector allocations, which we won’t repeat today. Let’s now jump into the portfolio to get an overview.

The portfolio in excel

The main part of the portfolio consists of 3 equity ETFs. The first and biggest holding is in the Invesco MSCI World ETF (MXWS) and we have it make up 64% of the equity allocation. This gives exposure to the large and mid-caps of the developed world, and is dominated by the US, which is of course the largest stock market in the world. This specific world tracker has some unique qualities, which makes it stand out from all other ETFs, which we’ll get to soon.

The next ETF is the iShares MSCI World Small Cap ETF (WLDS) which in our portfolio consists of 18% of the equity allocation, and the third ETF is the iShares Core MSCI Emerging Markets IMI ETF (EMIM). We have also allocated 18% of the equity to this fund, a slightly heavy weighting which is a play on China and India doing well over the coming decades.

We personally think that the portfolio benefits from some precious metals and think both the iShares Physical Gold ETC (SGLN) and iShares Physical Silver ETC (SSLN) are great, low-cost investments for achieving this. We now allocate 8% and 2% of the overall portfolio to these respectively.

In our own portfolios we also have small allocations to Peer-To-Peer Lending and some individual stocks, and I have a large percentage allocated to Buy-To-Let property, but the Ultimate Portfolio of ETFs is the core around which we’re now building our Freedom Funds.

We also used to have an allocation to Cash in our investment portfolios, extra to our emergency savings, but we’ve changed our minds about holding cash as an individual asset class. As Ray Dalio says, “cash is trash”.

Cash was originally in the portfolio to allow us to buy more stocks if there was a crash, but we now have better knowledge about using leverage, so prefer to go down this avenue if and when an opportunity arises.

The Best Investment Platform For This Portfolio

When we first announced this portfolio there was no way to invest in it with zero trading fees, but things have thankfully changed since then. InvestEngine, have since burst onto the scene and injected some much-needed competition, and better still they listen to their customers.

A few months back we reviewed InvestEngine and we collated a bunch of ETFs requests that you guys wanted to be included, and we’re thrilled to announce that InvestEngine have already made available many of these, including all the ETFs in our Ultimate Portfolio. Keep the requests coming guys!

With InvestEngine you can build a portfolio of fractional ETFs for FREE using their DIY service. That’s right, you can now invest in the Ultimate Portfolio with zero platform fees with InvestEngine. You just set the percentage allocation for each ETF, and you’re done! And rebalancing your portfolio is as simple as couple of clicks.

InvestEngine is the only free trading platform right now that is available to new customers that has all of the ETFs of the Ultimate Portfolio denominated in pounds sterling, making it the obvious choice for people wanting to follow our strategy.

If you want to give them a try, new users will receive a £50 welcome bonus if you use this link.

How Has The Ultimate Portfolio Performed?

Portfolio performance by ETF

Here is how each ETF has performed in each of the last 5 years and we’re really happy with those returns, with some massive profits coming from the developed world – both the large and the small caps.

The Emerging markets has disappointed this year so far and so has gold and silver, but remember this is a long-term strategy that is designed to capture growth wherever it happens in the world, and in the last year that growth was in the developed world. Precious metals’ poor performance was probably to be expected after an incredible 2020. In 2020 our gold ETF was up 20% and our silver ETF up 41%.

The beauty of a portfolio like this is that you don’t need to spend much time monitoring the portfolio and trying to second-guess the markets. So, we’re not going to analyse in any detail why the emerging markets has been doing poorly this year, but we know it’s driven by China.

According to the BBC, the slump comes after a series of crackdowns by Beijing on its technology and education industries.

Let’s now focus on the equity component of the portfolio and compare it to Vanguard’s FTSE All-World ETF (VWRL), which is a great benchmark for what an investor could get with zero effort.

Portfolio comparison to a benchmark World Tracker (VWRL)

The Ultimate Portfolio is neck and neck with the Vanguard ETF, with a slight underperformance in 2019, and 2021 ytd, but it performed better in 2020. The slight underperformance in 2019 and 2021 ytd is massively driven by the weak returns in the emerging markets. The largest position, the Invesco MSCI World ETF – which only holds developed world stocks despite the name – has beaten the Vanguard ETF for 4 consecutive years.

To be fair the allocation we have chosen is more forward looking, purposely weighted towards the Emerging Markets, but you don’t need to use the same percentage allocations as us. We think emerging markets and small cap stocks will do better over the long-term. If you don’t agree with us, no problem, simply adjust the allocation as you see fit.

Why This Portfolio?

There are so many great things about the portfolio: First, it’s super simple. There are just 3 equity ETFs and 2 further ETFs if you include gold and silver. This means it’s much easier to manage and keep track of, and if you’re not using a free trading app, then a small portfolio like this can save you a tonne in trading commissions. This simplicity also means you can easily change the allocation to whatever you want.

The portfolio does not mix and match index providers, with all 3 of the equity ETFs tracking MSCI indexes. This means we’re not crossing index providers and doubling up or omitting some stocks. This happens because each index provider categorises countries and market caps differently.

The Ultimate Portfolio is also super cheap (see table above). The OCF for the equity in our allocation is just 0.22% which coincidentally is the same as the Vanguard FTSE All-World ETF we looked at earlier. This OCF comes down a fair bit if you reduce the allocation to Small Caps, which the FTSE All-World ETF doesn’t have.

Better still, the Ultimate Portfolio has huge tax benefits that other portfolios don’t. The Invesco World ETF, which makes up the bulk of the portfolio, is synthetic. Synthetic ETFs avoid dividend withholding tax from a small number of countries such as the US. Index investors have been unforgiving when it comes to fees, and we think taxes should be treated with the same contempt.

The portfolio covers 99% of the market cap of the world and can be as passive as you like it to be. You can invest in this portfolio and forget about it and go and get on with your life while your money grows.

Or alternatively, you can use it as the core of your portfolio and bolt on any investments you want as satellites. Some people like government bonds, so could easily bolt on an ETF for this such as the iShares Global Government Bond ETF (SGLO), just like we have done with precious metals. If you want to add a thematic ETF, again, this is easily done! Likewise, if you think crypto is heading to the moon, then by all means invest in this also.

Alternatives If You Don’t Trust Synthetic ETFs

We think the distrust of synthetics is way overdone and stems from a lack of understanding. The synthetics we use do hold physical stocks, but swap the returns with investment banks for the returns of a specific index – in this case, the MSCI World index. At the end of the day, the ETF holds a basket of quality collateral. The Invesco ETF currently has Amazon, Intel, Google, Facebook, Berkshire, and so many more incredible stocks physically held behind the scenes.

Moreover, the SWAP counterparty risk is spread over multiple investment banks, which further reduces any risk. And finally, if you’re somebody who feels safety in numbers, then the Invesco ETF has you covered – the ETF has $3.2bn of assets under management.

If, however you still think there is excessive risk, then there are plenty of physical ETFs tracking the same index. One option is the HSBC MSCI World ETF (HMWO), which actually costs a little less at just 0.15%. Another is the iShares MSCI World ETF (SWDA) costing 0.20%.

Why We Pick Accumulation ETFs

Eagle eyed viewers may have noticed that the Ultimate Portfolio consists of accumulation ETFs, rather than distributing. This is done deliberately because we’re using an ISA and we will be reinvesting the income anyway. There is a slight cost advantage of using accumulation ETFs. If you have the income distributed and reinvest manually you have to pay the bid/offer spread each time.

If we weren’t using an ISA and were using a general account instead, we would probably go for distributing ETFs because it’s easier to differentiate between capital gains and income, which makes for less of a headache when calculating tax.

Your Questions Answered

Now we want to take some time to answer your questions about the portfolio from our previous video.

First question: “Is it worth setting up a portfolio like this if you already have a Vanguard portfolio and is it worth keeping both?” We personally would not be running too many portfolios. It’s pointless when they’re all doing similar things. All you’re doing is incurring more fees. It’s better for you to build the best portfolio you can and watch it like a hawk. I personally have this portfolio in my ISA and a different one in my SIPP.

The question is, “do we have alternative suggestions for the Invesco ETF because their investment platform doesn’t offer it.” They’re asking whether the Vanguard FTSE Developed World ETF will do.

We wouldn’t let the tail wag the dog. If you want to invest in this portfolio (or any for that matter) and your platform doesn’t offer the ETF or stock, then we would seriously consider changing platforms. Having said this, you shouldn’t pay over the odds to gain access to a specific investment. As we said earlier, we wouldn’t mix index providers because of the overlap or omission of stocks. FTSE is different to MSCI.

The question is, “do you feel this portfolio offers you enough exposure to the bond market and other commodities like agriculture, oil etc?” This portfolio has zero exposure to bonds and its only exposure to commodities (other than gold and silver) is through mining stocks that are part of the 3 equity ETFs. If you want exposure to something just bolt it on.

“For a beginner would you still recommend Vanguard and if so, what fun is best?” Top comedy award goes to the reply from Chris, advising the best fun is when you go to Disney Land.

Assuming the original question was a typo and really meant fund, we obviously think the funds in the Ultimate Portfolio are best. But having said this, we love Vanguard because they charge competitive prices across their entire fund range. If we were building an entirely Vanguard portfolio it would probably be 85% Vanguard FTSE Developed World (VHVG) and 15% Vanguard FTSE Emerging Markets (VFEG).

“What is the dividend yield of this portfolio?” As we’re in the building-wealth stage of our lives we focus on total return and not just the dividends. The Invesco ETF is synthetic and so there is no dividend, and the other ETFs are accumulation, so no yield for these either. In all cases, the dividend you would get is factored into the total return.

Jim says he “thinks the US exposure is a bit high”. We can totally see his point. The US market looks so expensive right now, but we think this is where the majority of the best companies in the world are, so want it to have enormous exposure to these. However, having said this, because we have slightly overweighted the Emerging Markets compared to a typical world index we’re not as heavy in the US as we might have been.

“Gold and Silver, if you can’t touch it you don’t own it. You can also hide physical from the tax man, even when you are dead.” Finished with a cheeky smile. Okay, so we don’t condone tax evasion but it’s a very good point regarding the precious metals. The argument is that paper gold and silver can easily be taken away from you by corrupt governments and other malevolent people.

The way we see it, because we’re investing relatively small sums into the gold and silver allocations of this portfolio, there is too much cost and hassle to own physical gold. Owning the physical might be something we consider when we’re genuinely rich. The paper metals in the portfolio are at least doing a job of protecting us somewhat against economic downturns.

What do you think of the Ultimate Portfolio? Join the conversation in the comments below.

Written by Andy


Featured image credit: ESB Professional/

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

Retire 6 Years Earlier With Lifecycle Investing (Diversification Across Time)

Hi guys, we’ve got a really interesting post in store for you today. It’s about an investing concept put forward by two Yale professors that has changed our approach to investing and how we perceive our investment risk. We think it will do the same for you too. Every so often there is a ground-breaking development in the investment world that shakes the very foundations of what we think we know – this is one of those times.

Forget everything you’ve ever been told about portfolio diversification and the dangers of using leverage to invest. In their book called Lifecycle Investing they proved using stock data going back to 1871 that by employing leverage to gain more exposure to stocks when young, individuals can achieve better diversification across time, known as temporal diversification, or time diversification.

Time diversification you say. How about that? I bet you previously had only ever considered diversification as across different asset classes and number of shares.

The Yale professors show that buying stocks on margin when young combined with more conservative investments when older dwarfs the returns of standard investment strategies. The expected retirement wealth of a time-diversified strategy is 90% higher compared to target retirement funds (such as Vanguard’s) and 19% higher compared to 100% stock investments.

The expected gain would allow workers to retire almost six years earlier or extend their standard of living during retirement by 27 years.

In this post, we’re giving you an overview of the leveraged lifecycle investing strategy and how we are implementing our own modified version of it from the UK. Let’s check it out…

If you’re looking for the best investment platforms, we have hand-picked our favourites and put together a comprehensive cost comparison table here. Also check out the Money Unshackled Offers page to get free stocks worth up to £200 and cash welcome bonuses of £50.

Alternatively Watch The YouTube Video > > >

The Theory: What’s The Strategy All About?

In their early working years, people should invest on a leveraged basis in a diversified portfolio of stocks. Over time, they should decrease their leverage and ultimately become unleveraged as they get closer to retirement.

This idea is built on the most important lesson in finance: the value of diversification. It’s widely accepted by most – and is in fact the central message by us on this channel – that investors should diversify over many stocks and over geographies. We have always suggested broad diversification using index funds and ETFs.

What is missing is diversification over time. The problem for most investors is that they have too much invested late in their life and not enough early on.

Unless you somehow come into a lot of money early in life – perhaps through an inheritance – your risk exposure is likely to be very tilted towards the end of your working life. In practise this means that in your early years (20-40) you have relatively little money invested compared to what you will likely have in your investment account when retiring (60+).

The problem with this bog-standard investing life path is that market movements in those early years are largely irrelevant to your overall lifetime wealth as you have so little money invested. A 60% loss in your twenties, or however much it might be, may feel like a decisive blow at the time but based on your lifetime wealth it’s inconsequential. And then market movements later in life are significant because your investment pot is big.

To overcome this issue the Yale professors are telling people to buy stocks using leverage when young i.e. borrow to invest in stocks.

They make an excellent point that this is the typical pattern with property, where the young take out a mortgage and thus buy a house on margin. Over the course of their life, they then pay down the mortgage and therefore reduce leverage. They propose that people follow a similar model for equities.

Your goal is to control more of your lifetime target equity value as early on as possible. Let’s repeat that. Your goal is to control more of your lifetime target equity value as early on as possible.

How Much Leverage

If your portfolio was leveraged 20 to 1, as is sometimes done with property with 95% LTVs, the risk would be significant. The authors propose a much more sensible maximum leverage of 2:1 and are only proposing this amount of leverage at an early stage of life. This way, investors only face the increased risk of wiping out their current investments when they are still young and will have a chance to rebuild.

The authors also stated that the market needs to move 10% before you should worry about rebalancing. If the market rose, you should consider buying more to bring that leverage back to 2:1. If the market were to fall and therefore your leverage increased you should sell off positions to bring that leverage back to 2:1. We take issue with this last point which we’ll address shortly.

Suggested Lifetime Path

If you are destined to save 1 million dollars (or pounds in our case) over the course of your lifetime, and a 60/40 split between stocks and bonds suits you, then ideally you should have $600,000 worth of exposure to stocks and $400,000 exposure to bonds for your entire life. If we treat all of your future lifetime savings as a kind of bond, then your focus should be on maintaining $600,000 exposure to stocks.

The problem is that while you are young and have modest savings, you don’t even have $600,000 in savings. The authors’ answer to this is leverage.

However, because they recommend limiting leverage to 2:1, you still wouldn’t be achieving $600,000 of exposure to stocks for your whole life, but it would be closer than any other commonly-advised investing strategy.

For example, say a young investor can save $10,000 per year, he would use 2:1 leverage to bring his effective exposure to stocks to $20,000. The following year, he saves another $10,000, which brings his exposure to stocks to $40,000. $40,000 isn’t perfect but it’s closer to the required $600,000 exposure than the unleveraged position would be.

With this approach, your investing life has 3 phases:

(1) 2:1 leverage until stock exposure reaches the right level, or approximately the first 13 working years. Forget the common 60/40 asset allocation of stocks to bonds. This is a 200/0 allocation.

(2) gradual deleveraging, but still owning no bonds until your portfolio holds more than you need exposed to stocks, or approximately for the next 14 working years.

(3) holding a mix of stocks and bonds for your last 17 working years. You should have no leverage at this point.

How To Invest With Leverage

The authors don’t stop at a theoretical plan. They lay down a few different tools that investors have to achieve the required leverage:

(1) The first possibility and their preferred method is the use of deep-in-the-money call options. They recommend LEAP Options as these have expiration dates that are longer than one year away, and typically up to three years. However, these are very complicated, and in the UK they are not very common. None of the major investing platforms here offer Options but our understanding is that some smaller brokers do.

(2) Another possibility is to buy stock indexes using a margin account at somewhere like Interactive Brokers. This source of leverage is probably the most straightforward as you essentially build a portfolio with both your money and borrowed money from the broker, but the interest rate is likely to be higher than the alternatives.

(3) The next approach put forward is to buy S&P 500 futures, but the authors point out that due to the high minimum amounts required to start investing in futures this won’t be possible for most people. However, as we’re based in the UK, we can invest in futures using a spread betting account, which is illegal over in the US, so would not have been considered by the authors.

We are able to invest in S&P 500 futures for practically zero cost, tax-free, and with a low minimum investment. If you’ve not seen some of our spread betting videos/posts before they’re certainly worth checking out next, links here and here.

(4) The final approach is to use leveraged ETFs, but the authors are somewhat dismissive of these as they constantly reset their exposure on a daily basis. This constant resetting means they do not track the index over a long period of time. This could be to the investor’s advantage or disadvantage. We’ll probably do a video on leveraged ETFs at some point soon, so signup to the MU newsletter and/or subscribe on YouTube so you don’t miss it.

Our Main Criticism

While their ideas are built on sound logic and extensive data analysis, the thought of selling our positions as the market falls to bring the leverage back down to 2:1 runs contrary to good investing practice of buying low and selling high. In this case they’re suggesting buying high and selling low.

We fully understand the need to do this with their exact strategy because otherwise the volatility of the stock market will eventually cause you to get wiped out.

During the financial crisis of 2007 to 2009 the S&P 500 dropped by more than 50%. If you were 2:1 leveraged at the beginning and allowed the leverage amount to increase as markets tanked, you would have said goodbye to your entire investment pot.

Other People’s Objections

We’ve seen one argument that states that it is quite likely that someone loses their job at the same time as the stock market tanks. Crashes often coincide with increased unemployment, so we agree this is a possibility. This unfortunate set of circumstances causes them to sell some of their investments to live on at the same time that the value has been decimated.

We don’t recall if the authors dealt with emergency funds, but this seems like an easy solution to the problem outlined. Everyone should have investments earmarked for retiring and a separate pot of cash earmarked as an emergency fund.

Perhaps the main reason why this strategy can fail is due to human psychology. Imagine that your investment pot has been decimated. This leveraged strategy says you must get back on the horse and continue investing with 2:1 leverage with your future earnings. But in reality, it’s highly unlikely that the average investor would have the guts to do this as their experience knows only pain. How many people could remain rational in such circumstances? Far too many would sell everything and swear off stocks for life.

What We’re Doing

The notion of diversifying across time has changed how we invest, but we won’t be investing exactly in line with this strategy. We’ve never been averse to using a bit of leverage as our regular readers will know but after reading the book, we realised that we we’re significantly lacking in the leverage department. We now consider ourselves to be dangerously underleveraged!

What we’re doing as demonstrated in our spread betting videos is investing in the S&P 500, long-term treasury bonds, and gold using futures in a 60/30/10 allocation. The portfolio itself is using 3:1 leverage, so really, it’s a 180/90/30 allocation – theoretically less risky than a 200/0 stocks to bonds allocation as suggested by the authors, as bonds and gold should run oppositely to stocks in a market crash. This significantly reduces the risk of a wipe out. We won’t be selling in desperation if the market falls a little.

Based on our backtesting, which included troubled times such as the financial crisis of 2008, we would never have been wiped out – although this is no guarantee of the future.

With our asset allocation at 3x leverage – 180% stocks, 90% bonds, and 30% gold – our stocks are almost leveraged in line with the leveraged lifecycle strategy. The stocks provide the growth, while the bonds and gold provide the portfolio stability.

For total transparency neither of us will be leveraged 3:1 across our entire net worth. That is just the amount of leverage used within our spread betting accounts. Across my entire portfolio I will probably settle at no more than 2:1 leverage and then derisk as I age.

I’m building this up very slowly each month, so psychologically I won’t really know how I feel about being this leveraged until sometime in the future.

What do you think of being 2:1 leveraged in stocks while you’re young? Is our strategy better? Join the conversation in the comments below.

Written by Andy


Featured image credit: kitti Suwanekkasit/

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

5 Myths About Early Retirement That Just Aren’t True | FIRE

The topic we love most is FIRE, or Financial Independence, Retire Early. FIRE involves stashing away as much money as you can during your working years so you can achieve financial independence as early as possible – ideally in your 40s or even 30s. At that point you are free to retire should you choose.

In this context, financial independence means you have enough money coming in from passive sources such as investments to cover your day-to-day living expenses.

On our missions to achieve FIRE – in which we’re both progressing nicely – we want to help as many people as we can to get to financial independence with us. But there are a lot of FIRE myths floating around, which are potentially dangerous. What we don’t want is people never starting or quitting along the way due to a misunderstanding of the process. So, in this post we want to set the record straight and dispel some of the biggest FIRE myths. Let’s 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 > > >

Myth #1 – It’s All Or Nothing

Probably the biggest myth doing the rounds is that there’s no point even trying because it’s so difficult to achieve FIRE. The naysayers spreading this falsehood believe that FIRE is an event. They see it as you are either FIRE, or not. But that is totally the wrong way to look at it and they fail to see the benefits of just being on the path!

FIRE is a journey with many destinations and goals along the way. There are many degrees of financial independence.

One of the earliest goals for you might be to start living on less than you earn. That’s an achievement that can turn your whole life around in a day. The next goal might be to pay down all your consumer debt – credit cards, store cards, overdrafts, and so on. The advantages of doing this are obvious. You don’t need to have attained FIRE in full to benefit from these smaller goals.

Say you have a goal of producing £40,000 per year passively from your freedom fund, which is what we call our retirement savings. You might have determined that to achieve this you will need a freedom fund of £1 million. On the journey to £1 million – or whatever your FIRE number is – you will probably start with just a few thousand quid. That doesn’t sound like much, but that small amount means life will no longer push you around like a leaf in the wind.

At that stage the passive income is almost non-existent, but a small freedom fund gives you breathing space from life’s little disasters.

As your freedom fund grows there is a noticeable change in life dynamics. For instance, once your pot hits £30k you might have the confidence to negotiate a higher salary because now you have a trump card – you are able to quit your current job and find another without financial fear. The balance of power has shifted from the employer to the employee.

Someone we knew had an engineering job and later his employer tried to make him do sales as well. His finances gave him the confidence to say no, and his employer backed down with their tail between their legs. This guy had a freedom fund and so was able to dictate terms and pull the strings!

As your freedom fund continues to grow you will be presented with new opportunities to make money that are probably unimaginable right now. Maybe someone you know is starting a business, or is taking on a new property project, and is raising capital. You don’t need to have completed FIRE in its entirety to benefit!

Moreover, if your goal was ultimately to earn freedom but you fancy having a bit of that freedom early, you can very easily take a career break and spend a few grand jet-setting around the world. You can continue working on FIRE when you return – no problem.

Myth #2 – You Will Get Bored / Have No Purpose / Can’t Socialise

We’ve tried to encompass all the main criticisms of early retirement into this one super-myth. They’re all total nonsense. The naysayers are clearly jealous and know they don’t have what it takes to succeed. Because they can’t do it, they want to discourage you from doing it.

Come on man, how will you get bored when you have both time and money? Why could you not find or build a purpose? And not being able to socialise is ridiculous. Having your manager choose all your friends is pathetic.

When you’re free you will be able to do more of the things you love. If you want to spend your days hitting golf balls, then there’s a good chance you’ll make friends with people who also like doing the same.

Generally, people who plan to retire early are goal-oriented and driven. Sometimes, and we’re guilty of this ourselves, the FIRE community has a tendency to promote FIRE as if it’s lying on a beach all day in a hammock. While that would be ace for a few weeks it probably would get boring pretty quickly. But you’d go find something else to do.

Those who are keen to retire early are rather looking forward to starting the next phase of their life – one that has gone unfulfilled for far too long due to being a wage slave.

It doesn’t matter if you don’t even know what it is yet – it will come to you later. I’m betting your purpose is not shovelling crap into a skip for somebody else, but that might be what you currently find yourself doing out of necessity. That’s not a purpose!

Once your free time opens up, you’re likely to focus your life on things that truly make you feel fulfilled. This could be charity work, spending more time with family and friends, traveling the world or learning new skills.

And guess what, FIRE does not mean you have to stop earning money. You’re free to pursue whatever you like. If you want to open a small business, for instance a B&B, that normally wouldn’t have supported your lifestyle, well now you can. Cos now you’re doing it out of love, rather than for money.

Myth #3 – FIRE Relies On Extreme Frugality And High Incomes

I suppose this one depends on what your definition of extreme frugality is. Some people choose to get to FIRE by living on rice and beans, living in a dive, and not owning a car nor many other possessions for that matter, but this is just one way. And not the way we would ever recommend.

If you think you can’t be happy without buying designer clothes, driving a fast car, living in the trendy part of town, and holidaying in the Bahamas, despite earning an average salary, then yeah you probably won’t ever attain FIRE.

But somewhere in between those examples lies the sweet spot. For me, I insist on having a certain level of comfort and lifestyle but it’s not luxurious by any means. I have a car – but it’s an old Ford Focus, not a brand-new Tesla. I want to go on holiday – but it’s likely to be in affordable Spain, not the Maldives. I want to eat out – but I choose Nandos, not a three-star Michelin restaurant.

You get the point. You can still do and have all this stuff without it costing the earth, and still achieve FIRE. It’s simply a case of spending less than you earn and investing the rest.

The more you earn the easier it is – we won’t lie about that. Once you’re living your desired lifestyle, every extra penny earned above this is there to be invested and help you reach FIRE.

Truth be told, we’ve yet to meet an early retiree who achieved FIRE by avoiding Starbucks.

Our approach is simple: Decide on your savings per month or SPMs first, and work hard to achieve that goal. Once you achieve your savings per month, spend the rest of your money however you want to – guilt free. If that means buying lattes or takeaways, go for it.

Myth #4 – The Next Bear Market Will Obliterate Any Hopes Of FIRE

This is another complaint by the naysayers. They argue that the next bear market will devastate investment pots, and that future returns will be lower than what they’ve been historically, such that if you were to continue drawing from your freedom fund it will soon run down to zero.

This argument is inflamed by the current lofty valuations of stock markets, especially the S&P 500, which at time of filming is sitting at all-time highs. The S&P’s Price Earnings ratio currently stands at 35, while its median value over history is under 15. You can easily to see why some people might think we’re due the mother of all crashes, capable of wiping out any chance of living off your investments.

Perhaps counterintuitively, a crash might actually benefit the FIRE community. High share prices only benefit those who already have wealth and are retired. For those accumulating wealth and hoping to FIRE in the future, like we are, we’re being forced to pay over the odds right now to buy into the stock market. We would love a crash, and low share prices would only fuel the FIRE community’s growth!

As for those who have already FIRE’d we don’t think there is too much to worry about from a bear market. For a start there are many studies that have analysed safe withdrawal rates such as the one carried out by William Bengen and then later the Trinity study.

Champions of the FIRE community have also come up with strategies designed to weather a bear market. One such strategy is to have a big pile of cash that can be drawn from when the stock market has tanked. This ensures you are not selling your investments at knockdown prices.

Another strategy or extension to the cash pile strategy is to build a high-yield, dividend portfolio, so even if the market crashes, you don’t need to sell off your investments. High dividend stocks tend to be more stable because they’re in mature, often monopoly like, industries.

And let’s not pretend that once you’ve FIRE’d you won’t be reacting to the market. The idea of FIRE is not to shrink your expenditure if the market tanks, but it remains a tool in your kit – at least until the market recovers.

And that leaves us with perhaps the biggest myth-buster of them all, which is your ability to earn money. When you consider that most people who achieve FIRE are ambitious and driven people who are good at making money it seems highly unlikely that their freedom funds will ever run dry.

Many who “retire early” find themselves continuing to make money following their passions. Take us for example. The day we hit FIRE doesn’t mean our income from Money Unshackled will suddenly come to a grinding halt. Sure, we might post videos less frequently but even as multi-millionaires we can’t see a day where our passion for helping people to make money would stop.

Myth #5 – Society Will Collapse If Everyone Reaches FIRE

This is a hilarious one because it’s never going to happen anyway. Only the truly committed will ever achieve FIRE and most people just aren’t. However, let’s play along and assume it did.

The people peddling this myth are implying that your plans for FIRE are in some way immoral – that you being free is damaging society. They don’t really believe that and secretly they just resent you because you’re doing something they can’t.

They question: who will serve you in the shops? Who will clean the toilets? Who will collect the rubbish bins? Who will cook in the restaurants? Of course, all this is total nonsense. Society would be far superior if everyone wasn’t broke. And remember it takes a long time to get to FIRE, so the country would still have a workforce.

As part of the FIRE community, even if you’re not directly doing it yourself, you will be investing money into companies that are changing the world, inventing new technologies and developing new life-saving drugs.

Plus, while you’re working a 9 to 5, you’re not spending money in society. But when you’re financially free you will be out there living, and the economy will grow because of it.

At the end of the day many people want to stay productive and are happy to work when the conditions are right, and the choice is theirs.

What do the people around you think about FIRE? Join the conversation in the comments below.

Written by Andy


Featured image credit: marekuliasz/

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

A Deep-Dive Into Warren Buffett’s Portfolio!

Hey guys, in today’s post we’ll be looking at Warren Buffett’s portfolio. Warren Buffett through his company Berkshire Hathaway has consistently been one of world’s best investors. If we all want to become better investors it makes sense to listen to the very best, and perhaps we should take inspiration from what they invest in.

Over in the US, institutional investment managers with at least $100 million in assets under management are required to disclose their equity holdings on a quarterly basis. This is publicly available and can provide insights into what the smart money is doing in the market. Today, we’re going to reveal the portfolio and look at the big positions in a little more detail. Let’s check it out…

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Why You Should Care What Buffett Buys

Ordinary folks tend to buy index funds like the S&P 500 because they probably don’t have a stock picking edge. But Buffett is no mere mortal – Berkshire Hathaway has delivered investment gains that have left the S&P 500 in its dust. But don’t take our word for it. Let’s look at the actual numbers.

Each year when Buffett’s company issues the famous shareholder letter, we get to see exactly how Berkshire Hathaway has stacked up against the S&P 500.

Since 1965, the S&P has returned 10.2% annually. Buffett has returned 20% – almost double. This would be impressive over 5 years, but he’s been smashing the leading US shares index for almost 60 years. That’s a whole other level of awesomeness.

The true magnitude of that outperformance is not clear when we only look at annual returns, so let’s look at the overall gains. Make sure you’re sitting down for this because it’s unreal.

Overall gains from 1964 for the S&P 500 are 23,454%. Very impressive until you hear that Berkshire returned 2,810,526%.

If you had invested just $1,000 into the S&P 500 you would now have $236k. Had you invested that same $1,000 in Berkshire, you would have over $28m.

We think this nicely demonstrates the importance of getting high returns and not settling for anything mediocre. One way to match Buffett’s returns is to simply buy Berkshire Hathaway stock. Investors interested in buying into Warren Buffett’s Berkshire Hathaway have two options: Class A stock (BRK-A) and Class B stock (BRK-B).

The Class A shares have never experienced a stock split and are currently priced at $431,000 per share. The Class B shares, currently priced at $286, were created to allow ordinary shareholders to buy shares directly as the class A shares were clearly out of reach.

Today, apps like Stake (new customers get free stock here) allow you to buy in fractions anyway, so this might not be as big of a problem as it once was.

One big reason to buy Berkshire stock, rather than buying its holdings individually yourself, is that Berkshire owns numerous companies outright – meaning they’re not traded publicly, so you’ll never be able to replicate Berkshire in its entirety. But by concentrating on the individual public stocks, you may even do better! With that being said, let’s look at the portfolio.

#1 – Apple (AAPL)

Apple is by far the largest holding for Buffett, comprising 42% of the portfolio. Berkshire Hathaway owns approximately 907 million shares in the tech giant, worth $134 billion at the time of this video and is a stake of 5.5% of Apple.

Their shareholding is actually down from its peak as Buffett pocketed $11 billion by selling a small portion of their position, which Buffett later admitted was probably a mistake on his part.

Warren Buffett and Charlie Munger have spent just $36 billion to acquire their stake in the technology company from 2016 till 2018.

Buffett says that Apple has developed an ecosystem and level of brand loyalty that provides it with a competitive moat, and that consumers appear to have a degree of price insensitivity when it comes to the iPhone. While Buffett has famously avoided tech stocks, he has said that Apple is a consumer products company and that he understands consumer products businesses.

Apple’s revenue for 2021 is expected to be $366bn up from $275bn in 2020, and its net profit is expected to be $94bn up from $57bn.

Apple Revenue By Category

Its revenue by product category is highly concentrated towards iPhone sales with approximately half of revenue coming from this product. A positive trend is the growing services business, which includes the likes of Apple Music, the App Store, iCloud, and Apple Pay.

Although it would be remiss of us to not point out that Apple has taken some flak with its practices around the App Store and its payment system. Future revenues could be hurt by lawsuits. Just now, Apple has agreed to let developers of iPhone apps email their users about cheaper ways to pay for digital subscriptions and media by circumventing a commission system that generates billions of dollars annually for Apple.

#2 – Bank Of America (BAC)

In number 2 position is Bank of America, consisting of 13.6% of Buffett’s portfolio. Buffett owns more than 1 billion shares, which is a stake of 12.3% and is worth $43bn.

Buffett’s interest in this company began in 2011 when he helped solidify the firm’s finances following the 2008 economic collapse. Bank of America is the 2nd largest bank in the US and 8th largest in the world. Its 2021 revenues are forecast to be $88bn, up from $85.5bn in 2020, and its net profit is expected to be $28.1bn, up from $17.9bn.

A major signal in 2020 from Buffett showing his fondness for Bank of America was that he sold shares of nine different financial stocks, including big sales of JPMorgan Chase, Wells Fargo, and Goldman Sachs, while simultaneously buying more Bank of America.

#3 – American Express (AXP)

American Express is the second financial services company to make Buffett’s top five list, consisting of 7.9% of the portfolio. With 152m shares to his name – worth $25bn – Buffett has a 19.1% stake in the company.

Buffett first invested in the financial services company in 1964 through a former partnership. In 1963, American Express was in the middle of a serious scandal, but Buffett’s instincts were to ignore the temporary noise and use the unrest as an opportunity to invest in a great company. He purchased a 5% stake in American Express amid the scandal fallout, resulting in one of his early investment successes.

According to business insider, Berkshire first invested in American Express in 1994, and spent $1.3 billion to establish its current stake, meaning it has scored a roughly $25 billion unrealized gain in under 30 years.

American Express is a leading issuer of personal, small business, and corporate credit cards across the United States and around the world.

American Express is one of the few companies that issues cards and has a network to process card payments. Visa and Mastercard have processing networks but don’t issue cards. With multiproduct capabilities, American Express generates revenue from both interest-earning products and network processing transaction services.

American Express has built a strong brand that resonates with affluent customers – and therefore has an economic moat, which is probably why Buffett likes the stock so much. Although this data is a little dated, those who use American Express as their primary card spend the most per month on average — around $1,687. Meanwhile, those using Visa, Discover, and MasterCard as their primary cards spend less than half that amount — at $843, $737, and $639 per month on average, respectively.

#4 – Coca-Cola (KO)

In 4th position and making up 7% of the Berkshire Hathaway portfolio is Coca-Cola. Buffett holds 400m shares, valued at $22.2bn, which is a 9.3% stake in the beverage company.

Warren Buffett bought more than $1 billion in Coca-Cola (KO) shares in 1988, an amount that was then equivalent to 6.2% of the company. The purchase made it the single largest position in Buffett’s Berkshire Hathaway portfolio at the time.

Coca-Cola has an iconic name and global reach creating an economic moat around its business. Coke has an incredibly far-reaching distributor network and retail relationships that protect it from encroachment by competitors. No competitor is ever likely to appear and take away Coca-Cola’s market share.

According to the Motley Fool, since 1995 to 2019, Berkshire has earned about $7 billion from the dividends alone on the Coke investment. This far exceeds the purchase price of the shares, which only has a cost basis of $1.299bn.

While Buffett still characterizes Coca-Cola as a “very good business”, he admits that the consumer backlash against sugary sodas has put a dent in its armour.

During an interview on CNBC in 2018, Buffett said of Coca-Cola, “It doesn’t look as good as it did 5 or 10 years ago.” Nevertheless, Buffett says it has the best distribution system in the world, which should serve the company well as it expands into energy drinks and comes up with new products. In 2019 they acquired Costa Coffee for $4.9bn.

Coca-Cola has incredible operating margins at 26%. According to Stockopedia this is ranked highly in both the wider market and the Beverages market.

You can probably see why Coke is so profitable. They mix a bit of sugar with carbonated water and you end up with a great product that doesn’t need to have billions of dollars spent on development each year.

#5- Kraft Heinz (KHC)

Another giant company. The Kraft Heinz Company is the third-largest food and beverage company in North America and the fifth-largest food and beverage company in the world, with eight $1 billion+ brands.

The company has experienced troubles in recent years, with the share price plummeting from a high of over $96 in Feb 2017 to just $20 in March 2020.

According to CNN, Investors are growing concerned that the company focused too much on cost cutting following the 2015 merger of Kraft and Heinz and not enough on finding new, innovative food products that younger consumers would actually want to buy and eat. The share price has rebounded somewhat but does the lower share price provide a good buying opportunity?

Despite the troubles, Buffett still seems to maintain faith in the company, holding 326m shares of Kraft Heinz, worth $11.7bn. This puts Kraft Heinz as number five in Berkshire’s portfolio, consisting of 3.7%, and a huge ownership stake of Kraft Heinz at 26.6% of the company.

Kraft Heinz might appeal to dividend investors as the company is currently yielding 4.4% and with forecast net profit expected to exceed $3bn per year over the next 2 years, the dividend looks well covered at 1.68 times.

Everything Else

The top 5 stocks make up around 75% of the portfolio. Think about that. Just five stocks make up the vast majority of Buffett’s public portfolio. He’s made it so simple to copy him, and hopefully, his performance.

Buffett's Full Public Portfolio

There are another 41 stocks as seen here that make up the rest. Some of the positions are so small (relatively speaking of course), you have to wonder why Buffett even bothers with them as they will make little impact on overall returns.

What do you think of Buffett’s portfolio and will Berkshire Hathaway be outperforming the S&P 500 over the next decade? Join the conversation in the comments below.

Written by Andy


Featured image credit: New Africa/

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