Sin Investing for Better Returns – or Socially Responsible Investing?

Is it OK to invest in sin stocks? Sin stocks include companies who deal in gambling, alcohol, tobacco, firearms – basically anything immoral.

Any companies that make a profit are OK in a sin stock portfolio, regardless of whether they are a cigarette company selling addictive or harmful products, firearms dealer, or a financial giant encouraging the vulnerable into bankruptcy for their own profit.

But shouldn’t investing just be about the returns? Are we trying to set ourselves financially free at any cost? And how do sin stocks compare against the returns found in socially responsible funds?

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Why Investors Buy Sin Stocks

The reason investors buy stocks and funds of companies that act immorally is because the returns are thought to be much higher, and more consistent, than other stocks.

Take tobacco for example. Despite public smoking bans in the UK, British Tobacco has cornered the market on an addictive product that consumers the world over see as essential – revenues are practically guaranteed, as are the dividends to investors.

Things like tobacco, alcohol and war are not going away anytime soon, and the profit margins there can be huge.

For investors just wanting to retire rich, the argument goes “why wouldn’t I buy the best stocks to achieve that target”, when the world’s problems aren’t going away by choosing not to buy those stocks.

One could argue that these products are only fulfilling someone’s desire, so perhaps are not even immoral in the first place.

Sin stocks trade in things like guns that are seen as unethical

Socially Responsible Investing (SRI)

At the other end of the spectrum are funds that specialise in Socially Responsible Investing.

SRI fans prefer an investment strategy that promotes responsible, liberal, green and cuddly corporate behaviour with a feel-good factor above investment returns.

Such funds could make phenomenal returns – but it would be a coincidence, as the main criteria for companies to be in these funds is meeting some fund manager’s definition of “socially responsible”. Token KPIs such as having more women than men on the board of directors could be a qualifier.

More women on the board of directors is a fantastic objective, and one that we fully support, but focusing on who is employed on a board is not the same thing as having a solid investment strategy for the shareholders.

While it is undoubtedly a good thing to promote equality, your retirement strategy should not be dependent on funds whose primary purpose isn’t making you money.

Socially Responsible is a way of life to many

Sin Investing vs Socially Responsible Investing – The Returns

Let’s look at a couple of US funds as examples. The Pax Balanced fund, launched in 1971, is the oldest operating SRI fund in the business.

The Barrier (or Vice) Fund, launched in 2002, is the industry’s oldest sin fund. Let’s compare the two.

The first table shows that the sin fund has done better, smashing market averages, probably because it focuses on making money instead of identity politics:

SRI fund (Pax) vs Sin fund (Vice)
How each compares against its closest index

However, comparing the funds to their respective indexes tells a different story. The socially responsible fund performed a little under the market index, but the vice fund fell short by quite a way. Maybe it doesn’t pay to sin after all.

These numbers suggest to us that cuddly SRI funds can perform to around the market average, though we suspect that is due to diversification and good management – SRI companies do a tend to have well-formed management structures.

While, it might actually be better to invest in the Russell 1000 and track this index, rather than invest in the sin funds that single out specific companies.

But history can’t tell us the future, and the sin stocks were still performing well above the 7% or so that is usual for markets more generally.

So Which Is Best? Or Neither?

Based on the history, there isn’t a conclusive win for either camp – and it was a limited comparison anyway between 2 funds, so isn’t definitive.

It comes down in part to your own moral code. We would suggest avoiding both extremes, and settle in the middle with top rated companies who make good money for their investors and will allow you to retire comfortably.

One thing to note is that many of the so called Socially Responsible funds invest heavily in big technology, pharmaceutical and financial services – probably why they are able to get returns that are almost as good as the market!

Also, as SRI is the in-thing at the moment this might be elevating valuations – People are prepared to pay more for an ethical stock. Likewise, this could be suppressing sin stocks.

Many SRI funds have also dropped their exclusion of alcohol and gambling – we can’t see the logic as to why these are not unethical but other things are, though it at least gives them a chance to make some decent money for their investors!

We can only know the past - the future remains uncertain

Where Can I Invest?

Likely a result of the breakout of snowflakery across the western world, SRI funds vastly outnumber sin funds.

There are dozens of SRI funds, including a number of exchange-traded funds (ETFs).

On the sin stock side, there are only enough to count on one hand, even with ETFs included, although there are plenty of individual stocks to choose from.

So you can easily (if not necessarily cheaply) construct your own portfolio of sin stocks.

Saint, Sinner, or Middle-Ground?

If you’re just looking to make a solid investment, political views aside, a diversified portfolio that focuses on its shareholders will serve your financial interests better.

We don’t specifically target Sin Stocks, but we both happily invest in something like British American Tobacco.

Are the companies you invest in seeking a profit? Or a political agenda?

We would not invest in any companies who were overtly immoral in their practises and these companies would not likely survive anyway.

Likewise, we would not invest in companies who prefer to make a political point with their shareholders’ investments, rather than profits – it’s all about balance.

Would you invest in sin stocks? Let us know in the comments below.

Freetrade Review – Best UK Investment App – Zero Fees

If you’re not careful your investment pot can be decimated by platform fees and trading fees amongst other charges. But with the launch of the Freetrade platform, we’ve got some exciting news for UK and even European investors – a shift that will hopefully change the investment world forever.

One of the biggest barriers to investing for young people or even people of all ages for that matter, is the cost of investing. Well, all that is beginning to change with the introduction of zero-fee, that’s right, zero-fee investment platforms such as Freetrade, Trading 212 and there’s even more on the way.

You can now invest for completely free!

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The US has been the leader in this market disruption when Robinhood entered the scene in 2013 but us UK investors were still left paying sky-high platform and trading fees until relatively recently.

Is Freetrade the revolutionary investment app that we’ve all been waiting for?

 

The Freetrade App In Action

What Is Freetrade?

According to Freetrade themselves, they are a challenger stockbroker providing free stock trading. There are no fees on basic trading, and they are able to do this by driving down their own costs and charging small amounts for “premium services.”

Freetrade is available on both Android and iPhone and with Andy having personally tried and tested the app with a small amount of his own money, we can vouch that it is very easy to use.

Looking at the key points:

  • You can indeed trade and hold investments for free.
  • You can invest in an ISA but this comes at a cost, which we’ll get to shortly.
  • They are FCA regulated, which means you will be covered by the Financial Services Compensation Scheme up to £85,000 – FYI, as with any other platform this does not protect your money from poor investments.
  • Wide range of funds – this is quite an exaggeration, which again, we’ll get to shortly.
  • US and UK stocks – You can indeed buy many popular stocks but not all.
  • Fast, friendly Support

What Is The Pricing?

Free isn’t it? Well, not exactly. It could be completely free for some but for most investors it will come with a very small fee.

The (Almost) Free Pricing Plan

Normally when you buy shares you get a live price and you execute the trade there and then. But Freetrade are collating all the trades and executing them all together at 4pm daily to cut their admin costs. This does mean that you won’t actually know the price before you buy which could be dangerous. On a normal day the price won’t change much but on occasion prices can skyrocket.

Imagine if there had been a takeover announcement and the share price had rocketed up 30%. You now would be paying way more than you had expected.

We actually really like this feature as it’s a way to cut trading fees, but we would like the option to set a maximum price just in case the situation changes. Let’s hope Freetrade are listening to this video.

Alternatively you can place an Instant order where you can execute the trade immediately, but they will charge £1 for this service. Our rule of thumb is to try and keep our trading costs below 1%, so we would make sure we at least invested £100 per trade but there is no actual minimum set by Freetrade.

The use of an ISA will cost £3 per month but you may not even need an ISA. We personally would always try and use an ISA as we plan on having huge sums of wealth.

But because UK residents get a generous capital gains allowance and a £2,000 dividend tax allowance, then many investors won’t ever pay tax anyway, so don’t need an ISA. Think about your own circumstances and act accordingly.

And finally there is a reasonable – but note – not free FX fee of 0.45%. Don’t forget that you could be trading in US stocks priced in dollars and even many UK companies pay dividends in dollars, so you will incur this small fee.

What Are The Available Investments?

So far, we are very impressed with the price, but this is where things begin to unravel. We have previously been spoilt for choice by more traditional platforms where you can invest in practically everything you can think of.

The most notable absence is funds such as OEICs and Unit Trusts.

There Are Currently Not Enough ETFs and Funds For Our Liking

They do offer a small number of ETFs, but we would expect traditional funds to also be available. The good thing about Freetrade is their transparency and they do provide a spreadsheet listing what is available but sadly at the time of writing this only contains 358 stocks and ETFs. In fact, they offer only 43 ETFs.

Now, they are updating this all the time and you can request they add something but there’s no guarantee you’ll get what you want.

One of the biggest absentees in our opinion is the family of Vanguard LifeStrategy funds. We believe these are great for beginners. Considering Freetrade is aimed at new investors we feel these should at least be included.

The App Itself

It’s fast, streamlined and not cluttered but doesn’t really offer too much. It would be nice to see some Stock or ETF information such as dividend history, yield and stock allocation.

Even when clicking on the max price graph, it doesn’t even indicate what time period it is for. You do get a brief description of the stock or ETF, which is nice and of course the key investor document.

There was so little information it means that you must go online to research everything first and can only really make the trade on the app itself. But perhaps this is a price worth paying in order to get zero-fee trading.

One major flaw is the lack of a trading website. We like having the option to download or even just view my portfolio on a desktop, so we can carry out some serious analysis on our portfolios. This isn’t possible on the small screen.

Is the Freetrade App a Game-Changer?

Customer Service

Whenever we have spoken to them, they have been helpful and quick to respond but the only way to contact them is with online chat. If you have a lot of money invested, you may feel you want to speak to a real person but will be unable to. We suppose this a key way to keep the cost down.

Conclusion – Is It A Game-Changer?

You bet it is, but we won’t be moving our investments to the platform just yet as we want wider choice and additional service that we feel is worth paying for. Also, as your pot grows the cost of investing comes down as a percentage of your pot, so personally the general cost of investing isn’t too much of a problem for us.

But for those with little money or those that don’t want any bells and whistles, Freetrade might be perfect for you. In fact, it is now truly possible to invest with just a few quid.

We also see or at least hope that traditional platforms will have to adapt, to prevent a huge exodus to these challenger brokers. As a result of these apps, we expect prices to come down across the industry in time.

What do you think of Freetrade and will it change the investment game forever? Let us know in the comments section.

Wombat Invest Review – New UK Investment App – Ideal for Beginners?

We’re proud to bring to your attention a brand-new investment app which could be ideal for beginner investors in the UK. We know that one of the biggest barriers to investing is the perceived complexity, and perhaps the opinion from most people that it’s just not cool.

The Wombat Invest App plans to change all that by “empowering generations to manage, save and grow their money” in their words.

This app has some cool features that we think that many young people and beginners are going to love!

Editors note: Don’t forget to check the Offers Page and grab free shares worth up to £200, plus £50/£75 cash backs when you open new investment accounts through the affiliate links there!

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In order to bring you this hot-off-the-press information and be amongst the first to review this app, Wombat gave us a small amount of credit to thoroughly test the app, on the condition that we had the freedom to provide an unbiased review.

We have remained impartial we will be covering the things we love and things we don’t love.

The Wombat Invest App

What Is Wombat Invest?

Wombat is a brand-new investment app available on Android and Apple devices that is making investing accessible to the masses. One of most commonly discussed problems with investing is the cost but it can also be very complex.

Even if you spend enough time learning the basics of investing it can still be needlessly complicated.

For instance, let’s take this ETF as example:

Ishares Dow Jones Global Sustainability Screened UCITS ETF

Most people will have no idea what that means, making it very difficult for beginners to even start.

It might as well be written in a foreign language.

Investing Language Can Make as Little Sense to Most People

Wombat will simplify all this for you as they have packaged investments into themes. Each theme invests in an ETF and we think the snappy names and description are far easier to understand for the average person than the complicated investment product names found elsewhere.

That ETF we just looked at by the way is actually the underlying fund that ‘The Goodies’ Theme invests in. We think you’ll agree that ‘The Goodies’ is far easier way to say that that the fund invests in socially responsible businesses.

A great thing about Wombat is it makes it simple for the novice but gives you enough detail for those that desire to know more. On the app you can easily view the fund fact sheet, KIID and prospectus.

It’s worth noting that Wombat does not currently offer investments in individual stocks.

What Are the Fees?

For those with small pots, fees can often decimate returns and we think that Wombat have been fairly competitive.

The Pricing Options - It's Free Under £1000

Usually the worst time for fees with many platforms is when you have a small pot. Wombat have amazingly [to find axe image maybe] taken an axe to all their fees when your investment pot is below £1,000.

We can’t stress enough what great news this is for those just starting out!

For those with pot sizes over £1,000 the prices are roughly in line with other platforms; but you need to be careful.

They’ve gone for a fixed monthly fee of £1 and a platform fee of 0.45%.

The 0.45% is perhaps a little high and they may struggle to attract investors with large pot sizes.

Having said this, this fee includes the use of an ISA, which you often must pay extra for on other apps, such as what Freetrade intend to do.

Unlike other platforms however you don’t need to pay extra for additional features.

As for the £1 monthly fee, this is practically nothing for those with a larger pot but if you have a small pot it can be on the rather steep side as a percentage of your pot – but of course it’s waived below £1000.

The Main Dashboard

You’ll want to grow your pot quickly to minimise the impact of this fixed fee.

In fairness though, if people start investing because of this app we feel that it’s a price worth paying. You will almost certainly be better off financially by investing than never investing at all.

Round Ups

Here at Money Unshackled we have longed encouraged the behaviour of paying yourself first, which means you either save or invest money as soon as you get paid.

Although this is best practice most people don’t or won’t always do this. So, a nice little feature Wombat offer is called ‘Round Ups’.

Invest While You Spend?

What this does is round up your purchases and every 2 weeks it will pay the accumulated ‘Round Ups’ into your Wombat Account.

Hopefully you’ll build up a nice little investment pot without really noticing.

Obviously for this feature to work they will need access to your banking details, so they can securely access your transaction history, so they can calculate the required ‘Round ups’.

We expect this is no problem for the tech-savvy youth of today.

Different Screens in the App

The App

The app is slick and easy to use. You can buy into a fund with just a few taps and set up auto invest. They have some nice charts, enabling you to track your portfolio size and see projections way into the future.

The app even has a Learning Hub where you can find interesting and very helpful articles that should hopefully improve your investing knowledge, so we encourage you to check that out.

Fractional Investing

Sometimes you want to buy into an investment, but the ETF price is way too high, which may mean you can’t buy it at all, or you can’t get your desired allocation percentage.

This isn’t a problem with Wombat as they offer a very cool feature known as Fractional Investing.

Instead of having to wait until you have enough money for 1 fund you can invest in a fraction, meaning you can invest no matter how little money you have.

This again is unusual for an investing platform, and welcome. Some funds can be priced at hundreds of pounds just for 1 share.

On another platform this might be too much for you and may prevent you from diversifying properly – not the case on Wombat thanks to fractional investing.

Cool Stuff is Coming Down the Track

Cool Stuff in The Pipeline

As we’ve been in touch with Wombat, we’re very pleased to share with you some of the great features on the horizon, which we think will really enhance the app.

This includes individual stocks, so people will be further able to customise and tailor their experience. We always think new investors need to tread carefully around stocks, but there’s no doubt that they’re in demand by most new investors.

They’re also working on a “Wombat Junior” App, which will allow those under 18 to invest and “Wombat Gift”, which will allow people to offer investments as a gift.

They mentioned a lot more, which we’re not at liberty to say just yet for confidentiality reasons but it must be really exciting times at Wombat HQ.

A Great App for Beginner Investors?

To summarise, you can find cheaper ways to invest but we feel that its prices are competitive enough and combined with its great app and simple themes-based approach the Wombat Invest App will prove very popular.

Of particular interest to us were the Round-Up feature and the Fractional Investing feature.

We’re disappointed that we can’t buy individual stocks, but we’re told will be possible soon. If you want to invest in diversified funds this is a top-notch app. When the word gets out, we can see this being very popular amongst new investors.

What do you think of the Wombat App and will you be checking it out? Let us know in the comments section.

How to Reduce P2P Lending Risk and Maximise Returns?

With any investment we’re taught to diversify to reduce risk and hopefully maximise returns. But most people fail to do this with P2P Lending.

Perhaps they feel that because they are diversified across many loans on their chosen platform, they are safe.

The recent collapse of Peer-to-peer provider Lendy has demonstrated that P2P Lending is not free from risk and you could potentially lose all your money.

As advocates of P2P Lending we feel this is unlikely, and Lendy was a platform that we have not endorsed, but there are some things you can do to minimise this risk.

So, how do you Reduce P2P Lending Risk and Maximise Returns?

YouTube Video > > >

What Happens When a P2P Lending Platform Goes Bust?

Let’s look at the case of Lendy. Lendy was a P2P provider that spectacularly went into administration with lenders now wondering if they will receive anything of their investment back.

In the words of their administrators “a key part of their role is to safeguard the loans made through the company to the various borrowers.”

This sounds moderately positive, but it is unclear what each investor will get back.

No Need to Worry When You're Risk Is Spread

As the loans are between the lender and the borrower one would hope they would get the majority back but only time will tell.

How to Stop This Happening To You?

Firstly, you need to consider the returns that the platform is offering. It’s our understanding that Lendy was offering 12%, which is absurd as we’re in an era of record low interest rates.

Contrast that with the more realistic P2P returns of 5-6% that we talk about regularly.

If the lender is receiving 12%, the borrower must be paying even more. These were clearly very high-risk borrowers.

So, RULE #1 – Don’t chase ridiculously high interest rates – if something looks too good to be true then it probably is.

Don’t Invest What You Can’t Afford to Lose

To us this is obvious but time and time again people continuously do this.

If You Can't Stand to Lose Money - You Shouldn't Invest

We came across a comment on Trustpilot in regard to Lendy, where the person is criticising the lack of warnings and says he can’t afford to lose the money.

We don’t mean to rub salt in his wounds but why has this person invested money he can’t afford to lose in a high-risk investment platform?

We hope that the lesson he learns is not that investing or P2P is bad, but instead:

RULE #2 – Only invest what you can afford to lose.

And RULE #3 – Only invest in what you understand.

Diversification

Every P2P platform we have come across encourages you to invest enough in their platform to ensure you are invested across multiple loans. This is usually at least 50 or 100+ loans.

This is critical, and we suggest you make sure you do this. In our opinion you want your maximum exposure to any one loan to be no more than 2% and ideally much, much lower.

An Individual Platform Could Invest In Complete Garbage

In fact, Funding Circle says they suggest you invest at least £2,000, so you achieve diversification across 200 businesses and have exposure to any one business of less than 0.5%

Diversification Does Not Stop There

What they don’t really tell you and neither will any P2P platform for that matter is that you’re still exposed to the platform itself.

Perhaps your chosen platform is a terrible business and cannot carry out proper risk assessment of loans. The loans that you invest in could potentially all be rubbish.

Therefore, it is also critical to invest across multiple P2P platforms. This way you are spreading your risk.

Come Out Fighting and Beat the Risk

This is also a fantastic way to boost your returns because the P2P Lending market is very competitive, and they are all offering very generous referral bonuses to obtain new customers.

If you’re interested in taking advantage of such referral bonuses, we have loads listed on our website here where you can earn several hundred pounds in bonuses from very popular (and in our opinion, responsible) P2P platforms. We will be adding lots more over time.

We have also reviewed the platforms and you can find the videos on here and of course on our YouTube channel.

How many platforms you choose to invest across is up to you but a balance between practicality and risk seems like the best approach.

We like the idea of about 5 platforms, but this totally needs to be based on your comfort level. Might as well get the referral bonus from each platform too!

The ISA Problem

A major problem is you can only deposit into 1 Innovative Finance ISA per tax year.

We believe this to a be stupid and dangerous limitation set by the government as it encourages people to under-diversify.

It’s worth noting that if you are basic rate taxpayer you can earn £1,000 before paying tax on interest, so you might not even be concerned about this.

In any case, it’s probably better to go for safety first and use multiple general accounts in addition to using your one ISA.

Better to be Safe than Sorry

Better to be safe than sorry. One technique we use is to open a different ISA each year.

Of course, those juicy referral bonuses will help to soften the blow of any potential tax.

New FCA Rules

It goes without saying that you should also have investments across different asset classes.

Well the FCA is placing a limit on investments in P2P agreements for retail customers new to the sector of 10 per cent of investable assets.

It’s difficult to see how this could be enforced in practise. We don’t see how a platform can know other than if you give a declaration what other investments you have.

We understand why the FCA might want to implement this though because P2P Lending looks at first glance to be like saving in a bank, but the risks are very different.

By knowing the risks and how best to protect yourself, you will not go far wrong.

Will you be investing across multiple P2P platforms, to spread risk and take advantage of those sweet bonuses? Let us know in the comments section.

Work Once Get Paid Forever

Work once, get paid forever. These are the words of millionaire’s the world over, and by following this simple mantra we can all be in with a shot of the big time.

A mix of passive income philosophy and good old hard graft, there is no simpler route to becoming wealthy than those 5, simple words – Work once, get paid forever.

So how is it done? Let’s check it out…

YouTube Video > > >

The Problem with Pure Passive Income

The purest form of passive income is earning interest from a bank savings account. It requires the least amount of work on your part, and consequently gives a pathetic return.

On this channel, we Money Unshackled boys advocate passive income in the form of high cash returns on investments, but these sweet returns are not 100% passive. We say that you need to put some effort in to get the best mix of returns and lifestyle.

Share portfolios need to be regularly rebalanced; rental property needs to be found, renovated, and managed even if you let your agent do the heavy lifting; and you should always invest time into understanding an investment before it is made.

Portfolios Need To Be Rebalanced Regularly

But investments don’t require you to get up at 7am each morning and put in a 9 hour session in someone else’s office working on someone else’s dreams – so are infinitely more passive than the alternative – trading time for money.

Targeted Work – An Example

Instead of spending your efforts working hard and getting paid once for that time, what if you only invested your time into efforts that paid off forever?

In 2017, Ben worked hard for 5 weeks in his spare time doing up a large city Victorian townhouse, transforming it from a run-down family home into a 5 bedroom multi-let HMO.

With his business partner and some builders, his hard work resulted in a second bathroom, fire-doors throughout, and a high standard of finish in each room – in essence, an amazing investment asset.

Work like that pays nothing while you’re doing it but promises to pay handsomely forever.

Transform Your Assets Into Better Assets!

Enhancing a property from a standard house to a pay-by-the-room model can double your future monthly income.

This was a result of a small extra upfront investment, and a few weeks of targeted work. Should he have paid professionals to do all the work for him?

He would now, but the first time you do something it’s usually good to get involved yourself, so that you have the knowledge to manage future similar projects.

Time spent – 5 weeks of weekends and evenings. Increase to future monthly income – about £300 extra per month per business partner. Work once, get paid forever.

The 70:20:10 Rule

Charles Jennings, a workplace performance guru, told businesses to live by the 70:20:10 rule to power growth.

It is a rule that we all can and should be applying to our personal finances as well.

The philosophy, translated into home finance terms, tells us that 70% of our time should be given to what makes us the most money currently.

Your Job Will Soon Have To Be Ditched Entirely

For most this will be your job.

Then 20% of your time should be spent on building up your next great income stream (a side hustle business that has the potential to be passive) – leaving 10% of your time to research and think about future, as yet undeveloped projects.

The idea is that you ditch working on your primary income stream as soon as your second stream is large enough to benefit from extra effort and once your first stream is passive.

Unfortunately, if your first stream is a job, it can never be passive, so will soon have to be ditched entirely.

You want to end up in a position where you work hard on a side hustle business idea until it can run itself and pay you money forever with minimal further input; thereby allowing you to upgrade the time spent on Project 2 from 20% to 70%.

Over the years you want to end up with multiple established income streams for which you worked on in the past but get paid in perpetuity. If you can make even a few hundred pounds a month from each stream, you’re going to end up being very rich once a few are established.

Good Marketing Is Essential To Getting Paid Forever

Marketing and Working Smart

We both recently went to a SUM41 gig in Manchester which got us thinking about passive income.

We thought that the support act that played before SUM41 was great; they worked really hard on stage to put on a performance and they were playing to the right audience for their genre. But their marketing was terrible.

We never learned their name. There were no banners on stage. The tickets didn’t mention them as the support band, nor did an internet search.

As audience members, we should have had the name of this band shoved down our throats so we could find them later on Spotify and potentially generate them royalties forever. They were working hard but not working smart – they were missing an obvious opportunity to build a passive income stream.

Marketing is an essential part of Work Once Get Paid Forever. Once you’ve put in the hard work of building your asset, whether that’s a music album, website, book or whatever; tell people about it.

Work Hard - But Work Smart

Who Wants to Be A Millionaire?

Very few people become millionaires through a salary. That is, by trading time directly for money.

By far and away the easiest way to become wealthy is by building up multiple passive or semi passive income streams, which build up and can be reinvested into the markets or other business ventures.

Most entrepreneurs work hard, but only on tasks that grow their income streams and that they enjoy – rarely to be paid directly for their time.

We can’t relate to those corporate CEOs who get paid 6 figure salaries, who are obviously millionaires, but continue to trade 70 or 80 hours a week of their time directly for money. Just invest your salary and retire already!

Investing For Success - It's In Your Control

What Can You Do? – Investing for Success

If you don’t have a side hustle idea or aren’t confident to start a business, you can still stick to the Work Once Get Paid Forever mantra by investing as much of your salary as possible into the stock market or other investments.

By building up a substantial investment portfolio from your slave wages, you are getting paid an income forever in the form of dividends, rent, interest and royalties.

By reinvesting everything you earn from your investments, your income will grow. Soon, your efforts will pay off and you’ll be getting paid forever for work that you did in the past. That’s Work Once, Get Paid Forever!

Are you stuck trading your time directly for money? What are you doing about it? Tell us about your side hustles and investments in the comments below.

How WE Would Invest £1000 UK

Updated: 27th November 2020

How would you invest £1000? We get asked this a lot. Should you invest in stocks and shares, equity funds, gold, property, exchange traded funds, peer to peer lending? And how much should you hold in cash?

In this article we’re looking at some of the best options for investing £1000; including what we would do.

For a more recent discussion on how we’d invest £10,000, check out this video next:

YouTube Video > > >

There are a lot of investment options available to you with £1,000, but if you only have £1,000, you should make sure that your money is accessible, in case of emergency.

Safety First

The only truly liquid asset is cash – we’re saying that you should have an emergency fund of cash saved in a bank to fight financial fires with, and if you only have £1,000 in the world, a cash account would be the place to start.

Unfortunately, one of the main rules of investing is that liquidity is best when return is worst. But some banks offer Regular Saving accounts with decent interest rates, even in this post-crash era.

£1,000 - But Where Should It Go?

Stock Market

£1000 is more than enough money to invest in stocks and shares, funds and ETFs.

Many platforms including AJ Bell allow you to invest from as little as £25.This is one of our favourite all-purpose platforms, with amongst the best fees for small pot sizes.

1) Shares

So you can buy shares with £1000, but should you? Unless you just want to practise investing and don’t mind losing your money, avoid buying shares at such low amounts.

We’ve said elsewhere that we think the minimum pot size needed to buy shares is more like £6,000 than £1,000 – unless you’re using a commission-free platform.

The problem with buying only £1000 of shares is that you are unlikely to be diversified enough, unless your platform offers fractional shares.

Due to crippling trading fees on the standard trading platforms, we would spend a minimum of £1000 on each stock to get decent value; so it’s almost like you are gambling rather than investing, as you would only hold one card in your hand. Maybe it does well – maybe it doesn’t.

However; there are now some new “free” platforms get around the problem of fees, making buying small amounts of shares more realistic platforms such as Trading 212 and Freetrade, but are limited in the number of companies and funds on offer. Shares and Funds alike can now be bought fee free! – amazing.

CASHBACK OFFER for our readers: if you want a free share worth up to £200, simply sign up to Freetrade through the link on the Offers page.

2) Exchange Traded Funds (ETFs)

ETFs are amazing because they track stock market indices without needing expensive fund managers, have very limited fees and can have very high diversification.

One great place to buy ETFs is on the Vanguard Platform. Their FTSE 100 and S&P 500 ETFs are ridiculously cheap in terms of fees, and track the market almost perfectly. Some of our all-time favourite investment products.

3) Managed Funds

Managed investment funds are certainly a respectable place to invest your thousand pounds. They are often well diversified across many companies, sectors and geographies.

The problem we have with managed funds are the management fees. Fees on actively managed funds can be quite damaging to long term returns. Sometimes that fee might be worth paying.

And even then, not all funds are expensive. Vanguard also offer funds, including funds of funds!

Vanguard LifeStrategy Funds are collections of other funds and ETFs in one package – a one stop shop for access to a significant chunk of the world markets in one ultra-diversified investment.

The fees are ridiculously low too which we love. If we were starting out in the stock market, we would either start here, or with S&P 500 and FTSE 100 ETFs.

So how can we invest and diversify in the stock market with limited knowledge?

Robo Platforms

Do you want to invest your wealth without having to think too hard, for minimal fees, and with some investment advice thrown in? Then try a robo investing platform.

We would use an established platform like Nutmeg. With even small amounts of money, you get access to basic investment advice, which otherwise would have been unaffordable, and Nutmeg will make the investment decisions for you based on how you answer their questions.

You can even get 6 months without fees if you use the referral link on the Offers page – remember, fees should be avoided at all costs!

Peer to Peer (P2P) Lending

Peer to Peer Lending is a good mix of decent returns, lower risk, and increased liquidity compared to the stock market. Since the coronavirus pandemic strated however, P2P platforms have mostly put themselves on freeze to new investors.

Some are still accepting new customers though, including Loanpad and easyMoney – again, cashback offers are available for these on the Offers page.

Gold Is A Defensive Investment

What About Commodities? Gold, Oil, etc

Only buying commodities with £1000 wouldn’t give you much diversification.

You could buy some physical gold bullion or invest through an ETF, but gold doesn’t pay a dividend. It is a defensive asset though that could be useful in a downturn, but not essential when you’re first starting out small amounts of money.

What about Property?

For £1000? No chance. You can invest in funds that invest in commercial and residential property, but to buy an actual buy-to-let rental property with the leveraged returns that come with it requires a cash outlay of £30k upwards. Keep this one on the back burner for when your pot is bigger!

Where will you be investing next? Let us know in the comments below.

Investment Property UK – FAQs

Investors who are new to Investment Property always have a ton of questions for us about the basics. Buying a profitable rental property is challenging, and if YOU are keen to start making lifestyle supporting passive income, here are the 8 top questions we get asked that you want answered…

YouTube Video > > >

1) Should I Buy Outright or Use a Mortgage?

Use a mortgage – this is hands down the most crucial decision factor between whether your investment provides a life changing return or a mediocre one.

If you buy outright you might need to spend £100,000 or more on one rental property, whereas for the same money you could buy up to 4 mortgaged properties in the same area.

In terms of monthly profits, you must pay some mortgage interest, but your revenues are 4 times higher.

In most circumstances, using a mortgage is the obvious choice. The rest of the market is doing it, and this is factored into rental prices.

And who can afford to spend £100k or more on one undiversified asset?

Applying For A Mortgage Can Be Daunting - But Necessary

2) Do I Need a Special Type of Mortgage?

Yes – the best model in our opinion to buy investment property is with an interest-only mortgage.

This is in fact the default mortgage type for buy-to-let property purchases. We invest for cash flow, and this is not achieved if we must repay hundreds of pounds of equity each month under a capital repayment mortgage structure.

By being patient and holding the property for 30 or so years, we expect the equity to build to a high enough amount to make the loan balance negligible. This is achieved when the house value increases.

Be Patient - Play The Long Game With Your Portfolio

3) How Much Money Do I Need to be Able to Invest?

In some areas of the North of the UK, a decent rental property can still be bought for around £100,000. A buy-to-let mortgage will let you put down a deposit of no less than 25%, so that’s £25,000 of capital.

Add to this stamp duty of £3,000 and legal fees, and you’re looking at around £30,000 for the average investment.

Don’t live in the north? No problem! – you should be using a property agent to manage your assets anyway. There’s no need for you to live down the street from your rentals.

You could also go halves with a friend – up to 2 people can be listed on a mortgage. More friends can be involved if you buy through a company structure.

On this note, buying through a company can open the option of 20% deposit mortgages although this is not common– an upfront cash saving of 5% on your deposit!

A Northman Contemplating His Vast Property Portfolio

4) Do Landlords Spend All Their Time Fixing Toilets?

I have never fixed a toilet in my life, and I don’t intend to! The only landlords who would are doing so because they’re “accidental” landlords (i.e. they’ve inherited a house), or they have bought a property based on reasons other than the highest profit margin available. Maybe they thought it looked pretty.

They don’t know what they’re doing finance wise and are forced to cut costs on maintenance. No, pay a plumber to do it for you, and have a management agent arrange it for you.

You Shouldn't Be Doing This As Investor

5) Should I Set Up a Company to Buy Property?

This is up to your preference and circumstances. Note that limited company mortgages carry higher interest rates than personal mortgages.

But companies are a way to protect your wallet from the tax man, and you pay tax at the corporation tax rate, currently 19%, which is cheaper than paying income tax which you’d pay if it was owned in your own name.

But you’d also have to pay dividend tax when you take your profits out of your company.

Whichever method you use, don’t plan to change it later, as you’ll incur stamp duty and legal fees to do so. Make your choice now; and stick with it.

Keep The Taxman Away From Your Dollar

6) What If Interest Rates Go Up?

If interest rates went up, the cost of your mortgage would go up, and your profits would go down.

But the same would be true for every other landlord in the country – will they all just continue taking that hit to their profits?

No, they would all raise their rents at the first opportunity, out of necessity, and so could you.

The Bank of England knows this, and they know that by raising interest rates, most of the additional cost will inevitably be passed on not to the landlords, but to the tenants.

So, they are reluctant to raise interest rates significantly as a result, unless it’s spread over a long enough term to allow rents to rise gradually.

As always, there is a risk that an investment will lose money, and interest rate risk is one of the biggest for property investors – only invest what you can afford to lose.

Put Rents Up With Interest Rates

7) Do Tenants Have All the Power Now?

In June 2019, new laws have come in that mean tenants don’t have to pay agent fees – these costs are likely to be shared now by the agent and the landlord, so factor this extra cost into your profitability calculations before investing.

It is the latest in a string of new laws that give tenants more rights. What this really means is you need to be aware of the rules now more than ever, and extra careful not to fall into any traps by accident.

A good management agent will hold your hand regarding the rules; they’ll make sure that new tenants have a good credit history, will chase up late payments, and help with any evictions.

Avoid taking on problem tenants in the first place using proper referencing, and take out legal cover insurance for evictions, just to be extra safe.

Avoid The Landlord Traps Set Up By Parliament - Stay Knowledgable

8) What Are the Scary New Tax Changes

We always get asked about the tax changes to mortgage interest – it’s something that seems to strike fear into the hearts of wannabe investors.

But you may not need to worry about this one – if you are a basic rate taxpayer, the impact is negligible.

The main effect being that your taxable income is increased by the amount of the interest, which could push you up into the higher tax bracket by a small amount.

If you are a higher rate taxpayer, you will be stung by this if you own your properties in your own name. Two solutions are to either buy in the name of a spouse who is a basic rate taxpayer, or to buy using a company.

What other questions do you have us about property investing? Let us know in the comments below.

Side Hustle Ideas UK

Do you want to start a side hustle, but need some ideas to get started? Millennials are turning in their droves to the gig economy and side hustles, with 1 in 4 people now taking on multiple money-making activities at the same time. Gone are the days of a high paying job for life.

YouTube Video > > >

Beyond the necessity to supplement stagnant wages, young people now demand the flexibility of a work life balance on THEIR terms.

Having a side hustle business outside of your normal job is a fantastic way to have fun doing a hobby you enjoy; and get paid to support your lifestyle at the same time.

So what makes a good side hustle? And what are some good side hustle ideas?

woman thinking
Time To Think Of An Idea

Thinking of an idea is challenging, but before that we need to be thinking of the right type of side hustle.

What Makes a Good Side Hustle?

We say that there are 3 types of side hustle. These are:

1) Pay By The Hour/Event

This is the “Trade Time for Money” type of side hustle, and the most common. It is also what most people think of when they think about side hustles.

Here’s some ideas for this type of side hustle:

  • Host murder mystery evenings at your home
  • Manage social media accounts for small businesses
  • Mystery shopping
  • Grow and sell plants
  • eBay clear-out
  • Dog walking / babysitting
  • Private tutor / music lessons
  • Londoner? Offer free tours – tourists expect to pay a decent tip each of £10 – £20

What’s good about the Pay-by-Event type of side hustle is that they are often simple to set up, you know roughly how much extra cash you’ll get each month, and there are plenty of ideas out there.

Whatever you are good at, you can spend your spare time doing it and getting paid for it.

planting seeds
Your Hustle May Take Time To Grow

The downside to this type of side hustle is that there is limited room for growth. You only have so much time in the day, especially if you are working alongside a full-time job.

2)100% passive side hustle

We’re not sure that these technically fit the definition of side hustle, but they are a way of making money outside of work – so we include them here.

Examples of 100% passive side hustles include:

  • Rent out a room to a lodger / become an Airbnb provider
  • Let a commuter park on your drive or garden
  • Rent your garage out for storage
  • Hire out the use of another asset you own e.g. a classic car or an expensive camera

These are much better types of side hustle as they take the time element out of it – if you can, set up one of these moneytrees first, and once they are ticking along without your input, you can turn your attention to a side hustle that requires your time.

This type of side hustle requires you to own assets, and to make them work hard for you while you do nothing.

lodger
Lodgers Can Bring In Hundreds A Month - Each!

Obviously not everyone can do this, but if you are lucky enough to have a foot on the housing ladder, getting a lodger is a simple and significant step you can take to make hundreds of extra pounds each month, tax free.

3) Business with Growth Potential

Finally, this type of side hustle is a true business start-up – you might expect to have an initial cash outlay, no profits for the first year or two, but thereafter could have unlimited growth – to the point where it’s making enough money for you that you can quit your day job.

This type of side hustle differs from something like a dog walking business, in that it has scalability in terms of the number of people it can reach.

dog walking option 2
Dog Walking Pays Only So Much - Where's The Scalability?

A dog-walker can only walk so many dogs; a tour guide can only put on so many tours.

Examples of side hustle businesses that have scalability are:

  • Start a YouTube channel, website or blog that offers value and helps people
  • Write a book
  • Graphic designer / Photographer / Music Samples creator – sell on sites such as AudioJungle
  • Produce and sell an online course e.g. website development, car mechanic, cookery – whatever you’re good at, make a course to show others how to do it, and charge big bucks
  • Investment Property business

Note that most of these are internet based. The reason so many people are able to make a living from the internet is that it is the purest and simplest tool to achieve scale.

global network
The Internet Means We're All Connected

We’re All Interconnected

Everyone in the world is connected the internet, meaning that your product or service has the potential to reach over 6 billion people.

Come up with a product that helps people or that entertains them, and a way of making sales passive, and you are onto a winner.

The web-based tutorials site Udemy is a place where you can upload a series of videos that you have filmed and packaged together as a course, which people can download and buy.

You create the course ONCE, then forget about it – an unlimited volume of the product can be downloaded without any further input from you, and a worldwide audience can see your product.

You have scalability of production and of audience reach.

What We’re Doing

This website is another example of a side hustle that can reach an unlimited number of people, and crucially we believe provides value.

In our YouTube videos, we aim to provide as much information on investment and finance topics as we can in as short a space of time, to educate, entertain, and help you become financially free.

In return, we hope our channel and website will grow over the years to reach a global audience, and act as another source of cash flow for us alongside our investment portfolios.

The key is that we are first and foremost doing something we enjoy and doing it for the right reasons – to help people. If you can genuinely help the masses, your business will grow.

monopoly
Building A Property Portfolio In Your Spare Time Can Make You Rich

Investment Property as a Side Hustle?

We include in that final list an Investment Property business.This lacks the scalability of an internet business but can grow from a handful of rental properties into a portfolio 50 strong, by reinvesting all profits.

We include it because it doesn’t require your time to manage (you should be using a property agent to manage your portfolio for you). Unlike an internet business however, it costs a lot more to set up.

Consider Your Schedule and Flexibility

When choosing a side hustle, you should ask yourself how much time do you have available, and what is your time worth to you? Are you willing/able to give more time as your side hustle grows?

time
How Much Time Can You Really Commit?

Setting up a business will take a lot of time and commitment before you start to make serious money, while a Time-For-Money side hustle might be better suited for someone who needs an extra income now.

Conclusion

As you know, at MU we both love and crave passive income, but if we must give up some of our time, it should be for scalable income.

Therefore, we would always go for the second and third types of side hustle.

The 100% passive such as lodgers and renting out assets and setting up Businesses with Scalability, like what we’re doing with Money Unshackled.

We hope we’ve opened your mind to what a side hustle can be – it needn’t be just another time-for-money trade off like your day job. If done right, it could set you free.

What’s your side hustle idea? Let us know in the comments below.

Investing For Beginners UK – FAQs

Investing for beginners can seem very daunting but it doesn’t need to be this way. In fact, investing is incredibly easy if you spend a bit of time learning the ropes. Just a few minutes here and there could shave decades off your working life and set you financially free.

Let’s Look At Five Frequently Asked Questions

YouTube Video > > >

1) Where To Put My Emergency Fund?

We regularly get asked this as if we have got a secret investment opportunity that somehow gives safe and yet enormous investment returns with instant liquidity. Liquidity refers to how easily assets can be converted into cash at its intrinsic value.

This means the value determined through fundamental analysis without reference to its market value. Or more simply what it should be worth even if the actual price is different.

So, property is very illiquid, as it can take several months to sell, and you may have to sell below its “real” value. And with stocks and shares you might be able to sell quickly but you may be forced to sell below its intrinsic value.

Property Is Illiquid - Your Money Is Locked Away

An emergency fund must be accessible and not prone to sudden value declines. This means the only place to store an emergency fund is in cash, whether that be in physical cash or a bank.

All is not lost as you can take advantage of some savings accounts and even higher interest regular savers on the proviso that you have instant penalty free access.

Unfortunately, an emergency fund is just one of those things we must all have despite inflation destroying its value.

In time your other assets will dwarf it, so the fact your emergency fund is doing nothing won’t be such a big problem.

2) What Is The Minimum Money Needed To Invest?

You can generally start as low as £25.  But often it’s not the forced minimum you need to be concerned about- It’s the minimum required to have a diversified portfolio that you need to be aware of.

If investing just in stocks, we traditionally would have said £6k in order to get basic diversification but with new “free” platforms, you can practically start with nothing.Of course, we never encourage beginners to start with a purely stocks-based portfolio due to the risks.

If you go down the fund route, which we always encourage, most traditional investment platforms have a minimum monthly investment of £25 and a monthly trade cost of about £1. But it’s better to do more than £25 if you can to reduce the impact of the regular trading fee.

You might be thinking“I’ll go with the free platforms”; but be aware they are limited in the service they offer and the investment choice.

Your Assets Will Soon Dwarf Your Emergency Fund

3) Which Is The Best Investment Platform?

This must be the most frequent question along with “what platform do we use?” The truth is there is no single best platform and what we use is probably not right for you, as there are so many different variables. It also depends on what account you are using such as ISA, SIPP and so on.

Perhaps we can summarise the platforms into categories and you can choose the one best suited to you:

  • “Free” but no frills
    • Try Freetrade or Trading212.com – The investing part, not CFDs
  • Low Cost Percentage Based Fee with decent service offering – For small pots
    • AJ Bell
  • Low Cost Fixed Fee with decent service offering – For Bigger pots
    • Interactive Investor
  • Dirt Cheap Vanguard Funds Only
    • Vanguard
  • Cheap Robo Investing Platform i.e. do it all for me
    • Nutmeg

Some people mention trading sites such as Plus500 or etoro but these are not investment platforms.These are trading platforms where you trade CFDs. We don’t currently gamble in CFDs and something like 80% of those who do, lose money.

The UK is a Great Economy

4) What Will Happen After Brexit?

Long term we will probably flourish and that is whether we are in the EU or Out. We’ve never understood all the negativity. The best approach is to just decide and get on with it. Indecisiveness is the only problem.

Personally, we both think we will be better off out long term but Britain is a great country and has been for thousands of years- This will continue either way.Leaving without a deal would probably see short term issues as we need to arrange so many things that we as a nation haven’t been responsible for, for decades.

And of course, some companies would want to adjust their operations. Perhaps to get better access to Europe and perhaps better access to the UK.Whatever you do, make sure you have a global diversified portfolio and laugh at everyone else worrying over nothing.

5) Should I Invest in Vanguard LifeStrategy and another Vanguard fund?

We have regularly promoted the Vanguard LifeStrategy fund as a great fund for beginners because it is dirt cheap, and has enormous world diversification but with a UK focus.

But we often get asked whether they should buy this fund or that fund to go with it. This could be the Vanguard S&P500 as an example.One of the main reasons to buy the LifeStrategy fund is because it’s a one stop shop. You don’t need anything else.

In our opinion the only reason to buy another fund is if you wanted to adjust the allocation. For instance, if you thought the LifeStrategy fund was too UK focused you could indeed buy some more S&P500 to alter this.

Just be careful that you are not altering it with the intention of increasing diversification, as in reality, you could be lowering it.

What other money or investing questions need answering? Let us know in the comments section!