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…

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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:

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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…

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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.

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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

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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!

Will Property Prices Fall in UK After Brexit?

Will property prices fall in the UK after Brexit? It’s the question that’s on the lips of buy-to-let investors and first time buyers up and down the country.

Brexit uncertainty, tax changes and new laws to protect tenants are shaking up the housing market in a way not seen since the 2008 recession.

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As investors, low property prices can be both a blessing and a curse – low prices mean we can buy more cash flow generating freedom assets, but also mean more competition with other investors; and ultimately, if prices fall too low, negative equity and dried-up credit lines.

So where is the UK property market heading, and will the post Brexit world (if we ever get there!) continue to be a land of opportunity for property buyers?

Bank of England

Where is the UK Property Market Now?

The expert advice is all over the place on this one. The Halifax have house prices surging 5.2% in the year to May, a fantastic rate of return for property investors, if true.

But the industry considers Halifax to be an outlier. The more consensus view is that house prices rose between 0.6% according to Nationwide and 1.4% according to Official Government figures. Either way you look at it, prices have risen over the last year.

The recent relative stability of the housing market is due in our opinion to wider economic factors outside of the Brexit debate.

Employment remains high and interest rates remain low, keeping mortgages affordable and house prices steady.

However, an economic upheaval such as a recession due to a mishandling of Brexit, or by a Corbyn government keen on shaking up the economy, could change all of this.

RPI Measure of Inflation

The RPI measure of inflation differs from the more commonly used CPI in that it includes house prices.

It is somewhat correlated to house prices as a result, and useful for tracking prices in the whole economy.

Above, we see how RPI has moved over the last 5 years. What is interesting is the period from 2016 to 2019 – despite the uncertainty caused by the Brexit shambles in Parliament, prices across the economy have continued to rise at a traditional rate of inflation, around 2-3% – led by a strong jobs market and affordable interest rates.

Brexit - Will Something Finally Happen Soon?

Brexit

Coming onto Brexit – what this now represents for economists is uncertainty.

Prolonged uncertainty is the death of an economy, and in our opinion the protracted feet dragging in Parliament is causing a much more severe economic impact than either Leaving or Remaining in the EU would bring.

No matter your position on Brexit, you should at least agree that something needs to be done quickly.

There are 2 realistic options for Brexit now in our view – a No Deal Brexit, or Leaving with a Deal.

Remaining is of course possible too, but doesn’t look likely in the short term, and certainly is not expected by the markets – and property prices are driven by market expectation.

Why Does Nobody Have Faith In The UK?

No Deal

Rightly or wrongly, the market is terrified of No Deal, and the latest line from the Bank of England is that they would lower interest rates in the event of No Deal to stimulate the market – possibly even down to 0%!

Under normal circumstances, we might expect lower interest rates to lead to higher house prices, as people can more easily afford mortgages and have more disposable income, creating more demand – more people competing for the same limited housing stock.

However, these are not normal circumstances, and if a No Deal Brexit is delivered incompetently, there could be an economic shock akin to the last recession.

We expect this would drive house prices down as buyers pull out of the market, over and above the effect of an interest rates fall.

Our expectation in a No Deal Brexit scenario would be that property prices hold steady at the least, or fall in the short term.

"Accidental" Landlords Will Drop Out

Leaving with a Deal

The Bank of England have said that if we Leave with a Deal, they would put interest rates up.

Raising interest rates would likely slow the economy as spending becomes more expensive, decreasing demand.

At the same time, accidental landlords would drop out of the market as their mortgages become too expensive to make a profit, increasing supply. When demand is decreased and supply increased, prices fall.

Other than the impact of interest rates, we expect that Leaving with a Deal would be business as usual.

Some investment cash may be released into the economy that had been held back, raising prices, but we think the impact of interest rates would be more significant.

The reason we think that interest rates will have a greater impact than Brexit itself is because we expect the Bank of England to over-correct the interest rates adjustment in response to Brexit, as they are so terrified by it.

We believe that the UK will carry on regardless of membership of the EU, or lack of it.

3. Mini Crash
The Property Cycle - Mini Crash

The 18 Year Property Cycle

Another tool in our arsenal is Property Cycle Theory. We’ve looked before at how the property market broadly moves in 18 year cycles.

As a refresher, the 4 phases are: Recession; Recovery; Mini-Crash; and Boom.

We are currently in an extended Recovery phase, teetering on the start of the Mini-Crash.

We think that the Brexit uncertainty of the last 3 years has held the market in paralysis, and is delaying the inevitable.

Once Brexit is resolved, we expect the market to return to form and see falling prices for a couple of years during a Mini-Crash, followed by rising prices during a Boom Phase – akin to what happened during the 90s.

4. Boom Phase
The Property Cycle - Boom Phase

Conclusion

We expect property prices to hold steady in the short term, then fall naturally for a year or 2 in line with the Property Cycle once the pressure valve of a political decision over Brexit is taken, possibly in October 2019.

Finger in the air, we would then expect property prices to return to strong growth during a Boom phase for several years more – but looking more than a year ahead really is guesswork.

Low prices mean investors can buy more houses – price rises mean we’re making a better return on our existing portfolio, and can take advantage of equity release to improve cash flow.

High or low, a good investor will take advantage of property prices as they stand.

Do you think UK property prices will fall? Let us know in the comments below.

Why You Need To Avoid Fees and Taxes – and the Devastating Impact on Your Investment Portfolio

The impact of platform fees, trading fees and management fees on an investment portfolio can be disastrous to long term success – add in taxes, and the impact can be catastrophic.

Below we’ll work through several examples of how a person might invest their money in the stock market – what we think the best method is – and show how fees and taxes can wipe almost half off of your portfolio’s value.

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Our Investor

In these worked examples we assume that an investor is regularly saving £250 a month into an investment platform, achieving a return on investment of 6% after inflation. All long term forecasts have inflation factored in, so show the real money returns.

Unless you are an expert, you might expect to get similar returns from investing in shares as you could investing in Funds or ETFs, at least this is the assumption we have used.

Section 1: Fees – a hidden parasite

If you are investing in the stock market, you are going to have to navigate a whole ecosystem of fees.

Fees for making trades, fees for using a platform, fees to pay a Fund Manager’s salary, and a whole bunch of hidden admin fees that investment platforms and funds are less-than-transparent about revealing.

At Money Unshackled, we have long promoted low fee stock market vehicles such as ETFs, exchange traded funds, over more Fee-heavy vehicles of Managed Funds and even buying individual stocks directly, and now we’re going to show you why.

Fees4

In green is our baseline – it’s how big our investor’s pot would be if left to grow over a 30 year term, adding £250 a month and compounding at 6% net return from growth and reinvested dividends. £244,000! Not a bad little pot to retire on.

30 years of industrious saving and investing giving you a result you deserve. But let’s now consider Fees.

Exchange Traded Funds

ETFs generally have the lowest fees. We’ve used as our example the Vanguard FTSE 100 ETF on the Vanguard platform, which has total fees of 0.26% – cheap as chips! Incidentally, their FTSE 250 ETF does have high transaction costs built in, making the total fee 0.4%.

For our example, we’ll use 0.26% as our example total ETF fee… and ask you to think twice about hidden transaction fees when you choose your ETFs!

If we’d invested in ETFs (the blue line in the chart above), our after-fees total pot size barely moves – we’re able to walk away with £233,000 with fees barely making a dent on our retirement.

Managed Funds

Managed Funds on the other hand are notorious for having high hidden fees. A popular UK fund we use an example is the Investec UK Alpha Fund J GBP Acc:

  1. Ongoing charges fee: 0.72% (includes Management Fee)
  2. Transaction Fee: 0.22%
  3. Platform Account fees of 0.25%
  4. Trading Fee on many popular platforms of £1 a time as a regular investment; £12 a year.

Total Fees on an example Fund: around 1.2% plus £12 a year

Investing in this fund will cost you 1.2% total fees. 1.2% doesn’t sound much, but consider that 1.2% knocked off your assumed 6% return gives you only a 4.8% return after fees. As we’ll see, the effect of this can be huge.

If we’d invested in Managed Funds (the orange line in the chart above), we’ve paid Fund Manager’s salaries and other costs of tens of thousands of pounds over the years, leaving us with only £196,000 to spend on ourselves.

Don't let your wealth fly away

Stocks and Shares

And finally, by buying shares individually you will incur lots of different fees, including but not limited to ongoing platform fees, stamp duty on trades, and regular platform trading fees.

You will need to regularly rebalance a portfolio of shares to keep your portfolio performing – we estimate this costs £200 a year on a 20 stock portfolio: 20 trades a year at around £10 a pop.

Other fees are stamp duty on rebalancing: which might be 0.125% a year on our portfolio [0.5% stamp * ¼ of our portfolio each year] if we assume we annually rebase a quarter of the value of our portfolio, platform account fees of, let’s say, 0.25%, and another £45 a year for trading and stamp duty on new deposits.

Total fees an example individual stocks portfolio = 0.375% plus £245 a year.

If the investor thought that they knew best and invested directly into shares, returning the same as a Fund manager could achieve, they’d have performed a little better after fees, keeping £210k to play with in retirement – the purple line in the chart above.

Of course, this assumes you know what you’re doing and are able to get the return before fees as a Fund Manager! And that you don’t have an itchy trigger finger and trade even more frequently!

The effect of fees is truly scary – the moral is, unless you think you can beat the market, tracking the market with an ETF will generally pay off better. It’s all in the Fees.

Section 2: The Greedy Tax-Man

Don’t forget that as an investor, the government feels it is entitled to take chunks of your invested savings for itself, despite you doing the “right thing” and planning for your future.

By investing, you will be less of a burden on the state as you will be able to sustain yourself through retirement rather than rely on the government for handouts, but this point is lost on the Treasury.

In any case, if you invest without shielding yourself from tax, you will be stung, and stung hard.

Tax is largely dependent on your circumstance, so let’s show a high level assumption of what out investor’s pot would look like as a higher rate taxpayer if he invested in ETFs vs Managed Funds, after fees.

A higher rate taxpayer will be taxed a crippling 32.5% dividend tax! We’ve assumed half of your return comes from dividends, and have factored in the £2k dividend tax threshold.

Fees7

Starting again at our baseline (the green line), lets now look at what a higher rate taxpayer would expect to keep investing in ETFs and Funds. A higher rate taxpayer might keep only £208k investing in ETFs (blue), while a higher rate taxpayer investing in Managed Funds (orange) might only keep £176,000 of their potential pot size – on the way to half your pot being lost to Fees and Taxes!

Stocks and Shares ISA

There is of course a way to protect yourself from Taxes. Just like ETFs have been created to avoid Fees, ISAs have been invented to avoid taxes – and legally.

A Stocks and Shares ISA works much like a regular Cash ISA, in that the returns within are shielded from taxes.

There are some exceptions that can’t be avoided, such as US Foreign Withholding Taxes of 0.15%, but for a UK investor investing solely in UK stocks this shouldn’t be an issue for you.

Conclusion

The ultimate Fee and Tax busting combo is therefore an ETF based portfolio, built up through an ISA, as below:

Fees8

Of course there is still reason to buy stocks and shares directly alongside ETFs, and we do this ourselves – if you know what you are doing, and have seen an opportunity for market beating value, it is of course possible to do better than the scenarios detailed here.

But for most of us, following a strategy of Fee and Tax minimisation is the key to a successful long term investment plan.

Have you put much thought into Fees? And are you making use of your ISA allowances? Let us know in the comments below.

Interactive Investor Review – New Charges – Best UK Investment Platform?

We get asked this question all the time – What is the best investment platform? But sadly, there isn’t a clear-cut winner. It all depends on the service or functionality that you want and the amount of money that you have invested and your investment style.

Previously we’ve praised Interactive Investor for those that have a decent amount invested. But from the 1st June 2019 they’ve introduced new charges. So, does Interactive Investor still cut the mustard?

Here we review Interactive Investor and see if it’s still the best investment platform for UK investors. Let’s check it out…

YouTube Video > > >

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What Accounts do they offer?

Interactive Investor offer a wide range of accounts including ISA, SIPP, Junior ISA and General Trading Accounts. We expect these as standard but it’s not uncommon for other platforms to only offer a general account, which means you could be liable to pay taxes on your gains and dividend tax.

So called “free” platforms such as Freetrade do offer an ISA but have additional charges for these. So, Interactive Investor including all these accounts as standard is great but note there wasn’t a Lifetime ISA option, which might be a disappointment for some of you.

Of course, those that watch our YouTube channel on a regular basis will know we strive for financial freedom today, so the standard Investment ISA is our weapon of choice.

What is the Right Fee Structure? Percentage Fee vs. Flat Fee

Generally, there are 2 type of fee structures for investment platforms: –

  • Percentage fee, which will see the total charge increase as your investment pot increases.
  • And a Flat fee, which stays the same as your investment pot grows

As you can imagine you don’t want to be paying a percentage fee if you have a lot of money.

For example, AJ Bell offer a low percentage fee of just 0.25% but if you’ve managed to build up a large investment pot of say £200,000, that 0.25% would be an annual charge of £500.

If you have built up a pot £500,000, which you might do if you’re serious about financial freedom then it would be a charge £1,250.

This is simply getting ridiculous on the larger pot sizes.

This is where the white knight Interactive Investor comes riding in to save us with their friendly flat fee pricing.  No matter how much your pot size grows Interactive Investor are going to charge you the same amount.

knight-2565957
White Knight To The Rescue

What are the charges?

They used to offer what we thought was a very good price at £90 per year (£22.50 per quarter). But sadly, they just increased this to £10 per month, so £120 per year.

Despite the disappointment with the cost increase it doesn’t really change too much, albeit you need a little more money to make Interactive Investor the lowest cost platform.

Service Plans
Interactive Investor Service Plans

In fact, Interactive investor don’t just charge £10 a month. They’ve introduced 3 service plans at different prices with the £10 plan being the cheapest. Whilst this does make things more complicated to compare, it does benefit those that trade frequently, as you will get lower trading costs on the more expensive plans.

Here at Money Unshackled we encourage you to trade less frequently and hold for the long term, so we don’t really see the need to be on the more expensive service plans. Those that trade frequently tend to underperform due to clocking up lots of trading fees. Because of this we’ll be basing the rest of the review on the cheapest ‘Investor Plan’.

A positive change they’ve made is the reduction of trading fees from £10 to £8, which is a very welcome change indeed.

The great thing about Interactive Investor is they actually give you the equivalent of 1 free trade per month. This is £8 credit to spend on whatever trades you like, so really can make Interactive Investor a cheap platform even for those without a huge amount of money.

Unfortunately, those credits expire after 90 days, which isn’t long. We think under the old prices, they used to last 12 months.

Other Services

Interactive Investor isn’t just a 1 trick pony. They have 1 of the best service offerings out there. And in their words, you “Get access to more investment opportunities than any other provider in the market”

This includes access to 40,000 shares across 17 global exchanges, over 3,000 funds, investment trusts, ETF’s and more. This superb range just isn’t provided by cheaper alternatives.

One of the features we like is Regular Investing, which allows you to invest on a monthly basis for just £0.99 per trade. We both feel that regular investing is one of the best ways to build significant wealth.

They also provide a dividend reinvestment service for just £0.99. Another service that many cheaper platforms don’t offer.

They also have a contact phone number…Wow! Don’t underestimate this. When you have a lot of money invested and you need help you may want to speak to a person. Not all investment platforms make it so easy.

Summary

To summarise, we feel Interactive investor is ideal for those with larger pot sizes, or even those that will have a large pot size in the near future.

The monthly free credit is also great, which depending on your frequency of trading can make Interactive Investor one of the cheapest platforms even for smaller pots.

What do you look for in an investment platform? Let us know in the comments section.

Investing in Unilever Stock (ULVR) – Should You Buy?

Unilever is one of the biggest companies in the world and yet many people have no idea who they are or what they do. But we guarantee that almost everyone has purchased their products.

Does their global reach and huge product range make Unilever stock an essential part of every investor’s portfolio? Offering an amazing dividend that keeps getting bigger and a strong balance sheet, surely this is the stock of dreams?

So, who are Unilever? How do their fundamentals look? What does Unilever’s future look like? And is it worth investing in?

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Who are Unilever?

Unilever are one of the companies we featured in our very popular Youtube video ‘Best Dividend Stocks UK’.

The company is a colossus with a market cap of whopping £127b, which is up from £109b in that previous video, so that’s some nice growth in such a short time.

Next time you’re in a supermarket or even just look in your cupboards and check out the manufacturer of those products. We bet a large majority of these are owned by just a small number of companies – Unilever being one of them.

In fact, according to Unilever, “Seven out of every ten households around the world contain at least one Unilever product.” They also own over 400 brands with 13 of these having sales of over one billion euros.

We love this company because brands, and lots of them, create a protective moat, which make it very difficult for competitors to enter the market. A protective moat is a key thing legendary investor Warren Buffet looks for when investing. Consumers tend to have loyalty with their favourite brands and keep coming back.

Not only does this give Unilever a more predictable income stream but it allows them to charge more than competitors – often a lot more. Take Domestos, Supermarkets tend to charge about £1 for a bottle but the non-branded supermarket version is around 45p – For essentially the same product. This is a whole lot of extra margin for Unilever.

Domestos - A Unilever Brand

Unilever’s Geographic Reach

They are also hugely diversified in terms of geographical reach with exposure to markets all around the world with particular exposure to emerging economies. It is these countries where large growth is expected to come from.

In fact, almost half their revenue comes from this area. Strong brands across many geographical markets make it less risky for investors…perhaps.

Remember as an investor you’re looking to stack the odds in your favour.

Dividend and Yield

The dividend yield is certainly not the highest in the FTSE 100 but it’s still decent at 2.80% with a healthy dividend cover of 1.52.

A rising dividend with healthy cover is exactly what you want to look for when constructing a dividend portfolio. Unilever even pay out the dividend on a consistent quarterly basis, which is great for your cashflow.

Bear in mind that Unilever now decides dividends in euros, so while the dividend is consistently rising in euro terms, UK investors will see a level of volatility due to currency exchange rates.

Unilever Dividend History Chart
Source: dividenddata.co.uk

Share Price

Just look at that share price growth on top of any dividend payouts. Whilst a chart like this is historical and not necessarily an indicator of the future, it goes to show that performance has been good.

Whilst your investment style will dictate whether this is good or bad, we tend to like this consistent growth. Stocks that show sharp drops may look like opportunities, but it is far too common to get stung again as further drops often occur. I should know as I’ve been stung a few times myself.

Unilever Chart
Unilever Share Price History

Earnings

We find the best place to go for information on earnings for any stock is the companies accounts. Investment Websites are good but can sometimes have errors. Unfortunately, annual accounts are long, complicated and extremely boring.

Revenue has hovered around the €50b mark for past 3 years but despite this they have managed to grow Net Profit and EPS. Bear in mind that we see a huge surge in non-underlying items. By following the notes, you can find that this relates to the disposal of its Spreads business. These sorts of gains are one-offs and should be treated as such when analysing stocks.

Whilst a full analysis of earnings goes beyond the scope of this article, we are happy with the company’s earnings.

Price Earnings Ratio

According the Hargreaves Lansdown the P/E ratio is 19.80, which is based on the adjusted EPS – This is excluding non-recurring items, which we assume to be things like the disposal of the spreads business just mentioned.

This is high when compared to the FTSE 100 PE of about 15 but we think that Unilever has better growth prospects and certainly more protection against a price drop.

Risks

Unilever relies on the power of its brands. They need to ensure that their brands stay relevant.

Changing consumer demands and even new taxes such as sugar tax can have a huge detrimental impact on Unilever’s business. Then there is the problem with plastic packaging. Unilever needs to find a way to reduce its use of plastic.

Customers are becoming more concerned with the environment and are beginning to avoid products that unnecessarily damage the environment. There is also taxes and fines that will damage profitability if they don’t act on this now.

Do you like the look of Unilever Shares and will you be investing? Let us know your opinion in the comments section.

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