Which Investment Platform is Best? – Choosing An Investment Platform

Which is the best investment platform for buying stocks and funds? The answer is that there is not one but several good ones that we have tried and tested over the years, and of these there are one or two that will be best for YOUR specific circumstances.

It all boils down to getting the right balance of Fees, Choice, and User Experience.

Editors note: Get your investing journey off to a flying start with the links on our Offers page, and which has £hundreds of sign-up bonuses for new users of investment platforms, that we use and love. Enjoy!

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Fees!!

The platform costs should be number one in your mind when choosing an investment platform. Stock market investment platforms are historically notorious for slapping you with hidden fees, including:

  • Platform fee
  • Fees to Buy and Sell
  • FX Fees
  • Account fees
  • Transfer fees

Navigating these and other fees successfully can be a headache – and it is investor frustration at the web of costs associated with investing that has led to the demand for the development of zero-fee investment platforms.

Navigating your way around platform fees can be a headache

Zero-Fee Platforms

The top zero fee trading platform in our opinion is the Trading 212 Invest app, which also has the option of an ISA – I have been using this platform to invest for a few months now and can confirm that it is as zero-fee as it is possible to be.

The only costs that remain are the ones outside of its control – stamp duty is still there at 0.5% when you buy shares, but not on funds. Stamp duty is a legal requirement in the UK when buying shares.

Dividend with-holding tax on foreign shares is still there too, even if these are held within funds, deducted from dividend payments by the country of origin.

Many people prefer the Freetrade platform, another decent zero fee investing app, though beware that they charge £1 for instant trades and £3 monthly to invest through an ISA.

The disadvantage of using a zero-fee platform is that you are limited on investment range. They offer a decent range of shares but nowhere near all of them, and their range of ETFs is again limited.

That said, I am building up a decent portfolio on Trading 212 of ETFs including the Vanguard FTSE 250, iShares FTSE 100, Vanguard S&P 500 and many more including the far east, Brazil, oil and gas and commercial property.

Safe in the knowledge that with zero fees, all my gains are mine to keep.

An example portfolio from our 4 Step Guide

Editors note: Download your FREE 4 Step Guide to Stock Market Investing here.

The Complete Package – Traditional Investing Platforms

The big traditional investing platforms like Hargreaves Lansdown, AJ Bell, Interactive Investor and Barclays are what the seasoned investors use, as here you’ll find a much wider choice across more geographies and sectors.

Because they are premium service providers, they cost a lot to run and so seek to bombard investors with fees, such as the ones we covered earlier.

The fees that most significantly affect the values of most portfolios however are Platform Fees and Trading Fees.

All platforms are not made alike however, and there are 2 clear favourites of ours from amongst the traditional platforms, which keep these fees to a minimum. These are AJ Bell, and Interactive Investor.

AJ Bell

AJ Bell is a good choice of platform if your investment pot is small – smaller than around £20,000. This is because they charge a small percentage platform fee, being 0.25%.

The fee is quite small on smaller pots, but of course the amount of fees you pay will get bigger the larger your portfolio gets as it is on a percentage basis. Compare and contrast with:

Interactive Investor

For the wealthier individual – this is another premium platform. Interactive Investor charges £9.99 a month fixed platform fee – a lot if your pot is just a grand or two, but barely anything if you own tens of thousands of pounds worth of stocks.

Both platforms charge a small fee for buying shares, funds and ETFs, of £1-£1.50 for regular monthly investments. This is our preferred way to invest, as it avoids the pitfalls in trying to predict the market.

Finally, buying shares outside of regular monthly instalments costs between £8 and £10 on these platforms, but with Interactive Investor you get your platform fees back in trading credits.

Our favourite platforms at time of writing

Vanguard

You may be familiar with Vanguard from the famous Vanguard LifeStrategy Funds and Vanguard collection of ETFs.

We love to buy Vanguard funds and ETFs for their strong history of performance and low product fees, and one of the best places to buy these is on Vanguard’s own platform.

This would be my platform of choice if not for the zero-fee apps – for following an ETF-only investment strategy – as all the best Vanguard ETFs traded on the London Stock Exchange are on there.

It’s also the cheapest place to buy and hold the LifeStrategy Funds, which are all-rounder Funds of Funds and ETFs, perfect for beginners and investors who just want one diversified place to put their money.

Robo Investing - automating your portfolio

Robo Investors

The third factor we mentioned after fees and range of choice was usability. The last couple of years has seen robo investment platforms hit the market, which aim to make investing easy for the masses.

Nutmeg is our favourite robo investor platform – called robo because it seeks to build a portfolio for you using algorithms to determine what is most suitable for you based on your money goals and attitude to risk.

You simply open an account, and it asks you a series of questions; after which it will start to build you a diversified portfolio.

It really takes the thought process out of investing, and you essentially get a fund manager – though you are simply assigned to one of the many Nutmeg designed portfolios – without having to pay to put the fund manager’s kids through college.

Nutmeg has an annual fee of 0.45%, though you can get the first 6 months fee-free if you use our referral link.

A beginner may as well try it for 6 months fee-free and then consider if you want to stick with the robo platform or move on to a platform where you make the decisions yourself.

Wombat is another new platform to the market that we reviewed a few of months ago, which also seeks to make life easy – by assigning easily understandable names to funds.

Know that you want to jump on the technology train and buy into a technology fund, but wouldn’t know where to start? Just join the wombat platform and buy the fund called “The Techie”. Simples.

"The Techie" fund on the Wombat platform

So, Which Is the Best?

We’ve reviewed 6 platforms that we use and consider to be the best. If you’re a beginner, we would say go with Nutmeg or Wombat – Nutmeg have the lower fees if you use our link, and Wombat is free if you only invest under £1,000.

If you have a bit of knowledge and want to be able to buy and sell shares and ETFs without having to pay any fees, then Trading 212 is our zero-fee platform of choice.

If you’re only interested in Vanguard products including the Vanguard LifeStrategy Funds, choose the Vanguard platform.

And if you’re a serious investor or plan to be, who intends to build up a sizeable and interesting global portfolio, then it’s AJ Bell initially, and Interactive Investor if your pot is growing much beyond £20,000.

So whichever of those 6 applies to you, sign up to it and start your investment journey! And remember to check the Offers page on MoneyUnshackled.com to see if we have any sign-up bonuses for your chosen platform.

Which do you think is the best investment platform, and have we missed it from our list? Let us know in the comments below…

Written by Ben

It’s Your Fault You’re Poor! 5 Reasons Why You Are Poor

It’s your fault you are poor – get over it. In the UK, unless you were born into genuine poverty, there is nothing to stop you from becoming financially comfortable or even rich.

But we’re not saying that you need to beg for handouts or pay rises from your boss – It’s our mission to make all of you financially free through good money management, investing in assets, and starting businesses.

If you’re feeling poor, don’t be disheartened by this message – here’s the 5 top reasons why you are poor, and more importantly, what you can do about it.

Get your investing journey off to a flying start with the links on our Offers page, and which has £hundreds of sign-up bonuses for new users of investment platforms, that we use and love. Enjoy!

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Why It’s Your Fault You’re Poor

1. Your goal is financial security

Your goal is financial security when it should be financial freedom. You are playing it safe in a job for a fixed salary that barely covers your outgoings.

Those with financial security as their goal will only ever be underpaid by an employer relative to what they’re really worth – and financial security isn’t even that secure.

Remember – a job can be taken away from you at any time. Your stocks and property portfolios, carefully grown over many years, cannot be taken from you.

"Safe, Secure Jobs" can be taken away from you

2. You don’t know how to use debt

If you’re genuinely poor, chances are you are heavily in bad debt on credit cards, overdrafts, or unsecured loans. This type of debt is like wildfire and you should make your number 1 priority in life to pay these off quickly.

But if you are poor in the sense of being stuck in a dead-end job for the next 50 years, then maybe you need to learn how to use good debt to rocket-power your finances.

For the financially savvy, good or low interest debt like mortgages and 0% money transfer credit cards can be used to alleviate cash flow issues and buy investments now, which earn an income to help pay off the cheap good debt later.

Debt is like fire – it can burn and destroy lives, but control it and it can warm and enrichen your life.

3. You don’t invest/You don’t pay yourself first

How old are you? How many years does that make it since you started earning money? Too many, if you’ve not been using that time to buy investments.

Anyone can afford to invest – new zero fee trading apps like Trading 212 and Freetrade mean you can invest pennies into the stock market whenever you want without being charged to do so.

Trading 212 Invest is a zero fee stocks trading app that allows normal people to invest like pros

Are you telling us you can’t spare £20 a month to buy stocks? Or £5? Pay yourself first, by investing small amounts immediately after receiving your pay-check, so you don’t run out of money to invest later.

Check out the Trading 212 Invest app – you are even given a free stock when you sign up using the link on our Offers page, worth up to £100.

We’d start by buying shares in ETFs, such as the Vanguard FTSE 100 ETF which simply tracks the UK’s biggest stock index. One of the safest and most reliable investments on there in our opinion.

4. You overspend

Come on – you know it’s true. We overspend – everyone overspends, but to different degrees.

Do you smoke? Cut back. Takeaways? Eat less. Or is your thing buying expensive clothes?

Maybe wait a bit until you’ve bought some investments first, whose dividends will help you to pay for them.

Though not our preference, cutting back is one way to expand your investable free cash. The other, is:

5. Side Hustles: You Don’t Have Any

A side hustle is a business that you set up on the side of working a job. You work on it in the evenings and on weekends, and over time it becomes a significant source of cash flow for you.

Anyone can start a side hustle – we don’t want to hear from you that you have no time.

You are choosing to priorities other things – you wish you had more money but are not prepared to pay the price.

The best type of side hustle business in our opinion is one which scales with time – i.e. it gets bigger and bigger without extra effort from you. After all, you’re busy at work, am I right?

Why you need a side hustle!

A good example is starting a website that sells a product. Over time that website will grow, and you can potentially reach the whole world with your product.

An example of a side hustle that is not scalable is something like dog walking, or tutoring in the evenings.

This type of hustle is really a second job, but could be a good place to start if you need to save money fast. Scalable hustles can take a while to set up, and you could run at a loss initially.

Check out our popular video on side hustle ideas linked in the description below for ways to grow your monthly income outside of work, and to stop being poor, and start being rich instead.

Stop Begging and Self Promote

If you’re feeling underpaid and undervalued, don’t sit in your job for years working yourself into the ground to get noticed for a promotion.

Whenever we wanted a better wage, we simply changed employer, promoting ourselves to the next career level in the process.

The difference in career trajectory can be massive. Anecdotally, we know plenty of people who have patiently waited for promotions for years, while we just took what was ours. If you don’t ask, you don’t get.

Your employers’ job is to make money, they won’t give you a decent payrise just because you’re loyal.

Don’t just rely on your current employer to help you out when you’re feeling poor!

No need to beg for a pay rise!

Take Responsibility

We don’t mean to be nasty when we say it’s your fault you’re poor. Most people in the country would class themselves as just-about-managing in their own words, and they all make the 5 mistakes that we’ve just discussed.

We do want you to equip you with the tools to fix the problem, though. And the most effective way to stop being poor is to take action yourself. You can’t rely on the government or on others to do it for you.

It’s Never Too Late to Start

Going back to personal responsibility, what are you waiting for?

Draw up that budget, research how to escape from or utilise credit card debt, invest £100 into the stock market, write down side hustle ideas! Remember: tomorrow never comes.

Are you thinking of setting up more income streams? Tell us your ideas in the comments below.

Why You Need to Be Financially Free

Why do you need to be financially free? Ask any of your peers and the majority will cite financial security as their top money goal – security, not freedom. The difference is huge.

Practically all of our peers have different financial objectives to us. Where they are bothered about money at all, they inevitably fall into one of two camps – the “I want to pay my mortgage off” crowd, or the “I want to pay more into my pension” bunch.

We can’t relate to either position. Both are basically saying that they are happy plodding along in their jobs until they are aged 70, and will funnel all spare employment income into financial products that will benefit them in 30 or 40 years’ time.

We are investors because our objective is Financial Freedom – today. Forget being comfortable at age 70. You need to be Financially Free; and here’s why…

Get your investing journey off to a flying start with the links on our Offers page, and which has £hundreds of sign-up bonuses for new users to platforms that we use and love. Enjoy!

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Chasing the wrong goal – job security

We hate the phrases “a job for life” and “safe, secure job”. The people who claim to have such things are claiming to have reached financial security early on in life and are happy to stop there – they do not have ambitions beyond this.

We hate these phrases because they are dangerous. Our fast paced economy and advances in tech means that in modern times there is no such thing as a job for life – that idea should be left in the industrial age where it was born.

What is Financial Freedom

First, we are not talking about being millionaires; only being able to cover your outgoings without having to rely on a paycheck.

Financial freedom is very different, and in our opinion far preferable to, job security.

An investment portfolio can't fire you - only a "safe and secure" job can do that

People who are financially free derive their income from a wide range of assets and businesses that they own.

They laughed in the face of safety and security and took sensible and measured risks to build up huge investment portfolios during their early career years, or started businesses that grew to be self-sustaining.

This income, once established, is called Passive Income, because it comes to the investor or business owner regardless of whether they show up to work or not.

You cannot be sacked or made redundant from your passive income – that’s only something a “safe and secure” job can do to you.

Is Financial Freedom a Realistic Goal?

Absolutely. It won’t happen overnight, and is much harder to achieve than simple job security. All it takes is commitment to the goal over a number of years.

We decided in our 20s that we would be financially free in our 30s. We’re almost there now, but continue to work hard while we still have the drive in order to build our pots even bigger to support a better lifestyle.

You only get there by trying

How Did We Do It?

We each have large investment portfolios which returns enough to cover the basics, and we have our Money Unshackled business to spread the word about financial freedom and free others from their shackles, which also brings in an income.

Note that we only get income from this business because it works hard for others to help them be free –  much like how our stocks and properties work hard for their owners.

So long as the underlying asset or business is sound, it will keep paying you an income that can’t be taken away by a boss.

Why You Need to Be Financially Free

1. Start Making a Difference

When money matters are resolved and your outgoings covered, you can spend your time how you like.

For us, the most meaning we could derive from our lives would be in helping others to become financially free, but for you it could be helping your community, taking up a cause such as campaigning for a greener world, or anything you deem worthy.

You can use your time as you see fit... once you're free

Or your time could be spent building up a massive business that gives generously to charity. It’s literally your call.

2. Gain Life Satisfaction

Working for someone else on someone else’s dreams is a non-starter for us, and if you’re watching this, we bet you feel the same way.

Wouldn’t you feel better about your direction in life if you were making money for yourself, and growing your own assets and pet-projects in the process?

We know some jobs do bring life satisfaction such as policing or nursing, and more power to the fanstastic work that these professions do for the rest of us – but the guy running numbers on a bottle factory’s inventory? Does he wake up each morning loving life?

3. Your Time is Precious

Most laugh at this – absurdly in our opinion. When we say we can’t do something because our time is worth more than that, the employee-lifers scoff.

Your time is precious

“Time isn’t worth anything” they say. This is coming from a mentality where a salary just pops into their bank account each month regardless of the effort they put in.

But we know that time is everything. You are worth so much more than a wage per hour.

If you spent all your time building a scalable business and investing the returns, you soon wouldn’t have to.

What You Can Do NOW to Be Financially Free

1. Learn to invest – start now, by Learning By Doing

Make your first investment in something lower risk like stock market ETFs or P2P Lending.

A couple of great platforms you could start with are Trading 212 and Ratesetter, linked with sign up bonuses in the description below, with many more on our website.

Being comfortable investing huge sums of money later starts with being comfortable investing small amounts today. Also, you’ll be earning passive income, however small at first, and that is a great feeling indeed.

If you're stuck working on someone else's dreams, you have to find time to work on your own too

2. Rethink your career

Are you sure that your 10 year plan to climb 2 levels up the corporate chain is the right plan for you?

What else could you be doing in that decade? Hint: you could start a side hustle business that grows way faster than employment income does and is taxed far less!

3. Set a plan with deadlines

How much passive income do you need before you can leave your job? How much time will be needed to establish this passive income?

Work out how much you need to be investing each month, and then plan how you’ll achieve that target.

Don’t put it off. You need to Financially Free. Start today.

When will you be financially free? Let us know in the comments below.

How Nutmeg choose ETFs to invest in – Learn to invest from the pros

Nutmeg are the UKs largest and fastest growing digital wealth management service. We reviewed the robo-investing platform back in February 2019 and we were so impressed that I continued to invest a small portion of my wealth with them on a monthly basis.

Other than the great investment returns, one of the things that we loved about Nutmeg was their transparency and the huge amount of information they make available on their website.

For some investors they just want to give their money to the pros, so they don’t need to worry about it themselves. For others though they want a deep understanding of what is happening with their money.

We know your time is precious, so we’ve gone through some of the Nutmeg resources on their website and in this video, we’re going to look at how Nutmeg choose ETFs to invest in and show you my actual Nutmeg portfolio.

Whether you invest in Nutmeg or not this is a great resource to learn exactly what to look for when selecting ETFs.

And don’t forget – sign up to Nutmeg using the link on our Offers page, and you get a zero fees shield applied to your account for the first 6 months. Enjoy!

YouTube Video > > >

Who Are Nutmeg?

For more info check out our full Nutmeg review but very briefly, Nutmeg is a robo-advisor that will ask its customers a few questions and then invest the customers money into one of its many portfolios that it considers most suitable.

Their portfolios are put together using Exchange Traded Funds or ETFs as they’re more commonly known. This is something that we at Money Unshackled really like as they’re a great instrument for achieving huge diversification at rock bottom prices.

So, How Do Nutmeg Select Their ETFs?

#1 – The Components of the Index

They look under the bonnet (or hood, if you’re American), to find out whether they would invest in the actual stocks that make up the index.

Many indices are weighted by market capitalisation so that the larger stocks make up more of the index. We often use the FTSE 100 as example, with Shell consisting of about 11% of the index just on its own.

Looking under the hood at what's in the fund

By looking at the underlying components they can assess whether the index is suitable.

#2 – Method of Replication and Tracking Error

Not all ETFs own every single stock within an index. Doing so can be difficult and expensive, so many funds choose to optimise selection by only investing in a sample of stocks within the index.

This is one reason why ETF performances can often deviate from the index, in what is known as tracking error. At Money Unshackled we prefer ETFs that use full replication, but this isn’t always possible.

Nutmeg will then assess the tracking error and will choose funds which are as closely aligned as possible.

Offer for new customers interested in starting a Nutmeg portfolio - click on image for link to sign-up

# 3 – Costs

Investors these days are very conscious about costs and they must be kept to a minimum. So, with no surprise Nutmeg aims to invest in the lowest cost ETFs that match its other requirements.

#4 – Size and Trading Volume

As with stocks, many small ETFs don’t trade in high enough quantities to make them liquid enough, so these will be avoided or at least won’t make up a large proportion of a portfolio.

They also seek ETFs with low bid-offer spreads.

This is the gap between the buying and selling price and can get quite large on smaller ETFs that are not traded frequently.

#5 – The Type of ETF

Some of you might be surprised to learn that not all ETFs directly hold the underlying stock or investment. Those that do are known as physical ETFs and are our preferred type.

In fact, we won’t ever invest in in any other ETF type and to our relief neither do Nutmeg.

Nutmeg invest in the RIGHT type of ETF

The other main type is called a “synthetic” or “swap-based” ETF – These involve legal agreements between 2 parties to produce the return.

This would expose you to counterparty risk, and in both Nutmeg’s and our opinion this isn’t worth the risk.

Other Considerations

Many ETFs will leave the investor exposed to currency risk and in some cases, Nutmeg will invest in a “hedged” version to reduce this risk.

Also, most of the major ETFs are very straight-forward index tracking funds.

However, there are some more exotic Actively Managed or Enhanced ETFs that Nutmeg may take advantage of but according to Nutmeg these are unlikely to make up a large proportion of portfolios.

What ETFs Do They Invest In?

In Nutmeg’s own words, they “choose from a universe of over 1,800 ETFs and favour physically backed ETFs with high liquidity and good tracking performance.”

I was assessed to have a high-risk level, and this is the portfolio that I was placed into. As you can see over 35% of the portfolio is in the iShares Core S&P 500 ETF. Note that this is the hedged version, which attempts to minimise foreign currency risk:

The breakdown of Andy's auto-generated portfolio on Nutmeg - well balanced!

We totally agree with this position. All investors need large exposure to the US as it’s the World’s major market but as UK investors we could do with some protection against currency swings. This achieves this and also comes in with a low TER of just 0.10%.

Next in the list is the Vanguard FTSE 100 ETF at around 10%. Again, we totally agree with having a large investment in the UK’s 100 largest listed companies. This is extremely cheap at just 0.09%

We have always loved Vanguard but must wonder why Nutmeg didn’t opt for the ever so slightly cheaper iShares equivalent.

Both are dirt cheap, so no problem either way. Perhaps they didn’t want too much exposure to any single ETF provider.

Next on the list with 9.5% is another iShares S&P 500 ETF, but this time it’s not hedged. Again, this is the US’s major index and the lack of currency hedging is perfectly fine in our eyes especially as we both have a high preference for risk and reward.

The future of portfolio balancing?

In fourth spot is the iShares S&P SmallCap 600 ETF at 6.4% of the portfolio. This is a riskier investment as it offers exposure to 600 small US-listed companies. We both love this because smaller companies tend to grow at a faster pace than large companies – you may have heard of the phrase “elephants don’t gallop”.

The portfolio contains many more ETFs but the allocation percentage gets far smaller as the geographical markets become less significant to UK investors.

What do you think of the Nutmeg portfolio that I’m invested in? What are they doing right and what are they doing wrong? Let us know in the comments section.

Written by Andy

When to Sell Stocks (Alternative Reasons) | Why I Sold my Shares at a Loss

Some people like to do a spring cleaning on their house. Well I just did a purge on my shares portfolio. I had a lot of deadweight and they had to go even though I was selling at a loss.

It sounds weird but it was a really hard decision because I had become emotionally attached to these companies, which is against our own rule – Never involve emotion when investing.

But I had been invested and following these stocks for years, so it’s only natural.

Some people say you shouldn’t sell at a loss, whereas other people say run your winners and sell your losers. So, which train of thought is correct and when should you sell stocks?

In this video, we’re talking about 5 alternative reasons to sell a stock, which don’t get mentioned that often and we’ll take a look at the stocks I sold and why.

Reminder: invest in UK shares and index funds without attracting any fees by using the Trading 212 app. If you use our link to sign up here, you get a free share for your portfolio. Enjoy!

YouTube Video > > >

There are loads of reasons to sell a stock and you’ll find a tonne of YouTube videos on the subject but they’ll all be telling you the same main reasons:-

1)         When a stock is overvalued

2)         Looming recession

3)         Slowing profits

4)         Cut in dividend

5)         New major competitor entering the market

6)         Directors are selling their stakes

Plus, so many more.

Now these are great and genuine reasons but we’ve compiled a list of alternative reasons.

When your mate down the pub thinks it's time to buy shares, you should be selling

#1 – Everyone is Talking About the Stock Market

Normally, outside of successful circles nobody talks about the stock market, business or the economy. When nobody is talking that’s an indication that everything is going fine.

But as soon as you start hearing Joey down the pub talking about the stock market and how much he’s making then it might be time to sell.

Joey doesn’t normally invest, Joey has never shown any interest in investing before, but for some reason Joey is now investing. Who’s Joey? He’s just a normal person. In times like this we’re running for the hills as markets are in bubble territory.

Although not a share, a recent example of this is when Bitcoin was reaching almost $20,000 a few years back. People were jumping on the bandwagon – people that had never invested in their life – and then, they lost big time.

A small value might no longer be worth your energy to monitor

#2 – Allocation Too Small – Time Waster

Selling only because a stock has fallen is a bad idea. If the fundamentals of the company have not changed then there is little reason to sell.

However, on occasion the share price will fall below what you consider to be worth your time. If you’ve seen our videos before you might be wondering why we bang on about time so much.

Well time is money or put another way money buys you time. We want money not to buy fancy things but to create time for ourselves.

If a stock consumes more of our time than it creates then it’s time to sell.

Investing in shares properly requires research before a share purchase and for however long you hold that stock. This requires significant time.

If you are buying small monetary amounts and then the value falls further, is it still worth your time to keep up to date with everything? Probably not. Get rid.

#3 – Loss Aversion Bias

You bought a dud and you know you should sell but you’ve lost a few quid and now you feel you can’t sell. You’re hoping that it will recover, so you can then sell once you’ve broken even.

Let’s say you bought a stock for £1,000 and its fallen to £800 because it was a dud. You should cut your losses. Accept you made a mistake and move on.

But nope, you can’t seem to sell. This is Loss Aversion Bias.

It could take years to recover and it may never recover at all. If the stock was then to rise from £800 to £900 this doesn’t justify the decision to hold on to it on its own.

The rest of the market could have increased by a far larger percentage, which means by holding on to the dud you had an opportunity cost. It has cost you even more money. Not cool.

Rebalancing can be counter intuitive

#4 – Rebalancing

There comes a time – maybe once per year or possibly sooner, that a portfolio needs to be rebalanced. Over time some stocks will have grown, and others fallen.

This causes your allocation to drastically change from your original intention, which exposes you to greater risks and possibly lower future returns.

As a result, you should sell some of the successful shares and reallocate the money to the worst performers to rebalance. This may sound counter intuitive but if you don’t you will soon find that all your eggs are in one basket.

#5 – Your Goals Have Changed

Over a lifetime your goals are going to change – it’s inevitable.

For example, it’s often said that young people should be taking more risk and so should probably invest in companies that have high expectation of growth but pay little to no dividend.

But later in life you will almost certainly need an income from the Stocks and so you will require dividend paying stocks.

Those exciting growth stocks may no longer suit your requirements. It’s now time to sell and buy big dependable and often boring dividend payers.

These may no longer have the chance to double in price but those divis are what you need now. No matter your goals make sure your portfolio matches those needs.

What did I Sell and Why?

I took an axe to my portfolio and sold 4 stocks – Centrica , Vodafone, Royal Mail and GVC.

The main reason for selling is that they had all fallen in value since I purchased them. This wasn’t the end of the world as they were all still paying dividends but the amount I now held was not worth my time.

Our lives have changed from the days when we had the time to analyse stocks in detail.

Time to chop that dead wood from your portfolio

We now spend great swathes of time establishing our business, so there is little point in managing stocks that are worth so little.

It has been a strategy of mine for quite some time that I have slowly been moving away from individual stocks and more towards index funds and ETFs. These get a great return without the hassle. 

Also, many of these stocks have had dividend cuts, so are no longer as lucrative as they once were. Each of them even faces horrendous political pressure and increasing competition.

Take GVC, which owns Ladbrokes and Coral. The government is out to minimise the impact that gambling has on society and tax it to the hilt. We see advertising bans on gambling similar to the smoking advert bans in the not too distant future.

Finally – you have to ask yourself – “would I buy this stock today, at the current market price?” If not, why not sell it and buy something else that you would buy. The past is the past – the future is what counts.

I bailed out late, but not too late.

What was the last stock you sold and why? Let us know in the comments section.

Written by Andy

FTSE 100 Index – Investing Risks That UK Investors Need to Be Aware Of

The FTSE 100 is an index of the top 100 companies listed on the London Stock Exchange by market capitalisation. It’s packed full of household names that you will be familiar with including HSBC, BP, Vodafone, Tesco and many more.

We think the FTSE 100 is a brilliant place to store your wealth – but do you know what risk you are taking on by investing in the FTSE 100?

As many of the companies listed on the London Stock Exchange are UK companies the FTSE 100 index is often seen as a barometer of the UK economy, but this isn’t really the case anymore. The FTSE 250 is a much better indicator of the UK.

This is because the companies that make up FTSE 100 actually generate 71% of their revenues outside of the UK. After all they are huge global companies.

In this video we’re going to look at some of the biggest risks that come from investing in the FTSE 100 index and some will surprise you!

Reminder: invest in the FTSE 100 without attracting any fees by using the Trading 212 app. If you use our link to sign up on our Offers page here, you get a free share for your portfolio. Enjoy!

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Risk #1 – Little Stock Diversification

Many investors invest in indices like the FTSE 100 for quick diversification. But look closer and the FTSE isn’t very diversified at all – Just a few stocks dominate.

In fact, just 5 companies make up about 32% of the index- Shell, HSBC, BP, AstraZeneca and GlaxoSmithKline. And the top 10 make up about 48%

Some of you will be okay with this but for us, this definitely means that we want further diversification.

One way to achieve this but still invest in the FTSE 100 is to go for an equal weighted FTSE 100 ETF such as the Xtrackers FTSE 100 Equal Weight UCITS 1D ETF (XFEW).

A very large chunk of the FTSE100 is made up from just oil giant Shell

Risk #2 – Little Sector Diversification and No Technology

This is sort of an extension to what we just discussed. Unless we are targeting a specific sector for a specific reason, we investors don’t want to be overexposed to just a few sectors.

Unfortunately the FTSE 100 has some serious overexposure to a handful of sectors such as Oil, financial services such as Banking and insurance, and Personal Goods.

What’s worse is there is no tech. We don’t have any Googles, Apples or Microsofts.

Technology is the future of business. There’s a reason why tech stocks have what seems to be crazy valuations. They are expected to make huge future profits.

These tech companies are going to dominate our lives and the FSTE 100 has zero direct exposure. The risk here is that the FTSE 100 is left behind, unable to keep up with the tech heavy index S&P 500.

This means you cannot just invest in the FTSE 100. You need exposure to more industries that will create huge future profits. One techy area the UK does particularly well in is fintech but again this is just more exposure to the financial sector.

Risk #3 – Currency Fluctuations

If you watch the FTSE on a regular basis, you’ll have seen that since the Brexit vote, there has been an inverse relationship between sterling and UK Stocks.

Whenever the pound gets weaker, UK stocks and therefore the FTSE has usually gained in value but why is this?

The prevailing logic has been that a weaker pound boosts the overseas earnings of the UK Stocks. This makes perfect sense because if you remember, UK Stocks make the majority of their profits internationally.

Therefore, negative Brexit news has often had a very positive effect on UK Stocks, sending the value of the big blue chips skyrocketing.

Another positive for those that hold the FTSE 100 or its constituents is that the relative weakness in the pound makes the stocks increasingly tempting targets for foreign investors, particularly US companies who are sitting on a lot of cash after recent tax cuts. Takeover bids can also send valuations skyrocketing upwards.

Negative Brexit news seems to rocket power the FTSE100 as the Pound falls

Risk #4 – Brexit and a World Crash

Other than the currency fluctuations just discussed, there is in our opinion an irrational fear that Brexit will somehow destroy the UK economy.

But let’s say this does happen and Britain’s economy tanks. The FTSE will be affected but probably not significantly due to the FTSE 100 being more of an international stock market than a UK domestic one.

It’s little brother the FTSE 250, however, will almost certainly struggle as this has significantly more UK exposure. But then again if Europe and possibly the world are dragged into a recession caused by Brexit then this will have serious consequences on the FTSE 100 too.

But it’s always worth remembering that no matter what has happened to the stock market in the short term, it has always come back stronger.

An artist's impression of Brexit 😉

Risk #5 – Dying Industries

The FTSE has many old industries, such as Banks, Oil and Tobacco companies. Some believe that they’ve had their day and their time is now over.

Banks were crippled during the financial crisis of 2008 and never fully recovered and face constant pressure from new technology such as Peer to Peer Lending, a ground-breaking new way to borrow and invest.

Oil is constantly being demonised and more renewable energy seems to only be a matter of time.

Alongside health concerns, tobacco is being taxed left right and centre causing the number of people who smoke to plummet, which is not good for tobacco profits. Good companies are able to adapt to new threats and respond to opportunities.

No matter what happens we know we’ll be looking for bargains. When the stock market falls, we’re buying!

When the stock market falls, we’re buying!

Only a few times in a lifetime does the stock market have incredible deals on offer that are far too good to miss. Make sure you’re ready when the time comes – maybe after Brexit?

What other risks does the FTSE 100 face and what do you do to mitigate it? Let us know in the comments section.

Why You Are Poorer Than Your Parents

Why is it that young people are poorer than their parents’ generation? It was once taken for granted that each successive generation increased in prosperity compared to the one before it, as the world became a better and more interconnected place.

But this has not happened for our generation – millennials and tail-end Gen Xers are falling behind, finding the post-recession world a difficult and expensive place within which to build a future.

Souring house prices, a soulless jobs market and an ageing population are often quoted as the blame. But is life really worse now than it was for our parents and grandparents?

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Why You Feel Poorer

1) Rubbish Pay

The jobs market has always offered insulting pay rises to hard working employees, but since the 2008 economic crash we have also seen starter salaries and pay grades stagnate and fall with inflation, and professions devalued.

Unskilled immigration has also infamously played a factor in stagnating pay rises at the bottom end of the jobs market, though Brexit may correct this. Employers are already starting to hire British workers over EU nationals in these lower paying roles to prepare for the uncertainty of labour access ahead.

It's not enough today to rely on even a professional job for financial freedom

By trade Ben is a Chartered Accountant; in our parents’ generation, being a Chartered Accountant meant you were wealthy by default; but it’s not enough today.

Even though we’re paid well relative to our peers, our investments and side hustles (business start-ups) are the vehicles by which we acquire wealth.

Most jobs, even professional ones, are now paid far less than their equivalents in the 90s in real terms. You can’t rely on a job any more for financial freedom.

2) House Prices Are Too High

Between the 20 year period 1996 and 2016, house prices rose 281% across the UK, and 501% in London. To put this into perspective, 2.5% inflation over 20 years should be only a 64% increase.

The youth of today are expected to buy far more expensive homes with their far lower salaries. It’s a recipe for trouble.

Underpaid and undervalued

3) Forced to Stay in Family Home

We were both fortunate to learn about investing and business early on and had built up income streams to subsidise our wages when we bought homes in our 20s.

But it is common for people to live at home well into their 30s to save money for a house deposit, taking away many freedoms that our parents’ generation knew when they left home aged 18, and making you feel poorer.

4) Your Pension Is A Joke

Our parents and grandparents generations enjoyed Final Salary Pensions, meaning they could look forward to retirement knowing their monthly income would be more or less similar to when they were working.

Workers in their 20s and 30s have only ever known Defined Contribution Pensions – you pay in a small amount of your salary and your employer pays a bit in too.

The young generations will be too poor to retire at 70

It is estimated that most people on these modern pension schemes will be too poor to retire on their pensions when they get to retirement age, as they are saving too little of their salaries. This is likely because their salary barely covers their rent or mortgage payments and they can’t save any higher.

Final Salary Pensions were far too generous and ultimately unsustainable, so we agree they had to go – we understand that if you want to retire wealthy, you have to invest and build passive income streams NOW.

It’s Not All Bad for Millennials Though, Surely?

Odds are you are currently looking at a smart phone, or have one in your pocket. Technological advances in the last decade have been incredible, and the improvements to our lives are taken for granted.

We can now shop online, invest in shares for free with a single click, watch TV on demand anywhere, navigate without paper maps, sell stuff on Facebook Marketplace and eBay, and run entire businesses from a laptop and mobile phone.

The freedom and time saving power that the internet and tech has given us was not there for our parents growing up, making life that little bit harder for them.

Also, a large part of why young people are poorer is because we tend to be looser with our cash – how often do you go out for meals or to the cinema?

For our parents’ generation this was a rare treat, and for our grandparents it was only on special family occasions like a silver wedding anniversary.

Because the economy is so vibrant now compared to then, we are constantly tempted by brands, gadgets and leisure activities – and we think our generation is guilty of overspend.

No such thing as a job-for-life anymore

A Job For Life

There is no longer such a concept as a job for life. People our age spend 2 or 3 years in a post before moving on to the next role out of career necessity.

There’s plenty of criticisms to say about David Cameron, but he at least got the jobs market moving again after the recession. The jobs market is so fluid and full of opportunity following the reforms of the coalition government of 2010 that people can climb the career ladder more quicker by changing employer than they can staying within one company. 

The jobs market at least is full of opportunity

Employers know this, and as such make little effort to retain and develop staff – far easier to hire someone new who already has those skills.

In the place of a job for life, we have the gig economy. More and more millennials are moving towards a multiple incomes approach, working several jobs and side hustles.

The gig economy is a harsh place to be if forced into it due to lack of money, but for those who choose this lifestyle, there is far greater freedom and life is rarely boring.

A job for life offered security. But the gig economy offers freedom.

What Can Be Done?

First, let’s look at what the government can do for you. Then we’ll look at what others can do for you, and finally, what you can do for yourself.

 The government could decide overnight to slash tax rates on entrepreneurs, recognising the many young people in the gig economy who are also our greatest innovators.

And the government could and should abolish stamp duty on houses, or at least slash it to a nominal 1%.

Many older people can't afford to leave their big homes, due to stamp duty

Old people can’t afford to downsize their homes as they are hit with thousands of pounds of stamp duty tax, meaning young families cannot access this limited housing stock of 3 and 4 bedroom houses.

We believe that tax cuts generally benefit everyone in an economy, so the fact that both the old and the young would benefit from this tax cut is a good thing – it doesn’t have to be zero-sum.

One popular idea that was widely reported on recently is the idea that your relatives could decide to skip a generation in inheritance, or hand money down years before their deaths.

The logic is that with people living far longer now, their descendants tend to inherit in their 60s or 70s when they are already financially comfortable, rather than what used to be the case, in their 30s or 40s when household income is tight.

We don’t agree with this though – we believe it is up to YOU to get your finances in order, and not to rely on a future windfall from a tragic life event.

Anyone relying on inheritance for their financial freedom is a) not managing their money right, and b) a little morbid!

The Twin Pillars of Business start-ups and Investing

Take Back Control – The Twin Pillars of Business Start-Ups and Investing

Finally, what can YOU do for yourself? We encourage everyone to take back control of their finances, and not let the modern world push you around.

If you are feeling poor, build yourself new income streams – check out our very popular video on side hustle ideas linked in the description below.

And make sure to invest any surplus cash you make from it. The twin pillars of investing and starting businesses will set you financially free.

Middle Class and Broke – Earn Multiple Income Streams

No matter your financial situation, people almost always end up with just enough money to get by. Why is it that middle class people with good careers end up worrying about money? And is their belief that financial security is equal to job security well placed? Let’s check it out…

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The Middle-Class Mindset

We have worked alongside so many professionals in our time who honestly believe that they have made it.

They have embedded themselves successfully in a well-paid career at a young age and now all they must do is show up to work 5 days a week for the next 50 years until they retire, at which point their company pension will pay for several years of pottering, and then finally, their nursing home.

Lifecycle 5.4
Lifecycle

We do joke, but honestly, we don’t understand why people think this is a successful life strategy.

Unless you’re one of the lucky few who have a truly fulfilling job, you’re going to realise by the time you’re in your thirties that you’ve wasted your best years and are looking likely to waste the rest.

Surely a better life plan is to escape the fear of job dependency early on, by changing your life goals to those of pursuing multiple passive income streams.

Unable to Save

We believe that almost anyone can save enough money aside each week to invest and build up a portfolio of assets and side hustles to allow them to retire early, and the middle classes are especially well placed to do this.

A middle-class household earning £60,000+ a year shouldn’t struggle to set aside many thousands into an investment pot, and yet they find themselves unable to save anything.

Money Flying Away
Money flying away

Money flies out of their bank accounts as fast as it goes in. Credit card payments, car financing of Audis, huge mortgages on huge houses inhabited by 1 couple, multiple exotic holidays, the latest iPhone at £60 a month, £10 monthly subscriptions to everything going, and of course avocados on toast!

Their issues are twofold – they cannot save what they earn, and everything they do earn comes from one source – their job, where they trade vast swatches of their time for money.

Changing the One-Source Mindset

We remember what it felt like to have one income stream. Powerless, dependant on an employer, unable to challenge.

How secure is a job when it can be taken away on the whim of one boss?

Starting in our twenties, we both ploughed our spare cash not into car finance schemes nor the back pocket of a bank manager, but into cash flow generating investments – stocks and funds, property, P2P lending and business ventures. No matter how small, we started, and you should too.

As a result, we are no longer totally dependent on an employer’s handouts to survive financially. And each passing day that dependency gets smaller.

Job Security?

Income from assets can’t be taken away from you by a boss – it’s why we believe that household finances based on passive income is more secure than just having a job.

Now that we’re in our thirties, we have income from multiple sources. We each have healthy investment portfolios, we make a bit from Money Unshackled, and yes, we still have employment income. But this is always becoming a smaller piece of the pie as we focus on the things that matter.

We are not reliant on that employment income – we use it to build our portfolios faster, or to buy the things that others would take out crippling financing deals to acquire.

We tell you this not to brag but to demonstrate what a little proactivity around your finances can do to your life.

Multiple Sources
Growing passive income seeds

Multiple Sources of Income

Don’t mistake multiple income sources with working multiple jobs. That isn’t what we mean. Really, people only have the time to work one job – anything else is asking for mental overload.

No; your non-job income streams must be either passive (requiring little or no effort on your part), or a side hustle business.

This will hopefully be something you enjoy and can do in your spare time, which hopefully frees up time in the future.

There’s no reason that the middle classes couldn’t divert huge amounts of money and effort into setting up investment portfolios and side hustles – but they choose not to. They are choosing short term pleasure over long term success.

Killer of Ideas

We hear it all the time from career employees – “if I only had an idea, I’d love to start a business” or “if only I had the time to look into it, I’d love to learn how to invest”.

The fact is, when you give the best hours of your day to working on someone else’s dreams, all your creativity goes to the benefit of your employer and their shareholders. You are too tired in the evenings to let ideas bloom.

How many years have you dreamed about having that one idea that would set you free financially?

Shifting the Balance – Time vs Job Income

If you want to set up multiple income streams, at some point you’re going to need more time on your hands to work on what you love.

Time vs Cost
Time vs Cost vs Quality

If you can get to the point where you can afford to work part time, maybe a 4-day week, you will free up precious time to invest into yourself. But for now, you will have to sacrifice evenings and weekends to set yourself free.

Remember – you don’t work for someone else – you work for you!

Have you managed to avoid being Middle Class and Broke? Tell us about your multiple income stream ambitions in the comments section below.