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

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

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

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

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

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

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

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

Alternatively Watch The YouTube Video > > >

Panic In The UK

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

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

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

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

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

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

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

House Prices Through The Roof!

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

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

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

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

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

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

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

Is Inflation Good Or Bad For Investors?

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

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

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

Increased Interest Rate

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

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

Cutting QE

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

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

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

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

High Inflation Impact On Stocks

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

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

Is Inflation Ever Good For Stocks?

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

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

High Inflation Impact On Investment Property

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

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

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

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

Savers May Be Glad… At First

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

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

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

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

High Inflation Impact On Bonds

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

How To Defend Against Rampant Inflation

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

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

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

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

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

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

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

These include:

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

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

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

Written by Ben


Featured image credit: Brian A Jackson/

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

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

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

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

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

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

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

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

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

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

Alternatively Watch The YouTube Video > > >

A Plan For Any Age

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

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

For Lifetime Mortgages, the most common qualifying criteria are:

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

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

How Much Equity Can You Release?

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

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

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

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

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

What It Costs

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

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

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

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

The Specialist Products: How Lifetime Mortgages Work

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

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

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

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

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

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

The Different Types Of Equity Release Products

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

#1 – Lifetime Mortgage

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

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

#2 – Income Lifetime Mortgage

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

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

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

#3 – Home Reversion Plan

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

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

How To Do It Yourself If You Are Under 55

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

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

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

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

Was It Worth It?

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

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

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

Things To Consider

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

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

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

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

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

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

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

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

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

Written by Ben


Featured image credit: Dean Clarke/

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

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

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

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

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

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

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

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

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

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

New customers who use this special link will also get the first 6 months with ZERO management fees. If you’d rather manage your investments yourself, check out our hand-picked range of ‘do-it-yourself’ Stocks & Shares ISAs, here.

Alternatively Watch The YouTube Video > > >

A Growing Problem

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

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

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

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

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

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

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

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

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

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

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

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

3 Reasons To Save For The House Deposit First

#1 – A House Can Be An Investment

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

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

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

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

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

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

#2 – The Emotional/Cultural Need

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Example 2 – Invest Instead & Never Buy A House

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

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

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

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

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

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

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

But It’s Good To Own Property, Right?

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

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

Our Preferred Order

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

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

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

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

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

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

Written by Ben


Featured image credit: Dean Clarke/

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

My Plan To Grow My £200k Portfolio To £1m In Under 10 Years

In a post back in May, I showed how my portfolio had grown to £200k over 5 years, starting from almost nothing.

Now I want to talk about my plan to grow that £200k to £1m over the next 10 years or less. It’s already up to £254k since that last article, thanks to the property market – a good start!

This won’t just be about what I’m doing. It will be packed full of tips and key steps to take that you can apply to your own financial journey.

There are a lot of ways to get to £1m in 10 years, but the plan outlined here is one that literally anyone can do if you’re willing to take your investments to the next level.

That’s right – a super high salary isn’t required, nor do you need to wait a lifetime for compounding returns of 4 or 5% to take their course.

This is a fast, sensible route to riches that I’m taking, and that you might want to consider taking too. Let’s check it out!

ETFs are the bedrock of my stocks portfolio. With InvestEngine you can build a portfolio of fractional ETFs for free. Just set the percentage allocation for each ETF and you’re done – say goodbye to spreadsheets! And rebalancing your portfolio is as simple as couple of clicks. New users to the platform will receive a £50 welcome bonus if you use this offer link.

Alternatively Watch The YouTube Video > > >

Getting To £200k – A Recap

The first £200k of my Freedom Fund was built over 5 years mostly from cash contributions from salary savings, and from home equity release on my house. Together that made up around 2/3rds of the portfolio’s value.

Actual returns from my investments contributed the other 1/3rd of the value to that initial portfolio.

In the early stages of your Freedom Fund’s life, your contributions from your salary will have far more of an impact than your returns on investment.

Enormous percentage returns don’t really matter all that much at this stage: a 20% return on £1 is still just 20p. You will be able to grow your portfolio at a steady rate just by adding new cash.

Why The Next £800k Needs A New Approach

Soon, those monthly contributions from work will become almost inconsequential. In fact, right now I’m adding barely anything from my salary from Money Unshackled, and my portfolio is still growing fast under its own weight, simply from compounding.

Cashflow from rent payments on my properties goes into the stock market, and the market values of the properties and the shares are growing like mushrooms.

New money from your salary will be a nice little extra boost at this stage in a portfolio’s life, but it’s not a requirement if your investing returns are high enough. We can demonstrate this nicely using the Money Unshackled Early Retirement (FIRE) calculator.

The blue cumulative contributions bars are quickly outstripped by compounding returns as the years go on.

Left to grow in index funds or ETFs without any further contributions or effort, £200k would still get to £1m, but over a couple of decades. ETFs will always be a major part of my portfolio, but I will need to pull all the levers that I’ve learned about during my investing career to maximise my returns to get me to £1m in under 10 years.

What’s In Our Toolkit?

There are 4 main components that we consider appropriate for building a Freedom Fund. These are:

  1. Contributions from salary or other earned income;
  2. Cash from extracting equity from your own home;
  3. Index investing in the stock market – this is our bread and butter, and will use ETFs held in Stocks & Shares ISAs and SIPPs; and
  4. Leveraged investments in both stocks and property.

To grow rockstar wealth in under 10 years I’ll need my salary contributions, ISAs and SIPPs to be supported by the power of home equity release and, very importantly, by leveraging.

Leveraged investment property already makes up a significant chunk of my portfolio – going forwards, leveraged stock market indexes will do too.

The Plan

The following is based on real numbers from Ben’s current and forecast future portfolio. The Returns On Investment are based on the following assumptions:

  • Inflation of 3%: all numbers are after deducting inflation.
  • 5% pre-inflation annual growth in the property markets, which is at the low end of historical average UK house price rises going back to 1952. Adding in leverage from mortgages, capital growth ROI is increased in this portfolio to 17% pre-inflation.
  • Rental income is based on what I actually receive now.
  • Investments in Stocks & Shares ISAs and S IPPs will grow by 8% pre-inflation.
  • Leveraged stocks, bonds, and gold in the portfolio will grow by 18% pre-inflation.

We also assume a smooth ride in the markets, for ease. In reality, it’s more likely there will be really good years and some bad years, maybe even a crash followed by a recovery.

So, here’s my smoothed-out forecast route to £1 million:

The orange headed columns are all property related. We don’t want to bog you guys down in too many numbers, so we’ll just point out the interesting things. There’s the opening and closing sizes of the Freedom Fund each year, while the numbers in-between are the various additions to the pot each year.

There’s Cash From Savings, which starts off at zero and assumes monthly salary will grow by a moderate £300 each year. As we are business owners rather than employees, this is a very conservative assumption. It should easily grow faster than this. That’s lesson #1 – work for yourself!

Now let’s talk about what’s happening with property investments in the middle there. My eventual goal is to have the option of selling my properties in the final years of the plan if, as I suspect, government meddling makes it more and more tiresome to operate as a landlord.

In the final years, property is gradually sold off rather than all at once, to take full advantage of the annual capital gains allowance. Rental income and capital growth go down as a result.

You get stung by capital gains tax on rental property, because HMRC fail to account for inflation. So even if you had only made an inflationary gain each year – and hence nothing in real terms – you’d still be taxed as though you had made a big gain when you eventually sell the property.

Cash is funnelled from the sales into other assets, which has a net zero overall impact on the value of the portfolio since I’m already accruing for capital gains tax. In the earlier years, I’m able to take cash out of the properties by remortgaging them. In one case, I plan to remortgage my own home and injecting that cash as fresh money into the Freedom Fund.

I don’t mind having a slightly higher mortgage as a result, if it means I can buy investments that pay me an annual double-digit rate of return.

We don’t include the values of our own homes in our Freedom Funds, as they can’t be spent. But if you extract cash from your home in a remortgage, that cash is fair game to be invested and then included here.

So, where’s that cash from the property equity release going? It’s primarily going into ETFs in my Stocks & Shares ISAs, and into Spread Betting.

For a full introduction to our method of doing spread betting check out this article/video next, where we explain what we’ve been doing to make killer returns!

Here’s why this portfolio grows so quickly over the next 10 years, from August 2021 to August 2031:

The light and dark green segments are the leveraged assets; light green for rental properties, and dark green for spread betting (which is leveraged stock, bond and gold market indexes). As I sell off the properties, they are being replaced with spread betting investments. This keeps leverage in the portfolio throughout.

The leverage, and hence the risk, is intentionally decreased though as a proportion of the overall portfolio over the period. The unleveraged ISAs and SIPPs right now make up 31% of the portfolio, while by the end they make up 45%.

The leveraged assets start out at 4x leverage as they are almost all mortgaged properties with 25% deposits, but leverage falls to 3x by the end – our current preference for spread betting.

In practice, I will be reducing my leverage much further than this towards the end if I’m doing well – volatility should ideally be reduced when you reach your goals. I almost certainly will reduce my leveraged assets to around 1.5x or less when the portfolio hits £1m, making the overall portfolio around just 1.25x leveraged.

As well as reducing leverage as I go, I’m also reducing effort. By the end, all my portfolio will be manageable from a web browser, at just a few clicks per month – no more tenants; no more calls from agents; no more mortgages to manage.

Of course, I always do have the option to just keep the properties, but I don’t need to.

Andy’s (MU co-founder) plans are similar to mine, but he’s using spread betting from the outset as his source of leverage, instead of investment property. The returns are expected to be not too dissimilar, but could be considered higher risk, since there’s a chance the debt could be called in if it’s managed poorly – in what’s known as a margin call. Crucially though, it’s almost completely passive to manage.

How Pensions (SIPPs) and ISAs Slot Into This Plan

I’ll still be building up my Stocks & Shares ISAs – the holdings won’t be leveraged but they’ll be safe. No matter how much the market falls (outside of all-out nuclear war), I will always own these positions as the market can’t fall to zero. Despite the magic touch that leverage provides, an ISA is still my favourite tool for growing and holding wealth for this reason.

The ISA is the reliable base layer of the portfolio, that I will feed with cash from elsewhere in the portfolio until it matches the size of the leveraged assets (see right-hand side of bar chart above).

Our SIPPs hold all the pension money from our previous jobs, and neither of us are touching our SIPPs for now, until it becomes advantageous in the future to filter money from our business holdings through a pension.

For our age group, the likely age at which we could access our private pensions is 58. As we’re planning to retire a decade or two before this, the question must be asked whether we should be including SIPPs in our Freedom Funds at all.

In both our cases, it can – if you’re young, a pension should only be considered part of your current wealth if it is a relatively small-to-medium sized chunk of your overall net worth, such that you have other pots to draw an income from between now and retirement.

If a pension is where you’re holding most of your wealth, it can’t help you much while you’re young!

Also see this article for a much more in-depth analysis of how Stocks & Shares ISAs work alongside pensions to allow you to retire at any age.

Will you speed up your own investment journey to riches, or are you content to wait it out? Join the conversation in the comments below!

Written by Ben


Featured image credit: Andrey_Popov/

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

The 5 Best Income & Cash Flow Investments

We’re living in an age of rock-bottom interest rates, where investors have largely given up on cash flow in favour of capital growth, both in the stock market and even in high-stakes new markets like crypto.

My investing journey started with the wise words of Robert Kiyosaki in his book Rich Dad Poor Dad, that “wealth is the measure of the cash flow from [your] asset column”.

For Rich Dad, physical cash in your hand from interest, dividends or rental income is real, and can pay the bills – while holding an asset purely for its growth potential is just placing your hopes in the market.

While we at Money Unshackled are happy to place our trust in the market to go up long-term, we also like at least part of our portfolios to be diversified amongst cash-flowing assets, for the stability and liquidity they provide.

But good quality income generating assets are getting harder and harder to come by. It used to be that you’d just buy some bonds, or even just whack your money in a high-interest savings account.

Now you need to be far more astute – there are still investments with good income returns to be found, but these usually come with a trade-off of higher risk. You need to do your homework to avoid putting your precious money to work for you in the wrong place.

Today we’ve pulled together our favourite collection of income generating, cash flowing investments that are best placed to provide you with a good, consistent income, without the need to take on excessive risk. Let’s check it out!

We’ll be mentioning a few ETFs in this article, and all those mentioned can be bought on Freetrade and Trading 212 – pick up free shares when you sign up to either using the links on the Offers Page.

Alternatively Watch The YouTube Video > > >

#1 – High-Yield Bond ETFs

First up, there’s bonds. Bonds are the stereotypical fixed-income investment class, known for paying out a steady rate of interest to the bond holder.

The problem is that since the financial crisis of 2008, bonds have been known for their incredibly low yields that have kept getting gradually worse.

The interest rate you get from bonds is linked quite closely to the interest rates set by central banks, which as we know is close to zero in the UK and elsewhere.

Not all bonds are alike though. One option is to buy Government Bonds, which from developed countries are super safe but currently pay out typically less than 1% in interest.

Another option is Inflation-Linked Bonds, which claim to offer some protection against inflation, but still may fail to even provide an above-inflation yield.

The option with the highest yields is High-Yield Corporate Bonds, such as what’s offered by the iShares Global High Yield Corp Bond ETF (GHYS). It’s a distributing GBP-hedged ETF with a yield of 3.9%, which is incredible for bonds in today’s climate, but it does have a high fee of 0.55%.

Alternatively, have a portfolio of bond ETFs built for you by opening a Managed Income account on InvestEngine. Choosing the Enhanced risk level will build you a portfolio that is 75% high-yield bonds and 25% dividend equities, with an estimated 4.1% income.

That’s on InvestEngine’s robo-investing area of the platform, meaning they do the portfolio building for you. They also offer growth portfolios that focus on equities. It’s the cheapest service on the market that we’ve seen, with a platform fee of just 0.25%.

But InvestEngine are now ALSO offering a Do-It-Yourself service which lets you trade ETFs for free! That’s NO dealing fees, NO account fees, NO FX fees… nothing! This could be the lowest priced investment platform there is for ETFs.

Use this link to join the InvestEngine platform and you’ll also get a £50 welcome bonus. Or read our full written review of InvestEngine here.

#2 – Peer To Peer Lending

The Peer-To-Peer Lending market is slowly coming back to life after the pandemic, during which most of them went into hiding and stopped new investors from signing up.

But Loanpad, my favourite P2P Lending platform, stayed active throughout and continued to deliver a great return. Loanpad works operationally like a savings account – the main difference being that this is an investment and therefore your capital is NOT risk-free. Unlike bonds, the value of your investment doesn’t change with the market.

Your money is lent out evenly across a portfolio of secured property loans. Your investment is secured against commercial property values, with 2 layers of protection between your money and the risk of capital loss from falling property values.

They offer an interest rate of 4% on a 60-day access account, with interest paid daily. If your income investments are supporting your day-to-day lifestyle, that daily payment of interest really comes into its own.

Also, if you invest £5,000 or more using the offer link here you’ll be given £50 cashback for free from these guys too.

#3 – Dividends… From Crypto!?

Cryptocurrencies like Bitcoin notoriously do NOT pay a dividend.

That’s because they are what’s known as an unproductive asset – they do not generate cash like a business or a loan does, which is how stocks, bonds and P2P lending are able to pay you an income.

But new technologies have been springing up which means that now, cryptos CAN pay you an income.

BlockFi is a bitcoin wallet that works like a P2P Lending site, in that it lends your money out to – in their words – “trusted institutional and corporate borrowers”.

Fig.1: Current interest rates on coins at BlockFi

Above are the interest rates on offer: at time of writing you could get a 5% rate of interest on your Bitcoin, and 9.3% for your Tether. Rates are variable from month to month.

We’re just scratching the surface of this innovation and will be sharing OUR experiences in a future article – stay tuned. Let us know in the comments below if you’ve found a better way to earn money on your crypto outside of normal price growth.

#4 – High-Yield Dividend Stocks and ETFs

The stock market isn’t just for growing wealth – it can also be a great source of income. We cover dividends all the time on this channel, and for our latest thoughts on the very best dividend stocks to own right now, check out this article next.

In it we build a portfolio of the best 20 dividend stocks on Trading 212 using a blend of data from stock picking tool Stockopedia and the Dividend Aristocrats global index. Here’s a link to the Trading 212 pie.

If you just wanted to invest using an ETF, one of our favourites is the SPDR S&P Global Dividend Aristocrats ETF (GBDV). All the stocks on the index have a 10-year track record of maintaining or increasing their dividend. The index dividend yield is currently 4.72%.

Another route to dividend success in the stock market is with investment trusts. Investment trusts have special rules that allow them to hold back cash, to be distributed out to shareholders in bad years – this helps to ensure a constant, steady flow of cash to the investor.

Fig.2: Dividend Hero investment trusts

The industry-standard investment trusts for income are those marked with the Dividend Heroes stamp of approval. The numbers are the number of years that each fund has consistently increased their dividends.

None of these trusts would want to risk their status as a member of this coveted league table by failing to provide you with an annual pay-rise, but you should check the basics like their dividend cover and revenue reserves first.

#5 – Cash-Flowing Property & REITs

You don’t need to part with tens of thousands of pounds to invest in property – you can do it on most investment platforms by investing in a type of fund called a REIT, which stands for Real Estate Investment Trust.

REITs are famous for paying dividends. With property as the underlying investments, there is always a lot of cash flowing in from property rents, and REITs have a rule that at least 90% of rental profits MUST be distributed out to shareholders.

We like to get a broad basket of properties in our REIT investments – the iShares Developed Markets Property Yield ETF (IWDP), with a Total Expense Ratio of 0.59%, does this by investing in 333 separate REITs. Each of these invest into multiple properties in the developed markets and must each have a dividend yield of at least 2%.

Fig.3: Reit Yield history

Here’s the dividend history of the index the ETF tracks, in blue – the FTSE Nareit Developed Dividend+ Index. It typically hangs around 4% but got a little erratic during the pandemic. It’s yield significantly outperforms the yield from the developed world stock markets, in red.

A note of caution against REITs: commercial property is going through a rollercoaster period of change right now, with office culture and working practices in the midst of a fast-paced work-from-home revolution.

What are now offi ce buildings might soon become residential flats. City centres will be fundamentally different.

What about residential? The residential sector is doing very well recently, with house prices AND rents soaring.

There ARE some REITs that focus on residential properties like apartment blocks, but these are few and far between: Equity Residential (EQR) is one example and has a 3% yield, which is forecast to grow.

We still think the best way to invest in property is by buying a few Buy-To-Let rentals in the UK.

Regular viewers will know that most of my wealth in is property, as we showed in this article. My cash-flow rental profits are about 9% – the capital growth is another matter, which because of mortgage leverage is around an additional 12%.

That 9% income is a significant game changer – I use the income from my properties as a base layer of income to support my lifestyle, meaning I can invest more of what I make elsewhere.

The higher income return of BTL reflects the increased effort involved – it’s the only investment we’ve covered today that can’t just be managed by a few button-taps on an app.

When To Avoid Income Generating Assets

Income generating assets are great for portfolio diversification as an add-on to your growth assets, or for people who have reached the point that they can retire on their investments.

If you’re still on the journey to financial freedom and want to build your wealth further, assets which focus on capital growth typically have better total returns than cash-flowing assets.

Using the stock market as an example, we would prefer for most of our portfolios to be invested in stocks with low dividends, as the act of paying a dividend (a) provides opportunities for the taxman to take a slice of your money, and (b) means the company cannot reinvest that cash in its operations.

Part of the reason why tech stocks have experienced a boom over the last decade is that they generally don’t pay any dividends – all that cash goes into product development instead. They can invest shareholder’s profits better than the shareholders could themselves.

When Income Is Essential

That said, I wouldn’t be without my investment property income. It has provided a safety cushion of monthly cashflow which has meant I could safely leave a job I hated, could start a business without needing it to pay out profits straight away, and now means I could survive even the rockiest patches of self-employment.

Would I have the same stability from a portfolio of growth stocks?

The eventual goal of most people in the Financial Independence community is to build an investment pot of many hundreds of thousands of pounds worth of stocks.

A small portion of their stocks can then be sold each year to provide an income, without upsetting the overall portfolio’s growth by too much.

We both intend to follow this plan too. But that is years away. Having extra income streams NOW oils the gears, and improves your ability to grab life opportunities.

What do you think about income generating assets, and what do you have in your portfolio? Join the conversation in the comments below!

Written by Ben


Featured image credit: ESB Professional/

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

How To Retire With A £1 Million Pension At Age 50

In previous articles we’ve looked at retiring really young, and there were two themes that were evident:

1) You had to save and invest an enormous amount of money; and

2) Pensions were of little use because they cannot be accessed until your mid to late 50s.

However, if you are willing to retire a little later, such as in your 50s, pensions are an incredibly powerful tool for building up a huge investment pot that can provide you an income for the rest of your life. What’s more, if you’re aware of smart strategies – the kind that we’ll introduce you to today – then you can in effect access your pension pot early.

In this post we’re looking at how you can retire with a £1 million pension at age 50, in today’s value of money. We’ll cover how much you need to save, the benefits of starting as early as possible, some strategies at your disposal, and more. Let’s check it out…

If you’re going to do the following strategy properly, at some point you’re likely going to need to use a SIPP. We’ve compared them all and handpicked our favourites. Check out the Best SIPPs page for guidance.

Alternatively Watch The YouTube Video > > >

Do You Really Need A £1 Million Pension?

How much retirement pot you really need is dictated by your desired income. The more income you want, the bigger the pot required! spoke to thousands of their members and they published some really interesting figures on how much money you need in retirement, whether you’re living alone or in a couple.

Couples would need just £18,000 for the essentials, £26,000 for a comfortable income and £41,000 for a luxury lifestyle. The comfortable lifestyle covers all the basic areas of expenditure and some luxuries, such as European holidays, hobbies and eating out. The luxury lifestyle includes all this plus more, such as long-haul trips and a new car every five years.

If you don’t mind popping your clogs and having nothing left to leave to your family, friends or favourite charity, then you’ll be able to drawdown on that pension much faster than someone who doesn’t want to deplete the pension pot. If your goal is to retire at 50, as per the title of this article, you might want to consider trying to maintain the value of your pension for as long as possible.

A good rule of thumb is to use the 4% safe withdrawal rate. We won’t cover it today because we’ve covered it a lot previously but in theory you would need a pension pot of £1,025,000 to achieve that £41,000 per year luxury lifestyle for a couple.

The pension lifetime allowance for most people is £1,073,100 in the tax year 2021/22. Up until the allowance limit, pensions are a very tax-efficient way to save for retirement. Past this mark, they start to become inefficient as the government start hitting you with hefty tax charges.

If you’re hoping to hit that £1m pension and you’re in a couple, you should definitely consider splitting it across the pair of you so you’re less likely to fall foul of the lifetime allowance from further growth, but at the same time you also need to consider the most tax efficient way to save.

How Much Do You Need To Save To Get To The £1 Million Mark?

For all the following figures, we’ve used a 5% real rate of return. We always assume that market returns will be 8% based on history and then deduct 3% for estimated annual inflation and investment fees.

Let’s first look at what you need to save, assuming that you’re going to save into a pension until you hit state retirement age at 68.

The amount you need to save per month depends on your age. As you can see in this chart the younger you are your required savings per month are far lower than if you start later in life. If you’re 25 you will only need to save today’s equivalent of £555 per month. But if you start at 40 you will need to save almost triple at £1,359.

We’d say that for anyone under 30 who wants to be a millionaire it is absolutely within their reach. 30-year-olds only need to save £737 per month. In fact, we’d even say that if you’re 40 you can still quite easily become a pension millionaire despite the seemingly higher savings rates required.

You can access your private pension before the state pension age, so let’s recalculate as if you want to access as early as possible. The current minimum pension age for taking benefits from a private pension is age 55. This is expected to increase over time. For this example, we’ll go with 58, which is probably most likely for those currently in their 30s and younger.

The required savings per month is noticeably higher than when the target date was 68. We have 10 years less to contribute and 10 years less of compounding returns. The later you start the harder it gets, like before, but every year later is so much harder. This is based on 58. Doing it by 50 is probably going to be a Herculean task. Let’s take a look…

This chart looks different to the other charts because you can’t actually access the money in the pension at 50. So, although you will stop contributing at 50, the pension pot will continue to grow until 58, hence why all the lines come together at 50.

What might surprise you is that the savings per month for the younger ages are not that different to those required for retiring at 58. At that point growth is far more important for compounding than the relatively low contributions.

Let’s look at all the figures together to more easily see how they compare. The later you start investing would make getting to £1m a very difficult task indeed. But for those who are currently 30, retiring by 50 looks very doable as you only need to save £1,625 per month.

I imagine that some of you are screaming expletives at us right now because unless you’re on the younger end of that scale some of those numbers are beginning to appear ridiculous. Well let’s take a look at how those numbers can be drastically cut down.

Taking An Axe To The Required Savings

All the numbers we’ve seen so far are the total contributions. The beauty of pensions is that thankfully you don’t need to pay all this yourself. You will get employer contributions and tax-relief, which can be enormous.

There’s also a smart hack that some companies use to avoid National Insurance (NI) called ‘salary sacrifice’, which saves you a bucket load of money. You can then make further contributions to your pension with the tax saved.

Better still, some companies who operate a salary sacrifice scheme will also pass on their employers NI savings of 13.8% to your pension pot too.

All in, this will be an effective boost of 83.8% for higher-rate taxpayers on top of whatever you put in. For lower-rate taxpayers it works out at a still impressive 53.8%.

If that wasn’t enough, if you have outstanding student debt, using salary sacrifice to increase pension contributions lowers the amount you need to pay back each month. This would further increase those figures to 98.8% for higher-rate taxpayers and 65.1% for lower-rate taxpayers.

For the purpose of the rest of the article we’ll assume you have no student debt and so don’t benefit from avoiding that.

Also, some companies don’t offer a salary sacrifice scheme simply because they’ve never heard of it. There’s no harm in asking and perhaps educating them why they should introduce salary sacrifice.

How Much Do You Really Need To Save To Get To The £1 Million Mark?

This is what both a higher-rate taxpayer and their employer will contribute to their pension, plus the tax relief they will receive, in order to hit that £1m pension. In this first example shown we’ve assumed a salary of £75,000 and 10% matched employer contributions.

Most companies will pay less than 10% but there are also many who do respect their employees and pay this or even more. If you’re serious about building a £1m pension, then it might be in your interest to seek a good employer out.

That 10% matched limit is why the company contributions are frozen at £625 for some of the ages. It means that you will have to pay in more yourself to compensate for lower company contributions. Hence at 35, to retire at 50, you will pay in £1,014 per month but only receive £625 from your company. Of course, if you earn more or have higher matched contributions your company will pay more than this, meaning you yourself can pay less.

Let’s look at what a lower-rate taxpayer earning £45,000 would have to save. As you can see the lower salary means the employer contributions are capped at £375 per month causing you to have to contribute more yourself. At 30 you would only have to save £812 a month to retire at 50 with a pot that would soon grow to £1m. For those age 40, the required monthly savings are a tall order, requiring £2,533 per month. This can be slashed for those willing to work until 58 and later.

How To Access Your Pension at 50?

As we mentioned earlier you cannot access a private pension until probably 58 in normal circumstances.

Our first lifehack is to take out debt at your chosen retirement age of 50, most likely mortgage debt as it’s very cheap, to fund your lifestyle until you reach the pension age of 58. When you can finally access the pension, you can take a 25% tax-free lump sum, which you could use to pay down the debt should you wish. If you did manage to build a £1m pension that’s a tax-free lump sum of £250,000.

If you had remortgaged your property and extracted £250,000 at age 50, that would give you £31,250 each year to live on. This could be supplemented with any other savings or investments that you hold outside of a pension, such as an ISA.

Our second lifehack also involves using debt smartly, but in the early years of pension building.

The irony of investing is that it’s far preferable to inject lots of money in the early years rather than later, in order to produce better compounding. But inevitably, your salary will be lower in the early years and your pension pot will be small, meaning it’s only in the later years that your pot grows to a size that the compounding starts making an impact.

Why not flip that on its head? By taking on a large amount of low interest debt in your twenties or thirties and investing it into your pension, you can then watch as your pension snowballs over the years from strong compounding returns.

Preferably the debt will be long term, cheap mortgage borrowings like the first hack, so you can defer paying it back for 2 or 3 decades, as before.

Other Key Tips

#1 – Consolidate Old Pensions

Most people will have several jobs or more during their lifetime and accumulate multiple pensions. This not only makes them a pain in the butt to manage but also many of them will be expensive and underperforming.

In many cases it’s worth consolidating them into one easy to manage, low-cost SIPP. Before doing this do your research and perhaps speak to a financial advisor if you’re unsure.

#2 – Partial Transfer Your Existing Workplace Pension

Following on from the last point, it might be worthwhile partially transferring your existing workplace pension into a SIPP if your existing pension is costly or badly run. Many workplace pensions have poor investment options and are likely to not be invested according to your risk profile and goals.

We’re suggesting a partial transfer because otherwise your employer will likely stop contributing, which you want to avoid. Before doing a partial transfer make sure your existing pension provider allows this.

#3 – Ramp Up The Risk

Generally, the higher the risk, the higher the potential reward. To build a £1m pension is no mean feat and will require great returns. In this video we think we’ve been quite conservative using just 5% real returns, and if you increase risk, we think there is a good possibility that you will get returns exceeding this.

#4 – Use Your Spouse’s Pension Too

If you’re fortunate enough to have a spouse who has a good workplace pension too, then take full advantage of this. You’ll get even more employer contributions and will now have two salaries to make quick work of those required savings rates.

Also, on your own you will likely eventually breach your pension lifetime allowance if you have a pot already worth £1m at age 58 as it will continue to grow. If that was spread across two people’s allowances, that is much better.

#5 – Don’t Neglect Your ISA

Pensions are incredible, but Stocks & Shares ISAs are also extremely powerful in their own right. Together they can be used to balance tax efficiency and accessibility. Check out this article and video next to learn how they can be strategically used together to retire early.

Were you surprised by just how little of your own money is required to become a pension millionaire? What’s your retirement strategy? Join the conversation in the comments below.

Written by Andy


Featured image credit:  Rus Limon/

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

Don’t Do This… Our 5 Biggest Money Regrets

“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.” – Warren Buffett.

In today’s post we’re looking at our 5 biggest money regrets. Hopefully, you’ll find this article entertaining but more importantly we hope you find it useful.

Some of these regrets are in direct opposition to popular opinion, which in some cases is why it has taken us so long to identify the bad practice in the first place. We like to think that we’re quite knowledgeable when it comes to financial matters, but even now we’re still perfecting our financial strategies, making mistakes along the way, and sharing it all with you. Let’s check it out…

If you’re looking to get a boost to your investments head over to the Money Unshackled Offers page where platforms like Freetrade, Trading 212, Stake and others are giving away free stocks and welcome bonuses when you sign up.

Alternatively Watch The YouTube Video > > >

What This Article Is Not About

If you’ve ever read or watched anything before on the topic of money regrets, you might be expecting us to reel off a list of predictable mistakes that any self-respecting financial blogger should not be making in the first place.

Things like racking up a huge amount of consumer credit card debt is the obvious one or blowing their life savings on a brand-new car. We’ve always been sensible with money and never squandered it, so we don’t have any major spending regrets as we’re too damn tight!

Sure, back in my student days I was living in my overdraft just like everyone else seemed to be doing, but it was interest free, and the debt was small enough to easily be paid back with a summer job.

Our financial regrets are stuff we would actually go back and change if we could.

Regret #1 – Focussed On UK Stocks And Dividends

This one must have cost me tens of thousands of pounds since I started investing properly in 2010. All we ever heard back then was the FTSE this and the FTSE that. The financial news would come on and tell you how many points the FTSE 100 had moved that day but there was never any mention of the performance of a world index.

Investment platforms would actively discourage investing in foreign markets like the US by charging extortionate trading fees on non-UK investments. Popular investing website The Motley Fool would run seemingly daily articles of 5 UK dividend stocks that every investor needed in their portfolio.

Dividends were spoken about as if they were the only way to make money in the stock market. You’d hear facts like 40 or 50% of overall long-term returns come from dividend reinvesting.

With all this potentially misleading information it’s easy to see why a new investor might be led down the wrong path.

Over the last decade or so the returns on UK stocks have been lacklustre at best, while US stocks have powered ahead. With hindsight it’s always easy to say you should have done this or should have done that. It’s not the past returns though that make me regret going heavy with UK exposure. It’s the fact that UK stocks only make up around 4% of the world’s market capitalisation.

Also, with my human capital (that being my ability to work and live) limited to the UK, it makes no sense to invest with home bias. Exposure to the whole world – or at least mostly US stocks which make up about 55% of the world’s market cap – would be a far more sensible allocation.

As for dividends, there’s nothing wrong with them per se, but by only targeting high yield stocks meant better growth stocks like Amazon, Google and Facebook were ignored. You don’t need to be an investor to know these stocks have left most others in their wake.

Regret #2 – Wasting Our Early Years

This regret is two-fold. Firstly, we both wish we had started investing earlier. Growing up, my parents saved up a small amount of money in a building society for me and I remember how cool it was to see money making money – back then of course interest rates were something like 5% so passive income and the magic of compound interest was clear for all to see.

However, you have to wonder what would have happened to my small pot had it been invested instead. Moreover, later in my early twenties when I did start investing, I was so slow to shift what cash I had into equity, that much of my cash was sitting idle as the stock market went on a bull run.

For Ben (MU Co-founder), he sat in cash even longer. But rather than gradually moving from cash to equity as I had, he had an epiphany after reading Rich Dad Poor Dad at age 27, which was six years ago.

From that moment on he was all in. He went on a buy-to-let shopping spree, buying as many as he could as fast as he could. This even included extracting equity from his own home to jumpstart his asset purchases.

The second part of this regret is about wasting our early years when we had so much time on our hands.

Ben and I lived together at Uni with a bunch of other likeminded people, all of whom had big dreams like we did. Looking back, we had so much time on our hands but did nothing productive with it. We drank, watched Lost, and became rock gods on guitar hero. Could that time have been used to build a business empire like Mark Zuckerberg did?

Most people who don’t start a business use the excuse that they have no time, but we know from having lived it and squandered the opportunity, that students have an abundance of time. We literally must have only spent around 15 to 20 hours a week doing Uni work, spending the rest of the week chilling. If only we had that time back now!

Regret #3 – Pigeonholing Ourselves In An Unscalable Career

A lot of people’s careers start when they’re around 17 and they choose a university degree with little understanding of where that leads to in terms of career. That decision in many cases dictates what they will likely do for the rest of their life. A frightening proposition for any 17-year-old, if only they understood the impact of their decision.

At best, a clued-up youngster might consider the earnings potential of different careers and choose one of the best paid.

Back then, we had no idea about the difference between trading time for money, owning passive income streams, or scalable income. We ended up learning accounting which does lead to a relatively highly paid job, but the work doesn’t lend itself well to scaling.

The best paid work is scalable, which means it can be rolled out to multiple customers with little to no additional work. For instance, if you provide online training courses, then you can create a course once and sell it to an unlimited number of customers.

The same can be said for software engineers who are able to code computer programs, apps and games that have endless reach. Do you remember the game Flappy Bird? Its developer said that it was earning $50,000 a day during its peak popularity. Incredible. That’s the difference between scalable income and trading time for money.

Generally, once you’ve learnt a skill, you become pigeonholed, but we think anyone that has something between their ears can apply themselves to any profession.

While basic accounting is an absolutely vital skill for any business owner to possess, it probably isn’t necessary to study for 6 years of combined university and professional level qualifications in the subject. Better we think, to learn a scalable set of skills.

Regret #4 – Lack Of Leverage

Leverage is the use of debt to amplify potential returns. So, if the stock market rose by, say 8% and you were using 3x leverage, you would get 24% returns, less any financing costs. High returns like this make an enormous impact when compounded over time.

Our regret of not using enough leverage runs contrary to what most people feel about borrowing money to invest. Most people believe that debt and therefore leveraging is inherently risky and so won’t ever touch it. They may regret using debt, while we regret not using enough of it.

Leverage is a useful tool that can enhance returns when used appropriately. For us, the biggest money risk is having to spend a lifetime working and not having the time left at the end of a career to live the life of our dreams. Leverage can be used to more easily achieve that dream life!

In fact, we’ve recently been swotting up on the use of leverage and came across some really interesting theories. One put forward in the book Lifecycle Investing, argues that we should all be using leverage in our early years to diversify across time, and the book makes a compelling case that this actually reduces risk. Can you believe it? Leverage being used to reduce risk!

We’ll probably do a full video on this soon because the theory is so eye-opening and deserves a full explanation, but to summarise, the theory says that because you have so little wealth at the beginning of your life, the movements of the stock market make almost no difference relative to the impact it has later in your life when your pot is large.

From a temporal diversification perspective, it’s as though your 20s and 30s didn’t even exist.

Another use of leverage that we’re only just beginning to use ourselves is a risk parity strategy. Again, this needs a dedicated video as we can’t give it the credit it deserves here.

In brief the asset allocation in a portfolio is adjusted, so that the assets have the same risk level, but then leverage is used to obtain the desired return. This risk parity strategy should have the same return as a stock dominated portfolio but crucially with less risk.

For example, a traditional portfolio might be 60% stocks and 40% bonds, but stocks contribute 90% of the volatility. A risk parity strategy might allocate 20% stocks and 80% bonds but then leverage the portfolio to obtain the desired returns.

Regret #5 – Trapped In A Fixed-Term Mortgage

Fool me once, shame on you; fool me twice, shame on me. Well, it looks like Ben’s a fool (his own words) as he’s made this mistake twice and regretted it both times.

Fixed-term mortgages look appealing. You can lock-in a low interest rate for a number of years and he’s done this with a 5-year fixed term mortgage twice.

Fixed-term mortgages have their uses, such as giving you certainty over repayments – you won’t ever get any nasty surprises from your bank telling you your monthly repayment is going up. But the downside is that they’re very inflexible, and life is bound to throw up many surprises during a 5-year timeframe.

The first time he wanted to release some equity from his house to invest in Buy-To-Let property, he was forced to pay an early repayment charge of a few grand. He then somewhat sensibly chose a 2-year fix, which allowed him to extract more equity just 2 years later.

At the end of the two years, he convinced himself that he wouldn’t ever want to extract equity again, so foolishly (his words again) opted once more for a 5-year fixed term.

Surprise, surprise, he changed his mind and wants to extract some further equity now that the property market is sky high – only to be facing another hefty early repayment charge. The moral is, think twice before locking yourself into a mortgage term… and if thinking twice doesn’t work, definitely don’t get it wrong a third time!

What financial regrets do you have and why? Join the conversation in the comments below.

Written by Andy


Featured image credit:  Golubovy/

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

From £0 To Rich In 10 Years Using Debt | Your 10 Year Plan

Here we’ve set out to prove that anyone can go from £0 of savings to financially free in just 10 years.

You don’t need a killer business idea, you don’t need to work 60-hour weeks juggling a job and a side hustle. All you need to do is accept and adapt to the new world order of money and debt that we’ve found ourselves in since the 2008 crash, and make the appropriate moves, like you would pieces on a chessboard.

But unlike chess with its infinite possible actions, this 10-year plan to financial freedom is laid out for you in this article step-by-step.

Thousands of ordinary people are doing this already and the basic ingredients are simple assets and good debt. No luck or beating the market necessary!

FYI: don’t forget to check out the hundreds of pounds worth of offers on the Offers page, including a £50 cash bonus when you open an investing account with InvestEngine. It’s free money, check it out!

Also, a word of caution: nothing in this article is advice, and investing with debt should only be done if you feel you can do it sensibly. All we can say is that following the steps here has transformed my own wealth drastically for the better.

Alternatively Watch The YouTube Video > > >

The Changing Financial Landscape

The financial truths that held for previous generations rarely hold true for future ones.

For instance, it used to be the case that bank savings accounts would pay you interest of over 5%, so a moderate return could be achieved with zero risk.

But the reality we find ourselves in as investors going into the 2020s is one of super low interest rates, seemingly endless inflation in asset prices, and governments and central banks the world over printing more and more currency like it was toilet paper.

As government debt has shot up to facilitate this, they have tied the fates of entire nations to global interest rates.

According to ThisIsMoney, if the interest the UK government had to pay on its debt rose by even 1 percent, this would add £21billion per year to the cost of financing the UK debt burden – making the cost around double what it is right now.

It’s unthinkable that governments and central banks around the world, most of whom are in similar positions, would allow interest rates to return to pre-2008 levels. Low interest rates are here to stay.

Even if they wanted to somehow counter rising inflation, we believe governments and central banks would first choose to pull OTHER levers before they would significantly raise interest rates: such as raising income tax, controls on wage growth, and decreasing the money supply.

Alongside low interest payments, the real value of any debt you hold falls away over time due to inflation – a £500 debt taken out 30 years ago might have seemed a fortune at the time to most people, but £500 today isn’t much money at all.

In this new world, investors who leverage low interest debt to buy assets with can thrive.

You have to roll with the punches, and to get rich today, the path of least resistance is to pick up all this low interest debt that’s lying around and use it to buy some sweet assets with.

The Basis Of The 10 Year Plan

This isn’t some zany get-rich-quick scheme, or some gamble on crypto – this is a logical, financially realistic 10-year plan to amass enough investment assets by taking advantage of low interest debt that you can be financially free from having to work another day to pay the bills.

The easiest way to invest using debt is to secure the debt against the very assets that you’re buying: like how a mortgage is secured against a property. The valuable asset is what gives the bank the confidence to lend you a lot of money. Property fits debt like a hand to a glove.

Unfortunately, this doesn’t work as well with stocks, as we’ve yet to find a bank that will lend you money to buy stocks with. But imagine if a bank did come out with an equivalent of an interest-only mortgage product for buying stock index funds? Maybe one day.

Over the centuries the property market has evolved to provide the borrower with additional perks, which include equity release.

This tool is available to everybody, but most people are too scared to use it because they have inherited the previous generation’s fear of mortgages, born out of decades of high interest rates.

Equity Release

When you are outside of a fixed term on your mortgage (or if you are mortgage free), you can renegotiate your mortgage agreement to withdraw some of your built-up equity out of your house and replace it with more mortgage debt.

As an example, a £200k home with an 80% Loan To Value of £40k equity to £160k mortgage might be reset to a 90% Loan To Value of £20k equity to £180k mortgage. That £20k difference would go into your bank account.

Equity release shouldn’t be feared unless you are financially illiterate or financially irresponsible, in that you would spend the cash on treats instead of investment assets. Instead, it should be welcomed as perhaps the single best opportunity available to any homeowner to become a millionaire in their lifetime.

That’s because it removes the need to have to first save up money from your wage-slave day job over many months or years to buy cash flowing assets with. We can think of few other ways to immediately get hold of 5 or 6 figure lump sums of cash to invest with without having to do any work!

The 10 Year Plan

For this next section we’re going to lay out an example 10-year plan that you can adapt to your own situation. The numbers are given at today’s value of money.

It assumes you have just bought your first home, worth £200,000, and have £0 of savings left after the purchase. From this baseline you can focus on building your financial freedom fund.

Years 1-10

In Years 1 & 2, not much happens other than squirreling away £500 a month from your soul-crushing day job. But hang in there – things are about to scale pretty quickly.

At the start of Year 3, after your 2-year fixed term mortgage period has become open for renegotiation of terms, you do just that and extract £23k from the house.

£23k is based on monthly equity repayments of £400 over 2 years (which excludes the interest), a 4% annual growth in property prices, and resetting the Loan To Value to 90%.

You buy your first Buy-To-Let (BTL) property in Year 3, worth £140,000 – which costs you £40,000 with a 25% deposit plus stamp duty and buying fees.

Because this happens at the start of Year 3, you can record a full year of rental profits at £300 a month, being rental income minus mortgage interest, tax, and other costs of renting.

Year 4 is just as boring as Years 1 & 2, except now you’re saving money from the rental as well as from your job. You’ve built a second income stream. Congratulations!

Year 5 gets fun. This year you get 3 more lump sums of cash into your bank account from low interest debt sources. The first is a Money Transfer Credit Card (or even a pair of such cards, if needed). They work like a 0% loan, transferring money from the credit card directly into your bank account.

I was carrying £15k on cards like this at the start of 2021, before paying off 1 of my 2 cards. You can pay 0% interest on these cards in the first 2 years – just remember to pay them off before that interest free period ends.

You also do your 2nd and final ever equity release from your home, which might net you something similar again to what you got the first time around. You’ve made the decision to let your mortgage pay down naturally thereafter, as it seems the most responsible course of action to you.

You also get to release equity from your first rental property, which you also took out a 2-year fixed deal on. 2-year fixes are the industry standard, and in our view are the most flexible for this style of investing.

You use the cash from your borrowings to buy your 2nd BTL property. Cash profits from your growing rental empire are double those of the previous year as a result.

In Year 6 you have little else to do other than drive to the office and back home again about 230 times. But note that your rental profits are now greater than what you’re able to diligently save from your 9-to-5.

At the start of Year 7 you sadly have to pay back the credit card debt – it’s not your money after all – but you can release equity from both of your rental properties.

You can afford to buy your 3rd BTL, and you do so. Your cash profits from your 3 BTLs bring home nearly £11,000 after tax this year.

In Year 8, there’s nothing stopping you from taking out more Money Transfer deals, since your record of repayments is squeaky clean. You use it, along with last year’s money carried forwards, to buy your 4th BTL at the start of the year.

This is about where I’m up to now in the plan, with 4 BTLs, though I’ve been able to move a bit more quickly.

In Year 9, you release equity from your first 3 rentals, and buy another one, bringing your BTL empire up to 5.

In Year 10, you pay back your credit cards, release a bit of equity from BTL #4, and have enough money left over at the end of Year 10 that a few weeks later you can also release equity from 4 rentals and can afford to buy 2 more.

After 10 years (and a few weeks), you have 7 rental properties paying out £25,000 a year, with the equity value of your investments at £245,000.

What does this mean for financial freedom? A £25,000 annual investment income may mean you no longer have to work.

A couple could both follow this plan and end up with a portfolio of 14 rentals bringing in £50,000 a year. Safe to say you’d be financially free at this point if you managed your expenses carefully.

But you may have noticed that our little 10-Year plan started gathering quite some momentum as the years progressed. Couldn’t you just keep going a bit longer to get substantially more readies coming in?

Years 11-15

Of course you could, and here’s how things might stand if you pushed on to Year 15. You could have 14 BTLs by then, pumping out £50k of annual rental profits. A couple might have 28 properties paying out £100k, all things being equal.

This person’s closing investment equity plus loose cash after 15 years is £556,000. You could even sell your rentals at this point and put the money you’ve made into passive stock market funds, kicking out over £20k a year at the 4% safe withdrawal rate. Less money, but less ongoing effort.

You’d just have to carefully navigate the capital gains tax rules, for which it might have been better to have set up your property empire as a limited company rather than in your own name.

But What If X Happened?

Here’s a quickfire round of common concerns we expect people to have with the plan, and our responses.

#1 – What If Property Prices Went Down?

Property prices could go down in some years, they could go up way more than 4% in others. We’ve used 4% to be conservative. History shows house price growth to far exceed this. Price movements could make the plan take longer or shorter than 10 years for you. But prices are likely to go UP overall based on history.

#2 – Can You Use Debt As A House Deposit?

When buying a residential property – such as your home that you live in – the banks will do checks to ensure you aren’t using other debt to get a mortgage with.

BTL mortgages in my experience do not do these stringent checks. I personally had thousands of pounds of money coming in from remortgages and credit cards on my bank statements when buying all of my Buy-To-Lets.

#3 – What If I Had A Problem Tenant?

Yes, this is a risk in the early years of property investing, which becomes less of a problem the more properties you own. Give your property portfolio to a good management agent to look after them for you, as they should have better processes to filter out the worst potential tenants before they become your problem.

#4 – What If I Lost My Job?

Holding all that debt can be a worry that would keep you up at night if you were to lose your job, but remember that all the BTL mortgages are attached to assets that pay you rent, which covers your many BTL mortgage payments whether you have a job or not.

And securing future mortgages and remortages doesn’t depend so much on you having a job once you own 4 or more rentals. At this point you are classed as a portfolio landlord, and it’s more important to the bank that you can prove income from your portfolio rather than a job.

These worries aside, the most likely scenario in our view is that you gradually get richer and richer exponentially, utilizing other people’s money to build an empire of assets valued far in excess of the value of the debt and setting you financially free.

What’s your view on using good debt to grow a freedom fund? Join the conversation in the comments below.

Written by Ben


Featured image credit: KamiPhotos/

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

Getting to 200 Grand – What I’d Change About My £200k Portfolio

When you reach an investment milestone like £200k, it’s good to reflect on your achievements so far, but more important is to course-correct before your past mistakes become any more ingrained.

Normally, for investors who only invest via online investment platforms or from an app on their phone, fixing a portfolio can be as simple as clicking the sell and the buy buttons in the right order.

But if you hold illiquid assets this isn’t as easily done. You might even have the first-world problem of holding assets which have such high returns that you can’t justify selling them, even though your strategy has changed since you bought them.

In this post, I want to share with you the details of my Financial Freedom Fund, so you can get a feel of how someone might come to accumulate £200,000 in just 5 years starting from almost nothing, and also to arm you with my experience so you can replicate this milestone while avoiding my mistakes. Let’s check it out!

I first started investing in stocks and ETFs on Freetrade, and it is still one of the best places to invest and grow a wicked portfolio.

As the name suggests, Freetrade doesn’t charge any trading fees, making it perfect to experiment with different combinations of funds and stocks without feeling trapped by fees.

Also, Freetrade are giving away a free stock worth up to £200 to every new customer who opens an account with them and funds it with at least £1. The offer is only available when you use this link.

Alternatively Watch The YouTube Video > > >

My £200k Portfolio

Let’s quickly look at the detail of this portfolio. Here’s the financial freedom part of my net worth, broken down. What should be glaringly obvious is that most of it is invested in Buy-To-Let property, specifically high cash-flowing terraced houses owned with mortgages, which were my first serious investments since committing to early retirement:

It’s this section of the portfolio that has seen the most capital growth, up by over 30% in the last year alone, and over 50% in total. It currently makes up 2/3rds of the pot.

I’ve consolidated most of my stocks and ETFs into a single Stocks & Shares ISA.

My old workplace pensions are likewise consolidated into a single SIPP. I might have regretted how small this slice is relative to other people in their early 30s… if not for the fact that I was purposefully diverting every penny I could from my wage into buying properties, which I saw as being of greater value.

There is also some small allocation to Peer-To-Peer Lending investments, and some commodities. And as we say at Money Unshackled, every portfolio needs a bit of cash.

There’s a red stain on the portfolio in that I partly financed the properties with 0% interest credit card debt.

Getting to £200k – Investing In Order Of Return

The original plan with this Freedom Fund was to invest my money in order of whatever assets could provide the greatest returns. I would worry about diversification later.

The answer for me lay in leveraged rental property.

My rentals give out pre-tax rental returns in the region of 11%, which is a higher return than the stock market, especially once leveraged annual capital gains of around 12% are added on as well.

My gamble of investing early on for maximum return rather than diversification has paid off so far – it provides a high second income AND incredible capital growth, and it has pushed the portfolio up to £200k in about 5 years. But it is now time to worry about diversifying.

Course Correction – Investing To Diversify

I got to £200k by leaning heavily on property, but I now need to focus on diversification. For the last year I have been ploughing all my investable money into the stock market, rather than hoarding it in cash ready for the next property.

A well-rounded portfolio should invest across multiple asset classes, but also many positions within each asset class.

As it stood, apart from some small-change, this portfolio held 4 assets – all being rental properties, and all serving the same demographic in similar locations to one another. It was NOT diversified.

Owning multiple rental properties offers some protection in case one tenant stops paying rent, but to be truly diversified you need to own the world – and that means owning stocks.

My small but growing equity portfolio contains 9,000 stocks, achieved by owning just 3 equity funds in my ISA and 2 in my SIPP, plus a smattering of individual stocks. There are also holdings in gold and silver.

The plan is for the allocations in the Stocks & Shares ISA and SIPP to grow over the years by drip feeding income into them monthly, until they catch up to the property slice.


If we look back at the portfolio, the portion invested in equities is what we would consider to be relatively safe and secure, due to good diversification and liquidity. The part representing just 4 individual properties is at far greater risk.

If I had desperately needed cash during 2020, I may have struggled to sell a property to save my bacon. But if I’d owned more shares, I’d have been fine – though they may have dropped in value.

Likewise, in a downturn I could easily lose all 4 of my properties’ incomes if tenants could not pay rent, while the odds of all 9,000 of my stocks failing to perform would be very low indeed.

The risk in my portfolio is therefore much higher than someone who owned purely equities or a mix of equities and bonds, which is probably most investors. But are the returns on this portfolio proportionally high too?

Return On Investment

Here’s the expected future weighted average returns on this portfolio:

For property, the return is a mix of 8% after-tax rental profits that I’ve been achieving consistently, plus 12% expected capital growth on the equity.

A very brief explanation for why these 2 numbers are so high is because I’m leveraging my equity using a mortgage, so the returns get amplified because I only need to invest about a quarter of the house’s value. 

After inflation that’s a 17% real return. The equities are expected to perform at historical market averages, while P2P and cash are assumed to continue at current levels of performance.

The weighted average real return of the portfolio overall is expected to be 12.8%.

This compares very favourably to a portfolio built using unleveraged assets such as stocks, and provided I continue to be fortunate and not succumb to the risks that low diversification brings, this asset mix should power me towards my Financial Freedom target at a fast pace.

The properties I already own should multiply on their own as well over the years, as I can extract equity from the growth to buy more properties with, which will lower the risk while increasing the returns.

If you take away one thing from this review, let it be that you too should consider getting some rental property in your own portfolio early on, for the boost to returns that it brings.


That said, why would anyone want to decrease their portfolio average return by diversifying away from property towards stocks? Part of the reason of course is risk. But also, you have to consider the effort involved.

£200k is a good start but it needs to grow to around £900,000 to give me and my family the lifestyle we’d want in early retirement.

This is my household’s FIRE number – FIRE standing for Financial Independence, Retire Early.

To find out how big your pot needs to be to retire early, check out the Money Unshackled FIRE calculator. You can tweak the returns based on your own portfolio’s asset mix, and it will tell you when you can retire and what your FIRE number is.

You might be happy to put more effort into managing your investments upfront, if they give you a head start on your FIRE journey. It might just shave some years off your goal. But if you have other commitments, understandably you may not want the hassle long-term.

Right now, big percentage returns are important to me because I need all the help I can get to grow my pot fast. But once the pot is built, I could tolerate a lower percentage return in exchange for a higher return in pounds, by virtue of the pot being a lot bigger.

Owning rental property is many times more effort-intensive than investing in ETFs. Even with the use of property management agents, there’s still a fair bit of ongoing admin to do.

This all runs contrary to my desire to sit in a hammock staring into space from no later than the age of 40 onwards.

The Stocks Allocation

A portfolio based mostly around passive equity-based ETFs can be automated. If we dig into the equity section of this portfolio, this is predominantly made up of the Money Unshackled Ultimate Portfolio, covered in detail here.

The MU Ultimate Portfolio: Geographies

Above is the split of the equities in the ISA by geography, and the portfolio covers the top 99% of market capitalisation in those countries. When this £200k portfolio grows into a £900k portfolio, the intention is that this component will be the largest chunk.

Money gets drip-fed into this section of the portfolio regularly and is automatically allocated into the pre-planned allocation of global funds. When I reach my FIRE date, I will simply drip-feed money OUT of it regularly instead.

That’s as complicated as investing needs to be.

The equity investments in the SIPP follow a similar idea of owning a diversified cross-section of the world, but with a slightly different set of funds.

A good strategy is to draw an increased income from the rest of your portfolio first when you FIRE, such as your ISA and properties, and access your SIPPs and other pensions from when you’re allowed to, which currently for our generation will likely be at 58.

Be sure to check out this article which shows you how to draw up a retirement income plan using a combination of ISAs and Pensions.

The Portfolio I’m Aiming For

Seeing as I have already done the hard work of establishing a property portfolio, I’m happy to hold on to them for their high returns, and even add to them over time – I’d be happy at around 30% of the total pot:

My main task between now and my early retirement date is to plough money into the stock market, bulking up my ISAs and SIPPs to reflect the green and yellow portions of this pie. You can see the specific weightings of the top countries for the equities, with the US making up 25% of the pot, or half the equity.

Above is another way to look at the target equity split, showing off the small cap and emerging markets elements. With a full 20% invested in the emerging markets and small cap stocks, this is hardly a low-risk portfolio. But it will have a good balance of diversification, liquidity, and returns.

The expected real rate of return shifts from the current 12.8% to 7.5%, still far higher than a stocks-only portfolio which might average 5% after inflation.

Actual vs Target Splits

Portfolio Financing

If you too like the idea of starting out with a higher risk strategy of targeting the highest rates of return first, it might help you to know that the way I got started with rental property was to optimise the use of good debt.

My first 2 rentals were paid for in part with money I had borrowed on 0% interest Money Transfer Credit Cards, but even MORE so by remortgaging my own home and extracting equity from it.

Much of this goes against the grain of what you are told you aren’t supposed to do, and this definitely shouldn’t be considered advice. But to get ahead in life, it’s worked for me to ignore the mainstream guidance.

What do you need to change in your portfolio, or are you happy with it as it is? Join the conversation in the comments below!

Written by Ben


Featured image credit: Vitalii Vodolazskyi/

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

Reviewing My Property Empire – Is Buy-To-Let Still Valid In 2021?

Written by Ben

I’ve been reviewing my property portfolio recently, in light of the covid pandemic.

Over the last year, landlords have endured loss of rents, illiquid markets and rising prices stopping them from expanding their portfolios.

Rishi’s stamp duty holiday has been of little use at the lower end of the market where the 3% Buy-To-Let surcharge still applies.

There was SOME help, like the mortgage payment holiday which I personally took full advantage of, as so many landlords did, and the furlough scheme to help struggling tenants pay rent.

But of the damage done by the lockdowns, how much is reversible with the reopening of society, and how much represents a true body blow to property investing?

Luckily, Paragon Bank have done some detailed analysis of the market which we’ll draw on as we go, for those of you who love a good chart.

We’ll briefly look at how my properties have fared since I started down the Buy-To-Let path, plus we’ve packed in a boat-load of statistics to show what the outlook is like going forwards for British landlords.

In doing so, we’ll find out whether Buy-To-Let is still valid as an investment in 2021. Let’s check it out!

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Do you still see Buy-To-Let rental property as a valid investment in 2021? Join the conversation in the comments below!


Featured image credit: OlegRi/

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