How do I become investment literate?
Discussion
Harry Flashman said:
All, thank you very much for contributions - some great leads.
As I said, I want to start by being better informed: at least them if I hire a professional, I'll be doing so on an informed basis.
In PH terms, the Vantage may be at the bottom of its depreciation curve but as schnozz said, it actively costs money. I can't see it increasing in value enough to offset the annual costs unless I literally pay to store it somewhere and leave if for 10 years. At which point I'd like to think I would have done better with the cash out of it!
I just need to know more. This thread is helping, as I hoped it would. Thanks again.
Whatever you do - keep the aston. It is a thing of pure beauty and the next time you blast it through a tunnel you will remember why you bought it!As I said, I want to start by being better informed: at least them if I hire a professional, I'll be doing so on an informed basis.
In PH terms, the Vantage may be at the bottom of its depreciation curve but as schnozz said, it actively costs money. I can't see it increasing in value enough to offset the annual costs unless I literally pay to store it somewhere and leave if for 10 years. At which point I'd like to think I would have done better with the cash out of it!
I just need to know more. This thread is helping, as I hoped it would. Thanks again.
Harry Flashman said:
In PH terms, the Vantage may be at the bottom of its depreciation curve but as schnozz said, it actively costs money. I can't see it increasing in value enough to offset the annual costs unless I literally pay to store it somewhere and leave if for 10 years. At which point I'd like to think I would have done better with the cash out of it!
All the more reason to run it as a cheap(ish) daily as mine has become. Perfectly suited to it with comfort, decent boot and GT capabilities, as well as decent reliability. Mine is covered in filth most of the time, left in the underground car park and run across the country visiting family when I need to, no mileage concerns just a beautiful beater to use until your heart is content. I am hoping to add something more feisty and italian alongside but why sink an annual cost into this when it won't shoot up in value as you say - use it, abuse it and treat it like any normal car. Lesson 1 in value right there from the mindset of Shnozz Investment Corp. Genuinely not being condescending but what are you really trying to achieve, Flashy?
My impression from your post is that you are at a stage in your life where you are conflicted and not confident of what you ‘should’ be doing.
I’m sure we’ve all reflected on some historic purchase or investment and no doubt there’s some 40 year old out there thinking he should have bought an Aston rather than invest in that boring portfolio that provided a steady return.
I know it's not just about the Aston, i’m guessing you’ve been evaluating lots of past decisions and now want to be as certain as possible your future choices are the ‘right’ ones.
I suggest you get to grips with what your goals really are (what do you want the next 50 years of your life to look like NOT how much £ you want to make/have?). Once you feel confident in your plans then speak to a qualified financial planner and they will recommend an appropriate course of action (which may just be to keep doing what you’re doing) to ensure your financial situation allows you to achieve your goals. Then just review everything fairly regularly but especially if anything changes.
If you don’t want to pay for that then there’s plenty of good info on investments out there (and a lot of garbage) and fairly comprehensive long term cash flow planning tools freely available too if you want to model your plan.
If gaining a professional level understanding of what you can expect from investing in all different types of assets and utilising various tax wrappers is really what you’re after then maybe get the study material for something like the Private Client Investment & Advice (PCIAM from the CISI).
My impression from your post is that you are at a stage in your life where you are conflicted and not confident of what you ‘should’ be doing.
I’m sure we’ve all reflected on some historic purchase or investment and no doubt there’s some 40 year old out there thinking he should have bought an Aston rather than invest in that boring portfolio that provided a steady return.
I know it's not just about the Aston, i’m guessing you’ve been evaluating lots of past decisions and now want to be as certain as possible your future choices are the ‘right’ ones.
I suggest you get to grips with what your goals really are (what do you want the next 50 years of your life to look like NOT how much £ you want to make/have?). Once you feel confident in your plans then speak to a qualified financial planner and they will recommend an appropriate course of action (which may just be to keep doing what you’re doing) to ensure your financial situation allows you to achieve your goals. Then just review everything fairly regularly but especially if anything changes.
If you don’t want to pay for that then there’s plenty of good info on investments out there (and a lot of garbage) and fairly comprehensive long term cash flow planning tools freely available too if you want to model your plan.
If gaining a professional level understanding of what you can expect from investing in all different types of assets and utilising various tax wrappers is really what you’re after then maybe get the study material for something like the Private Client Investment & Advice (PCIAM from the CISI).
Not condescending at all and a great question! Honest answer is that I do not know - but I would like to grow less dependent on my salary to pay outgoings as time progresses, meaning that if Lady F or I give up work, things will be easier to manage.
My career is good, but I will not be CEO of my company I think. I need to look at options for independent wealth - as much as I can realistically achieve with seed capital of around £100k. Yes, I could pay down the mortgage but frankly it is fixed and manageable and we could downsize if needed. I would prefer to have some money working for me and bringing something in to offset expenses and hopefully grow to cover them!
My career is good, but I will not be CEO of my company I think. I need to look at options for independent wealth - as much as I can realistically achieve with seed capital of around £100k. Yes, I could pay down the mortgage but frankly it is fixed and manageable and we could downsize if needed. I would prefer to have some money working for me and bringing something in to offset expenses and hopefully grow to cover them!
johnwilliams77 said:
Thanks - what did you learn?
Welcome to pistonheads!
Thanks, been viewing for years, but only just re-registered, as for the book, Andrew explains how the how world of all sorts of investments works, why the rich are rich and stay rich, what you can do with sensible plans meaning you're not exposed to one asset class, for example if there is a market share price crash, by being exposed to other investments that would go up. But its a really easy and interesting read for everyone.Welcome to pistonheads!
There are 2 main big questions.
What age do you want to retire and how much income do you want in retirement?
Generally speaking the later you retire the easier it is.
Next take that income, so e.g £40k and multiply it by 25. This will give you your "number". In this case its £1m.
The next questions are how much of your income can you save?
If you can save £25k per year it will take 25 years (based on simple ROI of 4%). If you can save £100k then more like 8 years.
The final thing is to look at what vehicle do you want to use to best suit your situation. Pension of some sort, ISA, property etc. With pensions LTA might be an issue for you esp if you have already been contributing for the last 20 years. With property CGT and overheads might be an issue. So ISA might be better... might not.
Some points to consider..
Some people use 20 x income. Some people use 30 or even 50 times. 25 does seem to be the accepted number though.
If you plan to have a big number you may need to consider IHT as the chances are the "pot" will grow.
Keeping things simple can often speed up the process and reduce fees.
If you want to retire over 67 then SP can also be taken into consideration although from what you say it might not be a major factor for you.
Devise an excel sheet to track everything. Also its a very good idea to track ALL spending for a period of 2 or 3 months to get a feel for what you *really* spend.
I was thinking I would need about £20k in retirement and after tracking all my spending its more like low £30s.
What age do you want to retire and how much income do you want in retirement?
Generally speaking the later you retire the easier it is.
Next take that income, so e.g £40k and multiply it by 25. This will give you your "number". In this case its £1m.
The next questions are how much of your income can you save?
If you can save £25k per year it will take 25 years (based on simple ROI of 4%). If you can save £100k then more like 8 years.
The final thing is to look at what vehicle do you want to use to best suit your situation. Pension of some sort, ISA, property etc. With pensions LTA might be an issue for you esp if you have already been contributing for the last 20 years. With property CGT and overheads might be an issue. So ISA might be better... might not.
Some points to consider..
Some people use 20 x income. Some people use 30 or even 50 times. 25 does seem to be the accepted number though.
If you plan to have a big number you may need to consider IHT as the chances are the "pot" will grow.
Keeping things simple can often speed up the process and reduce fees.
If you want to retire over 67 then SP can also be taken into consideration although from what you say it might not be a major factor for you.
Devise an excel sheet to track everything. Also its a very good idea to track ALL spending for a period of 2 or 3 months to get a feel for what you *really* spend.
I was thinking I would need about £20k in retirement and after tracking all my spending its more like low £30s.
At age 40, earning what you both do I would be looking at trying to get as much into a SIPP (or a SSAS if they still exist and it's still possible) as possible. Is salary sacrifice or whatever it's called possible?
in a few years time, you really won't be that far from being able to draw it.(Think Derek Randal - "in 15 minutes it will be 15 minutes until tea")
I have a massive issue in that money burns a hole in my pocket - but i get sensible every so often.
Spend a weekend pretending you are in work and think about your finances and I bet you can do better than any book.
Maybe a couple of sessions with decent IFAs - pay them properly for their time and you are under no obligation to use them going forward.
in a few years time, you really won't be that far from being able to draw it.(Think Derek Randal - "in 15 minutes it will be 15 minutes until tea")
I have a massive issue in that money burns a hole in my pocket - but i get sensible every so often.
Spend a weekend pretending you are in work and think about your finances and I bet you can do better than any book.
Maybe a couple of sessions with decent IFAs - pay them properly for their time and you are under no obligation to use them going forward.
At a simplistic level, someone posted a link to this flowchart on some thread or other - https://imgur.com/ezGWhE3
I think it is pretty useful as an overall guide before you get into detail....
But yes, at some stage, you will need to get into finding a FA you can trust.
I've struggled with that over the years, and have ended up managing most of our finances myself - almost certainly missing out on something, but feel like things are moving in the right direction. Helps that the company I am with has a fairly good online tool to enable me to ramp up (or down) pension investments.
A good friend also suggested you know you could retire when you were living off the amount your retirement pot would generate.....& bear in mind that pot is not JUST the pension: any income source you have saved into.
In the meantime, you clearly have LOADS of energy, so keep busy, keep doing things you enjoy!
Oh, I nearly forgot: invest everything in bitcoin, clearly it is the dogs 'nads!
(just kiddin'.....I remain sceptical of this kind of gambling......)
I think it is pretty useful as an overall guide before you get into detail....
But yes, at some stage, you will need to get into finding a FA you can trust.
I've struggled with that over the years, and have ended up managing most of our finances myself - almost certainly missing out on something, but feel like things are moving in the right direction. Helps that the company I am with has a fairly good online tool to enable me to ramp up (or down) pension investments.
A good friend also suggested you know you could retire when you were living off the amount your retirement pot would generate.....& bear in mind that pot is not JUST the pension: any income source you have saved into.
In the meantime, you clearly have LOADS of energy, so keep busy, keep doing things you enjoy!
Oh, I nearly forgot: invest everything in bitcoin, clearly it is the dogs 'nads!
(just kiddin'.....I remain sceptical of this kind of gambling......)
Thread already helpful - I have read 40% of "How to Own The World" this evening. About to sleep now, before starting the section on ISAs.
I wish I had read this book years ago. I have already learned lots in one evening. Explains concepts like inflation, but perhaps more importantly psychological concepts like "money illusion" and "anchoring" extremely well.
Depressingly I have just bought a house in London. However, it has made me realise it may be time to sell my flat and diversify assets to hedge against the house (a thought I was already having, to be honest, after calculating yield vs capital appreciation vs inflation vs interest costs/expenses - I was sure I was losing money renting it out in real terms. This book appears to confirm that, although I will obviously check the maths)
As I said - no decisions yet: just soaking up info. Thanks to the chap who posted this book.
Must sleep. This is fascinating stuff, though.
I wish I had read this book years ago. I have already learned lots in one evening. Explains concepts like inflation, but perhaps more importantly psychological concepts like "money illusion" and "anchoring" extremely well.
Depressingly I have just bought a house in London. However, it has made me realise it may be time to sell my flat and diversify assets to hedge against the house (a thought I was already having, to be honest, after calculating yield vs capital appreciation vs inflation vs interest costs/expenses - I was sure I was losing money renting it out in real terms. This book appears to confirm that, although I will obviously check the maths)
As I said - no decisions yet: just soaking up info. Thanks to the chap who posted this book.
Must sleep. This is fascinating stuff, though.
I love our house by the way, it was an emotional purchase as our family home. But my flat, which was my home since I bought it in 2004, I kept for emotional decisions too, and banking on it being worth tonnes in 20 years. Reading about the concept of relative wealth has put detail to my recent uneasiness that I may have got this decision rather wrong...
I'll sleep on all of this and keep reading/researching, and start making decisions when I feel confident (and have taken more advice). Thanks again, all!
I'll sleep on all of this and keep reading/researching, and start making decisions when I feel confident (and have taken more advice). Thanks again, all!
In order to become investment literate, you need a minor grounding in macro-economics. Being able to understand the correlation between interest rate policy and asset prices is a must. Even a macro-economics for dummies book would be a start, then look at some of the FT publications.
Any advisor you see should have your interests foremost, but YOU need to understand your risk appetite and investment horizon in mind. This means looking at economics to determine a range of asset outcomes based on interactions between monetary, fiscal, policy, global events and credit (remember bonds are loans that need to be repaid,).
Never be guided by their prejudices (a good advisor shouldn’t), and historical observation of performance is not always a good indicator of future returns - a bank no longer uses historical observation to test/predict future asset performance but a range of stressed model assumptions (so by having some basic understanding of economics you can do this yourself). For example BTL is often touted as a great investment, but it carries an increasing regulatory risk particularly if current political uncertainty translates to a Labour Govt in the next few years with land taxes and controls on wealth flight. If BTL landlords become sellers what happens to property values?
Based on the asset class you are going into, always ask the question whom are the major holders to predict future price performance. In 2015 the low oil price pushed many Soverign Wealth Funds to become asset sellers rather than savers, which contributed to a significant dip in Equity values as they sold out to cover bills at home. This type of event is well covered in the FT. Devote some weekly time to reading this even if over Sunday breakfast.
Whilst many of the websites offer great motivation, you need to determine your risk profile based on your own assumptions so understanding is a must.
Oh and for very basic product information, investopedia.com is ok.
Any advisor you see should have your interests foremost, but YOU need to understand your risk appetite and investment horizon in mind. This means looking at economics to determine a range of asset outcomes based on interactions between monetary, fiscal, policy, global events and credit (remember bonds are loans that need to be repaid,).
Never be guided by their prejudices (a good advisor shouldn’t), and historical observation of performance is not always a good indicator of future returns - a bank no longer uses historical observation to test/predict future asset performance but a range of stressed model assumptions (so by having some basic understanding of economics you can do this yourself). For example BTL is often touted as a great investment, but it carries an increasing regulatory risk particularly if current political uncertainty translates to a Labour Govt in the next few years with land taxes and controls on wealth flight. If BTL landlords become sellers what happens to property values?
Based on the asset class you are going into, always ask the question whom are the major holders to predict future price performance. In 2015 the low oil price pushed many Soverign Wealth Funds to become asset sellers rather than savers, which contributed to a significant dip in Equity values as they sold out to cover bills at home. This type of event is well covered in the FT. Devote some weekly time to reading this even if over Sunday breakfast.
Whilst many of the websites offer great motivation, you need to determine your risk profile based on your own assumptions so understanding is a must.
Oh and for very basic product information, investopedia.com is ok.
jinkster said:
Very interesting thread and I can see where the OP is coming from. Why line someone else pockets when you can learn to do it yourself.
Because you don't know what you don't know. Also, (specifically for investments), the typical punter is terrible when it comes to buying/selling at the wrong times, and underperforms their chosen benchmark by a whopping margin.Edited by BanzaiMan on Friday 5th January 09:49
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