How do I become investment literate?
Discussion
Chaps, long post, but I would like some advice: really some pointers.
It has occurred to me that I am financially poorly educated. Let me tell you what I mean. I have a good education, and a good job. But I have little idea of investing, little appreciation of investment risk, and no idea how to make money work for me.
I find myself with the classic middle class problem – I earn well, as does Lady F, and together we can manage our liabilities (mortgage and things that incur expense) and pay for extra stuff. I also realise that I have been thinking of things wrongly – I thought that my house is an investment, and that my cars are assets. They are not – they are both liabilities (they incur expenses). I do have some assets (things that do/could bring income), but they are not working as well as they should.
Assets-wise I have cash, and I own a rental flat (also mortgaged). I have no real portfolio of investments – just shares in the company I work for, and a pension that I do not actively manage. I have the classic middle class problem – I am entirely dependent on my salary to live my life.
Have any of you changed this? Can it be changed? All I want at this stage is to educate myself – I don’t want to be sold ETFs or investments, or BTL opportunities. I just want to invest in educating myself: I’d like to know what I can read, what courses have worked for you, to learn about the larger investing world. I want to make a start on thinking differently – I am not just looking for the big score.
I have had real trouble finding any sort of advisor who says anything but “buy these ETFs and pay me x per cent”. I have met no-one know knows anything about using a company to shelter myself from tax (I am a highest rate PAYE earner, as is Lady F, so makes anything we earn subject to lots of tax). I have met no-one who can advise on Lady F’s FATCA dual tax problem (she’s American). Ultimately we are well-off enough to qualify for off-the-shelf advice but are not rich enough to be interesting to the more interesting wealth advisors (we have been told this up front).
This is not a complaint – we are happy and (currently) financially unstressed and very lucky when compared to many. But I want to start learning how to become financially independent, rather than just well-paid. I am 40 years old – I would like to spend the last half of my life as financially literate. I have been shocked by me and my friends – many of us work in well-paid city jobs. No one has anything other than those jobs, and associated pensions, as their game plan for later life. I have worked out that if I am going to learn, I am going to have to teach myself.
My in-laws built themselves a property portfolio of rental houses in the 1980s/1990s. That pond looks overfished/taxed these days and anyway, having more money in property than I already do looks to my untrained eye a little undiversified. I want to learn about what else is out there, and how to get involved.
I have a working knowledge of companies, P&L/Balance sheets and securities due to my job, so I am not completely virgin territory. What I do not have is any sort of idea how to make money work for me, rather than me work for money. Any educational suggestions welcome.
As a starter – what books should I buy and read?
It has occurred to me that I am financially poorly educated. Let me tell you what I mean. I have a good education, and a good job. But I have little idea of investing, little appreciation of investment risk, and no idea how to make money work for me.
I find myself with the classic middle class problem – I earn well, as does Lady F, and together we can manage our liabilities (mortgage and things that incur expense) and pay for extra stuff. I also realise that I have been thinking of things wrongly – I thought that my house is an investment, and that my cars are assets. They are not – they are both liabilities (they incur expenses). I do have some assets (things that do/could bring income), but they are not working as well as they should.
Assets-wise I have cash, and I own a rental flat (also mortgaged). I have no real portfolio of investments – just shares in the company I work for, and a pension that I do not actively manage. I have the classic middle class problem – I am entirely dependent on my salary to live my life.
Have any of you changed this? Can it be changed? All I want at this stage is to educate myself – I don’t want to be sold ETFs or investments, or BTL opportunities. I just want to invest in educating myself: I’d like to know what I can read, what courses have worked for you, to learn about the larger investing world. I want to make a start on thinking differently – I am not just looking for the big score.
I have had real trouble finding any sort of advisor who says anything but “buy these ETFs and pay me x per cent”. I have met no-one know knows anything about using a company to shelter myself from tax (I am a highest rate PAYE earner, as is Lady F, so makes anything we earn subject to lots of tax). I have met no-one who can advise on Lady F’s FATCA dual tax problem (she’s American). Ultimately we are well-off enough to qualify for off-the-shelf advice but are not rich enough to be interesting to the more interesting wealth advisors (we have been told this up front).
This is not a complaint – we are happy and (currently) financially unstressed and very lucky when compared to many. But I want to start learning how to become financially independent, rather than just well-paid. I am 40 years old – I would like to spend the last half of my life as financially literate. I have been shocked by me and my friends – many of us work in well-paid city jobs. No one has anything other than those jobs, and associated pensions, as their game plan for later life. I have worked out that if I am going to learn, I am going to have to teach myself.
My in-laws built themselves a property portfolio of rental houses in the 1980s/1990s. That pond looks overfished/taxed these days and anyway, having more money in property than I already do looks to my untrained eye a little undiversified. I want to learn about what else is out there, and how to get involved.
I have a working knowledge of companies, P&L/Balance sheets and securities due to my job, so I am not completely virgin territory. What I do not have is any sort of idea how to make money work for me, rather than me work for money. Any educational suggestions welcome.
As a starter – what books should I buy and read?
No - was it useful? I'm trawling google for best personal finance books, but I really wanted to start a thread for like-minded folk to be told stuff about financial education by people who have had some and found it useful.
Not really what are good investments, but how to start thinking about making money work. More basic than much of the stuff on this thread.
The sad result of this thread will probably mean me selling my Aston: but as it has been in storage for six months and never gets used, I'd rather use the £35-40k locked in it for something that could start bringing me some income. Rather than servicing costs.
Not really what are good investments, but how to start thinking about making money work. More basic than much of the stuff on this thread.
The sad result of this thread will probably mean me selling my Aston: but as it has been in storage for six months and never gets used, I'd rather use the £35-40k locked in it for something that could start bringing me some income. Rather than servicing costs.
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.
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.
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!
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!
On getting rid of the rental property, it's real capital appreciation is and will be in the medium term below inflation.
As it is mortgaged, I need to work out if servicing the debt costs me more than the yield after tax. As for the equity, if it is getting me less after tax than sitting in diversified income generating assets, it can't be a great investment I think?
Also, owning it and a house in the same part of London means I am hugely vulnerable to adverse change - labour government and property taxes being the obvious one.
...I think.
As it is mortgaged, I need to work out if servicing the debt costs me more than the yield after tax. As for the equity, if it is getting me less after tax than sitting in diversified income generating assets, it can't be a great investment I think?
Also, owning it and a house in the same part of London means I am hugely vulnerable to adverse change - labour government and property taxes being the obvious one.
...I think.
Thanks all - I am currently researching investment ISAs. I have not used any of my 2017-18 allowance and suspect that doing so would be A Good Idea.
(I opened an HL Vantage a couple of years back which I have never really used, but they may not be the best game in town anymore. Anyone have any views? I basically want to diversify fully, so I need to read who offers the best of worldwide investments in their ISAs vs what fees they charge).
I have no cash to put into an ISA this year, as I have spent earnings and bonus on buying a house and renovating it. All other cash I hold is held in cash ISAs (which I will transfer into investment ISAs when I get my act together).
Next year (2018-19), I will have my full ISA allowance dealt with by a SAYE share scheme maturing in May. The remainder of those shares will eat into my 2018-19 CGT allowance.
So to my Aston - thanks for the commiserations: it’s rather that I think some of the cash tied up in it would be better put in this year's ISA allowance, so it needs selling soon to do this. Also, as we're planning on kids, I'll need something practical. I figured I could use the remaining money from the sale on a Mk1 C63 AMG wagon. I haven’t gone completely sensible yet…
(I opened an HL Vantage a couple of years back which I have never really used, but they may not be the best game in town anymore. Anyone have any views? I basically want to diversify fully, so I need to read who offers the best of worldwide investments in their ISAs vs what fees they charge).
I have no cash to put into an ISA this year, as I have spent earnings and bonus on buying a house and renovating it. All other cash I hold is held in cash ISAs (which I will transfer into investment ISAs when I get my act together).
Next year (2018-19), I will have my full ISA allowance dealt with by a SAYE share scheme maturing in May. The remainder of those shares will eat into my 2018-19 CGT allowance.
So to my Aston - thanks for the commiserations: it’s rather that I think some of the cash tied up in it would be better put in this year's ISA allowance, so it needs selling soon to do this. Also, as we're planning on kids, I'll need something practical. I figured I could use the remaining money from the sale on a Mk1 C63 AMG wagon. I haven’t gone completely sensible yet…
I will definitely hold one of those, but I don't really like it for everything. Reading his site, I get the principal of being 3.5% in Apple if tracking the US market. But as AIG and others have taught us, I don't fancy being overweight in Fortune 10 companies. So I need something a bit smarter - that tracks everything but also counteracts the weightings given to large cap companies, and takes a bit more risk in smallcap/emerging.
I also instinctively think that as equities are overvalued and developed economies are a bit stagnant, I should be looking at some other asset classes, especially stuff that is less vulnerable to QE/inflation?
Hell, I don't know. That's what this thread is for. I need more books to read - keep them coming!
I also instinctively think that as equities are overvalued and developed economies are a bit stagnant, I should be looking at some other asset classes, especially stuff that is less vulnerable to QE/inflation?
Hell, I don't know. That's what this thread is for. I need more books to read - keep them coming!
Thanks chaps - I'm deep in the reading/research phase now, as well as trying to pick the best investment ISA: any experiences on the latter would be good. HL seems user-friendly with a wide range of investments, but fees are (relatively) high.
Gibbon - your reasoning is like mine and having a London flat (sadly not old person suitable - it's floors 3 and 4 of a Victorian house with no lift) seems logical for all the reasons you state. I need to work on paying off the mortgage on it using the rent I think. Trouble is, tax breaks are disappearing soon...
Gibbon - your reasoning is like mine and having a London flat (sadly not old person suitable - it's floors 3 and 4 of a Victorian house with no lift) seems logical for all the reasons you state. I need to work on paying off the mortgage on it using the rent I think. Trouble is, tax breaks are disappearing soon...
gibbon said:
diametric123 said:
Believe me, I am no expert - buts it’s to do with the % return after fees and therefore amount of wedge you have to put down
Put simply, you can make 6-8% net on property versus ~1-2% on some equity thing that I don’t really understand...
Alternatively you could make 4% on property, have to actually occasionally do something for said yield or you could buy BP shares at periodic oil lows which div 6.5% and bounce back 10/20/30/40% with oil whilst doing sweet FA to earn your yield all wrapped up in a tax free pension/ISA etc. I have both these examples, so hopefully am not overly biased.Put simply, you can make 6-8% net on property versus ~1-2% on some equity thing that I don’t really understand...
- past performance is not guarantee of future returns you may get back less than you put in blah blah blah.
The initial advantage of property for me was the ability to take cash income.
I could well be wrong - and buying a load of student houses in Birmingham through a limited company may well be the way to go. But that still means that I would have all my wealth undiversified e.g. in UK property. Which, given world and UK events, makes me nervous - one country, one type of asset.
Diversification aside, a massive incentive on property was being able to use small amounts of my cash and plenty of leverage to make returns on the whole value, and long term make a capital gain. The downside is illiquidity and maintenance requirements/costs.
But take tax breaks on leverage away, take my income tax band, factor in rising interest rates (long term), and real inflation meaning that capital growth could actually be a myth mid-term as house prices normalise to income/spending power, and it doesn't look like a direction I want to go in.
My tax band alone means that maxing out ISA's and avoiding taxes is more compelling than many other things, just because I pay away 45% on anything I make anywhere outside an ISA. Effectively, my ISA income only has to be half as effective as anything else to be worth doing - and that's in income terms. Capital gains-wise, same thing on CGT, right?
I can only put £20k a year into ISAs (especially as my wife is American so cannot use ISAs). But it seems the smartest place for the first £20k, regardless.
I appreciate that only having ownership in another business can genuinely cover my expenditures with regular cash income, and maybe opportunities will arise as the economy worsens/interest rates go up etc. But it seems to me, for the next few years, tax shelter and diversification away from the UK seems logical for new investors?
My view obviously does not apply to folk who have a healthy and averagely leveraged portfolio of property bringing them income. But as a new investor, it seems the wrong time to go in.
Still thinking over here, rather than doing, but very much appreciating all the viewpoints and experience on this thread: it's really proving to be an interesting one (with some useful resources posted - thanks again).
Edited by Harry Flashman on Monday 22 January 11:44
Phooey said:
Since you liked the book "How to Own the World".. did you know Andrew Craig / Plain English Finance have recently launched their own fund - The VT PEF Global Multi-Asset Fund?
https://plainenglishfinance.co.uk/funds/
Anyone any views on the above fund^^?
I saw this - I am wondering about it myself. Haven't really looked into it in any detail yet.https://plainenglishfinance.co.uk/funds/
Anyone any views on the above fund^^?
This thread is so, so useful: thanks so much to everyone contributing. Given me a lot of stuff to research.
I think I am going to keep my old HL account, simply as it means I get some analysis. I have yet to fillup this year's ISA allowance (a massive house renovation put paid to that!) but will probably put in whatever I can before April, just to wrap whatever I can from tax.
Next year, in May, I receive a bunch of SAYE shares. I am trying to find an ISA provider to put these into - ultimately I would like to trade out of some of them every month and reinvest. I have contacted Vanguard and Moneyfarm, as at this stage, I think I would like low cost funds. Moneyfarm is a bit more actively managed than Lifestrategy, it seems. Still deciding between the two. I am a bit wary of going in now as equities are so pricey, but to not do so means I am attempting to time the market - and could end up doing so for years.
Anyone transferred SAYE shares to an ISA? Who did you use?
I think I am going to keep my old HL account, simply as it means I get some analysis. I have yet to fillup this year's ISA allowance (a massive house renovation put paid to that!) but will probably put in whatever I can before April, just to wrap whatever I can from tax.
Next year, in May, I receive a bunch of SAYE shares. I am trying to find an ISA provider to put these into - ultimately I would like to trade out of some of them every month and reinvest. I have contacted Vanguard and Moneyfarm, as at this stage, I think I would like low cost funds. Moneyfarm is a bit more actively managed than Lifestrategy, it seems. Still deciding between the two. I am a bit wary of going in now as equities are so pricey, but to not do so means I am attempting to time the market - and could end up doing so for years.
Anyone transferred SAYE shares to an ISA? Who did you use?
I think direct transfer into an ISA within 90 days means no tax. Realising the cash means that I'll be liable for CGT I think:
https://www.gov.uk/tax-employee-share-schemes/tran...
https://www.gov.uk/tax-employee-share-schemes/tran...
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