0:00

Hi folks and welcome to the

0:02

meaningful money podcast. This is season

0:04

30 episode 2. Yeah,

0:12

welcome back to the show where we hope

0:15

to equip and empower you to make serious

0:17

progress with your personal finances and achieve all

0:19

your goals Joining me as usual is the

0:21

one and only mr. Roger weeks. All right,

0:23

Raj? Yeah, fine. Thanks Pete. I'm glad to

0:25

be back and especially with this new you

0:27

can season that we kicked off last week

0:29

and actually which was very well received by

0:31

listeners It was a great starting point for

0:33

what we honestly think will be a season

0:35

which will give everyone several nuggets to help

0:37

them along their financials a Yep. So that

0:39

they are going to be continuing the theme

0:42

by getting practical to show you that you

0:44

can learn how to invest. Yeah, you

0:46

really can. People think we're investing. That's

0:48

complicated and difficult and very very important,

0:50

but actually anybody can do it and

0:52

it's such an important subject. So looking

0:54

forward to getting into it. Yeah, me

0:56

too. And as usual, after the main

0:58

part of the show, we'll read one

1:00

of the reviews sent in by a

1:02

listener. and you know what we're going

1:04

to be covered next time. Yeah, absolutely.

1:06

Remember notes and links of anything that

1:08

we talk about today are at the

1:10

show notes, which is the one link

1:12

that you need to remember. meaningful money

1:14

dot TV slash YC2 for you can.

1:16

Episode 2. Right, let's get started and

1:19

have a look at everything you need

1:21

to know about learning to invest. We

1:23

should probably start by... explaining what investing

1:25

is. The idea is that in the

1:27

no section will kind of give you

1:30

the context and particularly sometimes some of

1:32

the reasons why people think they can't

1:34

do something. The limiting beliefs and then

1:36

obviously in the do section will get

1:39

really practical but let's start with talking

1:41

about what investing is and I tend to use

1:43

the same definition. It's funny you know

1:45

you do this for long enough you end up

1:48

you know repeating the same stuff but essentially you

1:50

learn to kind of distill. potentially

1:52

quite complicated subjects

1:54

into simple one-liners

1:56

and really investing is swapping

1:59

your money. money in the

2:01

bank, for assets that grow in value,

2:03

produce an income or ideally both. Say

2:05

that again. Swapping your money for assets

2:07

that grow in value. produce an income

2:10

or ideally both. That makes sense. Yeah,

2:12

it does. Yeah, everything we do distills

2:14

down to the most simplest line really.

2:16

But the important thing is that investing

2:18

is not trading. You're not having to

2:21

look at the markets and do all

2:23

this all the time. It's not trading.

2:25

It's investing. It's a get-rich slowly scheme

2:27

ultimately. It really is. I mean, you

2:29

know, in the Instagram world, I do

2:32

anyway. Bombarded with adverts and, you know,

2:34

people saying. you know I made 30

2:36

grand last month from forex trading and

2:38

here is my 5,000 pound course and

2:40

I'll teach you how to do it

2:43

yourself. I would say that with a

2:45

slight irony of somebody yourselves courses. So

2:47

yeah I'm aware of the hypocrisy there

2:49

but you know plenty of people will

2:52

promise you that you can get rich

2:54

quickly but investing by definition is a

2:56

slow burn. money is best made slowly.

2:58

It's certainly less interesting and exciting that

3:00

way, but it's much more predictable. Yeah,

3:03

but if it was very easy to

3:05

earn in a big lump, everyone would

3:07

do it. Yeah, we'd all be billionaires

3:09

and money would have no meaning. No,

3:11

exactly. So getting rich slowly, really we

3:14

tend to think of investing as a

3:16

multi-decade endeavor. Really you are putting your

3:18

money to work. The reason why we

3:20

do it is so that it can

3:22

grow, so that it can buy us

3:25

the same amount or more stuff later

3:27

on. Yeah, because the biggest bug, but

3:29

you've got to try and beat this

3:31

inflation. So you need the money you

3:33

put aside to be worth more tomorrow

3:36

than it is today. But when I

3:38

say tomorrow, we use in the future.

3:40

Exactly, metaphorical tomorrow. Because I think particularly

3:42

when we're... working and earning we tend

3:44

not to think about inflation too much.

3:47

It's been a hot topic obviously the

3:49

last two or three years as we've

3:51

seen double-digit inflation for the first time

3:53

since the 70s early 80s and you

3:55

know it's definitely cost of living is

3:58

the phrase that's sort of got into

4:00

the sort of national consciousness global consciousness

4:02

really. But inflation is simply the the

4:04

fact that your one pound will buy

4:06

you less stuff in ten years than

4:09

it does today. simply because a pound

4:11

becomes worth less. Yeah, I remember when

4:13

you could, when petrol, when petrol, I

4:15

got to take my mind back a

4:17

lot of years now. Remember when petrol

4:20

hit one pound a gallon. Now on

4:22

the basis that a gallon is something

4:24

like five and a half litres. Yeah.

4:26

Bound a gallon. Bound a gallon. So

4:29

how kids that today, they don't believe

4:31

you. Yeah. So it says this thing,

4:33

you know, things will be more expensive

4:35

in the future. So that loaf of

4:37

bread you want to buy today, if

4:40

you're putting money aside to buy it

4:42

tomorrow, decades time, you're going to need

4:44

it, decades time, you're going to need

4:46

it to grow ahead of inflation, so

4:48

you can afford that loaf, perhaps for

4:51

some butter to go with it, I

4:53

don't know. Yeah, maybe. So that's why

4:55

we invest. So that's why we invest.

4:57

We have we invest. We have to

4:59

grow our money. We have to grow

5:02

our money. We have to grow our

5:04

money. We have to grow our money.

5:06

We have. We have to grow our

5:08

money. We have. We have. We have

5:10

to grow our money. We have. We

5:13

have. We have. We have. We have.

5:15

We have to grow our money. We

5:17

have. We have. We have. We have.

5:19

We have. We have. We have Really,

5:21

there are only three uses of money,

5:24

at least in my not so humble

5:26

opinion. They are to spend now on

5:28

living, enjoying life, whatever, spend now. We

5:30

either invest it to spend later, or

5:32

we give it away. Three things. Spend,

5:35

invest, or give. And investing is, we

5:37

talk about a lot here, obviously, because

5:39

it's about storing up wealth for ourselves

5:41

to use in the future. Okay. So

5:43

why then... Do people think that investing

5:46

is hard? Why is it such a

5:48

limiting belief for people? We talked a

5:50

lot about limiting beliefs last week. We

5:52

covered a lot of ground last week,

5:55

things like the messages we get. Maybe

5:57

as we're growing up, so if you

5:59

happen to live with a parent who

6:01

maybe had dabbled in the stock market

6:03

and they haven't gone well, maybe you

6:06

heard messages like, well, shares, everybody loses

6:08

money in the stock market, the only

6:10

ones who win are the bankers in

6:12

London. And it's a gamble, you're gambling

6:14

your money, you know, it's very complicated,

6:17

it's, you know, smoke mirrors, you're not

6:19

quite sure what you're buying what you

6:21

buy in and that sort of stuff,

6:23

you buy. It's only there to pay

6:25

financial advisors, you know. Yeah. Maybe you

6:28

think you're not good enough at maths

6:30

and you have to be, you know,

6:32

to invest, you know, spoiler alert, you

6:34

don't have to be. Maybe you have

6:36

to, you know, have an economics degree

6:39

or something like that. You don't need

6:41

any of those things. We can show

6:43

you how to invest simply and effectively

6:45

and the way that you can. a

6:47

repeat month in month out and build

6:50

wealth consistently. So there are tons of

6:52

reasons, listen to last week's, why we

6:54

might have limiting beliefs, perceived complexity is

6:56

definitely one though. So it might just

6:58

be like, I mean, first of all,

7:01

invest, how do I even do that?

7:03

I kind of just about understand my

7:05

bank account. Where do I even start

7:07

when it comes to investing for the

7:09

future? Yeah. We don't teach this stuff

7:12

in school. No. And it used to

7:14

be difficult to start. Yeah, but it's

7:16

so easy so much easier these days

7:18

with platforms and stuff like that. So

7:20

it's not as complex as people perceive

7:23

it to be. Yeah. And people think

7:25

they have to be an expert on

7:27

this or have an edge or even

7:29

a pinstripe suit. I need to be

7:32

in the industry in order to be

7:34

able to do this. Otherwise I'll be

7:36

floating around doing nothing that I understand.

7:38

Yeah, sure. Some people may have tried

7:40

in the past and you know, made

7:43

losses or known somebody who's done that

7:45

and you know the sort of fear

7:47

of choosing badly. holds you back, it

7:49

might make you think that this is

7:51

really difficult and can't possibly get into

7:54

it. Well again, that's not the case.

7:56

that we're going to show you how

7:58

to do this as simply as we

8:00

know how. So it's a limiting belief

8:02

that investing is difficult and impenetrable, but

8:05

you can overcome that belief and we're

8:07

going to help you. So let's give

8:09

you then what you really need to

8:11

know. And this is hard. It's hard

8:13

to distill it because there is tons

8:16

of stuff you could know. But you

8:18

don't need to know a lot. Or

8:20

there's a lot that you don't need

8:22

to know right? So remember the definition

8:24

You swap your money for assets. Now

8:27

what? What is an asset? Right. Would

8:29

you want to answer that? I could

8:31

do an asset You could do an

8:33

asset you could you hear the talk

8:35

about equities? We're talking about talking stocks

8:38

and shares. So this is part ownership

8:40

in a company. Yeah, let's deal with

8:42

equities first. Yeah. Okay partnership ownership in

8:44

a company and what does that ownership

8:46

of a company? company's AGM, which you

8:49

probably never ever go around to doing,

8:51

but what it enables to do is

8:53

to benefit from the profitability of the

8:55

company. So as the company makes profits,

8:57

it issues dividends to clients, to owners.

9:00

Share the profits, you own a share

9:02

of the profits, you own a share

9:04

in voter phone, and voter phone makes

9:06

a profit, you know, the board may

9:09

propose a dividend, and that means that

9:11

everybody won shares in voter phone will

9:13

get a tiny slice of the profits

9:15

of the profits of the company. Some

9:17

money back, it's an income, essentially. But

9:20

also, you might own... a hundred quid

9:22

with the shares in Vodafone and if

9:24

Vodafone are doing really well then those

9:26

shares will be in demand and the

9:28

value of them will rise so suddenly

9:31

your hundred quid might be worth 120.

9:33

So the difference you had was the

9:35

income yeah suddenly the share is worth

9:37

more that's capital growth remember the definition

9:39

swapping your money for assets that grow

9:42

in value produce an income or ideally

9:44

both shares as a general rule will

9:46

do both. Some shares don't produce an

9:48

produce a very high income. So there's

9:50

new ones here, but generally shares will

9:53

grow in value over time. They can

9:55

fall in value for long. We should

9:57

probably say that here. But they generally

9:59

will grow in value, certainly the way

10:01

we're going to suggest that you invest

10:04

in them over time. they will grow,

10:06

they will produce an income, and both,

10:08

so that's great, right? So the definition

10:10

of a great asset class. The other

10:12

main asset is something called a bond.

10:15

You could be careful. There are lots

10:17

of things called bonds, that's the thing.

10:19

They have lots of other names, fixed

10:21

interest or fixed income securities. That's the

10:23

sort of phrase that's going to strike

10:26

fear into anybody, isn't it? You need

10:28

to address some fixed income securities. The

10:30

hell does that mean? And what's a

10:32

security? So it's a... So it effectively

10:34

listeners in, you probably know this already,

10:37

whereas a bond in the investment element

10:39

of discussing this would be a loan.

10:41

Normally, the naive, a big company or

10:43

a government. So you effectively lend money

10:46

to these governments or big companies in

10:48

return for an interest return, because you

10:50

lent them money. Yep. And the promise

10:52

of a repayment at some point down

10:54

the line. Yeah. So you lend Vodafone,

10:57

who wants to open 50 new stores,

10:59

you lend Vodafone a hundred pounds of

11:01

your money and they say cool, thank

11:03

you very much, we're going to use

11:05

that towards building these new premises and

11:08

opening new shops and we're going to

11:10

give you five quid a year and

11:12

we're going to pay that hundred quid

11:14

back in 2035. Yeah. Essentially that's what

11:16

a bond is. Now if it was

11:19

that easy, it'd be that straightforward, but...

11:21

These things are very often bought by

11:23

people or institutions who want to buy

11:25

the income. There's a reason why these

11:27

are called fixed income securities. The income

11:30

is a known quantity. You know that

11:32

that voter phone bond is going to

11:34

give you five quid a year. So

11:36

if you're a pension scheme or something

11:38

similar like that and you want to

11:41

lock in an income, you can buy

11:43

that bond off me and what you've,

11:45

you know, I've had my money back

11:47

or... Maybe not all of it, maybe

11:49

a little bit more than the hundred

11:52

pounds I invested. These things are invested

11:54

on the stock market. I lose the

11:56

five pound income because that's gone to

11:58

the new buyer, but I've had my

12:00

money back in some form. So they

12:03

are different from equities instead of owning

12:05

a slice of a company. instead now

12:07

you have loaned money to a company

12:09

or a government as Rosh says. And

12:11

the important thing with this is the

12:14

capital value isn't subject to such a

12:16

great extent on how good the company

12:18

is. The industry is based upon that

12:20

but this is more subject to the

12:23

vagaries of interest rate movements. So it's

12:25

far more stable, mostly if I say

12:27

that. It's an unusual statement. Generally. And

12:29

so we tend to use bonds as...

12:31

Think of it as the water in

12:34

a glass of squash. Oh, I think

12:36

of it as sort of dilution. So

12:38

if you were to have a glass

12:40

of squash and you fill up the

12:42

whole thing with the cordial, that's gonna

12:45

be really strong, right? It's gonna have

12:47

a kick to it. Well, if you

12:49

have a portfolio with just equities, shares

12:51

in it, it's gonna have a kick.

12:53

It will be very volatile. It will

12:56

go up and down in value. Bonds

12:58

are a kind of a dilution. you

13:00

may find a level of up and

13:02

downiness, volatility in your portfolio that you're

13:04

happy with. Excuse me. Now, the third

13:07

main asset class is property, and pretty

13:09

much everybody listened to this, we'll understand

13:11

that. Equities and bonds are a little

13:13

bit more sort of intangible somehow. But

13:15

the great thing about property is that

13:18

you can walk up to it and

13:20

you can put your hands on it

13:22

and you can feel it around you.

13:24

It's a physical thing for the most

13:26

part, so you can own a house.

13:29

you can own an office building, whatever.

13:31

But the downside of property, there's a

13:33

few downsides. It's a brilliant asset class,

13:35

there's no doubt about that. But it

13:37

is illiquid, which means it's difficult to

13:40

sell. It takes time to sell, and

13:42

sometimes, you know, lots of supply and

13:44

demand. The property is generally very inefficient

13:46

when it comes to tax as well,

13:49

whereas equities and bonds, we can wrap

13:51

those in wrappers, which we're going to

13:53

talk about later, which can make it

13:55

more tax efficient. Really, those are the

13:57

three asset classes that matter. There are

14:00

subsets to those. there are alternatives but

14:02

shares bonds and property for the vast

14:04

majority of us that's all we need

14:06

to think about when we're talking about

14:08

investing okay I'm gonna pause a

14:11

little bit and claim my throat this

14:13

a couple of episodes ago well I'll

14:15

talk about the up and downiness yeah

14:17

I'm still gonna need to pause because

14:19

my cough will come over your mind

14:22

as well two seconds there you go

14:24

that's better good glad to go that

14:26

was unpleasant you didn't want to hear

14:28

that so Those are the asset classes, volatility

14:31

is a word of mentioned a little

14:33

bit. Yeah, this is the up and

14:35

downiness of the way the way your

14:37

money works. Effectually, it's a

14:40

price of entry. You've got to get

14:42

used to it. Exactly, it's the

14:44

thing that worries a lot of people,

14:46

but actually you should make friends with

14:48

it. You know, it's one of those

14:51

things that if you want the benefits

14:53

of the long-term above inflation growth of

14:55

your money, you've got to come to

14:58

live with. Yeah. there are ways around

15:00

perhaps trying to mitigate some of that.

15:02

Yeah, we can do that. Based

15:04

upon what Pete said just now

15:07

about the bonds and equities, the

15:09

different proportions you have in each

15:11

will affect the volatility. So the

15:14

more bonds you got, the less

15:16

volatility and vice versa. Yeah, as a

15:18

rule. So volatility is not the same

15:20

as risk. Right? investment industry

15:23

talks about risk a lot and

15:25

there's very sort of risk warnings

15:27

that will be plastered all over

15:29

anything you read about investing and

15:31

that's good that's to protect the

15:33

innocent really and those who don't

15:35

really understand this stuff but volatility

15:38

the fact that a portfolio will

15:40

go both up and down on

15:42

its way towards to a generally

15:44

upward trajectory given enough time that

15:46

you've just got to accept you

15:48

can't have as Rod said that

15:50

above inflation growth without accepting the

15:52

up and downiness. If you could, everybody'd

15:54

do it. It'd be like a magic

15:56

bullet, right? If you had a one-way

15:58

only investment that all. ever went up

16:00

well everybody would have it and and

16:03

the and the volatility you're able to

16:05

expect on your portfolio depends on a

16:07

lot of other variables outside as well

16:09

stuff you can't control so so somebody

16:12

might be willing to put a hundred

16:14

pounds in and be willing to have

16:16

it worth 50 quith the next day

16:18

knowing that ultimately it'll be worth 150

16:21

some point yeah somebody might have been

16:23

except a 50% reduction then we go

16:25

actually I feel comfortable with 25% reduction

16:27

and therefore you need to choose a

16:29

fund that has that volatility. We'll talk

16:32

about that in a minute. Yeah, exactly.

16:34

So you can, to some extent, kind

16:36

of craft a portfolio that a portfolio

16:38

is just a mix of investments, right?

16:41

You can kind of build something which

16:43

should enable you to sleep at night,

16:45

which is really important. So there's a

16:47

couple of ways you can kind of...

16:49

mitigate volatility. So one is, as we've

16:52

already mentioned, that you can kind of

16:54

spread your money a bit, particularly between

16:56

equities and bonds, and there are subsets

16:58

within those, but for the purposes of

17:01

today, you can kind of dilute your

17:03

equities, which are generally quite volatile, with

17:05

bonds, and it will dilute the volatility

17:07

a little bit. One other way you

17:10

can almost benefit from volatility, something called

17:12

pound cost averaging, something called pound cost

17:14

averaging, something called pound cost averaging, something

17:16

called pound. If you think about it,

17:18

if you have a hundred pounds per

17:21

month to invest, well you put a

17:23

hundred in this month and let's just

17:25

say, let's go quite sort of over

17:27

the top figures, let's say you buy

17:30

some shares and there are a pound

17:32

each. So you've got a hundred pound

17:34

to invest, shares are a pound each,

17:36

you buy, I can hear you talking

17:38

to a hundred shares, a hundred shares,

17:41

right, you buy a hundred shares. Next

17:43

month you come to invest your 100

17:45

pounds and the markets have tanked. And

17:47

instead of your shares being worth a

17:50

pound each, they're only worth 50 pence

17:52

each. So you've lost in inverted commerce,

17:54

you know, you look at your statement,

17:56

and it's only worth 50 quid, you

17:59

invested 100 pounds. All right? So that

18:01

doesn't. feel very good, but of course

18:03

you've still got 100 pounds to invest,

18:05

but now these shares are only 50

18:07

P each. So this month you buy

18:10

200 of them. So you've kind of

18:12

averaged out the fluctuating volatile share price

18:14

by investing two months in a row.

18:16

Well you do that over 20, 30

18:19

years and you will benefit from market

18:21

falls because the shares are on sale.

18:23

effectively. And using your example, Pete, if

18:25

the following month, the price goes up

18:27

to a pound again, your first portfolio

18:30

has got back to a hundred quid.

18:32

The second portfolio has gone from a

18:34

hundred to two hundred. So now you've

18:36

got three hundred pounds for a two-pound

18:39

investment. For a two-pound investment, which has

18:41

only gone back to where it was

18:43

at the very beginning. Yeah, exactly. In

18:45

price terms. Yeah, that's right. So it's

18:48

a way of kind of averaging out

18:50

volatility over time. pound cost averaging and

18:52

just keeping on investing and buying every

18:54

single month is a really great way

18:56

of kind of mitigating the volatility over

18:59

time. And the other main way is

19:01

something that you don't actually do, it's

19:03

almost that you don't do, and that's

19:05

basically you just hold your nerve for

19:08

the long term. So instead of sort

19:10

of ducking in and out, selling when

19:12

markets are bad or you know. Usually

19:14

people sell when things are bad and

19:16

buy one thing. Which is the opposite

19:19

of what you should do. You should

19:21

buy a low-sell high if you're going

19:23

to do it at all. But basically,

19:25

time is a brilliant way of reducing

19:28

the impact of volatility. I could show

19:30

you any stock market graph for the

19:32

last 100 years. and there will have

19:34

been very short term periods where things

19:37

were grim, where people might have lost

19:39

half their money, maybe even three quarters

19:41

that lost half of the value of

19:43

their money. But if you zoom out

19:45

and instead of looking at that one

19:48

year period, you're looking at a 20

19:50

year period, that hideous time. is nothing

19:52

more than a blip. No. And what

19:54

you'll also find is that during the

19:57

good years you'll make a decent bit

19:59

of profit and you'll have a blip

20:01

and it'll go down, but actually you're

20:03

eating into what may be just your

20:05

profit. So your capital that you're usually

20:08

put in may still be there in

20:10

spades. Just so you haven't got as

20:12

much profit as you had, but you've

20:14

not made that profit to sell it

20:17

anyway. Yeah, key point. And likewise you

20:19

haven't made a loss until you sell.

20:21

change your assets back into cash that

20:23

you can spend. And so volatility we

20:26

need to get comfortable with, we need

20:28

to understand that markets and investments rise

20:30

and for, it's just the nature of

20:32

the thing, but we can actually harness

20:34

that volatility and mitigate it to the

20:37

degree that we want to. When it

20:39

comes practically to investing money, there are

20:41

kind of three levels you need to

20:43

think about, and this is the practical

20:46

stuff here, right? So we could take

20:48

it to four levels, but I'm going

20:50

to keep it at three. platform would

20:52

be the first level. That is kind

20:55

of just like the website, the admin

20:57

system that you use, right? You've got

20:59

to, you know, you might think, where

21:01

on earth do I start investing? Well,

21:03

the answer is on one of the

21:06

many great investing platforms that are available

21:08

today. It's never been easier, as Roger

21:10

said earlier on. You know, you remember

21:12

the days when there were share certificates

21:15

in the bank. Yeah, in tins. You

21:17

used to have the tins of the

21:19

share of stuff. You used to take

21:21

them out and sign a transfer form

21:23

and post them off and stuff. I'd

21:26

pitch you like in a dusty, like

21:28

wood paneled room and it's a bit

21:30

of writing with a quill. Not quite

21:32

like that. But yeah, something like that.

21:35

I mean, we had customers who had

21:37

shares in St. Mark's or Spencer cable

21:39

and Spencer's or cable cable and wireless

21:41

or cable and wireless or whatever. And

21:44

they wanted to sell some cable and

21:46

wireless or cable and wireless or whatever.

21:48

So we'd phone up a stock broker

21:50

and say we've got a customer, I've

21:52

got a share stuff here in front

21:55

of me with a stock transfer form

21:57

selling 200 of these thousand shares. Okay.

21:59

And they strike a price and the

22:01

customer say yes or no. And then

22:04

we send this transfer form off with

22:06

the certificate to the registrars. The registrars

22:08

would... transfer the 200 shares to the

22:10

new owner and send back a certificate

22:12

for the 800, which we then put

22:15

back in the save again for the

22:17

next time, you know. And then a

22:19

tiny team comes in and asks about

22:21

a turkey for the script. But the

22:24

thing is this is not that long

22:26

ago, you're not that old, honestly. And

22:28

now, you know, it's never been easier.

22:30

We've got incredible online investment platforms that

22:33

make it easy to open an account

22:35

basically in seconds. and begin investing like

22:37

the multi-billionaires. So platform is just the

22:39

admin system, it's the website really that

22:41

allows you to invest. On those websites

22:44

you can open different kinds of accounts.

22:46

Now this is a UK podcast so

22:48

we're generally talking UK for terms. And

22:50

there are different kinds of accounts, many

22:53

of which you'll have heard of, so

22:55

most people have understand what a pension

22:57

is, or at least have heard of

22:59

them, and a lifetime ISA. Those are

23:01

the only three accounts really that matter

23:04

to most ordinary people. There are others.

23:06

And so you can open an account

23:08

on a platform and then choose what

23:10

kind of account or wrapper you want

23:13

your money to go into. Pension, lifetime

23:15

ISA. That's level two. And then level

23:17

three is the fund. So if the

23:19

account is like the box. The fund

23:22

is what's inside the box and it's

23:24

the fund that's going to make you

23:26

the money ultimately. And this is the

23:28

bit that people worry about. Because it's

23:30

so easy to account and the wrapper,

23:33

they understand an icier. Yeah, yeah. But

23:35

there's thousands of funds available. Yeah, that's

23:37

the worry. It's always very complex, I

23:39

couldn't possibly do that. And lots of

23:42

different types of funds as well. And

23:44

so, you know, it is understandable why

23:46

people might freak out because they look

23:48

at terms like, like oike. which is

23:50

not a scruffy child. It's OEIC, open-ended

23:53

investment company. Or it's one option. Or

23:55

an ETF, is an exchange traded fund?

23:57

Or a unit trust. Or an investment

23:59

trust, which sounds like a unit trust.

24:02

But it's built differently. Completely different. So

24:04

these things are dead. different, but they

24:06

all are there to do the same

24:08

thing, which is to pool your money

24:11

with that of other investors. Don't worry.

24:13

You always know how many shares you've

24:15

got. There's the strictest laws in the

24:17

world about making sure that your money

24:19

is always your money and ring fence

24:22

from other people's. But OX ETFs, these

24:24

funds will pool your money with that

24:26

of thousands of other investors. And with

24:28

that scale... comes various economies. So the

24:31

money can be spread more widely, you

24:33

can buy more stuff because if you've

24:35

only got a hundred pounds to invest,

24:37

you're not going to buy more than

24:39

a couple of shares. And the cost

24:42

of trading that that small amount with

24:44

the stock broker is really expensive. Exactly

24:46

on economical. Yeah, so if your money

24:48

is in with somebody else's and they're

24:51

investing a hundred thousand pounds, yeah. The

24:53

cost of that trade is far less

24:55

per person than it would be. some

24:57

of these funds will have scale where

25:00

you know your hundred pounds is joined

25:02

and with everybody else's it's five billion

25:04

pounds vast sums but that's all these

25:06

different kinds of funds do they're just

25:08

they're called pooled investments so you pull

25:11

your money with all these other people

25:13

and you pay a manager usually a

25:15

fund manager to make decisions on that

25:17

money going to that a little bit

25:20

more in a bit But don't worry

25:22

about whether it's an oraker or ETF,

25:24

we're going to suggest you stick to

25:26

those two as a general rule. But

25:28

if you see unit trust or investment

25:31

trust, it's just all the same stuff.

25:33

They're just different kinds of funds. That's

25:35

all. But then people worry about what

25:37

shares. What bonds do I need in

25:40

those ETFs and oics and stuff like

25:42

that? It's like, ooh. Pink's mentioned Vodafone

25:44

twice. That's a recommendation there. Vodafone, no

25:46

great. But other telecom companies are available

25:49

there. But there's no need to choose

25:51

which individual share. I remember back of

25:53

the day when I had a quill

25:55

pen with a candle on my death.

25:57

And people coming in and reading the

26:00

back of the pink Financial Times. Yeah,

26:02

all the shares in the back. Which

26:04

one of these are going to choose?

26:06

Oh, I quite fancy British Telek. or

26:09

a mining company, they'll be doing well.

26:11

So you want to choose an individual,

26:13

but that individual company may be good

26:15

or bad. Yeah, and you really would

26:18

have to know your stuff. Yeah, you'd

26:20

have to have a pinstripe suit to

26:22

know that. And even then, you probably

26:24

wouldn't know. So you don't need to

26:26

have to know which individual share to

26:29

buy. What would do is you buy

26:31

everything. That's certainly the way we recommend

26:33

them. You'd either have, a lot of

26:35

these funds have managers have managers who

26:38

are making choices, Our general suggestion is

26:40

that you instead buy what are called

26:42

passively managed funds or trackers. And so

26:44

all those kind of funds do is

26:46

they don't choose which shares to buy,

26:49

they buy them all. So if you

26:51

were to buy for instance a UK

26:53

tracker fund, that fund would buy shares

26:55

in all UK listed companies or nearly

26:58

all. And the advantages then is because

27:00

you're spreading your risk around lots of

27:02

companies. That one mining company you may

27:04

have bought may not be a good

27:07

one and would go down and your

27:09

money is at risk. Well if you've

27:11

bought them all, some would be going.

27:13

Some would go down and some would

27:15

go up. So you'll get the average

27:18

of the market. The point is you

27:20

don't have to choose because the fund

27:22

does that for you. You might have

27:24

to choose a fund. I'm going to

27:27

talk to you about that in a

27:29

minute. So, but we think index tracking,

27:31

passive investing is kind of the baseline

27:33

for most people, particularly if you're getting

27:35

started. A couple of things just as

27:38

kind of remind us at the end

27:40

of this no section really. When it

27:42

comes to investing, there is a million

27:44

things that you can't do anything about.

27:47

You can't control what central banks want

27:49

to do with monetary policy. You can't

27:51

control who the new incoming president of

27:53

the United States is or, you know...

27:56

the person controlling the new incoming president

27:58

of the United States. or you know

28:00

what interest rates are going to do

28:02

or you know another pandemic you can't

28:04

control any of these things so we

28:07

can only focus on things that we

28:09

can control and that are those are

28:11

costs and tax those are the things

28:13

that we can actively control costs and

28:16

tax and then which funds we choose

28:18

basically yeah exactly and and ultimately Our

28:20

guiding principle on everything we talk about

28:23

on the podcast is as simple as

28:25

best. We talk about this being slow

28:27

and steady and boring, that's the stuff

28:30

that makes the money. The excitement gives

28:32

you a nose bead and you could

28:34

end up losing stuff. So if you

28:36

can control your costs and tax and

28:39

you choose a fund that suits your

28:41

volatility ability and somebody buys that market

28:43

for you and they look after the

28:46

day-to-day running of the fund, you can

28:48

just sit back and let it all

28:50

happen. Simple is definitely best. There is,

28:52

I think, I think we have a

28:54

perception problem in, you know, speaking of

28:57

somebody who works in financial services

28:59

that simplicity is hard to sell.

29:01

Right, people think that, oh, if

29:03

it's going to be good, it

29:05

needs to be really complicated. I

29:07

have developed this 30 fund portfolio

29:09

for you, Mr. Clients, and we

29:11

monitor it by the second, and

29:13

we make changes and all this sort of

29:16

stuff, and it's going to cost you two

29:18

and half a year. Well, it'll almost certainly

29:20

underperform a tracker investment that will cost

29:22

a tenth of that. So, simple is

29:25

best. So, we're going to give you

29:27

everything you need to do in a

29:29

minute about how to build a simple

29:31

portfolio. So, in summary of what you

29:33

need to know, that's the background. What

29:36

investing is, why people think it's difficult

29:38

and the basics you need to know

29:40

all in. How many minutes been? Just

29:42

under 30 minutes, so that's not bad.

29:44

Well, it's pretty good. Yeah, yeah, yeah, for sure.

29:46

So, for sure. So, for sure. This

29:49

will take 45. It's funny how you

29:52

write these things. You think, oh yeah,

29:54

it's probably only half an hour episode.

29:56

We'll fly through that bit. Problem is

29:59

we tend to. Go track of it.

30:01

So first things first, right? You need to

30:03

build a foundation. So this is before you

30:05

even start investing. All right? So really obvious

30:07

things to do first. Don't invest if you're

30:09

carrying bad debt. No. If you have balance

30:11

on a credit card that you're paying like

30:13

30% interest on. If you're in your overdraft,

30:16

if you've got a personal loan. Don't invest

30:18

until those things are gone. That's your priority.

30:20

There is no sense in trying to build

30:22

wealth in one hand while you're giving it

30:24

away in the other hand. And you'll be

30:26

giving it away in spade on the other

30:28

hand with bad debt. Yeah, particularly with bad

30:31

debt, which is generally very high interest stuff.

30:33

So credit cards, overdrafts, personal loans. payday loans.

30:35

These things have got to clear them first.

30:37

We're not talking about student debt, we're not

30:39

talking about mortgages. Those are generally good debts,

30:41

our definition. And then you need an emergency

30:44

fund. You do. So get three to six

30:46

months of basic expenses behind you so that

30:48

you haven't got to worry about money being

30:50

invested. If anything comes along... money for the

30:52

car something happens at home the cooker blows

30:54

up you need some money you can lay

30:56

that lay your hands on that without having

30:59

to touch your investments make sure you got

31:01

the emergency fund first really important because if

31:03

investing as we say is a multi-decade endeavor

31:05

if you want to be leaving it for

31:07

a little certainly at least five years ideally

31:09

you want to put money aside and let

31:11

it do its thing for you don't want

31:14

to be dipping into it every time something

31:16

like the emergency happens so you got an

31:18

emergency fund on the side and then Finally,

31:20

we would just say, you don't do a

31:22

bit of a budget check, right? Because again,

31:24

the same reason, you don't want to be

31:26

saying, right, I'm going to start to invest

31:29

and then realize in month two that you

31:31

can't because there's a big birthday that you've

31:33

forgotten about and you, that you're going to

31:35

need that money to buy presents or whatever.

31:37

So make sure that your budget can stand

31:39

it, even if you're allocating a small amount

31:42

to investing, you got to start somewhere, right?

31:44

You've got an emergency fund behind you, we

31:46

generally say three to six months worth of

31:48

basic expenses if you can, and then just

31:50

make sure your budget is humming along. nicely

31:52

and there's some spare money every month that

31:54

you can put away. And what I would

31:57

say at this point, a lot of people

31:59

say, oh you should only invest money you're

32:01

willing to lose, well actually you're not going

32:03

to lose the money ultimately in the longer

32:05

term. If you're putting this money away for

32:07

the longer term, you're not going to lose

32:09

money for the longer term, you're not going

32:12

to lose money. So don't think of it

32:14

is I'm happy not to have that money

32:16

ever again bust. Yeah, that's been the case.

32:18

I think we've got more problems than that,

32:20

than worry about your 100 pounds. So it's

32:22

not money you're happy to lose. It's money

32:24

you're willing to put away for the longer

32:27

term with the benefit of making money. Yeah,

32:29

nicely put, Raj. The way we're going to

32:31

teach you to invest. The only way you

32:33

lose everything is Armageddon. Yeah, really. The zombie

32:35

apocalypse. In which case, you know, you're going

32:37

to need a gun and a big club

32:40

with a spice. I say a cricket pack.

32:42

So, the second thing you need to do

32:44

is, if you're going to start investing, a

32:46

really great way to start is with money

32:48

that you're probably already investing, you just never

32:50

think about it, and that is your workplace

32:52

pension. Now, we're assuming what are called defined

32:55

contribution schemes, where you've got a pot of

32:57

money here, so we're not talking about very

32:59

often the public sector schemes, which are defined

33:01

benefit, where... you put money in and they

33:03

give you an income one day but there's

33:05

no pot as such we're talking about the

33:07

kind of pension where you get a statement

33:10

every year that tells you how much is

33:12

in it okay so dig out that statement

33:14

or log into your portal and check online

33:16

and first thing to know is how much

33:18

is in there you might be surprised yeah

33:20

and and because so many people come to

33:22

us I've never invested before well actually I

33:25

bet you have honestly so look at the

33:27

funds you're invested in What's inside the fund

33:29

you've got? The chances are for a vast

33:31

majority of people they'll have the default fund.

33:33

90% Yeah, as a rule. 90% of people

33:35

never even look at the fund that they're

33:37

invested in the pension. Which is fine. That's

33:40

why there is a default. Because there's no

33:42

interest in it. The employer will look and

33:44

choose a fund that will suit the vast

33:46

majority of people who aren't interested in looking

33:48

after it themselves. It's usually a kind of

33:50

balanced middle of the road. Broadly even split

33:53

between shares and bonds isn't it? Yeah. And

33:55

it'll do the job for the vast majority

33:57

of people with any worry. Yeah. You can

33:59

do better, but look at the fund or

34:01

funds that you're invested in and you can

34:03

probably on the portal sort of click in

34:05

and find out what's inside. you probably look

34:08

for something called a fact sheet and that

34:10

will tell you that well actually 10% of

34:12

that money or 50% or whatever is invested

34:14

in America and so much in France and

34:16

in Japan and all these places and that

34:18

might be of interest to you and it

34:20

will give you if it's a kind of

34:23

blended fund with shares and bonds in it

34:25

which lots of default pension funds are you'll

34:27

be able to see what the weights are

34:29

so is it a 50-50 fund or a

34:31

60-40-40 equity bond fund just have a look

34:33

at it and start to maybe look up

34:35

some of the terms that you see there

34:38

and start to learn and look at how

34:40

it's done because there will be usually on

34:42

a pension website there be some kind of

34:44

performance chart on that yeah but please don't

34:46

look at the most short-term performance because short-term

34:48

performance means nothing at all you're looking to

34:51

invest this money for the longer term particularly

34:53

pensions yeah exactly so I tend to say

34:55

look at least three years plus three years

34:57

five years even ten years how has it

34:59

performed yeah and you'll see those little blips

35:01

which at the time might have felt like

35:03

nasty falls, but just see how it's done.

35:06

You will generally, particularly if you're sort of

35:08

five, ten years, you'll see that it's increased

35:10

in value. Hopefully, if it hasn't over that

35:12

kind of period, then it's probably a bit

35:14

of a tough one, but that's unlikely over

35:16

those kinds of periods. And what it also

35:18

says, when you look under the bonnet, and

35:21

a piece said it might be like 10%

35:23

in Far East, think, well that's quite a

35:25

risky, that that's quite a risky area. That's

35:27

quite a risky area. That's quite a risky

35:29

area. That's quite a risky area. You have

35:31

got a risky area. You have got a

35:33

risky area. You have got a risky area.

35:36

You have got a risky area. You may

35:38

not like the fact that it's far east

35:40

perhaps, but actually in the investment world there

35:42

are certain areas that produce better returns to

35:44

others. I'm not saying a forest at different

35:46

times. So what the manager is doing is

35:48

saying to you, okay, you want a global

35:51

fund, let me invest globally. You can tie

35:53

one hand to me back if I've got

35:55

one area of the world I can use.

35:57

Yeah, so just have a look at it,

35:59

learn how you're invested, because that's your money,

36:01

right? You've already invested in that stuff. And

36:04

chances are there will be other funds available.

36:06

There should be, certainly, there might not be

36:08

loads of them, there might just be, you

36:10

know, five or ten or ten or ten

36:12

or ten or so, or so, or there

36:14

might, or there might, or there might, or

36:16

there might, or there might be five, five,

36:19

five, five, five, five, five, five, five, five,

36:21

five, five, five, five, five, five, five, five,

36:23

five, five, five, five, five, five, five, five,

36:25

five, five, five, five, five, five, five, five,

36:27

five, But just maybe if you've got the

36:29

option, compare how one fund has done with

36:31

yours. Right? Now, again, look for, you're looking

36:34

at both performance, so how it's done over

36:36

any given period, and you're looking at how

36:38

up and downy, it's been, upy and downy,

36:40

but only over decent time scales. And remember,

36:42

you're starting to look at this stuff, you're

36:44

starting to learn a little bit. And you

36:46

might see that one fund has done much

36:49

better than the other, and as you dig

36:51

down, you realize that actually the fund that's

36:53

done better is a higher equity fund, and

36:55

you start to make connections in your mind.

36:57

Think, okay, higher equity fund generally does better

36:59

over time. That is true, not guaranteed, but

37:02

generally and certainly over longer periods. So, you

37:04

know, you're starting to learn about it, and

37:06

you learn this is money that you've already

37:08

got. You might even have the confidence to

37:10

change the fund that you're invested in. what

37:12

we're teaching you is how to look after

37:14

your money and if as a result of

37:17

doing this you feel more confident of looking

37:19

at it and you think well actually there's

37:21

a fund here that has the volatility I

37:23

can live with yeah but actually has done

37:25

better over the longer term and I'm happy

37:27

to make a move you may not move

37:29

all of it you may decide to go

37:32

50-50 or whatever so it and you can

37:34

dip you toe Yeah, but the important thing

37:36

is, is with a bit of knowledge behind

37:38

you and a bit of logic, so you're

37:40

not going, that one's done really, really well,

37:42

compared to that one, I'll change it, but

37:44

actually it's like five times as volatile, you

37:47

wouldn't want that. You may not want that,

37:49

because you made up with it, so as

37:51

long as you're making an informed choice, there's

37:53

no reason why you shouldn't decide, actually on

37:55

the balance of what I've looked at, I'm

37:57

happy to change that fun. Yeah, good shout

38:00

about maybe splitting the difference. You might just

38:02

say, okay, I've got 10,000 pounds in my

38:04

pension fund or 5,000 pounds. I'm going to

38:06

put 1,000 of it in this fund that's

38:08

done a lot better, but been very volatile.

38:10

I'm just going to watch it for a

38:12

bit. Yeah, all right. And you learn with

38:15

your own money, that's an important point, but

38:17

you learn by doing. Yeah, but the important

38:19

thing then is, if that more volatile fund

38:21

goes down, Don't say, oh, I made a

38:23

mistake, I'll change it. Quite right. Because you've

38:25

looked at it for the longer term, so

38:27

give it a decent chance to do what

38:30

it needs to do. That's right. Changing the

38:32

fund is usually easy to do. You know,

38:34

if you've got a portal for your company

38:36

pension, it's probably an option to do it

38:38

on there. The most difficult cases likely to

38:40

be a form, but you can usually call

38:42

the provider and ask them to do it.

38:45

But here is a kind of truism that

38:47

you need to understand when it comes to

38:49

investment, right. Pensions particularly, certainly if you're in

38:51

your 20s or 30s, they're a long-term thing,

38:53

right? You're not even going to be able

38:55

to touch this money until your late 50s.

38:57

So a long-term, you should have a higher

39:00

equity content. Yes, it's going to be higher

39:02

volatility, but higher equities lead to higher returns

39:04

over the long term. So long-term, you should

39:06

invest higher equity content. You'll have to accept

39:08

higher volatility. but the benefit of that will

39:10

be a higher return over the longer period.

39:13

So remember that, that's like a core truth

39:15

as an investor. Right? And if it's long-term

39:17

money... Don't matter if it goes down. If

39:19

it goes to, take the pandemic as an

39:21

example, a big slab of value, I say

39:23

value, was wiped off the markets, because it

39:25

was an unforeseen thing that took the world

39:28

by storm, you know? And it looked horrendous

39:30

for a good year and a year and

39:32

a year and a year and a year

39:34

and a year and a year and a

39:36

year and a year and a year and

39:38

a year and a year and a year

39:40

and a year and a year and a

39:43

year and a year and a year and

39:45

a year and a year and a year

39:47

and a year and a year and a

39:49

year and a year and a year and

39:51

a year and a year and a year

39:53

and a year and a Yeah, markets were

39:55

back in less than that though. Yeah, markets

39:58

had a lot of their recovery in... I

40:01

want to say 8 to 10 weeks,

40:03

but it was rocky. Actually, 2022 and

40:05

3 were rocky. But even if you're

40:07

in your 20s or 30s when that

40:09

happened, do you think, well I can't

40:11

touch over 20 years? And over the

40:13

longer term, it's just a blip. Yeah,

40:15

it is. Sometimes we have to strike

40:17

your balance, because if you're learning about

40:19

investing, you need to sort of check

40:21

in. We'll talk about that in a

40:23

bit, but at the same time checking

40:25

on your portfolio too often can be

40:27

counterproductive too. equation almost, you know, longer

40:29

term you should have higher equity content,

40:31

you'll have to accept higher volatility, but

40:33

you'll get higher returns as a result.

40:35

And the problem is as well is

40:37

that if the market's tanking, if I

40:39

say that, you think I'm worried about

40:41

my money, I'll have a look. Well,

40:43

if it's tanking, then you look, it

40:45

will look in the make you feel

40:47

good. Exactly. So what do you do

40:49

then? Is it better not to look?

40:51

Is it better not to look? Is

40:53

it better not to look? drunk the

40:55

post you know do it when you're

40:57

on an even keel and of course

40:59

we're talking about workplace pension but there

41:01

will be a large number of people

41:03

listening to this who are self-employed right

41:05

so there is no workplace pension there's

41:08

no boss paying into a pension for

41:10

you this is all down to you

41:12

all would say is that if you

41:14

are self-employed the first thing you need

41:16

to do is open a pension is

41:18

so so important all kinds of reasons

41:20

for that which will doubtless get into

41:22

but if you're self-employed you need a

41:24

pension you need a pension right I

41:26

No trades person indirectly used to live

41:28

near them. And he was a electrician,

41:30

I gotta be careful. His wife used

41:32

to say to me all the time,

41:34

all the things you see, he hasn't

41:36

got a pension. They used to do.

41:38

It would move a lot by property,

41:40

very tax inefficient, truckless and stuff, duty

41:42

every time. Move houses a lot and

41:44

the idea is that the house, their

41:46

pension. Build their pension. Yeah, yeah. Because

41:48

your thing is, you see, he hasn't

41:50

got a pension. I'm like, why? It's

41:52

like, you know, he could have opened

41:54

one. Yeah. How do you want to

41:56

do is almost like it had happened

41:58

to him? Somehow he ended up in

42:00

his late 50s without a pension. And

42:02

as we always say, it's only little

42:04

steps. You know, you're not going to

42:06

have a 50,000 pound pension tomorrow, unless

42:08

you're 50 grand in, and you made

42:10

up it before that anyway. But little

42:12

small steps, you start a pension with

42:14

50 pounds a month. You know, in

42:16

20 years time, with the contributions and

42:18

the growth on those contributions, it will

42:20

build something. It's a bit more than

42:23

nothing. So start with your workplace pension

42:25

if you've got one open one if

42:27

you don't And if you don't we're

42:29

gonna move on step three which is

42:31

to open one Right so you need

42:33

to think about how much you can

42:35

invest on a monthly basis usually and

42:37

as we've said I remember whether it

42:39

was earlier in this episode or whether

42:41

it was last week I think was

42:43

last week talking about automation. So if

42:45

you've worked out in your budget, you

42:47

know, I can invest 100 quid a

42:49

month or whatever automate that so that

42:51

it goes out to your investment on

42:53

payday or the day after. Yeah, and

42:55

if you do that, you'd probably be

42:57

funding some cash into a deposit account

42:59

or savings account beside that. So don't,

43:01

so if you can say, oh, I've

43:03

got a hundred pounds spare each month,

43:05

I'll put it into my pension, as

43:07

long as you got the emergency fund

43:09

behind you, that's okay. But you might

43:11

even say, okay, I'll do 75 pension

43:13

or 25 into a deposit account or

43:15

a deposit account or whatever, whatever. Yeah,

43:17

yeah, yeah, yeah, yeah, okay. Okay. So

43:19

remember we talked about three levels, we

43:21

talked about platforms, accounts, and funds. So

43:23

first thing you need to do is

43:25

to choose a platform. So remember this

43:27

is just a website, it's just an

43:29

admin system. We tend to suggest that

43:31

people start with Hargre's Lansdowne, which is

43:33

H.L.org, or H.B. They're the two largest

43:35

platforms, I think, in the UK. H.L.

43:37

certainly is. They're not the cheapest, but

43:40

one of the benefits of using them,

43:42

particularly for novice investors, is that the

43:44

websites are really accessible. and there's a

43:46

ton of, they're really easy to use.

43:48

They really do guide you through the

43:50

process of opening accounts very very well.

43:52

So, you know, people who have an

43:54

opinion on Argos, they're on AJ Bell

43:56

and on any platform that we suggest,

43:58

but they're generally a good place to.

44:00

start for novice investors not

44:02

least because they charge on

44:04

a percentage based so you

44:06

know if you're just getting

44:08

started and how is that I'm

44:10

trying to charge you no 0.45%

44:13

of your man invested well if

44:15

you want to go 100 million

44:17

invested that's not a lot

44:20

of money at all it's 45 p

44:22

less than that point four five it

44:24

be four and a half on it

44:26

no no reach no I should trust

44:28

you all my money It is 45 p

44:30

Roger, I should trust you. Oh, that's

44:33

wonderful. I'm glad I still got mathematics.

44:35

But yeah, so it's not a large

44:37

amount. And the important thing with anything

44:39

we tend to talk about here is

44:42

If something ends up not being right,

44:44

you can switch it. You're not stuck

44:46

with Harvey's land or any cable. So

44:48

when these scenes get to a point

44:51

when they've got a mass to them

44:53

and the percentage charge is higher, you

44:55

could, if you want, change somewhere else.

44:58

Yeah, definitely. And you might be more

45:00

experienced by then. So you can, you know,

45:02

they're kind of like a gateway joke, if

45:04

you're like easy way in. But pick a

45:06

platform, you can always change it. You're dead

45:08

right, Rush, Rush, Rush, good shout. Good Shout.

45:11

Good Shout. being better at mental

45:13

anxiety. So once you've chosen your

45:15

platform, you will have options as to

45:17

what kind of accounts it to open.

45:20

So the main accounts really are. Pension,

45:22

we've spoken about ISA, individual savings account,

45:24

it's a tax-free account, and then there's

45:26

a version of that called a lifetime

45:28

ISA. Done lots on those in the past,

45:31

so we don't need to go into details

45:33

about the benefits of each one sort of

45:35

thing, but we do need to just think about

45:37

which ones you might open open and

45:39

when. So we would say that if you're working

45:41

for somebody else, there will be a workplace pension,

45:43

so you should be in that. Don't open a

45:45

pension on your own. There's a workplace pension. No,

45:48

it's already up and running. You can only

45:50

add to that extra if you wanted to.

45:52

Yes, you could. And your employer will be

45:54

paying into your workplace pension, which they won't

45:56

usually into a personal pension. So, you know,

45:58

assuming you've got a workplace pension. the next

46:00

thing to do is really open an

46:02

eyeser or a lifetime eyeser. Worth just

46:04

saying lifetime eyesers you've got to be

46:06

under 40 to open one and you've

46:09

got to be under 50 to contribute

46:11

but anything you do put in gets

46:13

a 25% bonus from the government so

46:15

you can put up to 4,000 pounds

46:17

a year in a lifetime eyeser and

46:19

they'll get made up to 5,000 quick

46:21

right. But you can only use it

46:23

to buy your first house or after

46:26

age 60. Use it for any other

46:28

reason you're going to pay a penalty.

46:30

Generally speaking, if you haven't bought a

46:32

house, then think about a lifetime iser.

46:34

If you don't have a workplace pension,

46:36

like if you're self-employed, I would suggest

46:38

that you open a pension and a

46:40

nicer together. Yes, because it's better than

46:43

two feet in each camp than one

46:45

other side, really. And then you haven't

46:47

decided how much you want to invest,

46:49

then you split the money, whichever way

46:51

you want. Yeah, so if you've got

46:53

an emergency fund, I would always tilt

46:55

more towards pensions because you get the

46:57

tax relief. It's like additional money from

47:00

the government folks. Okay, we're going to

47:02

detail that on another show, but you

47:04

put money into a pension, the government

47:06

makes it up. And the nice thing

47:08

is... It's a drawback, but it's a

47:10

benefit as well. So the drawback is

47:12

you can't get your hands on that

47:14

money till far, far later. But that

47:17

is a benefit, because it'll stop you

47:19

spending it if something, oh, I like

47:21

that shiny boat, I'll buy one of

47:23

those. So you know it's tucked away

47:25

for the longer term, and linking back

47:27

to what we said earlier on, because

47:29

it's a lot longer term, you might

47:31

be going to take a little bit

47:34

more risk on that with volatility. fund

47:36

the pension primarily and then lifetime Icer

47:38

if you haven't bought a house yet

47:40

and you want to or an Icer

47:42

Ices are more accessible than lifetime Ices

47:44

right so it's hard you know you

47:46

almost want kind of a flow chart

47:48

well there is one actually it's the

47:51

UK personal finance flow chart I'll put

47:53

a link to that in the notes

47:55

but it's a useful way of thinking

47:57

what do I do next right it's

47:59

kind of general but it really works

48:01

so pension and like ISA slash lifetime

48:03

ISA so you need to just open

48:05

one and start putting money into it

48:08

basically yeah just take the first step

48:10

take the first step you can change

48:12

it if you've got a hundred quid

48:14

a month to invest and you put

48:16

75 into pension 25 into an ISA

48:18

next month you can change those ratios

48:20

yeah and and say yourself employed and

48:22

you finish a contract and you get

48:25

a big lump of payment at the

48:27

end of it you can always throw

48:29

a lump up both or either yeah

48:31

So they're really really flexible. Stop, start,

48:33

increase, reduce, whatever you want to do.

48:35

Yep. Super flexible. Like you say, easier

48:37

than it's ever been. So once you've

48:39

opened, remember that's just the account. You've

48:42

got the platform, you've got the accounts

48:44

on it. We need to choose a

48:46

fund, right? And this is where people

48:48

think, okay. Thousands of options, where do

48:50

I even start? So here we're going

48:52

to help you here. So we believe

48:54

you want a global multi asset fund,

48:56

right? impact that. Global hopefully is self-explanatory.

48:59

So you're not just investing in the

49:01

UK, but in all the countries of

49:03

the world. Very often funds that are

49:05

global will have the world global. And

49:07

strangely enough, you know, a global equity

49:09

fund or global equity index fund or

49:11

whatever, it'll be in the name very

49:13

often. Often on your platforms you will

49:15

be able to filter, you know, choose,

49:18

I want to see funds that are

49:20

global or Europe or UK or America

49:22

or whatever. Go for global. When I

49:24

say you want a multi-asset fund, it's

49:26

a bit of a general term, that.

49:28

So unless you decide you are happy

49:30

with 100% of your money in shares,

49:32

which, you know, if you're 25 and

49:35

you're putting money into a pension, you

49:37

really should be 100% in shares, I

49:39

think you just need to go all

49:41

out, can't touch your pension money for

49:43

30 years at least, go for it.

49:45

Who cares about the volatility? And bonds

49:47

in it. Right? Don't matter whether it's

49:49

an oic or an ETF, remember those

49:52

are the types of funds, really doesn't

49:54

matter. It's the same thing basically. Yeah,

49:56

they're just slightly differently put together, but

49:58

that doesn't. affect you at all. The

50:00

global multi-asset fund will do the work

50:02

for you. The multi-asset could be other

50:04

things where I have shares and bonds

50:06

and stuff, but you haven't got to

50:09

worry about that. Somebody else is deciding

50:11

what the nuts and bolts under the

50:13

bond are. You just said, okay, I

50:15

want to go worldwide and multi-asset. I

50:17

don't want to rely upon one asset.

50:19

Yeah, and we talked about sort of

50:21

passive or tracking investing the other day.

50:23

We could get deep into that here,

50:26

but... I'm going to make it easier

50:28

for you. There's a brilliant website called

50:30

Pick a Fund. It's free. Right? And

50:32

it basically looks at all the funds

50:34

available pretty much on the planet and

50:36

shows you how to pick between them.

50:38

And right on the home page, there's

50:40

a little box that says, follow Pete

50:43

Matthews' methodology for choosing a global passive

50:45

fund. That's how important you are in

50:47

the financial world. I think, yeah. thinking

50:49

more highly than they all there, but

50:51

you know, it's it's a system that

50:53

I teach that anybody can do that

50:55

can whittle sort of sometimes I think

50:57

50,000 funds or something or versions of

51:00

funds that are on that platform and

51:02

you can get it down to a

51:04

literal handful, right, using just a few

51:06

filters. One of the key ways you

51:08

can choose a passive fund is to

51:10

keep your costs really low. active funds

51:12

they've got to pay analysts and fund

51:14

managers who you know have nice yachts

51:17

and things and so the cost of

51:19

those things generally much higher if you

51:21

can choose a fund where you're paying

51:23

less than 0.25% a year you're looking

51:25

for a figure called the T-E-R total

51:27

expense ratio or the OCF ongoing charge

51:29

for funds. This is why people don't

51:31

do this. Exactly. Right, you're looking at

51:34

costs below 0.25, you should, that's probably

51:36

a passive fund, right? So look for

51:38

global multi-asset, but go to pick a

51:40

fund and follow the steps there. You

51:42

only need one fund to talk about

51:44

keeping it simple. Yeah, because you think,

51:46

well, I don't own makes one basket

51:48

in one basket. Well, you haven't. The

51:51

portfolio itself is investing. hundreds of shares

51:53

and bonds underneath the bonnet, that one

51:55

fund will do you for quite some

51:57

time. Last time I looked like the

51:59

Vanguard Life Strategy funds which are one

52:01

of many options of these kinds of

52:03

funds that's something like 24,000 holdings in

52:05

it. Yeah, you know, I mean that's

52:08

many baskets in which you have put

52:10

your eggs. Okay, so you only need

52:12

one fund, the fund itself will do

52:14

the spreading around for you. And then

52:16

you just got to start right. There's

52:18

no kind of alternative, you just got

52:20

to put some money on the line.

52:22

Yeah, skin in the game, watch it,

52:25

brings it too. And the number of

52:27

people have said, you know, that they've

52:29

spent their life not doing this, but

52:31

they've made that for a step and

52:33

glad they have. So yeah, once you've

52:35

done it, then you need to watch

52:37

and learn. So you need to watch

52:39

and learn. So you've made the first

52:42

step, but actually seeing what's happening. promise

52:44

yourself that you'll do nothing for at

52:46

least a year on that. You've made

52:48

the decision, I've opened a platform account,

52:50

I've chosen which account I'm going to

52:52

put it in, and that's the fund

52:54

because I've investigated that fund. Yeah. It's

52:56

taking some time to do that. Don't

52:58

wind it in a month. No, exactly.

53:01

So promise yourself you do nothing. Promise

53:03

Rod, you'll do nothing. Rod will cry

53:05

if you change your investments. I get

53:07

really upset if you ignore advice. And

53:09

the unicorn will die as well. You

53:11

wouldn't want that. So commit to doing

53:13

nothing for at least a year. If

53:15

you can, increase the amount you save

53:18

throughout the year. If you start at

53:20

100 pounds, set a diary note for

53:22

two or three months down the line

53:24

to make it 110, 125. You probably

53:26

won't notice it. And it gets really

53:28

exciting as you see your numbers start

53:30

to grow. But if the fund does

53:32

go down, unless you know, you look

53:35

one month and you add 200 quid

53:37

in there, and the next month you

53:39

look in, you've put another 100 pounds

53:41

and it's actually only worth 250. You're

53:43

like, that should be 300 at least.

53:45

It's only worth $2.50. Remember, that means

53:47

that the funds you're buying are on

53:49

sale. So if you can find another

53:52

50 quid, whack it in. Yeah, it

53:54

makes a heck of a difference. Buy

53:56

more. And what we would say is

53:58

you get these warnings when you see

54:00

financial advisors or on the fact sheet,

54:02

so investments can go down as well

54:04

as up. will guarantee they will go

54:06

down. We can tell you how far

54:09

and how long it takes to come

54:11

back, but they do go down, but

54:13

they will come back again. They will.

54:15

So just keep buying the flipping stuff.

54:17

Keep on buying, month in, month out.

54:19

Remember the pound cost averaging thing, so

54:21

you're kind of averaging out the ups

54:23

and downs, the longer you do this

54:26

for. My favorite phrase is when it

54:28

comes to investment markets, is that the

54:30

advance is permanent, the declines are temporary.

54:32

So, you know, if it goes down,

54:34

it's only going to be temporary, but

54:36

you can look over decades and see

54:38

that markets advance, given long enough. So

54:40

just keep buying. And you know, you

54:43

watch, you learn, you get better, you

54:45

start to understand about why things are

54:47

happening, and you might think, actually, I'm

54:49

going to have another fund, and you

54:51

do a bit more research. and maybe

54:53

you compare the two for a year

54:55

and see how they get on. I

54:57

think, okay, maybe I'll add a third

55:00

or maybe whatever. Don't overcomplicate and certainly

55:02

don't drink your own kulet, his own

55:04

American cousin, say, just because things are

55:06

going well. Remember, you're buying the whole

55:08

market, so it's nothing to do with

55:10

you. You're not a great investor, you

55:12

just happen to have timed things well.

55:14

So don't sort of get a smug

55:17

or arrogant or arrogantone, and think that

55:19

you're in the industry. Well, one of

55:21

us is still in the industry. One

55:23

comes in and talks about it. When

55:25

we do client reviews with customers and

55:27

they walk through the door and the

55:29

funds go up, we don't, they suddenly

55:31

go over that and see what we've

55:34

done for you. You say, see what

55:36

the fund is done in the background

55:38

and what it's done to your plans

55:40

for the future. I was at client

55:42

school. That's done well. Thank you, Pete.

55:44

And I'm not taking any credit for

55:46

this. Because if I take credit for

55:48

it going up, I have to take

55:51

responsibility because it goes down. And none

55:53

of that's anything to do with me.

55:55

That's what markets do. So watch and

55:57

learn, folks. Put your own money on

55:59

the line. It's the only way. And

56:01

the last thing we're going to say

56:03

under the everything you need to do

56:05

section is actually headed don't. And we're

56:08

just going to read these because they

56:10

hopefully are self-explanatory. So don't switch funds

56:12

for at least three years. Remember

56:14

you're investing, not trading, give it

56:16

time to work. A real good cardinal rule.

56:18

Don't ever log into your account when

56:21

you're drunk. Tired. upset, depressed or euphoric.

56:23

Any extreme emotion doesn't mix well with

56:25

investing at all. Really doesn't. Yeah, it

56:28

needs to be a very much an

56:30

even keel thing. Don't believe you're an

56:32

expert if markets go up. They just

56:34

do that. And don't believe you're a

56:36

failure if markets go down. They do.

56:39

Don't stop investing and quote, wait until

56:41

things improve. That is timing the market.

56:43

It's a Mugs game. You'll never make

56:45

it work. Don't preach to your friends

56:47

about what you're doing. Pride comes before

56:50

a huge fall generally. Yeah, let me

56:52

tell you about my eyes support for

56:54

you. It's doing so well. I'm a

56:56

genius investor. No, no. Pride comes before

56:58

404. Don't skip building an emergency fund.

57:00

That is there to stop you having

57:03

to dip into your investments. Don't invest

57:05

with one hand while paying high interest

57:07

debt with the other. Don't expect immediate

57:09

results. Slow bone, remember. Don't over complicate

57:12

things, keep it simple. Yeah, but don't

57:14

invest money that you're going to need

57:16

in the short term. Think two to

57:19

three to four years. Don't put that

57:21

money in the stock market if you're

57:23

going to need to spend it. Okay. The

57:25

best way to learn is to start

57:28

folks. You know, it's a massive subject.

57:30

It's hard to distill it. But hopefully

57:32

you're getting the message that we think

57:34

anybody can do it. You can do this.

57:36

Put real money on the line. It doesn't

57:38

have to be a big amount. start keep

57:40

going keep learning and good luck yeah because

57:43

the hardest thing is to make that first

57:45

step once you've made the first step that

57:47

the next month or the additional funds you

57:49

put in at some point in the future

57:51

are far easier is they getting across that

57:53

first step and it's not as difficult as

57:55

you think as hopefully we've proven that yeah

57:57

hope so hope that's helpful come out as

57:59

with any questions Hello at meaningful money. TV,

58:01

if you want to send us an email

58:03

or leave us a comment on the show

58:05

note. So review, Raj. Right, review from Matthew.

58:07

Not my Matthew, I don't think. I've always

58:10

been a reasonable earner that lives payday to

58:12

payday and have been comfortable with debt and

58:14

found complex ways to justify spending more than

58:16

I earn. Over the last year via Dave

58:18

Ramsey and then yourselves, I've really taken control

58:21

of my finances. Good. My wife and I

58:23

now use Winead, so you need a budget,

58:25

to budget and choose our priorities. We'll shortly

58:27

be debt-free and plan to fill our lices

58:29

to a minimum. I have an NHS pension,

58:31

my wife a defined contribution pension. Once again,

58:34

thanks to the unbelievable podcast, I've learned so

58:36

much, I feel much more positive about our

58:38

financial future. Matthew. Hey, job done. Well done,

58:40

Matthew. Good action taking there. You're the other

58:42

one making the change. You've done it. Take

58:45

control of your finances and make positive change.

58:47

And as you do, Matthew, feel much more

58:49

positive about it. That's the reason why we

58:51

do it, right? So Matthew, you had some

58:53

questions in your comment as well, so we're

58:55

going to add those to a future Q&A

58:58

show, so stay tuned for that. But if

59:00

you're listening to this podcast, folks, and you're

59:02

enjoying it, and it's helpful, please leave as

59:04

a rating or a review. Wherever you're listening

59:06

to this, you can probably do that, just

59:09

go into the just go into the app,

59:11

just go into the app, just go into

59:13

the app, click the app, and leave a

59:15

app, click the option to leave a review,

59:17

and leave a review, click the option to

59:19

leave a review, or review, or you, or

59:22

you, or you, or you, or you, or

59:24

you, or you, or you, or you, or

59:26

you, or you, or, or, or, or, or,

59:28

or, or, or, or, or, or, So just

59:30

in news this week, we have a release

59:33

date for the meaningful money retirement guide for

59:35

a split second, then I forgot the time.

59:37

The meaningful money retirement guide. So this is

59:39

book two, essentially. So September 2018, the first

59:41

book came out, which is the meaningful money

59:43

handbook, and Harriman House have sort of badgered

59:46

me to get this second one done, which

59:48

basically picks up where the first one left

59:50

off. So the first one was everything you

59:52

need to know about building wealth. and the

59:54

second one is everything you need to know

59:57

and do to retire well to plan and

59:59

execute the perfect retirement. So the meaningful money

1:00:01

retirement guide is out on May the 6th.

1:00:03

So stay tuned, lots of news about that

1:00:05

to come and I need your help to

1:00:07

help. to make it a bazaar and get

1:00:10

it to the top of the chart so

1:00:12

really excited about that is yeah sort of

1:00:14

I want to say a passion project I

1:00:16

actually found it really difficult to write actually

1:00:18

but I'm really pleased with the outcome the

1:00:21

publishers are really pleased with it so I'm

1:00:23

excited to get that out six of the

1:00:25

base stay tuned could I say then because

1:00:27

I've already read the manuscript oh you have

1:00:29

yeah and like the first book is written

1:00:31

in really an a really accessible way it's

1:00:34

not eyebrow it does everything you need to

1:00:36

know in a simple way that you can

1:00:38

actually action them. Great. Thank you mate. The

1:00:40

choice I say that. Yeah no, thank you.

1:00:42

And thank you for reading it. Well it

1:00:45

was a chore. It was a chore. The

1:00:47

things you do. Yeah, things you do for

1:00:49

friendship. Yeah, I appreciate it. Well we're talking

1:00:51

about next week. Right next time. We'll be

1:00:53

assuring you that you can prepare for big

1:00:55

life events. Like getting married, having a child,

1:00:58

not quite sure what preparation we'll do for

1:01:00

that for you. And some more negative things

1:01:02

like losing your job or getting ill. Yeah

1:01:04

the financial. Oh financial of getting it all

1:01:06

right okay now I understand now. I'm glad

1:01:09

we're not on video for that bit. Yeah

1:01:11

for sure we might stick a Q&A show

1:01:13

in before that we'll see but that's gonna

1:01:15

be the next in the You Can series

1:01:17

but thanks that's it for this session of

1:01:19

the podcast hope it was helpful and hope

1:01:22

you enjoyed it as ever any questions or

1:01:24

comments go to Meaningful Money. T. T. We

1:01:26

will talk you next time. So,