2021.09 Property 🏠🏠🏠Investment – Multiple Avenues to Achieving the Goal

Hey there! Today, I share a bit about my story in relation to property investment and a couple of lessons I have learnt in the process.

In one of my first few blog posts about financial freedom I told you about how I developed a sudden need to divest myself of all debt, to the extent that I needed to sell my home! The plan was to use the equity from that house to buy another one outright.

As I embarked on the process of acquiring a new property, I quickly realised property prices wouldn’t permit for an outright purchase (at least not in the location I had settled on) and, the thought occurred to me that I could use some of the funds from the sale to invest in another property and let it out. Then I read Robert Kiyosak’s Rich Dad’s Cashflow Quadrant and learnt about good debts (which increases your wealth) and bad debts (which increases your liabilities) and that whole need to divest myself of debt seemed to disappear! Talk about a 360* turnaround!

And so I started what I call my property investment journey. When I started out, I knew I could buy a property and rent it out and then I started interacting with property investors on social media and joining online property networks and very early on, learnt that there were so many other property investment strategies (and not just buy a house and let it out) – and eye opener (and attestation to the saying “you don’t know what you don’t know”!

The strategies shown in the table above is not an exhaustive list, but they are the more common ones.  There however are some more complicated ones and new ones evolving as investors navigate through the pandemic.  Of course, most of the strategies shown require an initial capital outlay that would be deemed substantial for most, but I want to draw attention to the fact that there are also some that require very little initial outlay.  In fact, in the property investment community they reference “no-money down strategies”; I haven’t seen any of such, but I know the R2R strategy requires less of an initial outlay than if you were buying; and property sourcing is probably the one I will accept is a no-money down strategy, as it mostly involves time put into research and negotiating deals. If you are interested in getting into property investment and don’t have a substantial amount of money, these are two strategies you could use as stepping stones to however high you want to go on the rungs of the property investment ladder.

From interactions in property networks, masterminds and trainings attended, I learnt that it was best to focus on a one strategy (and best to choose a strategy that moves you towards achieving your goals) and that it wasn’t as easy as just going out and buying the first property that appealed to you! One phrase that is usually bandied about in the property investor community is “you make your profit when you buy” – meaning that your focus isn’t shouldn’t be on the profit you’d make when you sell from appreciation of value in the long term, but it should be on profit at point of purchase, which is only possible if you manage to find a property being sold below market value or one that you’d refurbish or perhaps one that needs minimal tweaks that will result in increased value. The rationale being that if you buy a house today and have to sell it (for whatever reason) in the short, rather than long term, you’d still be able to make a profit (or at least not make a loss).

This meant I couldn’t operate based on my usual modus operandi of “jump in and learn as I go”! I guess if I did that, any mistakes made here might be costly; so I engaged a property investment coach from whom I learnt a great deal, including how to assess property deals (while continuing to interact with property investors, joined property mastermind groups, etc.). I also spent hours and hours, late into the night, early hours of the morning (after and before I signed off from/in to work) and weekends scouting through Right move, Zoopla and other property sites!

Guess what; after more than five months of scouting through hundreds of properties online; about 60 of them being potentials and only about five of them being worth a viewing (and only one of those warranting a second visit), it was almost time for my busy time at work (end of year audit: during which time I knew wouldn’t be able to give property investment the focus it required) and I hadn’t identified a suitable deal! My coach encouraged me to keep going and they, and other people in the property investment community alluded to the fact that deals had become harder to find with the pandemic and resulting lock down.

Suddenly one of my contacts in the property investment community, mentioned they were looking for an investor in order to be able to complete on a property investment deal. I mulled this over and thought; well, the funds have been sitting in my account for almost a year (yielding interest at less than 1%) and I knew I wouldn’t be using it before the audit at work was over; so why not invest at a fixed rate for a short term. After negotiating an amicable interest rate, the deal was done! The thought that struck me as we were negotiating this deal is “there’s always multiple ways to skin a cat” – while I haven’t actually purchased a property, I have invested in enabling completion of a property deal and it could technically be said that I am a property investor; no? One school of thought advocates for “being stubborn about your goals, but flexible about your methods” and this is a clear articulations of being flexible about how one’s goals are achieved (while being clear on what the goal is).

As I mentioned in last week’s post, the audit is now over (well mostly), so I’m about to get right back on to the wagon of searching for property deals. I am a bit wary given the current economic climate of uncertainties, but am still committed to the goal of building a portfolio of investment properties, so we’d see how this year goes (keeping my fingers crossed)

So today I leave you with the below lessons I have learnt from my property investment journey so far (and hope it is of value to you):
• For young ones (and older ones with minimal capital) interested in property investment: go research property sourcing and R2R as potential starting points
• There’s always multiple avenues to achieving one’s goals, so be flexible about the method and rigid about the goal (though some might argue that even the goal evolves with time, so it’s good to be flexible with that as well)

Have a good weekend and see you next week.

Like, share and let me know in the comment if this is of any value.

2021.08 Changing Times; are you matching it with Changing Financial Practices/Habits

I have just had a whole week of audit! As always the build-up is usually very tiresome; extra checks to make sure all is as should be, all balance sheets reconciled and preparing the financial statement, while trying to stay on top of the day-to-day at the same time! This year’s was a different kind though: a virtual audit (just about completed our audit last year before lockdown 1.0 kicked in). For some reason I can’t quite explain, I was more involved in the field work than I usually am with an in-person field visit (as the week of on-site testing is called), but hey it’s more or less over now; just a few ‘t’s to cross and i’s to dot and that would be it for 2020 audit. I wonder if it would be another virtual one next year… who knows what lays ahead!

Oh gosh, didn’t mean to go off on one there! How’s your week been? Hope it’s been productive; anything particularly interesting happened at your end? Please share in the comments, I am interested.

Having just completed a different kind of audit, I’ve been mulling over how everything has changed! It is my opinion that times are different and there is no going back to how things used to be e.g. I don’t particularly see a time when everyone would be expected to go to work in a designated workspace in the same manner as before; employees have proven that they can be trusted to deliver without being in the office and employers also have saved quite a bit on office space since lockdown (those who have been able to get out of or end their leases) and are not likely to want to incur unnecessary office space bills, if it can be helped. We also gave to get changing I believe!

With regards our finances (which is the main focus of my post, though I seem to have written almost a page of unrelated stuff already) the changes have been long staring us in the face, we just hadn’t paid much attention to it. Gone were the days of high interest rates which formed the reason our parents’ main financial lesson for us being ‘save for the rainy day’; did your mum also use to tell you that? Check out the chart below which shows interest rates on savings accounts (in U.K.) over the years; can you see what I see?
Looking at the chart, I now fully understand why my mum used to remind us about the need to save as I am sure the rates must have been even higher pre-1980! Unbelievable though; interest rate of almost 14% just in 1990 and about 6% in 2008 (I guess that was before the financial crisis)! Only about 3 years ago, it was already down to about 2%! The pandemic has only served to bring the plight to the forefront for most of us; so even though the rates are closer to 0% than 1% right now, it’s been a gradual downward spiral (a change that’s been happening over time), rather than something brought about solely by the pandemic.

Not to belabour the point, the question is what are you doing about it (are you continuing to follow mum’s advice) or making a change and adapting your financial practices to the changing times?

To be honest, looking at the above chart makes me feel like I have been sleep walking for years! Each time I come across facts like this, I ask myself whether prior to the year gone, I had been financially literate (in spite of being a finance professional)! One of the things I am slowly learning is that working in the field doesn’t make you financially savvy (which I define in this instance as utilising your expertise in your own personal life)!

Based on what I have learnt in the last year, it is my opinion that you’ve got to be intentional about your finances (just like everything else). It is only with clearly defined goals that attention gets paid to the things that would enable achievement of those goals.

Anyway, back to the question at hand, what are you doing? I tell you what I’ve been doing, a lot of which I have shared in previous post – diversifying that’s what!

In a previous post , I referenced discussions about negative interest rates. In the last couple of weeks, the Bank of England has been quoted as asking banks to prepare for the possibility of negative interest rates. It seems to me that it is only a matter of time before it happens! Think about it, interest rate of below 1% have been with us for a while and the we are being hit by all sorts of calamities that are inadvertently affecting the world economy, which means it is only a matter of time before it becomes a necessity rather than an option, for monetary policy makers to dig into their toolbox and utilise a different tool (negative interest rate) than one they’ve used for a while now,  and it seems the Bank of England is ready to utilise that tool.

If negative interest rates do kick in, it would be just one more thing to cause the erosion of the value of money. To me therefore, it seems the end to taking comfort from watching your bank balance is already in sight and it is now a no-brainer that it is so much more important now to get intentional about one’s money; what are you holding it for?  Is there a better way to hold it than in a savings account?  If you don’t know what the alternatives could be, speak to a financial adviser, read, research, etc.  

I have tried my hand at different investments and continue to do so; some more than others. I also understand some more than others; but I am trying them all. I am learning that some are more secure than others.  The uncertainties in the world would however not allow me play it safe and only invest in what is deemed safe, because in my opinion, we are in uncharted waters and nothing remains as was; so what might have been safe in prior times, may not necessarily be the case now.  I am as such, trying my hands at it all; in different proportions and doing more of what I am comfortable with, but also a little bit with some of the ones I don’t completely feel comfortable with. I am also not getting carried away by all the hype in the media about bitcoin or the ease of investing in the stock market (made possible by the platforms like Traidng 1-2-1, Freetrade, eToro, etc.) resulting in social media postings of profits being made in investments! In summary, I am staying in my own lane and running my own race as best as I can.  It could be tempting to put all one’s funds in a certain investment vehicle, but I continue to tread carefully and to read and learn, but more importantly; I diversity.

For older people I would suggest a cautious approach, whereas the younger ones could take a riskier approach if they felt comfortable with it, given that they have a lot of time ahead to recoup any losses, but most of all, one’s risk appetite would guide the investment strategy engaged.

Main thing, don’t be overly cautious and watch your hard earned money slowly die! Sometimes, being cautious could be more dangerous than taking action, and this feels like one of those times to me.

(Remember though, before you begin investing, pay off/down bad debts and fill up you emergency pot (at least six months of your living expenses))

Do your own research; these are all my personal opinions and me sharing my personal journey. It shouldn’t be taken as financial advice.

I however invite you to share your own journey and experiences, am I the only finance professional only just waking up to the realities beyond the ledgers and financial statements and finding themselves a bit wanting? I’d really like to know.

Who’s more comfortable watching their bank balance and still thinks that’s the right thing to do? I’d be interested to know why they think so.


Like, but don’t just like. Also, add your comments and views below, and share the post.

2021.07 Valentine Day, Self-love, Finance and Gifts

I thought I’d delay this a day so I could deliver you a Valentine day edition. Happy Valentine’s Day to you all.  ❤️💙💜💚


Interesting Facts about Valentine’s Day

“Valentine’s Day, also called Saint Valentine’s Day or the Feast of Saint Valentine is celebrated annually on February 14. It originated as a minor Western Christian feast day honoring one or two early Christian martyrs named Saint Valentine and, through later folk traditions, has become a significant cultural, religious, and commercial celebration of romance and romantic love in many regions of the world.” https://en.wikipedia.org/wiki/Valentine%27s_Day

“Valentine’s Day, also called St. Valentine’s Day, holiday (February 14) when lovers express their affection with greetings and gifts. Given their similarities, it has been suggested that the holiday has origins in the Roman festival of Lupercalia, held in mid-February. The festival, which celebrated the coming of spring, included fertility rites and the pairing off of women with men by lottery. At the end of the 5th century, Pope Gelasius I forbid the celebration of Lupercalia and is sometimes attributed with replacing it with St. Valentine’s Day, but the true origin of the holiday is vague at best. Valentine’s Day did not come to be celebrated as a day of romance until about the 14th century.” https://www.britannica.com/topic/Valentines-Day

In spite of these facts, it is known worldwide as a day to celebrate romance and love. It is a day in which lots of money is spent as indicated in below chart. It is however expected that spend in 2021 would be a lot lower because of the lockdown 3.0!

Given that this year’s Valentine’s Day is going to be of a different kind (more likely a lot more low key than usual), do you agree that this is as good a time as any, to consider whether or not highly priced candle lit dinners, flowers, chocolates, etc. is the best way to celebrate romance and love?

What about celebrating self-love rather than just romance and your loved ones?

Self- Love is defined by Wikipedia as “love of self” or “regard for one’s own happiness or advantage” https://en.wikipedia.org/wiki/Self-love

Let’s consider how lack of self-love impacts your finances. Lack of self-love may materialise thus;

You try to please everyone and want to be liked and be friends with certain people and your efforts to achieve this could be in the form of giving unnecessary or unwarranted gifts or presents; or doing others’ biddings at one’s own expense
Other people’s opinions of you is deemed important, so you endeavour to look a certain way so you meet others’ expected standards. This will often entail you adopting a certain style of fashion/dressing and sometimes buying high end or designer clothes and accessories
You are envious of how others look or dress/have a complex about yourself so you go shopping for things you admire on others.

More often than not, trying to fit or adopt other people’s styles or copy them, does not provide fulfilment or happiness, and doesn’t necessarily give you the in to the group or friendships being sought!

It all just ends up being a drain on your financial and emotional resources! Those wasted financial resources could have been put to work for you (e.g. giving yourself some love in the form of small treats and beginning to build an investment for the future)!

So what treats are you giving yourself this Valentine: is any of the below on your list (if none, what treats are you giving yourself – share in the comments)?

  • A candle lit soak on your own with some soft music in the background or just some nice quiet time (especially if you are a mum with young kids, in lock-down)
    Selfies for the day, which can later be included in your annual photobook compilation
    A day of lazing around and just being (including going inwards and reconnecting with self)
  • A day pottering around in the garden (perhaps a bit too cold for that) or in the shed with a hot pot of coffee or tinkering about with that classic motor bike or car
  • Get lost in a good book
  • A day off watching film or binge watching a TV series

Self-love remember; it matters and it should come first! If your cup is empty, you won’t have anything to give!

Now onto what you are giving your loved ones; is it the same old box of chocolates, flowers, perfumes, etc. albeit without the expensive meal in a restaurant, or have you considered gifts that contribute to building your loved one’s wealth? If you can’t think of any such gifts; below are some ideas;

Send them a bitcoin or altcoin

  • Buy them a silver bullion coin
    Buy them a gold bullion coin
  • Deposit some money in their stock ISA so they can invest it in shares (don’t think there is a way you can send a share to someone, but if there is then you could do that instead; and if there, please let me know how)

If you want to, you can accompany any of the above with a box of chocolates and/or flowers, but in my opinion, the more meaningful gift is those that are of longer term benefit rather than the consumables and perishables.

Whatever you do, remember to give yourself some love today, after all it is Valentine’s Day and you matter.

Sending you all loving thoughts and kisses.



Remember to follow, like and share.

2021.06: Is Passive Income Really Passive?

As you know from my previous posts, last year saw the commencement of a new journey for me. I started out with a lot of uncertainty about which direction to take, but knowing one thing for sure; “I want to do more”.

At the time, I defined ‘do more’ as not being a contracted employee, but ‘being in full service’ but my dilemma was how to achieve this? I thought I would make money and then start supporting the less privileged, but the question was how do I make enough money to do that? Then I read Robert Kiyosaki’s “Rich Dad’s Cashflow Quadrant” and a new world opened up to me; and that was where I first came across the phrase “passive income”!

Wikipedia defines Passive income as income that requires little to no effort to earn and maintain. https://en.wikipedia.org/wiki/Passive_income I have come to understand this to be income that flows in from one’s investments and requires minimal effort or work from the investor.

When I however first came across the phrase, I had thought, yep; that’s the key! I decided the easiest way to achieve the money goal (without even having a target amount!) would be to invest in property! Alas, little did I know the journey I was about to embark on (I’d come to that in another post)!

I spent more than six months focused on finding an investment property that would cover its own expenses and generate a bit extra – said ‘passive income’ and not finding one! This involved trolling through Rightmove.co.uk, Zoopla.co.uk and several other property websites late into the night and in the early hours of the day, before logging in for work. I also joined several property networking groups, read a lot of books and attended several trainings – including viewing properties. Lots of learning along the way (which has been enlightening), but definitely not passive!

As part of my journey to financial freedom, I then started looking at other asset classes: my experience with investing in Shares and Crypto, I have shared in previous post. These also require research time, before investing and keeping an eye on the market after investment. In recent weeks, I reached a place where I fully understood what Index Funds and ETFs are and will be investing in those in the coming weeks; but again research is required to understand where you want to put your money; even if a fund manager is to be engaged, you need to come to the conversation informed so you are able to have a meaningful discussion, rather than leave it entirely to the fund manager to decide.

Then there’s commodities – which I haven’t even begun to scratch the surface of, but will stick to gold and silver and am not likely to delve into other areas. These perhaps have been the most passive for me because I utilise them as a store of wealth rather than a means to grow wealth; of course if they increase in value, that’d be a bonus. They also serve to stem my craving to go shopping (when the urge to spend bites), the difference being that my craving is met in a manner that moves me towards my financial goals 😊 If the purpose of investing in commodities is to grow wealth, there are quite a few vehicles to do this and again, time is required to research which of the vehicles to utilise; and even with gold and silver, there are various ones issued in different countries, so again there’d be the need to put the time in to understand exactly which to invest and what the risks and challenges around these might be e.g. storage.

I surmise from my experience so far, that there is no such thing as “Passive Income”, at least not in the manner that got me excited when I first came across the phrase! It does require time and effort, so be prepared and don’t assume the funds would just start flowing in.

There is something to be said for perhaps the initial stage is where the time and effort is required and once it’s all set up, it becomes passive, but I will let you in a few years’ if that’s the case.  Steve Fisher in “Residual Millionaire” however implies that’s the case.

Tell me what your experience has been in the comments – have you found passive income to be passive (with minimal effort or time required from you)?

2021.05 Winning by Investing vs Losing by Saving

You know how I describe keeping your money in the bank as slowly killing your money (see previous post) – because its value slowly erodes away?

Well, I have an in my face example to share of the loss of the value of money! Most of us have a periodic (weekly, monthly, etc.) bulk grocery shopping done and would have some standing items on the list. More often than not, we don’t observe/pay attention to the change in prices when we buy those standing items.

Well this month, I placed my order about three weeks ahead of delivery date and a couple of days before delivery, I went back in to add a few item and alas, these notifications popped up!

Do you notice the small changes in price for each item?  I probably wouldn’t have noticed the price difference to previous orders, if I was ordering and checking out on the same day! These however are a clear demonstration of erosion in the value of money – what would have originally cost me £8.92 would now cost £10.12 (£1.20 more than original price, representing 13% loss of value in the space of three weeks)!

The changes may not always be as high and probably not as many in such short space of time, but it is a clear demonstration of what I talk about when I say not to take comfort from looking at your bank balance, rather once you have your emergency funds tucked away; invest, invest, invest – at least that’s what I’m doing.

To be fair and for the purpose of full disclosure, a couple of notifications also popped up about price reductions, but the purpose of this post is to demonstrate erosion of the value of money in a manner that we can all relate to, so I am focusing on the price increases especially as it’s not just one or two, but several items in my shopping basket.

There will absolutely be some wins and some losses along the line when investing. In the long term though, in the event that I don’t make huge gains from my investments, a net gain that affords me the chance to still buy the standing items (or indulge in the same activities) on my list, if I chose to, will be a WIN.  Do you agree with this view?

Let me know in the comments below.  

Reminder: these are my personal views (and experience) and not financial advice so do your own research before making any financial decisions.

2021:04 Self – Assessment: Don’t Get Caught out (8 Days To Go)

Topic of today speaks more to U.K. residents and I am going to keep it brief (mostly because I’ve got the grandbabies in hand and they require a lot of attention).


What is Self- Assessment
“Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax.” https://www.gov.uk/self-assessment-tax-returns

Most people pay income tax at source via pay-as-you-earn (PAYE) – tax is deducted before you receive your salary. If however you receive other income, you are expected to submit a tax return in which you declare all other income (apart from salary) to HMRC and are assessed for tax on this.

What period does a tax return cover
The self-assessment tax return is for the preceding tax year (April – March); so the period under review for the 2021 tax return (due on 31 January, 2021) is April 2019 – March 2020. Any untaxed income during this period, must be reported and assessed for tax.

Who should submit a tax return
The self-employed, sole-traders and Directors are the typical groups who are expected to submit tax returns as they are the ones who in the main, don’t earn salary which is taxed at source.

However a tax return should also be completed if in addition to your taxed-at-source income, you earn other income from sources such as:
• Renting out a room
• Savings and investments e.g. gains on shares, crypto, etc.
• Interest on peer-to-peer loan
• Dividend income

Don’t get caught out thinking self-assessment doesn’t apply to you because you receive your salary net (post-tax deduction).  If you do receive income from other sources (some examples given above), these need to be reported to HMRC in a tax return.

How do you submit your return
You could submit a paper return, but the deadline for that was 31 October 2020.

The deadline for online submission however is 31 January 2021 and can be submitted at the HMRC website here https://www.gov.uk/log-in-file-self-assessment-tax-return

After submitting your return, you then need to pay any tax due by midnight on 31 January 2021.

You can easily submit your returns yourself without the help of an Accountant. However, it is your responsibility to get it right, so if you have multiple sources of income or if they are complicated, you might be better off engaging a professional so you don’t get caught out.

Late filing (of up to three months) immediately attracts a fine of £100; beyond that the fine increases.

Also, for late payment of any tax due, you get charged interest.

Rather than pay a fine or interest, better to invest the money, so be money smart and don’t get caught out!

Submit your tax-return and pay any amounts due by 31 January, 2021


2021:03 Funds: Mutual, Index and Exchange Traded

A depiction of investment strategies, in a previous post, referenced benefits of investing in Index funds. In that post, I said I would look into index funds as I didn’t know what they are/how they worked.  When I said that back then, I had thought I would read an article and voila, I’d get it! What I found was a continuous reference to mutual funds and ETFs which confused me even more! Anyone else have the same problem? Well here goes; let me try and piece this together in a manner that is less confusing (basically taking you on the journey I went through that’s brought me some clarity).

Index Fund 

Wikepedia defines an index fund (also known as index tracker) as “a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can track a specified basket of underlying investments.” (Source: https://en.wikipedia.org/wiki/Index_fund) – this is one of the clearer definitions I came across, yet it left me wondering whether mutual funds and ETFs are in effect a type/sub-set of an index fund, so I continued my research.

Some of the other easier to understand explanations described an index fund as an investment approach of a fund and as a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index.

I surmise that an index funds pool money from investors (thus, a mutual fund of sorts) to buy shares, bonds and securities that make up a specific market index they are tracking e.g. FTSE 100 and in effect try to be, rather than beat the market – the pooling of funds from investors explains why mutual fund keeps coming up in the explanation of an index funds!

Index Tracking?

Collins dictionary defines an index tracker as “an investment fund that is administered so that its value changes in line with a given share index” (Source: https://www.collinsdictionary.com/dictionary/english/index-tracking-fund)

Which explains index tracker funds thus “…funds are collective investment schemes that follow the movement of a market index, such as the FTSE 100. So when an index rises, the value of your fund rises with it (after costs). Conversely, when the index falls, your investment in the fund falls with it, too.” (Source: https://www.which.co.uk/money/investing/types-of-investment/investment-funds/tracker-funds-explained-a6s543x0ss5x)

Mutual Fund

Investopedia explains mutual funds as “a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.” It goes on to say “A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.” (Source: https://www.investopedia.com/terms/m/mutualfund.asp#what-is-a-mutual-fund)

Based on further reading about this, I found that there are different types of mutual funds (which are representative of the type of securities they invest in and the investment strategies) e.g. money market funds, fixed income funds, equity funds, index funds, etc. and that mutual funds trade once a day, after the market is closed.

Exchange Traded Funds (ETFs)

I was able to obtain the most understandable explanation of ETFs from Vanguard who say “ETF stands for Exchange Traded Fund and they offer you a way to invest in a wide range of bonds or shares in one package. They’ll typically track a specific market, like the FTSE 100.”

Nerd Wallet (https://www.nerdwallet.com/article/investing/what-is-an-etf) explains how ETFs work thus: “The fund provider owns the underlying assets, designs a fund to track their performance and then sells shares in that fund to investors.”

One other key point that came from my research is that ETFs are traded on the stock market i.e. can be bought and sold all through the day, the same way shares are traded.

Difference between Index, Mutual and Exchange Traded Funds

The biggest difference between ETFs and index funds is that ETFs can be traded throughout the day like stocks, whereas index funds can be bought and sold only for the price set at the end of the trading day. (Source: https://www.nerdwallet.com/article/investing/etf-vs-index-fund-compare) – this made me think: does that mean index funds are the same as mutual funds (based on the explanations given above about mutual funds)?  So I went looking for the answer…

This article https://finance.yahoo.com/news/index-funds-vs-mutual-funds-185646815.html#:~:text=Many%2C%20but%20not%20all%2C%20index,a%20range%20of%20investing%20strategies on Yahoo! Finance explains that “mutual fund” refers to a fund’s structure, whereas “index fund” refers to a fund’s investment strategy. It goes further to say “Many, but not all, index funds are structured as mutual funds, and many mutual funds are index funds. Generally speaking, though, “index fund” refers to a fund whose investments closely track a market index, while “mutual fund” refers to a broad class” of investment funds that follow a range of investing strategies.”

Got it (I think)! With a mutual fund, you are putting your money into a pool of funds; the funds in this pool are invested (by fund managers) depending on the funds’ investment strategy which could be any of investing in equity, money markets, index funds or even exchange traded funds. With an ETF however, you are investing directly in a pool of shares owned by a fund.and with an index fund, you are investing in a share of a specific market, depending on which index the fund is tracking.

Funds vs Shares – Benefits

In comparison to directly investing in individual shares, investing in either of these (index funds, mutual funds or ETFs) automatically means your investment is diversified.
• By investing in an index fund however, you know exactly what you are investing in since your investment is in a specific market index (which is made up of all shares in all the companies in that index).
• An ETF on the other hand offers the diversification benefits of mutual funds as well as being able to trade through the day, like you can do with shares.
• Investing in a mutual fund provides diversification in either asset classes, investment vehicles, country, sector or a mix, depending on the investment strategy of the fund you invest in.

In summary, the most important benefit of investing in a fund is the diversification it offers; it is highly unlikely that all the shares or asset classes of a fund will lose value at the same time, so risk of losses is minimised and where there are losses, it is likely to be less than if invested in a single share. It also saves the time spent researching and monitoring investments in shares of a specific company when investing directly; and as such is a passive investment.

I hope this helped demystify/clarify what funds (the different types) are and would help you better able to decide whether either of these are the best way for you to invest or not.  My opinion, given this research, is that they are less risky than directly investing in shares (and I shall be investing in these in the future) given the diversification they offer, so dependent on your risk appetite, these are worth considering (as low risk sort of investment).

Please do your own research before making any investment decisions.

Leave your comments below; including offering further clarification if you can.


2021.02 “House Cleaning” and Cryptocurrency

Hope everyone is finding ways to stay in high spirits in spite of lockdown 3.0 and the demoralising news about the spread of the virus.

Goal Setting: House Cleaning
Thought I would share something I did different when setting my 2021 financial goals (courtesy of Peter Komolafe’s The Conversation of Money podcast). My financial plans have in the past been based on the figures in the current month’s budget figures, but off the back of Pete’s suggestion, I did an analysis of my 2020 expenses. I literally went through all my 2020 bank statements and analysed the expenses into different categories (while along the way identifying standing orders that will be cancelled and unnecessary cost I plan to either completely cut out or cut down on, in 2021). How useful that turned out to be; I will save about £320 of unnecessary standing orders. This is a similar, but more thorough process than just looking at your monthly budget; we could call this “house cleaning”, don’t you think 😊 I now have a more realistic figure of what my average living expenses are; so I have taken a look at my emergency pot and will be adjusting as necessary during this year. I think it is a good idea and encourage you to take the time to carry out the exercise.

Today: Cryptocurrency
In a previous post, I had alluded to my investment in crypto and  promised to write about it. With Bitcoin currently in the headlines, there is no better time than now to deliver on that promise!

What is Cryptocurrency
“A cryptocurrency (or crypto currency or crypto for short) is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership. It typically does not exist in physical form (like paper money) and is typically not issued by a central authority. Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.” (Source: https://en.wikipedia.org/wiki/Cryptocurrency)

https://www.investopedia.com/terms/c/cryptocurrency.asp) goes further to say “… A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.”

To put all that into nonprofessional speak; crypto currency is a virtual (not physical, like bank notes and coins) asset which can be used as a medium of exchange, just like money. The difference is that it is not issued by the government nor is it stored in the bank, rather it is mined and its ownership records are stored in computerised databases; and it is transferred across a network of computers.

The word ‘crypto’ derives from encryption which is how the network through which it is transferred, is secured.

Since the advent of Bitcoin in 2009, several alternatives to Bitcoin (known as altcoins) have emerged e.g. Bitcoin Cash, Ethereum, LItecoin, Ripple, Peercoin, EOS, Cardano, etc. Bitcoin however, according to Investopedia represents more than 68% of the total value of the cryptocurrencies in existence.

Where and how to buy/Store crypto
To invest in cryptocurrency, you need to register with a crypto exchange like Coinbase, Binance, etc. These exchanges charge a fee for purchases and sales made.

To store crypto, you would do so using either a software wallet (which Coinbase provides automatically when you register) or a hardware wallet which looks like a USB. For those who actively trade crypto, a software wallet is better as it makes for easier access to your crypto.

Why is Crypto Volatile
This is a question that has held back my crypto investment decisions, and not until now have I taken the time to find the answer. Some of the answers I found in writing this post are:

Emerging Market: Because the crypto market is still a small market in comparison to gold and fiat currencies, if a small group decide to sell crypto with a substantial total value. (especially if such people are renowned investors), the prices would be affected (unlike if that were the case with gold).

Digital Currency/Demand and Supply: crypto are purely digital and not backed by anything physical (like a currency or commodity) so their price is dependent on demand and supply. The supply is however fixed (as there is a known maximum number that would ever be mined), so the price will always be dependent on how many people want to buy crypto/how much of it they buy. The more the demand, the higher the prices will be and vice versa.

The above are the main influences on the price of crypto, however the below also play a part;

Barriers to entry/Investor profile: There are no barriers to investing in crypto, so it is easy for inexperienced traders to get involved in trading crypto, while institutional investors have until recently been very cautious and sceptical about investing in crypto because of its volatility. This therefore means that until recently, most investors in crypto have been inexperienced traders whose investment decisions are influenced by fear and doubts resulting in them wanting to cash in their investments while the going is good, rather than ride any waves like experienced traders might do.

Media: Given the size of the cryptocurrency market (relatively small) speculators and investors look to the headlines when making buy or sell decisions, so media stories have an impact on crypto prices.

With continued global uncertainties, increased interest in crypto and claims that cryptocurrency could soon become a mainstream method of payment, all eyes have been on cryptocurrencies as their values began to climb. in the last quarter of 2020. This article https://www.theguardian.com/technology/2021/jan/03/bitcoin-hits-record-high-on-12th-anniversary-of-its-creation says Bitcoin quadrupled in value in 2020 and surpassed its previous all-time high last week (on its 12th anniversary).  The value of altcoins are mostly, directly correlated (some more closely than others) to Bitcoin’s so as the value of Bitcoin rises, so do the altcoins’.

My experience with Crypto in pic

I started out in August with a £250 investment and its value, at some point fell below £200. I invested a further £20 in December bringing my total investment to £270. The value of the investment has gradually crept up (and down as well, as depicted in the picture), but this morning the value of that investment stands at £602 (133% increase).

As with all investments, irrespective of what the charts say, the profit does not actually crystallise until you take the money out. I guess I therefore have a decision to make; with what I now know about it’s volatility do I want to increase my investment in crypto and if so, how much more do I put in and what would be my investment strategy – buy and hold (long term investment) or sell as the profit materialises (and even if selling, I would need to set parameters e.g. at what my profit target i.e. at what percentage gain do I take profit).

The research put into writing this has helped me further understand cryptocurrency and its volatility; and would help with my decision on what percentage of my investments (if any more than already invested) I would put into crypto. I hope the post helps someone else out there with some basic understanding of cryptocurrency and springboards them into further research, if crypto is an investment consideration for them.

As usual, don’t base any investment decisions solely on the contents of this post, rather take the time to do your own research.

Share, like and comment in the box below. Let me know if you found this useful and what other topic might be of interest.