Just 26 sleeps to go until the new government’s first Budget on Wednesday 30 October. And I cannot recall there ever being so much pre-match jitters.
I could have filled the links below with forecasts, evasive action tips, and threats to emigrate. Hardly what anyone would call a honeymoon period, let alone the good vibes of Tony Blair’s 1997 win.
Even those who didn’t vote for Blair admitted the national mood music went up a level overnight. This time the change has been more like somebody coming in, turning the music off and the lights on, and telling everyone to sod off home.
And I say that as someone who has more sympathy than most with the view that the State’s finances are atypically feeble.
There have been worse economic periods, for sure. Seldom did they unfold though while so many in power gaslighted us with tall tales about how great things were – and millions believed them.
(In short: where did you spend your ‘Brexit dividend’, eh?)
Black rod
With that said, Labour made a rod for its own back by waiting so long to hold the Budget.
It’s like sitting outside the headmasters’ office all day before you’re seen. Almost as bad as the punishment!
For my part I haven’t much to add beyond what I wrote in my articles on the potential capital gains tax (CGT) hike and whether CGT fears could be presenting us with opportunities.
Monevator readers added tons of value in the comments to both articles, incidentally. Go read them if you haven’t.
I would also note that in less than four week’s time the picture will be clear.
ISAs
If you plan to fill your ISA, I say get on with it ASAP. It’s hard to see a downside, given the risk of a cut to the annual allowance.
In practice I suspect any new ISA rules would begin from April next year. Still, why risk it?
However I certainly wouldn’t take out ISA money fearing withdrawals could be taxed in the future. I wouldn’t risk shrinking my ISA tax shield on the very unlikely odds of retrospective taxation.
(Exception: if you have a flexible ISA and if you can definitely put the money back in post-Budget Day if required, different story…)
Pensions
Pensions are trickier. There are reports of people cashing in their tax-free lump sums now or maximising their contributions, in case the rules change.
Yet the former might not be tax optimal for you if nothing changes (depending on wildly varying personal circumstances) while if you’re stretching yourself to load up your pension, you could face other day-to-day spending difficulties. Remember, pension money is locked away for the long-term.
This is not to go into the myriad edge cases that dance around on the threshold of pension drawdown and the like. Take care whatever you do.
Calm before the storm-let
Finally beware of excessive panic due to someone else’s political agenda.
The right-wing papers are having a field day – and worries around pensions and the like are a pre-Budget staple anyway.
But usually not too much happens in practice.
Personally I do expect some things to change but not everything. And I’m not going to do anything hugely radical on the back of that.
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The Slow & Steady portfolio has hit an new all-time high! Yes, our model passive portfolio has finally surpassed its previous peak, reached on New Year’s Eve 2021. Almost two years later we’ve put 2022’s bond crash behind us – in nominal terms anyway – as the portfolio grew for the fourth quarter in succession.
And for once that growth wasn’t driven by our US-dominated Developed world fund. Here are the numbers, in Allswell-o-vision™:
The Slow & Steady is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £1,264 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and find all the previous passive portfolio posts in the Monevator vaults. Last quarter’s instalment can be found here.
The big winner this quarter was global property. It soared over 10% in the three months – having spent much of the year sinking into the mud like a cheap tower block.
In fact even after its recent spurt, global property has managed less than 5% growth year-to-date. That lags the double-digit returns from Emerging Markets, UK equities, and the Developed World.
I need to do a deeper dive into the diversification potential of a REITs index tracker (which is what any passive property fund is) because I am far from convinced that owning this type of real estate makes much difference at the portfolio level.
Bond of bothers
What news of the irradiated bond asset classes?
The recovery looks healthy on the longer one-year view – in terms of what you can hope for from bonds, anyway – but 2024 itself has been a poor year so far.
Here’s how this year’s bond weakness pings out in red in the fund view in Morningstar’s Portfolio Manager:
I’ve circled the two bond funds’ one-year performances in green, and their year-to-date returns in red.
Note the table shows nominal returns. Both funds are actually down in real terms this year, once you factor in August’s 3.1% CPIH inflation figure.
I’ve also circled the 10-year annualised returns in cyan – because we’re all about the long-term here at Monevator!
You can see the long-term growth engine of our portfolio has been its Developed World fund. Indeed if we unpack the Matryoshka dolls of causation, then really it’s the US S&P 500 – and inside that a handful of tech firms.
See our last update for a chart showing how well we could have done if we’d gone all-in on tech when we launched our model portfolio in 2011.
Which we might have done if we could predict the future. Which we can’t.
(And incidentally neither can you).
Choose wisely
A portfolio choice can only be meaningfully compared with an alternative you might have reasonably made ex-ante.1
The model portfolio’s ‘competitor’ then is not a wise-after-the-fact YOLO punt on a tech ETF, but rather something like a Vanguard’s LifeStrategy multi-asset fund. An off-the-peg investing ready meal that enables you to invest in a nutritious portfolio with minimal work. (Sounds awful, I know.)
So has all my DIY dosey-doe added one scintilla of value compared to picking this magi-mix investing alternative?
I think you can see where this is going…
Chart attack
Firstly, because I’ve taken the trouble to painstakingly unitise the portfolio for this comparison, I’ll treat you to the exclusive unveiling of the Slow & Steady’s performance chart. (A happy byproduct of the exercise):
Our model portfolio was launched to world acclaim global indifference on 31 December 2010.
From there, the little portfolio that sorta could has grown 161%. You can see that its value has just reached a new high as it hits the wall on the right.
This 161% gain amounts to a time-weighted return of 7.24% annualised since purchase. (A time-weighted return strips out the impact of cashflows upon a portfolio, and is how comparisons between investments are usually made.)
Meanwhile, the portfolio’smoney-weighted annualised return is 6.97%. (The money-weighted return is more realistic in my view. That’s because the periods when you have more invested make a greater contribution than if, say, your portfolio doubled when you put in your first fifty quid.)
Oh really? Note you can subtract approximately 3% to reflect average inflation to get the real return. A 4% annualised real return is what you might expect a 60/40 portfolio to deliver, based on long-term historical datasets.
More ups and downs
As average as all that sounds, the numbers show the Slow & Steady hasn’t so much as taken a bear market beating during its adventures to-date.
That’s encouraging!
Our worst slide was -15% during 2022’s bond crash. Covid amounted to a -11% plunge before we were rescued by the authorities’ big bazookas.
In comparison to the worst investing can throw at us, the portfolio’s performance looks more like riding a vintage merry-go-round horse than a rollercoaster.
I’ve even made the journey look choppier by using a linear chart above. A linear investing chart exaggerates the scale of later events relative to earlier ones.
Here’s a more realistic logarithmic view:
Essentially, the portfolio has gently wafted higher over the course of its 14-years, with just the occasional stomach-tickling lurch due to turbulence.
I think my first chart feels like the voice of anxiety in our heads yelling: “AAAARGH! Everything is incredibly important and sometimes quite scary because it’s happening to me right NOW!”
While the second chart is closer to objective investing reality, as experienced by a 60/40 passive investor in recent times.
Multi-asset face-off
Now, about that Slow & Steady vs LifeStrategy Thrilla in Vanilla I’ve been dawdling towards.
Here’s Morningstar’s chart for the LifeStrategy 80 and LifeStrategy 60 funds. It’s set to the longest comparison period I can make with my Slow & Steady returns:
LifeStrategy funds only launched in the UK on 23 June 2011.
My nearest Slow & Steady datapoint dates from 1 July 2011, so that’s the starting line for this foot race.
But why is this a three-cornered contest, with two Vanguard funds in the chart?
Because the Slow & Steady portfolio was originally an 80/20 portfolio.
To reflect its fictitious owner aging, we rebalanced into a 60/40 over the course of its first ten years. This saw 2% of the equity allocation transmuted into bonds every year for a decade.
Hence we’d expect the Slow & Steady to perform somewhere between the LifeStrategy 80 and 60, which stick rigidly to their asset allocation lanes.
Out-take – I know, if I had any gumption, I’d gather 14-years’ worth of price data for the Vanguard twosome, combine them into a portfolio, and plot an equivalent declining glidepath. Perhaps one wet weekend I will. If I really want to drive Mrs Accumulator into serving those divorce papers.
Show me the money
This is the best comparison I can do for now. And I think it’s very telling:
Portfolio
Cumulative (%)
Annualised (%)
Vanguard LifeStrategy 80
191.47
8.41
Slow & Steady
158.97
7.45
Vanguard LifeStrategy 60
143.07
6.93
Nominal returns, 1 July 2011 to 27 Sep 2024.
Over this timeframe, the LifeStrategy 80/20 portfolio has grown 20% larger than the Slow & Steady, which in turn is 11% larger than the LifeStrategy 60/40 portfolio.
Our plucky DIY champ has split the two Vanguard funds down the middle! Which is as it should be because its asset allocation lay somewhere between the two.
And while I don’t know how this match-up looks on a risk-adjusted basis, I’m doubtful of snaffling too many crumbs of comfort given the Slow & Steady was (by design) maxed out on UK government bonds just as that asset class suffered its worst year in history.
Ultimately – as much as I had fun ensuring the Slow & Steady portfolio was better diversified than its fund-of-funds equivalent – if I’d really had that crystal ball in 2011, I’d have recommended picking the LifeStrategy option unless you really enjoyed being hands on.
In fact that’s exactly what I suggested to friends and family.
For some peculiar reason they don’t give two-hoots about investing. But they needed to save for retirement all the same.
So much for taking the scenic route
The main lesson I draw from this investing smackdown is simplicity is under-rated and optimisation over-rated.
Monevator’s model portfolio is souped-up with small cap equities, global real estate, and inflation-linked bonds that LifeStrategy lacks.
And the Slow & Steady’s OCF of 0.16% compares well with the LifeStrategy’s 0.22% charge.
But despite all that, the two load-outs are very similar at a broad equity/bond asset allocation level.
And that’s proved decisive in this score draw.
New transactions
Every quarter we throw £1,264 like autumn leaves into the market winds. Our stake is split between our portfolio’s seven funds, according to our predetermined asset allocation.
We rebalance using Larry Swedroe’s 5/25 rule. That hasn’t been activated this quarter, so the trades play out as follows:
UK equity
Vanguard FTSE UK All-Share Index Trust – OCF 0.06%
Fund identifier: GB00B3X7QG63
New purchase: £63.20
Buy 0.225 units @ £281.34
Target allocation: 5%
Developed world ex-UK equities
Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%
Fund identifier: GB00B59G4Q73
New purchase: £467.68
Buy 0.703 units @ £665.56
Target allocation: 37%
Global small cap equities
Vanguard Global Small-Cap Index Fund – OCF 0.29%
Fund identifier: IE00B3X1NT05
New purchase: £63.20
Buy 0.147 units @ £431.23
Target allocation: 5%
Emerging market equities
iShares Emerging Markets Equity Index Fund D – OCF 0.19%
Fund identifier: GB00B84DY642
New purchase: £101.12
Buy 49.095 units @ £2.06
Target allocation: 8%
Global property
iShares Environment & Low Carbon Tilt Real Estate Index Fund – OCF 0.18%
How filthy rich would you be if you could see tomorrow’s newspapers today – and then trade on the back of your unfair insight?
Actually, many people could end up poorer.
At least that’s the takeaway of new research by Victor Haghani and James White of Elm Partners Management.
They decided to investigate conjecture by Black Swan author Nassim Nicholas Taleb that knowing the news in advance wouldn’t help most people make money.
Haghani and White devised a clever experiment to test out Taleb’s hunch: 118 ‘young adults trained in finance’ were given $50 and a copy of the front page of something called the Wall Street Journal, minus stock and bond prices, one day in advance.
The lab monkeys’ task was simple — to use their knowledge of the future to make as much money as possible by trading in the S&P 500 and a 30-year Treasury bond futures contract.
Participants were free to use as much leverage as they liked and asked to place bets on 15 different high-volatility days over the past 15 years, five of which coincided with big employment reports, five of which coincided with Fed announcements, and the other five of which were picked purely at random.
Now, if you’re a naughty active investor like me you’re probably licking your lips in anticipation.
“It’s very humbling,” said Victor Haghani, who was a founding partner of Long-Term Capital Management.
“Even if you have the news in advance, it’s still really hard to do asset allocation or whatever with a high chance of being right, let alone not knowing what’s going to happen.”
Haghani was a Monevator reader back in the day. I’d love to think my co-blogger’s passive investing articles added our two pence to the intellectual capital behind this research. 😉
Anyway if you’re the sort who doesn’t believe something until you’ve tried it for yourself then you can (a) join our Mogulsmembership gang (and be sure to track your returns!) and (b) play the same game over on the Elm Funds website.
Lie about let us know how you do in the comments below!
You partied in your 20s and 30s. Or you had kids early and there was no money leftover. Or perhaps you got divorced and your partner took the lot. Bottom line: you’re late to start investing.
Are you doomed to eat cat food in your retirement? To be grinding out another shift in your 80s as the oldest barista on the block?
Probably not – provided you to take sufficient action now to turn things around.
You’ll need to be more focussed than a younger saver though, without their head start.
And maybe you should do a few things differently.
Saving grace
Imagine you’ve woken up penniless after 20 years in a coma – long of hair, but short of time.
The good news? You avoided selfies, Brexit, Covid, social media, and the last series of Game Of Thrones.
However you also missed out on two decades of compound interest effortlessly growing your wealth.
It’s a financial morality tale is as old as time spreadsheets, handed down from bloggers to Twitter pundits to TikTok influencers.
Person A and Person B both start work in their early 20s. They earn the same salary.
Person A notices there are a lot of old people around and begins to save, before they too get old.
Person B imagines they’ll wear crop tops forever, eats out or orders in every day, spends everything, saves nothing, and reaches their 40s with little to show for it except for a pretty Instagram account.
Run the numbers and Person A may already be headed for a comfortable retirement in their early 60s.
But person B will need to save much more – and/or for much longer – just to catch-up.
What happens when you invest early
We’ve marvelled at the mathematical wonder of compound interest on Monevator before:
Consider two investors: Captain Sensible and Captain Blithe.
From the age of 25, Captain Sensible invests £2,000 per year in an ISA for 10 years until he is 35. At 35 he stops and never puts another penny into his fund again.
Captain Sensible then leaves his nest egg untouched to grow until he hits age 65. He earns an average annual return of 8% and when he looks at his account 30 years later, he has £314,870 to play with.
Captain Blithe, meanwhile, spends the lot between the ages of 25 to 35.
Only when he hits 35 does he sober up and start tucking away £2,000 per year in his ISA. He keeps this up for the next 30 years until he reaches 65.
Captain Blithe earns an average annual return of 8%, too. He ends up with £244,691.
To recap:
– Captain Sensible has invested a total of £20,000.
– Captain Blithe has invested a total of £60,000.
Yet Captain Sensible’s pile is worth over 28% more than the late-starting Captain Blithe’s – even though Sensible only invested a third of the amount.
Compound interest takes a while to get interesting.
All things equal, the earlier you start, the bigger your pension snowball will be by the time you’re old enough to start worrying about it.
What if it seems too late to start investing?
Of course hearing “you should have started earlier” isn’t any more welcome in personal finance than when you’re facing last dibs at a swingers’ party.
There’s not much you can do about that now. What matters is how to best proceed.
The good news is that beginning in 2012 most people have been auto-enrolled into pensions at work.
But if this came too late for you – or if you didn’t put enough away – then start addressing things today.
Powering-up your pension
To catch up with swots like me who were aggressively saving by age 23, you have two broad routes:
#1: Take the conventional approach on steroids. Live much more frugally, spend a lot less, save much more, invest riskier, work longer – and try to do it all smarter to further ratchet up your returns.
#2: Do something different. Start a business, take a more active approach to getting rich, marry strategically, rob a bank, punt on crypto…
Clearly you can also pick-and-mix from these options.
But know that all of them – from making your own lunch to save an extra tenner to gambling your life savings on a start-up – come with potential risks, rewards, and the chance of outright failure.
Risky bets like putting real money into the likes of Bitcoin might well speed up your gains.
But very often taking bigger or less orthodox risks will see you do worse. People try to get rich quick because it promises a shortcut, not because of any stellar track record.
So you must consider the options for yourself and chart your own course.
Just for the record, we strongly advise against robbing a bank!
Start at the end: work out your retirement income needs
We’ve looked at devising your investing plan before, and also how much you can eventually withdraw from a portfolio.
But before you get to that good stuff, you need to understand how far behind you are – and what investing success would look like.
When it comes to retirement, success mostly means meeting your annual spending requirements with a low risk of running out of money.
So you’ll want know how much you’ll need – realistically – to spend in your retirement years.
A good way to get a handle on this number is to track your current spending. Use that as a base to figure out your budget, adjusting as seems appropriate. For instance, fewer work suits in retirement, but more gardening magazines.
For a quick start though, see estimates from the likes of the Pensions and Lifetime Savings Association (PLSA) and Which magazine.
Here are the latest annual retirement income figures from the PLSA:
But for the purposes of a late-starter getting – well – started, ballpark figures will help you to zero-in on the scale of the challenge.
From there you can estimate the size of retirement pot you’ll need to generate your desired income – in conjunction with your State Pension – and so what shortfall you face, especially as a later starter.
You can always further refine your numbers as you go.
Sensible ways to get your pension plans back on track
So you’re on the wrong side of those Sensible Sarah versus Spendy Samuel spreadsheets?
Let’s look at your main evasive action options, with links to further reading.
Save more
By far your best remedial action is to put much more of your salary into your retirement pot. Ideally in the most tax-advantaged way.
Every penny you save rather than spend today is more income for your future self.
Also, by getting used to a leaner household budget now, you may be happier making do with less when you do retire.
Crucially, your savings rate is one lever that’s mostly under your control – unlike say investment returns or how many healthy working years you have left.
Remember there are young FIRE-seekers who are targeting retirement in their 30s or early 40s by saving hard and investing.
To some extent you can flip that script, copying their tactics to catch-up late.
Another sure winner. Every year you stay in paid employment is (a) an extra year to put savings away, (b) another year for your pension pot to compound, and (c) one less year in retirement that your pension has to pay for.
Working for longer is probably not the most appealing prospect, but maybe you can make lemonade out of lemons and enjoy a late bloom at work? Or pivot to a second career?
Our final years in work are usually extra-valuable because earnings are higher at the end of our careers than at the start. (Though professional footballers and lap-dancers may need to pursue a different tack).
Normally we think it’s a good idea to save into both an ISA and a pension, given they are both tax-efficient wrappers.
That’s because money in an ISA is much more accessible – which can be a huge benefit if you need it.
But saving into a pension usually has a numerical edge due to tax-bracket arbitrage, salary sacrifice, and the tax-free lump sum you can withdraw on retirement.
As a late starter, ISA savings may be a luxury you can’t afford. Run the numbers to see if you’re better-off throwing everything you can into your pension in your precious remaining work years.
Maximise your employer’s pension match Your employer is obligated to chip in 3% of your qualifying earnings into your pension under the workplace pension rules. You must contribute 5% of your earnings (though this will cost you less in take home pay terms, after tax relief) for a total minimum contribution of 8%. Some employers are more generous though, and will match further contributions you make up to some limit. This is effectively a hike to your salary, albeit a pay raise that you must put into your pension. Contribution matching is an unbeatably cost-effective way to turbo-charge your savings rate, so you should almost always try to maximise your employer’s contributions. (Ideally via salary sacrifice).
Locking more money away for decades probably won’t come easy if you’ve been a spender all your life.
At least as an oldie you’re closer to the age where you’re allowed to get your hands on the money again…
“Earn more money so I can save more money. Why didn’t I think of that?”
Understood. But it’s worth a second reminder that how much you can feed into the hopper of your retirement investing engine is what will largely determine what you can spend in retirement.
Maybe you planned to coast as a team leader rather than pushing hard to become a department head?
Or to stay in a steady public sector job, rather than following your former colleagues into the tougher but more lucrative private sector?
Obviously I don’t know your work situation. The permutations are endless.
My point is just that easing up and retiring early isn’t on the horizon for you. So maybe knuckle down and work harder instead?
Think of it as the bill coming due for all that spending you did 20 years ago…
Okay, we’re heading into more controversial territory. But if you can stomach the extra volatility, then it might be worth running your portfolio a little hotter in the hope of bigger gains.
For example, instead of the industry standard 60/40 portfolio split between equities and bonds, perhaps you’d go 75/25 instead.
In theory, you can expect (but not be certain) to earn higher returns over the long term with a higher allocation to equities.
The price you’ll pay will be a bumpier ride – and the potential for unlikely but possible lower final returns. (Here’s how that could happen).
Remember: the market doesn’t care about your pension predicament nor your hopes for higher returns.
Markets will certainly crash from time to time – in the worst case right as you retire – so do keep the riskiness of your portfolio under review as you get older and your pot grows.
This is even riskier again, and definitely not for everyone.
But if you find yourself in your early 40s, say, with inadequate pension savings when your ‘What About My Retirement?’ lightbulb goes off, then gunning for expected equity returns of 6-10% (hopefully) and tax relief in a pension may make more sense than paying off mortgage debt costing you 5%, say.
There’s a panoply of options here, from choosing not to make overpayments on a traditional mortgage to switching to an interest-only option, to remortgaging to extend your mortgage term.
All these paths have downsides. Such risks are what ‘pays’ for the potential upside from getting more money growing in your pension for longer.
I’ve written a lot about these pros and cons before. And like I did then, I’ll stress again that paying down a mortgage ASAP is also a fine strategy – even for late starters. You can always go on a massive savings push once you’ve cleared the mortgage. Even if it’s not the financially optimal path, clearing your debts may be more motivational for you. That matters!
I’d certainly urge you to reject any other kind of debt when borrowing to invest.
Mortgages are low cost, they buy you somewhere to live, and they’re not marked-to-market, so you won’t face a sudden cash call during a stock market rout.
Other kinds of debt are much more expensive and/or risky.
Is amping up the conventional approach not moving the dial for you?
Have you left it so late – or are your ambitions are so big – that you need more money than 20 years of diligent plodding can possibly deliver?
Let’s run through a few more disruptive alternatives.
Keep working in retirement
Maybe you can’t hack the rat race anymore in your late 60s, but you could live with doing a few more years of lower-stress work?
So-called ‘BaristaFIRE’ involves earning a bit through the sweat of your brow or muscles to top-up the income from your retirement portfolio.
Like this you can survive with a smaller retirement portfolio.
It takes a six-figure capital sum to generate £3,000 to £6,000 a year in retirement (a wide band to reflect the vast range of starting points, end points, and all the rest).
So earning say £10,000 a year from part-time work can make up for a lot of missing invested money.
But I probably wouldn’t work at a coffee shop or similar, if I’d been a high-earner in my main career and money was my main BaristaFire motivation.
Most Monevator readers should instead pursue part-time or consulting work in the same vein as their lifelong profession. Doing so will maximise the kerching!-to-effort ratio.
I believe everyone has a passion, hobby, aptitude, spare bedroom, or the free time to make £5,000 to £20,000 a year to supplement their main income – without the risks of quitting work to start a business.
You may disagree, which is fine but is also perhaps why you’re behind on your retirement savings…
The truth is options abound and I can’t list them all here. Be creative, test and iterate, and back yourself.
The better pushback is that for a high-earner, it’s not worth messing around with side hustles for £10,000 a year when they are earning £100,000+ in their day job.
And I agree. Such people are probably better off getting promotions or doing more overtime.
But for the average earner on £35,000, say, the extra cashflow of £5,000 from a side-project can go straight to the bottom line to massively boost your pension savings.
Risky business
Of course if you want to make really big bucks then starting a proper business is one of the best ways. Perhaps the only way for most for us.
But that doesn’t mean it’s easy – or in fact less than unlikely or near-impossible. (Beware survivorship bias!)
The risks vary. If you’re trying to create a start-up software business, say, or to launch a restaurant, then your chances of success are low.
But if you’re an established architect wanting to set up your own practice doing what you already do and with an existing book of contacts, for example, then there’s surely less risk of outright failure.
Either way, your workload goes through the roof when you run your own business.
By all means be an entrepreneur if it’s your life goal. But I wouldn’t quit work to start a business to try to fix my pension pot.
Some active investors do beat the market. A handful even over the long-term.
Warren Buffett, I’m looking at you.
You’re not Warren Buffett and you haven’t got much chance of finding the next Buffett, either.
But if you can – or if you have edge yourself and so can pick your own stocks to beat the market – then by definition this will increase your long-term returns.
Perhaps there’s a case for investing into a few previously proven but out-of-favour active funds that might recover over the long-term, if you really want to roll the dice. Say with 25% of an otherwise passive equity allocation.
Examples as I write could be investment trusts like Scottish Mortgage, Finsbury Growth & Income, Pershing Square Holdings, and RIT Capital Partners. These funds have all compounded money very well over the long-term but are more or less in a funk right now. And they all sit on big discounts.
To be clear though, there’s zero guarantee that these or any other active funds will beat the market again in the future.
And needless to say you should not take my top-of-head list as any sort of investment advice. Do your own research!
Remember: you’ll probably do worse if you invest actively. You’re unlikely to beat the market and you’ll pay more in fees for trying.
But there’s always a chance… so onto the list it goes.
Some ways of making money sit between investing and running a business.
Moves like investing into a family or friend’s franchise business, running a multi-unit buy-to-let portfolio via a limited company, or reserving property off-plan in the hope of flipping it for a profit later.
These are idiosyncratic investments where the outcome will be about your aptitude – and luck – rather than what the S&P 500 does.
Again, possibilities abound. I’d suggest looking at areas close to your own professional expertise. You might have some kind of edge or insight there.
For example, if you’re a dentist then perhaps you know there’s a need for a new multi-practice building in your local area? You could be part of a consortium that gets it built and occupied.
There’s no end of other high risk, high reward ‘opportunities’ out there.
And yes – I’m lifting my fingers off the keyboard to put ‘opportunities’ into air quotes because one person’s reasoned speculation is another person’s reckless gamble. If not a borderline scam.
Into this bucket we might put everything from punting on cryptocurrencies to extreme concentration into just a few company stocks (putting it all into nVidia, say) to investing more than a small percentage of your net worth into a handful of private or crowdfunded start-ups.
I would define this category as anything where if a hundred of us have a stab, 90 of us will lose some or all our money – or at the least lag the market in the case of listed shares – but 5-10% might see huge returns.
So as the man once said: “Do you feel lucky, punk?”
Personally, I would again at most ring-fence a portion of my assets for such antics. Maybe a maximum 10% allocation.
That way if I did pick a winner it would meaningfully move the dial, but if – as is most likely – it goes tits up then I’m not too far further behind on my goals.
If you say “No way, not touching this stuff with a bargepole” then I can only applaud your good sense.
We all know other ways to get rich that aren’t written about on worthy websites like Monevator.
And as an upstanding citizen I don’t recommend any of them. Besides the moral issues, do you really want to risk your reputation or your liberty for the sake of a slightly comfier retirement?
Perhaps marrying rich is the exception. But I’m the wrong person to ask about marriage, as I see mostly risks…
For some of our regular readers, this post will have seemed like one long ‘obviously’.
Such people began saving and investing when they were very young maybe, or they’re on the other side of work already and enjoying the fruits of their labours.
Good for them!
However I do regularly hear from people with proper jobs and responsibilities who’ve no idea where they stand or what to do about their pensions – and they’re sometimes only ten to 20 years from retirement.
If that’s you, then don’t panic. Follow the links in this article, learn more, and begin to create your plan.
For most non-investment crazed would-be retirees, I’d suggest stick mostly (or entirely) to the sober tactics, with maybe an added side hustle.
Beyond that you could perhaps make a modest 5-10% allocation to a few out-of-favour trusts or to very carefully chosen long-shot bets in the hope – but not expectation – of faster gains.
I’m sure I’ve missed out a few possibilities above. Let me know in the comments below – and do tell us your story if you closed the gap in your retirement savings later in life yourself!
