David Sawyer didn’t read the small print. Having written a guest post for us a year ago after publishing his debut financial independence bestseller, RESET, we’ve harassed him into writing a follow-up. You know, like The Godfather 2. Only with (slightly) fewer flashbacks.

These days it’s all about the data. Or so they tell us. But what part-time author has time to get into all that?

When you finish writing a book, the last thing you want to do is work on the manuscript full-time for another six months before it’s ready to publish. And the very last thing you want to do is spend aeons writing the index and doing the Notes section. Many don’t bother.

However, I’m glad I did with my own book, RESET – albeit 511 footnotes over 28 pages was perhaps taking it too far.

Tracking reader curiousity

Of the thousand-odd messages I’ve received from readers post-publication, one common thread has emerged.

“Thanks for all the references, Dave, they’ll keep me going for months.”

People like knowing where your thinking comes from and finding sources of further reading.

It’s proved handy for me, too – or at the least intriguing.

I employed short URLs to make it easy for paperback readers to type in the links, which means I can track how many people click each one.

Which brings me to that data and the other reason I’m glad I included a Notes section.

Around 6,500 people have clicked the 500-plus links in RESET’s Notes. That gives us a unique insight into the UK financial independence seekers’ hive mind.

Click for more: The top ten references in RESET

RESET is aimed at people aged 35-60 who are stuck in a bit of a rut and looking to reset their lives halfway through.

It’s a UK take on US financial independence. Although some topics might not seem core to financial independence (such as decluttering or going digital to future-proof your career), I’ve found the majority of the book’s readers are drawn from the FIRE1 community.

So, with this lengthy preamble over, let’s look at the top ten most popular links – ranked by click volume – and reflect on what it tells us about the UK’s FIRE enthusiasts.

(After that I’ll throw the data overboard and outline the top ten things I’ve discovered about the FIRE community since writing my book. And in between there’s a special intermission, so look out for that!)

1. Candid Money’s ‘How long?’ investment calculator

An online calculator where you can plug in figures to find out when you can retire/reach financial independence.

Purpose, values, vision, decluttering your home, mind, and technology are all topics covered in RESET. But when it comes down to it, the primary concerns of most mid-lifers is: “When can I stop working. When can I put my feet up? When does day-to-day reality not include 9-5?” This is no surprise.

2. How rich are you?

An article looking at how rich you are compared to everyone else living in the UK.

We’re human. We want to know where we fit in the world. And we often measure our success – our rank in the pecking order – by how much money we earn. In his excellent book Status Anxiety, Alain de Botton writes: “…the hunger for status, like all appetites, can have its uses: spurring us to do justice to our talents, encouraging excellence, restraining us from harmful eccentricities and cementing members of a society around a common value system. But, like all appetites, its excesses can also kill.”

3. Pakt

An expensive life/travel bag produced by The Minimalists.

People like the idea of owning one bag for all needs. It’s the holy grail of travel. We chase efficiency, and will pay a bit extra for something endorsed by the kings of minimalism.

4. Osprey Porter 65 travel duffel

A less expensive and more durable travel bag produced by Osprey.

Err, people really like the idea of one-bag-for-all-needs. This is the one I use. Seriously, I’m scratching my head here! I’m all for minimalism and use this bag a helluva lot, but why it and Pakt come out ahead of other links in RESET, I don’t know.

5. How much will you need to retire?

Which? magazine’s annual reader survey to find out how much annual income after tax the average UK couple need to retire on.

FIRE is a lot of things to a lot of people. But boiled down to its essence, you need a firm grasp of your numbers. This link is popular because it’s a shortcut to the in-depth planning and future-gazing one would have to do with one’s partner to come up with an annual retirement spending figure for yourself. Which? magazine is a trusted and reputable source and the fact it has surveyed 6,000 of its members makes the research robust and believable. (You can complement with this data with the recent study by Loughborough University.)

6. Tim Ferriss’s Five-Bullet Friday

A weekly newsletter by all-round self-help guru, podcaster, and author Tim Ferriss.

We’re all searching for something, and followers of the financial independence movement more than most. Tim Ferriss is an anomaly. Through hard work, dedication, and being in at the ground level when blogs and podcasts were becoming a thing, Tim Ferriss has grown his email list subscribers to more than a million. He’s an anomaly because there are tens of thousands of people trying to become the new Tim Ferriss, working their socks off, but only he has succeeded. Every Friday he issues his Five Bullet Friday newsletter, sharing what’s on his mind. I seem to remember first reading about the Osprey bag here. Ferriss gets the world’s best thinkers on his podcast, notably including Mr. Money Mustache, Marie Kondo, and Walter Isaacson.

7. Blogs don’t tell the full FI story

A blog post written by US blogger and author Tanja Hester exploring how US FI bloggers make money from their activities.

Many people who read RESET are already familiar with FIRE. Others are exploring the concept for the first time. Either way, if it grabs you, if you start viewing the world differently, or even if it just gives you a conceptual framework on which to pin information you already understand, it’s only natural you want to pick holes in it. After all, we’re only human, eh? This blog post scrapes the surface of an interesting topic that divides FIRE bloggers, podcasters, and authors on both sides of the Atlantic. There are scores of people in the US who make a tidy living out of FI-blogging, what with product referral fees, affiliate advertising on their blogs, books, appearance fees, coaching practices, and so on. Fewer do so in the UK – and none, as far as I know, fully fund their lifestyle off the back of it. I don’t object one bit to people making money from their creative work. But I do think people have a right to ask whether they’re preaching mung beans on air but eating caviar off it.

8. Global Rich List

A website where you can type in your annual after-tax income and see where that places you in the global rich list.

Back to that status anxiety again. We want to see where we rank, and it’s a nice and surprising feeling (for those living in the UK) when we find out.

9. The Feynman technique

A technique to enhance learning, named after Richard Feynman: once you learn something, explain it to someone else. This helps you retain the information.

Seekers of information apparently revere Nobel prize-winning physicists. Have you read Surely You’re Joking, Mr Feynman!? A great man, clearly, but also an arrogant bore. Or an alternative explanation would be that people find it difficult to remember information, and Feynman’s technique is one I use, usually on the kids, or unsuspecting friends over a pint of Brewdog’s Elvis Juice.

10. Emotional value headline analyser

If you do any kind of writing and want to make a snappy heading/title/email subject line, this tool rates how emotionally appealing it is.

People love a good tool and like communicating well. Everybody writes these days, and this tool is useful. It’s also intriguing. Imagine if you could write an important title in ten different ways and then pick the one that’ll work best.

Intermission

How are we all faring? In need of a pause that refreshes? A cup of tea? A comfort break?

Suspecting as much, I’ve smuggled in an excerpt below from my new audiobook version of RESET. It’s eight minutes long and is taken from Chapter 21: Financial Independence and F.U.Money.

And yes, that’s me narrating!

[Note from The Investor: If you’re reading via email and no SoundCloud player is visible above, you can listen to it by visiting this post on the Monevator website.]

Conclusion

And back to our story – and to the conclusion. What, in a nutshell, do those 6,500 clicks really tell us about RESET and UK FIRE? What does the data reveal?

Well, aside from a couple of outliers (travel bags!), there’s a fair bit of crossover with the Monevator post I wrote at the turn of the year, which was also about tools.

People love tools and it seems that even we FIRE enthusiasts can’t resist using them to compare our lot with others’.

Data, schmata?

Perhaps data can only take us so far in understanding the needs and wants of FIRE pursuers in the UK, why they read books like RESET, and what the UK FIRE community looks like as we reach the tail end of 2019?

In the last part of this post then, I’ll list 10 observations from someone who 15 months ago knew no one in the UK FIRE community but has immersed himself in it ever since.

These observations reflect my own experience. They’re also based mainly on the thousand-plus conversations I’ve had with RESET readers – in person, through LinkedIn, on Facebook and most of all via email, where people feel most comfortable sharing what they really think.

1. Investing is simple, but you have to learn such a lot of information to make it so. Investing knowledge among the UK populace is still woeful.
2. The single most important quick win for anyone living on these isles is to max out their employer match and intentionally pick which fund/s their workplace defined contribution scheme invests in. Then consolidate the rest of their funds into one SIPP, and, again, invest the money intentionally. Despite all the information out there, the amount of people who’ve thanked me for giving them a process and detailed step-by-step instructions to “sort their big money” is unbelievable.
3. People in the FIRE community are bright, knowledgeable, adaptable, and open to new ideas.
4. While not mainstream as yet, FIRE is now definitely a recognised thing, as the smattering of UK national newspaper and broadcast coverage over the past 15 months attests. There are around 20 decent bloggers, a (European, but based in the UK) podcast, a handful of extremely active Facebook groups (most notably ChooseFI London, Financial Independence London and Financial Independence UK) and regular meetups across the UK (not just in London).
5. Most FIRE enthusiasts are different from the norm, and dissatisfied with what society/media/advertising holds up as success. Some have just discovered FIRE but many RESET readers I chat with are a fair way along the journey and are just looking for a bit of reassurance that they’re on the right path and haven’t missed anything.
6. Financial independence can be a solitary pursuit – there’s all those spreadsheets for one thing! In Quiet, Susan Cain reports that two-thirds of the populace are extroverts, one-third introverts – but I believe you can reverse this for followers of financial independence.
7. There’s a swathe of FIRE enthusiasts living in the UK who follow all the American blogs and have read all the American books but haven’t connected with the UK FIRE movement. As a bare minimum they should follow Monevator, The Escape Artist, join the Facebook groups mentioned above, and read or listen to my book.
8. Of the 1,000-plus messages I’ve received, three words stand out: resonate, connection, vision. FIRE enthusiasts want to be connected with others, they want people to articulate the way they are feeling, and they want a clear holistic path of how to change their lot. The messages I remember are the ones that connected with me: the guy contacting me through LinkedIn while at Center Parcs with his kids, the woman who’d stayed at the same place on Loch Coruisk in Skye where I’d bivvied-down with my brother-in-law 20 years ago, and the many people who spend some of their year in one of those white towns in Andalusia (the vision my family is aiming for). In this yearning for connection we are no different from other members of the human race. Yet if there’s one thing the past 15 months have taught me it’s that making online, email, face-to-face, phone, and Skype connections with like-minded people is far better than lurking in the background. You learn more and it’s fun, too.
9. Financial advisers/planners are not to be avoided at all costs. There are exceedingly good ones out there. Some, such as Pete Matthew and Andy Hart at Maven Money, have covered FIRE extensively on their podcasts in 2019.
10. My final observation is this. The more books, podcasts, blogs, seminars, coaches, meetups that spring up this side of the pond, the better. Compared to the FIRE community’s size in America, we’re a barnacle on a whale’s nether regions.

The more people put their heads above the parapet and share their brand of FIRE, the more others will find stories and life experiences that resonate with them – and so the more UK folk will pursue financial independence.

David Sawyer (47 this month) is a United Nations award-winning PR man and author, who has written several posts for Monevator. He lives in Glasgow with his wife, Rachel, young kids (Zak and Jude) and pet – Hamsterdam. RESET: How to Restart Your Life and Get F.U. Money is priced £0.99 for the Kindle version this month only. If you buy the Kindle version you can also get David’s newly published audiobook at just £3.492.  AND THERE’S MORE! David is giving away 10 copies of his new audiobook to Monevator readers who can answer the following question: David’s pet is named after a European city. What is the name of the city and what sort of animal is his pet? Email your answers to dave@zudepr.co.uk (subject line “Monevator Competition”) by midday Friday 22 November – stating whether you’re from the UK or overseas – and he’ll be in touch if you’ve won. Or perhaps even if you’ve lost? A maverick, is David.

1. Financial Independence Retire Early. [↩]
2. Full price £22.89 [↩]

What caught my eye this week.

I stuck my oar into a Twitter debate this week, after economist Julian Jessop produced a graph purporting to show that the UK has not grown much more unequal post-Thatcher:

I responded that if we assume the data is right, then it’s still interesting that things don’t feel that way. So why the disconnect?

I am sure one reason is house prices. Those who have been on the housing ladder for decades – especially those who can help their own kids on – don’t seem to understand how un-affordable prices for the young have fractured society.

Perhaps that doesn’t show up in overall statistics of inequality because older would-be poorer citizens were made richer by rising house prices? I don’t know.

The other reason I put forward was Instagram. The fabulous lives of celebrities, influencers, and the several thousand photogenic cats and dogs made famous by social media cast a pall over our realities.

In the old days the Jones’ lived next-door, or perhaps across the street. Now they’re in your pocket, for many people day and night.

On the spectrum

It all points to new, technology-enabled (or perhaps enfeebled) ways of feeling rich or poor, which reminded me of an excellent blog post by US writer Morgan Housel.

Commenting on how the super-rich can’t help but make even the ordinarily rich feel poor, Housel writes:

Past a certain income the most difficult financial skill is getting the goalpost to stop moving.

And today’s level of global wealth has moved it a town over.

Housel then proposed a new spectrum of financial wealth, described by words, not numbers – because numbers don’t seem to tell us the whole story anymore.

While there are categories on the list I’d feel prouder to belong to, I plumped for ‘Health Wealth’ as my current status:

You can go to bed and wake up when you want to. You have time to exercise, eat well, learn, think slowly, and clear your calendar when you want it to be clear.

…which is gratifying, because I’ve been reading Why We Sleep? by Matthew Walker, and it’s life-changing enough to have seen me buy some new blackout curtains!

Where would you place yourself on Housel’s spectrum? And are there any categories he’s missing?

Have a great weekend!

p.s. Monevator has been ranked as the #1 UK personal finance blog by Vuelio. Several other good blogs on that list, too.

[continue reading…]

When we asked you for questions to put to passive investing guru Lars Kroijer, we were inundated. So we’re doing something a bit different – a collaboration between Monevator and Lars’ popular YouTube channel.

Every month Lars will pick a few of your questions and then answer them individually, in video and transcript form, as below. We’ve already got enough questions to last us a year or two, so sit back and enjoy!

Note: embedded videos are not always displayed by email browsers. If you’re a subscriber over email and you can’t see the three videos below, head to the Monevator website to view this Q&A with Lars Kroijer.

Should I invest in passive products that mimic hedge funds?

First up this time, Tony asks about ETFs that seek to mimic hedge fund exposure. Do they make sense for a passive investor?

Lars replies:

In short, I don’t think you should invest in these sorts of products. There are a couple of reasons.

First of all, it’s incredibly hard to mimic hedge fund exposure. There are perhaps 10,000 hedge funds in existence. They are doing all sorts of things. But it’s really really hard to get access to a lot of them – they’re closed for new investments. Besides, it would be impossible to create investments in the proportions or the sizes of these hedge funds.

So the exposure you’ll end up having is probably quite far from the actual hedge funds’ exposure.

I think what a lot of these ETF providers try to do is not to replicate an investment in hedge funds, but to say synthetically what does hedge fund exposure look like? So they would say that hedge fund exposure is like having point two of S&P, point one of oil, point two of gold, and so on. But like this you’re creating a lot of tracking error versus the actual hedge fund industry.

To me, a passive investor is someone who doesn’t think that through active security selection they can outperform the market. I think there are a lot of benefits from coming to that realization. But a hedge fund is almost opposite of that. And by picking the people that we think can outperform the market – the hedge fund managers – we are indirectly being the pickers ourselves, too, by picking the funds.

So I think investing in hedge funds is almost the opposite of what a passive investor should do. Generally, the huge fees and expenses associated with the funds put you so far behind that unless you have some special angle, it’s worth staying away from them.

There’s probably been some value created in hedge funds over the last couple decades, but there’s also been tons and tons of fees. There’s also selection bias – we tend to hear from only the successful funds, much like in the mutual fund industry, and we don’t hear about the huge failures because they tend to die and disappear. That’s another reason I think just to stay away from this type of investment.

I would say that if you’re really interested in hedge funds (and if you’re able to invest in them, because they often have minimum investment sizes) I would do the work and find a few funds that perhaps offer unique investment opportunities, and invest in those.

That can be an incredibly exciting thing to do and but it’s also something that’s hard for regular investors. In any case, I think it is slightly outside the scope of this question.

Checking up on your portfolio

Rick asks how often he should monitor the funds in his portfolio:

Lars replies:

First of all, there’s no firm rule for this whatsoever.

Just to take a step back, one of the major benefits of a passive portfolio – on top of probably making you wealthier in the long run – is that you spend very little time on it.

You don’t have to spend a ton of time reading the Financial Times, the Wall Street Journal, or research reports. You don’t have to understand whether Facebook is a better investment than Apple. No, you just buy the broadest cheapest index tracker and let the market do all that for you. That saves you a ton of time.

Incidentally, let’s say you invest in a market that’s up 10% – say Europe. [With a tracker] you make that investment with zero time spent and almost no cost.

Let’s say instead you’re up 12% [from investing actively] in the market. That’s only 2% that you spent all that time to achieve – because 10% you got via the market!

I’d even question whether you can reliably make 2%. But even if you did, it’s only the 2% extra you spent all that time achieving.

Coming back to the question, I would say definitely have a look at your portfolio when there’s money flowing in and out. Also have a look when something in your personal circumstances has changed that could impact your risk profile.

This could be a personal thing such as – to start with the positive – a bonus at work. Or it could be you lost your job. Perhaps you got a windfall through an inheritance, which is often obviously not entirely a good thing. Or perhaps there’s an external issue, such as an economic crisis where you live.

I would definitely have a look in those circumstances – and perhaps it’s not a bad idea to get help from a local financial adviser.

But in general, I’d say have a look at it every three to four months just to make sure things are not totally out of whack and then have a more thorough review once a year, perhaps again with a financial adviser. In general, when you hear lots of financial drama in the news that could impact both the markets and currencies again, check out how that impacts your portfolio.

And of course as Rick suggests, once in a while you should think about whether there are better products out there? Has your tax situation changed?

And again, that could be worth talking to an adviser about.

What is the point of owning the minimum risk asset?

Finally for this session, Paul asks why do we need to have a minimal risk asset – that is, the lowest-risk asset we can get our hands on – in our portfolios?

Lars replies:

The short answer is you don’t always need this asset, but you’re very likely to.

Just taking a step back, it’s my view that most people are very unlikely to be able to outperform the financial markets. As a result, they should put together a very robust two product portfolio.

Firstly, they should invest in the global equity markets, through an index tracker typically.

Second, they invest in the lowest risk asset they can possibly get their hands on. For most people, this is typically government bonds that are highly rated in your local currency, with a maturity that suits your investment horizons.

You combine these two to match your investment risk profile, and you’re done! Investing can be more complex than that, but in my view, it doesn’t really have to be for most people.

So why do you need this minimum risk asset? Well, if your risk profile is such that the risk of the global equity market suits you, then you don’t need it. For most people though, that’s just too risky. So they temper the risk of the global equity markets by also investing in a very low-risk asset and then combining the two so that they optimize for their own risk.

Let’s say you want a 50/50 allocation – you’d need to put 50% of your portfolio in the minimal risk asset.

In some people’s cases, they want all their assets to have no risk at all! In that case they’d invest only in the minimal risk asset.

Until next time

Right, we’re out for this month. Please do feel free to add to or follow-up Lars’ answers in the comments below.

Watch more videos in this series. You can also check out Lars’ previous Monevator pieces and his book, Investing Demystified.