Like being too scared to date or too shy to visit a gym, the fear of investing is a hangup that costs you nothing in the short-term but can cripple your long-term future.

I’ve seen it many times over the decades. More so as my family and friends have come to think of me as the person they know who is into investing. They approach me with their hopes and fears.

Many people grow up with no role models who invest. It can all seem foreign and frightening.

My own working-class parents relied on a defined benefit pension – and their home – for their old age. They didn’t think about shares once.

My dad said I was gambling. Only after he died did my mum start a modest portfolio.

Other people get burned early by a self-inflicted loss. This used to happen because they unfortunately discovered the market via a friend or workmate who day trades. Today first contact probably happens more on social media.

Half a dozen lost shirts later, some look for a better way. For them, punting on blue sky stocks turns out to be an on-ramp to a global tracker and a simpler life.

But others eventually conclude, again, it’s all gambling. They might swear off investing for a decade. Our lives are too short for that much forsaken compounding not to hurt.

I saw this nervous sentiment after the Dotcom bubble burst. Even those who did keep investing snatched at cheap shares and wanted to sell before they were caught out. Faith in the future was in short supply.

That trepidation must also be widespread in the wreckage of the meme stock boom of 2021.

Doing better by knowing nothing

Let’s think about the future by remembering the past – and previous market corrections.

By late 2009 the global stock market had bounced far off its admittedly somewhat scary lows hit during the financial crisis.

One could certainly quibble about valuation then, or the pace of the economic recovery.

Many of us also fretted, wrongly, about what quantitative easing – as we misunderstood it – would do to inflation or proper market functioning. (A dozen years too early, perhaps?)

However I did believe it was pretty clear all the shoes had dropped, as our US cousins say. The global economy had gone to breaking point and back. It had buckled, but it had not been busted.

The way ahead from the dark depths – however bumpy – was going to be up.

And after two years of writing about a relentless bear market on Monevator – from 2007 to 2009 – I was personally looking forward to some good times!

Yet online people called me naive or reckless for my optimistic take. The pain of loss was still fresh.

Worse, in real-life I learned of friends who had invested nothing for years – too scared by all the bad news.

Luckily those who’d set up Legal and General ISAs stuffed with the in-house tracker funds I used to suggest in those faraway days had mostly kept up their modest but meaningful contributions.

And buying equities cheap for several years eventually boosted their returns, as you’d expect.

One ex-girlfriend was even sweet enough to phone me around 2015 to thank me for getting her started with what eventually became her London house deposit. (I tutted and said it was all her own hard work. While secretly realizing yet again she’d been a keeper!)

However those I knew who tended to talk about “doing something clever” with their money or even “playing the markets” had often not acted so well.

Fear of investing when shares are cheap

You might run away from a bear or scream at a spider. But fear of investing is typically manifested in doing nothing.

In late 2009 a good friend admitted to me that’d he still not started with the regular index-tracking ISA investment plan we’d by then been informally discussing for – oh – five or six years.

He told me this ruefully after seeing the FTSE 100 index break through the 5,000 level again, in the summer rally of that year.

In an article on Monevator in July 2009 I wrote:

Normally you have to hold your nose when you buy because of equity valuations.

For the past six months, you’ve instead had to close your eyes and ears to bad news headlines.

But unfortunately my friend had neither held his nose nor closed his eyes.

He’d kept on doing nothing.

“I knew I should have invested when the FTSE was below 4,000,” my friend bewailed. “But everyone told me it was going to fall further.”

Ahem. “Everyone?” I thought to myself. (I was more diplomatic in those days).

All summer, he continued, he’d been waiting for a correction.

Then he’d swoop!

However in my view, anyone who fancied themselves as a tactical investor who didn’t buy something in March 2009 is never going to be a swooper.

Most people aren’t constitutionally built for making repeated active decisions. Even fewer – nearly all of us – aren’t any good at the timing, anyway.

There’s no shame in it. We just need a different plan. Probably one that automates the decisions we made in the cold light of a Sunday morning.

But this friend of mine struggles. He seems to have an unshakeable image of himself as a wheeling and dealing active investor, but he rarely acts.

Perhaps it’s because he’s an (excellent) entrepreneur. Action is his forte.

Whatever it is I can’t get through to him. He’s still much the same over a decade later. Begrudgingly and inevitably he’s finally made some investments over the years. But there’s still no coherent plan.

Lost in Neverland

Such people are stranded in an investing Neverland. For years they avoid committing. Instead they wait for a perfect tomorrow that never comes.

Or, almost worse, they eventually do buy into a market – but only when their fear of investing fades and it feels super-safe to do so. When everyone is loudly buying again, and the market has been rising for years.

They think they’re taking less of a risk buying in the good times. The opposite is true.

I had another acquaintance who was unlucky enough to make vast profits punting on tech IPOs during the Dotcom boom. From memory he made at least ten times his salary in a couple of years. Possibly more.

He lost virtually the whole lot in the subsequent crash. (Fortunately for his subsequent lifestyle, his wife cashed out her share of ‘the pot’ at the turn of a century, months before the fall, to invest in a lifestyle business in the Med. They went on happily to run it).

This fellow’s ups and downs cemented for him an unfortunate idea about investing. He talked about company insiders, daring bets, nose-tapping tips, and doing vastly better than the market – as well as taking vast amounts of risk.

And that was actually a workable strategy in the crazy late 1990s.

Right up until it wasn’t.

Similar would be the meme stock and crypto traders of a couple of years ago who had laughed at those of us who didn’t double our money in an afternoon.

What speculators do in these rare periods of euphoria works brilliantly, for a while. But they don’t realize they’re essentially exotic creatures in a very unique ecosystem with a short lifespan.

Sooner or later a meteor hits the rarefied climes, and everything changes.

Exaggerated threats

But isn’t fear of investing rational, then? If a generation can go metaphorically extinct like that?

I don’t think so.

What it misses – especially for someone like my entrepreneurial friend, for whom investing is a must-do not a passion – is that questions of when or what to buy today or sell tomorrow are really irrelevant to what investing should be doing in their lives.

They are not fund managers, nor even DIY investor hobbyists.

Their fear of investing is an emotion that arises mostly from their faulty investing worldview.

In reality, investing is just a means to an end for most. We work hard, save, and have spare capital to put to work productively for the future. We need our money to at least stay ahead of inflation over longer periods. We’d ideally like it to do better.

That’s it.

Going back to my friend, his surplus capital should be invested for the long-term. Money he might need in the short-term should stay in cash or short-duration bonds.

History has shown this is a winning strategy.

Follow it and what is there to fear?

Here’s what is likeliest to happen to a balanced portfolio after a bad year like 2022:

Source: Vanguard

My friend should focus on the yellow dotted line – while accepting that now and then some people will find themselves in the unlucky 1%. And he should invest accordingly.

Then he should get back to doing what he’s great at when it comes to making money, and doing what he actually likes doing with the rest of his time.

Everything else is noise for someone like him.

With friends like these…

I am not making my friend up. (I appreciate he sounds like a composite created for a blog post.)

But I don’t believe he’s that unusual.

My friend is no idiot. He’s a clever and capable businessman. He just hasn’t been able to get past the fairy tales spun by the finance industry to extract from us all the cash they can.

My friend is also unfortunate enough to have old university friends in the City – let’s call them the Lost Boys – who were mired in gloom in Spring 2009. They were convinced the stock market would plunge further.

They expressed this view loudly to my friend, who listened. Talking to them flattered his fear of investing – making it look instead like a sound strategic decision.

His Lost Boys were getting wealthy in the financial services industry. So they must have known what they were talking about, right?

Not so fast.

The sophisticated face of fear

While City folk can obviously give extremely valuable information in specific areas, in my experience they used to be terrible sources of general investing insight for ordinary investors because:

• Your goals and their goals are probably very different.
• They flock together, and most tend to think much the same thing at any point in time.
• Many base their mood on what they’ve been paid recently.
• Career risk (good and bad) influences their investing outlook.
• Some don’t seem to understand reversion to mean. Seriously.
• They are often somewhat-to-very rich, which gives them different profiles to most of us. (One very wealthy banker acquaintance of mine used to keep the bulk of his millions in bonds, and intended to until he stopped working. He didn’t need risk, he said. It was rational in its way.)
• Nearly all of them got rich on other people’s money. They didn’t compound a nest egg out of their savings. They took earned 1% of hundreds of thousands of other people’s nest eggs

The younger City types I meet these days are admittedly a different breed. They have grown up in an era where it’s at last widely understood that passive investing usually delivers the best results.

But back in 2009, surrounded by his oldest pals and with a head full of ideas such as doubling his money in banks on the brink, it was difficult to persuade my friend that he should invest regularly and automatically into an index tracker, and to turn volatility over 30 or more years to his benefit.

Passive investing sounded to him more like a tax. Not like high-rollin’ share tradin’!

So he sat on the sidelines and did neither. Watching the market soar.

Fear of heights

Indeed when you’re not invested – or even when you are – rising markets can also encourage a different kind of fear of investing.

Now you’re not scared because markets are falling.

You’re worried because they’ve already gone up.

The Accumulator addressed this one in 2016, after the market had risen for what in hindsight seems just a scant few years.

Yet some readers were already nervous that another bear market must be imminent.

A crash is always a possibility. But the bigger danger is that trying to anticipate such corrections again turns you into a share trading punter. And not a very happy one at that.

As The Accumulator noted:

It’s easy to drift away from a simple and iron-rigid strategy into a messy, complex, ad hoc one where you’re constantly pulling all kinds of shapes in order to outguess the market.

Most of us should stick to a simple, automated, passive investing strategy and only get involved with some light rebalancing once a year, or when the markets have swung wildly.

But this stuff is only very easy in retrospect.

Looking back now it seems almost comic that anyone would have worried about the market getting carried away in 2016.1 Think of all we’ve seen since!

But that’s not to mock those who were. We considered it worth writing about, too, after all.

Number crunching side note

A good antidote to such nervousness after a modest 20% rally is to read old investing histories. You will hear them talk about index levels that seem to be missing several decimal places.

For example, here’s the Federal Reserve recalling the crash of the early 1930s:

The slide continued through the summer of 1932, when the Dow closed at 41.22, its lowest value of the twentieth century, 89% below its peak.

The Dow did not return to its pre-crash heights until November 1954.

True – a smidgeon over 44 was the low in the 1930s depression.

It’s also true that the Dow is breached 36,000 in 2021!

Yes, I understand you haven’t got 90 years to wait for a bounce back. You won’t need so long (absent a disaster like a communist revolution) but even that is not the point.

I’m simply arguing for perspective.

You wouldn’t panic that you hadn’t yet reached Glasgow just 30 minutes after pulling out of your drive in Bristol.

Set your investing horizons appropriately long-term, and you have more time to be less afraid.

Peter Panic

As I said, it’s untrue that nobody suggested my friend put money into the market back in spring 2009.

For my sins, I did. (I stopped giving advice like this years ago, unless my friends really push me).

I also recorded my views on Monevator, writing almost to the day of the low in March 2009:

The global stock markets have suffered their worse declines for several generations.

Ultimately, if you’re not trickling money into the markets at these levels then I think you might as well forget stock market investing altogether.

While I am proud of that piece, I admit I was lucky with the timing. And quite rightly the article was fully of caveats.

Still, in 2022 I could send my friend a link to that old article, note its date, and pretend I’m brilliant at calling markets like his City chums might have. (They’d have launched a fund on the back of it!)

Actually, I’d probably go up a notch in his eyes!

But doing so would be to do my friend a huge disservice. It would teach entirely the wrong lesson.

I’d simply become another Lost Boy in his Neverland gang. Whereas what he really needs to do is to finally take a mature and disciplined approach to long-term investing.

So I keep it to myself, and nowadays just nod as he bemoans his years of ill-fortune in the markets.

Epilogue: fear of investing in the property market

I’m sounding a bit too smug in this article for someone who saw pretty big market-lagging losses in 2022 and felt rotten about it.

So I’ll conclude with a reminder about how I’ve been shell-shocked myself.

Not with equities, but property.

Specifically, how the fear of investing in an expensive-looking London home cost me a fortune.

Long-time readers may remember it took me 20-odd years to buy my own place to live in. This despite my huge interest in the property market throughout.

Years before Monevator – in my 20s and early 30s – I was arguably even obsessed. The tail-end of this period crept onto this blog. I used to compute my own affordability ratios and the like, and swap anecdotes on the madness of the market on forums where we’d try to call down a property crash like some ritual cargo cult.

We didn’t think we were doing that, of course. We thought we were the sane ones.

And perhaps in another reality – where the financial system wasn’t bailed out in 2008 by near-free money and so there was subsequently a second Great Depression – we were. In that universe we could tell everyone in the line for the soup kitchen how we had seen it all coming.

But I’m glad I was wrong and we got the reality we did.

If nothing else, being optimistic is a nicer way to live!

I say that as someone who once calculated that not buying a two-bed flat in an up-and-coming area of London like my father urged me to – at the very bottom of the market in the mid-1990s – had cost me roughly three-quarters of a million quid.

You literally live and learn. But it’s better – and cheaper – if you can do so from someone else’s mistakes.

Invest sensibly and appropriately. Diversify. Never go all-in on anything.

And with that lose your fear of investing.

1. The bond market maybe, given last year’s historic crash back to 2010 levels. [↩]

What caught my eye this week.

Things are looking up for investors. Not because the markets have got off to a strong start in 2023 – the gains logged so far could reverse in a day – but because the pain of 2022 has set the stage for higher future returns.

This is often overlooked during a bear market, probably because those paying the most attention have already invested a decent sum of money. It hurts to see it hammered.

In contrast, those 20- and even 30-somethings who most benefit from the falls have often yet to realize they need to invest for the future. And they aren’t paying attention!

Or, if they are putting money into a workplace pension or similar, for many the sums at stake won’t seem life-altering or worth the headspace.

But those of us who understand compound interest know better.

Let’s say a 30-year old has amassed £50,000 in global equity tracker funds across their tax-efficient pensions and ISAs.

Assuming the future looks like the past in terms of returns, say 8% annualized, their pot might compound to around half a million pounds after 30 years – with no further contributions.

Perhaps if you told them that their future self had a future half a million quid on the line, gyrating with the markets whims during 2022, they’d have been more interested?

Probably best you didn’t.

I get knocked down, but I get up again

Back to 2022, and recall that those who can save meaningful money typically do so throughout their lives.

Let’s assume for the sake of simplicity that our young-ish saver adds another £5,000 every year to their initial £50,000 pot from age 30.

At the same rate of return, adding £5,000 a year, they should end up a millionaire by 60.

(Yes, a million will be worth a lot less in 2052, due to inflation. Trust me you’d still rather have it.)

In this case they’d already saved £50,000 by age 30. But over the next 30 years they’ll save and invest another £150,000 in our simplified illustration.1 Most of their earnings and savings are ahead of them.

For anyone in this position, market falls are good news. They lower the price of new purchases. Which in turn improves the odds of higher future returns.

Let’s assume the 30 years of £5,000-a-year saving came after a 20% bear market that took their initial pot down to £40,000 – but that future returns would afterwards be 1% higher. In this case they would end up around 14% better off than if the bear market had never happened.

Again, all very over-simplified. Some mathematically inclined readers are cross I’m using arithmetic returns and a compound interest calculator, others that I’m not belabouring sequence of returns risk, that I’m suggesting that a mere 20% correction would juice returns for three decades, or that I’ve talking about nominal rather than real returns.

Yes yes. This is a friendly illustration you can enjoy with a cup of coffee on a Saturday morning, not a dissertation. Besides, even if I wrote 5,000 words it wouldn’t change the point.

Which is that falling prices are good when you’re putting more new money to work – whether you’re buying a house, a hamburger, or another dollop of your fav index tracker.

Vanguard expected returns

So what kind of future returns can we expect from here?

Nobody knows in the short-term, but industrial-strength modelling can give credible ranges of probability over longer time frames.

Which is exactly what fund behemoth Vanguard has done for equities:

And also for bonds:

Sorry about all the small print clutter but it seemed best to include it – you know what giant corporations are like.

Remember too that these are expected returns, within ranges of probability. Note the outliers. Nothing is certain.

With all that said, these expected returns are much higher than what Vanguard was forecasting a year or two ago. Especially for fixed income.

Tubthumping

I doubt that after a terrible couple of years for bonds, the average investor would think that UK gilts are likely to deliver 4.3% a year over the next decade?

No, but as I wrote last November, bonds actually got more attractive – not less – thanks to the sell-off.

Again, these are all nominal returns. For sure if you believe inflation is going to stay above 10% for the next few years then you shouldn’t touch bonds with a barge pole.

However me and more importantly most economists think we’ll be back down around the Bank of England’s 2% target in a couple of years, if not before.

Enjoy that thought, the other links below – and the weekend!

p.s. Want more expected returns? GMO did a good job calling the 2021 exuberance. Here’s its new forecasts [PDF]. Note these are real returns this time.

[continue reading…]

1. In practice the amount they save would usually rise at least with inflation, and often far more with raises. [↩]

Today we’re kicking off our monthly interviews with Monevator readers who’ve achieved financial independence and/or early retirement (aka FIRE). In this debut episode, Mark Greene explains how a pretty conventional work-life and a lot of saving and investing unlocked an early and unusual retirement for himself and his wife. We hope it inspires you.

Also, I want to give a quick shout out to ESI Money, whose interviews with US millionaires inspired this series. Do check them out!

Okay, let’s get this show on the road – appropriately enough, as you’ll see…

A place by the FIRE

Hello Mark, thanks for sharing your life story with Monevator. To start with the basics, how old are you and yours?

I’m 51 and my wife is 57. We’ve been married for 28 years.

Do you have any dependents?

We never had children, and each have one surviving parent – mid-70s and mid-90s. Both are living independently at present and are not hugely reliant on us. Long may that last!

Whereabouts do you live and what’s it like there?

Since early 2020 we’ve been traveling. Most of the time we have been in our own motorhome. At present I am near the beach in the south of France, and it is very pleasant!

Did you have any second thoughts about FIRE – or traveling – given a global pandemic kicked off right at the same time?

If we had known the pandemic – and particularly the travel restrictions – were coming, it’s probable we would have delayed stopping work. That said, it suited both of us to have missed the ‘pivot the way you work’ that everyone else went through in the spring of 2020.

I’ve never had second thoughts about not working, but retiring early to travel was the main motivator for stopping work for my wife. She found the first few months under lockdown hard.

Now though, no regrets on either side!

When do you consider you achieved Financial Independence?

We retired in early 2020. I was 48 and my wife was 55. So I guess that was when we consider we reached financial independence. Whether our pot could have been considered ‘enough’ before there could be a point for discussion, but we worked to a particular date, rather than a particular amount – which we hope is more than enough.

My wife has done some very limited freelance work since, mainly to stimulate the brain than for the money.

I haven’t worked since. We have been filling our time with traveling, when allowed to do so through the pandemic.

Assets: only a little bit racy

What is your net worth?

We currently have about £1.1 million in investments, plus our house which is valued at about £600,000.

What are the assets that make up your net worth? Any mortgages or other debts?

In general terms, our main assets are:

• One SIPP (invested in a range of stock and bond funds) £330,000
• Three ISAs (invested in funds and many individual stocks) £635,000
• Peer-to-peer lending (Funding Circle, Crowdstacker) £30,000
• Property Investment Vehicle (Propertypartner) £55,000
• Premium Bonds/cash £40,000
• House £600,000
• Total £1,690,000

One of us also has a small government pension due at 60. It’s worth a few thousand a year.

We have no mortgage or debts, other than current month credit card bills. These are paid off every month.

What was thinking behind the peer-to-peer investing?

Peer-to-peer was a way to diversify my asset allocation, chase a bit of a higher return, and to experiment with something new.

Tell me more…

Initially it was Funding Circle, which I was a big fan of until about three or four years ago. They diversified the loans automatically to spread risk, it was automated, and it provided good returns.

Funding Circle has switched off retail investors though, and now I’m just running down the balances as loans get repaid.

Crowdstacker was less liquid and very hard to diversify. A couple of loans defaulted and whilst supposedly asset-backed, the platform has had some real struggles realising value from the assets. Credit to Crowdstacker, I think they have managed it brilliantly, but I don’t expect to see much of those loans back.

My other loans with Crowdstacker have performed perfectly well though. I achieved rates of about 7% when the banks’ rates were under 1%.

Property Partner is another innovative finance platform. My investments are made into numerous companies that hold property and take capital gains and rental income, distributing dividends along the way. I really like the platform, and it affords me exposure to property (other than our former home) in a diversified way.

The property market has suffered through the pandemic. But again I’m very happy with how the management of the platform have handled it.

So much for digital property holdings – what about your main bricks-and-mortar residence?

Our former home is an Edwardian three-bed semi in a somewhat rural location in the Home Counties, near a commuter rail station. We own it and it is currently rented to a tenant while we travel.

Do you consider your home an asset, an investment, or something else?

While we are not living in it, we consider it an asset as the rent provides some of our income. Once we return to living in it, I would consider it part asset – as it has value – and part liability – because it costs money to live in.

Earning: doing it the traditional way

Tell us more about your old job…

I was in business consultancy and my wife was in training – of adults for professional exams.

Before this we both worked in local government jobs for a few years. That said, we had both done our last jobs for around 20 years when we retired.

…and your annual income?

Mine varied according to the success of my consultancy – I was self-employed – but probably averaged to about £60,000 of annual salary if it were a normal job. My wife was on a salary, which was about £80,000 at the end.

We have no formal income now. We live off our assets!

How did your career and salary progress over the years – and to what extent was pursuing financial independence (FI) part of your career plans?

We both switched careers and then progressed in earnings terms, though neither of our jobs had a traditional career ladder involving promotions and so on. For a few years my wife reduced her working hours slightly – and sacrificed salary – for a better work-life balance.

Other than seeking to maximise earnings in order to grow our assets, pursuing financial independence didn’t directly influence our plans.

Did you learn anything about building your career and growing income that you wished you’d known earlier?

We realised part way along the journey that it was better to work and earn less but stay sane, rather than go all out for a big income and suffer stress and other effects.

We delayed our FI date by a few years so that we could temper our workload – and spend a bit more on holidays – on the way.

Did you have any sources of income besides your main job?

No, we didn’t. We’ve had no significant sources of money other than our work – no side hustles and no inheritances.

Did pursuing FIRE get in the way of your career?

No, never. In fact the mental discipline required to plan for financial independence, and then execute on the plan every month, proved beneficial when applied to our professional careers too.

Saving: starting with an awesome budget

What is your annual spending? How has this changed over time?

Our baseline budget is just under £40,000. This goes up if we are on a major travel trip, but it’s all planned for in our mother-of-all-spreadsheets.

Do you stick to a budget or otherwise structure your spending?

Since we met 34 years ago, my wife has operated an awe-inspiring level of structure in our spending, so we have always budgeted and have always stuck to it. We allocate so much a month to various buckets of spending – food, drink, going out, bills, and so on – which smooth out big bills over the years and has allowed us to ensure we don’t spend on things we don’t really need, whilst still enjoying life.

What percentage of your gross income did you save over the years?

I have to say, I don’t know. It was lower when we started out as we earnt less and had a mortgage, but we never recorded what it was.

This was way before the days of the FIRE movement and an understanding of such numbers. We just saved as much as possible after we had funded the basic budget mentioned earlier. This meant any bonus, pay rise or a bumper year for my consultancy went into the FI pot – not on vanity purchases.

What’s the secret to saving more money?

My first ever financial advisor told us to find a level of life we were comfortable at, and then stick to that budget even if we earnt more, and to save the rest. That was arguably the best advice I have ever been given. In life and business we strove to spend less than we earned and to use the rest to grow an asset base.

I have also tracked our net worth for well over 20 years. Seeing it gradually increase as we paid down the mortgage and grew our investments was a good motivator to keep going.

Do you have any hints about spending less?

The game changed for us when we decoupled from the materialistic societal norms we are all surrounded by. The less we watched TV, read weekend newspapers or monthly magazines, the less we were exposed to ads telling us we would be happier if we only spent on X, Y, or Z.

Whilst all our peers were buying bigger houses, more cars or funding expensive hobbies, we were focusing on what we valued, which didn’t cost money – time together, simple hobbies, and so on.

Oh, and don’t have kids! That turned out to be a significant factor in our story.

Do you have any passions, hobbies, or vices that eat up your income?

Our one guilty pleasure has been travel, which we have spent a lot on over the years. That said, we tend to travel cheaply – not backpacking, but definitely not five-star hotels and big meals out – so we can have a lot of experiences for what we spend.

We have banked some unbelievable memories from that spending.

Investing: starting outside a pension for early access later

What kind of investor are you?

My financial education started with the original Motley Fool in the mid-1990s, and then was influenced by Warren Buffet. So I have been primarily a buy-and-hold investor.

I started with managed funds, then moved into trackers as they became available and online trading became a thing.

For many years I did choose my own stocks. I’d buy in chunks of about £2,000 and try to build a diverse portfolio – although all were in the UK. Some were stars, and many were dogs…

Over the last ten years, as I learnt more and as the products developed, I have sought to consolidate into passive tracker funds. I’m a big fan now of Vanguard’s LifeStrategy funds.

What was your best investment?

In terms of headline percentage return from specific buys, Games Workshop, Novo Nordisk, and Unite Group have been big winners. But the actual return has hardly been life-changing.

Arguably my best investment decision was made firstly at 22 when I decided not to have a pension and invest in funds instead – so that I could access it early – and then a few years later deciding to manage it myself rather than through an adviser. That has made a huge difference in terms of that compounded percentage return over two decades of investing.

Can you tell us more about that decision not to invest in a pension?

When my decision not to have a pension was made in the mid-90s, SIPPs were never raised – even though they existed – and I’m not sure I knew enough to manage it all then. They were also not accessible at 55 at that time. And I knew I wanted the option to retire early, because of the age difference with my wife.

Once I had embarked on the ISA path, I just stuck with it for me – even when we were putting a lot into my wife’s SIPP.

Did you make any big mistakes on your investing journey?

If I had my time again, I would buy tracker funds from the off, not individual stocks. It was interesting to do, and made it partly a hobby. But for every tenfold grower like Games Workshop, there’s a total wipeout like Carillion or Laura Ashley.

As I mentioned earlier I also made some peer-to-peer loans that were in theory asset-backed, but were not immune to alleged illegal practice by company directors. I’ve mentally written off the loan, but court proceedings are continuing.

That bit where they say “you may not get your capital back” is there for a reason!

What has been your overall return?

My best guess would be an annual return of 4%, though I think it is probably a bit more. This includes keeping a reasonable amount in cash – over 20% of the portfolio – when interest rates were almost negligible, because we were approaching retirement. We wanted the security of knowing we were safe from sequence-of-returns risk in the first few years. It was also kind of handy when Covid broke the month we retired and the markets dropped 20%!

Listening to my own answer it strikes me that 4% doesn’t sound too great… But I have another rough calculation that suggests we more than doubled what we put in, partly through pension tax relief but mostly through compounding, because we’ve been doing this for over 20 years.

How much did you fill of your ISA and pension allowances?

Until we retired we filled our ISA contributions every year for most of the years. That – and compounding – is how we have amassed over £600,000 in ISAs.

I don’t have a pension at all so I never benefited from pension allowances. My wife has a SIPP. In the last few years of her working we maximized the contributions (including backdating) using cash we had accumulated.

That immediate uplift as a higher-rate tax payer is the best return we have ever had!

To what extent did tax incentives and shelters influence your strategy?

The tax rebate on the SIPP definitely influenced our decision to pour money in there in the last few years of working. Although the SIPP is just a wrapper, and the money would have been invested in the same thing in an ISA or in the pension.

How often do you check or tweak your portfolio or other investments?

Overall, I do a full evaluation every month, and have done for 30 years. This enables me to report our position to my wife, and to ensure I have an eye on the performance of individual investments.

In addition, I have a reasonable amount of our portfolio that I use to day trade on the ups and downs of the FTSE 100. This is my non-passive guilty secret!

Because of this part of the strategy, I am prone to checking the FTSE more than once a day. But I only ever do this around what we are already doing for the day.

Sometimes we will be off-grid and I don’t check for a week or more.

Wealth management: making it last

We know how you made your money, but what about keeping it?

The meeting of the two systems used by my wife and I enabled us to keep it.

My long-term spreadsheet and the plan to grow from nothing to our nominal £1 million retirement pot, coupled with her monthly budget and accessing only money available for planned spending meant we overcame the temptation to splurge or to fritter it away.

I was passionate about becoming financially independent and retiring early. That drove our behaviour every month, every week, and every day.

Which is more important, saving or investing?

Well, that depends what you mean by both terms. I see saving as money in the bank, investing as more risky options like funds or stocks. Saving is the essential first discipline, but bank interest rates will not grow enough to retire early. You need to take more risk and therefore invest.

When did you think you’d achieve financial freedom – and was it a goal with a timeline?

I thought it would be in my 50s. But then as the plan developed it became clear that with a fair wind it would be possible before that. The main driver was my wife’s age (she’s older), but I am proud to have got there in my 40s.

For the last ten years or so – once it was a clear goal with a very clear timeline – I told a LOT of people about. We really committed ourselves to it.

Did anything unexpected get in your way?

I’ve invested through three big recessions and crashes, though arguably that was expected – if unwanted – over a 25-year period.

Our life wasn’t without challenges, but from an investing sense nothing really got in the way.

Are you still growing your pot?

As we don’t have kids, our spreadsheet allows us to de-accumulate. But that could stretch out over a 50-year time frame or longer, so I am currently trying to maintain the pot.

With our spending heavily front-loaded so that we can make the most of retiring early – and with the tough market conditions since 2020 – that hasn’t always been easy. But we’re not too far off plan!

Do you have any further financial goals?

Ensuring the pot lasts long enough to pay the funeral bills, and not a moment longer. Who knows how far in the future that will be, so in the meantime I seek to do as well as I can with the assets we have accumulated. The targets are in my spreadsheet!

What would you say to Monevator readers pursuing financial freedom?

I genuinely wish Monevator had existed when I was in my 20s. There is so much more information available now, and it is so much easier to do with online platforms. My investing journey started before the internet.

A danger is though that one can spend too much time reading and learning, and not getting started.

Compounding is our greatest friend so, however small, start straight away and keep learning. Read and absorb and improve your strategy as you go.

Learning: starting young, headed to 100

When did you first start thinking seriously about money and investing?

At 22, when I took my first job and had to decide whether to have the company pension or not.

Did any particular individuals inspire you to become financially free?

My father was terrible with money and I didn’t want to be like him. I wanted the security of knowing I need never work again and I could live. That has always been my driver – because life is too short to waste working, even if you enjoy it.

Can you recommend your favourite resources for anyone chasing the FIRE dream?

Genuinely, Monevator! I think it is excellent and strikes exactly the right tone

If your only source of information – other than detailed personal tax and pension advice – was Monevator, you’d probably do well.

I am also now a massive fan of the Vanguard Life Strategy funds – inexpensive, easy to manage, and they take away the risk of paralysis by analysis. Rather than wasting hours optimizing the perfect asset allocation, trust Vanguard and spend the time earning more, learning more, or just enjoying your family.

Based on my own experience, I would work with a quality business or life coach to understand and plan what you really want from life and how you want to make it happen. The clarity that coaching gave me, on many occasions, changed my life.

What is your attitude towards charity and inheritance?

Being charitable is not just financial. I am intensely aware of our good fortune, and we have a budget (of course!) to make donations that help others.

We also now have the luxury of giving our time – either to support people we know, or to help organisations that have a broader impact. My life plan includes some form of major charitable service after we’ve finished traveling too.

Like everyone should we have also written our wills and they provide for charitable donations and inheritances for people we know who would benefit. We don’t have kids, so I guess we have less societal conditioning about who we leave our wealth to.

What will your finances ideally look like towards the end of your life?

Our plan allows for the money to last past our 100th birthdays. But the one thing I know for sure is that life never perfectly follows your plan.

We intend to enjoy the next 20 or 30 years as much as possible, and then anticipate a slowdown, but with enough funds to still enjoy life. If we go early and our beneficiaries gain, then so be it.

My dislike of the fees charged within the financial sector means we will probably avoid any managed products like annuities – but never say never. I enjoy learning about money and managing our finances, and I hope I have the acuity to do so for a very long time.

I guess the dream remains to have a wonderful life (which we do) without diminishing the pot.

So there you have it readers! FI by 50 and retiring early to travel and enjoy life on the road with his wife while they’re both young enough to make the best of it. Questions and reflections – on the concept of these FIRE-side interviews generally or on Mark’s journey specifically – are welcome below. But please do remember Mark is not a hardened Internet warrior like me and he is just sharing his story to inspire others, not to feed the trolls. Of course you can disagree constructively, but please keep that in mind. Thanks!