The goal of investing is to put your capital to work in one or more types of investment vehicles in the hopes of growing it over time.
October 22, 2021
We’ve talked about trading several times; how and why it can make heightened returns in the hands of professionals like those at The Portfolio Platform, but we haven’t really looked at the different options available to the everyday investor and the very basics of investing itself.
Investing is a way to set aside money while you are busy with life, and have that money work for you so that you can fully reap the rewards of your labour in the future. Investing is a means to a happier more sustainably affordable end.
Legendary investor Warren Buffett defines investing as "the process of laying out money now to receive more money in the future." The goal of investing is to put your capital to work in one or more types of investment vehicles in the hopes of growing it over time.
The first thing you need to work out is how much you have to invest, and what you’re hoping to achieve with it. Then you can look at the best place to put it in relation to the costs incurred.
It’s all very well wiping you’re hands of it and just handing it over to an IFA, but as we discussed last week, if you opt for a safe portfolio, you will be paying the IFA, and the relevant funds they pass your money on to, about 1.5-2% in fees.
The safer your investment with them, the lower the expected return. If 40% of what they do with it, is yielding less than 2%, you are just losing money, and you don’t need anyone else’s help to do that.
Due to the world of the internet and available information, the younger generation will be significantly more aware of their alternative options, than those currently at the age of, or beyond, retirement.
20 years ago, there weren’t many things you could do OTHER than give it to an IFA/wealth manager. But now you have access to almost everything they do, without having to pay them, so why would you bother?
In fact, now you even have access to professional traders at TPP; traders whose only job is to make you more money!
It’s a little like using a travel agent, 20 years ago everyone used one; now, most under 50 wouldn’t even think about it and in another 20 years nobody will even know what they are. All of the parts of a holiday, such as flights and hotel, are cheaper if you just do it yourself online, and investments are similar (or at least heading that way).
The computer generation are happy and comfortable with the idea of ‘DIY’ holidays, but for those who didn’t grow up with them, many would still want human interaction to give them the comfort and assurance that nothing will go wrong – obviously it doesn’t actually mean that nothing will go wrong, but at least it’s somebody else’s fault when it does.
This is no different to investments. The average age of self-investors according to Saxo Markets, is 35 for men, and 38 for women. More and more millennials are choosing to invest their money, which is great, but they are choosing to do it themselves and this could be problematic if they don’t know what they are doing.
The days of getting interest in a savings account at a bank, are long gone. Keeping money in a bank now won’t earn you anything, but it will keep it safe (although the credit crunch in ’08 has made us question if even that is true).
So, what are your options?
IFA’s cost money, and don’t return a great deal, but at least they will invest it so you don’t have to think about it again. This very passive approach was fine 20 years ago, but as we have mentioned, this is no longer good enough for the internet generation.
There used to be a minimum amount at brokers. It was considered a rich man’s game to ‘play the stock market’. Well, not any more. Now, £1,000 in an account and you’re good to go (some will let you open an account with much less). You can build it up over time, add a little each month or year, increase your holdings and you’ll hardly pay a thing.
However, there is one very significant problem here: how exactly do you decide what to invest in?
This is the point of Exchange Traded Funds, ETF’s. These are funds that have been built by (or technically they are ‘sponsored’ by) investment firms such as Barclays, Fidelity, Vanguard, JP Morgan etc. to provide exposure to a variety of assets, or a variety of a single asset such as shares. They are similar to mutual funds only they are traded on the stock market. This means that they can be bought or sold just like a single stock. So if you buy one, you are actually buying a selection of pre-chosen stocks/bonds etc.
This has given the world of self-investment, the chance to invest for themselves with low costs, but still have somebody else do the ground work.
There are ETF’s available for virtually every asset class, including stocks, bonds, real estate and commodities. You could build your own diversified portfolio, by simply selecting a few ETF’s on the market. You can trade in and out of them depending on how you would like to weight it.
Obviously, you could also set it up and leave it. There is an ETF which tracks the performance of the S&P, much like the FTSE tracker x1.5 or x3 on The Portfolio Platform. Rather than select a certain stock, you can add the FTSE tracker at 3x the market rate for any selected period of time, and your allocation will simply move in line with that. You can’t get much more diversified than the whole of the top 100 stocks in the UK.
However, we are now slowly creeping into the trading world where a ‘hands-on’ approach may be required. This is definitely likely to become more common, with the younger generation coming through and setting themselves up online, but it doesn’t help those who still want to leave it to someone else.
This is where The Portfolio Platform comes into its own. ETF’s may be cheap, and they are selling you into a diversified collection of an asset, but they aren’t actively trading it for you. An ETF will usually cost you less than 0.5% per year, so compared to a wealth manager, you could be saving a lot by doing it yourself. You also won’t buy an ETF with a return that is less than what you’re paying for it, unlike your wealth manager.
So, we have looked at the old way, and the new way, but we haven’t looked at the best way.
The third option that has only recently become available, is here at The Portfolio Platform. This really takes in the best of everything. You can put your money on the platform for no initial cost, knowing there is also no exit cost. There are no fees to trade, and selecting the strategies is like selecting an ETF. You can look at past performance, and see which level of risk reward interests you, put them in your portfolio and then leave it.
The real difference is with what happens next though and this is the part that is only now available due to our innovative software. Our strategies are run by professional traders. These are individuals, or teams, with lots of trading experience. They make a living doing what they do, and now they will do the exact same thing for you, without you having to lift a finger.
Every trade they place in their own accounts, is replicated in the investors account. The investor doesn’t have to do anything other than subscribe to that trader. There is no limit to the number of traders you can have in your portfolio at any one time, but the charges are per strategy, so the costs will rise as you increase strategies.
Due to the fact that they are actively traded, they cost a little more than an ETF would, but then these traders are working for you, all of the time. As they trade for themselves, they are trading for you.
The average return on investment by our traders last year was 58.8%. That is compared to an average return from the FTSE since its inception of 7%. Bear in mind that our traders look to profit regardless of market direction, whereas wealth managers who buy equities will only make money if the market goes up. With this strategy, timing is everything. If you invested into the FTSE in December 1999, you would only be up 4% in 22 years, or 0.18% per annum.
On TPP, the traders will keep working for you, with only one goal in mind: to increase the value of your portfolio. It’s what traders have always done, the difference now is they can do it for you. The returns you see on the platform are 100% accurate. They are recorded as the trades are placed.
Our trader selection committee will only allow the very best we can find to be showcased and we think you’ll agree, they’ve done a fantastic job.
The Portfolio Platform is really gaining traction and if you take the time to look at the selection of trading strategies available here, we think you’ll understand why.
If you would like to speak to a member of our team, please click here and we will get back to you. Or if you would like to sign up for a free demo account, please click on the link here.
If you wish to book a call and speak to a member of the strategy selection committee, please click here.
“TPP might just be about to revolutionise investment for the retail market.”
- London Stock Exchange 2020