Invest For Growth - Beat Inflation - Retire Well
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- Опубліковано 2 чер 2024
- Whenever I do a video where I quote something like a 6% return, I get tons of comments challenging my assumptions. Is it really possible to get a return on your money of 6%, 7%, 8% or more? Well, let’s find out…
#meaningfulmoney #meaningfulacademy #inflation
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Chapters:
00:00 Intro
00:36 Interest vs returns
03:05 Rising and falling markets
05:31 Why you don't get high returns
06:47 The biggest factor
08:07 Resolution
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We are all different, but when my portfolio dropped by about 40% a year before I retired just over two years ago, I had to remind myself that beforehand with growth and tax breaks it had grown by a significantly greater factor way beyond 40% over many years. My portfolio this week has returned to its zenith. This philosophy for me works. No point in being over greedy and its only money after all. Its OK to loose a shed load of money for a while, knowing it will return.
Classic case of "sequence of returns". Glad you had the bottle to persevere.
Honestly you have been a gamechanger in my whole approach to monetary matters! Before i avoided it like the plague, now i feel empowered by knowledge and eager to get started and to pass on what i have learnt! Thank you
You’re very kind to say so, thank you! I’m delighted to have helped a bit along your journey…
Well done Pete, great video, keep up the good work👍
9 minutes that everybody should watch. Thank you Pete
Agree 100% Pete. Love all your output, keep it going.
Thank you Mark - glad you’re enjoying it!
Thank you another fab video ❤
Great stuff Pete. well explained and presented. 👍
Thank you - very kind of you 👍🏻
A fantastic video!
don't get weighed down by ill informed comments big man, your channel is great
Oh wow, 100k finally, Grats! This is the most well deserved milestone!
Thank you! Been a long time coming but very glad to have made it!
Wise words as always Pete
There was a piece of YOUR advice that I wrote down many years ago that I have got plastered all over graphs and data that I use to track my performance and it has helped me keep a level head when trying to survive the fluctuations of the stock market. REMEMBER "it's time in the market; NOT timing the market". Something else I've taken from your sage advice is don't fool yourself that you as a novice investor can predict the market movements. Thank you
Glad to have been of help! Thanks for watching and commenting, but thanks for taking action most of all!
As always Pete, another great video.
Very kind, thank you!
Great work Pete, really like what you do. Derek
Thanks for being here, Derek!
Great video Pete!
Very kind, thank you!
Great content, as always Pete
Why, thank you!
What's the best approach to get started? and how long do I wait before the lnvēstment can y!eld profits?
Excellent explanation. Thanks Pete.
Thank you Ken!
Pete,as per usual a very well explained ,logical and informative video.
Myself, I don’t want to be greedy.. I’m happy with 6%,if it beats inflation and my annual withdrawal of 3.5% on my pot, because I’ll use my ISA reserves to supplement if I need to.
You so often and correctly highlight personal behaviour in times of crisis, me ,I look at my holdings at the beginning of each month and pop a ‘chill pill’ if they look bad,but,will never change my method of investments 60%Global,20% Bonds,5% Emer Mkt,5% FTSE,5% Small Caps.
Love the videos keep em going..
You can place interest in year 1 on deposit and achieve the same effect. The difference is that, backed by the FSCS you have the covenant of the central bank. So interest is exactly like a very low risk investment.
Totally agree. I reinvest all my dividends, and max out my ISA allowance every year. I also occasionally trade the big dips and spikes, as well as black swan events like pandemic and war (some might call me a disaster capitalist, I simply see it an opportunity).
This is an excellent and honest explanation of real world investing. A short simple video that actually does want so many others promise, but fail to do.
Thank you, Alastair - I appreciate that very much!
Evening Pete, I have been educating myself with your show and have made the jump into the etf world of global trackers wrapped in an isa on low low costs. I'm in for 13 years through thick and thin... Thanks for your wisdom
Hello Jonathan! Great work - your future self will thank you! Thanks for being here…
Great explanation, as ever.
It was due your (and Andy Hart's) great advice that not only have I swapped into low cost, globally diverse indeed funds, but, at the start of the pandemic, I remained invested and have reaped those rewards. Was easy to listen to your advice, nervous following it through, but well worth it.
Pretty much the same journey I took - plus won a copy of JL Collins' Simple Path to Wealth on Meaningful Money
Well done for taking action, @hooksforestchin! And thanks for watching...
What a book that is, @roblowry9457 !!
Great video again, Pete. Love your content, always really well delivered. Thank you
Thank you Rhydian!
Thanks Pete. :)
Thank you, Minimad!
More wise words from PM!
Heckin’ love you, Tony! 😍
Excellent video, Pete. I always love zooming on out on charts to realise how those scary moments are nothing in the long term.
Absolutely - so important.
Much appreciated Pete, definitely understand this more now! Thank you so much! Pension, ISA, investing + buying in a dip = not going to do too bad haha.
I guess the question becomes what to invest in!
Global equities, for the most part. Watch this space...
@@MeaningfulMoney I’ll definitely be on the lookout! Thanks Pete!
Thanks pete, in 2023 my isa provided a 24% return and my sipp returned 22%. Not invested in any UK companies or funds. Great videos. Heres hoping the bull run keeps running.
Amen to that!
This is an excellent video very well explained. I can support your stated return over the period in question as across a SIPP and two ISA's I achieved just under 12% p.a.
Cheers Mark!
Wonderful video Pete. Thanks as always for being so informative and engaging. Trick is to start small, be consistent, commit to building wealth. and resist the temptation to meddle with it.
Preach! Thanks for being here 😍
As ever Pete excellent video and love your clarity 👍
I appreciate it, Andy!
Another excellent video, Pete. I am forwarding it to a friend who I am encouraging to start investing, instead of keeping her money in a bank savings accounts. She has a lump sum that she has no plans for in at least the next 5 years.
Wish her well from me, Christine!
Great video as always Pete. Thanks for posting.
2023 was quite the year, I enjoyed the big returns. In fact, it’s the first time my portfolio earned more than me so that was a definite switch in my mind! Got about 4 years to go I think before I can sail away into the sunset…
Having said that I also enjoyed the drop around Covid because, like you say, they always bounce back, and it was like there was a sale on. Was surprised how quickly they did bounce back actually. If anything, that was a bit disappointing lol.
Just ride it out guys, long term, it works out!
It does - cheers, @Banthah!
The covid quick bounce back was as a result of central banks decreasing interest rates.
100% agree with every word 🚀
Thank you!
Useful info as ever Pete - I am only now realising that the platform I use is one of the most expensive (HL) and kicking myself for not comparing. I also wish I had seen a video like this 5 years ago as I could be sitting pretty now instead of just ok - oh well better late than never 😊
Not if you invest in ETFs within the HL S&S ISA (it's capped at £45/year for however much you invest). At least cheaper than my Vanguard and ii ISA charges.
Always better late than never - you’ve got this!
@@Jal-ls9zuAnd also the HL platform charges in a SIPP for ETFs are capped at £200/yr which is good news for relatively large value pension pots.
In addition for many OEIC funds a fund manager fee discount is also the case through HL compared to standard fund fee, which offsets the HL platform charge fee.
Ok....on this basis can you do a video on withdrawal strategy on the said 80/20 portfolio during the peaks and troughs of the market for a retiree.
Many thanks
Noted. We’ll see…
My Scheme AMC is 0%. I am in 100% equities with a fund charge of 0.12%. Happy to leave it there forever. The only time I care about fund drops is I don't have more money to buy cheaper units.
You’ve nailed it 👍
Yep, nailed it indeed! 👊🏻
Is that a company pension scheme, with discounts applied?
@@andrewfielden284 Yes company pension in financial services. They don't charge for administration for employee's which is one of the perks.
@@andrewfielden284 yes, a company scheme in financial services. They do not charge administration fee's, just fund fee's.
Great stuff as always Pete - non finance question though, I always wonder what the audio file is in the background? ☺️
Ha - you're not the first to ask that. It's the waveform of Digital Man by Rush. My daughters got it for me for Christmas a few years ago.
@@MeaningfulMoney very apt! Good song 👍🏻
Simple to understand explanation
Regarding FA costs, I would like to see a video on what is a reasonable % for an FA with portfolio size examples
I presume a £100k portfolio will not be the same as £1million? How would an investor negotiate as the fund sizes increase?
All advisers work differently. Some charge % fees but would tier down at higher levels, and other charge a flat rate or cap fees altogether. Ultimately it’s what you deem to be good value that matters.
Is there any better way to save and invest than a sharesave scheme and what ways can avoid paying capital gains tax on investments?
Oops, you forgot to mention something really important about staying invested in shares even when stock markets are falling. Companies will be paying dividends even when their share prices are going down. So, if you disinvest, you will miss out on those dividends even if you are lucky to get back in just before stock markets start recovering.
Excellent video. Should be compulsory viewing.
Thank you Shelly!
Hey i love this channel it puts everything in such simple terms. I I’m a newbie Paraplanner and looking to get into the adviser world in the Uk. Has anyone got any recommendations for daily or weekly podcast/ UA-cam channels / tik toks that give weekly market updates. What the markets are doing and why due to recent news or updates on big financial stories. I haven’t come across any yet and find it quite hard to keep reading articles after articles!
I have a reasonably large pension pot invested by my advisor in a Royal London managed portfolio in bonds and some equities starting in 2021 (oops). To date it has lost around 1% plus inflation although there has been some minor recovery in the last few months but still in the red. The problem is I will need to draw on it later this year as the wife retires on her very poor NHS pension. Keep her working or go back to work......?
Any positive returns from ethical shares via companies that actually leave the planet in a better condition, or is all investing ecocidal by its very nature? (And I don’t mean “ESG“ greenwashing ones). Thanks
You definitely have to dig a bit to find those companies and they’re no more or less likely to provide decent returns than any other company. By limiting your universe of available shares, you inevitably increase the risk of a portfolio. But if environmental investing is important to you, you factor that in
Awesome vid
Hi there. Great video. Was the 80/20 portfolio for someone approaching retirement or someone younger ? Also, what bond fund did you use ? Not sure if you can say or not.
Can't give you specific funds, sorry. As I'm a regulated adviser that could be taken as advice. The portfolio is suitable for any life stage, but would depend on someone's attitude to risk.
@@MeaningfulMoney Thanks. I’m around 12 years away from retirement. Consolidated all previous pensions into my current employers one recently a year ago. I noticed recently that lifestyling/derisking had started to kick in too early for my liking so I switched lifestyling off and went 80% global equities passive fund , 20% in the active multi asset fund that they were derisking to- the lifestyling had taken the global equities to 69% and 31% active multiasset fund with higher fees. I’m happy with the 80/20 split for now 🙂
I’d say that’s a decent split. Lifestyling assumes you’re going to buy an annuity at retirement, rather than opt for drawdown where the money stays invested. And there’s lots of academic studies that show that pensions funds should be fairly aggressively invested to last as long as possible
Pete I. Your opinion with the age you can withdraw from rising to 57 is it worth the extra returns if you might not ever be able to see then who knows where we will be in 20 years time ? No point have extra money sitting there if your blocked access ?
I think that it depends on your unique circumstances and your goals for retirement. I think you should have accessible money for sure, and not pile EVERYTHING into pensions, but pensions still offer the best return via the tax relief and 57 isn’t old, not really!
Clear enough even for me.
That means a lot - thank you!
How do Vanguard calculate the return percentage? For my investments, they seem to report double what my calculations come up with.
If you have been using Vanguard for a number of years and you need the performance percentage over a given period, you need to change the dates to your chosen period in the performance section. Vanguard then gives you the required accurate percentage. Shame the dates need to be scrolled through rather than using a manual setting but hey, 1st world problem.
It would be good to see a graph of what a % ongoing adviser charge does to investment returns over 20 and 30 years
Good shout. It’ll affect it of course, which is why costs need to be kept to a minimum…
There`s a graphic on google images from one of the big banks showing that the average investor only makes 2.4% per year due to " mistiming , greed and fear ". Don`t be average !
Why isn't there a fund that tracks the Top 20 Global companies and how much more would that fund would have made compared to the S&P 500 for example?
As a crypto investor for a few years now, I’m ready to ride these bull and bear waves!
Would you not go with an all share fund though until you approach retirement and then de-risk into bonds?
And an idea for something to explain in a video maybe?, FCA protection is 85,000.00 GBP per account or per institution? So I am with Bank A and have a current account and an instant access savings account is that 85k each account or 85k total? And if your in the privileged position to have over 85K ( eg 250k inheritance how do you div that up to make sure your covered via the 85k rule?) and finally if you have a stock and shores ISA which you grow over time you would want more that 85k to allow the snow ball effect to take over, is that just a risk you have to take?
So. Many. Questions!
You could go 100% equity - I chose not to for the example is all.
£85,000 FSCS limit is per institution and per person. So £85k across all accounts in one person's name with that one bank. Be careful of banks with different trading names but within one group. A couple would be covered up to £170,000 with one bank as it is £85k each.
If you have a lot of cash, then you have to spread it around intentionally, or use a service such as Raisin or HL Active Cash which does it for you.
When it comes to investments, it is tricky. Is the £85k limit per platform or per fund house? I did a video on it here: ua-cam.com/video/YcjKlxAYEEE/v-deo.htmlsi=N9kOynWC32g_S15q
Many thanks :) @@MeaningfulMoney
Great video! 80% equity 20% bonds…. Question - Would you recommend a gold ETC for a SIPP?
For context, I’m 30 years old, currently 100% equity and happy with that risk. I am considering making 10% gold, but conscious I may miss out on the growth compared to normal equity.
Thanks in advance!
Gold is a lump of metal that will sit there taking up space while producing nothing of economic value. The only way to make a profit from owning gold is to find someone else to buy it at a higher price than you paid. That's not investing, it's speculation.
You cannot expect Pete to offer financial advice that is specific to you; for that he would have to know far more about your situation. As a financial planner, it would be illegal to give advice without analysing your income, assets, outgoings, risk capacity, etc.
As a fellow investor, I would ask you why would you want to buy gold when the price is close to the all-time high.
Sorry I can’t advise on specifics. Tread carefully with gold - it doesn’t make an income so cannot, by definition, compound
Thank you all for your comments. Some valid points.
My considerations for making 10% of my SIPP into a gold ETC, was because I believe that it offers some stability to the portfolio and is an asset that’s value is highly likely to continue to increase in the long term.
However, the fact that the asset does not provide income and compound as Pete says, and that the annual price increase is typically below that of a global tracker does makes it a less attractive option admirably. Thought I’d ask anyway. Thanks
@@kieron8051Also, you’re still young right? You got decades (I’m assuming) before you retire. You can consider moving away from 100% equity later on in life. For now, zoom out and look at the long term growth that shares provide. Ride the waves, long term you’re up
I've based my billy basic spreadsheet model on 4% real return, I'd rather end up with more in retirement than I'd planned for, than less.
Absolutely - err on the side of caution and be pleasantly surprised!
Before I knew about investing I just had an idea it would pay better than inflation so I calculated my retirement income to grow at 1 % and was therfore able to ignore inflation.
Me too! Love the ‘billy basic’ description - fits mine to a t!
I get 7% APY guaranteed just by holding Stablecoins.
I don't want to use the 'c' word because it brings out the bots in force, but not all... K-rip-toe 😅 is volatile.
How refreshing that I haven't seen anyone making comments like "Can't go wrong with a highly leveraged BTL Portfolio". Are things not so rosy in the world of BTL :-)
Never been much of a fan. They have their place, but they’re not a panacea.
@@MeaningfulMoney My comment was a dig at the "My BTLs are my pension" people.
I like to remind people that house prices dropped every year from 1989 to 1996. From experience, having the one house which I lived in was a big enough financial burden back then.
Totally agree! 👍🏻
Nothing about sequence risk for people about to retire? Perhaps that was in the other video (I haven't seen it yet)
This was about wealth-building primarily. I have dealt with sequence of returns risk in another video.
I suspect the only times the market won't recover is if things get so bad that it's impossible for it to recover. The market recovered from the near collapse of the global financial system for crying out loud, if it can recover from that then there's almost nothing realistically feasible or likely for it not to recover. It'd have to be some sort of post apocalyptic scenario where money is no longer in use for this to happen. At the moment my investments are bombing along at 16% growth, I'm actually hoping for a bit of a correction so I can dump a load of cash into the market rather than drip feeding it in.
Agree with all that, Mike!
Exactly this.
If the market cannot recover, we’ve got bigger things to worry about than the market not recovering…
Im pretty sure the Japanese Nikkei index crashed in the 1980s and it still hasn't recovered anywhere near the high it was during the 80s today. So there is always a chance the market won't recover back at the period of record highs.
@@RebeccawalkswithChrist12 Yea fair play. That’s why you globally diversify. One country can go to shit sure, but if they all do, get your zombie crossbow ready…
@@Banthah 😂
Do ANY of you guys worry about the Dow and Nasdaq being at the 4.236 ??
My biggest issue isn't investing when equities are down, it's investing when the S&P is over 20 PE and completely euphoric. Great video Pete.
Yes, I agree. Some measures are high at the moment, but I’m still investing of course and will do throughout.
I'm waiting for a fund manager to base their fee's on the gain (or loss) of the portfolio rather than the total value of the portfolio. It's like going to a restaurant and being charged differently for the same meal based on your weight 🤣
You may be waiting a while!
Pete, it's misleading to say 125% return over 11 years is 11.4% average annual return. It is actually a 7.65% average annual return. (1.0765 ^^ 11 = 225). And if inflation is running at 5% then that's a 2.65% return in real terms per annum. Way off your 6% claim.
I did use the word ‘simple’ for exactly that reason. I do understand the maths, honest. Also I didn’t claim a 6% real return in the previous video that this one was answering. In fact I halved the 6% return to account for inflation in a simplistic way. Average inflation was 2.9% over the period, not 5%.
Please understand that some people want precise mathematics, but most people need inspiration. I’ll never lie to achieve the latter, but neither will I get bogged down in minutiae at the risk of losing the message, which in this case was to invest, and not leave money in the bank.
Thanks for watching and commenting.
He did say that 11.4% was a “simple annual average” but I agree, that was an odd stat to quote - because by ignoring the compounding effect it appears to inflate the actual annual return.
Spot on.
An average 6% nominal return per year from a 60% equity / 40% bond portfolio after fees is entirely possible given historical market performance.
The above data together with different % equity / % bond portfolios can be found in articles concerning sustainable pension drawdown strategies (Guyton-Klinger).
As you say inflation has an adverse effect on a nominal return creating a real return, hence the need for central banks to manage inflation to be at a low level.
I agree with the O/P - I'm reasonably familiar with financial maths and I thought this was a slightly odd choice of words. Certainly, if you've got a string of unrelated percentages then it's perfectly reasonable to take the simple/arithmetic average. But as soon as you start describing the compound growth of an investment over time, then the geometric average is the only one that makes sense. Quoting the "simple annual average" in this context is meaningless (after all - if your investment fell by 50% then rose by 100%, you've made a "simple" average of 25% pa even though you're back where you started !). I know that you know this, Pete, but IMHO I think that by trying to simplify this point you've actually made it a bit confusing.
Love your videos.
Is this a good retirement plan?
1. Pension (match)
2. Lifetime ISA (max)
3. Stocks and shares ISA (max)
4. Pension (max)
Yes.
What is the optimal order for investing?
I’m following Dave Ramsey’s Baby Steps.
No mention of government interventions on companies & the negative impact that has on investors, take Lloyds bank for instance & the companies they were forced to take on.
Just one of tens of thousands of companies globally. I cover the GFC in the bit with the chart. Lloyds was and is in that portfolio and it weathered that storm, given enough time.
@@MeaningfulMoney Lloyds shares were £12 at one point now they are 40p & they don't have complete control over what dividends they can issue, not my idea of weathering.
Yes, I should have been clearer. The portfolio weathered the storm, but Lloyds shareholders were royally screwed by the Government, no doubt.
It was GEC then Lloyds that put me off investing in individual companies. It was especially annoying with Lloyds as I spotted that Halifax was a basket case and sold my shares in them back in 2003.
Now I follow Warren Buffets advice and invest in trackers. For every Lloyds there is an Apple who seem to have done reasonably well in the past decade.
A question for Pete. There seem to be various "World Indexes" such as FTSE, MCSI. Could you do a video explaining any differences.
@@MrDuncl The government even incentivised the financial sector investing with tax breaks, which in relation to pensions we are all pushed towards taking advantage of, but of course the government was also taking investors away from risk spreading. Stitched up left right & centre. Ftse Q4 2023 return 4.3% with risk.