Here are the investing commandments I try to live by.

The first one came to me in a dream 😄 I woke up at 5:30am and wrote the rest down straight away. Almost as if I was a vessel for a higher power!

I am now on the lookout for a burning bush…

Speculating is not investing, it is gambling.

It doesn’t matter how many fancy screens you have, or the hours you’ve spent analysing candlesticks, it is a different game to investing.

You are simply betting on which way the price of an asset will go – as detailed in the next commandment, you cannot know this without a crystal ball.

Investing, on the other hand, is curating a diversified basket of assets and holding them over the long term – whilst ignoring short term movements in price.

The future is unknown.

Stock markets are unpredictable.

No one can predict with any certainty as to what will happen. 

If I had told you in 2019 that there would be a global pandemic, what would you have predicted? 

The odds are, like most pundits, you would have predicted financial armageddon – I sure did! I held spare cash in my pension awaiting the ‘inevitable’ second dip in 2020…

In hindsight that was a mistake, my portfolio continued to soar throughout 2020 with that cash sitting on the sidelines.

I didn’t follow my own commandments and I paid the price.

Whilst tempting, try to avoid making predictions – the future is unpredictable.

Even worse than making your own predictions, please do not be swayed by others! Financial pundits constantly cry wolf.

Just remember, a broken clock is right twice a day. There is typically a 10% downturn each year, so they’ll eventually ‘be right’.

There is only one prediction I will make:

“Stock markets will be higher in 20 years time than they are now”

Tom Redmayne

Feel free to quote me on that!

The reason I make this prediction is because the historical evidence shows us that it has always been the case:

Over any 20 year period the stock market has achieved positive growth, as detailed above!

To explain the graph, in any 1 year period, the S&P 500 is up 75% of the time. In any 10 year period, it is positive 94.28% of the time and once you hit 20 years, it is 100% positive across any 20 year period.

Those 20 year periods include, but are not limited to:

• The great depression
• World War 2
• Vietnam
• High inflation
• The tech bubble
• 2008 housing crisis

If you want to build real wealth, and not work forever, then your money needs to be working for you. Therefore, you need to avoid non-productive assets and invest in productive assets. 

Gold has never worked a day in its life, it has just sat around for three billion years. It does not compound, it does not produce anything. It just sits around being scarce.

Equities, on the other hand, work for you 24/7. They are real life businesses offering products and services to real people.  

Put your money to work. Don’t let it languish in non-productive assets. 

This one should be obvious but I’m afraid people are emotional creatures. It is important to understand that being irrational is in our nature. Once you acknowledge this, it becomes easier to stop yourself making emotional errors.

As investors we are often our own worst enemy. 

For example, I was working at HL during the crash of 2020 and spoke to multiple people who sold on the way down.

They all said something similar:

“I’ll sell now, then buy back in when the market recovers”

HL Clients

They acknowledged to me that the market would recover, but the emotional pain was too great! They would rather sell when the market was low and buy back in when it was higher.

It is completely irrational, but if you empathise with someone seeing their net worth plummet, it is emotionally understandable. 

Whilst understandable, it is our job as investors to not allow our emotions to lead us towards financial ruin. Buying high and selling low is financially destructive.

If you find yourself wanting to sell during a crash, please take a step back and… breath.

Remember, all market declines are temporary. They are baked into the stock market. If you look back across history, you will see that a market decline is often followed by the stock market reaching new heights.

Hold tight. Don’t look at your portfolio. It will be OK.

Fear sells.

Negativity sells.

We know this. Media companies are not on our side.

They all produce a negative news cycle that plays on our emotions. Delete their apps from your phone and generally avoid the negativity they constantly pump out. It will make your life more pleasant! 

GameStop. Meme stocks. Crypto sh*t coins. Squeezing silver. Buying oil because the US bombed Iran. These are all trends which are financially destructive.

If you are chasing someone else’s past gains or acting on a third party tip then you are too late!

To quote Margin Call:

“Be first, be smarter or cheat”

That guy from Margin Call

The first two are hard to do and good luck with the third one – I wouldn’t recommend it!

If you chase every trend you are actually chasing financial ruin, and I’m afraid you might find it. 

Ignore the noise. Don’t give in to FOMO. Stick to a sensible, evidence based plan for wealth creation. 

---

Hey! Thanks for visiting my blog 😀 If you’d like to receive new content, please subscribe:

Enjoy the rest of the post 😁

---

Speaking of evidence-based plans for wealth creation, here it is!

Global equities = the best businesses in the world, producing real products and services for real people.

As we know, we cannot predict the future, so it is not wise to only choose a handful of companies to invest in. It is much smarter to buy a lot of them and hold for the long term.

The cream always rise to the top.

When you invest in equities you are setting yourself up to benefit from the magic of compounding (money making money). Einstein called compounding ‘the 8th wonder of the world’ and he was a pretty smart chap!

When investing in our global basket of equities, we want to keep our costs down. Equities compound, costs negatively compound.

If your fees are too high, then your investment growth will be stunted.

Luckily, there are lots of options out there to invest in a low-cost manner. You want to look out for:

• Platform fee (the charge from the company holding your investments – eg HL, Vanguard etc)
• Fund charges (there are a few, annual fee, transaction fees etc – check the KIID)
• Dealing charges/other admin

Try and keep these charges as far away from 1% as possible! I think my ISA charges are about 0.35% all in.

Think decades, not days.

Once you have shifted your focus it is much easier to not worry about short term volatility, or the latest trends.

Investing is a long term game. It is about building wealth to generate yourself an income in the future.

My number one top tip for those looking to invest. Automate!

Set up a monthly deposit, ideally on payday, and then get on with your life. Check out my post, Automation is King, for more details.

The second step to this commandment is to increase the level of your contributions whenever possible – it will have a startling effect on your wealth creation!

Quick maths to demonstrate the importance of increasing your contributions:

Monthly Investment	Value After 30 Years
£200, no annual increase	£243,994.20
£200, increasing contributions by 10% each year	£834,769.40

A mind boggling difference! And it isn’t hard to do. The first year you invest £200 a month, in the second year £220 a month and so on.

(In an ideal world your earnings will increase more rapidly, allowing you to invest more in a shorter timeframe).

I saved the most important until last, follow the above commandments and then get on with your life!

Do not waste hours of your life going over and obsessing over investing. There is more to life than money.

Money is simply a tool to help you live the life you deserve. Investing helps you ensure you have enough money to do so until your dying day!

Decide what a good life looks like to you then go and live it, with your investments ticking away in the background.

Knowing I have my monthly investments sorted means I fully enjoy the present.

Thanks for reading,

Tom Redmayne

Financial Planner-in-waiting/Burning bush enthusiast

If you enjoy my content, please subscribe. You will get new posts straight to your inbox:

• Twitter
• Instagram
• LinkedIn

A problem we have as humans is our tendency to compare upwards. Especially with the advent of social media, it is all too easy to compare our situation with someone who is better off than us.

Unfortunately, you cannot avoid the fact that there will always be someone who is better off than you.

But, what you probably don’t think about is how much better off you are than others. It is not in our nature to compare downwards.

So, come with me on a journey of downward comparison.

What if I told you that, in all likelihood, you are within the top 10% for earned income worldwide?

Imagine this; your name is on a list of people who’s income outstrips 90% of the global population. So is mine and anyone who is likely to read this post. Welcome to the elite club.

How did you make it into this club? Most likely through the lottery of birth. Over half of the worlds population live on $10 or less a day, with roughly 1 billion people who live on less than $1 a day.

There are 30 countries, the UK included, with over 90% of their population falling into the global middle class.

To put this into perspective, let’s look at an annual income of £25,000. If you earn £25,000 then you are even more elite than the 10% club! You, you lucky chap, have breached the top 5% for global income!

At £25,000 per year, only 3.2% of the global population earn more than you. 96.8% of the population earn less money than you – that is over 7.5 billion people!

Now, before you say, ‘but the cost of living is higher in developed countries, £25,000 doesn’t get you far in the UK’, let me me tell you this; at £25,000 you are earning more than 70% of the UK population.

Feeling better about your situation? I hope so, otherwise this post isn’t doing its intended job!

Whilst upward comparison promotes jealously and envy, downward comparison is a powerful tool for generating gratitude – which is important for our personal wellbeing.

Next time you find yourself comparing upwards, being envious of another’s life or possessions, remember that there are potentially billions of people who would be envious of your life.

Now, I will concede that downward comparison may also prompt feelings of guilt, however I believe these to be unfounded.

We are all playing the cards we’ve been dealt, so do not feel guilty about where you land on the spectrum. Giving up your worldly possessions and moving somewhere to live on less than $1 per day wouldn’t help anyone!

Be grateful for your privileged position and use it as a catalyst for good, both internally and externally – I’ll leave it up to you as to how you go about that 😊

To finish, let’s leave income behind and look at how different UK households manage their assets. It should give you an idea as to where you are going right or wrong in your wealth building journey.

(The poorest households are on the left, with the wealthiest households on the right).

The striking difference is between physical assets vs business assets. The lowest percentiles have a huge chunk of wealth in physical assets, whilst the wealthiest of this nation own business assets.

Without going into too much detail, this is the key to becoming wealthy – you must own productive assets that make money for you. Check out my short post, Owner > Consumer to find out why.

Property makes up a large chunk of assets held, which isn’t surprising for the property-centric UK. Property has generally been great for most people, appreciating in value over time.

I’d like to see pensions making up a bigger chunk of overall assets, I believe the graph shows they are being under-utilised. A pension is a Wealth Creation Machine and should not be avoided.

The below graph again shows a huge disparity between the top and bottom households in the UK. It pains me to see zero-return assets and savings assets dominating the bottom half of the graph. Your money must be working for you if you wish to grow real wealth.

It is unsurprising to see the correlation between wealthy households and productive assets. Again, check out Owner > Consumer to find out more.

So, the moral of the story is:

• Stop comparing upwards if you want to be happy!
• Take a step back and gain perspective by comparing downwards.
• Wealthy households hold a high percentage of their net worth in productive assets.
• Poorer households hold their net worth in low or no return assets.
• Put your money to work if you want to build wealth.

Want to see where your income puts you? Check out these calculators:

• Global Income Calculator
• Home Country Comparison

Thanks for reading,

Tom Redmayne

Financial Planner-in-waiting

• Twitter
• Instagram
• LinkedIn

If you enjoy my content, please subscribe. You will get new posts straight into your inbox:

Investing turns you from a mere consumer to an owner.

When you invest in the stock market you are investing in a collection of great businesses, which provide products and services to real people. Ones you and I interact with everyday. 

By investing in the stock market you are investing in our way of life.

You are investing in Capitalism. 

Continue reading “Owner > Consumer” →

“It takes a lot of hard work to make something simple, to truly understand the underlying challenges and come up with elegant solutions.”

Steve Jobs

In 1945 Picasso created The Bull, a series of 11 lithographs showing The Bull in various levels of abstraction.

Picasso’s goal was to simplify The Bull down to its essence, to find, in his words, “the spirit of the beast”.

Continue reading “Picasso’s Bull” →

One of the most profitable industries in the UK thrives on chronic under-performance.

In this post I dive headfirst into the ongoing war within the investment industry, Alpha vs Beta. Active vs Passive. Complexity vs Simplicity. Good vs Evil…

Before we get stuck in, here’s a quick overview of the key terms:

Alpha and Beta are two key measurements used within the investment industry.

Alpha measures the return of an investment against a particular benchmark or market index. An Alpha of 5 would mean the investment has outperformed it’s benchmark by 5%. Inversely, an Alpha of -5 would mean it has under-performed by -5%. When you invest in an active fund you are typically paying the fund manager to find Alpha.

Beta measures the volatility of an investment in relation to the market. The Beta of the market is shown as 1. If your investment has a Beta of 1.5, then your investment is 50% more volatile than the market. If the Beta was 0.5, then its 50% less volatile. When you invest in a passive fund you are typically paying to achieve Beta (less charges).

If that made no sense to you then hopefully this simplified example will:

If you are not familiar with funds (active or passive) you can find out more in my quick guide, what is a fund?.

If you are happy with the above, then let’s jump in.

The investment industry is set up around the promise of delivering Alpha to retail investors. For the last 70 years or so, achieving Alpha has been the promise from the institutions and the expectation from investors. You more regularly hear it referred to as ‘beating the market‘.

The titans of industry employ lots of clever people in an attempt to generate excess returns for their investors, allowing them to charge a premium for their service.

You may be asking yourself, what’s the problem with that?

Well, the issue is that no one can consistently beat the market. It is becoming increasingly difficult for Alpha to be found and there is a wealth of evidence to back this up (Rock Wealth have a great knowledge bank linking to studies).

The below info-graphic from SPIVA highlights how many active funds under-perform over a one, three and five year period:

The Financial Conduct Authority (FCA), who is the industry’s regulator, conducted a study in 2017 which found that where consistent performance exists within active management, it is only for consistent under-performance:

To address the issue of delivering Alpha we need to head back in time.

In the good ol’ days, there was no internet. Information did not spread around the globe at the speed of light. It was a time where information was scarce and the scarcity of information gave the investment houses their competitive advantage.

Seeking out advantageous investments through scarce information used to be the industry’s bread and butter. The industry was set up on beating the market, as it used to be a more feasible proposition.

Fast forward to the modern day and everyone has up to date information at their finger tips. There is a parity of information in the marketplace. Technology has removed the industry’s competitive advantage.

Due to the speed of technological innovation the investment industry is now a legacy operation.

It is yet to catch up with the speed of change in the new world. People are still being charged a premium for a pre-internet era service in the age of the internet.

A lot of investors in active funds are being overcharged for under-performance.

I call this the ‘Alpha Tax‘.

Now, it is worth highlighting that you will typically not achieve Beta with passive funds, due to the ongoing management fee (which is typically a lot lower than an active fund):

Even more worryingly, lots of active managers now just ‘hug the index‘.

What does ‘hugging the index’ mean? They are running a passive fund but charging active fund management fees.

They are effectively selling an expensive tracker fund that promises the world but doesn’t deliver.

The FCA highlighted this in the same 2017 study where they estimated about £109bn of investors’ money was tied up in such funds:

Whilst a lot of investors are unwittingly holding these hidden trackers, even more are exposed to the main risk of active management, human judgement and skill.

In a 2014 paper called “New Evidence on Mutual Fund Performance: A Comparison of Alternative Bootstrap Methods“, Blake, Caulfield & Ioannidis deliver a scathing verdict based on their research:

Whilst some fund managers may be genuinely talented, their performance mainly benefits them and it is unlikely they will perform well over a long time period.

By selecting an active fund you are choosing a team of individuals to predict the future and buy the right stocks ahead of time – which is unsurprisingly quite a challenge without a crystal ball.

The investment industry consistently overcharges for under-performance, and as there is a lack of competition they are not having to lower their prices.

The interests of the retail investors are second to that of the industry and their shareholders. 

The average investment firm makes 36% profit a year (2017 figure) – making the fund industry one of the most profitable in the UK.

Let that sink in…

One of the most profitable industries in the UK thrives on chronic under-performance.

So, what does the future hold for those seeking Alpha?

Whilst I do not have a crystal ball, judging by the current trend money will continue to flood out of active funds and into lower cost passive alternatives:

According to Morningstar, between January – November 2020 European passive funds received an additional $111 billion in new money.

The future does look bleak for active management companies. My personal view is they will either need to adapt or die.

I believe active funds will become the niche, not the norm.

Whilst I have spent this article bashing up the active management industry, I do in fact hold one active fund.

Active funds do perform well in some sectors, typically where information is scarce – such as smaller companies, illustrated by the below graph:

However, as the graph shows there is no guarantee that they will outperform. Smaller companies inherently pose higher risks, especially when you are paying a set of individuals to pick a portfolio for you.

I personally have a ‘thematic‘ active fund, which is where I feel active managers can offer value. A thematic fund is one that concentrates on a particular niche or theme.

I hold a ‘global energy transition’ fund, which invests throughout the supply chain of renewable energy (excluding nuclear).

I am happy to pay a higher charge for this fund, as I am interested in the sector and believe an active manager has an opportunity to outperform due to the scarcity of information.

Even if the fund does not outperform, I want to expose my capital to this sector as I believe it to be important for all our futures.

Therefore, I have invested in the fund for more than performance reasons, it aligns with my values and by allocating some of my capital to it I feel I am helping out.

I do believe active investing can still have a place in a portfolio. I do not believe it to be necessary, but if you enjoy it then why not.

I believe a thematic approach to active investing can add value. Utilising active funds to target a particular niche or sector allows you to expose some of your capital to your particular areas of interest.

If you find an active fund within a niche of interest and are aware of the additional risks, then you should feel free to crack on.

To clarify, the majority of my portfolio is within globally diversified passive funds, I only have a small allocation within an active fund.

To conclude:

• The active management industry overcharges for under-performance
• Alpha is hard to find and seemingly impossible to find consistently
• Active funds are suffering large outflows and may become the niche, not the norm
• Whilst active funds can still be used by investors, they should beware of the Alpha Tax

Thanks for reading.

Tom Redmayne

Financial Planner-in-waiting

• Twitter
• Instagram
• LinkedIn

I cannot stress enough the importance of the message delivered in Paul Armson’s book, ‘Enough? How much do you need for the rest of your life?’.

It may change your life!

I highly recommend reading the book, it is a short read that really packs a punch.

The below is my summary which highlights the two key points:

1. Life is not a rehearsal, we only get one go at it. So do not spend it on things that don’t fulfil you.
2. Everybody has a ‘bucket‘, this bucket is filled with your liquid assets and has to last your lifetime.

Enjoy 🙂

To reiterate, life is not a rehearsal, I am afraid none of us are getting out of here alive.

As such, money should be viewed as a tool to live your best life.

You cannot take it with you and it will be of no use when you arrive at the pearly gates.

Once you have come to terms with this fact, material wealth and status will slip to the wayside.

With that out of the way, lets move onto Paul’s bucket analogy – a concept I wish they taught at school!

Everybody has a bucket.

In this bucket are all your ‘liquid assets’, that is any money you have easy access to.

Such as, the cash in your current account, savings account, premium bonds, ISA’s and any investments you hold outside of a pension that can be easily liquidated (sold).

These liquid assets fund your lifestyle. Having a grasp of YOUR bucket is essential.

Outside of your bucket sits all your illiquid investments, these are assets that you do not have immediate or easy access to.

Such as, your house (if you own one), any other properties, your pension pot(s) and any businesses you may own.

These assets do not fund your current lifestyle, however they will hopefully grow over time and one day end up in your bucket to fund your future lifestyle in retirement.

---

When it comes to the buckets, there are only three types of people.

One of the main problems people have is not knowing which person they are. That means that the three types of people are all prone to anxiety and stress around their money.

Understanding your bucket can help take away those negative feelings.

Don’t worry if you are in the ‘not enough‘ camp, now you know and can take positive steps to become ‘just right‘ 🙂

If you are in the ‘too much‘ camp, you have a good problem on your hands – figuring out how to spend that excess money in a meaningful way!

If you are still young and only beginning to fill up your bucket, then the below can provide clarity and will help you meaningfully plan your future.

---

As well as the three types of people, there are three key life stages we go through.

The ‘current lifestyle‘ is right now, unless you are already retired (if so, feel free to skip ahead).

In this stage you will be busy filling up your bucket and hopefully building up some illiquid assets too.

Whilst filling up your bucket you still have to live, so there is a tap on the bucket to pay for your lifestyle.

The trick is to balance the inflows and outflows so that your bucket gets fuller over time, whilst still enjoying yourself.

Life is not a rehearsal, so do not make unnecessary sacrifices and ensure you still have some fun.

Tomorrow is not guaranteed.

---

‘Active retirement‘ is when you have filled up your bucket with enough assets to last you the rest of your life, so you can stop working and start spending.

During this time you may start accessing some of your illiquid assets to top up your bucket (e.g. drawing from your pension, selling your business or downsizing).

Ideally you are still young and healthy enough during this stage to have fun, so it should be the time that you spend the most money.

Go on adventures, give to charity, drive down Route 66, sail the seven seas – whatever tickles your pickle!

Life is not a rehearsal, if you’ve made it this far then make sure you enjoy it.

---

‘Late retirement‘ is the final stretch, when you’re too old to have as much fun. You will probably be tired from your ‘active retirement‘ and will just want to chill out.

Research has shown that whatever your level of affluence your household spending will diminish as you make your way into ‘late retirement‘.

Ensure you have enjoyed the first two life stages to the max, as you’ll be needing fond memories to look back on in.

---

And then, I’m afraid, it’s all over.

Your remaining assets become ‘your estate‘, which will be distributed according to your will (make sure you have one!).

If you do not have a plan in place prior to your demise, you may find a good chunk of your estate will end up in the chancellor’s pocket – which is not ideal!

So, work out what a good life means to you and use your money to live that life. If you want to help others, do so when you are alive, so you can enjoy the benefits.

The book goes into more detail on this and working with a financial planner may also be beneficial.

---

Being the wealthiest person in the graveyard is not a badge of honour, it shows that you did not live your life to its full potential.

Remember:

1. Life is not a rehearsal, so grab the bull by the horns and leave here with a smile on your face.
2. Everyone has a bucket, think of this concept when you are planning your life and your money.
3. Read the book, you won’t regret it.

I’ll leave you with the same quote Paul ends the book on, from Hunter S Thompson.

Thanks for reading.

Tom Redmayne

Financial Planner-in-waiting

• Twitter
• Instagram
• LinkedIn

The below started out as a blog post to explain the name ‘Mantaro Money’.

The graphics I made for the post reminded me of a children’s book, so I developed the concept.

I hope you enjoy this style of storytelling, it was enjoyable to make and conveys the message as simply as possible.

Narrated by my friend, Christian H Miles.

If video isn’t your thing, please find the slides below.

Thanks for reading!

Tom Redmayne

• Twitter
• Instagram
• LinkedIn

Financial Planner-in-waiting

The purpose of this post is to try and distil complexity into a simple, digestible format. If done correctly a picture can say a thousand words, so please let me know if I managed to achieve this.

If you like my content please subscribe and follow me on Twitter and Instagram for similar posts.

I hope you enjoy it.

What is a fund?

A fund is a pooled investment vehicle. Investors put their money together and a professional fund manager invests on their behalf. 

A fund can give you access to lots of different assets, companies and countries – some of which you may not have access to as an individual investor. 

By pooling money together the fund can benefit from economies of scale when purchasing assets and allows for a more hands off approach for retail investors. 

What is an active fund?

This is when the fund manager’s job is to ‘beat the market’. You pick these when looking for superior returns and typically pay a higher annual charge for doing so. 

The evidence has shown that the majority of active funds actually underperform the market over the long term whilst draining fees from the investors (e.g. 1% per annum) – so tread carefully. 

The example shows a UK Smaller Companies fund. 

What is a passive fund?

Instead of trying to ‘beat the market’, the fund simply tracks it.

There is no fund manager looking for superior returns, which leads to typically lower fees for the investors (e.g. 0.3% per annum). 

The example shows a global tracker fund. 

Income or accumulation?

An income unit of a fund aims to generate and pay out a regular income (e.g. quarterly or bi-annually). You typically use these when looking to generate additional income (e.g. whilst in retirement). 

An accumulation unit of a fund reinvests the income generated back into the fund. You typically use these when you are looking for capital growth over income.

Thanks for reading!

Tom Redmayne

Financial Planner-in-waiting

• Twitter
• Instagram
• LinkedIn