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Most investing mistakes are not dramatic blow-ups, they are quiet, expensive decisions made in the wrong order. We keep it simple and practical by using a four-part framework you can apply to any portfolio: choose your asset first, then the fund, then the account, and only then the platform. That one change stops you picking a shiny investing app and shoehorning your plan into whatever it happens to sell, and it puts the focus back on what actually drives results: asset allocation and time horizon.
We dig into the part almost everyone gets wrong: confusing risk with volatility. Volatility is the price of admission for long-term returns, especially if you are investing for 10+ years. We also pull inflation into the conversation, because returns that fail to beat inflation are not real progress towards financial freedom. Using clear examples, we explore why some “low risk” portfolios can be risky in a different way, by making it harder to reach your goals.
From there we move into the nuts and bolts: using funds, ETFs and index funds for global diversification, what to look for in tracking and fund charges, and why passive investing often wins after fees. We then weigh up UK investing accounts such as a General Investment Account, an ISA, and a pension or SIPP, focusing on the trade-off between tax efficiency and access. Finally, we talk platforms, the reality behind “no fee” claims, flat fee versus percentage pricing, and the fee ranges that should make you pause.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
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Episode Transcript
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Dr James (01:15):
I've heard people explain investing in lots of
different ways, but actually,and if you ask me, people overly
complicate it a lot of thetime.
And that's why today I'm goingto break investing down into
four simple steps.
Whether you're a beginner, anintermediate, or an expert, I
promise you probably neverthought about it in this way,
and there's going to be littlebits of wisdom that you can pull
(01:36):
out.
Looking forward to this one.
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Why do people overcomplicateinvesting?
(02:23):
I think it happens a lot.
And I think I think that uhsocial media has a big role to
play in that, especially if youspend a lot of time on Twitter
and X where people post chartsand everything along those
lines.
And as someone who's been thatstyle of investor and kind of
saw the light a little bit andcome back to the more
steady-eddy stuff, I candefinitely see say I've seen
both sides of the fence.
(02:43):
Having said that, I'm a littlebit more open to those more
faster styles than maybe a lotof people that are out there.
Both have their place and bothhave their merits.
But if you ask me, you've gotto walk before you can run.
And maybe that's when I seepeople run afoul of the whole
investing side of things a lotmore than they should do.
What do I mean by that?
Understand the basics, which bythe way are amazing strategies
(03:05):
that will people make peoplemillionaires with time and
probably beat 95% of what's outthere.
In fact, you know what?
I'm gonna say 99% of what's outthere versus people's standard
investing portfolios.
Even if you do the very steadyeddy index funds uh linked
investing strategies that areout there, you will still beat
the vast majority of people.
It is crazy trading.
(03:26):
Uh, whenever you start to godown that route, really it's
like 0.0001% that you're betterthan, providing you can master
it, of course.
But anyway, let's revert backto what I was saying just a
second ago.
Let's keep things simple wherewe can because the simpler the
better.
You only really need to knowfour things in order to set up
an investment portfolio.
This is the most eloquent I'veever seen anybody articulate
(03:48):
investing before, and it's notmy concept, it's not my idea, by
the way.
I have put my own flavor on itwith time, but like I was saying
a second ago, I can't I can'ttake all the credit.
I really, really, really can't,but I definitely have never
seen this articulate morebeautifully.
Here's the four things you needto know, and here's the order
that you need to know them in aswell.
I'm gonna cover them highlevel, then we're gonna get into
the nitty-gritty and thespecifics of each one so that
(04:09):
everybody can make thesedecisions and make the best
investment portfolio they can.
First thing you need to know isyour asset, what blend of
assets are going to take you towhere you need to go and allow
you to achieve your goals, as infinancial freedom.
That is the whole point andprinciple behind investing.
Second thing you need to knowis the fund, as in how are those
(04:30):
assets packaged together.
How can we make that asefficient as possible in terms
of fees and returns?
Third thing you need to know isyour account.
Will it be a pension?
Will it be an ISA?
Will it be a GIA?
Will it be something else?
You gotta decide that.
Then the fourth thing you needto know is the platform.
And actually, when it comes todeciding the platform, look
(04:51):
beyond the ones that are outthere that you see quoted an
awful lot on social mediabecause those are the ones that
tend to have a little bit morefees.
You pay for the brand, if youask me.
Now you'll notice that Iactually said at the very
beginning that you gotta underyou gotta make the decisions in
that order.
Notice what you decide first.
You actually decide on yourasset first.
You decide on your asset beforeeverything else.
(05:12):
And I feel a lot of people dothis the wrong way around.
They'll pick a platform becausethey'll be like, oh, this
platform sounds cool.
I've heard someone say goodthings about this, and then
they'll try to find the assetsthat they like in that platform.
Actually, your platformselection should be determined
by your asset first of all.
And your asset is mainlydetermined by your time frame as
in when you need the money.
Because if you need a certainasset that will take you uh
(05:35):
towards your goal, that thatwill that will take you the
fastest towards your goal in themost efficient way, then
actually, why are we trying topick a platform and then just
shoehorn in the best asset thatwe can?
Why are we picking from theselection of assets that are on
a platform that we think is coolversus selecting the asset
first, which is gonna be thegreatest determinant of how
efficiently we reach financialfreedom, and then letting that
(05:56):
determine the platforms that wefind that asset on, narrowing it
down our selection to thoseplatforms, and then deciding
based off the decision as towhat asset we're gonna select in
the first place, is actuallyfar better to do it that way.
And that was a decision that Imade wrong at the start.
So, yeah, asset comes first,then fund, then account, then
(06:17):
platform in that order.
So let's talk about assetsfirst of all.
What do I mean by that?
Well, really, your asset iswhat you invest your cash in, as
in an asset is somethingdesigned to retain value and
appreciate with time.
Therefore, by that definition,cash is not actually an asset in
that instance.
It does retain value, but itdoesn't appreciate with time, it
depreciates.
(06:37):
And what I found really helpfulwas whenever someone said to me
back in the day, they said,James, you've got to think about
all these ways that you canstore value, all these things
that you can invest in as justdifferent forms of asset,
they're just different means anduh they're just different
portals through which you caninvest your money into
something.
(06:57):
And really, cash is just a wayof measuring their value, it's a
measure of value.
That's all it is.
So, therefore, by that token,really, whether you have your
money in a property or in astock or in bonds or anything
under the sun, all cash does isjust a way of measuring how
valuable it is relative tosomething else.
(07:19):
That's all it is.
It's kind of arbitrary, itdoesn't actually really mean
anything, it's all relative,effectively.
And that's all cash is.
It's just a yardstick, it'sjust a meter stick.
It's just like the same wemeasure a house in terms of
meters, in terms of itsdimensions, we measure its value
in terms of cash.
That's all we do, that's all itis.
It's just a metric.
That's simply all it is.
So you know when price goes upand down, let's say the price of
(07:40):
an asset goes up and down,everybody thinks the value of
cash is fixed.
But actually, would the valueof an asset not appear to go up
if the value of the cashdecreased?
Think about it.
That's also true.
So, really, we think cash isthe given and the constant.
We think money is safe in ourbank account, and it just
because it it has the appearanceof being static when we look on
the bank screen that it's afixed number and it stays that
(08:02):
way.
Actually, its value isfluctuation as well.
Check out the DXY, the value ofthe dollar uh measured against
a brass a basket of othercurrencies.
Measure out measure how itfluctuates with time.
Actually, that's why exchangerates go up and down as well,
because the value of the cash isfluctuating.
Anyway, we went on a smalltangent there.
Your biggest determinant withregards to time frame, with
(08:23):
regards to your asset, is yourtime frame, as in when do you
need the money.
Now, what do I mean by that?
Really, you can breakinvestment down into three
things returns, volatility, andinflation.
It's only really those threethings.
You know when you look at achart, you know when you look at
an investment chart, really youcan boil that chart down into
one of all the fluctuations andall the movement on that chart
(08:46):
is only ever going to be one ofthree things.
It's gonna be appreciation, asin returns on your asset, it's
gonna be the volatility as inhow it fluctuates in terms of
value.
And the other thing to beconscious of is inflation as in
how that rises with time,because a return may not
necessarily be a true return ifit is lower than inflation or
around about the same rate.
So we have to actually beatinflation in order to get some
(09:08):
true returns in our investmentportfolio.
Now, that's interesting becausea lot of people equate risk and
volatility, but they're not thesame thing 1,000%.
I see far too many peopleallocated low risk portfolios,
and what those actually mean islow volatility portfolios.
We tend to equate risk.
What we tend to assume risk iswhenever we hear that term is
(09:29):
total capital loss.
The principle that we may loseall of our money.
But if you ask me, awell-selected portfolio of bonds
versus stocks, the two mostcommon assets that people will
invest in whenever going througha financial advisor or going
through a typical investmentaccount.
Really, whenever it comes tothose assets, what we have to
(09:49):
remember and what we have tobear in mind is that actually we
need those to outpace inflationby as much as possible.
And we also, it's ourportfolio, whether it's in a
low-risk portfolio with bonds,which is the standard
definition, risk inverted,commas, or a high-risk portfolio
of folio stocks.
Actually, if we look at itthrough the lens of which
portfolio is more likely to loseall of our money, neither of
(10:11):
those portfolios is more likelyto lose all of your money than
the other.
You're either in vet providingyour investing in the world bond
market or the world stockmarket.
I mean, obviously it depends onthe fund.
There's a few more variablesthere, of course, but actually,
no more, neither of thoseportfolios is more risky than
the other in terms of thechances of a losing her money.
It's it comes back to ourdefinition of risk.
(10:32):
Whereas what you mightconceivably argue is that the
low risk portfolio, which say iscomprised of a higher
proportion of bonds, is morelikely to lose us money with
time because the real returnswill never outpace inflation.
Therefore, in a weird way, thelowest risk portfolios, people
are allocated those portfoliosas low risk all the time.
But in a weird way, they'reactually some of the risky S
(10:55):
portfolios because we're neveractually going to achieve our
goals and attain financialfreedom.
So this is the thing, that'sthe crazy thing that's out
there.
And this is a standarddefinition that if you go to a
lot of financial advisors, slashfinancial planners up and down
the country, they have to usethis because it is a regulatory
requirement by the FCA tocategorize your investors in
terms of risk.
But the weird paradox is thatwhen you put them in a low-risk
(11:15):
portfolio, it's also therisky-esque portfolio sometimes.
And this is something that wehave to remember, we have to get
over this.
Risk does not equal volatility.
If you want to get reallyacademic for this, this is a
podcast for another day.
There's actually fourdefinitions, there's four types
of risk, four common ones atleast, anyway.
There's many more.
But anyway, that is one of thebiggest belief shattering things
that is out there whenever itcomes to the investing side of
(11:36):
things.
Now we got to understand in onthat basis, really, if we are
deciding to ourselves, okay,cool, once we've removed
volatility as a factor, once weunderstand that that's actually
part of the journey, once weunderstand that actually it's
good a good thing to take on alittle bit more volatility when
we've got the right asset blend,then immediately now we
(11:57):
understand what we understandnext is that actually it can be
our friend and we want to takeon a little bit more of it, or
at least we understand that itis part of the journey in the
process, and it doesn'temotionally unnerve us so much
anymore.
And we can achieve financialfreedom much sooner, which is a
great thing, which is a goodthing.
So, therefore, if we removeemotional factors and volatility
(12:18):
as in from our decision makingwhenever it comes to our asset,
all we're really left with istime frame as in when do we need
the money.
Now, if you look at returnsover 10 years and above on any
conceivable period of historyfrom the beginning of the stock
market or when these things weremeasured, which is roughly the
1920s, you'll see that over a10-year time frame, a
(12:41):
well-selected, well-diversifiedportfolio of stocks has outpaced
a portfolio of bonds, and it'scertainly outpaced a portfolio
of cash, of course.
Inflation on average is aboutthree to four percent every
year.
The world stock market hasreturned roughly 10% on year
year on year.
So therefore, you've got amargin real returns of 7% just
(13:02):
there.
Now, 7% margin or profit margincompounds to quite a lot with
time.
We won't get into compoundingtoday, of course, but Einstein
called it the eighth wonder ofthe world for a reason.
Let's just say that.
Whereas the low-risk portfoliosthat you see out there are
sometimes getting like three,four percent returns every year,
and that's before we factor ininflation.
(13:22):
Have we even got a profitmargin there?
It's actually bananas, and thishappens a lot.
I mean, the number ofportfolios that I look into just
through having conversationswith people through run and
Dennis who invest, and you seethat virtually every single one
has got something to optimize onthis front, is just bananas.
Sometimes you see, you lookinto people's portfolios.
I had one lady the other day,and uh she had 20% cash in her
(13:44):
portfolio, even though shedidn't need the money for 10
years, she was in her early 40sand she wasn't able to access
her pension until she was 57.
Therefore, really all of thatmoney should have been doing
something in her pension.
And when queried, theprofessional that was in charge
of her money had simplyforgotten to allocate it to some
sort of asset other than cash,which is just friggin' bananas.
(14:05):
Like, this is the sort of stuffthat's out there.
So, really, I implore anybodyout there to start looking into
your portfolio and questioningthings because actually, in my
experience, it's very rare thatthere's not something to
optimize.
And when we're talking aboutoptimize something, optimizing
something, we're literallytalking about your future, we're
literally talking aboutfinancial freedom here.
So, one little tiny tweak canmake a huge difference or pull
(14:26):
that forward, it's about five toten years.
Anyway, it's not just as simpleas selecting any old stock.
I'm just gonna go ahead andthrow that out there.
You have to get the rightcombination, you have to measure
you have to invest in a waythat diversifies you across the
whole of the global economy.
But before you decide thatyou're gonna pick a fund with
stocks in it, you have to knowthat stocks are the right asset
selection for you, and thereforeyou need to nail down your time
(14:49):
frame.
If you don't need the money for10 years, then stocks have can
at least 10 years, then thevolatility is not so much of a
factor, and you really areorientating your money towards
returns.
Whereas if you are going toretire in the next 10 years and
you need that money, well,really that's where you want to
diversify into more defensiveassets such as cash and such as
(15:11):
bonds.
But really, at that stage, thatis probably where it's worth
having a conversation with agood financial planner at that
point.
Food for thought.
And by the way, please justcaveat, please bear in mind that
I'm caveating everything thatI'm saying right now with not
financial advice.
There's a little bit more toit, but painting with broad
strokes, this is the stuff thatanybody can use to set up their
(15:32):
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of this podcast.
Anyway, we've dealt withassets.
Next move is funds.
Now, obviously, we talked aboutstocks just a second ago.
If you're investing inindividual companies, no matter
how big the company, there'salways a risk that that company
can go busted any one time.
So what you really want to dois have a collection of
companies.
Now, helpfully in the world ofETFs and online investing and
(17:44):
apps investing, somebodysomewhere has compiled a lot of
these bonds and uh stocks intofunds that we can select, as in
off-the-shelf pre-madecombinations, pre pre-packaged,
uh specific combinations ofcompanies, sometimes as much as
tens of thousands, all in oneplace that you can buy as one
(18:05):
product, or you can buy as oneuh pre-packaged uh you know
asset, or it's there ready togo.
You just purchase the fundrather than having to purchase
all the individual companies.
It's gonna be slightly tediousto get exposure to 8,000, 10,000
companies, maybe even more.
You'd have to buy individuallythose 10,000 companies.
So why not just buy it via afund, which is so much more
(18:26):
convenient?
Now, when it comes to fundselection, obviously this is
determined by your assetselection.
If your time frame is over 10years and volatility and
emotional factors are not aconsideration, then a 100%
stocks portfolio is somethingyou could feasibly argue as an
option.
Therefore, you want a fund thatis 100% stocks at that point,
but not just anyone, awell-diversified one.
(18:48):
Now, the really cool thing isthat because of how simplified
investing has been made thesedays, well, a lot of funds out
there, passive funds, willsimply mimic common indexes or
indices.
Therefore, we really just haveto find one that mimics an index
that we like, and then we'reaway because it's done all of
(19:10):
the thinking for us.
What is an index?
I mean, an index is just ameasurement, it's just a it's
just well, we'll give the SP 500as an example.
It's it's not quite this, butit pretty much is this.
The 500 biggest companies inAmerica, uh basically uh it's
it's a it's a selection, it's acollection of those companies
all amalgamated together uh interms of their market cap.
(19:31):
So let's say, for example,Apple is like, now I don't know
these off the top of my head,but let's say, for example,
Apple is 20% of the US's 500biggest companies, then
therefore, because we'veselected 500 companies to go
into this fund, well, then Appleis going to constitute 20% of
this fund, of course.
It's just an arbitrarymeasurement.
Why does it have to be 500?
(19:52):
The answer is it doesn't.
The Dow Jones is 30.
Someone just made this up oneday and then they just decided
to measure it, and it kind ofworked out and it went well.
There's no reason it has to bethat.
But anyway, that's certainly ifyou have something that's been
around since the 1950s, whichthe SP 500 has, well, then
you've got a lot of data to showthat it's continued to grow
with time.
That's the only reason whypeople gravitate towards
(20:15):
indexes, they're not a magiccombination of assets, that's
really not what they are.
It's just that they've beenaround for such a long time and
have a lot of data and have alot of credibility and belief.
That's all.
Anyway, so the whole idea is toget funds that mimic indexes
that perform extremely well, orat least that's certainly one
investing thesis, anyway.
Not just the SP, there's loadsout there.
(20:37):
You might want to check out theMSCI as another cool index as
well.
When it comes to fundselection, really what you want
to do is a few things to lookout for.
Now, the funds won't 100% mimicthe indexes, that's an
important thing to remember.
So, say for example, in the inthe SP 500, of those 500
companies, you might get like 10that constitute like 0.0001% of
(21:00):
the market cap of the fund,therefore, or the market cap of
the index rather.
So, therefore, is it reallyworth a fund manager's while to
purchase those funds and go outof the way to get it and
maintain them in terms of themof rebalancing them in the
portfolio?
Probably not.
So they probably just omit themuh to a degree, which is an
(21:20):
important thing to remember.
But anyway, this is a this is akey tenet whenever it comes to
the investing side of thingsbecause because because because
not every fund will 100% mimicthe index that we talked about
just a second ago, and you canactually look up to what degree
they mimic the index in the keyinvestor information document of
(21:44):
each fund.
It'll give you a percentagevariance in that document as
regards to the performance ofthe index versus the performance
of the fund.
Generally, you want to keep itto within 0.2% if you can,
because then you know that thefund does actually mimic the
index.
Anyway, something interesting.
There's a lot to be said forpassive funds as well.
(22:05):
The difference between apassive fund is it will just
blindly mimic an index, whereasan active fund will have a fund
manager who will actively buyin, dip in and out of the market
at opportune moments, what heor she believes to be opportune
moments, in order to makeprofit.
Now, the vast majority of fundsthat are active do not
(22:27):
outperform passive funds, eventhough they might be able to eke
out a few percentage pointsextra of returns.
Once you've factored in theadditional fees for funds,
typically you will find thatpassive funds outperform.
Now, there's some data on that.
Apparently, in the UK, 75% ofpassive of active funds do not
beat the market.
Uh, in the US, apparently it'sa little higher, it's more like
(22:48):
93% of active funds do not beatthe market, where the benchmark
we're using is the SP 500 inboth those examples.
But really, what that serves tohighlight to me is if you've
got a one in four chance ofbeing able to beat the market,
and you're also in for a littlebit of a white knuckle ride
because you have no idea if yourfund is the 75% or the 25%, to
me, it might just be so muchless stressful to just go and
(23:10):
find a really good index thatyou know has performed for a
very long time.
If you're Looking at fees interms of the funds, really, what
I would expect to pay for agood passive fund is between 0.1
to 0.2% fund fee.
Whereas for an active fund,what I would expect to pay is
maybe like 1% to 2%, somethingalong those lines.
(23:31):
And remember, if you're inmargin in terms of
profitability, is 10%.
Basically, if you have anactive fund, sometimes you're
giving away 1 out of 10 isobviously 10% of your profit, or
2 out of 10 is 20% of yourprofit, where 2% is the fee and
10% is potentially your returnif you're if it's comparable to
the market.
Well, then you're basicallygiving away 10 to 20% of your
(23:53):
profit, which is actually quitea lot whenever you frame it in
those terms.
So definitely, if you ask me,I'm of the school of thought
that passive is superior, buthorses for courses.
Once you've determined yourasset and then use that to
determine your fund and find agood fund, then the next move is
to find a good account which istax efficient, maintains a good
balance between tax efficiencyand ease of access, because
(24:16):
those are the two keydeterminants of what account you
might choose for, what whataccount you might go for.
Then you just got to decidewhat makes sense for you, where
do we actually store this fundin terms of a tax wrapper?
There's only really three inthe UK if you're investing in a
personal name.
It's either going to be ageneral investment account,
sometimes call sometimes calleda fund and shares account,
(24:37):
depending on the platform thatyou choose.
Uh an ISA, oh, there'sdifferent tax files, so there's
five different types, or aself-invested personal pension.
If it's inside a limitedcompany, obviously that is
another option that a lot ofdentists have.
However, it's not in yourpersonal name, it is of course
incorporated.
If it's in your personal name,you just got to weigh up, which
(24:58):
makes sense for you.
Again, this podcast wouldprobably double or triple in
length if we were to go into thepros and cons of each and every
investing account.
But it's always, it canliterally only be one of those
three.
Uh generally, broad strokeshere, absolutely broad strokes.
If having access to your moneyat all times is a non-negotiable
for you, then you're going toprioritize the ISA and take the
(25:20):
tax hit.
Whereas if you're happy to uhwell, if you're you if if it
makes sense for you from a pointof view from uh you're happy to
give your money and you putyour money into a pot and not
have access to it until acertain age, then you may wish
to prioritize a pension becausewe can't ignore the tax benefits
of pensions, of course.
But it's always going to be atoss-up between those two
things (25:40):
ease of access, accessibility, slash, slash tax
efficiency.
Those are the two main thingsthat you've got to decide.
It's a little bit like a like ascale or like a thesaw.
We've got to weigh up which ismore important to us.
Again, it makes more and moresense the older you get to
prioritize the pension as well,because obviously it's going to
be sooner, it's going to becloser and closer than when you
(26:02):
can actually access that moneyin terms of time.
So this is just something toconsider.
I see a lot of people outthere, whenever it comes to
received wisdom on investing orparents, I feel like everybody's
had a parent wag their fingerat them once upon a time in
their life and say that theyshould contribute to their
pension and max that out.
Actually, if you ask me,there's such a thing as
contributing too soon to yourpension.
(26:24):
I know there is presently nolifetime allowance, but that
will come back.
Therefore, if you have too muchmoney in your pension pot, you
can't get that out.
You're almost beholden as towhat the government decides to
do if they decide to tax thatvery heavily.
Uh, if you wish, you can readup on when they brought the
lifetime allowance in.
I think it was 2012 and howthat's actually that actually
(26:45):
went down over the years interms of what the allowance was,
as in the threshold at whichyou were taxed heavily in your
pension went down every year,even though you might expect it
to go up.
Uh, off the top of my hand, Ithink it was 2 million, then it
went to 1.8, 1.6, and then maybeall the way down to 1.2.
But anyway, something toresearch, really
counterintuitive, and then theLabour government just
(27:06):
completely got rid of it uh afew years ago, which was a
little unexpected.
But if you ask me, it's amatter of time until they bring
that back because they know thatwhen the money's in there,
people can't get it out, andthey're kind of uh, you know,
they can bring that back, andthere's not a great deal people
can do about it.
It might be popular votes-wise,but yeah, your money's kind of
stranded.
But of course, listen, you knowwhat I mean.
(27:26):
They make sense for a lot ofpeople, definitely not bashing
pensions.
I'm just saying it's a littlebit more of a decision than a
lot of people think it is.
Decision number four, whatplatform do we go for?
Really, what you've got tofigure out.
There's a few things here interms of deciding what platform
is good for you, but you'llnotice how we haven't even
spoken about platform whatsoeverup until now.
(27:47):
All we've talked about isasset, the combination of
assets, the blend of assetsrather, as in your fund, how the
assets are packaged, in otherwords, and the account that they
go into.
We haven't talked aboutplatform whatsoever.
And that's because if you askme, it's the final thing that
you need to decide becauseactually you need to figure out
what assets you want and thendecide, and then find a platform
(28:08):
that has them, rather than finda platform and then try to find
the best assets on the platformto take you towards your goals.
There's not an efficient way ofdoing it.
All about these little tweaksthat make a huge difference.
Platform I think the biggestthing that is important to
decide whenever it comes to yourplatform is is is is is is is
(28:31):
is is the fees as well as thefunctionality.
So you want a nice slick app.
Uh you'd be surprised even in2025, some of the biggest names
do not have slick act slip slickuh slick apps.
Uh they can be a little clunkyin terms of usability, some of
the biggest names.
Even the one that I use, uhthankfully it has somewhat
(28:54):
decent fees and a good selectionuh of assets on there.
So those are the real thingsthat you want to weigh up
basically whenever it comes tothat.
There's no one size fits all.
You may be interested to know,you may be interested to know
that certain platforms willcharge you a fixed fee versus a
percentage fee.
So that means as your portfoliogrows, it works out to be that
(29:14):
much more economical for youbecause you're not giving away a
percentage, you're giving awaya flat fee, and say that flat
fee is like 20-30 pounds everymonth.
Obviously, if you have asignificant amount of money and
invest it, well, then a port apercentage is going to scale
with that.
There's going to be a crossoverpoint where the flat fee starts
to make more sense versus thepercentage.
Obviously, you just got to wearthat up on an individual basis.
(29:34):
Worth mentioning because noteverybody knows that.
There are certain platforms outthere that claim themselves to
be no fees and they advertisethemselves as that.
I'd be extremely wary.
They've got to make their moneysomehow.
They can only make their moneythrough through one of three
things.
It's either going to be tradingfees, it's going to be holding
fees, or it's going to besomething that's a little
complicated that we're going tosave for another day called the
(29:56):
spread.
So if some if a platform outthere is advertising itself as
no fee, it still has to makemoney somehow.
So, therefore, if you ask me,it probably means they're making
money in a little bit more of alow-key way and taking
advantage of the spread that wetalked about just a second ago.
Does it actually work out moreeconomical for you to use those
platforms versus a platformthat's upfront with their fees?
(30:19):
Well, I'm dubious, put it likethat.
Food for thought, something toconsider.
If you look at the fees on aplatform in terms of the ongoing
fees, the platform fees,usually I would expect those to
be around about the 0.1.2% mark,if you ask me.
So that's in addition to thefund fee that we talked about
(30:39):
just a second ago.
So you might be paying 0.3.4%all in.
That is for the platform feeand the fund fee.
If it's higher than that, redflag right there, just have a
real look around at how youmight be able to get a better
deal.
I've heard people explain investing in lots of
different ways, but actually,and if you ask me, people overly
complicate it a lot of thetime.
And that's why today I'm goingto break investing down into
four simple steps.
Whether you're a beginner, anintermediate, or an expert, I
promise you probably neverthought about it in this way,
and there's going to be littlebits of wisdom that you can pull
(01:36):
out.
Looking forward to this one.
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Why do people overcomplicateinvesting?
(02:23):
I think it happens a lot.
And I think I think that uhsocial media has a big role to
play in that, especially if youspend a lot of time on Twitter
and X where people post chartsand everything along those
lines.
And as someone who's been thatstyle of investor and kind of
saw the light a little bit andcome back to the more
steady-eddy stuff, I candefinitely see say I've seen
both sides of the fence.
(02:43):
Having said that, I'm a littlebit more open to those more
faster styles than maybe a lotof people that are out there.
Both have their place and bothhave their merits.
But if you ask me, you've gotto walk before you can run.
And maybe that's when I seepeople run afoul of the whole
investing side of things a lotmore than they should do.
What do I mean by that?
Understand the basics, which bythe way are amazing strategies
(03:05):
that will people make peoplemillionaires with time and
probably beat 95% of what's outthere.
In fact, you know what?
I'm gonna say 99% of what's outthere versus people's standard
investing portfolios.
Even if you do the very steadyeddy index funds uh linked
investing strategies that areout there, you will still beat
the vast majority of people.
It is crazy trading.
(03:26):
Uh, whenever you start to godown that route, really it's
like 0.0001% that you're betterthan, providing you can master
it, of course.
But anyway, let's revert backto what I was saying just a
second ago.
Let's keep things simple wherewe can because the simpler the
better.
You only really need to knowfour things in order to set up
an investment portfolio.
This is the most eloquent I'veever seen anybody articulate
(03:48):
investing before, and it's notmy concept, it's not my idea, by
the way.
I have put my own flavor on itwith time, but like I was saying
a second ago, I can't I can'ttake all the credit.
I really, really, really can't,but I definitely have never
seen this articulate morebeautifully.
Here's the four things you needto know, and here's the order
that you need to know them in aswell.
I'm gonna cover them highlevel, then we're gonna get into
the nitty-gritty and thespecifics of each one so that
(04:09):
everybody can make thesedecisions and make the best
investment portfolio they can.
First thing you need to know isyour asset, what blend of
assets are going to take you towhere you need to go and allow
you to achieve your goals, as infinancial freedom.
That is the whole point andprinciple behind investing.
Second thing you need to knowis the fund, as in how are those
(04:30):
assets packaged together.
How can we make that asefficient as possible in terms
of fees and returns?
Third thing you need to know isyour account.
Will it be a pension?
Will it be an ISA?
Will it be a GIA?
Will it be something else?
You gotta decide that.
Then the fourth thing you needto know is the platform.
And actually, when it comes todeciding the platform, look
(04:51):
beyond the ones that are outthere that you see quoted an
awful lot on social mediabecause those are the ones that
tend to have a little bit morefees.
You pay for the brand, if youask me.
Now you'll notice that Iactually said at the very
beginning that you gotta underyou gotta make the decisions in
that order.
Notice what you decide first.
You actually decide on yourasset first.
You decide on your asset beforeeverything else.
(05:12):
And I feel a lot of people dothis the wrong way around.
They'll pick a platform becausethey'll be like, oh, this
platform sounds cool.
I've heard someone say goodthings about this, and then
they'll try to find the assetsthat they like in that platform.
Actually, your platformselection should be determined
by your asset first of all.
And your asset is mainlydetermined by your time frame as
in when you need the money.
Because if you need a certainasset that will take you uh
(05:35):
towards your goal, that thatwill that will take you the
fastest towards your goal in themost efficient way, then
actually, why are we trying topick a platform and then just
shoehorn in the best asset thatwe can?
Why are we picking from theselection of assets that are on
a platform that we think is coolversus selecting the asset
first, which is gonna be thegreatest determinant of how
efficiently we reach financialfreedom, and then letting that
(05:56):
determine the platforms that wefind that asset on, narrowing it
down our selection to thoseplatforms, and then deciding
based off the decision as towhat asset we're gonna select in
the first place, is actuallyfar better to do it that way.
And that was a decision that Imade wrong at the start.
So, yeah, asset comes first,then fund, then account, then
(06:17):
platform in that order.
So let's talk about assetsfirst of all.
What do I mean by that?
Well, really, your asset iswhat you invest your cash in, as
in an asset is somethingdesigned to retain value and
appreciate with time.
Therefore, by that definition,cash is not actually an asset in
that instance.
It does retain value, but itdoesn't appreciate with time, it
depreciates.
(06:37):
And what I found really helpfulwas whenever someone said to me
back in the day, they said,James, you've got to think about
all these ways that you canstore value, all these things
that you can invest in as justdifferent forms of asset,
they're just different means anduh they're just different
portals through which you caninvest your money into
something.
(06:57):
And really, cash is just a wayof measuring their value, it's a
measure of value.
That's all it is.
So, therefore, by that token,really, whether you have your
money in a property or in astock or in bonds or anything
under the sun, all cash does isjust a way of measuring how
valuable it is relative tosomething else.
(07:19):
That's all it is.
It's kind of arbitrary, itdoesn't actually really mean
anything, it's all relative,effectively.
And that's all cash is.
It's just a yardstick, it'sjust a meter stick.
It's just like the same wemeasure a house in terms of
meters, in terms of itsdimensions, we measure its value
in terms of cash.
That's all we do, that's all itis.
It's just a metric.
That's simply all it is.
So you know when price goes upand down, let's say the price of
(07:40):
an asset goes up and down,everybody thinks the value of
cash is fixed.
But actually, would the valueof an asset not appear to go up
if the value of the cashdecreased?
Think about it.
That's also true.
So, really, we think cash isthe given and the constant.
We think money is safe in ourbank account, and it just
because it it has the appearanceof being static when we look on
the bank screen that it's afixed number and it stays that
(08:02):
way.
Actually, its value isfluctuation as well.
Check out the DXY, the value ofthe dollar uh measured against
a brass a basket of othercurrencies.
Measure out measure how itfluctuates with time.
Actually, that's why exchangerates go up and down as well,
because the value of the cash isfluctuating.
Anyway, we went on a smalltangent there.
Your biggest determinant withregards to time frame, with
(08:23):
regards to your asset, is yourtime frame, as in when do you
need the money.
Now, what do I mean by that?
Really, you can breakinvestment down into three
things returns, volatility, andinflation.
It's only really those threethings.
You know when you look at achart, you know when you look at
an investment chart, really youcan boil that chart down into
one of all the fluctuations andall the movement on that chart
(08:46):
is only ever going to be one ofthree things.
It's gonna be appreciation, asin returns on your asset, it's
gonna be the volatility as inhow it fluctuates in terms of
value.
And the other thing to beconscious of is inflation as in
how that rises with time,because a return may not
necessarily be a true return ifit is lower than inflation or
around about the same rate.
So we have to actually beatinflation in order to get some
(09:08):
true returns in our investmentportfolio.
Now, that's interesting becausea lot of people equate risk and
volatility, but they're not thesame thing 1,000%.
I see far too many peopleallocated low risk portfolios,
and what those actually mean islow volatility portfolios.
We tend to equate risk.
What we tend to assume risk iswhenever we hear that term is
(09:29):
total capital loss.
The principle that we may loseall of our money.
But if you ask me, awell-selected portfolio of bonds
versus stocks, the two mostcommon assets that people will
invest in whenever going througha financial advisor or going
through a typical investmentaccount.
Really, whenever it comes tothose assets, what we have to
(09:49):
remember and what we have tobear in mind is that actually we
need those to outpace inflationby as much as possible.
And we also, it's ourportfolio, whether it's in a
low-risk portfolio with bonds,which is the standard
definition, risk inverted,commas, or a high-risk portfolio
of folio stocks.
Actually, if we look at itthrough the lens of which
portfolio is more likely to loseall of our money, neither of
(10:11):
those portfolios is more likelyto lose all of your money than
the other.
You're either in vet providingyour investing in the world bond
market or the world stockmarket.
I mean, obviously it depends onthe fund.
There's a few more variablesthere, of course, but actually,
no more, neither of thoseportfolios is more risky than
the other in terms of thechances of a losing her money.
It's it comes back to ourdefinition of risk.
(10:32):
Whereas what you mightconceivably argue is that the
low risk portfolio, which say iscomprised of a higher
proportion of bonds, is morelikely to lose us money with
time because the real returnswill never outpace inflation.
Therefore, in a weird way, thelowest risk portfolios, people
are allocated those portfoliosas low risk all the time.
But in a weird way, they'reactually some of the risky S
(10:55):
portfolios because we're neveractually going to achieve our
goals and attain financialfreedom.
So this is the thing, that'sthe crazy thing that's out
there.
And this is a standarddefinition that if you go to a
lot of financial advisors, slashfinancial planners up and down
the country, they have to usethis because it is a regulatory
requirement by the FCA tocategorize your investors in
terms of risk.
But the weird paradox is thatwhen you put them in a low-risk
(11:15):
portfolio, it's also therisky-esque portfolio sometimes.
And this is something that wehave to remember, we have to get
over this.
Risk does not equal volatility.
If you want to get reallyacademic for this, this is a
podcast for another day.
There's actually fourdefinitions, there's four types
of risk, four common ones atleast, anyway.
There's many more.
But anyway, that is one of thebiggest belief shattering things
that is out there whenever itcomes to the investing side of
(11:36):
things.
Now we got to understand in onthat basis, really, if we are
deciding to ourselves, okay,cool, once we've removed
volatility as a factor, once weunderstand that that's actually
part of the journey, once weunderstand that actually it's
good a good thing to take on alittle bit more volatility when
we've got the right asset blend,then immediately now we
(11:57):
understand what we understandnext is that actually it can be
our friend and we want to takeon a little bit more of it, or
at least we understand that itis part of the journey in the
process, and it doesn'temotionally unnerve us so much
anymore.
And we can achieve financialfreedom much sooner, which is a
great thing, which is a goodthing.
So, therefore, if we removeemotional factors and volatility
(12:18):
as in from our decision makingwhenever it comes to our asset,
all we're really left with istime frame as in when do we need
the money.
Now, if you look at returnsover 10 years and above on any
conceivable period of historyfrom the beginning of the stock
market or when these things weremeasured, which is roughly the
1920s, you'll see that over a10-year time frame, a
(12:41):
well-selected, well-diversifiedportfolio of stocks has outpaced
a portfolio of bonds, and it'scertainly outpaced a portfolio
of cash, of course.
Inflation on average is aboutthree to four percent every
year.
The world stock market hasreturned roughly 10% on year
year on year.
So therefore, you've got amargin real returns of 7% just
(13:02):
there.
Now, 7% margin or profit margincompounds to quite a lot with
time.
We won't get into compoundingtoday, of course, but Einstein
called it the eighth wonder ofthe world for a reason.
Let's just say that.
Whereas the low-risk portfoliosthat you see out there are
sometimes getting like three,four percent returns every year,
and that's before we factor ininflation.
(13:22):
Have we even got a profitmargin there?
It's actually bananas, and thishappens a lot.
I mean, the number ofportfolios that I look into just
through having conversationswith people through run and
Dennis who invest, and you seethat virtually every single one
has got something to optimize onthis front, is just bananas.
Sometimes you see, you lookinto people's portfolios.
I had one lady the other day,and uh she had 20% cash in her
(13:44):
portfolio, even though shedidn't need the money for 10
years, she was in her early 40sand she wasn't able to access
her pension until she was 57.
Therefore, really all of thatmoney should have been doing
something in her pension.
And when queried, theprofessional that was in charge
of her money had simplyforgotten to allocate it to some
sort of asset other than cash,which is just friggin' bananas.
(14:05):
Like, this is the sort of stuffthat's out there.
So, really, I implore anybodyout there to start looking into
your portfolio and questioningthings because actually, in my
experience, it's very rare thatthere's not something to
optimize.
And when we're talking aboutoptimize something, optimizing
something, we're literallytalking about your future, we're
literally talking aboutfinancial freedom here.
So, one little tiny tweak canmake a huge difference or pull
(14:26):
that forward, it's about five toten years.
Anyway, it's not just as simpleas selecting any old stock.
I'm just gonna go ahead andthrow that out there.
You have to get the rightcombination, you have to measure
you have to invest in a waythat diversifies you across the
whole of the global economy.
But before you decide thatyou're gonna pick a fund with
stocks in it, you have to knowthat stocks are the right asset
selection for you, and thereforeyou need to nail down your time
(14:49):
frame.
If you don't need the money for10 years, then stocks have can
at least 10 years, then thevolatility is not so much of a
factor, and you really areorientating your money towards
returns.
Whereas if you are going toretire in the next 10 years and
you need that money, well,really that's where you want to
diversify into more defensiveassets such as cash and such as
(15:11):
bonds.
But really, at that stage, thatis probably where it's worth
having a conversation with agood financial planner at that
point.
Food for thought.
And by the way, please justcaveat, please bear in mind that
I'm caveating everything thatI'm saying right now with not
financial advice.
There's a little bit more toit, but painting with broad
strokes, this is the stuff thatanybody can use to set up their
(15:32):
own portfolio.
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(17:19):
of this podcast.
Anyway, we've dealt withassets.
Next move is funds.
Now, obviously, we talked aboutstocks just a second ago.
If you're investing inindividual companies, no matter
how big the company, there'salways a risk that that company
can go busted any one time.
So what you really want to dois have a collection of
companies.
Now, helpfully in the world ofETFs and online investing and
(17:44):
apps investing, somebodysomewhere has compiled a lot of
these bonds and uh stocks intofunds that we can select, as in
off-the-shelf pre-madecombinations, pre pre-packaged,
uh specific combinations ofcompanies, sometimes as much as
tens of thousands, all in oneplace that you can buy as one
(18:05):
product, or you can buy as oneuh pre-packaged uh you know
asset, or it's there ready togo.
You just purchase the fundrather than having to purchase
all the individual companies.
It's gonna be slightly tediousto get exposure to 8,000, 10,000
companies, maybe even more.
You'd have to buy individuallythose 10,000 companies.
So why not just buy it via afund, which is so much more
(18:26):
convenient?
Now, when it comes to fundselection, obviously this is
determined by your assetselection.
If your time frame is over 10years and volatility and
emotional factors are not aconsideration, then a 100%
stocks portfolio is somethingyou could feasibly argue as an
option.
Therefore, you want a fund thatis 100% stocks at that point,
but not just anyone, awell-diversified one.
(18:48):
Now, the really cool thing isthat because of how simplified
investing has been made thesedays, well, a lot of funds out
there, passive funds, willsimply mimic common indexes or
indices.
Therefore, we really just haveto find one that mimics an index
that we like, and then we'reaway because it's done all of
(19:10):
the thinking for us.
What is an index?
I mean, an index is just ameasurement, it's just a it's
just well, we'll give the SP 500as an example.
It's it's not quite this, butit pretty much is this.
The 500 biggest companies inAmerica, uh basically uh it's
it's a it's a selection, it's acollection of those companies
all amalgamated together uh interms of their market cap.
(19:31):
So let's say, for example,Apple is like, now I don't know
these off the top of my head,but let's say, for example,
Apple is 20% of the US's 500biggest companies, then
therefore, because we'veselected 500 companies to go
into this fund, well, then Appleis going to constitute 20% of
this fund, of course.
It's just an arbitrarymeasurement.
Why does it have to be 500?
(19:52):
The answer is it doesn't.
The Dow Jones is 30.
Someone just made this up oneday and then they just decided
to measure it, and it kind ofworked out and it went well.
There's no reason it has to bethat.
But anyway, that's certainly ifyou have something that's been
around since the 1950s, whichthe SP 500 has, well, then
you've got a lot of data to showthat it's continued to grow
with time.
That's the only reason whypeople gravitate towards
(20:15):
indexes, they're not a magiccombination of assets, that's
really not what they are.
It's just that they've beenaround for such a long time and
have a lot of data and have alot of credibility and belief.
That's all.
Anyway, so the whole idea is toget funds that mimic indexes
that perform extremely well, orat least that's certainly one
investing thesis, anyway.
Not just the SP, there's loadsout there.
(20:37):
You might want to check out theMSCI as another cool index as
well.
When it comes to fundselection, really what you want
to do is a few things to lookout for.
Now, the funds won't 100% mimicthe indexes, that's an
important thing to remember.
So, say for example, in the inthe SP 500, of those 500
companies, you might get like 10that constitute like 0.0001% of
(21:00):
the market cap of the fund,therefore, or the market cap of
the index rather.
So, therefore, is it reallyworth a fund manager's while to
purchase those funds and go outof the way to get it and
maintain them in terms of themof rebalancing them in the
portfolio?
Probably not.
So they probably just omit themuh to a degree, which is an
(21:20):
important thing to remember.
But anyway, this is a this is akey tenet whenever it comes to
the investing side of thingsbecause because because because
not every fund will 100% mimicthe index that we talked about
just a second ago, and you canactually look up to what degree
they mimic the index in the keyinvestor information document of
(21:44):
each fund.
It'll give you a percentagevariance in that document as
regards to the performance ofthe index versus the performance
of the fund.
Generally, you want to keep itto within 0.2% if you can,
because then you know that thefund does actually mimic the
index.
Anyway, something interesting.
There's a lot to be said forpassive funds as well.
(22:05):
The difference between apassive fund is it will just
blindly mimic an index, whereasan active fund will have a fund
manager who will actively buyin, dip in and out of the market
at opportune moments, what heor she believes to be opportune
moments, in order to makeprofit.
Now, the vast majority of fundsthat are active do not
(22:27):
outperform passive funds, eventhough they might be able to eke
out a few percentage pointsextra of returns.
Once you've factored in theadditional fees for funds,
typically you will find thatpassive funds outperform.
Now, there's some data on that.
Apparently, in the UK, 75% ofpassive of active funds do not
beat the market.
Uh, in the US, apparently it'sa little higher, it's more like
(22:48):
93% of active funds do not beatthe market, where the benchmark
we're using is the SP 500 inboth those examples.
But really, what that serves tohighlight to me is if you've
got a one in four chance ofbeing able to beat the market,
and you're also in for a littlebit of a white knuckle ride
because you have no idea if yourfund is the 75% or the 25%, to
me, it might just be so muchless stressful to just go and
(23:10):
find a really good index thatyou know has performed for a
very long time.
If you're Looking at fees interms of the funds, really, what
I would expect to pay for agood passive fund is between 0.1
to 0.2% fund fee.
Whereas for an active fund,what I would expect to pay is
maybe like 1% to 2%, somethingalong those lines.
(23:31):
And remember, if you're inmargin in terms of
profitability, is 10%.
Basically, if you have anactive fund, sometimes you're
giving away 1 out of 10 isobviously 10% of your profit, or
2 out of 10 is 20% of yourprofit, where 2% is the fee and
10% is potentially your returnif you're if it's comparable to
the market.
Well, then you're basicallygiving away 10 to 20% of your
(23:53):
profit, which is actually quitea lot whenever you frame it in
those terms.
So definitely, if you ask me,I'm of the school of thought
that passive is superior, buthorses for courses.
Once you've determined yourasset and then use that to
determine your fund and find agood fund, then the next move is
to find a good account which istax efficient, maintains a good
balance between tax efficiencyand ease of access, because
(24:16):
those are the two keydeterminants of what account you
might choose for, what whataccount you might go for.
Then you just got to decidewhat makes sense for you, where
do we actually store this fundin terms of a tax wrapper?
There's only really three inthe UK if you're investing in a
personal name.
It's either going to be ageneral investment account,
sometimes call sometimes calleda fund and shares account,
(24:37):
depending on the platform thatyou choose.
Uh an ISA, oh, there'sdifferent tax files, so there's
five different types, or aself-invested personal pension.
If it's inside a limitedcompany, obviously that is
another option that a lot ofdentists have.
However, it's not in yourpersonal name, it is of course
incorporated.
If it's in your personal name,you just got to weigh up, which
(24:58):
makes sense for you.
Again, this podcast wouldprobably double or triple in
length if we were to go into thepros and cons of each and every
investing account.
But it's always, it canliterally only be one of those
three.
Uh generally, broad strokeshere, absolutely broad strokes.
If having access to your moneyat all times is a non-negotiable
for you, then you're going toprioritize the ISA and take the
(25:20):
tax hit.
Whereas if you're happy to uhwell, if you're you if if it
makes sense for you from a pointof view from uh you're happy to
give your money and you putyour money into a pot and not
have access to it until acertain age, then you may wish
to prioritize a pension becausewe can't ignore the tax benefits
of pensions, of course.
But it's always going to be atoss-up between those two
things (25:40):
ease of access, accessibility, slash, slash tax
efficiency.
Those are the two main thingsthat you've got to decide.
It's a little bit like a like ascale or like a thesaw.
We've got to weigh up which ismore important to us.
Again, it makes more and moresense the older you get to
prioritize the pension as well,because obviously it's going to
be sooner, it's going to becloser and closer than when you
(26:02):
can actually access that moneyin terms of time.
So this is just something toconsider.
I see a lot of people outthere, whenever it comes to
received wisdom on investing orparents, I feel like everybody's
had a parent wag their fingerat them once upon a time in
their life and say that theyshould contribute to their
pension and max that out.
Actually, if you ask me,there's such a thing as
contributing too soon to yourpension.
(26:24):
I know there is presently nolifetime allowance, but that
will come back.
Therefore, if you have too muchmoney in your pension pot, you
can't get that out.
You're almost beholden as towhat the government decides to
do if they decide to tax thatvery heavily.
Uh, if you wish, you can readup on when they brought the
lifetime allowance in.
I think it was 2012 and howthat's actually that actually
(26:45):
went down over the years interms of what the allowance was,
as in the threshold at whichyou were taxed heavily in your
pension went down every year,even though you might expect it
to go up.
Uh, off the top of my hand, Ithink it was 2 million, then it
went to 1.8, 1.6, and then maybeall the way down to 1.2.
But anyway, something toresearch, really
counterintuitive, and then theLabour government just
(27:06):
completely got rid of it uh afew years ago, which was a
little unexpected.
But if you ask me, it's amatter of time until they bring
that back because they know thatwhen the money's in there,
people can't get it out, andthey're kind of uh, you know,
they can bring that back, andthere's not a great deal people
can do about it.
It might be popular votes-wise,but yeah, your money's kind of
stranded.
But of course, listen, you knowwhat I mean.
(27:26):
They make sense for a lot ofpeople, definitely not bashing
pensions.
I'm just saying it's a littlebit more of a decision than a
lot of people think it is.
Decision number four, whatplatform do we go for?
Really, what you've got tofigure out.
There's a few things here interms of deciding what platform
is good for you, but you'llnotice how we haven't even
spoken about platform whatsoeverup until now.
(27:47):
All we've talked about isasset, the combination of
assets, the blend of assetsrather, as in your fund, how the
assets are packaged, in otherwords, and the account that they
go into.
We haven't talked aboutplatform whatsoever.
And that's because if you askme, it's the final thing that
you need to decide becauseactually you need to figure out
what assets you want and thendecide, and then find a platform
(28:08):
that has them, rather than finda platform and then try to find
the best assets on the platformto take you towards your goals.
There's not an efficient way ofdoing it.
All about these little tweaksthat make a huge difference.
Platform I think the biggestthing that is important to
decide whenever it comes to yourplatform is is is is is is is
(28:31):
is is the fees as well as thefunctionality.
So you want a nice slick app.
Uh you'd be surprised even in2025, some of the biggest names
do not have slick act slip slickuh slick apps.
Uh they can be a little clunkyin terms of usability, some of
the biggest names.
Even the one that I use, uhthankfully it has somewhat
(28:54):
decent fees and a good selectionuh of assets on there.
So those are the real thingsthat you want to weigh up
basically whenever it comes tothat.
There's no one size fits all.
You may be interested to know,you may be interested to know
that certain platforms willcharge you a fixed fee versus a
percentage fee.
So that means as your portfoliogrows, it works out to be that
(29:14):
much more economical for youbecause you're not giving away a
percentage, you're giving awaya flat fee, and say that flat
fee is like 20-30 pounds everymonth.
Obviously, if you have asignificant amount of money and
invest it, well, then a port apercentage is going to scale
with that.
There's going to be a crossoverpoint where the flat fee starts
to make more sense versus thepercentage.
Obviously, you just got to wearthat up on an individual basis.
(29:34):
Worth mentioning because noteverybody knows that.
There are certain platforms outthere that claim themselves to
be no fees and they advertisethemselves as that.
I'd be extremely wary.
They've got to make their moneysomehow.
They can only make their moneythrough through one of three
things.
It's either going to be tradingfees, it's going to be holding
fees, or it's going to besomething that's a little
complicated that we're going tosave for another day called the
(29:56):
spread.
So if some if a platform outthere is advertising itself as
no fee, it still has to makemoney somehow.
So, therefore, if you ask me,it probably means they're making
money in a little bit more of alow-key way and taking
advantage of the spread that wetalked about just a second ago.
Does it actually work out moreeconomical for you to use those
platforms versus a platformthat's upfront with their fees?
(30:19):
Well, I'm dubious, put it likethat.
Food for thought, something toconsider.
If you look at the fees on aplatform in terms of the ongoing
fees, the platform fees,usually I would expect those to
be around about the 0.1.2% mark,if you ask me.
So that's in addition to thefund fee that we talked about
(30:39):
just a second ago.
So you might be paying 0.3.4%all in.
That is for the platform feeand the fund fee.
If it's higher than that, redflag right there, just have a
real look around at how youmight be able to get a better
deal.
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