March 4, 2024

My Investments Update March 2024

Nick Investing, Everything Else events, reviews, property 0 Comments

Here is my latest monthly update about my investments. You can read my February 2024 Investments Update here if you like

I’ll begin as usual with my Nutmeg Stocks and Shares ISA. This is the largest investment I hold other than my Bestinvest SIPP (personal pension).

As the screenshot below for the last 12 months shows, my main Nutmeg portfolio is currently valued at £ £22,994. Last month it stood at £22,386 so that is a welcome increase of £608.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This is now worth £3,640 compared with £3,530 a month ago, a rise of £110. Here is a screen capture showing performance over the last 12 months.

Finally, at the start of December 2023 I invested £500 in one of Nutmeg’s new thematic portfolios (Resource Transformation). As you can see from the screen capture below, this is now worth £530, an increase of £11 since last month and £30 or 6% over the three-month period since I first invested.

February was obviously a good month for my Nutmeg investments. Overall I was up £737 or 2.79%. In these turbulent times I am more than happy with that.

You can read my full Nutmeg review here. If you are looking for a home for your annual ISA allowance, based on my overall experience over the last seven years, they are certainly worth considering. They offer self-invested personal pensions (SIPPs), Lifetime ISAs and Junior ISAs as well.

Don’t forget, the current tax year ends on 5 April 2024 and after that the 2023/24 tax-free ISA allowance of £20,000 will be gone forever!

I also have investments with the property crowdlending platform Kuflink. They continue to do well, with new projects launching every week. I currently have around £1,570 invested with them in 10 different projects paying interest rates averaging around 7%. I also have £14 in my Kuflink cash account.

To date I have never lost any money with Kuflink, though some loan terms have been extended once or twice. On the plus side, when this happens additional interest is paid for the period in question.

There is now an initial minimum investment of £1,000 and a minimum investment per project of £500. Kuflink say they are doing this to streamline their operation and minimize costs. I can understand that, though it does mean that the option to test the water with a small first investment has been removed. It also makes it harder for small investors (like myself) to build a well-diversified portfolio on a limited budget.

One possible way around this is to invest using Kuflink’s Auto/IFISA facility. Your money here is automatically invested across a basket of loans over a period from one to five years. Interest rates range from 7% to around 10%, depending on the length of term you choose. Full up-to-date details can be found on the Kuflink website.

You can invest tax-free in a Kuflink Auto IFISA. Or if you have already used your annual iFISA allowance elsewhere, you can invest via a taxable Auto account. You can read my full Kuflink review here if you wish.

Moving on, my Assetz Exchange investments continue to generate steady returns. Regular readers will know that this is a P2P property investment platform focusing on lower-risk properties (e.g. sheltered housing). I put an initial £100 into this in mid-February 2021 and another £400 in April. In June 2021 I added another £500, bringing my total investment up to £1,000.

Since I opened my account, my AE portfolio has generated a respectable £168.53 in revenue from rental income. As I said in last month’s update, capital growth has slowed, though, in line with UK property values generally.

At the time of writing, 10 of ‘my’ properties are showing gains, 4 are breaking even, and the remaining 15 are showing losses. My portfolio is currently showing a net decrease in value of £40.01, meaning that overall (rental income minus capital value decrease) I am up by £128.52. That’s still a decent return on my £1,000 and does illustrate the value of P2P property investments for diversifying your portfolio. And it doesn’t hurt that with Assetz Exchange most projects are socially beneficial as well.

The overall fall in capital value of my AE investments is obviously a little disappointing. But it’s important to remember that until/unless I choose to sell the investments in question, it is largely theoretical, based on the most recent price at which shares in the property concerned have changed hands. The rental income, on the other hand, is real money (which in my case I’ve reinvested in other AE projects to further diversify my portfolio).

To control risk with all my property crowdfunding investments nowadays, I invest relatively modest amounts in individual projects. This is a particular attraction of AE as far as i am concerned (especially now that Kuflink have raised their minimum investment per project to £500). You can actually invest from as little as 80p per property if you really want to proceed cautiously.

As I noted in this recent post, Assetz Exchange is particularly good if you want to compound your returns by reinvesting rental income. This effectively boosts the interest rate you are receiving. Personally, once I have accrued a minimum of £10 in rental payments, I reinvest this money in either a new AE project or one I have already invested in (thus increasing my holding). Over time, even if I don’t invest any more capital, this will ensure my investment with AE grows at an accelerating rate.

My investment on Assetz Exchange is in the form of an IFISA so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and intend to continue investing with them. You can read my full review of Assetz Exchange here. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

In 2022 I set up an account with investment and trading platform eToro, using their popular ‘copy trader’ facility. I chose to invest $500 (then about £412) copying an experienced eToro trader called Aukie2008 (real name Mike Moest).

In January 2023 I added to this with another $500 investment in one of their thematic portfolios, Oil Worldwide. I also invested a small amount I had left over in Tesla shares.

As you can see from the screen captures below, my original investment totalling $1,022.26 is today worth $1,238.51, an overall increase of $216.25 or 21.15%.

You can read my full review of eToro here. You may also like to check out my more in-depth look at eToro copy trading. I also discussed thematic investing with eToro using Smart Portfolios in this recent post. The latter also reveals why I took the somewhat contrarian step of choosing the oil industry for my first thematic investment with them.

eToro also offer the free eToro Money app. This allows you to deposit money to your eToro account without paying any currency conversion fees, saving you up to £5 for every £1,000 you deposit. You can also use the app to withdraw funds from your eToro account instantly to your bank account. I tried this myself and was impressed with how quickly and seamlessly it worked. You can read my blog post about eToro Money here. Note that it can also serve as a cryptocurrency wallet, allowing you to send and receive crypto from any other wallet address in the world.

I had three more articles published in January on the excellent Mouthy Money website. The first is How to Save Money on Motoring. Like everything else in life the cost of motoring is going up and up, so in this article I set out a variety of ways – from ride-sharing to driving for fuel economy – you may be able to reduce it.

Also in February Mouthy Money published Are You Making the Most of Your Annual ISA Allowance?. As mentioned earlier, the 2023/24 tax year ends in just a few weeks’ time. And after that the £20,000 tax-free ISA allowance for that year will be gone forever. In this article I describe the different types of ISA – Cash ISA, Stocks and Shares ISA, Innovative Finance ISA (IFISA) and Lifetime ISA (LISA) – and explain how they work and the differences between them. I also provide some tips and advice for making the most of your annual ISA allowance.

My final article published on Mouthy Money last month was Can You Save Money on Your Shopping with JamDoughnut? Regular PAS readers will know that I am a fan of the JamDoughnut app, which enables you to save up to 20% on purchases with a growing range of retailers. The article also reveals how you can get a £2 head-start by using my referral code.

As I’ve said before, Mouthy Money is a great resource for anyone interested in money-making and money-saving. I am a particular fan of my fellow MM contributor and money blogger Shoestring Jane. She writes mainly about money saving and frugal living. Her latest article Frugal Skills to Save You Money sets out a selection of life skills that can save you money (and aren’t hard to learn). You can see all of Jane’s articles for Mouthy Money via this web page.

I also published several posts on Pounds and Sense in February. I won’t bother mentioning those that are no longer relevant now, but the others are listed below.

In Get Your Will Written Free of Charge in March I revealed how you can get your will written (or updated) free of charge during Free Wills Month. This regular event supports a range of leading charities. Obviously the hope is that you will include a bequest to charity in your will, but there is absolutely no obligation to do this. Free Wills Month is now up and running. If you want to take advantage and get your will written free, I recommend acting now as there are only limited spots available.

Also in March I published a guest post titled Building Your Own Home – It’s Not Just for the Super Rich! This post was written on behalf of Suffolk Building Society, who are trying to raise awareness of the self-build option in the UK. As they say in the article, they can provide mortgages to purchase land suitable for self-build projects. SBS emphasize that this option is suitable and available for ‘ordinary people’, not just the super-rich folk you see on TV shows like Grand Designs!

I also published Saving for a Rainy Day or a Stormy Breakup? The Surprising Facts About Secret Savings Accounts. This post is based on some eye-opening research from my friends at Smart Money People, which revealed (among other things) that one in ten people in a serious relationship, including marriage, civil partnerships, or cohabitation, maintain a secret savings account. Find out more in this post.

Finally, in What is AER and Why Is It Important to Savers and Investors? I revealed what AER is and why both savers and investors need to understand it. This was really a follow-up to my article last month about the importance of compounding to investors. The article reveals how more frequent compounding increases AER (annual equivalent rate) and includes the formula used to calculate this.

Also, from January this year I became a regular contributor to the new Over 60s Discounts website. You can read my latest article here: Who Cares for the Carers? This is about help available for unpaid carers in the UK, both financial and practical. I highly recommend registering at Over 60s Discounts, by the way – they list a growing range of discounts and bonuses for older people, including some that are unique to O60D.

One other thing is that this month I switched my Santander 123 Lite current account to a Santander Edge current account. I will try to find time to write a separate post about this soon. But briefly, my main reason was because having an Edge current account allows you to open an Edge savings account, which offers a market-leading 7% interest rate (AER) for amounts of up to £4,000 for one year (it then falls to 4.5% AER).

The Santander Edge account has slightly higher fees (£3 a month as opposed to £2) and the cashback on offer is slightly less. However, when I crunched the numbers, the value of having an Edge savings account easily outweighed this. Though I am fortunate in that I had £4,000 I could put into it immediately from another, lower-paying savings account. If I hadn’t had that, it wouldn’t have been worth switching to the Edge account.

Finally, a quick reminder that you can also follow Pounds and Sense on Facebook or Twitter/X. Twitter/X is my number one social media platform these days and I post regularly there. I share the latest news and information on financial (and other) matters, and other things that interest, amuse or concern me. So if you aren’t following my PAS account, you are definitely missing out!

That’s all for today. As always, if you have any comments or queries, feel free to leave them below. I am always delighted to hear from PAS readers

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Note also that posts may include affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered, but it does help support me in publishing PAS and paying my bills. Thank you!

If you enjoyed this post, please link to it on your own blog or social media:

February 8, 2024

What is AER and Why is it Important to Savers and Investors?

Nick Saving Money, Investing 0 Comments

I recently posted about the importance of compounding to investors. In the article I pointed out that compounding, when combined with the magic of compound interest, is a powerful tool for building wealth and long-term financial success.

Compounding involves earning interest on both your initial investment and the accumulated interest from previous periods. In other words, it’s the process of generating earnings from an asset’s reinvested earnings. The more frequently your money is compounded, the faster it grows. And the longer your money remains invested, the more significant the compounding effect becomes.

A reader asked me if the effect of compounding is equivalent to getting a higher annual interest rate. The answer to that is yes, if interest is compounded more than once a year. The more times per year interest is compounded, the higher the effective annual rate becomes. The official term for this is AER, or annual equivalent rate.

In this article I thought I would explain AER in a bit more detail, as it is a very important concept for savers and investors to grasp.

What is AER?

Annual Equivalent Rate (AER) is a standardized way of expressing the interest rate on savings or investment products over a one-year period. It allows investors to compare the potential returns on different financial products on a like-for-like basis. AER takes into account the effect of compounding, providing a more accurate representation of the overall return on an investment.

Why is AER Important?

AER is crucial for investors as it helps them make more informed decisions when comparing different savings and investment options. While nominal interest rates may seem attractive at first glance, they can be misleading. AER provides a more accurate reflection of the actual return on an investment by factoring in the compounding of interest over time.

Example

Let’s consider two savings accounts:

Savings Account A offers a nominal interest rate of 7% per annum, compounded annually.
Savings Account B offers a nominal interest rate of 7% per annum, compounded quarterly.

To compare these accounts accurately, we can use the AER formula:

Where:

$r$ is the nominal interest rate (as a decimal)
$n$ is the number of compounding periods per year

For Account A:

For Account B:

In this example, even though both accounts have the same nominal interest rate, Account B has a higher AER due to the more frequent compounding.

Let’s now add a third savings account, Account C, again with a nominal annual interest rate of 7% but this time compounded monthly. We can calculate the AER for Account C using the formula as before:

As you can see, the AER is higher again due to the increased frequency of compounding. If compounding was even more frequent (e.g. daily) the difference would be even more pronounced. In addition, the longer the period over which you invest, the greater the difference frequency of compounding will make.

While AER is often considered with regard to savings accounts, it also applies to investments. As I said in my earlier post, with a property crowdlending platform like Assetz Exchange [referral link] which pays monthly dividends (and has low minimum investments), you can keep reinvesting the income you receive to boost the returns you make.

Here is a link to my original review of Assetz Exchange.

Closing Thoughts

Understanding AER is crucial for UK savers and investors as it provides a standardized measure to compare the true potential returns of different financial products.

By taking into account the compounding effect, AER offers a more accurate picture of overall returns on investments. When evaluating savings or investment opportunities, always look beyond nominal interest rates and consider the AER to make informed decisions that align with your financial goals. And take any opportunity that arises to reinvest your returns to harness the power of compounding to grow your wealth faster.

As ever, if you have any comments or questions about this post, please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

If you enjoyed this post, please link to it on your own blog or social media:

February 3, 2024

My Investments Update – February 2024

Nick Investing events 1 Comment

Here is my latest monthly update about my investments. You can read my January 2024 Investments Update here if you like

I’ll begin as usual with my Nutmeg Stocks and Shares ISA. This is the largest investment I hold other than my Bestinvest SIPP (personal pension).

As the screenshot below for the last 12 months shows, my main Nutmeg portfolio is currently valued at £22,386. Last month it stood at £22,292 so that is a modest increase of £94.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This is now worth £3,530 compared with £3,501 a month ago, a rise of £29. Here is a screen capture showing performance over the last 12 months.

Finally, at the start of December 2023 I invested £500 in one of Nutmeg’s new thematic portfolios (Resource Transformation). As you can see from the screen capture below, after a storming start in December this fell back in January before recovering again to £519, a small drop of £4 or 0.76% month on month. It is still around 4% ahead since I invested at the start of December, though.

January was obviously a mixed month for my Nutmeg investments. Overall I was still £119 up, though. If you add this to the increase of £1,160 last month, that gives a total value increase over the last two months of £1,279 or 5.17%. In these turbulent times I am more than happy with that.

You can read my full Nutmeg review here (including a special offer at the end for PAS readers). If you are looking for a home for your annual ISA allowance, based on my overall experience over the last seven years, they are certainly worth considering. They offer self-invested personal pensions (SIPPs), Lifetime ISAs and Junior ISAs as well.

I also have investments with the property crowdlending platform Kuflink. They continue to do well, with new projects launching every week. Last month I withdrew £350 from completed projects to help pay for a much-needed holiday in the spring. I currently have around £1,570 invested with them in 10 different projects paying interest rates averaging around 7%. I also have £14 in my Kuflink cash account.

To date I have never lost any money with Kuflink, though some loan terms have been extended once or twice. On the plus side, when this happens additional interest is paid for the period in question.

There is now an initial minimum investment of £1,000 and a minimum investment per project of £500. Kuflink say they are doing this to streamline their operation and minimize costs. I can understand that, though it does mean that the option to test the water with a small first investment has been removed. It also makes it harder for small investors (like myself) to build a well-diversified portfolio on a limited budget.

One possible way around this is to invest using Kuflink’s Auto/IFISA facility. Your money here is automatically invested across a basket of loans over a period from one to three years. Interest rates normally range from around 7% for one year to 9.83% gross for a three-year term.

As a special Valentine’s Day promotion, however, until 14 February 2024 they are offering enhanced rates of 9% for one year, 10.5% for two years and 12.25% gross for a three-year term. These figures are AER (annual equivalent rates) that incorporate reinvestment of interest paid at the end of each year. These are actually the highest rates I have ever seen Kuflink offering ❤

You can invest tax-free in a Kuflink Auto IFISA. Or if you have already used your annual iFISA allowance elsewhere, you can invest via a taxable Auto account. You can read my full Kuflink review here if you wish.

Moving on, my Assetz Exchange investments continue to generate steady returns. Regular readers will know that this is a P2P property investment platform focusing on lower-risk properties (e.g. sheltered housing). I put an initial £100 into this in mid-February 2021 and another £400 in April. In June 2021 I added another £500, bringing my total investment up to £1,000.

Since I opened my account, my AE portfolio has generated a respectable £161.85 in revenue from rental income. As I said in last month’s update, capital growth has slowed, though, in line with UK property values generally.

At the time of writing, 6 of ‘my’ properties are showing gains, 3 are breaking even, and the remaining 19 are showing losses. My portfolio is currently showing a net decrease in value of £40.87, meaning that overall (rental income minus capital value decrease) I am up by £120.98. That’s still a decent return on my £1,000 and does illustrate the value of P2P property investments for diversifying your portfolio. And it doesn’t hurt that with Assetz Exchange most projects are socially beneficial as well.

The overall fall in capital value of my AE investments is obviously a little disappointing. But it’s important to remember that until/unless I choose to sell the investments in question, it is largely theoretical, based on the most recent price at which shares in the property concerned have changed hands. The rental income, on the other hand, is real money (which in my case I’ve reinvested in other AE projects to further diversify my portfolio).

To control risk with all my property crowdfunding investments nowadays, I invest relatively modest amounts in individual projects. This is a particular attraction of AE as far as i am concerned (especially now that Kuflink have raised their minimum investment per project to £500). You can actually invest from as little as 80p per property if you really want to proceed cautiously.

As I noted in this recent post, Assetz Exchange is particularly good if you want to compound your returns by reinvesting rental income. This effectively boosts the interest rate you are receiving. Personally, once I have accrued a minimum of £10 in rental payments, I reinvest this money in either a new AE project or one I have already invested in (thus increasing my holding). Over time, even if I don’t invest any more capital, this will ensure my investment with AE grows at an accelerating rate.

My investment on Assetz Exchange is in the form of an IFISA so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and intend to continue investing with them. You can read my full review of Assetz Exchange here. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

Last year I set up an account with investment and trading platform eToro, using their popular ‘copy trader’ facility. I chose to invest $500 (then about £412) copying an experienced eToro trader called Aukie2008 (real name Mike Moest).

In January 2023 I added to this with another $500 investment in one of their thematic portfolios, Oil Worldwide. I also invested a small amount I had left over in Tesla shares.

As you can see from the screen captures below, my original investment totalling $1,022.26 is today worth $1,209.37, an overall increase of $187.11 or 18.30%.

You can read my full review of eToro here. You may also like to check out my more in-depth look at eToro copy trading. I also discussed thematic investing with eToro using Smart Portfolios in this recent post. The latter also reveals why I took the somewhat contrarian step of choosing the oil industry for my first thematic investment with them.

eToro also recently introduced the eToro Money app. This allows you to deposit money to your eToro account without paying any currency conversion fees, saving you up to £5 for every £1,000 you deposit. You can also use the app to withdraw funds from your eToro account instantly to your bank account. I tried this myself and was impressed with how quickly and seamlessly it worked. You can read my blog post about eToro Money here.

I had three more articles published in January on the excellent Mouthy Money website. The first is How to Save Money on Your Water Bills. In Britain we’re lucky to have high-quality running water on tap whenever we need it. Like everything else in life it costs money, however. And in these times of rising prices and squeezed incomes, those costs can be a growing burden. So in this article I set out some ways you may be able to reduce your water bills.

Also in January Mouthy Money published How to Make Money With Classic Cars. In this article – written in association with my friends at the Car & Classic website – I described the surprising number of attractions to investing in classic cars, and provided a range of tips for those new to the field.

My final article published on Mouthy Money last month was Top Tips to Avoid Online Scams. This article set out my top ten tips for staying safe online and avoiding becoming a victim of the scammers. Do check it out!

As I’ve said before, Mouthy Money is a great resource for anyone interested in money-making and money-saving. I particularly like the ‘Deals of the Week’ feature compiled by Jordon Cox (‘Britain’s Coupon Kid’) which lists all the best current money-saving offers for savvy shoppers. Check out the latest edition here.

I am also a fan of my fellow MM contributor and money blogger Shoestring Jane. She writes mainly about money saving and frugal living. Her latest article How to Get Almost Everything More Cheaply has some great tips and ideas. You can see all of her articles for Mouthy Money via this web page.

I also published several posts on Pounds and Sense in January. I won’t bother mentioning those that are no longer relevant now, but the others are listed below.

In How to Start Copy Trading With eToro I discussed how to get started using the popular copy trading facility on eToro. This allows you to automatically copy successful traders on the platform – so when they make money, you make money too. As mentioned above, I have done this myself following Dutch professional investor Mike Moest and am currently around 23% in profit. You can read more in my post about copy trading on eToro and my experiences with it.

I also published HMRC Crackdown on Side Hustles – Truth and Fiction. As you may know, from January this year digital platforms like eBay, Etsy and Airbnb are required to collect additional information from sellers, including numbers of sales and amount of income generated. This data will be automatically shared with HMRC, who will compare it against their records to see if any tax may be due. This news has caused some consternation on social media, with many who have side hustles to help pay the bills worried they may be hit by an unexpected tax demand. In this post I explain what exactly is happening and set out to separate the truth from the fiction.

In Planning a UK Holiday This Year? Here Are Some Ideas For You! I set out a list of destinations in the UK I have visited myself, with links to my full reviews of the places concerned. They range from Bath to Barmouth, Lavenham to Llanbedrog. If you’re looking for ideas for a short break (or longer) in the UK this year, this could be a good source of inspiration for you 🙂

One Key Lesson About Investing I Learned From My Dad’s Big Mistake reveals an important lesson I learned from my late father about investing. It is a lesson I have tried to apply in all my investing myself. While it hasn’t stopped me making some mistakes along the way, it has certainly helped me avoid any disastrous losses. This article was first published in a slightly different form on Mouthy Money.

Finally in January I published How to Harness the Power of Compounding. In this article I discussed the power of compounding and compound interest. This is a wealth-building secret every saver and investor should embrace. I also revealed two particular types of investment where you can apply compounding to help boost your returns.

Also, from January I have become a regular contributor to the new Over 60s Discounts website. You can read my first article here: How to Cope With Loneliness in Later Life. As you may gather, as well as personal finance I will also be writing about ‘lifestyle’ matters for O60D.

On other things, the opportunity to get a free share worth up to £100 with Trading 212 has now closed. However, you can can also still Get a Free ETF Share Worth up to £200 with Wealthyhood. This DIY wealth-building app is aimed especially at people new to stock market investing. The minimum investment to qualify for the free share offer is £50 – but on the plus side, they now guarantee your free ETF share will be worth at least £10.

I am still using and getting good results from the cashback app JamDoughnut. You can see my review of JamDoughnut here, along with a referral code that will get you a £2 bonus when you sign up. To be honest I’m surprised more PAS readers haven’t taken advantage of this opportunity. Not only can you get discounts of up to 20% using the app, they also hold regular contests and promotions offering additional bonuses and discounts.

Finally, a quick reminder that you can also follow Pounds and Sense on Facebook or Twitter/X. Twitter/X is my number one social media platform these days and I post regularly there. I share the latest news and information on financial (and other) matters, and other things that interest, amuse or concern me. So if you aren’t following my PAS account, you are definitely missing out!

That’s all for today. As always, if you have any comments or queries, feel free to leave them below. I am always delighted to hear from PAS readers

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Note also that posts may include affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered, but it does help support me in publishing PAS and paying my bills. Thank you!

If you enjoyed this post, please link to it on your own blog or social media:

The power of compounding and compound interest

January 26, 2024

How to Harness the Power of Compounding

Nick Investing reviews 0 Comments

In the world of investing, there’s a powerful force that has the potential to turn small contributions into substantial wealth over time.

This force is known as compounding, and when combined with the magic of compound interest, it becomes a powerful tool for building wealth and long-term financial success.

For savers and investors, harnessing the power of compounding can be the key to achieving your financial goals.

The Basics of Compounding

Compounding is a simple yet highly effective concept that involves earning interest on both your initial investment and the accumulated interest from previous periods. In other words, it’s the process of generating earnings on an asset’s reinvested earnings. The longer your money remains invested, the more significant the compounding effect becomes.

Let’s consider a hypothetical scenario to illustrate the point. If you invest £1,000 with an annual interest rate of 5%, you would earn £50 in the first year. In the second year, however, you wouldn’t just earn interest on your initial £1,000, you would also earn interest on the £50 you earned in the first year (at 5% that would be another £2.50). Over time, this compounding effect can result in exponential growth.

The Magic of Compound Interest

Compound interest takes compounding to the next level. Unlike simple interest, where you only earn interest on the principal amount, compound interest allows you to earn interest on both the principal and the previously earned interest. This compounding occurs at regular intervals, such as annually, quarterly, or monthly, depending on the investment vehicle. In general, the more frequently compounding occurs, the faster your money will grow.

Compound interest can make a significant difference to the growth of your wealth. Whether you’re investing in stocks, bonds, or other financial instruments, the power of compound interest allows your money to work harder for you, potentially accelerating your journey towards financial freedom.

The Importance of Time in Wealth Building

A critical factor in maximizing the benefits of compounding and compound interest is time. The earlier you start investing, the longer your money has to grow, and the more substantial the compounding effect becomes. This is sometimes referred to as the ‘time value of money’.

For example, let’s compare two imaginary investors, Jane and Bob. Jane starts investing £1,000 per year at the age of 25 and continues until she’s 35, contributing a total of £11,000. Bob, on the other hand, starts investing the same amount at 35 and continues till he’s 65, contributing a total of £31,000.

Assuming an annual return of 7%, Jane’s investments will grow significantly more than Bob’s due to the extra years of compounding, despite the fact she invested £20,000 less than Bob in total. In this scenario, Jane’s investment would grow to over £193,000 by the time she is 65, while Bob’s would reach around £148,000. The difference is striking and emphasizes the importance of an early start in wealth building.

Key Steps for Investors

Start Early: The earlier you begin investing, the more time your money has to compound and grow. Even small amounts invested regularly can lead to substantial wealth over the long term.
Reinvest Earnings: Instead of cashing out your investment earnings, reinvest them to take full advantage of compounding. Reinvesting dividends and interest compounds your returns, accelerating wealth accumulation.
Diversify Your Portfolio: A diversified investment portfolio helps spread risk and enhances long-term returns. Consider a mix of stocks, bonds and other assets to optimize your investment strategy.
Stay Disciplined: Consistency is key when it comes to compounding. Stick to your investment plan, contribute regularly, and avoid unnecessary withdrawals to maximize the long-term benefits.

Practical Examples

Although compounding is often discussed in regard to cash savings, as indicated above the principle applies very much with stock-market-type investments as well.

To take one example from my own experience, regular readers will be aware that I have some money in the P2P property investment platform Assetz Exchange [referral link]. This platform specializes in relatively low-risk social housing projects where rents are typically paid by charities and housing associations or the government (e.g. asylum seeker hostels). Here is a link to my original review of Assetz Exchange.

With all my AE investments, I receive pro rata rental distributions every month. My investment is quite modest so these aren’t huge amounts in themselves. But once they have added up to a reasonable sum (say £10 or more) I reinvest them in another AE project or increase my holding in an existing one. From the following month I then start receiving distributions from these investments as well. That means my investment and monthly returns are building steadily, month by month, through the power of compounding.

Obviously that’s just one example. But Assetz Exchange works particularly well for this, as the minimum investment per project is so low (as little as 80p in some cases). So even if you are only investing relatively small amounts like me, you can still harness the power of compounding to grow your money.

That’s just one possible approach, of course. Another would be to invest in dividend-paying shares and reinvest the dividends when they arrive in more such shares. This approach to investment was discussed a while ago on PAS in a guest post by Lewys Lew.

Whatever your chosen investment vehicle, reinvesting your interest, income or dividends will help you grow it faster using the power of compounding.

Final Thoughts

As I hope I’ve shown in this post, the power of compounding and compound interest is a wealth-building secret every investor should embrace.

By understanding these concepts and implementing a disciplined and long-term investment strategy, you can harness the power of compounding to achieve your financial goals.

Start early, stay committed, and let compounding work its magic on your road to financial success 🙂

As always, if you have any comments or questions about this post, please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

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One Key Lesson I Learned About Investing From My Dad's Big Mistake

January 18, 2024

One Key Lesson About Investing I Learned From My Dad’s Big Mistake

Nick Investing families 0 Comments

Let me tell you about my dad. He was a kind, thoughtful man and I learned many important things from him. But money was, sadly, never his strong point.

Here’s an example. Quite a few years ago a family member persuaded him to invest all his spare cash in a media services business a friend of a friend was setting up.

I didn’t hear about this till after the investment had been made. But even though I was much younger then, I could still see it was insanely risky.

It was a new business with no track record. And Dad knew nothing whatsoever about the media – he was a carpet-fitter turned hydraulic machinery salesman. And perhaps sensing that his wife (my stepmother) would disapprove, he didn’t actually bother to tell her about it.

For the next year or so, any time my partner Jayne and I went to visit, Dad would find an opportunity to take us aside at some point to give us an update. Inevitably this would begin with a conspiratorial, “Don’t tell Shirley, but…”

At first the news seemed encouraging, but soon it became clear the business was going south and Dad’s money was going with it. I’ll never know the full story, but it seemed to me he was badly advised (to put it kindly) by the relative concerned and quite probably cheated by the main shareholder, though it was all technically within the law.

Eventually he had to confess to my stepmother that he had lost most of their life savings. This inevitably caused a rift between them and had further ramifications that continued for the rest of their lives.

This whole incident was, of course, deeply traumatic for the whole family. The one good thing it taught me was the folly of putting all your eggs in one basket when investing.

I vowed I would never make that mistake with my own investments and have therefore always aimed to diversify as widely as possible. To date that principle has served me well.

How to Diversify

There is no one single recipe for successfully diversifying your investments, but here are some guidelines I have tried to follow myself.

Don’t even think about investing until you have paid off any interest-charging debts. You should also have at least three months’ of income in easily accessible form in case of sudden, unexpected emergencies. An instant access cash ISA (see below) might fit the bill.
Don’t invest more than a small proportion of your portfolio in single company shares. You will get much better diversification by investing in a fund that includes a broad range of shares and other investment products.
Aim to invest not only across different companies but different countries, sectors, industries, and so on. A well-diversified global fund can do this for you.
Make full use of your tax-free ISA allowance. This is currently a generous £20,000 a year. Investing via a reputable stocks and shares ISA can save you thousands of pounds in tax.
For further diversification you might also consider investing a small amount in an Innovative Finance ISA. IFISAs let you invest in peer-to-peer lending. While riskier than bank savings, the potential returns from this are also better. Each year you are allowed to invest in one IFISA as well as one stocks and shares ISA and one cash ISA, as long as you keep within the annual £20,000 limit. [Note: the rule about only investing in one of each type of ISA per year is being abolished from the start of the 2024/25 financial year.]

With a well-diversified portfolio, you greatly improve the chances that if one or more of your investments fails to perform, others will compensate. And whatever happens in the world, your overall investment pot will hopefully build over the years into a substantial sum.

Whatever you do, though, please don’t make my dad’s mistake and put all your money into a single business (or other investment), especially if it’s one you don’t understand. That really is the fast track to a financial meltdown!

Disclaimer: I am not a qualified financial adviser and nothing in this post should be construed as personal financial advice. All investment carries a risk of loss. You should always do your own ‘due diligence’ before investing and consult a professional financial adviser if in any doubt how best to proceed.

This is an updated version of an article originally published on the Mouthy Money website.

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January 5, 2024

How to Start Copy Trading With eToro

Nick Investing reviews 5 Comments

In my post today I’m focusing on the trading and investment platform eToro. I originally reviewed eToro in this post.

eToro is a global fintech company with its HQ in Israel. The company has registered offices in Cyprus, the UK, the US and Australia. It is a hugely popular platform with 25 million customers from over 140 countries across the world. They offer a range of share trading and investment services.

eToro is regulated and authorised in the UK by the Financial Conduct Authority (FCA) and is covered by the Financial Services Compensation Scheme (FSCS). That means if eToro were to go bust any cash deposits with them up to £85,000 would be protected. Of course, the FSCS doesn’t protect you if you lose money simply due to your investments performing poorly.

What is Copy Trading?

Copy trading is a very popular feature of eToro. As mentioned, it allows you to automatically copy the trades of established eToro investors and benefit from the profits they (hopefully) make.

eToro has hundreds, probably thousands, of approved ‘popular investors’ whose trades you can copy automatically on the platform. They each have a profile page where you can find out more about them and their investment strategy.

On a trader’s profile page you can see various stats about them, including how many copiers they have and how many people are following them. You can also check their profits over various timeframes (though of course this is no guarantee of how successful they will be in the future).

eToro operates in US Dollars, though that isn’t an issue for UK investors (see tips, below). There’s a minimum investment of $200 (around £165) for copy trading. However, many approved traders recommend a higher minimum than this. That’s because, when you sign up to copy a trader, eToro automatically duplicates all of that person’s trades in proportion to the size of your investment.

eToro has a minimum investment size of $1 and if a trade would work out less than that pro rata it won’t be executed. It follows that traders whose strategies typically involve placing large numbers of relatively small trades generally recommend a higher minimum starting investment.

One of the biggest attractions of copy trading is that no charges are payable. The traders in question receive commission from eToro for the business they bring in for the company. So in effect you are getting privileged access to the skills and expertise of these people at no cost to yourself.

You are allowed to copy up to 100 different popular investors, though you can of course start with just one.

How to Copy a Trader

Before you can start copy trading, you will need to register for an account with eToro and deposit some funds with them. I talked about this in my original eToro review.

Once you have done this, you can check out popular investors on the platform by clicking on Discover in the left-hand menu of your dashboard when logged on, then clicking on CopyTrader near the top.

A new page will open showing the most popular copy traders and also those whose copier numbers are currently growing the fastest (probably due to good recent performance). Here’s a screen capture showing part of this page at the time of writing:

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You can also use the search facility to search for popular investors according to where they are based, what they invest in, and how much profit they have made within a certain period.

Once you’ve found an investor you want to copy, click on the green ‘Copy’ button on their profile page. A pop-up box such as the one below will then appear. Enter the total amount you want to invest at the top.

You also have to choose whether you want to copy all existing open positions as well as new ones. ‘Copy Open Trades’ is the default, and if you want to do this you should leave the box in question ticked. If you uncheck the box, only new trades opened after you start investing will be copied.

One drawback with copying all open positions is that you’ll be investing in these trades at the current price, whatever it is, instead of the price when the trader concerned opened their position. If the price has gone up since then, the profit potential may be less. On the other hand, if you opt only to copy new trades, it may be some time before your money is fully invested. There are pros and cons either way, but ultimately the longer you stay invested, the less difference this decision is likely to make.

Another choice to make here concerns the CopyTrader Stop Loss (CSL). If your copy value falls by that amount, the CSL will automatically terminate the copy relationship and return the remaining money to your eToro balance. You can set this figure anywhere between 5% and 95%. My advice is not to set it too high, as even a brief ‘wobble’ will then trigger the stop loss and crystallize your losses (see tips, below).

If any of the above sounds at all daunting, note that everyone on eToro also gets a $100,000 virtual portfolio to practise with. You can copy trade using this virtual money to see how the process works and what returns you make.

My Experience of Copy Trading

In June 2022 I invested $500 (then about £412) copying a Netherlands-based eToro trader called Aukie2008 (real name Mike Moest). I chose him for various reasons, including his eToro profit record and the number of followers he had already.

On his profile page he came across as a likeable, straight-talking individual, as well as being an experienced and knowledgeable trader. He posted regular updates on his strategies and on investing generally. I also liked the fact that he always took the trouble to answer questions posted by his followers. His recommended minimum starting investment was $500.

Unsurprisingly in these volatile times, my investment has been up and down, but it is currently (after 18 months) about $125 (25%) in profit. All things considered I am very happy with that.

In due course I may top up my copy trading investment with Aukie2008. I may also diversify my investments, either by following another approved trader or perhaps via another themed smart portfolio. As regular PAS readers will know, a few months ago I invested $500 in the Oil Worldwide smart portfolio. As the screen capture below shows, this has done okay, though not as well as my copy trading investment. It’s still early days, though.

Top Tips for Copy Traders

Here are some top tips to help you make the most of the copy trading facility on eToro. These are based partly on my own experiences, but also on other comments and advice I have seen.

As mentioned above, check the minimum recommended investment for any trader you are thinking of following and be sure to invest this amount of money or more.
Note also the risk score assigned by eToro. Each approved trader is allocated a score between 1 and 10, with 1 representing very low risk and 10 the highest. Scores are based on the number, size and type of trading activities they engage in. If you are just starting out you might prefer to begin with someone relatively low risk (say 5 or lower) and work up from there as you gain experience on the platform.
Other things being equal, when following a trader I recommend choosing ‘Copy Open Trades’. This will ensure all your money is put to work immediately. As mentioned above, it does mean some positions may not have the same profit potential as when they were opened, but the longer you remain invested, the less this will matter overall.
Also, as mentioned earlier, don’t set your CSL too high. Doing so will mean even a slight wobble may trigger your stop loss and crystallize your losses. Personally I wouldn’t set this figure any higher than 70%, but it’s your decision, of course, based on your tolerance for risk.
To keep currency conversion costs to a minimum, I strongly recommend opening a separate eToro Money account. This will allow you to deposit instantly to your eToro account without paying currency conversion fees or charges.
Remember one key principle of successful investing is diversification. You should therefore consider copying a number of traders with different investment strategies rather than just one. In addition, eToro offers a range of other investment opportunities as well, including individual company shares and themed portfolios.
Even though you’re following an approved trader, you should still monitor his/her results carefully and be prepared to switch if it seems they are losing their touch.
I recommend reading all the updates on the trader’s profile page too. Not only do these provide valuable background about their strategies, you can also learn a lot about the thought processes of professional traders.
Finally, don’t forget that everyone on eToro also gets a $100,000 virtual portfolio to practise with. You can use this to try out copy trading or any other type of investment without risking any real money.

Closing Thoughts

If you’re looking for an interesting (and somewhat unusual) investment opportunity, copy trading on eToro is certainly worth considering.

In effect, your portfolio is managed on your behalf by an experienced professional trader, whose expertise you get access to at no direct cost to yourself. There are plenty of approved traders to choose from, and you can study their past performance and personal updates via their profile pages before picking one (or more) to follow.

For more information about eToro, please see my original eToro review. Alternatively you can sign up directly on the eToro website via this link [affiliate]. I will continue to update Pounds and Sense readers about the performance of my eToro investments in my monthly updates (such as this one).

As always, if you have any questions or comments about this article, please do post them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Note also that this post includes affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered.

This is a fully updated version of my original (2022) blog post about copy trading on eToro.

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January 1, 2024

My Investments Update – January 2024

Nick Investing events, reviews 0 Comments

Happy New Year! Here is my latest monthly update about my investments. You can read my December 2023 Investments Update here if you like

I’ll begin as usual with my Nutmeg Stocks and Shares ISA. This is the largest investment I hold other than my Bestinvest SIPP (personal pension).

As the screenshot below for the year to date shows, my main Nutmeg portfolio is currently valued at £22,292. Last month it stood at £21,282 so that is an increase of £1,010.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This is now worth £3,501 compared with £3,351 a month ago, a rise of £150. Here is a screen capture showing performance since the start of this year.

Finally, at the start of December I invested £500 in one of Nutmeg’s new thematic portfolios (discussed further below). This has now grown to £523, an increase of £23 or 4.6%. That would equate to an annual interest rate of just over 55%. Naturally I don’t expect that to happen in reality!

December was obviously another very good month for my Nutmeg investments. Excluding my new thematic portfolio, their total net value rose by £1,160 or 4.71% month on month. That represents an increase of £2,872 (12.53%) since 1st January 2023. If you add in the increase in value of my thematic portfolio as well (£23), that gives a total increase of £2,895 since the start of the year.

This is obviously a much more positive outcome than appeared likely just a few months ago. It clearly demonstrates the importance of taking a long-time view where investing is concerned and not panicking when the inevitable downturns occur.

As regards thematic portfolios, I discuss these in more detail in my full Nutmeg review. Personally I opted for Resource Transformation. Nutmeg’s description of this portfolio is copied below:

As the global population has risen, so has our demand for energy and resources. In recent years, the way we use resources has also shifted to meet changing consumer demands and national policy shifts towards a lower carbon future.

This theme aims to provide exposure to companies that will participate in these changes and service our energy and material needs in the future. This includes the next generation of energy production, which includes renewables and non-renewables, the mining of metals and materials needed for mass-market electrification, and the treatment and transportation of water.

This appealed to me for various reasons. Clearly energy production will be crucial in the coming decades as the world attempts to transition away from fossil fuels. But I also like the fact that the portfolio includes both renewable and non-renewable energy providers. Realistically we are still going to require fossil fuels for many years, not least to keep the lights on when the wind doesn’t blow and the sun doesn’t shine.

The Resource Transformation portfolio offers plenty of diversification, with all investments in the form of ETFs (exchange traded funds). In addition, only a maximum of 20% of your investment will be in ETFs specific to the theme, with the other 80% more broadly diversified. Actual percentages depend on the risk level you choose. I went for the highest (10/10), so 20% of my investment will be in RT-themed ETFs. But if I’d opted for a lower risk level the proportion of my investment dedicated specifically to the theme would have been less (down to 10% for the lowest risk level, which is 5 for thematic portfolios).

If you are new to thematic investing and want to dip a toe in the water, it does seem to me that Nutmeg thematic investments could be a good, relatively low risk way of doing so, with plenty of diversification. Though of course there are never any guarantees where investing is concerned and you can always lose money when doing this.

You can read my full Nutmeg review here (including a special offer at the end for PAS readers). If you are looking for a home for your annual ISA allowance, based on my overall experience over the last seven years, they are certainly worth considering. They offer self-invested personal pensions (SIPPs), Lifetime ISAs and Junior ISAs as well.

I also have investments with the property crowdlending platform Kuflink. They continue to do well, with new projects launching every week. I currently have around £1,600 invested with them in 10 different projects paying interest rates averaging around 7%. I also have around £300 in my Kuflink cash account, after a couple of other loans were paid off with interest. I will probably withdraw this to help pay for a holiday in 2024 🙂

To date I have never lost any money with Kuflink, though some loan terms have been extended once or twice. On the plus side, when this happens additional interest is paid for the period in question.

There is now an initial minimum investment of £1,000 and a minimum investment per project of £500. Kuflink say they are doing this to streamline their operation and minimize costs. I can understand that, though it does mean that the option to test the water with a small first investment has been removed. It also makes it harder for small investors (like myself) to build a well-diversified portfolio on a limited budget.

One possible way around this is to invest using Kuflink’s Auto/IFISA facility. Your money here is automatically invested across a basket of loans over a period from one to three years. Interest rates currently range from 7% for one year to 9.83% gross for a three-year term.

You can invest tax-free in a Kuflink Auto IFISA. Or if you have already used your annual iFISA allowance elsewhere, you can invest via a taxable Auto account. You can read my full Kuflink review here if you wish.

Moving on, my Assetz Exchange investments continue to generate steady returns. Regular readers will know that this is a P2P property investment platform focusing on lower-risk properties (e.g. sheltered housing). I put an initial £100 into this in mid-February 2021 and another £400 in April. In June 2021 I added another £500, bringing my total investment up to £1,000.

Since I opened my account, my AE portfolio has generated a respectable £155.08 in revenue from rental income. As I said in last month’s update, capital growth has slowed, though, in line with UK property values generally.

At the time of writing, 7 of ‘my’ properties are showing gains, 1 is breaking even, and the remaining 19 are showing losses. My portfolio is currently showing a net decrease in value of £42.61, meaning that overall (rental income minus capital value decrease) I am up by £112.47. That’s still a decent return on my £1,000 and does illustrate the value of P2P property investments for diversifying your portfolio. And it doesn’t hurt that with Assetz Exchange most projects are socially beneficial as well.

As mentioned last time, I recently reinvested £40 of my rental income from Assetz Exchange in a house for asylum seekers in Sunderland. This property is being managed by Mears on behalf of the Home Office, so I think the chances of them going into default are pretty remote! My £40 investment in this property has already increased in value by 54p and I have received 22p in revenue. It all helps 🙂

The overall fall in capital value of my AE investments is obviously a little disappointing. But it’s important to remember that until/unless I choose to sell the investments in question, it is largely theoretical, based on the most recent price at which shares in the property concerned have changed hands. The rental income, on the other hand, is real money (which in my case I’ve reinvested in other AE projects to further diversify my portfolio).

To control risk with all my property crowdfunding investments nowadays, I invest relatively modest amounts in individual projects. This is a particular attraction of AE as far as i am concerned (especially now that Kuflink have raised their minimum investment per project to £500). You can actually invest from as little as 80p per property if you really want to proceed cautiously.

My investment on Assetz Exchange is in the form of an IFISA so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and intend to continue investing with them. You can read my full review of Assetz Exchange here. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

Last year I set up an account with investment and trading platform eToro, using their popular ‘copy trader’ facility. I chose to invest $500 (then about £412) copying an experienced eToro trader called Aukie2008 (real name Mike Moest).

In January 2023 I added to this with another $500 investment in one of their thematic portfolios, Oil Worldwide. I also invested a small amount I had left over in Tesla shares.

As you can see from the screen captures below, my original investment totalling $1,022.26 is today worth $1,224.88, an overall increase of $202.62 or 19.82%. In these turbulent times I am very happy with that.

You can read my full review of eToro here. You may also like to check out my more in-depth look at eToro copy trading. I also discussed thematic investing with eToro using Smart Portfolios in this recent post. The latter also reveals why I took the somewhat contrarian step of choosing the oil industry for my first thematic investment with them.

eToro also recently introduced the eToro Money app. This allows you to deposit money to your eToro account without paying any currency conversion fees, saving you up to £5 for every £1,000 you deposit. You can also use the app to withdraw funds from your eToro account instantly to your bank account. I tried this myself and was impressed with how quickly and seamlessly it worked. You can read my blog post about eToro Money here.

I had two more articles published in December on the excellent Mouthy Money website. The first is How to Make Money Teaching English Online. As I say in the article, this can be an excellent home-based money-making opportunity which offers great personal satisfaction as well. Prior teaching experience isn’t necessarily required, though if you have some it will certainly help.

Also in December Mouthy Money published my Christmas Gift Guide for Older People. Obviously Christmas has now passed. But if you are looking for gift ideas for older friends and relatives (maybe for birthdays or anniversaries) you may still find this a good source of inspiration 🙂

As I’ve said before, Mouthy Money is a great resource for anyone interested in money-making and money-saving. I particularly like the ‘Deals of the Week’ feature compiled by Jordon Cox (‘Britain’s Coupon Kid’) which lists all the best current money-saving offers for savvy shoppers. Check out the latest edition here.

Mouthy Money are also currently running a competition to win one of five free copies of Freedom: Earn It, Keep It, Grow It by Robert Gardner (see Amazon image link below). Visit this page of the Mouthy Money website for further info and to enter.

I also published several posts on Pounds and Sense in December. I won’t bother mentioning those that are out of date now, but the others are listed below.

I guess My Top 20 Posts of 2023 is self-explanatory. The posts are chosen based on comments, page-views and social media shares. They are in no particular order and I excluded any that were no longer relevant. I hope you may enjoy revisiting these posts, or seeing them for the first time if you are new to PAS.

The other post was Take The Penny Challenge to Save £667.95 by This Time Next Year! This post sets out a clever, relatively painless way to save up a useful sum by the end of 2024. Do check it out!

On other matters, the opportunity to get a free share worth up to £100 with Trading 212 has reopened. If you haven’t done this before, you can get a free share worth up to £100. You just have to sign up on the website and deposit a minimum of £1 into your account. This offer is running till 27 January 2024. See Get a Free Share Worth up to £100 with Trading 212 for more info.

You can also still Get a Free ETF Share Worth up to £200 with Wealthyhood. This DIY wealth-building app is aimed especially at people new to stock market investing. The minimum investment to qualify for the free share offer is £50 – but on the plus side, they now guarantee your free ETF share will be worth at least £10.

I wanted to mention as well that I am still using and getting good results from the cashback app JamDoughnut. You can see my review of JamDoughnut here, along with a referral code that will get you a £2 bonus when you sign up. To be honest I’m a bit surprised more PAS readers haven’t taken advantage of this opportunity. Not only can you get discounts of up to 20% using the app, they also hold regular contests and promotions offering additional bonuses and discounts.

Finally, a quick reminder that you can also follow Pounds and Sense on Facebook or Twitter/X. Twitter/X is my number one social media platform these days and I post regularly there. I share the latest news and information on financial (and other) matters, and other things that interest, amuse or concern me. So if you aren’t following my PAS account, you are definitely missing out!

That’s all for today, so I will close by wishing you a very happy and prosperous new year. As always, if you have any comments or queries, feel free to leave them below. I am always delighted to hear from PAS readers

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December 22, 2023

My Top 20 Posts of 2023

Nick Making Money, Saving Money, Investing events 0 Comments

As is customary for bloggers at this time of year, here are the top twenty posts on Pounds and Sense in 2023, based on comments, page-views and social media shares. They are in no particular order. I have excluded any posts that are no longer relevant.

I hope you will enjoy revisiting these posts, or seeing them for the first time if you are new to PAS.

All posts in the list below should open in a new tab/window when you click on the link concerned.

I’ll be taking a break from blogging over the festive period (though I’ll still be around on X/Twitter and Facebook). I’ll therefore close by wishing you a Very Merry Christmas (strikes and cost-of-living crisis permitting) and for all of us a brighter, more prosperous new year 🍾

If you have any comments or questions, of course, feel free to leave them below as usual.

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December 1, 2023

My Investments Update – December 2023

Nick Investing events, reviews 1 Comment

Here is my latest monthly update about my investments. You can read my November 2023 Investments Update here if you like

I’ll start as usual with my Nutmeg Stocks and Shares ISA. This is the largest investment I hold other than my Bestinvest SIPP (personal pension).

As the screenshot below for the year to date shows, my main Nutmeg portfolio is currently valued at £21,282. Last month it stood at £20,214 so that is a welcome increase of £1,068.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This is now worth £3,351 compared with £3,183 a month ago, a rise of £168. Here is a screen capture showing performance since the start of this year.

November was obviously a good month for my Nutmeg investments after a disappointing previous three months. Their total net value rose by £1,236 or 5.28% month on month – a rise of £1,712 (7.47%) since 1st January 2023. This has obviously been another roller-coaster year, but as things stand I think that’s a pretty decent annual return. I am hoping the trend will continue with the traditional Santa Rally in December!

Of course, as I always have to say, investing is (or should be) a long-term endeavour. Over a period of years stock market investments such as those used by Nutmeg typically produce better returns than cash accounts, often by substantial margins. But there are never any guarantees, and in in the short to medium term at least, losses are always possible.

As you may know, I recently revised and updated my full Nutmeg review. This was mainly to incorporate details of their new thematic investment styles, but I took the opportunity to update some other information and performance stats as well.

As it says in the updated review, the new thematic style provides a globally diversified, risk adjusted portfolio with a tilt (up to 20% of equity exposure) towards your chosen theme. The majority of the portfolio will be actively managed by Nutmeg’s investment team, whilst the ’tilted’ part of the portfolio will be made up of ETFs that their investment team believes will deliver the best returns from the trend in question (to be reviewed annually).

Currently three themes are available, these being Technical Innovation, Resource Transformation and Evolving Consumer. Nutmeg thematic portfolios are only available on Risk Level 5 or above. There’s a minimum investment of £100 for Junior ISAs and Lifetime ISAs or £500 for stocks and shares ISAs and pensions. There is a 0.75% management fee. For more details about what each of the themes comprise, check out the Nutmeg website.

I like the new thematic styles on Nutmeg and have just invested a modest amount in one myself (I opted for Resource Transformation). I will talk more about this in my next monthly update in January, and will obviously keep PAS readers informed as to how it fares.

Nutmeg’s thematic styles are similar in concept to the so-called smart portfolios on eToro, which I discussed in this recent blog post. They appear to be more broadly diversified, however, so may be a good choice for those who are new to thematic investing and want to dip a cautious toe in the water first.

You can read my full Nutmeg review here (including a special offer at the end for PAS readers). If you are looking for a home for your annual ISA allowance, based on my overall experience over the last seven years, they are certainly worth considering. They offer self-invested personal pensions (SIPPs), Lifetime ISAs and Junior ISAs as well.

I also have investments with the property crowdlending platform Kuflink. They continue to do well, with new projects launching every week. I currently have around £2,100 invested with them in 12 different projects paying interest rates typically around 7%.

To date I have never lost any money with Kuflink, though some loan terms have been extended once or twice. On the plus side, when this happens additional interest is paid for the period in question.

As mentioned last time, there is now an initial minimum investment of £1,000 and a minimum investment per project of £500. Kuflink say they are doing this to streamline their operation and minimize costs. I can understand that, though it does mean the option to ‘test the water’ with a small first investment has been removed. It will also make it harder for small investors (like myself) to build a well-diversified portfolio on a limited budget.

One possible way around this is to invest using Kuflink’s Auto/IFISA facility. Your money here is automatically invested across a basket of loans over a period from one to three years. Interest rates currently range from 7% for one year to 9.83% gross for a three-year term.

As you may gather, you can invest tax-free in a Kuflink Auto IFISA. Or if you have already used your annual iFISA allowance elsewhere, you can invest via a taxable Auto account. You can read my full Kuflink review here if you wish.

Moving on, my Assetz Exchange investments continue to generate steady returns. Regular readers will know that this is a P2P property investment platform focusing on lower-risk properties (e.g. sheltered housing). I put an initial £100 into this in mid-February 2021 and another £400 in April. In June 2021 I added another £500, bringing my total investment up to £1,000.

Since I opened my account, my AE portfolio has generated a respectable £149.50 in revenue from rental income. As I said in last month’s update, capital growth has slowed, though, in line with UK property values generally.

At the time of writing, 6 of ‘my’ properties are showing gains, 3 are breaking even, and the remaining 18 are showing losses. My portfolio is currently showing a net decrease in value of £42.37, meaning that overall (rental income minus capital value decrease) I am up by £107.13. That’s still a decent return on my £1,000 and does illustrate the value of P2P property investments for diversifying your portfolio. And it doesn’t hurt that with Assetz Exchange most projects are socially beneficial as well.

As a matter of interest, I recently reinvested £40 of my rental income from Assetz Exchange in a house for asylum seekers in Sunderland. This property is being managed by Mears on behalf of the Home Office, so I think the chances of them going into default are pretty remote!

The fall in capital value of my AE investments is obviously a little disappointing. But it’s important to remember that until/unless I choose to sell the investments in question, it is largely theoretical, based on the most recent price at which shares in the property concerned have changed hands. The rental income, on the other hand, is real money (which in my case I’ve reinvested in other AE projects to further diversify my portfolio).

To control risk with all my property crowdfunding investments nowadays, I invest relatively modest amounts in individual projects. This is a particular attraction of AE as far as i am concerned (especially now that Kuflink have raised their minimum investment per project to £500). You can actually invest from as little as 80p per property if you really want to proceed cautiously.

My investment on Assetz Exchange is in the form of an IFISA so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and intend to continue investing with them. You can read my full review of Assetz Exchange here. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

Last year I set up an account with investment and trading platform eToro, using their popular ‘copy trader’ facility. I chose to invest $500 (then about £412) copying an experienced eToro trader called Aukie2008 (real name Mike Moest).

In January 2023 I added to this with another $500 investment in one of their thematic portfolios, Oil Worldwide. I also invested a small amount I had left over in Tesla shares.

As you can see from the screen captures below, my original investment totalling $1,022.26 is today worth $1,203.02, an overall increase of $180.76 or 17.68%. In these turbulent times I am very happy with that.

You can read my full review of eToro here. You may also like to check out my more in-depth look at eToro copy trading. I also discussed thematic investing with eToro using Smart Portfolios in this recent post. The latter also reveals why I took the somewhat contrarian step of choosing the oil industry for my first thematic investment with them.

eToro also recently introduced the eToro Money app. This allows you to deposit money to your eToro account without paying any currency conversion fees, saving you up to £5 for every £1,000 you deposit. You can also use the app to withdraw funds from your eToro account instantly to your bank account. I tried this myself and was impressed with how quickly and seamlessly it worked. You can read my blog post about eToro Money here.

I had another article published in November on the excellent Mouthy Money website. This explains how you may be able to Write and Publish Kindle e-Books for Profit. This is something I have done myself in the past, and when I was researching this article I was impressed to discover it’s easier than ever now. It’s a competitive field, but definitely worth checking out if you’re looking for an extra string to your sideline-earning bow.

As I’ve said before, Mouthy Money is a great resource for anyone interested in money-making and money-saving. I particularly like the ‘Deals of the Week’ feature compiled by Jordon Cox (‘Britain’s Coupon Kid’) which lists all the best current money-saving offers for savvy shoppers. Check out the latest edition here

You might also like to know that Mouthy Money are currently running a competition to win one of five free copies of Freedom: Earn It, Keep It, Grow It by Robert Gardner (see Amazon image link below). Visit this page of the Mouthy Money website for further info and to enter.

I also published various posts on Pounds and Sense in October. I won’t bother to mention those that are out of date now, but the rest are listed below.

Key Things to Consider When Making a Gift or Loan to Married Children was an eye-opening guest post by Joanna Toloczko, a partner, family law solicitor and mediator at UK law firm RWK Goodman. Joanna’s article discusses what can become a major issue for parents when making gifts or loans to their married children. Specifically, it looks at what you can do to ensure that your wishes are respected should the worst happen and the marriage fails.

I also published (or more accurately republished) How to Make More Money From National Grid Powersaving Events. For the second winter in a row some energy companies are offering incentives to customers to reduce their electricity use during periods of peak demand, with payments made to those who succeed in doing this. In this article I explained how these schemes work and what you can do to maximize your earnings from them.

Also in November I published an article about a survey from HSBC regarding how British people choose life insurance. There were some interesting findings in this, including the growing numbers of people deciding against getting life insurance due to the cost-of-living crisis. As I note in this article, this could sadly prove to be a false economy.

Next up, I published a short post about an important (in my view) change to the tax-free ISA rules in the Chancellor’s Autumn Statement. This is a rule change I warmly welcome and have in fact been advocating on PAS (and elsewhere) for some time.

Finally, I published a fully updated post on the subject What Are the Best Video Calling Tools for Older People? This is particularly relevant in the run-up to Christmas. Video calling can provide an invaluable means for older people (and others) to keep in touch with far-flung friends and family. In this post I set out a wide range of options you can use.

On other matters, the opportunity to get a free share worth up to £100 with Trading 212 has now closed, but you can still Get a Free ETF Share Worth up to £200 with Wealthyhood. This DIY wealth-building app is aimed especially at people new to stock market investing. The minimum investment to qualify for the free share offer has been raised from £20 to £50 – but on the plus side, they now guarantee your free ETF share will be worth at least £10. What’s more, for the next month Wealthyhood say they will plant a tree for every new account opened

I did just want to mention as well that I am still using and getting good results from the cashback app JamDoughnut. You can see my review of JamDoughnut here, along with a referral code that will get you a £2 bonus when you sign up. To be honest I’m a bit surprised more PAS readers haven’t taken advantage of this opportunity. Not only can you get discounts of up to 20% using the app, they also hold regular contests and promotions offering additional bonuses and discounts.

Finally, a quick reminder that you can also follow Pounds and Sense on Facebook or Twitter (or X as we have to learn to call it now). Twitter/X is my number one social media platform these days and I post regularly there. I share the latest news and information on financial (and other) matters, and other things that interest, amuse or concern me. So if you aren’t following my PAS account, you are definitely missing out!

That’s all for today. Do hope you are keeping safe and warm in the current Arctic spell. As always, if you have any comments or queries, feel free to leave them below. I am always delighted to hear from PAS readers

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November 23, 2023

Important Change to ISA Rules in the 2023 Autumn Statement

Nick Investing events, benefits, Tax 4 Comments

As you will doubtless know, yesterday the Chancellor delivered his 2023 Autumn Statement. This included various economic measures, which you can read about on the Moneysaving Expert website (among other places).

I thought today I would highlight one particular change to the rules about tax-free ISAs (Individual Savings Accounts) which caught my eye. From April 2024, you will be allowed to open more than one of any particular type of ISA in a single tax year. This is a change I was particularly pleased to see, and have in fact been advocating on Pounds and Sense for some time.

As you may know, there are various types of ISA, including the stocks and shares ISA, cash ISA and IFISA. The latter stands for Innovative Finance ISA and allows people to save tax-free with peer-to-peer lending and similar platforms. Everyone has an annual tax-free ISA allowance, which currently stands at £20,000. Despite rumours to the contrary, this limit was not changed in the Autumn Statement.

So why do I think the change in the rules announced yesterday is so important? Well, for one thing, it brings about much greater flexibility in ISA transfers. Investors will now be able to transfer funds freely between different types of ISA without jeopardizing their tax-free status. They will also be able to transfer just part of a holding to a different provider, regardless of when they paid in the money.

This will empower investors to optimize their investment strategy by making it easy to move money between cash, stocks and shares, and Innovative Finance ISAs. This enhanced transfer flexibility should enable investors to adapt to changing market conditions, seize new opportunities, and align their portfolios with their evolving financial goals.

A further benefit of the rule change is that it will make it easier for investors to build a well-diversified portfolio. Rather than having to put all their money into just one stocks and shares ISA per year (for example) they can divide it among a range of providers. Regular readers will know that I am a big fan of diversifying your portfolio as much as possible to help manage risk, and this rule change certainly facilitates that.

The change will also make it easier for investors to try out new platforms with relatively small investments initially. Previously they may have been deterred from doing this by the realization that once they had committed to one particular provider, they would have to stick with that provider for the rest of the financial year. FOMO (fear of missing out) may even have inhibited some people from investing at all.

This is certainly something I’ve experienced myself. At the start of a new financial year, I was wary of investing in any type of ISA, because I knew that once I did so, I would then have to stick with that provider for that type of ISA for the rest of the financial year.

So those are just some reasons I particularly welcome this rule change. From a broader perspective, I think it will also encourage more people to start investing, which has to be good for UK PLC in general. Apart from a few admin costs, it seems to me this measure will cost the government nothing, while bringing major benefits to the economy and individual investors. Really, the only thing I don’t understand is why it wasn’t done sooner!

So those are my thoughts anyway. But what do you think? Will the new rule encourage you to make more use of ISAs in future? I’d be interested to hear any views.

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