The Investment Newbie

Profile - the investment newbie
Age- soon to hit 30
Family - 2 full time income generators, 1 baby, 1 furry baby (dog don’t worry I’m not a yeti)
Reason for investing - saving a pot for sons uni/first house and a desire to retire at 55
Investment strategy - currently it is ‘don’t invest too much until I have one’

Post 1 - Pre-Investment Research

I want my future blog posts to talk about my investing decisions and rational but I think it’s fitting for my first entry to be about the last 9-12 months when I first started looking into how I might make my money work harder.

On the 23rd of November 2017 I became a dad! And in the run up to this, one of the many things I thought about (along with how the hell am I going to look after another human being) was certainty of my financial position whilst I am responsible for this little human and also saving for his future.

After looking into a few stocks and shares ISA’s I quickly realised that the small amount I was able to invest resulted me being priced out with fees so stopped thinking about it for a while. During one of the many long nights on baby feeding duty I started looking at other ways of investing and came across robinhood and then quite quickly freetrade.

I was very lucky in that I found freetrade before the third round of crowdfunding, and the thought of investing accelerated my need to educate myself because if I was going to invest in freetrade as a company, it would only happen if it was a product I wanted to use.

So, completely new to the investing world I set about understanding it. The Martin Lewis website is my first port of call for most things financial and believe it’s one of the most easy to understand websites, it helped give me a base level of understanding. I then delved into investopedia and ultimately found myself as a lurker on this forum. That introduced me to podcasts like ‘invest like the best’ and pointed me to the morningstar website, yahoo app and other things to investigate specific stocks allowing me to figure out a bit more about what it takes to track and research them.

I think the turning point for me was learning about ETFs, as my big blocker was how to start from zero with small deposits and diversify my portfolio. Once I found I could instantly do this with an ETF I realised how easy investing should be.

So I bit the bullet and invested a small amount of money (but significant to me) into freetrade and awaited the release of the app.

During this time I started looking into methods of diversification, some simple and some overly complex investment strategies but generally talked to people and got much more comfortable asking my simple questions on this forum.

As very lucky super early tester and proud freetrade user #67 I will make my next blog about my thought process once I got a hold of the app and how I picked my first handful of stocks and shares. But for now I hope some of the other complete novices to investing can take something from my journey and add things you have done so that more people can go through the process I have but quicker!

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This will be an interesting one to follow, Jeff!

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Post 2 - First Picks

I have been away from the forum a little while settling into a new job but wanted to drop in a quick update since I was keen for people to create these blogs and have only done one myself.

Although my thinking has progressed a little I still want to talk about my first picks and the thought process I had when buying them.

It was definitely quite daunting and although I was only investing £60 initially I felt like these would be the foundations of my portfolio. I pretty much looked through every ETF on offer to compare and contrast. In particular comparing similar ETFs was something I wanted to understand before committing and got some good discussion [here]’(Choosing ETFs)’

Initially all I had in my head was to keep my investments broad and diversified avoiding anything too complicated.

Despite all of this research (or because of all the research) I committed to a couple very broad diversified ETFs.

This was very much keeping things simple and following the strategy of its best to be invested in the broad market and to leave it alone for decades.

Ultimately I still think these are great long term picks but I’m not going to say too much more and I want my next post to talk about how this thinking has evolved a bit more now that I have taken into account the investments in my work pension. I also want to explore my thinking in looking at the different categories in which I want to diversify, and how these safer ETFs don’t fully meet my risk profile and diversification aspirations.

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That’s a pretty strong investment strategy right there.

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I agree with rob that in principle it’s a good strategy, but I think your current implementation in Freetrade doesn’t quite match up.

  1. If your different index trackers were diversified, by just buying 1 share of each, your weighting of them is going to be arbitrary and not reflective of the stock market as a whole or any other way of justifying a diversification strategy. The way things stand, you are very highly weighted toward medium/small UK companies thanks to FTSE 250, even though the UK makes up a very small proportion of the global stock market.
  2. Your ETFs are probably not diversified much from each other. In particular, about 60% of MSCI World is the S&P 500. Or to put it another way, S&P 500 is a subset of MSCI World, so there’s no need to invest in both. I’d imagine most if not everything in FTSE 250 is also in MSCI World (but I didn’t check). You don’t have any diversification in to emerging markets.
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All good points, which I have started to address and will try to explain in my next post :wink:

Realistically though my first £60 was never going to create a fully diversified portfolio, and I was also restricted by the initial offerings of freetrade which didn’t have much from Asia or emerging markets!

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Indeed, though it is nice to think that later this year with fractional shares (assuming they apply to ETFs), someone actually could build a diversified portfolio with just £60. Yay Freetrade! :star_struck:

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Monevator is also a great UK-focused online resource for passive investing.

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Hello im new to freetrade and this forum. I myself I’m trying to start up and looking at getting some different etfs. Just wondering is there any update on how yours has been doing and any suggestions you would say to do .

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Hi Jake! Glad you found my posts from last year useful, the newborn mentioned in the original post is now 2 and a half and I must admit life has been busy!

That said I have been jotting down notes whenever I do something investment related and my portfolio is roughly £1000 in the app (and as of the latest round £1000 into freetrade, not a good lesson in diversification!).

I will try to make some time to write a new blog very soon, I am still keen to talk about how I think it’s important to take into account what your pension is invested in and some lessons learned about about how easy it is to over complicate your portfolio. (I am a big sufferer of FOMO)

Watch this space!

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No problem ill look forward to it I’ve been doing research myself for a few months tried a vary on different apps and decided to go with freetrade. Very interested in doing currencies and fractional shares but I know freetrade haven’t got that running yet.
Currently only got a few shares with a small amount of cash I put on the account and just hoping to build whiles learning along the way.

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Fractional shares are here for a lot of users now! I bought a % of Disney recently as an early tester. but to be honest as mentioned in some of the above posts I really think ETFs are the magic bullet to get a diverse portfolio quickly and easily. There are definitely some good threads on this forum to explore on that topic!

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Oh I didn’t think fractional shares were here yet. Think about 2 days ago I go a notification on the app about them bringing it to the app I pressed the early access button and not heard anything back yet so I dont have fractional shares on my account yet.

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I think it was in beta Testing, as a previous investor I may have gotten preferential treatment. But I can say it works for me so it will here soon I have no doubt!

Post 3 - Creating your first portfolio

In each job/ role I have had, by the end I thought I knew everything, but in the next role I always look back and it turned out I didn’t. I’m expecting investing to be like this and I hope my blog posts read as such. In this post I will talk about how I assessed my portfolio and decided upon a more specific strategy. As always I am a little further ahead on my journey and this post is very retrospective (luckily I have been taking notes as I go!). Fundamentally I still think I want to aim for this strategy long term (I would love some feedback/challenge from this forum though!)

I started by looking into how i wanted to categorize my portfolio. % by risk, % by type, % by geography, % by market sectors or just chuck it all in an all world ETF. I initially tried to factor in all of these things systematically and frankly for the amount I am investing this was way too over complicated, I would make more money spending my time getting a second job than the amount of time it would take me to figure this out for a circa £1k portfolio.

I settled upon a portfolio where the % split was based on risk but factoring mainly geography and/or sector as a basis of what risk means to my portfolio. This was because the majority of my investments would be in ETFs for broad categories and the key information docs would allow me to get an easier comparison against my pension.

My basic assumption was:

western economies = safe ish

other developed economies = risky

semi developed = v risky

emerging = v v risky

everything else = don’t touch

As to which countries exactly fit into these, that is not yet based on anything other than my (probably biased) opinion and (basic) understanding of the world economy. In addition where I instead focus on a sector the risk ratings are based on whatever research I get around to doing (very scientific I know).

I started by thinking what I wanted my % split to be and why. The main factors are

1 my goal/ investment horizon (25-30 yrs)

2 my personal attitude to risk and

3 my investments outside of freetrade.

The objective of my investing is early retirement and the horizon means in theory I can afford to invest in more volatile stocks that bring a higher long term return, I am happy with a good portion of higher risk stocks but not too extreme.

In addition when I looked at my other investments I realised I could actually afford more risk in my freetrade portfolio. I have a mortgage with decent equity and I am building a healthy workplace pension (geared mostly towards stocks and shares but generally restricted to the lower risk end) this was the outcome of my pension analysis using the key information doc definitions.

My house and pension dwarf my freetrade investing and they are also aimed at early retirement. Ultimately this made me a bit more comfortable ‘playing’ with a small %, e.g. doing a bit of stock picking.

You throw all of this into a pot and my first stab of a ratio any my opinion on risk came to the below.

10% Pick (stock picking or non-generic ETFs with a buy and hold strategy) - v risky

10% proper Emerging (e.g India, Africa. I see some call China an emerging, that’s not my uneducated view, but happy to be educated!) - v v risky

15% Boost for geographies I feel are under represented in my current ETFs and pension (e.g. China, Japan) - safe to risky

15% What I call ‘supporting industries’ which by i mean things needed to support current trends that appear likely to grow over the long term. By that i mean things like the robo etf, companies dealing with the infrastructure needed for increased electric cars, Growing software systems, mulesoft type. Not just tech though, I would put long term care including medical/pharma in this category too. No stock picking here, just trusts/ETFs - v risky

50% generic/ broad ETFs similar to my pension (large cap, global, diversified risk, predominantly western, some with focus on dividends) - safe

I am sure to more seasoned investors this may look overlapping or missing some crucial elements (bonds, precious metals etc) and I am more than open to critique.

If I look at my very messy actual portfolio right now it is looking like.

No surprises it’s not quite as planned… but really I was quite surprised at how close it was as I created the ratio when freetrade first opened the app (user #67 :sunglasses:) and this is the first time I have actually compared the portfolio against it. Notable omission from my original plan is “proper emerging”, there has been limited to nothing available in this space in the app to date so nothing I can do there (that may have changes but I haven’t added to my portfolio for a little while). Notable difference against plan has been me giving in to temptation and doing too many of my own picks…

This is just how I as a novice investor have tried to make sense and plan a little, this is by no means right but hopefully it helps someone take the first steps. As always if any more experienced investors see any glaring mistakes I am open to critique.

Hopefully it wont be as long before my next post but I want to look a bit more into the psychology of my experience of first time investing, and also at some point (maybe when the economy settles a little) about balancing my portfolio. There are lots of questions to be answered e.g. What mistakes have I made? What should and shouldn’t I be worrying about? Why have I got multiple all world ETFs? Why have a got so many of my own picks? Why does my portfolio have so many separate investments? (I told myself I wouldn’t buy more that 10 different stocks/ETFs when I started… currently I am on 17!)

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As another investment newbie, in a similar position to you Jeff, I love this thread. Look forward to reading more about how your investment journey progresses!

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I’m new to investing…. What’s your hints and tips. Who is worth investing into thanks

Watch what I do. Then do the opposite.

Also sign up to the weekly Freetrade newsletter - Honey by Freetrade

Personally I also enjoy the business podcast with Kara Swisher and Scott Galloway

Galloway also has his own podcast

Once you get used to their voices you can easily listen to them at 1.5x speed or greater :slight_smile:

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Hi, and Welcome @Gemma_99
Firstly bear in mind that NO-ONE here is qualified to give you professional financial advice.
But, they are mostly full of helpful advice, hints, tips, and the like.
My advice, as someone also new to investing, is to think of the stockmarket as quicksand. If you want to survive, and not lose everything you need a nice wide raft, so diversity is the key in my opinion. If you follow the analogy, and stick all your money in one place, it’s a very narrow footing and if it goes bad it’s all sunk. If you have a few different stocks, then it’s less likely that they’ll all drop at the same time and your “raft” is less likely to sink.
The other thing I’d say is to never, ever, invest more than you are prepared to lose. If that money is for Christmas, car repairs, rent, etc, then don’t invest it. If it’s for days out, treats etc, then have fun…
If you haven’t found it yet, the First time investing chat here is great.

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Etf is a great way to invest we it’s already diversified

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