by The Investor
on February 15, 2008
Most of us get into investing because we want freedom, whether it be freedom from the office, from traffic jams or from the drudgery of a mortgage. We want to be free from having to work for a living.
Why then are money-motivated books called things like The Millionaire Next Door
or Secrets of the Millionaire Mind? A million isn’t what it used to be, but it’s still more than most people require for financial freedom.
What many of us are really looking for is a replacement for our salary. The number on your pay check is therefore the number you need to beat.
If your salary arrived in your bank account no matter what you did, wouldn’t you be free? You could quit work the next day, if you wanted – or you could get a more enjoyable or meaningful job, work for charity, or do a dozen other more fulfilling things instead.
This post explains why and how I focus my investing on growing my annual passive income stream to replace my income, rather than concentrating on my net worth.
Note: If you’re an American or European investor, please do keep reading. The principles of good money management are international! 🙂 Just mentally swap the £s for your currency and scale up or down as appropriate.
Why target income instead of capital?
[continue reading…]
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by The Investor
on February 13, 2008
New government statistics reveal home ownership in the UK is the lowest it’s been for a decade. In London there are an incredible 110,000 fewer home owners than in 2001 (not that surprising if you’ve seen London prices recently). Blame buy-to-let.
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by The Investor
on February 13, 2008
J.D. over on Get Rich Slowly has eliminated his debts and is ready to tackle his mortgage. He reckons you too can pay off your mortgage in half the time. I’m not sure that the technique he suggests works with UK banks, however.
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by The Investor
on February 7, 2008
I wrote recently about how you can improve your diversification with Exchange Traded Funds tracking government and corporate bonds.For some investors, further tweaks to their asset allocation can come courtesy of the new generation of Exchange Traded Commodities, which enable you to follow everything from the price of iron to the rising (or falling) price of a basket of agricultural goods.
My usual disclaimer about your own investments applies here as elsewhere. Arguably, you need to do even more research before you track commodities, as they’re a much more esoteric investment than a FTSE 100 tracker, say.
Why would you want exposure to commodities?
Commodities are an asset class that rise and fall over time, and are subject to bull and bear markets. In this, they’re not dissimilar to other assets – but they’re not closely correlated either. The price of, say, corn isn’t particularly related to the performance of the stock market, for example.
By buying commodities you can therefore diversify your portfolio over the long-term so it’s less dependent on the returns from shares. You might also hope to trade commodities, if you think you can buy when they’re priced low and sell when they’re high. (Far easier said then done, and plenty of boys in braces will hire you if you manage it regularly).
Commodities also offer a hedge against inflation. If the price of everything is going up, it usually starts or ends with commodities rising in value, too. Therefore, devoting a portion of your funds to commodities can help offset inflation-risk.
If the stock market doesn’t affect the price of a commodity, what does?
Lots of things. [continue reading…]
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