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I realise I’m very new to investing compared to many and 18 months is nothing in the grand scheme of things. But I feel 18 months an appropriate time to sit back, reflect on some of the things I have learnt and tip my mortarboard to an investment journey, so far, that I’ve thoroughly enjoyed…
1. Just do it
I read and watched everything I could get my hands on when I first became interested in investing: blogs, books, internet forums, tutorials, YouTube videos…everything.
I knew the difference between a fund and a share; I knew about passive and active; I understood the effects of compound interest and the impact of high fees (not everything obviously, but to a basic enough level). But still I didn’t pull the trigger.
I wasn’t until a friend actually showed me his account, and I could see what the inside of an S&S account looked like, that I actually put in my first £25.
Investment paralysis is a very real thing, and can often be the biggest stumbling block in building wealth, up there with compounding fees. After all it’s long reiterated that time IN the market beats timING the market; if you’re not in it you’ll never see give your money the chance to grow.
So just go for it. Dip your toe with your first £25 and get started on your journey.
2. ‘Doing’ is the best education
My education regarding investing in funds mimicked a lot of that when I learnt to drive a car. 40% was reading theory and taking (and passing) the tests, the other 60% came when I got out on the road on my own.
With investing, 40% was reading, watching videos and listening to podcasts and 60% was actually getting on with it and making my first deposit.
Watching my money move up and down in the market was the best education. My knowledge (admittedly still not as good as someone who’s been doing this a lot longer) has grown exponentially quicker than when I spent that time with my nose buried in a book (not that this should be ignored).
3. Active funds are…ok
For me, so far I have enjoyed dabbling in active funds. If you follow the main personal finance channels, you’d think active funds are the devil’s spawn.
This may very well be the case, but I’ve enjoyed putting time and research to dedicate ~10% of my portfolio to testing the active fund ‘waters’, and SO FAR, it has paid off.
Before I get a stream of backlash from this, I feel I need to qualify that I understand that this may have been just incredible luck and the chances of this continuing over a 5-10-20 year period is unlikely. But we’ll see.
4. Regular AND lump sum
So far investing small amounts, regularly, has worked out ok for me.
I also keep a little back to invest a lump sum when markets are down which has allowed my to capitalise on cheaper unit costs.
I prefer this hybrid strategy to either one or the other as this suits my risk tolerance, while not missing out on considerable market dips.
5. Overlapping is easy to get caught up in
When I started investing in funds, I caught the investing bug…big time. Wide eyed and eager to jump in headfirst, I was adding EVERYTHING to my watchlist, flirting with all number of different sectors and regions.
“Ooo that one looks good…that one includes a few companies I like…that one has more of a tilt towards Indian/ Chinese equities; how risky, how exciting”.
Some of these I invested in and still hold, and they have been doing very well for me. Others I invested in, then quickly came to the realisation that they had almost identical weightings towards the same countries and sectors.
I have no problem with this on a small scale, but I found myself in very similar funds like the Lifestrategy 100 and the FTSE Global All Cap. While I’m not adverse to a little overlapping if it has some sort of targeted approach (holding a healthcare fund as well as a global fund if you want a heavier weighting in healthcare than the global fund offers), holding the two Vanguard funds simultaneously was a little redundant.
I quickly chose to focus on the FTSE All Cap and ignore the LS100. I still hold the latter as a little experiment, just to see what happens when you invest lump sum compared to regular investments, but it’s a very small holding now and serves as little more than a reminder to not let myself fall into the same trappings.
6. Don’t stare
Once I overcame my paralysis, investing became very exciting. Watching my money go up (as well as down) was so interesting and having skin in the game allowed me to learn so much about investing and business as a whole. But I became a little too obsessive and began checking my account every day.
I now only check it once a month to update my spreadsheets. With my 25-30+ time horizon, I realised the 0.3% drop last Thursday really doesn’t matter.
Even the 10% correction can be countered by staying calm and continuing to focus on my ‘small but regular’ plan, hoping that time will iron out these losses.
So that’s it for me. My lessons after 18 months. I’ll come back to these again in another 18 months and see if my feelings have changed.