Do you want to be able to:
Do you feel?
Hello Dear Friend,
Has your so-called retirement investing consultant managed to reduce your retirement fund by about 40% during the Covid-19 pandemic?
Do you feel that the guidance you are paying extortionate fees for are no longer value for money, if indeed they ever were?
Are you concerned that subsequent crises will render devastating affects on your retirement fund's bottom line?
Or maybe you haven't even started saving for your retirement yet.
It is now well into the 21st. century and times have changed significantly.
You need to take control of your retirement investing - NOW!
Do you read the national newspapers?
If so, then you will be familair with headlines such as the one below ...
NOW IT’S WORK UNTIL 75
Government poised to raise retirement age again
Take Chris Taylor, he's aged 32 now (although what follows would be applicable to anyone aged 18 to 70).
knows that he has to start saving for his retirement but keeps putting
it off. But with his 33rd. birthday looming, he feels an urgency to get
something sorted out - and quick!
He's a family man and wants to provide for himself and his family but doesn't know where to start.
Then, one Friday evening down at his local pub he got chatting with this old curmudgeon, Clem, that he'd had lengthy discussions with before.
As it transpired, they sat there for over three hours rattling on about what options Chris had with regard to saving for his retirement.
The old "gimmer" turned out to be one eccentric, but very successful, and wealthy, ex-stock trader. Albeit - not a professional.
He knew only too well how the financial markets worked and for the first hour of their marathon discussion, he instilled into Chris the principle of Einstein's 8th. Wonder of the World.
He rammed home to Chris the magic of how compound growth can accelerate any investment portfolio.
He also cautioned Chris about letting so-called investment experts manage his portfolio.
"Them smooth-talking, fancy-dressed yuppies are out to get a slice of your savings - a big slice. After our little talk tonight, you will know infinitely more than them. I'll guarantee that."
"Don't believe me? Then take a look at this newspaper headline I saved just for a friendly discussion like the one we're having right now. Convinced?
Who needs financial advisors? Build a cheap DIY pension
What the veteran ex-trader said next, metaphorically knocked Chris off his bar stool:
see Chris, when you invest your own money in the stock market, you most
definitely have a vested interest. It's your money and you have worked
hard for it. Psychologically, this works in your favour.
"The slick and greasy financial advisors, deep down, couldn't care less whether your portfolio were to go up, down, or sideways. It's not their money and if it were to go belly up, as it sometimes does, they have a list of excuses as long as your arm as to why it happened that way.
"Oh, and they will still want their hefty fees - win or lose. If you don't believe it, just look at this next newspaper cutting ..."
"Now are you convinced?"
"Investing in company shares via your own DIY pension is really stress free. Investing the way I have found out, which is - investing for the long term - is really as safe as houses. But a good start in investing is how to learn about yourself.
"Invest with peace of mind by understanding Stock Market Psychology. Understand that and you will rid yourself of any demons that are running around in your head.
"Chris, I've known you for over 10 years, and I was good friends with your Dad who retired on a poor pension annuity because that's all that people understood at the time, in fact, it was the only option in those days."
"Your options for saving for your retirement are now so flexible, all but the laziest of people should get involved."
"You're a family man. It's not just a good idea for you to invest now for your retirement - it is essential."
"I can tell that you live comfortably and you probably don't have a lot each month to put by but it is absolutely essential that you do."
"Make sacrifices elsewhere in order to lock some money away each month. Be frugal. But try and salt away at least £200 a month"
Chris retorted that there was no way that he could find £200 a month. There was only his monthly earnings coming in and a little bit of child allowance. His wife, a qualified teacher, stayed at home and looked after the kids.
The wise old man nodded his head in understanding but still insisted that our young man tried hard to do it. Explaining that it won't always be like it is. The kids will grow up, your wife will gradually get back to work, and you will be very much part of middle class UK.
"The longer you put this off, the more you will regret it later - trust me. I wish that I had started (a lot) earlier."
"Knowing what I know now," he said "I would have cut down on my booze, cut down on luxuries, cut down here and cut down there"
"Don't make the same mistake."
"Here's what you need to do first thing on Monday morning - which gives you all week-end to discuss it with that beautiful wife of yours."
"Because of the UK governent's flexibility on saving for your retirement, you have options but the real way is to put all your spare cash into a Self Invested Personal Pension, or SIPP as they are known as."
"There are about 10 main providers in the UK. There are more, but this list of ten are the ones you need to consider, and out of those ten, two or three stand out."
Clem hurriedly wrote out on a blank envelope (see below) the names of those ten SIPP providers. Explaining that each of them had Stock Trading Platforms that even a 10 year old could intuitively use.
Chris replied with the comment that he doesn't know "Jack" about investing, acknowledging that the 'SI' in SIPP stood for "self investing."
But the old curmudgeon smiled at Chris and asked if he'd ever heard of a character named Warren Buffett.
"Sure," said Chris "everyone's heard of Warren Buffett. You'd have to have been living under a brick not to have heard of him."
Chris was right of course, but did he realise how Warren Buffett became so rich and famous.
But the old friend gave Chris a short synopsis of the life and times of his hero.
He explained that he got his basic investment advice from his mentor, Benjamin Graham, and worked with a guy called Walter Schloss on financial statements, and in later life teamed up with his now present business partner - Charlie Munger.
And of course he studied other Stock Trading Legends - past and present.
He learned and practised his trade to the minutest of detail. Folowing rigidly Graham's principle of Value Investing, albeit, modifying it along the way.
You cannot argue with his results and he is the perfect example of Einstein's 8th. Wonder of the World, having clocked up double digit growth every single year of his investing life.
He's now in his 90s - that's some achievement.
No wonder he's the $90 billion man.
Chris' old friend painted such a success story that it really impressed his 32 year-old listener.
Chris' mind worked overtime on how he could achieve similar results within the SIPP that he was going to choose on Monday morning.
"Sounds fantastic" said Chris " ...in theory"
"How could I be sure that any investment I make would perform the same wasy as it does for Warren Buffett."
His old friend replied: "you can't be sure" then, taking a pen out of his pocket drew a quick, and very rough graph, on the back of that old envelope.
"see this?" he said, "that's how the stock market has performed over the last 100 years or so"
"As you can see, it has had its ups and downs but the overall trend has been up, up and away. Even allowing for recessions, depressions, wars, pandemics, and anything else thrown at it."
When you consider Warren Buffett's lifespan, he has witnessed many of the ups and downs, known as bull markets and bear markets respectively.
Our model investor (Warren Buffett) has been a prolific reader. He studied all the classic Stock Market Books written by his mentor and other recognised authors, but never actually authored too much himself, although together with his business partner, Charlie Munger, he did co-write some lively notes at the annual meetings of their company - Berkshire Hathaway.
Incidentally, Berkshire Hathaway was founded in the 1960s and has never, ever paid a dividend to its shareholders. It has always ploughed back any spare cash into the company. If you want to buy one of their company shares right now, it would cost you somewhat north of $290,000 - for just ONE share.
Warren Buffett does not like distributing dividends or splitting share prices.
His philosophy is to research a company using Fundamental Analysis, that is scouring the fundamentals of a company (such as its financial statements, what it does, what are its brands, etc. etc).
He would watch any share under his scrutiny, like a hawk. Putting it on his "watchlist", monitoring it, and then, when he thinks the time is right, and all his criteria were met, he would buy.
And he would hold that share through thick and thin, knowing full well that the company was fundamentally sound and when the stock market trended upwards, his company shares would trend up.
He would never buy obscure companies. He only researched good, solid companies with what he termed had an "Economic Moat".
Clem made it clear to Chris that our guru consistently achieves 20%+ compound growth, year in, year out. But he's a dab hand at it, and Chris couldn't expect such returns - possible, but not probable.
But what Clem did suggest was that Chris punch a few numbers into a pension pot calculator that he was familiar with.
Sidenote: just take a shufty at what the calculator showed Chris could retire with at age 65 and that figure was if he "only" saved £200 per month. Surely, as Chris got older, and as inflation would most certainly mean that £200 in 30 years' time would not be worth what it is today, Chris could afford more han £200.
But, ignoring all that, and if the cost of living stayed the same, just look at what a nest egg Chris could retire with assuming that his pot of money were to grow at 10% per annum.
Chris aged 32 now (33 next) and retiring at age 65, contributing £200 per month and with no initial capital, would mean that, by age 65 he would have paid into his SIPP a total of £79,200 and with an annual average growth rate of 10%, his pension pot would have grown to:
See details below
Use a growth rate of half of what Warren Buffett achieves and you will be astonished, just as in Chris' example above.
Clem told Chris to imagine what his, and his family's lives, would be like if he only stashed away £200 per month. But Clem reckoned that with a few money saving tips, Chris could save more.
It was obvious that the old man was reasonably well-off, well-dressed, and well-educated. Chris knew that what came out of his mouth was good, honest advice. Sure, he was no Warren Buffett, it was never his full-time job to study financial statements but he had once heard Warren Buffett speak, and he never forgot those words of wisdom.
Warren Buffett had given a lecture to which Clem had attended some 10 or maybe 20 years ago. Warren Buffett stated that over a lifetime, you need never study more than 30-40 individual shares.
His philosophy was to find the right companies, monitor them, wait for a buying opportunity, and then lock them away (for years, even decades).
On the UK stock market there are some 5000 shares traded daily. Big companies, little companies, and anything in between.
And companies in all manner of industry.
The UK market has 37 different Stock Market Sectors ranging from Aerospace and Defence through to Tourism and Leisure.
is ample choice within the UK market for investment with dozens of
international companies trading within the FTSE 100 (the main UK stock
market index). There are dozens of other Stock Market Indices to choose from.
The Warren Buffett way is to find companies that conform to his criteria and wait until they become undervalued by the market and then to buy as many shares in those companies with all the cash that is available in your fund.
However, there is just one area where a lot of successful investors are at odds with Warren Buffett.
The Sage of Omaha, does not have any faith in Technical Analysis. He thinks it is all techno mumbo-jumbo. He prefers to stick to his Fundamental Analysis of stocks.
But ... there are plenty of traders out there who believe that if Fundamental Analysis tells you what to buy, then Technical Analysis tells you when to buy.
Some very clever people, past and present, have spent their entire lives working on their technical theories. Some, it has to be said, with incredible results.
Old Clem had this to say to our new 32 year-old and now enthuiastic stock trader "to be." He said: "Chris, the philosophy of Warren Buffett, when you really think about it, is nothing more than common sense".
learned from Benjamin Graham a principle called "Value Investing."
Basically, you research a company (remember: Warren Buffett only
researches a handful of companies at any one time) and look for good,
sound, solid companies. Companies that have good branding (Economic
Moat), companies that have solid financials, companies that will do well
in bad times as well as good times.
Warren Buffett and all students of Benjamin Graham do not speculate in third rate companies, or even second rate ones. They want to play in the Premier league.
The bottom line is this:
If you invest like Warren Buffett and all of this students - there is the absolute minimum of risk.
If you want to speculate and take some "tip" from a mate or some newspaper columnist who doesn't know "Jack" then that's what a risk is.
There is no need to invest like that.
Why would anyone not listen to Warren Buffett?
Admittedly, his methods are not get rich quick, but you are saving for your retirement not after a quick "turn."
Warren Buffett's methods are certainly not get rich quick, they are get rich slow. Anybody want to pit their wits against Warren Buffett?
No, I didn't think so.
"Chris, you are only 32, you've got light years ahead of you. But you should start now. It's never too late but the sooner you start the sooner you can put Einstein's 8th. Wonder of the World to work for you.
You've only got to look at the Pension Pot Calculator to know that.
The evening was now getting on, the old man and the young gun had been chatting for over 3 hours and one or three drinks had already passed their lips.
The old man was, by now, getting a little bit worse for wear but insisted on one last hurrah before he called it a day.
"Chris," he said, "there's one more thing that you need to do before Monday morning."
"What's that?" replied Chris.
"You need to make a plan - a Retirement Planning Guide, as I call it" Clem said, "and you should do that this week-end. Do not put it off, it may never get done if you do."
"Planning for your retirement needs to be your No.1 priority."
Chris took a gulp of his pint of bitter and reluctantly agreed.
"You might also think hard about what you might want to do in retirement. Estimate approximately how much moolah you may need. I envy you.
mean you're gonna want to travel, have hobbies, that sort of thing.
They all cost money. You need to compile a "bucket list."
"Knowing what I know now, I could make a real good fist at this retirement investing thingy. I have so many Retirement Ideas. But what I'm trying to do here tonight is put an old head on your young shoulders."
"I really hope Chris that you have not consumed too much alchohol and that you have listened to every word."
"Oh, I have" said Chris, "everything that you have said makes total sense. Let's meet up again next Friday night and I'll up-date you on my progress. I think I will surprise you."
"Attaboy" Clem seemed to shout out, "I'll look forward to that."
Chris and Clem Meet Up - hopefully, the last time before lockdown easing
Chris and Clem Meet Up - at last! They can meet in the beer garden
Chris and Clem Meet Up and it is Chris' turn to do most of the talking. Chris' little windfall has allowed him to widen his portfolio. Chris vows of more.