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  • Martyn Johnson

DIY Investing

This is the theme of this newsletter since we have been getting lots of calls from people who handle their own investments, in some cases they started small and added to their holdings over the years and in other cases their advisor retired and they never got around to replacing them. Taking advice is not for everyone and whilst we earn our living from providing advice, we take the view that some will always want to sail their own ship. Below we look at some considerations.

Market Commentary

Interest rates - how much will it cost to leave your money in the bank? Government debt: UK public debt exceeds Gross Domestic Produce for the first time since 1963. As my granny said – never a borrower nor a lender be…. Interesting times, as the Chinese say.


Our last Newsletter was headed ‘Knowledge Conquers Fear’ and this is what has happened in market terms. The next pivotal market moment will be when a vaccine is found. Happily, most of our portfolios are now slightly into profit over a twelve-month view.


Why invest? Most people appreciate that leaving money in the bank or building society is not the best place for it on a medium-term view. Money is only good as a medium of exchange – what stuff you can buy with it – ‘real’ returns (the amount that your money grows above the rate of inflation) are important; this is particularly so given current interest rates and the possibility of inflation – see our last newsletter.

There follow some of the advantages and disadvantages of DIY investment:


  • Low costs – you can choose a tracker type fund (for example) which tracks a particular index, and pay very low management fees. Of course, the challenge is in picking the right index to track.

  • Interesting – perhaps you take a personal interest in the nuts and bolts of investments, and this is a way to make your hobby into something potentially profitable. Choosing your own investments can be a gratifying experience (though of course the risk is all yours).

  • Acquiring new knowledge – your investment knowledge should improve as you go along, so don’t try and swim before you can paddle. Start small and weather at least one market crisis before deciding on whether to commit more money.


  • Risk assessment – when investing you must be able to assess risk on an ongoing basis, and this can be tricky for a beginner. Always be very clear about how much you can afford to lose. Also make sure you have the right mix of assets for your personal risk tolerance.

  • Tax wrapper allocation – you’ll need to consider your tax position, and also how easy it is to get your hands on your money (what we call ‘liquidity’). This will influence your choice of ISAs and/or pensions. You’ll also need to decide whether you’re investing for gains (a lump sum at some point in the future) or income (a steady return).

  • Loneliness! – Investing can be a lonely place if you don’t have someone to talk to in times of stress. Even worse, you might have the wrong person to speak to, like Fred down the pub who reckons now is the perfect time to go large on Crypto…

Risk and Return - a list

Objectives: Saving can be described as deferred spending. Why are you investing? Do you have a specific target such as needing a lump of money at a certain time or to be able to take income in the future? Is it just a comfort thing of feeling more secure or independent?

Risk: The way to get rich quick is to concentrate your investments (risk) – although the way to go bankrupt is also to concentrate your investments. Think about diversity – geographically, by sector and category. This latter is called asset allocation – and this is how you manage risk. For more information follow this link and scroll down to ‘Asset Allocation’.

Timescale: how long can you leave the money alone? Generally, you can take more risk with a longer timescale.

Tax: One of your last considerations. Sometimes clients come to us with the objective of maximizing their tax efficiency at all costs – when we suggest losing loads of their money so that they can claim tax back they typically seem less keen.

Charges: When taking on clients we have a simple philosophy – can both we and the client benefit? We take into account all of the charges (us, fund houses etc.) and assess the likelihood of there being sufficient returns to make it worth an investors’ while.

Liquidity: Not to do with beer – this is how easy it is to get all or part of your money back. To use the example of investing in property – if you run out of food it is tricky to take a few bricks out of the wall and exchange them for food down the corner shop.


The foregoing points are a checklist of stuff to consider, there are of course also psychological aspects, how much do you value having a second opinion or someone to talk over the difficult bits? How much time and effort do you want to devote to managing your money? How disciplined are you in this regard?


Our daughter opened her new barber shop four weeks before the lockdown. Don’t worry however since her bankers are (if not enthusiastically) supportive. We are her bankers – more on this below. Luckily, she had 30 bookings within the first hour of re-opening her booking system and is tiptoeing through the COVID hoops.

Bank of Mom and Dad (BODMA): When on a plane and the oxygen masks drop the instruction is to put your own masks on first before you try to help others; is it now time for BODMA to close its doors and for the little darlings to use their own two feet for standing on? Probably yes, but when discussing this with your partner please remember one of my main financial rules is ‘don’t get divorced’.

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