My Investment Profile
I am not a certified financial advisor so I cannot give formal advice, however, I have cobbled together what I feel is a balanced…
I am not a certified financial advisor so I cannot give formal advice, however, I have cobbled together what I feel is a balanced investment portfolio based upon the writings of the great investors that I admire.
What do you want?
It all starts with this question. Once you know what you want you can put a plan together. Do you want to get rich slowly? Do you just want to have fun? Are you looking to learn more about stocks/cryptos/equities other?
My investment profile has the following parameters:
I’m not old, but I’m not young either so I need to weight things towards the medium-risk part of the spectrum.
I want to get rich slowly, but not too slowly.
I want the freedom to have fun and make mistakes with some portion of my portfolio.
The breakdown
With the above answers in hand, I’ve developed the below framework to achieve my goals. This has come through reading many books, making many mistakes, and having some great successes too.
Ultra-low Risk
Cash, you’ve got to have some cash in order to live and it’s a good safe haven when other assets get volatile. I hold a few percent of my total net worth in cash.
Of course, the riskiness of holding cash depends on what your home currency is!
Low Risk
30–40% of my wealth is distributed across property and index funds. My index fund investments are weighted towards the S&P500 and NASDAQ, but I have a large portion spread across Indian, Chinese, Japanese and other emerging market indices. A tiny portion of this also sits in bonds.
When you buy an index fund you are effectively betting on a sector or entire country’s economy. With a diversified investment in index funds, you’re betting that the world’s economy continues to thrive in the long run. Literally the only thing that will stop you making money is the end of the world, and in that case, you’d have more serious problems.
These funds will stay put for 20 years minimum, fees and effort to maintain are very, very low.
Medium Risk
35–50% of my wealth is stocks, CFDs, and equities. These are considered medium risk because they are less diversified than indices, and my investment and trading time frame is shorter than above (minimum 5 years).
Fees are higher than above, but every effort is made to keep them as low as possible. The effort required: medium-to-high.
High Risk
I’ve put 5–10% of my hard-earned cash into startups and cryptos. This portion needs to be rebalanced from time-to-time as (by their nature) some grow very quickly, whilst some die completely. Startups are also one of the riskiest investment you can have. I am willing to have everything in this category go to zero, but (of course) I’m hoping that I the success of the few outweighs the losses!
The cost of entering and exiting these investments can be high, either in capital, time and/or knowledge.
A Word on ISAs
If you live in the UK you have the ability to use an Individual Savings Account (ISA) which is a “tax-free wrapper” for your investments. This means that gains made from investments through your ISA cannot be taxed. There is an annual cap imposed on ISAs but I highly recommend you top them up as much as possible each year. You can read more about them on the Gov website.
For those not in the UK, a similar wrapper is probably offered by your government so definitely look into it!
A Word on EIS Investments
The Enterprise Investment Scheme (EIS) allows individuals in the UK to invest in eligible companies with some incredible benefits e.g.
You immediately qualify for a tax rebate of 30% of the value of the investment
If the company goes into liquidation, you can claim more of your investment back as a rebate — in some scenarios you are only risking 30% of your original investment
If you hold stock in the company for more than 3 years, you don’t pay capital gains on your gains!
On sites such as Seedrs I’ve invested in the likes of Revolut and seen incredible paper gains. Seedrs will let you know if a potential investment is EIS eligble.
I’m sure there are many other successful investment approaches out there, I’d be interested to hear yours. But before you answer, do you know what you want?