Welcome back, I'm not going to lie it's been one of those weeks; essentially no progress on the business front, several khachapuris, and I'm writing this episode this morning. But, this is going to be the first of a two-part segment on personal finance, starting with my rookie's guide to asset management and ending next week with a rookie's guide to international tax efficiency. I'm not going to use any fancy words like 'risk adjusted return' or 'portfolio optimization', instead it's going to be a guide for the average person, so that if you have no financial literacy or are a child or medium sized dog you can still benefit from reading. Before we get into it, none of this is financial advice, as always draw your own conclusions, read around the topic, and remember I'm just a homeless guy with a laptop so continue at your peril.
To kick things off let's start with what the goal is; to make as much money as possible? Not really. The goal is to set things up so that ultimately work becomes completely optional. All of your time becomes 'free time', and yes, having as much money as possible helps (to start), but the real key is reliable, repeatable growth. When you put it like this it seems quite simple, but as your savings grow it quickly becomes scary. £1000 to a student, nurse, teacher, etc in the beginning represents maybe 80% of their net worth, so committing all of it to one account or strategy is a big mental leap, even if that strategy as we'll see is pretty straightforward. After a while it becomes £5000, then £10,000, and before you know it there are the equivalent of many months or years salary sat looking at you as you decide to do some napkin calculations and think 'okay maybe now's the time to try a new way of life'.
So how do you get there? I see it as a single change in mindset followed by two distinct chunks of time. The change in mindset is; commit as much as humanly possible to your 'pot', and invest your 'pot' in a global index fund. Your success now depends on a) your savings rate, do you need a new phone every year, a 3-bed apartment, a new wardrobe every few months? and b) your discipline, can you sit and watch as other people commit large amounts to property, cars, and lifestyle as you quietly accumulate investments without 'cashing in'? Several seemingly small decisions like where to live and what to do on weekends can have disproportionately large impacts on your savings rate, so choose wisely and yes, if you like avocado toast and coffees every day, go ahead, just don't have them in Kensington. The chunks of time on the other hand are the period where you're saving up, dreaming of this stress free life, and then the period after you've hit the critical mass such that your pot will be reliably self sustaining.
There is of course the elephant in the room. If you stay on a low to moderate income either by choice or by necessity through life events and do everything right, it is still possible that you never achieve financial independence. This is a brutal reality, but one that is essential to remember; pursuit of this goal is a choice that can alienate you from many people in both your personal and professional life, but could also be the most liberating thing you ever do. Increasing your income during the saving period will make the saving period shorter than it needs to be, but you still need to enjoy your life during this time, so I recommend choosing a job that is at least a little bit interesting to you and that is also a high earner, if possible.
I want to take a quick detour into the world of hedge funds, family offices, and private equity here just to put the personal finance journey into perspective, and why I largely ignore most news and discussions around these topics. Actively managed funds (those where a (usually) middle aged white guy in a tailored suit leaves his apartment at 05:00 in the morning and gets home around 23:00 at night having spent the whole day reading about soy bean supply chains) generally perform worse than index funds. If you don't believe me, one of my favourite publications is AJ Bell's manager versus machine report , which describes exactly this but with some numbers behind it.
An example close to home is that Eisler capital (the firm I turned down in favour of joining Vitol - phew!) reported growth in 2025 of a whopping -14.3% , despite paying employees an average of £824k/year . Meanwhile my personal portfolio grew by +12.83% - not to toot my own horn but I achieved that growth without reading anything about supply chains. I mention this not to pitch myself as a future portfolio manager on the 'index desk' of some hedge fund, but to highlight that it's very common that large groups of intelligent, highly capable, and highly qualified people, routinely fail to make more money than simply buying the global index and waiting.
I can feel several of my more financially inclined readers already seething at my blatant heresy - these funds are managing more money, they have investor responsibilities, they have political and international objectives. It just doesn't matter . The only thing that matters is that we find a source of reliable and repeatable growth for our own pots, and that we don't have to pay anyone £827k/year to do it. Detour over, lets break down why I'm so focussed on index funds rather than real estate, private credit, and other options.
Asset management is gambling, everything is gambling, but the real question is what assertions do your financial decisions make about the future? To start, zoom out on your life and imagine seeing all of your chunks of money, your car, your investment account, your house, as circles on a page. The circle with your car in it is making the statement 'this £4000 gives me a higher quality of life than public transport options'. The circle with your house in it is making the statement 'this £25000 and ongoing payments give me location security, plus I think the value of the property will go up faster than renting and investing the difference'. There could be a whole episode on renting vs buying but lets move on.
Now to the circle with your investments. If like me you hold only the global index, then your statement is something along the lines of 'I think that worldwide human capitalism will grow faster than anything else in the next year' - something which has generally been true in the last 100 years. If you're only invested in a single country's index, then your statement is along the lines of 'I think capitalism in this country will outperform other countries'. If however, like the hedge fund gang you are not all-in on the global index, then your statement is along the lines of 'I think this company in this time frame will outperform anything else', or 'I think the price of this commodity will go up/down/sideways in this time frame and we can make more than any other option by doing x/y/z'.
Going back to the abysmal performance of hedge funds compared to the global index in the past, I am sceptical to say the least of anyone that is choosing their own stocks, or doing any kind of day trading in any capacity. There is simply no way one person or even one algorithm can reliably capture the many complex interactions which contribute to the price of a single company, especially as the world continues to get more complicated, more intertwined, and more political. This is despite what the adverts for trading platforms and online gurus might say - there is no such things as low risk and high reward. Keeping things simple is almost always the best way to go.
One topic I have yet to broach in this whole piece is debt, and how it plays in to your savings rate, your investments, and ultimately your lifestyle. I can only really talk about one kind of debt, and thankfully the only kind I've ever been in, which is student debt. I took on around £30k of student loans to fund my undergraduate studies, and then (unfortunately for the debt timeline) spent a further 3 and a half years doing a PhD, during which I was on a full scholarship (so not adding any more debt) but still paying nothing back to the original amount. This meant that by the time I left university it had ballooned to roughly £48k, making it the singular focus of my life after becoming a full tax paying adult human.
Whilst I agree to some extent that there can (in very rare cases) be 'good debt' like borrowing for a suit for an interview or something like that, I stand by the statement that there is no good debt when it comes to personal finance. Your goal should be to minimize your debt first, and then to maximise your savings*. Following this advice myself, I paid off my student loan over the next 3 years by making it my number one priority after filling a smaller tax efficient account (which we'll get to next episode when we talk about tax efficiency). Also just a side note: if you have any student debt and make over £67k/year (if I remember my napkin maths correctly), it makes more sense to pay it off as fast as you can rather than to 'let it ride' as you'll end up paying more over your lifetime than you will if you pay it off asap.
When I was proof reading this episode it feels like there should be another section here, maybe something motivational, or something technical about exactly how to invest and which platforms to use, but there's actually not much more to add. The equation for financial independence is straightforward; earn, save, invest, wait. You'll start by creating an investment account and depositing £100, then you'll watch some videos, read some guides, and then decide which index to buy. This deposit will then grow both with the market and as you save more, until it becomes just another thing you do each month, making investment decisions for what you used to think was a huge amount of money will eventually become completely normal. You'll watch your friends buy cars, houses, and go on nice holidays, but they might have to stay in their jobs for another few months or years pay for those things.
In the end, you might be sat typing a newsletter having travelled across the world, grateful for the sacrifices the younger you made, but unsure of the future and how to spend the thing you have really been working for since the start - free time. I think that being the biggest problem in your life is a good place to be.
See you next time for a real white-knuckle episode about the sexy world of tax efficiency.
Thanks and all the best,
Oliver
* there is a caveat here re: tax efficiency which we'll get to next week!
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