Login Request account
Reset your password

Investing puts capital at risk

Where do you want to sign in to?

Or your simulation account

A single step

July 28th 2017

Over the last two months, we have been running our lifecycle investment campaign.

It started with us asking the question if everyone should invest. A fascinating read on the risk and rewards of putting your money to work. We followed this up with why it’s never too early to start investing where we looked at simple maths to show how starting early can have a significant impact on how big your pot of gold is at the end of the rainbow.

To encourage early investing we launched our student campaign offering 6 months of free fees. Last month we followed this up with our investment gap campaign to encourage and assist another group of investors to get started. Today we launch the third and final campaign. But before we get into that, we wanted to focus again on why and what these lifecycle campaigns are all about.

The investment life-cycle

Most of us go through a life cycle of investing. We finish university, with some of us having student debt, and spend our first few year of employment paying this off while focusing short term goals. Holidays with our friends for example. As we progress in our careers, our discretionary income tends to increase. We then start to focus on more long term investment goals. Buying an apartment or house perhaps. We slowly start to think about investing for retirement (most of us will have our employer’s pension scheme to help us with this).

These habits tend to permeate into our thirties and forties when some of us might choose to find significant others and settle down. We then start families and our investment goals are changed yet again as we now plan for their futures. As time passes the reality of retirement becomes more tangible and plans are put into place to secure the drawdown of income we will need and the lifestyle we want to lead in our later years. The next generation then takes up this baton and run through their own life cycle of investing.

Time and compound interest are great allies in making sure we reach our desired outcomes.

One thing we have tried to re-iterate, in much that we have written, is that there are certain golden rules that you can follow to ensure that you have a great chance of reaching your investment goals.
First and foremost is to keep your investment costs as low as possible.
Secondly, is to invest in a product that matches your willingness and ability to take risk and your capacity for loss. Your risk profile. Putting your hard-earned money into something that loses 10% when you could only stomach (emotionally) and afford to lose (in reality) only 5% is a sure fire way to stop you from investing ever again.
The other golden rules are to invest for the long term and to do it consistently. Time and compound interest are great allies in making sure we reach our desired outcomes.

So what are we at ETFmatic doing to help you with these golden rules, you may ask?

Well, we offer some of the lowest investment management fees in the industry. Keeping costs low with ETFmatic check. We offer three portfolio management styles and hundreds of different asset allocations to ensure you can select or construct the exact right portfolio that meets your investment needs. Risk-aligned investing with ETFmatic check.

But what are we doing when it comes to helping our clients with the other two rules?

Besides having zero investment management fees for children under the age of 18, we constantly try and find ways to assist and help investors start their investment journey. Because starting can be very daunting sometimes and the thought of the large amount of capital you need to retire or buy a home even more so. So today we wanted to show, in practical terms, just what a big impact getting started can have in reaching your investment goals. It’s not as a daunting as you might think.

A journey of a thousand miles begins with a single step

Let’s make a few simple assumptions. Let’s say that Jane wants to retire at the age of 75. Today she is 30 years old and working in London. Once she retires she wants to live on the national UK average income of £25K (until the age of 100). How much do you think Jane needs when she turns 75? If we assume an annual portfolio return of 5% and a simple 20% tax rate she requires £440,435. So far so good. So how much do you think she needs to invest every single month? Also how important is it that she starts as soon as possible? We’re glad you asked:

Age Monthly contributions
£100 £200 £300 £400 £500
30 £202,644 £405,287 £607,931 £810,575 £1,013,219
31 £191,613 £383,225 £574,838 £766,450 £958,063
32 £181,118 £362,237 £543,355 £724,473 £905,592
33 £171,135 £342,270 £513,405 £684,539 £855,674
34 £161,637 £323,275 £484,912 £646,549 £808,187
35 £152,602 £305,204 £457,806 £610,408 £763,010
36 £144,006 £288,013 £432,019 £576,026 £720,032
37 £135,829 £271,659 £407,488 £543,317 £679,147
38 £128,050 £256,100 £384,150 £512,201 £640,251
39 £120,650 £241,299 £361,949 £482,598 £603,248
40 £113,609 £227,218 £340,828 £454,437 £568,046

The table above indicates the final portfolio value she will have at age 75, based on the age she starts investing and the monthly amount she contributes. It’s important to note the large difference 100 pounds a month (1.2 Flat Whites a day at Starbucks) makes. £607,931 vs £405,287. Perhaps also not surprising is the large difference time can play. Assuming waiting just 5 years can mean the difference of over £100,000 pounds. We’ve assumed that Jane starts with nothing though. What if she made sure she made an initial large investment along with her 300 pounds a month contribution? Well, the numbers are as evident:

Initial Large investment Final Portfolio value
£500 £579,413
£1,000 £583,906
£2,000 £592,891
£4,000 £610,861
£8,000 £646,801

Announcing our latest campaign

At ETFmatic we allow you to keep your costs low, we give you complete freedom to select and build the right asset allocation to meet your needs. Lastly, we constantly aim to find ways to encourage you to not only start your investment journey as early as possible but consistently contribute towards your goals.

With this in mind, we are launching our third and final lifecycle campaign.

Double your AUM. Any clients that double their AUM with us over the next month, from 28 July to 25 August, will receive 6 months for free investment management fees. So keeping your cost low, increasing your contributions and doing so as early as possible. All recipes to increase your chances of reaching your investment goals.

With all investments your capital is at risk and the value of your investments and the income deriving from it can rise as well as fall. Past performance is not a guide to future performance.