Welcome to this series exploring different investment portfolios and strategies.
We’re starting with the ‘simplest’.
The one and done.
This strategy involves you picking just one thing to invest in and adding to it for the long term.
No buying and selling.
No constant researching.
A bit of upfront learning and automation and you’re done.
The one and done strategy is based on investing in just one thing, with one provider for the long term.
Five years is the minimum you’ll want to do this for and the longer you’re invested for the more your money can grow for you.
Keep your investments diversified
When I say ‘one and done’ I mean investing in just one thing that you manage but that one product will have bundled together different investments for you.
That keeps the risk as low as possible because the money is invested in lots of different things.
That’s essential because if one thing fails it doesn’t mean losing everything.
Jargon recap:
Stocks/share: a small slice of a company you can own
Fund: a mix of stocks/shares/bonds all put together allowing you to invest in multiple things at once.
ESG: A way to screen companies and investments based on environmental, social and governence factors.
So what are the options?
Roboadvisors
Quite possibly the easiest way to invest as they make all the decisions for you.
You’ll answer some questions so the platform can figure out your risk tolerance. After that it will suggest one portfolio for you to invest in and then it will manage it for you in line with that.
Simple.
You can just set up your direct debit to go in each month and check on the app when you need to.
Most roboadvisors in the UK have ESG options too.
Target date fund
A target date fund will suggest what assets to invest in and the mix of each based on when you want access to the money.
It’ll be managed for you so that the risk level decreases as you get closer to the planned date you need the investments. That makes the chances of your investments having a big sudden drop just before you want to sell less likely.
These might be used for retirement planning or investing towards something like a child’s education.
The downside with this is right now the options for ESG target date funds aren’t as extensive but hopefully in time these will be more readily available.
100% stocks
This one has a higher risk and won’t be for everyone but as stocks usually give the highest return in the long term the idea is to pick one fund invested in stocks and stick with it.
This is usually more suited to younger investors with decades ahead of them.
You’ll want to make sure it’s diversified across lots of companies, sectors and countries which is why going for an index fund make sense if you’re using this strategy.
The 100% stocks portfolio is favoured by JL Collins a financial writer who says:
“Owning 100% stocks like this is considered “very aggressive.” It is and you should be. You have decades ahead. Market ups and downs don’t matter ‘cause you avoid panic and stay the course. If anything, you recognize them as the “stocks on sale” buying opportunities they are. Perhaps 40 years from now you might want to add a Bond Index Fund to smooth out the ups and downs. Worry about that 40 years from now.”
Thankfully ESG options are now more widely available for index funds/ETF’s
Stay the course
All these strategies are a long term decision with the potential rewards growing exponentially with time.
In the graph below I compare the returns based on ten years and twenty five years of investing.
You can see much of a difference the extra fifteen years made even with investing the same amount of £200 a month.
This example is based on keeping all the money invested throughout with the account on accumulation mode.
In the twenty five year example the investment returns were more than double the amount than cash that was put in.
Graph is based on an 8% return
You can try this for yourself and add in your own numbers with this investment calculator.
If you found this useful I’d love for you to pass it on to a friend :)
More strategies coming your way next week!
Paid subscribers put any qs or thoughts in the comments and I’ll get back to you x