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Long Term Wealth Creation - Investment Portfolio by TrendFollower

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The one thing I have realised is that a lot of people are trying to run before they can walk. People are trying to be successful at trading when they have not become successful at investing. For me being a successful and profitable investor by creating long term wealth is the sound foundation that can lead to into trading or other forms of investing. 

I am going to use this thread to begin discussing my journey as an investor and the good things I did and the bad things or mistakes I made along the way. I have nothing to hide and I want to share real life examples for the IG Community. Of course I hope you can appreciate that I will not disclose monetary amounts or the valuation of my investment portfolio and this is private but will be open and transparent. I will use 'clear and plain' English and where any jargon or complex words or phrases are used then I will try and explain them in a simple manner for the IG Community. 

@dmedin, I have tagged you into this as you have inspired me to create this thread. Please bear with me and when I have some time I shall commence with Part 1 below. 

Part 1: Introduction to Creating Long Term Wealth by Investing - Coming Soon

 

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This reminds me of the maxim, 'Master inter-day trading before you attempt intra-day trading'.

Also, become good at investing before you try and become good at trading.

Investing has a much better track record.  99% of traders lose money.  lol!

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@dmedin,

Of course it is only my personal opinion but I do think that if one has never invested or is not both successful and profitable at investing then it does make it potentially harder for them when it comes to trading. I accept investing and trading are both different. 

When I refer to investing in this thread it is more geared to the investment funds such as investment trusts, unit trusts, OEICS and ETF's rather than individual shares. Investing in individual shares is very different to investing in investment funds. I shall be focussing on investing in investment funds in this thread.

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Part 1: Introduction to Creating Long Term Wealth by Investing:

I am going to write about my personal thoughts and opinions here so I appreciate that some of you will not agree, others will not understand, a few will not believe and a small group will think that I am copying and pasting something from some website, book, magazine or other source. 

For me long term wealth creation can be achieved by investing. I am not talking about trading the markets here. I am talking about having a longer term vision to create some serious wealth over many years by demonstrating some discipline and patience. I am going to focus on investing in Investment Trusts, Investment Funds such as Unit Trusts and OEICS along with ETF's rather than individual shares.

So first of all, let me share with you my investment strategy. I invest an amount in pounds sterling every single month via direct debit into many different funds. I do not wish to disclose the amount I invest but it would be fair to say that it is a significant amount and would not look out of place if compared with a mortgage for a property, etc. I use a 'cost pound averaging' approach. This means that when the markets are down then I get more units in the investment funds I am investing in for my money. This is great when one has a long term horizon and is investing during the 'accumulation' phase. This will be a very long period if you start at the earliest age possible until a few years before retirement when one may look to de-risk and switch to income funds. That is a different topic and for another time if there is demand from the IG Community for it. If markets rise then yes you will get less units for your money but you will be in profit on all the previous months where you have been accumulating prior to the current rising market. The theory is that over time the price will average and smooth out so that you are unlikely to pay too lower price or too higher price and more likely to pay close to an average price in your investment funds. 

My investing strategy could be defined as a 'high risk capital growth' strategy. 

I want to accumulate as many units as I can over the longest time horizon I can. Now you will find this strategy in books, magazines and online material. I got it from those sources too many years ago. What I did differently which you will not really find in many or any books, magazines or online material is that when ever there is a recession, major correction, large drop then to invest lump sums into these investments. This is what I have done over the many years and this has served me well. It has turbo charged my returns, profits and annualised returns on individual funds and my fund portfolio. 

An investment is only an investment if you sell it at a given time. If you just simply buy and hold and never sell or do not have an intention to sell then it is not an investment for me. Now I have switched money from some funds into different funds where I have identified emerging trends which I think could provide higher returns for me. The key to knowing when to sell any individual funds or switching out of them is to identify when the longer term trends change. This will require monitoring the performance of individual funds and making sure you are on top of your fund portfolio so that should any changes be required then you are alert and quick.

Part II: Investment Themes to Consider in your Fund Portfolio - Coming Soon:

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Part II: Investment Themes to Consider in your Fund Portfolio:

There are many different investment themes you could consider to include in your high risk growth fund portfolio but some of them could be the following:

  • US Smaller Companies
  • Japanese Smaller Companies
  • European Smaller Companies
  • Emerging Market Smaller Companies
  • UK Smaller Companies
  • UK Micro Companies
  • China
  • India
  • Russia
  • Emerging Markets
  • Asian Markets
  • Frontier Markets
  • ASEAN Frontier Markets
  • Commodities - Agricultural / Energy / Precious Metals
  • Latin America
  • US
  • UK
  • Europe
  • Emerging Europe
  • Africa
  • Technology
  • Biotech
  • Robotics
  • Automation
  • Artificial Intelligence

The above are just some of many different themes. There will be some which are not on this list and others which maybe should not be on this list. This is all down to the individual investor, their time horizon and risk appetite.

A high risk capital growth strategy needs time to really create long term wealth. 

Part III: To Switch Or Not To Switch - Coming Soon:

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Part III: To Switch Or Not To Switch:

Switching allows an investor to switch out of poor performing funds into funds they perceive to have better performing potential. If the investor has funds which are all performing well then it also allows an investor to switch into funds which could be even better performing that the funds they are already invested into due to a more stronger investment theme. 

Not just that but it can allow an investor to switch into a different fund within the same investment theme due to another fund offering lower costs / fees. There are many different reasons why an investor may choose to switch and there are platforms that will allow investors to do so without additional charges apart from the obvious cost of selling and buying. Switching can also be done within a tax efficient wrapper like an ISA. Many years ago switching was not really available to retail investors. It was a case of selling your investment and then once you had received the funds to use them to invest into another fund. This was a long winded process and during this the market was moving making it pretty risky too. Switching is a far quicker and cost effective method if the investor wants to keep the capital within their fund portfolio without money hitting their bank account. 

So the question some of you may be wondering or asking is which fund platforms to use? That is what I shall discuss in the next part.

Part IV: Potential Fund Platforms To Consider - Coming Soon:

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Part IV: Potential Fund Platforms to Consider:

There are several platforms to consider for fund investing. I shall start with the platform that I personally have used for many years now and that is Fidelity. They have a FundsNetwork with thousands of funds available. Others are:

  • Hargreaves Lansdown (I personally use this for shares, investment trusts and ETF's).
  • Interactive Investor
  • iWeb
  • AJ Bell
  • Equinti Selftrade (I personally use this for my SIPP)
  • Cavendish Online
  • Charles Stanley Direct

There are many different providers. You need to look at which platform offers the types of funds you are looking for in your portfolio as in the variety and choice. You need to look at costs and fees associated with using that broker. Then there is the customer service and quality of their online platform and ease of use. You may want to consider if they offer ISA's, Junior ISA's, SIPP's, Junior SIPP's and other things of importance to you. 

Each investor will have their own personal preference and a level of loyalty too. There is not right answer to this question. It is what platform is best for you. Finally, IG offer ISA's and Fund Investing via their Smart Portfolio's. These are based on ETF's but could be worth a look for some of you who are looking for simplicity. 

https://www.ig.com/uk/investments/smart-portfolios

 

Part V: How Long To Hold - Coming Soon:

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Part V: How Long To Hold:

So how long should one hold their long term investments in funds, trusts, etc? This all depends on your age, investment goals and time horizon. Some may be planning to use the funds to purchase a property or use it as a deposit. Others may use the money to funds their children's university costs. There is no right or wrong but generally one should look to have a time horizon of five years minimum. Anything shorter and it is extremely unlikely that any serious wealth can be created in such a short time period. One could argue that even five years is not enough and I would be inclined to agree. 

For those who want to create long term wealth then this becomes 10 years, 20 years, 30 years and maybe even 40 years if you can start in the 18-22 age bracket. I started in my 20's and I am still investing now (don't wish to give my age away). After many years my funds portfolio has grown and for me the metrics I look at are annualised returns. I believe the time has gone when you can achieve higher annualised returns when taking into accounts costs in property over high risk capital growth investment funds. Those days are gone when you could buy a property for £5k and sell it within 10 years for £50k. A £120k property 10 years ago is going to be worth around the same and may be £150k now. The price rises seen in the 70's, 80's and 90's are not seen on residential properties now unless you have deep pockets and can purchase unique properties in a high demand area. This is for the HNW and Super Rich not for the normal person off the street. 

Creating wealth for a normal person is achievable if they invest for the long term and invest wisely using patience and discipline. One must have an investment strategy and stick to it. By all means adapt it and change it should market conditions dictate but using time to create wealth is one of those things that can be achieved by the smaller investor if they have the passion and desire to create wealth over the longer term.

If you are serious and in your 20's then I would suggest thinking big and having a timescale of around 30 years in mind. This could allow you to create a substantial investment portfolio when you are in your 50's and may even help you to retire early!

Think BIG and think LONG. TIME is a key ingredient. Have PATIENCE and DISCIPLINE. This will lead you to LONG TERM WEALTH CREATION

 

Part VI: Diversification - Coming Soon:

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Stock markets are continuing their upward trajectory.

During this period over the past months and years it has been an opportunity to create long term wealth. If you had just invested regularly in certain investments themes, investment funds and trusts then it would have increased your wealth. It is there for all to see. This is why I am an investor first and trader second. My foundation and platform is my investing. Trading is secondary.

Real wealth creation over time comes from having the discipline and patience to invest on a regular basis. More importantly it is to invest in the right themes at the right time. If you can do this then it increases the chances of you achieving long term wealth. 

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Creating Wealth can be described as 'Running a Marathon' rather than partaking in a 'Sprint'. It is very difficult to lose money if you select the right investment funds and you have patience and time. Time is one of the key ingredients to create wealth through investing. 

Has anyone recently set up their investment portfolio?

If so then which investment funds have they selected?

The reason why I ask is that there are thousands of fund choices so there may be a few great performing funds which I have not considered which could improve the performance of my own portfolio. 

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If you do a search on the internet then it will not take long to see that investing in equities over the past 5, 10, 15 and 20 years would have been a better decision over say Cash and Bonds. 

Investing in equities through fund and trust management allows an investor the opportunity to create wealth. If they can select the best performing funds as early as possible and then are able to switch into better performing funds throughout the life of their investment portfolio, it presents a real opportunity to outperform the market in general. 

In my personal opinion the annual performance of an equities portfolio for high risk capital growth investors must outperform cash, bonds and property over the same time period. Of course there will be years along the way where cash, bonds and property outperform equities but if an investor can select the right themes are the right time then I believe they can easily outperform over say a 10 to 20 year period other major and established asset classes. 

For me investing in equities through funds, trusts and ETF's are one of the best ways to create long term wealth without some of the risks associated with trading. Investing and trading are different. Building a robust and solid investment portfolio first to create the wealth and then moving to trading is a far more sensible approach than not investing and going straight into trading. I personally believe investment experience is a prerequisite for trading rather than the other way around. 

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