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Sources of wealth
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- Lemon Slice
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Sources of wealth
My eldest step-daughter is due to graduate this spring and head off in the adult world and we've been having a few talks about money and long term wealth. One of the topics we got on to was how people accrued their capital and it got me wondering how those on here had amassed their personal wealth hence the poll. Personally, the modest sum i've accrued has come about from continuously investing surplus wages every week/month into shares whereas her boyfriends parents started a business, built it up and sold it getting a large lump sum from it. She's quite keen on the idea of starting her own business with a view to flogging it off in the future and i've no doubt she will, thankfully she's got her head screwed on so i'm not too worried about her financially!
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- Lemon Half
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Re: Sources of wealth
The key is to start saving early and keep doing it regularly. Increase the amount as funds allow. I would avoid tracker funds.
TJH
TJH
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- Lemon Half
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Re: Sources of wealth
My wealth has come about mainly from growing my previously smaller wealth!
Accruing has been mainly through successful investing. Starting was from saving/investing from salary.
Accruing has been mainly through successful investing. Starting was from saving/investing from salary.
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- Lemon Quarter
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Re: Sources of wealth
In the late 1990s my earnings rocketed thanks to Pensions Misselling compensation work greatly increasing the demand for people with Actuarial skills. I went freelance because of the tax advantages, and the money rolled in.
My spending didn't increase all that much, except for extra work-related costs. I'd been investing since the early 1980s, so I knew what I was doing; now I had a lot more financial firepower to work with.
Thanks to TMF's Oil & Gas board I discovered Soco International (and a few others) so the early 2000s were amazingly profitable (small and medium oils were one of the few sectors which was doing well in the aftermath of the dotcom crash).
When the gravy train came to a halt in 2003 I'd made enough to retire very early. Actuarial employers weren't keen on hiring people like me (and the pay on offer was nothing special), so I retired.
My spending didn't increase all that much, except for extra work-related costs. I'd been investing since the early 1980s, so I knew what I was doing; now I had a lot more financial firepower to work with.
Thanks to TMF's Oil & Gas board I discovered Soco International (and a few others) so the early 2000s were amazingly profitable (small and medium oils were one of the few sectors which was doing well in the aftermath of the dotcom crash).
When the gravy train came to a halt in 2003 I'd made enough to retire very early. Actuarial employers weren't keen on hiring people like me (and the pay on offer was nothing special), so I retired.
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- 2 Lemon pips
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Re: Sources of wealth
For me it has been regular investing, started doing £50 a month 35 years ago and increased with salary increases, used low cost Investment Trust savings schemes, maxed out on pension contributions later on, picked funds and some years that achieved decent growth, watched costs, but not obsessively though, and let the benefit of compounding work its magic, ended up with 25 times my annual income at 55. Maybe could have done better, but not taken excessive risk. Never used a financial adviser.
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- Lemon Quarter
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Re: Sources of wealth
tjh290633 wrote:The key is to start saving early and keep doing it regularly. Increase the amount as funds allow. I would avoid tracker funds.
TJH
I'd say that the key is to start.... anything early. Then put the effort in understanding what you are doing. It's as true of a small business as it is of investing. Or indeed becoming an expert in your chosen vocation, which will probably pay.
In terms of investing, if that is your interest as it is mine, then tracker funds are blancmange. However if your interests lie elsewhere they are often better than picking a fund and ignoring it's performance over the decades that follow.
My "wealth" though is from invested salary.
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- The full Lemon
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Re: Sources of wealth
I would say that a successful career is necessary but not sufficient. You can do quite well working for someone else but it generally will not leading to huge wealth, unless you are a professional footballer or get incredibly lucky with employer share options.
But what the career does get you is surplus income that can then be put to work. In my case it was stock market investments (1982-present), and some buy-to-let properties (1978-2010).
After a while money begets more money, and the daily fluctuation of your net worth can greatly exceed what you would get paid for going to work for a day, so you retire early. I got lucky with a decent-sized inheritance but that was after I had already retired and so just became play money.
What also helps is not being extravagant. Other than on travel I really do not conspicuously consume. And the other key factor is to marry well (or don't marry at all), preferably to a fellow professional with good money sense. Nothing destroys wealth like a divorce. Kids, on the other hand, I never found to be that expensive to run.
But what the career does get you is surplus income that can then be put to work. In my case it was stock market investments (1982-present), and some buy-to-let properties (1978-2010).
After a while money begets more money, and the daily fluctuation of your net worth can greatly exceed what you would get paid for going to work for a day, so you retire early. I got lucky with a decent-sized inheritance but that was after I had already retired and so just became play money.
What also helps is not being extravagant. Other than on travel I really do not conspicuously consume. And the other key factor is to marry well (or don't marry at all), preferably to a fellow professional with good money sense. Nothing destroys wealth like a divorce. Kids, on the other hand, I never found to be that expensive to run.
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- Lemon Half
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Re: Sources of wealth
tjh290633 wrote:The key is to start saving early and keep doing it regularly. Increase the amount as funds allow. I would avoid tracker funds.
TJH
avoid tracker funds
Why? There is a lot of evidence to suggest that unless you are extremely gifted/lucky (delete as appropriate) trackers provide the best returns over time- particularly if you want a 'fire and forget' regular investment
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- Lemon Half
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Re: Sources of wealth
I voted something else.
I almost had to vote for "what wealth".
Most of my current wealth is long term pension plans. Yes I have a P226. But also the home we have lived in for 26 years has also increased in value. If we can afford it would be nice to see it go to our only child. But we don't know what lies ahead just yet.
Going forward I am looking at increasing my pension commitments from £21K to the max £40K pa for the next 10 years when the state pension beckons. That will leave us without the money for a new kitchen but priorities beckon.
Long term illness has had quite a negative impact on my/our finances. Sometimes [expletive deleted] just happens. So we're in catch up. My good lady has a works pension (local authority) with over 40 years service. We won't be able to book a cruise on retirement but we will be able to go away when the schools aren't on holiday and perhaps do a little baby sitting - who knows.
But I too have attempted to show my 13 year old daughter the benefits of investing with patience.
She has saved up £1,400. And when her grandma asked her what she was going to do with it she said I'm going to save more as I will need to buy a car when I'm 18 to get me to work. She's not aware that she has a little more which we've tucked to one side for which is about £5K and we add when we can. The last year has been difficult though as once again I've not been too well. But back on my feet this week and feeling tired out from working for a change
AiY
I almost had to vote for "what wealth".
Most of my current wealth is long term pension plans. Yes I have a P226. But also the home we have lived in for 26 years has also increased in value. If we can afford it would be nice to see it go to our only child. But we don't know what lies ahead just yet.
Going forward I am looking at increasing my pension commitments from £21K to the max £40K pa for the next 10 years when the state pension beckons. That will leave us without the money for a new kitchen but priorities beckon.
Long term illness has had quite a negative impact on my/our finances. Sometimes [expletive deleted] just happens. So we're in catch up. My good lady has a works pension (local authority) with over 40 years service. We won't be able to book a cruise on retirement but we will be able to go away when the schools aren't on holiday and perhaps do a little baby sitting - who knows.
But I too have attempted to show my 13 year old daughter the benefits of investing with patience.
She has saved up £1,400. And when her grandma asked her what she was going to do with it she said I'm going to save more as I will need to buy a car when I'm 18 to get me to work. She's not aware that she has a little more which we've tucked to one side for which is about £5K and we add when we can. The last year has been difficult though as once again I've not been too well. But back on my feet this week and feeling tired out from working for a change
AiY
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- Lemon Half
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Re: Sources of wealth
AleisterCrowley wrote:tjh290633 wrote:The key is to start saving early and keep doing it regularly. Increase the amount as funds allow. I would avoid tracker funds.
TJH
avoid tracker funds
Why? There is a lot of evidence to suggest that unless you are extremely gifted/lucky (delete as appropriate) trackers provide the best returns over time- particularly if you want a 'fire and forget' regular investment
If youn buy tracker funds you are condemned to mediochre results. Compare the FTSE100 on 31st Dec 1999 to today. If you invest regularly, month in, month out, you will benefit from cost averaging, but a little due diligence will find you better vehicles.
TJH
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- The full Lemon
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Re: Sources of wealth
tjh290633 wrote:AleisterCrowley wrote:tjh290633 wrote:The key is to start saving early and keep doing it regularly. Increase the amount as funds allow. I would avoid tracker funds.
avoid tracker funds
Why? There is a lot of evidence to suggest that unless you are extremely gifted/lucky (delete as appropriate) trackers provide the best returns over time- particularly if you want a 'fire and forget' regular investment
If youn buy tracker funds you are condemned to mediochre results. Compare the FTSE100 on 31st Dec 1999 to today. If you invest regularly, month in, month out, you will benefit from cost averaging, but a little due diligence will find you better vehicles.
Depend on which index you choose to track. Since indices exclude the return from dividends, then a FTSE-100 tracker is always going to look bad over long periods of time, because so much of the return from UK shares comes from those dividends, and the reinvestment thereof.
Take instead the S&P 500. At the end of 1999 it was at about 1,400. It is now at about 3,850. Again it is higher than that with dividends included, plus you got a currency kicker as well. So figure you would have at least tripled your money, despite investing a lump sum at the very worst time - right before the dot.com crash.
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- Lemon Half
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Re: Sources of wealth
tjh290633 wrote:AleisterCrowley wrote:tjh290633 wrote:The key is to start saving early and keep doing it regularly. Increase the amount as funds allow. I would avoid tracker funds.
TJH
avoid tracker funds
Why? There is a lot of evidence to suggest that unless you are extremely gifted/lucky (delete as appropriate) trackers provide the best returns over time- particularly if you want a 'fire and forget' regular investment
If you buy tracker funds you are condemned to mediocre results. Compare the FTSE100 on 31st Dec 1999 to today. If you invest regularly, month in, month out, you will benefit from cost averaging, but a little due diligence will find you better vehicles.
TJH
If you buy tracker funds you are 'condemned' to the market's results - rather than overperformance /underperformance, which is the whole point
I'm not sure a little due diligence will allow the average investor to consistently beat the index - there's plenty of evidence to show that the majority of actively-managed funds fail to do so in the long term and, importantly, past performance is absolutely no help when trying to pick the winners...
(and if comparing against the FTSE use Total Return)
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- The full Lemon
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Re: Sources of wealth
I may be a little unusual but what wealth I started with was from a lump sum in lieu of a pension, what nowadays can be achieved by 'cashing in' your pension entitlement.
Dod
Dod
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- Lemon Slice
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Re: Sources of wealth
I had nothing in the world when I started out and it took me until I was 30 years old to make my first financial market investment. The ground-work before that was saving enough cash for a mortgage on a flat then move upscale to a house and still meet the bills. At one time my first house mortgage payment was slightly more than half my wages.
After doing the basic life insurance / assurance I would say my three big efforts to pay the bills in my enforced early retirement were through money management and investing:
1. Don't ever be satisfied by being paid a pittance, get a better paid job or other legal income. I did extra academic studies and sacrificed my early twenties to graduate and so justify eligibility for a better paid job.
2. I lived well and my wife and I (and later kids) had foreign holidays every year from my mid twenties but never lived ostentatiously nor above my means. Clearing debt ASAP is essential.
3. In my mid thirties, and a much bigger house move, I was finally able to save monthly, direct debit, fixed amounts into mutual funds in PEPs then ISAs, a SIPP and employers pension plan (to receive their contribution to my pension too). I maintained this through thick and thin times to the level it was financially manageable.
You cannot just wish you were rich you need to read up and make it happen.
Good luck
midgesgalore
After doing the basic life insurance / assurance I would say my three big efforts to pay the bills in my enforced early retirement were through money management and investing:
1. Don't ever be satisfied by being paid a pittance, get a better paid job or other legal income. I did extra academic studies and sacrificed my early twenties to graduate and so justify eligibility for a better paid job.
2. I lived well and my wife and I (and later kids) had foreign holidays every year from my mid twenties but never lived ostentatiously nor above my means. Clearing debt ASAP is essential.
3. In my mid thirties, and a much bigger house move, I was finally able to save monthly, direct debit, fixed amounts into mutual funds in PEPs then ISAs, a SIPP and employers pension plan (to receive their contribution to my pension too). I maintained this through thick and thin times to the level it was financially manageable.
You cannot just wish you were rich you need to read up and make it happen.
Good luck
midgesgalore
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- Lemon Half
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Re: Sources of wealth
tjh290633 wrote:If youn buy tracker funds you are condemned to mediochre results. Compare the FTSE100 on 31st Dec 1999 to today.
So what is the Total Return of the FTSE100 from that date to today?
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- Lemon Quarter
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Re: Sources of wealth
Professional career, and living within my means, saving surplus
Fortunate in my choice of spouse - we are still married
Fortunate in my choice of spouse - she is a professional earner as well
Fortunate in my choice of spouse - she is not extravagant
Fortunate in my timing chose of property purchases
Bit of help along the way in stock options
Bit of help along the way in an inheritance
Main thing that we economise on compared to peers is transportation. I am amazed out how much people spend on depreciating assets.
Parked out front is a selection on ancient second hand Toyotas, which are far from glamorous but do the job. Mine is 16 years old, with 235k miles on the clock. My neighbour gets a new BMW or Porsche every 3 years. The cost difference between our respective choices is roughly what goes into my savings.
Hard not to feel smug when the vehicles have spent the last year parked on the drives
Fortunate in my choice of spouse - we are still married
Fortunate in my choice of spouse - she is a professional earner as well
Fortunate in my choice of spouse - she is not extravagant
Fortunate in my timing chose of property purchases
Bit of help along the way in stock options
Bit of help along the way in an inheritance
Main thing that we economise on compared to peers is transportation. I am amazed out how much people spend on depreciating assets.
Parked out front is a selection on ancient second hand Toyotas, which are far from glamorous but do the job. Mine is 16 years old, with 235k miles on the clock. My neighbour gets a new BMW or Porsche every 3 years. The cost difference between our respective choices is roughly what goes into my savings.
Hard not to feel smug when the vehicles have spent the last year parked on the drives
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- Lemon Quarter
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Re: Sources of wealth
I haven’t filled this in because all but the last one apply, so being limited to 3 didn’t work for me.
Two things that aren’t on this list are inflation and super returns on certain investments. Also I assume Inheritance includes being given assets as a child rather than waiting for someone to die.
For my generation, a massive factor was being able to buy a house on leaving University, paid for by a mortgage the interest on which was high but tax deductible, then rampant inflation pushing up house prices and wiping out the real value of the mortgage. In my case I bought a half share in a house in London in 1971. Last time I looked on Rightmove it was about 230 times the 1971 price (Sadly I sold it in 1980) (and the gain on the house was tax free).
I had one investment that did extremely well (not SMT)
So inflation can result in the huge transfer of wealth from some people to others (and to HMG), and understanding that is important looking forward as I think it is coming back.
Two things that aren’t on this list are inflation and super returns on certain investments. Also I assume Inheritance includes being given assets as a child rather than waiting for someone to die.
For my generation, a massive factor was being able to buy a house on leaving University, paid for by a mortgage the interest on which was high but tax deductible, then rampant inflation pushing up house prices and wiping out the real value of the mortgage. In my case I bought a half share in a house in London in 1971. Last time I looked on Rightmove it was about 230 times the 1971 price (Sadly I sold it in 1980) (and the gain on the house was tax free).
I had one investment that did extremely well (not SMT)
So inflation can result in the huge transfer of wealth from some people to others (and to HMG), and understanding that is important looking forward as I think it is coming back.
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- Lemon Half
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Re: Sources of wealth
dealtn wrote:tjh290633 wrote:If youn buy tracker funds you are condemned to mediochre results. Compare the FTSE100 on 31st Dec 1999 to today.
So what is the Total Return of the FTSE100 from that date to today?
As Captain Mainwaring would have said, I'm glad you asked that question, Pike.
Date UKX UKX-TR HIX HIX-TR FTAS-TR TJH Acc
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69%
There you have a comparison of the ordinary and TR versions of UKX and HIX, with the FTAS-TR and my own HYP accumulatins units thrown in for good measure.
Is that clear enough?
TJH
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- Lemon Half
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- Lemon Quarter
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Re: Sources of wealth
tjh290633 wrote:dealtn wrote:tjh290633 wrote:If youn buy tracker funds you are condemned to mediochre results. Compare the FTSE100 on 31st Dec 1999 to today.
So what is the Total Return of the FTSE100 from that date to today?
As Captain Mainwaring would have said, I'm glad you asked that question, Pike.Date UKX UKX-TR HIX HIX-TR FTAS-TR TJH Acc
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69%
There you have a comparison of the ordinary and TR versions of UKX and HIX, with the FTAS-TR and my own HYP accumulatins units thrown in for good measure.
Is that clear enough?
TJH
Yep, and if you'd embraced fixed interest as well as shares:
Date UKX UKX-TR HIX HIX-TR FTAS-TR TJH Acc GS Acc GS Wife Acc
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1.00 -1.00
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 7.69 16.22
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 10.74% 14.95%
[GS dates: 2001-2021]
GS
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