#26 - Finance Fridays - Stocks and Shares ISA Platforms, Index Funds Inflating the Market

*This is not financial advice, just me brainstorming about things related to money. Stocks are extremely volatile - value can go down as well as up. All investments and income streams may be subject to tax.

Contents:

• 💹Finding a platform to build my Stocks and Shares ISA

• 💷My hard and fast rules for money management

• 🎒Are ETFs and Index Funds inflating the market?

• 💹 Stock picking is an expensive hobby.

💹Finding a platform to build my Stocks and Shares ISA

If you’re like me, based in the UK and interested in investing. You want to set up a Stocks and Shares ISA to put all your money into the S&P 500 (as is the advice of every serious finance influencer not trying to sell you a course).

So I went hunting for the best platform to do just and found that InvestEngine has a comparison table on their website.

Obviously, I couldn’t rely on their bias table alone, so I also used ChatGPT to put together a summary table of all the top platforms to build your Stocks and Shares ISA.

Here’s ChatGPT’s response:

“Here's the updated summary table with columns for the annual account fee, FX fees, and any other relevant fees for investing in the S&P 500 in a Stocks and Shares ISA”:

If you’re still not satisfied, here’s another Comparison Sheet that’s pretty useful:

Best Stocks & Shares ISA Providers 2024 - Comparison Sheet

So based on some basic research, I would say InvestEngine looks good, so I’ll most likely use InvestEngine whilst keeping my Cash ISA elsewhere that has a good interest rate - ideally above 5%.

💹 Stock picking is an expensive hobby.

There’s this weird mentality on forums such as /r/wallstreetbets and /r/stocks where losing money through stock picking is worth it. And I really want to question that. One redditor wrote "That was a £2k lesson", and I’m thinking: Like what do you mean, $2000 loss is a lesson? 

Everywhere you look, you see how difficult it is for professionals to beat the market, but at least hedge fund managers get a salary and a % of their clients’ portfolios. On the other hand, being an average joe on a normal salary, you’re losing your own money with significantly less upside for free.

Let’s quantify a realistic scenario to express my point here with a simple question.

Is losing £2000 from £20000 invested worth the opportunity to gain £4000?

My answer. No. That’s a terrible risk profile.

This guy picks stocks for fun - Portfolio Update: Revamping My Fun Portfolio 

Even your favourite finance influencer sees stock picking as a “hobby”. But to me that’s an expensive and irrational hobby. Especially if you ‘re investing 700k of your grandmother’s inheritance into a dying tech stock called Intel.

💷My hard and fast rules for money management

I’m a self declared world class saver. I genuinely don’t believe there’s anyone more frugal than me in all of our social circles. And I’ve never really shared how I’ve managed to save money all my life with no help from my parents. So I’ve got some quick tips for anyone that cares.

• No trainers over £100

I only make exceptions for specialist sports like football boots or running. Even then I’m super hesitant.

• No lunch over £5

Lunch is the most pointless meal in the day and if I had the willpower I would skip it but as a gym bro, these gains need fuel. I don’t know what I’ll do once the Tesco/Sainsbury Meal Deal exceeds £5.

• Inflation doesn't mean I must spend more.

Inflation isn’t an excuse to justify £20 takeaways, £5 coffees or £12 street market lunch meals. I am one of the many consumers fighting back against GREEDflation and Starbucks and McDonalds are feeling it (alongside the boycott which investors refuse to acknowledge).

• Add 20% to uncertain costs especially big purchases like holidays

A holiday isn’t just flights, accommodation and daytime spending. There’s airport parking, logistics, holiday shopping, souvenirs, itinerary activities, tipping fees, service charges, local taxes, additional fees and more. So if a holiday cost £500, put aside £600 to make up for all the additional costs along the way.

• Round up to the nearest £1, £10, £100

A new iPhone isn’t £959. It’s £1000.

A new pair of jeans isn’t £42. It’s £50.

A takeaway isn’t £15. It’s 20.

You get my drift?

• Don’t overspend on dinner

Each home meal is never more than £5. This is why you never find me shopping in M&S or Waitrose.

Each takeaway is never more than £10. That’s why I always collect my takeaways. Uber Eats ain’t getting a penny from me in service or delivery fees! And Dominos only sees me if I’m doing a collection for a special offer. 

• Every Amazon order, sleep on it.

Amazon.com has made it too easy to order online so never place an order the same day, the item enters your basket. Sleep on it and see if you still need it the next day or week if it can wait. In my case, I regularly have things in my Amazon basket for weeks on end, only to eventually remove them. Showing that I never needed them in the first place.

💹 Are ETFs and Index Funds inflating the market?

This podcast has added additional fuel to my scepticism towards the idea that Index Funds will continue to deliver above inflation returns for the rest of my lifetime. The idea is that if everyone is invested in the stock market via Index Funds then there’s not even price discovery to ensure stocks given accurate valuations. It’s an interesting discussion above my pay grade. - Michael Green: Market Efficiency Is Not The Question | Rational Reminder 302

There’s increasing noise to suggest that AI has a serious monetization problem and from a valuation standpoint has already peaked. So what’s next? Apparently Biotech - No1 Finance Author: Don’t Miss This BIG Opportunity! It’ll Create Trillions Of Wealth | Andrew Craig 

✍🏿Quote of the Week 

“During hype cycles (just like with the dotcom boom), people tend to overestimate the change that can happen in one year and underestimate the change that can occur in ten years ”

― Roy Amara