I’m a 30 something guy with an interest in finance and in particular wealth creation, especially of the passive income kind. It’s not that I don’t want to work hard for the wealth i generate (else I wouldn’t work in the finance industry – more on this below) but I find money earned outside of my monthly pay check much more rewarding. If i can generate this extra income passively then it pleases me even more.
What Is The Money Tree?
The money tree is simply metaphorical speak for my investment portfolio.
I currently have a good job that pays well, however it’s not what I want to do when I grow up. My solution to this problem is to invest my hard earned cash as wisely as I can until such a point I (and my family obviously) can live off the returns. Some like to call this reaching ‘financial independence’ but I prefer a horticultural analogy.
I like to think of my investment portfolio as a tree. Hopefully if I feed the tree (in the form of additional capital investments) over time it will grow steadily over the years into a mighty oak. As any gardener knows, any tree needs feeding (read additional investment), regular pruning (read reallocating resources) and training (read diversification, good asset allocation) if it is to thrive.
Assuming I look after the tree well, hopefully at some point in the future I’ll be able to live of its fruits. Of course when I am able to do this depends on both how much fruit the tree produces and how much fruit I need to survive!
The Day Job
Well my career has kind of stumbled along for the last 10-15 years and somehow I’ve ended up working in an investment bank. Before you dismiss me as a fat cat and spit at your screen in disgust, you need to know that i’m not one of the [very] few that makes extortionate amounts of money (allegedly) from other peoples misery.
While I know my wage is well above the national average, it’s not huge by any means compared to many other people working in finance, football or so called entertainment.
Working in Finance is not something I set out to be ‘when i grew up’ but I suppose it rather suits my keen interest in money matters along with my low risk/frugal attitude to financial risk. I’m far too cautious to be some flash harry trader so the relatively calmer backwaters of risk management and regulatory interface suit my skills rather well.
My Investments of Choice
Does this day job provide me with any insights or hot tips when it comes to my investments? No (well actually there are a few). Firstly that would most likely be illegal. Secondly, I’m not about investing in OTC derivatives or structured products.
Instead I like to stick to simple products, sound companies, broad concepts and obvious trends. I like dividends, love cash flow and always seek growth if I can. I try to seek out long, slow and steady performance over overnight riches.
Working in banking I’ve witnessed first hand the long term destruction that certain investments can do within a portfolio. At the day job we call them ‘legacy holdings’. In my portfolio I call them froth (a simple term to describe what’s left over after a bubble). The lesson I’ve learnt from this is to only invest in things I truly understand and not to always chase the highest available returns.
Working where I do often hinders my investing. Any trading activity I do has to be approved by management and compliance in advance, and depending on the asset I am faced with a big fat policy’s worth of minimum holding periods (typically 30-60 days as a minimum) meaning I can’t often react quickly to sudden market moves. Actual I see this as an advantage as it forces me to invest with a long time horizon and to avoid short term speculation.
I’ve been lucky enough to develop a small property portfolio over the years. Excluding the family home we live in, we (my wife and I) have 3 properties that we rent out on a buy to let basis. As a result of this bricks and mortar exposure I’m naturally a keen watcher of interest rates. Some of the articles on this blog will focus on the maintenance of this property ‘portfolio’ and the issues or decisions faced along the way.
The future income this property produces forms a key part of the Money Tree. Al of my property investments were made with no thought about making future capital gains. These are irrelevant to me because I take a more conservative income focused approach to property investment. The concept of getting someone else to pay off my mortgage and leave me with an income producing asset after 20 years is what I focus on.
A few years ago I kind of stumbled into the internet marketing industry. A basic (and very poor) hobby site I set up for a joke suddenly started making me a few cents each month. With hardly any upkeep, I became fascinated by the fact that I was quite literally making money in my sleep with very little to no work involved. With a little effort I was suddenly pulling in a few hundred £ each month.
Before I knew it (well after a fair bit of reading, writing and html tinkering) I was running a blog network and was funnelling this extra cash into a Ltd company. This site is not intended to be another income earner in this blog network. Instead it is a genuine attempt to distil my thoughts on money matters and share some ideas with other like minded folk.
Increasing ones wealth is a pretty simple business. To do it, all you need to do is increase the difference between your income and your expenses (I’m assuming here that your income is > your current expenses). So there are two variables at play in this wealth game: income and expenses.
So far I’ve mainly talked about generating more income. However having tartan blood running through my veins means that not only do I like porridge and whiskey, but I can also appreciate the elegance of frugality. I’m equally happy making my existing pounds go further as I am finding ways to make more pounds. As a result you can probably expect a fair amount of discussion on ways to make those pounds buy me more stuff.
Slowly Grows It
The down side about gardening as an activity is that there is no instant gratification. Horticulture, much like investing, is an activity that tends to reward the patient and punish the impatient. Like trees, some investment portfolios grow much quicker than others (think Conifers versus Oaks). However you don’t see to many 100 year old Conifer trees around.
I’m looking for some steady, solid growth from my portfolio mixed in with a good degree of longevity. In tree terms I’d like to think the portfolio has the robustness of a hard wood combined with the productivity of a fruit tree – I’ll settle for a trusty old Bramley apple tree.