Encourage discussion in the discuss comment section, alternatively please reach out to me on twitter @corriedotdev Not financial advice but an opinion piece and should be taken as such.
The safest option is to invest into an index tracker fund such as the S&P 500 and get on average 5-10% roi each year tax free if using an S&S ISA. Vanguard will do all this for you in their ISA but don’t do that, do it yourself. Vanguard even have a tracker on most brokerages.. I prefer more risk, more variation and understanding how companies operate so prefer to target less than 3 investments at once in order to intimately understand the business or service.
Mainly the objective of this post is to share the process of understanding how companies work and how you can invest in others companies. There are lessons from starting your own that transcend just running a company, it allows you to invest in other companies better.
Your own personal development will improve your output of work in business, so there is a disconnect between reality if you cant progress on your personal projects alongside. It should be encouraged. So lets change that👌
It is either an asset or a liability. If its a liability don’t get it, you don’t need it.
Knowledge is an asset, if that new laptop will support your understanding of architectures and help you learn its an asset. If that new pair of shoes is just calling you but you have shoes its a liability. People are liabilities, breakdown everything and you will see what adds value to your life both financially and intrinsically. This was discussed more in the book “Rich Dad Poor Dad.”
Start your own company
It costs £12 in the UK. You can then start researching what is a companies responsibilities. It is an invisible entity, it has a bank, accounting duties.. even parents in the form of directors. Everything a living person has a company has, including legalities.
I recommend doing your own accounting, using software like Crunch you become familiar with what can be expensed. You have a £5 allowance for food each day which is tax deductible when at clients workplaces. The use of your own hardware can be claimed or if the hardware is used exclusively for the company, you can also claim this as an expense. Your miles in your own car can be as well for essential travel to clients. Internet.. anything you need to make money in your company is an expense. It improves and contributes to the growth of the company, you need to reinvest as a priority. This is a great indicator of a company looking to grow, and something to look for the stock market.
In relation to your company, reinvest everything into this passion or interest before investing in someone elses.
Working class loop looks something like
- Company hires you - you are working as an employee
- You save your money into a bank account - maybe like 2% interest in ISA
- Bank reinvests your money into a company - loop back to 1 when you change jobs
You are being taken advantage of at each step of the game.
Step 1 you are providing such value to a company that they make money off you. Why not make as much dollar to value YOU add as possible? Cut them out.
Step 2 unless exposed to other investing opportunities it is standard for people to just use the ISA from the bank you have you direct debit in. 2% interest? Inflation? .. not ideal. That is the biggest lesson in this entire system, you can work for another company and have a happy life, but invest your money smarter.
You will need to file a confirmation statement every year to let HMRC know if the company is trading still 12 months later or if it is Dormant, where the company inst dissolved but not actively trading. Also your accounting needs to be filed every year before 6th April, unless you have a partial year in which you can carry over to the next year if its only been a few months or file a partial year accounts.
You pay yourself as a director of your company in the form of PAYE and dividends. Your investments in the ISA account are also tax free, so sell a share or two for a holiday etc.
SIPS - Self-Invested Personal Pension
(I don’t have a pension but if I did this is what I would do) PAYE is pay-as-you-earn and what a standard pay check looks like. You also have your pension, national insurance contributions (possibly more “benefits” like car reduction) taken off your paycheck so its always less. Notice how much your pension comes out? The best hack for this is to have your own company contribute to a SIPS pension fund, where YOU control the pension contributions. You cant touch this money until retirement but at least you are in control of your investments. I however do not have a pension, maybe a few hundred from various jobs but if I am in a situation where I need or want my pension money I have been playing the game wrong and not living the life I want so whats the point. However SIPPS allows your “employer” to match your pension contribution tax free so absolutely consider this if you have your own company.
Debit accounts have just have bare minimum (apart from company where you need to have enough to pay the taxes due), why would you want fiat currency.. its just useless, i cant make money from it sitting in my account and its vulnerable to exploitation. A credit card is your buffer between your business bank account and your investments. If you need something there is a process to get your money from your business. Firstly need to have a minutes meeting and establish how much dividend is being taken out from your in profit company (if not in profit it can be an ‘illegal’ dividend), it is distributed proportionate to your % owned in the company. As the only director and employee I get 100% of the dividend. Tax for dividends change, but HMRC have a great step by step. Honestly HMRC system is bloody great, it makes giving them money and the correct amount a breeze (although frequent.)
- You do not pay tax on any dividend income that falls within your Personal Allowance (the amount of income you can earn each year without paying tax). 2022 is £2000
- You also get a dividend allowance each year. You only pay tax on any dividend income above the dividend allowance.
- You do not pay tax on dividends from shares in an ISA.
So even if you only have a dividend of £2000, you’re still getting 2k tax free! How cool.
|Tax Band||Rate over allowance|
So you are paying yourself in dividends and your PAYE is only your tax free allowance in 2022/23 it is £12,570. This keeps national insurance contributions to as little as possible.
Dollar cost averaging is the way to do it. If you complete a tax return, you do not need to declare any ISA interest, income or capital gains on it.
S&S ISA - Stocks & Shares Individual Savings Account
ISA’s are the best thing about this entire thing. Better yet, you can trade your money in the market without letting the bank do it and charge you for the privilege! Fuck that! Find a broker by googling “UK Stock and Share ISA Broker” trading212 or ig.com or e-toro. Give them a search.
You can only have one ISA so if you currently have one and want to transfer to an S&S ISA you actually can do this, however you need to contact your bank and new broker, file some forms for evidence and you’re good. This wouldn’t usually be an issue but there is a £20,000 deposit cap on your ISA every year. Meaning if you wanted to put in £20,001 in the 2022/23 tax year you physically cannot do that. So if you put money into your ISA don’t take it out unless you really need that money, as the money has already been accounted for.
If you deposit 10k and take out 10k you can only put 10k back into the account until the next tax year comes around.
Any money you make from your investments is tax free in the ISA. So you work for your company to get capital fast and smart. Then invest your money into larger companies and live off the returns! Its sick, the world looks different once you achieve it. Its not easy but its worth it.
A diverse portfolio is healthy, you don’t want all your eggs in one basket. However the conviction I have for my investments is good just now that I don’t do crypto but enjoy researching and following its story. Explore with cryto, understand how it works and how staking your coin to make passive income is actually a smart way to make passive income each month.
You could set up a stocks and shares isa where you invest in companies that provide dividends frequently known as “Dividend stocks.” Not all companies give dividends so your account only increases if the stock goes up, $APPL was a good one along with $MSFT from memory. Its nice getting paid from a large company like that for doing nothing other than investing. These companies are blue chip stocks / value stocks but not going to get rapid % roi so I avoid that. I want to make a lot of money fast with minimal but some risk. For this there are fundamentals to follow which allow you to stay convicted to your investment.
Look outward. What industries are growing? What companies are working on this?
Not even god himself can beat dollar cost averaging. You want to beat the index or you should just invest in the index, so find a company you like, invest when you can. Get conviction from understanding the companies balance sheet, how are they expanding, is their mission statement valid.
You want to beat the index or you should just invest in the index.
Estimate your future portfolio by using this calculator or formula. Help find conviction in your decisions by looking at what your portfolio could look like in x years time if you don’t sell and dollar cost average.
Profit (P) = ( (SP * NS) - SC ) - ( (BP * NS) + BC )
NS = number of shares, SP = selling price per share BP = buying price per share SC = selling commission BC = buying commission
https://goodcalculators.com/stock-calculator/ © 2015-2022 goodcalculators.com
We can’t predict the future but we can get pretty good at it. Superforcasters is a great read and turns out pretty accurate… Developing a regression algorithm using AI for the last 10 years of $TSLA stock ALSO seems pretty accurate. Stonks go up. Below are some fundamental concepts you should understand to quickly see what patterns exist and where you can capitalize on them when getting to understand and become familiar with a stock. It takes time to recognise what a company is doing in the stock, hence why I only invest in one as I cant fully immerse myself into news for many companies.
I don’t like day trading that much, its not that safe but these allow you to get intimate with your stock of choice and maybe can start seeing patterns after market shifts.
- Squeeze (gamma squeeze) «« my favorite for seeing a potential move
- Head and shoulders
8 Principle base pattern
- Solid cup with handle
- Double bottom
- Flat base
- Ascending base
- Base on base
- Tight flag
- Ipo base
Check out the following links for inspiration and further reading about this topic