David Meckin - How to Grow Your Own Money: The no-nonsense guide for the Independent Investor

HOW TO GROW YOUR OWN MONEY

THE INEVITABLE (BUT IMPORTANT) DISCLAIMER

The contents of this book are for general use only and are not intended to address your specific personal circumstances. In particular, the information provided does not constitute any form of advice or recommendation by the publisher or the author and is not intended to be relied on when making or refraining from making any investment decisions. The value of investments can go down as well as up and favorable results are never assured, regardless of the techniques used, nor are any guarantees given. You should exercise caution when making any investment decision and any such decisions made by you are at your sole risk and responsibility.

The no-nonsense guide
for the independent investor

DAVID MECKIN

First published by
Nicholas Brealey Publishing in 2014

www.nicholasbrealey.com
www.insight-investing.com

David Meckin 2014
The right of David Meckin to be identified as the author
of this work has been asserted in accordance with the
Copyright, Designs and Patents Act 1988.

ISBN: 978-1-85788-614-6
eISBN: 978-1-47364-470-0

British Library Cataloguing in Publication Data
A catalogue record for this book is available from the
British Library.

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recording and/or otherwise without the prior written
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Printed in Finland by WS Bookwell.

Making your own investment decisions is the key to maximizing your returns.

To be a successful investor all you need to understand are a few fundamental principles. Be wary of those who claim they know better.

Savings accounts, bonds, shares, and property.

A six-step process that will help maximize your returns and minimize your losses.

Savings accounts can help you win the fight against inflation.

Government and corporate bonds can provide better returns than savings accounts and are less risky than shares.

Understanding how businesses work and knowing how to interpret their trading results is an essential skill for anyone who aspires to invest in company shares.

Always check the price before you part with your money; overpaying for shares will damage your returns.

Fortunes have been made investing in property, but fortunes have been lost as well. To be a successful property investor you must understand how to manage the risks.

Investing is something you do, not something you dream about.

It was supposed to be another of those annual reviews with my financial adviser where he tells me my investments are doing fine, I sign a few forms, and then get back to work, but this day was to prove different. About ten years previously I had invested $100,000 in a managed fund and now wanted to access the cash to help finance a new business venture. You can imagine my surprise when I was told that $90,000 would be in my bank account within the next few weeks. This led to a conversation, somewhat incredulous on my part, that went along the following lines.

If I have got this right, in the space of ten years a professional fund manager has managed to turn $100,000 of my money into $90,000.

Regrettably, this fund has not done particularly well.

Youre telling me! Im assuming I havent had to pay any fees for this debacle?

Fees are always applicable, Im afraid; managing funds is a costly business.

What fees are we talking about here?

Well, we receive a fee for providing you with advice and for introducing your business; then theres the fund manager, who charges a fee for managing your money; then there are a wide variety of administrative costs such as dealing charges (those are the costs of buying and selling shares within the fund); also lets not forget...

Just wait a moment. Over the past ten years you have received a fee, the fund manager has received a fee, and various other parties have been imposing charges as well, so the only person worse off on the deal is me!

Keen to ascertain just how much I had been charged over the previous few years (and angry with myself for not having fathomed this out earlier), a little research on my part indicated that fees and expenses totaled somewhere in the region of $30,000. In other words, over the preceding ten years I had paid financial advisers, fund managers, and various other parties $30,000 to turn $100,000 of my money into $90,000. That is the difference between managing money and growing money.

The financial services sector offers to manage your money for you, and will charge you handsomely to do it, but that is not what investors want all investors are interested in is seeing their money grow. Ironically, that is the one service the financial services sector will not promise to deliver; if it did, I would have been due a substantial refund. Fund managers just cannot lose. They are paid a basic salary, plus they are incentivized with a bonus if they can improve short-term profits, which encourages risk-taking. If a fund manager is looking after your money and loses it all, they still get paid. If they take risks with your money, providing short-term wins (possibly at the expense of long-term gains), they earn even more. That is when it dawned on me:

Nobody cares more about your money than you do!

These few words were about to change the way I approached investing for ever that statement became my rallying cry and my mantra.

I decided it was time to take control it was time to become an independent investor. Over the next few weeks I converted my various funds to cash and started out on a journey that has turned out to be one of the most stimulating, and ultimately profitable, of my life; and I dont mean purely in terms of money. When I talk about control, I dont only mean taking control of your finances, I mean taking control of your life. The whole point of investing is to help you attain the lifestyle you aspire to. Whether its driving that dream car, living in that idyllic country cottage, or being able to travel and experience the joys of the world, investing can turn fantasy into reality.

And yet, despite the potential rewards, many investors feel powerless, particularly when they have a large sum to invest. They feel that they dont have the time, or the expertise, to invest independently, and that they have no alternative but to use the services of fund managers. The problem is, once they hand over their money, they are at the mercy of these individuals (and their fees). Maybe their fund will grow, maybe it wont they themselves have very little control.

In this book we are going to discover how you can take back control how you can become an independent investor and grow your own money.

This seems like an appropriate juncture to reveal a little about my background. I spent the first few years of my working life climbing the corporate ladder, ultimately achieving the position of finance director of a multinational group, but it had always been my goal to set up my own business. One thing I noticed in every company I worked for was the gulf that seemed to exist between the finance people and the managers who were running the business. As a result, the managers endeavored to steer well clear of financial issues wherever possible.