How to Invest £100 a Month: Sammie Ellard-King’s UK Beginner Investing Guide

This transcript is auto-generated and lightly edited for readability, it may contain errors.

Host: Sammie Ellard-King (Up The Gains). Solo episode.

[00:00] Sammie: Right, so you’ve got your hundred quid, you’ve got your tongue, you need to put it to work instead of letting it rot in your current account. And if that’s you, well then good, we are in the right place, because by the end of this podcast you’re gonna know exactly what to do with it. You’re gonna be able to go and do it yourself today. There’s no jargon in this, there’s no scary charts. I’m gonna explain it to you exactly how I would have wanted to hear it when I needed to get started investing myself. And if you’re expecting me to go “this time next year, we’ll be millionaires, Rodney,” then sorry, this is the wrong video, okay, so that is not what we are doing today. I’m 36 years old, I know, tough paper round, look at me. And I went from £24,000 in debt to a multi-six figure net worth in just over a decade. And I did it mostly with dead boring, steady investing that anyone can copy, including you watching or listening to this right now.

[00:54] Sammie: So before we get started on the Money Gains podcast, I just want to say what actually made me invest, because it’s not this thing that we all know about, right? It’s quite foreign and alien to a lot of the UK, we weren’t taught this stuff in school. But I was in debt and I got myself back to zero, and I had a choice at that point. I wanted to try and send some money out to start bringing stuff in. I had a growth mindset, I got out of my debt in 18 months, I was bringing in side hustles, I had this money that was coming in, and I wanted to use some of it. And as I started to learn about this, I read book after book after book, I realised it was actually a lot more simple than what is made out in the movies or online or whatever we read in the newspapers on a day-to-day basis. It’s actually really, really simple. So, what are we going to cover today?

[01:39] Sammie: We are going to cover if £100 is even worth it, what compounding actually does to that money, the bits to sort out before you start, how the stock market actually works, what happens in a crash, the accounts to use, and then the simple strategy that I would use if I was you and getting started today. So stick the kettle on and let’s go through it properly, start to finish, on this episode of the Money Gains podcast. All right, so the first one, why that £100 even matters. Now I know some of you listening to this or watching this right now are going, “£100, what’s even the point? That is absolutely nothing.” And that right there is the exact thinking that keeps people skint their whole life, because it was never about the 100 quid, guys. It’s about getting started, and then not stopping. Consistency.

[02:29] Sammie: My sister started with 50 quid. My girlfriend started with 50 quid and then crept it up to 250 quid. And over 12 years, they’re both sitting on thousands of pounds that they would have never had. Neither of them are city traders, they just got themselves going off the starting line and kept going, and they added to it as they grew. £100 can be the starting point, right? And if it’s not £100 for you and it’s £10 or it’s £20, that’s not going to matter, we can literally take away from this entire podcast exactly what you need to do. So why does this actually matter, right, for my girlfriend and my sister? Because neither of them came from money, and now they’re in a position where they can bat off large parts of what life can throw at them. It’s given them choice and freedom and options which weren’t necessarily available to them. And neither of them had a clue, right?

[03:15] Sammie: And here’s the number that genuinely wound me up when I first saw it. Because according to the FCA, only about one in six UK adults have a stocks and shares ISA open, but one in three have a cash ISA. So most of this country is saving their money and not investing. The government have highlighted this as a problem, they are actively trying to push people into investing, because they understand that the problem with this is when you just save, over the course of history, inflation will eat it away. Now, it’s balanced at the moment, we’ve got roughly around 4% in interest rates, and roughly recorded figures, though personal inflation is very, very different, is roughly around about 3.5%, right? So technically, if it’s roughly around those points, your money is only growing by 0.5%.

[04:02] Sammie: But most periods in history, especially when we’ve had low interest rates over the past sort of 10-odd years, before the COVID crash kicked off, your money was losing value in a savings account. Now, prices in this country have roughly gone up around about 43% in the last decade, which means that if you had 100 quid sat in an account basically earning nothing at all (we’re talking a current account), it’s rather going to buy you around about 70-odd quid of stuff today. Your money is going backwards, and you can’t even see it happening. It’s not like this happens overnight, it’s just like a slow rug pull, and eventually that money is worth less. So just by starting with 100 pounds, doing what we’re about to go through today, you’re already ahead of most people in this country. Your first 100 pounds is you stepping over this starting line, and what matters is what it turns into, which is exactly what I’m going to show you next.

[04:53] Sammie: Because the numbers genuinely surprise people when I run through it. Now, we had Andrew Craig on the podcast the other year, I think it was, when he mentioned this, and he basically said that if you could learn compounding, you are better off than over 60% of this country. So let’s actually walk through it. So let’s say you put in £100 a month, right? We can very easily see that that turns into £1,200 a year as a contribution. And if we stick with that for 10 years, you’ve got £12,000 of your own money going in. 20 years is £24,000, and 30 years is £36,000. That is just your contributions, money out of your pocket into your investment account, right? Now here is where it gets interesting: when you invest that money, on average, it grows. Okay.

[05:39] Sammie: If we’re talking about it from investing from a total market perspective, and I will get onto that in a little bit, if there’s anything you want me to bring up again, please let me know and we will cover it off for you either in the comments below, just ask me the question, we are here to help. I’m going to use 7% for this, which is a very sensible, slightly conservative number to plan with. Okay. Some people will say a little bit less, but I think 7% is right about the benchmark here. It factors in inflation: when you look at the average stock market growth for what we’re going to be talking about today, it’s roughly 9 to 10%, so if you take off average inflation, roughly around about 7%, I think that’s fair. So the market’s done a little bit more than that, as we just mentioned, over the long run, but this is an average. Some years it’s up a lot, some years it’s down. And 7% just keeps us a little bit honest here.

[06:26] Sammie: So at 7%, that £12,000 that you put in over 10 years is worth £17,300. Okay, so you can see the growth that’s kicking in there, but it’s not huge at this point. And over 20 years, your £24,000 is worth £52,000 if we got that 7% on average a year, so it’s doubled now, right? Okay. And so over 30 years, that turns £36,000 into roughly £122,000. Now look at that: you put in £36,000, you end up with £122,000. That extra £86,000, you didn’t earn it, your money invested has earned it. That’s the thing that everyone bangs on about when they’re talking about compounding. And all it means is that your money is making money over time as it grows.

[07:15] Sammie: It’s compounding on top of each other, and then that money is making money of its own too. It’s very slow at the start because mostly at the beginning it’s your own cash, but every year it snowballs a little bit harder for you, right? That 10 grand, if you’ve got 10% say on 100,000 pounds, that’s 10,000 pounds, but 10% on a thousand pounds, well, that’s 100 pounds, it’s very different amounts. And when you’ve got larger amounts, it compounds in larger amounts if you carry on getting an average rate. Now, a quick rule that you can actually work this out from, it’s called the rule of 72. So you divide 72 by your yearly return, and that’s roughly how long your money takes to double. Now, at 7%, it’s roughly around every 10 years.

[08:02] Sammie: The real trick here isn’t being clever, it’s time, in case you hadn’t noticed. Time is the contributing factor. The longer we leave it, the more we have, the harder our snowball can roll down that hill and pick up more snow as it grows. Set it up and leave it, and come back in 30 years to potentially having £122,000. You would take that, wouldn’t you? Of course you would. Now, this is the one that I get every single time I do a video about these types of topics: “yes, but what about inflation?” Well, we’ve factored that in partially to the actual numbers that we’ve done here with that 7%, but if it’s a little bit larger, then yes, your money is going to be devalued by inflation. But I like to say to people, when they say this to me, would you prefer having £122,000 or zero? And just have a think about that.

[08:50] Sammie: It’s going to pay for things, it’s not going to be as good as what it is today, but it’s going to be very, very effective. If you take into account as well that the average retirement pot in the UK, depending on where you look and the studies, it’s roughly between around £80,000 to £110,000, £122,000 is above that. So we’ve now got money that we can potentially use later on down the line. Now, when this actually clicked for me and I started seeing it in real time happening to me, you know, it’s brutal at the beginning, because you’re putting money in and you’re thinking, “oh, I’ve made 36 quid this month,” you’re like, yay. But over time, that’s really kicked off for me. I’ve passed that six-figure mark, last year I earned more than the UK average salary, which is just nuts to even say. And yes, it was a fantastic year, but that money is real.

[09:39] Sammie: I can actually, if I want to, sell that and withdraw it, and it’s mine, it’s made money. So it really does have power, but you need patience and you need time. Now, there are some contributing factors to sort out before you invest your money, and this is so key, and I want to go through this, because you might not be ready to invest yet, and that’s just a simple fact, guys. Before you chuck in a penny, we want to sort these things out, please don’t skip these, because they’re the difference between this working and falling over later on, okay? Now, the first one is get yourself an emergency fund, guys. It is honestly the most liberating, the most powerful thing. We did a workshop the other week, and a lady jumped on the call and she said to me, “hey Sammie, I’ve watched a few of your videos and I have got my emergency fund together.”

[10:27] Sammie: And I said, “how do you feel?” And she said, “absolutely liberating.” Do you know why? Because it’s given her choice, it’s given her options, it’s given her freedom at that point. But it has a massive, massive factor when it comes to investing: it is a safety blanket for your money, for that rainy day when it does eventually rain on you. And trust me, I’ve been there, last year it’s more than rained, it bloody poured on top of me last year. And I’m not looking for a sob story, it’s just facts. But without my emergency fund, I’d have been in trouble, and I probably would have had to have sold some of my investments. Now, the real power of that emergency fund is it makes you a better investor. Because when you’ve got three to six months of bills tucked away in an easy access savings account or a cash ISA, for example, you don’t need the money that you’ve invested yet.

[11:13] Sammie: Potentially, right? If that problem is way bigger than that, then yes, you might need to go and get it, but then you can, and that’s the power of what we’re doing today. But when you don’t need it, you don’t need to touch it. You can potentially watch the market drop a little bit, by 20% here or there or 10% here and there, and you just shrug because what you’ve learned today, you go, “okay, yeah, no, I get it, this is part of the game.” The people who panic and sell at the bottom are almost always the ones who needed that money. So the emergency fund isn’t there to earn you anything, it’s there to stop you making the emotional decisions that wreck this whole thing. And it matters because the FCA also reckoned one in ten adults have no savings at all. And another, sorry, and another one in five have less than a thousand pounds. So most people are one surprise bill away from being forced to sell, or just not being able to pay that in the first place.

[12:04] Sammie: So we want to sort this first. Now, look, I did invest, and I have also had friends who have had to pull money out at bad moments simply because they needed it. I have had to go in, when I was a little bit, you know, trying to figure out who the hell I was, getting started, and I had to take a couple of grand out, and I really regret doing that. But I didn’t actually have a big enough emergency fund set aside. This was when I was first kicking off and starting out, roughly about 28, 29, and it really annoyed me. But nowadays, I just keep it locked away, it’s only there when I need it. And in fact, I actually have a joint one with my partner as well, so I have a personal one and an emergency fund, which is a bit smaller, with me and my partner, and we are trying to grow that actively back up at the moment. Now, second thing is, and this is a big one, right, is get aware of your money. Because if I asked you to find 100 quid right now and you said, “well, look, I haven’t got it,” I would gently push back on that a touch.

[12:57] Sammie: Because for most people, it’s not that they can’t afford it, it’s that they can’t see where it’s going. And Citizens Advice has said that people are wasting around £170 a year on subscriptions, up to £470, up to £1,000 as a family of four on wasted food. You are paying for this, right? So we can try and look at our own spending and just get a little bit of awareness around where our money is going. Because in today’s day and age, we are buying things on impulse, it’s roughly around £800 on impulse spending in the UK alone. So if we cut some of these things down here and there, and I’m not saying live on baked beans and shut yourself off in a dark room, that is not what I’m saying, you can find some money within your spending, I guarantee it. And even if it’s a tenner, it will end up adding up over time.

[13:44] Sammie: It’s about getting started with this. So, what I actually built recently is something called Gains App, where you can connect all of your banks up to it, and that’s basically so you can see all of your spending across all of your different accounts. You can track things, you can set up goals, you can track your net worth from your investments as well, and it will help you find that money. And another thing is as well, is with your spending, you can earn money back from something called cashback. And let’s say you’re putting your groceries through Gains App, and your B&Q trips and your Curry’s new TV for the World Cup or whatever that might well be, that 25 to 50 quid a month that you can earn back from cashback, which you definitely, definitely can if you are meticulous with it, can be the difference, right? It can top up your investing. So then you only need to find a little bit extra from your spending, and if you already can do that £100, well then you can potentially add even more to your investments as you grow.

[14:34] Sammie: So it has a double-edged sword, it’s not just for the people who can’t afford the £100, it can help you go even faster. I use side hustles, I use cashback to funnel into my investments, because it just helps me get to my goals a lot faster. So download Gains App, it’s totally free to get started and connect your first bank, there’s a link in the description below. Then we want to basically clear any pricey debt first. Now I am covering this off because it’s more important than investing. A credit card charging you 24% is robbing you blind, guys, and basically paying it off is a guaranteed 24% return that no investment can touch, right? If you’re carrying this kind of debt, and I’m talking thousands of pounds on credit cards, I’m not talking about 100 quid on a 0% balance transfer card, you are trying to run the race with weights tied to your feet.

[15:20] Sammie: So cut them loose first. And the last one, only invest the money that you will not need for five years. Money for a house deposit, you know, next year, keep that in savings, guys, this is the long game money, right? We want to push it out over five years, potentially 10, 20, 30, 40 years, if you’re young enough right now. Now, the fun bit, let’s get to it: how the stock market actually works. So, what even is investing in the stock market? Honestly, it’s a lot simpler than people make out. When you invest into something, you’re buying a piece of a real company, so think of it like a piece of the pie. Actual businesses, the ones that you potentially use every single day. Now, you buy the share and you own that slice, and as it grows, hopefully over time, but it can also decrease in value if the company does poorly, that can make you money over the years, and your slice can grow with it.

[16:15] Sammie: Now, the stock market is just all of those companies, and there’s these prices of these companies bobbing up and down as people buy and sell it. It has a little bit of sentiment to it as well, so sometimes that’s why you see someone say that company is undervalued, because people have sold it more than they have bought it, but the company could potentially have carried on performing well, that’s an undervalued stock. And that’s it. You’re not gambling on squiggly lines here. If you invest like we’re going to go through today, you’re owning bits of the biggest businesses on the planet and letting the smartest people in the world do this work for you while you get on and live your life, or potentially focus on growing your income so you can have some more going into it. Now, the bit you need to be ready for is the crashes and the risk here, because there is risk when it comes to investing.

[17:03] Sammie: Because this is where most people get hurt, guys, and it’s never the way they think, right? The market goes down, not might, it will, and more than you might expect. JP Morgan’s data shows the US market falls roughly 14% on average at some point within any given calendar year. Every year, roughly 14% dip somewhere in there. And that’s not just in one day, it can be one day, but it could also be over a course of a few weeks. If the economy’s been bad or inflation’s kicked off, you know, there are so many factors, or someone invades somebody else, right, there are a multitude of factors that can make the stock market go down. And it can also be because there’s been a period of extreme greed, and so what goes up must come back down again. And yet, despite all of this, it still finishes the year up around about three out of every four years.

[17:53] Sammie: And since 1928, we’re talking about the US market in particular, this has ended up 73% positive most of that time, right? So 73% of the time, the markets ended the year in positive returns. So dips are extremely normal, they are the price of admission and they mostly sort themselves out. And the longer that you hold for, the better the odds get. Now, over one year, you’ve got roughly around about a three in four chance of being up, if we’re taking historical data as our metric here. Now, over 10 years, it’s more like nine out of 10. Now, that’s not bad, right? But here’s the mad one: there has never been a 20-year period where the US market has lost money, not one single 20-year period. So time doesn’t just grow your money, it shrinks your risk.

[18:41] Sammie: Even proper market crashes recover. In 2008, which was the big financial crisis, the market halved, and it took around about five and a half years to get back to a new high, where it came back to the levels that it was at before it dropped, right? Rough, yes, but it got there. And in 2020, when COVID happened, it dropped around about a third in a few weeks and was back to new highs in around about six months. These are extremely, extremely difficult to go through. My first big one was in 2018, I wish I was prepared for it, I wasn’t, and it can feel very different at the time. I went through it in COVID as well, and you feel like the world’s ending. And that’s what I’ll say about stock market crashes: each one feels extremely, extremely different, and you have to kind of remember your training, which we’re going through today, to kind of stomach it out.

[19:34] Sammie: Because each one they’ll say, “oh, the world’s going to end,” the press will do this in droves. If you look at it over the year, I think it’s roughly 91% of stock market stories are based on negativity. So eventually, if you let them get into your brain, you will do something bad and emotional during those periods. But when we come back to this, remember your training, the stock market has recovered 100% of the time. And it might take a year, and it might take 10, that’s the game that we play. But when we do something called dollar cost averaging, we’re investing all of the time along the way, especially if we’ve got a longer time horizon here, I’m talking 10, 20 years, you might actually look at a stock market crash as beneficial to you. And that’s certainly how I approach them now. I actually would quite like the stocks that I buy to be on a bit of a discount, because I’m 36 and I’m not going to need this money potentially for 10, 20, 30 years from now.

[20:25] Sammie: Now, both times during those two crashes which I mentioned, the people who sat tight came out absolutely fine. The people who panicked and sold locked in those losses. So you only get those losses when you lock in the sale of whatever you’ve bought. And this is exactly why I told you to sort that emergency fund out, because if you don’t need the money at that point, you can sit through any of this without flinching. It’s also why I tell beginners to start small, because a 10% drop on 100 pounds is a tenner, you’re okay with that at that point, right? But if you put in your entire life savings on day one, then, you know, if it drops, let’s say you put in 10 grand, then that 10% drop is a grand, now you’re telling me that’s going to feel a bit different. I know it would, I’ve been there, trust me. I’ve watched my portfolio in a year literally tank by 20,000, 30,000 pounds.

[21:14] Sammie: And it doesn’t feel nice looking at that, it feels very, very different, it feels very, very real. But you have to remember your training at this point. So start small, learn how it feels, and I think it’s really important, just check, you know, how it’s performing this month. Okay, well, this happened in the world’s economy, and look, I got a dip in my portfolio this month, oh, interesting, that’s what happens when that happens. Now, every time it’s a little bit different, but you’ll start to see little patterns emerging, and so when you see something kick off on the news, you’re not like, “oh my god, oh my god, it’s gonna be the end, it’s gonna be the end.” And what I’d also say to this as well is that if the stock market ever goes to zero, we’re not gonna be worried about our investments at all, we’re gonna be worried about how we can nick a tin of baked beans out of someone’s larder down the road, you know, marching around with our sticks, because the world will be coming to a severe end at that point, okay?

[22:09] Sammie: If that ever happens, trust me on that, we’ll be in absolute Mad Max turmoil at that point, you won’t be worried about your stock portfolio, okay? So, the account that you want when you’re doing this. Now, I love talking about stocks and shares ISAs, and for me, this is where a large portion of my money actually lives. Now, for most people in the UK, a stocks and shares ISA is a great place to start. Now, loads of people get confused about this and they think that the ISA is the actual investment itself, it’s not. The ISA is the account that you wrap the money in. So what I like to liken this to is: think of it like your ISA is a shopping basket and the stock market is a supermarket. You take your basket in and you fill it up with what you want, and that’s where your stuff lives. So when you’re buying the investment, you put it in the basket and the basket keeps it, the investments are the shopping, the ISA is just the basket holding it.

[22:58] Sammie: Now, here’s how I want you to think about your money, because it comes in two types. For me, you’ve got slow pounds and then you’ve got fast pounds. And what I liken this to is, your slow pounds are basically your pension, right? They’re slow, not because they grow slowly, but because you can’t get at them, you can’t get them, right? You can’t go and withdraw your pension unless you’re of pension age. So they’re locked away until you’re 55, rising to 57 in 2028, so basically until you’re nearly 60, because it’s probably going to go up again by the time that we actually get there. And I’m saying “we,” you know, you might be in your 40s, 50s, you might not, but if you’re in your 30s like me, it’s risen already. Could it rise again? Potentially, right? So honestly, though, with pensions, that’s a good thing, because you can’t actually, you know, fiddle with them, you could potentially sell them if you control your own pension, but realistically, they’re just sitting there growing for you over the long term.

[23:48] Sammie: And then you’ve got your fast pounds, and I liken this to the stocks and shares ISA, because money can go in and you can also go and get it if you actually need it. And for what we’re doing today, your first 100 pounds, fast pounds are exactly what we want, we want flexible pounds here. Now, I’m just assuming that you might have your pension sorted out, and potentially you might want to allocate this to your pension if you’d prefer slow pounds over fast pounds. I’m not a financial advisor, I’m not giving you financial advice, but I’m going to focus on the stocks and shares ISA today. So I want to keep this flexible for us, just so we have choice at this point, and I think it’s important when you first get started. So a stocks and shares ISA is the home for our £100 today. The reason it’s so good for me is everything you make inside of it is completely tax-free forever.

[24:36] Sammie: So if that pot does grow to that £122k, you keep the lot, the tax man doesn’t get a sniff. Now you can put up to £20,000 a year in, and you’ve got to be 18 to open one. Now, £100 a month is only £1,200 of that, so you’ve got loads of other room, which you can contribute to your cash ISA or even a Lifetime ISA as well, that’s the balance that you have across your ISAs. And opening one is genuinely so easy, five minutes on your phone, you just need your ID and your bank details and your national insurance number. Honestly, opening an ISA today is so, so simple. 20 years ago, you’d be picking up the phone and trying to phone up a stockbroker to buy tickets, you know, to buy a stock, sorry, or a share, and that’s an absolute nightmare.

[25:22] Sammie: They’d charge you a fortune. These days, you need a mobile phone. You can pick a platform that is FCA regulated and FSCS protected, that bit keeps your money safe if the company goes under, up to the value of £120,000 per stocks and shares ISA, because you can have multiple stocks and shares ISAs. So you’re looking for low fees and something called fractional shares, so your whole hundred pounds gets invested. Now, for me with this, one of the best platforms that I’ve ever used, I personally keep my ISA, I moved my ISA from Hargreaves Lansdown down to Trading 212, because they have low fees, the app is brilliant, super easy to use, they have social investing, they have auto investing into something called Pies. And you can get yourself something called a free fractional share, worth up to 100 pounds, when you just deposit one pound into your account.

[26:09] Sammie: You can use the code MGP for Money Gains Podcast to do that, it’s also on your screen if you want to scan it, but if you’re listening, there is a link in the description below. That’s £100, up to £100, free fractional share when you invest your first pound. Okay, so it’s a brilliant way to get started. And because I said you can have multiple stocks and shares ISAs, you can make use of these offers. And if you like the platform, which I’m sure you will with Trading 212, because it gets praised for its social investing, then you can carry on using it from there. So let’s explain stocks, funds, and ETFs in plain English for you guys. Right, so you’ve got your basket, what do you actually put in it? And this is where most people get overwhelmed. So let’s keep things very simple with a little bit of chocolate and a single stock.

[26:56] Sammie: For me, it’s just like a Mars bar. So let’s say that Mars bar is Apple stock, lovely, everyone wants a Mars bar, but if Apple has a bad year and everyone stops buying MacBooks and iPhones, we’ve seen these things happen before, businesses go out of fashion eventually, it’s just the case, right? That’s your whole investment having a very, very bad year, because you put all your eggs in that one single chocolate, so to speak, right? I’m not the Easter bunny, guys, all right. But look, when I did this, I literally thought I was Warren Buffett when I first started, I was picking stocks here and there, I had a few go really well, and then I had ones which didn’t, and that absolutely slapped me round the face. My mate Dave down the pub would tell me stuff, and I’d be like, “yeah, what a great idea,” and it would go up and then it would go to zero, and I’d be like, “what am I doing here?”

[27:43] Sammie: Like, this isn’t a good strategy. And then I found something called a fund. Now, a fund is like a box of Celebrations, so it’s lots of these chocolates inside of one single investment. So if the Bounty’s playing up, and let’s be honest, nobody’s fighting over the Bounty, even though I do love myself a little Bounty, so I’m very happy when there’s 20 Bounties left in the Celebrations box at Christmas. You’ve got the Maltesers in there as well, and the Galaxy. So if the Bounty’s playing up, one dud doesn’t ruin the box if the others are doing okay. And then there’s something called an ETF, right? So an ETF is a type of fund, but this you can buy and sell like a share. So a fund, potentially if it’s like a mutual fund, you’ll put the money in and the fund manager would go and buy the shares and you would get the value of that fund.

[28:31] Sammie: But an ETF trades like a share on the stock market, but it’s still a fund, so there’s baskets of stocks inside of it, just like the Celebrations. Now, most of the time, in today’s day and age, we will buy something called an ETF. You can buy and sell them very easily, and usually, depending on the type, they are very nice and cheap. And most of them track something called an index. So there’s something called an active fund, where a fund manager will pick their own investments inside of it, but an index is just a list of companies. Now, you may have heard of a few, if you’re from the UK watching this, then you have something called the FTSE, you’ve probably seen it on the news in the bottom right-hand corner with the green and red lines if it’s not doing too well, right? So the FTSE 100 is the top 100 companies in the UK.

[29:18] Sammie: The FTSE 250 is the next 250 companies in the UK. Now the S&P 500 is the 500 biggest companies in America. A fund that tracks one of those just buys the companies on that list automatically in relation to their size. So for example, Apple might be 4 or 5% of that, we’ve had the SpaceX IPO recently, that’s potentially going to go on there as well now. So you’ve got all of these aspects, it’s companies in the list by their size. In the UK, we have HSBC, we have Shell, we have multiple corporations, many of them multinational corporations, you know, we’ve got Ocado, M&S, all of these types of companies, right? So no picking, no guessing when we’re buying an index, no being glued to the news here, we’re buying the list.

[30:05] Sammie: So what’s the strategy which I would actually use? I’ve mentioned some indexes, so this is what I would do with my first hundred pounds. And I’m going to keep this very, very simple, because you genuinely don’t need anything fancy to get started. For me personally, this is not financial advice, but if I was you, I would pick a globally diversified fund. That is literally the whole strategy. So if a single stock is a Mars bar and a normal fund is a box of Celebrations, now a global fund is like tipping a box of Roses, a box of Celebrations, a tin of Quality Street, French chocolates, Japanese chocolates, all of the chocolates into one single bowl. Now we’re talking around about, depending on what fund you pick, a couple of thousand to four thousand-plus companies in a single fund, from the USA, from the UK, from Europe, from Japan, all over.

[30:55] Sammie: One purchase and you own a tiny slice of basically the whole world’s economy. Now, yes, there are a few duds in there, and potentially if everything keeps moving in the right direction, because of human progress, you’d never even notice, because the winners carry them. And that’s where I’m steering you potentially towards this. Now, I’m not saying trying to pick the next Amazon is a good idea, I just personally think when you’re getting started out, you want to essentially diversify quite heavily, as much as you possibly can, and a global fund is a brilliant place to do that. Now, the S&P 500’s research shows that over 15 years, nine in 10 professional fund managers fail to beat the market. Fail to beat the market. So for global and US funds, over 10 years, it’s actually even more.

[31:44] Sammie: It’s around about 94.7%. So these are people with the smartest teams on the planet, you know, teams of analysts, billions of pounds behind them, supercomputers, and they can’t beat a simple index. So you and me picking a few stocks on our phone at lunch break, we’re basically potentially not going to beat it either. And it just takes the stress out of things, because a global fund means you don’t have to try, you can just own the lot and let it grow. So one last thing: keeping your fees low. The FCA found that a low-cost fund would leave you roughly around 44% better off over 20 years than a very expensive active fund, for the exact same returns, purely because of fees. Now, a good global fund costs around 0.1 to 0.25% a year.

[32:33] Sammie: So don’t be paying over 1% for the privilege. Now, the reason why, I used to talk about the S&P 500 a lot, and it’s a sexy investment, because it’s earned over 10% and it’s got all the big companies in it, your Apples, your Teslas, your Microsofts, your Facebooks, you know, they’re all in there, right, the Nvidias of this world. And the S&P 500 feels sexy, but the reason why I actually shifted all of my money out of an S&P 500 fund into a global fund was this one single reason. Now, back in the 80s, Japan was a large amount of the stock market relative to what it is today, so Japan shifted and the USA has taken large portions of that, but that doesn’t mean that’s always been the case.

[33:20] Sammie: So if, for example, the UK, I’m gonna hang my hat on us finally getting it together here, if we start massively performing really well in relation to the companies in the USA, that is a potential, you know, history can tell us that these things have shifted quite a lot. I implore you to go and Google this and have a look at it, it’s absolutely mental. So if things shift and a country starts doing much better and starts to take a share of that, if I only own the US, then I potentially lose out on that growth. So that’s why I think owning a global fund and letting the world’s economy sort this out. And because technology and AI and things are moving very, very quickly, there are some fantastic companies springing up all over the world that could potentially end up being the new Apple, the new Nvidia, the new SpaceX over time.

[34:07] Sammie: So just by doing this, we’ve kept it very, very simple. And the fact is as well, when you own a global fund, you own all of the S&P 500 pretty much inside of it anyway, so you already own it. You already own the Apples, the Teslas, the Microsofts, and in fact, they are the largest part of most global funds out there, because they are the biggest companies on the planet. So you still own it, but you’re not just with 500 companies, you have a few thousand instead. So that first £100, potentially a global index fund, and you are properly away. Don’t overcomplicate this, you don’t need to be out there picking stocks, you can just do this one single thing, and that is the whole game. Now, consistency here for me is the next part of this whole game, because staying consistent is actually the most important bit, and weirdly the easiest, but also the hardest as well, because we will tell ourselves that those new boots, we deserve them, right?

[35:00] Sammie: But if we’ve got that £100 a month earmarked for our investing, we want it to get in there and do its thing every single month. So set up a direct debit, same day every month, and forget about it, guys. You buy a bit every single month. I literally think of this more, especially when I’ve got 10-plus years ahead of me, as stacking bricks rather than the actual performance of it. Because if I stack those bricks and I’ve got those bricks, then more bricks can grow for me when there is a good month or a good year, right? So that’s what I want you to think about, like this: you buy that bit every single month, some months it’s cheaper because it’s gone down, some months it’s dearer because, you know, it’s gone up, and eventually that’s going to even out. They call this dollar cost averaging, or pound cost averaging, because we’re from the UK. Now, the best bit about this is it just takes the emotion out of it.

[35:48] Sammie: So you’re not sat there trying to time things, you know your investments are going in each and every single month. It’s a good way to get started. Because for me, there’s actually some studies on this. Morningstar looked at this and found that the average investor actually does worse than the very funds they’re invested in, by over 1% a year, which actually works out to 15% of their returns gone over their lifetime, purely from trying to time the market. So buying and selling at the wrong time, they don’t lose because they picked a bad fund, they lose because they can’t sit still and they have to move things around. And there’s an even scarier one: JP Morgan worked out that if you’d have stayed fully invested for the last 20 years, you’d have more than double what you would have had if you’d missed the 10 best days in that whole 20 years.

[36:34] Sammie: Just 10 days. And the kicker on that, most of those days happen right after the worst ones, in the middle of the panic, so when the nervous lot have already sold up. So the people trying to dodge the bad days were missing the good ones and wrecking their returns over the long term. And trust me, I am no stranger to this, I still fiddle around a little bit here and there. And I will tell you, I have worked this out, I would have been better off doing absolutely nothing and just investing into my funds every single month. But I do enjoy this and I do invest a little bit of my money into individual stocks, but I love it and I have my finger on the pulse with this, and I’ve learned a lot over these past 12 years. But that doesn’t mean I get it right all the time, I’ve had stocks go to basically zero, or I’ve had to pull out of them because I’ve got things wrong, and I’ve had some winners.

[37:24] Sammie: Yes. But you can just do this, set it up and forget it, and crack on with your life and focus on income going into this rather than anything else. So once you’re set up, the best thing you can do, pretty much most of the time, is actually sweet nothing, right? Buy it, keep it, you know, ignore the noise and stay well clear of these get-rich-quick schemes and, you know, have you seen me on Telegram with my trading signals, and just let this thing cook. So each of that £100 going in, you’re buying yourself that day back, a day you potentially can control your freedom a lot more later on. So this is how that looks, right? You’re going to get your emergency fund together, get your debt sorted, get aware of your spending, you can use Gains App to do that, remember, it’s totally free to download. Open that stocks and shares ISA. There’s also a link to Trading 212 where you can grab that free fractional share worth up to £100 when you deposit just one pound in your account.

[38:15] Sammie: Think about those global index funds, set that £100 up, get that money going in, and leave it alone to let it do its compounding. And as you grow, you might potentially look to edge that up. Now I like to look at this: if you can afford that £100 right now, that each year that inflation rises, so if inflation rises by 3%, next year I’m going to start putting in £103, and I’m just rising up my contributions with inflation, because hopefully my wages are coming along for the ride as well. It is not complicated, guys, and you do not need to be rich. I went from 24 grand in debt, knowing absolutely nothing about money, to where I am today. So if I can do this, you can too. I just love talking about this stuff and helping people realise that they can actually change their life. Now, yes, your capital is at risk with this, and please do your own reading too, but there is generally nothing stopping you getting started today.

[39:08] Sammie: Past performance is not a future indicator of success. So be conservative and go and check out a compound interest calculator on Google as well and have a play around with the numbers. But be conservative, you know, have a play around with the numbers at a higher rate, because if you do get a higher rate, fantastic, but it might not stay the case. So I just think playing around with six to seven percent is a good benchmark, and if you do get more, then brilliant, it’s a bonus. Now, I think the best podcast to follow on from this is actually my conversation with the legend that is Ryan from Making Money Simple, who walks you through this a little bit more as well, and it’s coming up on your screen right now. And if you are listening to this on Spotify or Apple, it’s also in your description, I’ll leave it there so you can click and get started on that. But look, it’s been a real pleasure.

[39:54] Sammie: As you can tell, I love this stuff on the Money Gains podcast. So share it with a friend that needs to get started with investing, share it with a family member who you think might find this useful. And if you can, I’ll just ask a massive favour: if you’re still listening, leave us a review. If it’s one star, email it to me so we can improve, and please don’t hurt our ratings. But if you can leave us a nice review, it massively helps the show grow. I love you guys, thank you, thank you so, so much for all of your support and helping us grow the show. I love it and I love my audience, and I think it’s amazing how we’ve potentially changed a lot of people’s lives today, hopefully for the better. Now, I’ll catch you next week when we’re back with Andrew Craig for another episode, and oh my god, this one is an absolute banger, and it’s actually all about investing your money as well.

[40:45] Sammie: So listen out for that one, it’s coming next week, and I will catch you on that show next week. Bye-bye.