Monday, 28 February 2011

5 Ways to Minimise Your Tax Footprint (UK)

Here at the DIY Income Investor we don't believe in paying more tax than we have to - it can make the difference between keeping up with inflation or not. We have talked about minimising the amount of tax liability before - but as it is nearing the end of the tax year (in the UK, at least), it is worth revisiting this topic and minimising your tax footprint.

Friday, 25 February 2011

6 Steps to Maximise Your Wealth Potential

The DIY Income Investor is about generating wealth by maximising income from your savings and investments. We have highlighted previously the Wealth Potential formula:

                            Wealth Potential = Income - Expenditure

The Wealth Potential is the surplus cash you have to save or invest. So the greater this is, the faster your wealth can grow. The faster your Income Snowball will roll.

Thursday, 17 February 2011

Buying an Exchange Traded Fund (UK)

Buying an Exchange Traded Fund or ETF is Level 4 of the Income Pyramid in the DIY Income Investor approach, and should be done only after paying off debts and building up a safety buffer of cash in 'easy access' bank accounts and in fixed rate savings bonds.

An ETF is a low-cost collective investment that is spread over a diversified selection of similar types of individual investment, so it minimises your risk of catastrophic loss. This is why we recommend ETFs as the entry point to stock market investing. If you're not familiar with investing, I suggest that you use ETFs for a couple of years, until you get the hang of the 'ups and downs' of the market - and what these mean for the different types of investment. This advice is based on my own hard experience - so only move onto investing in individual companies or bonds when you have understood fully how they work. Prepare to be slightly bored for a while...

Tuesday, 15 February 2011

Get an Online High Yield Savings Account

One of the core tools of the DIY Income Investor is an online savings account (or accounts - you may have more than one, with different maturities). The savings account acts as a kind of financial bridge between your online current account (used for everyday expenses) and your online brokerage account (used for your longer-term investment strategy).

7 Things Not to Invest In

To help clarify the DIY Income Investor approach I thought it would be useful to summarise what I recommend you don't invest in.

More about Dividends

Dividends are a key income stream in the DIY Income Investor approach - and can be accessed via an ETF or by directly buying individual shares. The basics are pretty much the same everywhere - you buy shares in the company and it pays you money regularly for owning the shares. However, the way to shield that income from tax (if possible) will differ around the world.  This post gives a couple of examples of dividend investing from around the world.

Wednesday, 9 February 2011

ETFs for Income (US, UK)

Although generally the DIY Income Investor approach is based on avoiding paying someone to do what you could do yourself, one exception is Exchange Traded Funds or ETFs. There are now many attractive income-oriented ETFs - both bond and dividend-oriented - on both sides of the Atlantic.

Tuesday, 8 February 2011

Mr Bearbull's Income Portfolio (UK)

As this blog is based on investing for income, it is interesting to look at other examples of successful long-term income investing.

Monday, 7 February 2011

Focus on Income

The DIY Income Investor approach is - pretty obviously - mainly about income, although safeguarding and growing your capital faster than inflation is also a core consideration.

You might need to adjust your mindset to focus on income. How much income do you have now and how much would you need in the future?

Protect Against Inflation

As a DIY Income Investor, it is obviously important that income should keep pace with inflation (and then some - to increase your overall real wealth). Different asset classes have different inflation-resistance characteristics.

Corporate Bonds: Tesco, First Group and Imperial Tobacco

Corporate bonds are part of the Level 7 investments of the Income Pyramid of the DIY Income Investor approach. They are effectively loans to companies, but are traded a bit like shares (i.e. their value fluctuates). Bonds offer the opportunity to 'lock in' a fixed rate of income - either over a limited time horizon (up to a date when the underlying loan amount is repaid) or as a perpetual loan.

Keep Your Financial Data Safe

The DIY Income Investor approach is based on being online - steering your wealth creation from a computer. The last thing you want is for your computer to fry up all your financial information.

Tuesday, 1 February 2011

Cash Bond Rates on the Rise (UK)

Using fixed-rate cash bonds is part of the DIY Income Investor strategy - they form part of the Income Pyramid Level 3 cash 'buffer' to provide for life's up's and down's. The rates on offer for these bonds is starting to increase - this implies that you should be cautious about taking out any long-term bonds at the moment.

Gilts - Government Bonds (UK)

Fixed income government securities, such as UK 'gilts' form part of the DIY Income Investor strategy (as part of Level 5 of the Income Pyramid - for more sophisticated DIY investors). However investing in gilts (within a UK ISA) may seem confusing for many new investors. 

The Power of Dividend Investing - Transcript

This is a review of a transcript of an interview with Todd Wenning, the Motley Fool's resident dividend investing guru (I have highlighted his 'Dividend Report Cards' in another post). This transcript is a useful summary of the advantages of dividend investing, which - as you will probably now be aware - is recommended as part of the approach for the DIY Income Investor (at Level 3 of the Income Pyramid - see separate posts for details).