financial independence

on our investment strategy

The definition of financial independence is broadly having enough sufficient personal wealth to live, without have to work actively to provide for basic necessities. For people that are financially independent, their assets generate passive income that is higher than their expenses.

To achieve the milestone of having enough assets that generate annual living expenses, we need an investment strategy to guide us there.

investing in the stock market

Our investment strategy, like our current spending habits can be summed up in word: simple. We do not like over complication in our lives. Our main strategy at the moment is investing in the stock market, holding our money in low-fee exchange traded funds (ETFs).

simplifying our investments allows us to have more time for enjoying views like this

The ETFs we have are index trackers; they track a quoted index (with the index being a number that reflects the value of all of the shares in that market). An index tracker means that you have a reference point to both tell you what the fund is trying to replicate and ensure that it is replicating it accurately.

We diversify by having a UK ETF (iShares ETF) which tracks the FTSE100 index and the Vanguard Emerging Markets ETF which tracks the MSCI Emerging Markets index.

We also each have a LISA (Lifetime ISA), that we deposited the maximum in in each tax year it’s been available so far to get our £2,000 bonus each – £4,000 of free help towards our goals, thanks to the government (and I tell you, it’s not often I have cause to thank our government these days). We hold our LISA’s in Hargreaves Lansdowne in a stocks and shares ISA.

We follow the J L Collins wealth accumulation phase idea, which is investment in 100% stocks, assuming that will give us the best return over the long-run so long as we don’t sell when the market tanks and continue to use dollar (pound) cost averaging etc. This strategy will change once we move beyond the wealth accumulation phase.

why etf’s?

My (very) limited knowledge of  the stock market in my late teens, early to mid 20s was of holding shares in individual stocks. You might hold shares in your favourite companies for example or shares in companies that you think/predict will do well over the long term.

Here’s our little rundown of why we will not hold stocks in individual companies and why we are DIY’ing our investments:

  • Most actively managed funds can’t beat the indices, so why pay a fund manager’s fee when you can put it in an ETF and let it sit there?
  • It’s very hard to pick market out-performers over the long term.
  • Individual stock picking is messy and hard work. You have to research, purchase, track and sell each stock in your portfolio.
  • There’s too much exposure with individual stocks. Think BP’s Deepwater Horizon oil spill in 2010, Tesco’s accounting fraud in 2014, Volkswagen’s emissions scandal exposed in 2015; all incidents that saw the company’s stocks plunge. Too much can go wrong with one individual company. Spread your risk.

I still wouldn’t call myself an expert but I do understand more about investing now since we begun our mission to become financially free. I now realise that trying to grow wealth and get consistent returns over the very long term from individual stocks is difficult and fraught with more stress than you need in life. Also, listen to your elders. Warren Buffett, the most successful investor of all time, had this to say on investment strategy in 2013, (

“The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well.”

If the world’s best investor does not stock pick, then that’s good enough reason for us not to either.


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