Month: April 2017

Guru Lessons – 9 quotes from Warren Buffett to make you rich

Guru Lessons – 9 quotes from Warren Buffett to make you rich

Warren Buffett has guided my own financial principles and people who emulate him will no doubt become wiser and richer.

Buffett is one of the richest men in the world and started from nothing, just like you and me, so his words carry the weight of gold in the investing domain.

Here are some of his top quotes.

Investing is easier, when you know what you’re investing in

“Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

Buffett doesn’t do tech investing (although he is getting warmer to the idea with his trades in Apple and IBM) because he doesn’t believe that they fall in his circle of competence. Who blames him? How many people get that Taptica drives revenues through PPC and other online advertising devices? It doesn’t mean that tech is a bad investment, just make sure you understand how the business makes its money!

Rising stock prices equates to less of a discount

“If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. … Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

Remember, a market crash is like a great big fire sale. Think about going to your favourite store which is holding a sale with 50% off all items and you have £100 to spend. What happens? You get double the amount of items.

News agencies tend to misunderstand that lower prices today equates to higher returns tomorrow. Instead, they strike fear and can paralyse an otherwise intelligent population.

Are you an investor or a speculator? 

“Consciously paying more for a stock than its calculated value — in the hope that it can soon be sold for a still-higher price — should be labeled speculation (which is neither illegal, immoral nor — in our view — financially fattening).”

fundamental analysis is key here. Don’t worry, I’ll teach you my methods of evaluating a stock throughout this blog. However, If you are investing in Tesla because EVs are taking off then you wouldn’t have noticed how fundamentally overvalued it is. In fact, it’s due a major correction. The price may rise further but only because other speculators are more ignorant than you.

Debt is financial suicide 

“I will guarantee if you run up big credit card debts, you will be in trouble probably the rest of your life in terms of your financial situation. On the other hand, if you get ahead of the game, even on a modest scale, so that money is coming in from investing and people owe you money or equities owe you ownership, you’ll be way ahead of the game as opposed to you owing your creditors every month. So my advice to you is: if you can’t pay for it, don’t buy it.”

If, like many other Millennials, you are already in debt then fear not because there is a way out but it will require a little dedication and discipline. I’ll aim to create a debt guide for you guys in due course. Just remember, interest rates can only get higher which will make your situation worse so act now.

Imitate the habits of the people who you admire

“Chains of habit are too light to be felt until they are too heavy to be broken. … At your age you can have any habits, any patterns of behavior that you wish. It’s a matter of what you decide.”

Beautifully articulated, no further comment.

Trade regularly if you want to lose your returns 

“Investors, of course, can, by their own behavior, make stock ownership highly risky. And many do. Active trading, attempts to ‘time’ market movements, inadequate diversification, the payment of high and unnecessary fees to managers and advisors, and the use of borrowed money can destroy the decent returns that a life-long owner of equities would otherwise enjoy. Indeed, borrowed money has no place in the investor’s toolkit: Anything can happen anytime in markets. And no advisor, economist, or TV commentator — and definitely not Charlie nor I — can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.”

I owned a fundamentally strong portfolio when Brexit happened, I owned the same portfolio when Trump happened. According to economists my portfolio should have been obliterated in both instances. Instead it gained 27%. Stop trying to time the market – a position is only a loss if you sell it. Just make sure you have enough personal cash on the sidelines for a market downturn and a portion to buy the bargains of course!

Make money whilst you sleep, literally!

“Our portfolio shows little change: We continue to make more money when snoring than when active. … Inactivity strikes us as intelligent behavior. Neither we nor most business managers would dream of feverishly trading highly profitable subsidiaries because a small move in the Federal Reserve’s discount rate was predicted or because some Wall Street pundit had reversed his views on the market.”

If you picked 5 of your favourite stocks based on sound quantitative and qualitative reasoning for the next five years and never looked at them until year 5 I can assure you that you’d be presently surprised when you reviewed them 5 years later. I found an old dummy trade account that I opened in 2012 with £100,000 – 3 years later it had a value of £250,435 sitting in it. It’s now worth £390,890. A 58% CAGR and exactly the same stocks.

Investment managers don’t beat markets

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds. … My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion.”

Who needs to look for the next Amazon when you could have it by investing in the whole market and still beat most of the managers around! Admittedly, Buffett has historically beat the market so purchase some Berkshire Hathaway B shares too! (Only buy them when they are trading at a P/B ratio of 1.20)

“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.”

 Prosperity always prospers

“Who has ever benefited during the past 238 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. In my lifetime alone, real per-capita U.S. output has sextupled. My parents could not have dreamed in 1930 of the world their son would see.

“Though the preachers of pessimism prattle endlessly about America’s problems, I’ve never seen one who wishes to emigrate (though I can think of a few for whom I would happily buy a one-way ticket). The dynamism embedded in our market economy will continue to work its magic. Gains won’t come in a smooth or uninterrupted manner; they never have. And we will regularly grumble about our government. But, most assuredly, America’s best days lie ahead.”

So stop worrying and think of the bigger picture. We are advancing quicker than we can comprehend and productivity, the key driver to economic growth, will only boom with technological advancements such as robots, free energy and artificial intelligence. Trust me on this.

Forecasters are fortune tellers in suits

“We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

You may assess the long-term market forecast because an overvalued market will impair your long-term return. You should continue to scour the market for undervalued issues in any circumstance. You’ll naturally find fewer opportunities in an overvalued market and will therefore buy less. If someone tells you that there will be a crash tomorrow, rejoice and prepare yourself for the bargains.

Buy his book which I rated 5 ⭐️ here.

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Should I go to university?

Should I go to university?

Woah, heavy question and fraught with variable answers based on your personal situation but this blog post will focus on whether going to university is a worthy investment.

Investing in a degree is investing in yourself and your future earnings potential. It’s clear that people with a degree can expect an earnings premium and are generally recruited to higher positions than those that do not. This premium has been calculated by Statisticians Jaison Abel and Richard Deitz to be around £240,000 over a lifetime.

For example, people with degrees earned an average of £12,000 a year more than non-graduates over the past decade. The mid-point salary of graduates aged 22 to 64 was £29,900, compared with £17,800 for non-degree holders. If you are a graduate and aren’t earning anywhere near that then learn how to get a pay rise.

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My personal circumstances

If I consider the cost of my education to be £12,000 (the size of my student debt pile excluding living expenses) and the opportunity cost of the three years that I spent at university where I could have been working to be £37,400 (£17,800 non-degree salary x 3 years minus living expenses). My graduate degree has cost £49,400 in total. If I earn £240,000 more due to my degree over my lifetime then that’s a 380% ROI or 10% per year over 40 years. That’s a fantastic rate of return!

Fees were just £3,290 when I started university and interest rates are BOE base rate plus 1% or 1.25% as of writing. I was pretty lucky.

What about today?

Would I have gone to university with today’s fees and interest rates? With fees at £9,250 and interest rates of Retail Price Index (RPI) + 3% (6% as of writing!) My gut feeling says no. But let’s run the numbers.

Debt pile: £27,750 (£9,250 x 3 years)

Opportunity cost: £40,400 (£18,800 non-degree salary in 2017 x 3 years minus living expenses).

Total cost: £68,150

ROI: 252%

That’s a 6.3% ROI per year over 40 years which isn’t bad but the stipulation comes with that spiky interest rate. Central bankers will target Consumer Price Inflation (CPI) to be around 2% per year. RPI will be similar if not slightly more. Historically RPI is about 1% above CPI so real ROI after interest repayments is 0.3% or rounded down to nothing. Don’t believe me? Here is a BBC article which says the same thing independantly.

So, I shouldn’t go to university, right?

Wrong, it’s not always all about money. My degree has allowed me to open doors to opportunities that I would never had access to and has allowed me to compound my wisdom exponentially. I have always had a natural acumen for business but studying it alongside a language expanded my mind in so many ways. The return on investment may be 0 but the return on your life will be immeasurable. It also focuses your mind on where you want to go and what you want to do.

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Life without a degree

Remember, if you are reading this then you probably aren’t the average non-degree person. You don’t have to earn £18,800 – your potential is limitless. Look at Bill Gates if you don’t believe me. If I hadn’t gone to university then I would have invested more time to self learning. I may have built some kind of business. That’s equally as exciting and leaves a lot of what if statements.

Personally, I’d say no to university at the current prices.

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How to get a pay rise

How to get a pay rise

Pay reviews are upon us!

Your lifetime savings are significantly impacted by every pay rise that you receive. £25,000 today at an average pay rise of 2% means that you’ll be earning £41,000 in 25 years. This means that your wage has kept up with the economy at best and you have had no real inflation adjusted wage increase. A millennial’s tendency towards loyalty means that they are grossly underpaid in their roles, but they do nothing about it. Let’s get this straight – you can!

Before you start thinking about your pay rise you need to think about your worth. There are two perspectives here, your self-worth and the value you add to your company. The below five steps will increase your chances of getting that meaningful pay rise.

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1. Calculate your fair market value

What is market value? Market value is the value that employers would pay if you were to get a new job at the market average rate.

How much do you think other companies would pay you to do your job? If you’ve been in your job for 5 years with the same company and have only received a 2% pay rise per year because the company “is experiencing tough times” then the market has probably moved on! Trust me, your skills are commodities and they follow simple supply and demand dynamics so some positions have wage growth of +12% per year.

If you have a position which is sought after then you have no doubt been head hunted and approached by recruiters. I tend to log these interactions and gather the required information from the recruiter. Ask them what the salary range is, what perks could you expect. Print it out and save it for your pay review (if you have a structured one, if not I’ll come to that shortly).

If you don’t have a sought-after position then worry no more because calculating your market value has never been easier. You can gather lots of information from web-based tools such as or even by looking at recruitment sites. The key to an accurate reading here is having a job title which matches your position and to make sure you select location. A great tool for this is Here you can add your skills and experience which will give you a far more accurate reading. Recruitment firms relevant to your industry will publish detailed salary reports. After amassing all of the above information pick the value which is in the 50th percentile and save it for the right moment.

2. Calculate your value to your company

The market value can diverge markedly from real value. It’s the same as anything. It’s more subjective and difficult to calculate but it will be along the lines of the below calculations.

The cost of hiring a new employee is exceptionally high – especially employees on a salary. I know that my recruiter received 20% of my salary to place me. Depending on your job it can cost between £2,000 – £25,000+ to replace you. This is not a value that you can ask for but it will certainly add to your leverage and arsenal especially if you know that it would cost £10,000 to recruit a replacement and train them up. Remember, time is money to the employer and if you are a good egg, they might find it difficult to find someone similar.

What value do you generate? If you can quantify the value added eg; £300,000 of sales or billed time then you can demonstrate your worth in quite an obvious and simplistic way. What about them cost savings you spotted? That market opportunity you saw? The customer lead that you sourced? If you know that you have demonstrable areas where you add value then you could even link a bonus to this. Let’s be honest, sales people should push for at least 15% commissions. If you can’t sell your worth to your company then you don’t deserve to be in sales!

If you are in law or accountancy then how much are they charging the customer for your time? They are basically subletting your time – so make sure you get a decent rate on their return!

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3. Be realistic and not greedy

It will be hard for your boss to justify a pay rise of higher than 10% unless of course you are trading at a greater discount to fair value than 10%. If you are worth £25,000 but you are only being paid £20,000 then you can certainly go into your meeting armed with points 1 and 2.

I’m going to ask for 9% this year. Why? Well firstly, I think that the productivity I have achieved is greater than my current pay. I have also accomplished all the personal development tasks that my employer set at the start of the year. I value this as a fair 6% increase. Secondly, inflation is going to be 3% this year. I will not accept my hard work to be eroded away by inflation. I know that my company is charging more due to cost increases so, why shouldn’t I?

4. Time it right

Timing the right moment to ask for a raise can be awkward, I know.

You can get this right from the start by asking for a pay review every year as you start your new job otherwise it can become very difficult to work out when to ask. If your employer knows that you expect a pay review it won’t come as a surprise to them and they may have a considered response.

If you don’t have a structured pay review then you need to consider timing as it’s quite important. Let’s be honest, asking for a pay rise after a mistake or a poor quarter isn’t ideal. You want to ask when you are on a high and value is considered highest. Also, asking on a Monday morning is usually a bad time to ask as everyone hates Mondays. Ask on a Friday after lunch and you’ll notice it is much more relaxed.

Managers understand that you have a life too and if you play on their heartstrings a little then it can go a long way. Perhaps you are saving for a deposit or starting a family? Drop it into the conversation.

5. Just Ask

The amount of people who want a pay rise and the amount of people who actually ask is astonishing. Especially amongst millennials. According to research only 12% of people directly ask for a pay rise.

Guess what, you are valuable and your employer clearly wants you otherwise you’d be gone already. All you have to do is be honest and get what you want in life. If you are going in armed with the right data then you’ll be just fine. If they don’t accept and you consider yourself undervalued, time to move on. Loyalties are nothing in this world, especially in business. At least you’ll get the market rate – minimum!

P.S don’t forget to review them on! Save us all the wasted time.


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