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Why I bought shares in Disney

Disney is a brand we all know and love. The company has been around for almost 100 years and in that time has built a formidable business in the media sector. It’s a company that until the pandemic was also consistently growing it’s dividend. But the dividend is not the only reason why I bought shares in Disney. In this article I want to outline Disney’s business and inform you why I have bought shares in Disney and will continue to do so over the coming years.

Disney’s Revenue:

Disney has 4 main revenue streams to their business. 

The first is their parks business, which is their Disney branded theme parks and cruises they have in places like Paris, Hong Kong and Florida. Pre covid, this segment contributed the majority of their revenue base and has been quite badly impacted from the lockdowns as a lot of their parks have been shut or on reduced capacity. This segment is forecasted to be hit in the short term but start to recover in 2021.

Their second business line is their studio entertainment business which includes brands such as Lucas films, Pixar and Marvel. This segment generates money through distributing their films and content. It was also quite badly affected from the pandemic as a lot of cinemas have been shut and the whole industry has effectively grinded to a halt. However some of their newest movies such as Mulan were released on their Disney Plus platform but I will go into more detail about this later.

Third is their media networks, so think of their TV channels such as ABC, National Geographic, The Disney Channel and many others. This segment makes money through advertising and licensing content.
Their Fourth is their direct to consumer segment which I believe is their most interesting segment. This includes their relatively new streaming platform “Disney Plus” which aggregates a lot of their legacy content into a platform that can be viewed from home. This segment makes money by charging users a monthly subscription fee.

Based on their latest financials, here is a breakdown of their revenue.

Disney's revenue

Headwinds and Tailwinds 

Disney is unique in that is has had some significant tail winds and headwinds at different times this year. At the start of the year the lockdowns across the world meant it’s parks have been shut and this has impacted it’s revenue from this segment quite badly. 

However, this has been mitigated by the growth in Disney plus which has grown subscribers significantly over the past 1 year. 

Disney's subscriber growth

Remember that Disney plus was only announced in November 2019 so to add 73 million subscribers in a year is quite an achievement.

Vaccine Tail Winds


Now that we have multiple vaccines starting to roll out globally, we should start to see the parks open up in 2021 which will mean their revenues from this segment will improve. I think the big win from 2020 is Disney plus and I think their DTC segment will be their shining light through the next few years as it continues to grow.

Streaming Business: Disney Plus

The company during their investor day in December 2020 said Disney+ had 86.8 million subscribers as of Dec. 2. If you also add in the subscribers from their other networks like ESPN+ and Hulu then they have 137 million subscribers worldwide to their content.

Initially when Disney anounnced Disney + in Nov 2019 they issued guidance of how many subscribers they were looking to have by 2024. Initially they said they would likely have between 60 million to 90 million subscribers by this time. We can see the effects Covid-19 have had on these estimates as they have already reached the top end of this estimate in only one year!

Furthermore, what is really exciting is they have upped their future estimates of subscribers to between 230-260 million worldwide by 2024. This represents a huge potential for them to become one of if not the dominant streaming player in the market alongside Netflix. At the time of writing this article Netflix have a subscriber base of around 195 million people. So we can see if Disney can execute on this estimate that they will take a large pie in the streaming sector. They expect this segment to become profitable in 2024 and have started to increase their prices already.

If they can execute they will be able to generate a huge amount of cash from this recurring subscriber base.

Content is King


One of the key reasons I think Disney has a huge advantage over a company like Netflix is they own all of the content they have on their platform.
Netflix started out as a tech company that would aggregate content from lots of different providers (Disney included) and then would pay each of the content owners a fee based on the number of views each piece of content gets.

This means that the unit economics of such an endeavour mean that it is much harder to get to profitability. 

So what did Netflix do?

They started to invest aggressively into creating their own content. And so far this has reaped them a lot of rewards in terms of subscribers as they are able to generate lots of amazing content that is relevant and topical (think TigerKing this year).

I think that Netflix realised something really important. This is that the content owners are going to be the ones who win the streaming game.

Netflix subscriber growth

As you can see from the graph, they have consistently invested more and more money each year in order to generate the content that people want to watch. Once you have the platform then your main differentiator to your competitors is your content you have.

Netflix are not the only streaming provider to invest money into new content. Amazon are also investing around 6 billion dollars this year into their own content.

Why does this matter for Disney?

Well, a huge advantage Disney have is that they already own bucket loads of content. With all the media brands and movies they already own their content is already in massive demand and this doesn’t account for all the content they will create in the future. In their Investor day their CEO announced that they will be investing into generating more content and announced some new series as part of their Star Wars and Marvel franchises. 

Disney also piloted on their platform the release of a highly rated movie called Mulan on a pay per view basis. If this type of content becomes more popular they could look to monetise more of their content in this way and cut out the middle man distributors which could help their button line.

What things to look for with Disney?

I think a key consideration with Disney and any other content provider is whether or not they can turn their platform of subsribers into a profitable business. If you need to constantly invest money into more content to keep growing or retain market share then this could be a risk to the model. However, I think the streaming sector will further consolidate in the future and there will be 1-2 winners of this, which is why I think the strategy Disney is employing at the moment makes a lot of sense. If they have the best content then they can raise their prices and the barriers to entry for others are too high to be able to compete.

If however over the next few years I can’t see a clear path to profitability from this segment then my investment thesis might change.

Subscriber Growth

The key to Disney’s success will be it’s subscriber growth over the next 3 years. I will be paying a close eye to earnings reports to see if they are able to deliver on their targets. If this fundamentally changes then this might make me reconsider my position.

Valuation

Disney is trading at an all time high at a market cap of 322 billion dollars. Based on Market Watch’s analysts recommendations there are 19 buy, 10 holds and 0 sells. The price has run up over the past 2 months, firstly on the news of the vaccine being approved and then after their most recent investor day when they vastly increased their guidance of subscriber growth over the next 4 years.

Whilst there are still some headwinds from their parks business still being impacted by Covid I think investors are looking further afield and are pricing in the growth of Disney Plus which is why the share price is trading above it’s pre-covid levels.

I am not concerned about the price being at an all time high. When I take a look at the comparison with Netflix in terms of subscribers theres still a lot of value to have here.

Comparison with Netflix

When looking at the Disney Market Cap with Netflix, Disney has a market cap of 322 billion vs 227 billion in Netflix. Netflix has 195 million subscribers vs 137 million subscribers Disney has for all of the subscription services it owns.

Netflix doesn’t have any other business lines like Disney does so in terms of market cap, each subscriber is worth $1164 in terms of market cap price. Because DTC only makes up 24% of Disney’s overall revenue, I think it makes sense on a like for like basis to compare the value of each subscriber based on 24% of their market cap. If we do this calculation, each subscriber contributes $564 in market cap to Disney.

What this means is, on a like for like basis that investors in Netflix are paying over double what investors are paying for in Disney for each subscriber.

Disney also have a much stronger brand in terms of content than Netflix so I think investors are not pricing the difference in these two.

If Disney were priced the same as Netflix in terms of their subscribers, they would be priced around 25% higher than the current share price.

My Strategy with Disney

I bought some shares during the crash earlier this year with my average buy price around 120 USD. When cash allows I will be dollar cost averaging more into this stock over the next year and if any significant pullbacks occur I will look to add to my position. However, as I think this stock will continue to grow over the next few years I am not as concerned about the daily price.

This is a stock I am looking at investing in for the long term as I think if they can execute on their strategy in Disney Plus, this will be a lovely cash generating businesses that could form a core part of my portfolio. My hope will be is that they can grow around 20-30% per year over the next 4 years and increase their dividend once they start to make Disney plus profitable.

Conclusion:

I think there are a lot of positives when looking at Disney’s stock and it’s a stock you can buy without worrying. Disney is a brand that is never going to go away and I think it will rewards shareholders in the future.

If you are interested in investing in Disney and don’t have a trading account, I recommend FreeTrade. They have no brokerage fees and it’s a really easy app to use.
If you sign up with this link we will both get a share worth up to £200

Disclaimer: This article is written for entertainment purposes only. I advise you to seek out professional help if you are looking to invest and do your own research.

What to do with leftover money at the end of the month (spoiler – it’s not to spend it!)

If you are a person who at the end of the month finds they have money leftover then you should consider yourself lucky! So many people live paycheque to paycheque (or even go into debt before receiving their paycheque). If you have leftover money at the end of the month, what should you do?

Well.. it really depends on your goals

Firstly, if you are finding that you don’t have any money at the end of the month then starting with creating a budget is the most important thing. Thankfully, technology has made this so much easier and there are some awesome apps to help you stay on track and automate this. My favourite is Monzo (available in the UK) but outside of the UK Revolut is probably the next best thing.

But if you’ve come this far I’m going to assume you already have a budget sorted out right? So let’s see what we should do with our leftover money at the end of the month.

Pay down high interest debts

If you have a credit card or loan balance, I would strongly consider paying this down first. If you have credit card debt this should be your first port of call as interest rates can be up to 35% annually and any gains or value you might get from using this money to invest will be negated by such a high interest rate.

If you have multiple cards, a good tip is to pay down the smallest card first because then you will start to see progress quicker and this can help you gain momentum. However as a rule of thumb, always pay down the debt that has the highest interest rate first.


Once this has been paid down, consider if you have any other debts with interest repayments to cover, such as student loans, car loans or a mortgage. In a similar light to the above, always prioritise higher interest debt and try pay off debt for the things that are not income producing assets.

So if you had a car loan, student loan and mortgage I would prioritise the car loan because it probably has the highest interest rate. A car loan is also is for a liability instead of an asset as a car will lose value over time, whereas a loan for a house can be a good type of debt because a house can go up in value and also pay you an income.

Build an Emergency Fund

Once you have paid down debts that have high interest rates or debts for liabilities, it’s time to build up an emergency fund. I am so thankful I took my own advice with this one because when lockdown 1.0 started in the UK I lost my job and I had to live off savings for almost 9 months! Lucky for me I got back onto my feet financially but without this I would have had a lot more stress in my life

If you have leftover money you should aim to build up at least 3 months of expenses but ideally 6 months. Trust me, future you will thank you for this.

Define your long term and short term goals

So once you have the emergency fund sorted, its time to think about what you would like to use your money for in the future. For example if you are saving for a house deposit you might want to consider leaving your money in cash or in low risk investments like bonds or a savings account because the stock market can be volatile and if you need the money on a certain date, you might find yourself in a position with less money than you started.

Generally speaking, if you are investing for 5 years or more then shares can be a good choice because you should be able to ride out any volatility. And because shares generally go up more than they go down (the S&P500 has returned around 10% annually over the past 100 years) you are likely to make some money.

By first understanding what you need the money for you can then define the how. When it comes to money and investing most people just focus on making a return on their investment, without considering when they need the money. Which brings me onto an important point.

Understand your risk tolerance

Ask yourself the question, will I be ok to see my investments go down in the short term to try get a bigger gain or would I sleep better at night knowing my money is safe. This is a super important question you need to have an answer to before you decide where to put your leftover money. If this is the case you should think about what investments are the right thing for you.

Contribute to Pension/ Retirement Fund

If you are not really sure about risk or if you don’t need the money, it’s a great idea to maximise your pension or retirement fund. In the UK you if you are a basic rate tax payer you will get an instant 20% return on your money and 40% gain if you are a higher rate tax payer which is really quite hard to beat!

`Conclusion

Remember, by having leftover money at the end of the month you are already ahead of so many people! Don’t be afraid to enjoy your money as well but having a clear goal in mind and thinking about how money can work for you means that you will thank yourself in later years.

If you know someone who could use this advice, feel free to share the article with them on social media.

How to invest in ARKK funds from Europe or the UK

One of the most exciting investment funds of 2020 has been Cathie Wood’s ARKK funds. Her active Innovation ETF154% have returned 154% in 2020, making them the highest performing active ETF on the market.

Whilst historical performance in shares doesn’t mean you can expect the same in future if you are like me in Europe you are probably wondering how you can invest in ARKK’s funds?

ARKK invest primarily in companies who are at the forefront of innovation in their respective sectors. They have large holdings in companies such as Tesla, Square, Roku, Spotify and most recently they invested in Palantir. This is a fund that is high risk, high reward! Tesla alone has gone up 7x in 2020 and so it’s no surprise given they are ARKK’s biggest holding that they have had such an amazing return in 2020.

One of the more frustrating things for European investors has been that currently ARKK funds are generally not products that are generally available to invest in on our investing exchanges.

However there are some other ways in which you can invest in ARK’s funds, here is one way in which it can be done:

Investing in ARKK funds in the UK/ Europe using a Trading 212 Pie

Trading 212 is a great app for tech savvy investors. One of the best features it has is the ability to create “Pies” which are effectively pots of money you can create with a fixed percentage of stock holdings.

So if you want to build up a portfolio of the same stocks with equal weightings, all you need to do is invest money into the Pie and Trading 212 will purchase the stocks at the same ratio each time.

Pretty cool hey!

For example if you wanted a portfolio of 33% Tesla, 34% Apple and 33% Facebook you could create this as a pie and then every time you bought £100 worth of shares it would buy £33 of shares in Tesla and Facebook each and £34 in Apple.

Trading 212 allow you to create public pies which can be accessed across it’s community of investors. They allow the community to share pies.

A couple of absolute legends have created some pies that replicate ARKK’s holdings and these are rebalanced each week to account for any new purchases or sales. Whilst it’s not going to be 100% accurate to ARKKs holdings, it’s pretty close, especially considering a lot of their holdings are long term growth stocks.

Another advantage to these pies is that you won’t pay any management fees which currently are 0.75% annually. The only downside is that you will need to make sure you sell the holdings based on when ARKK do as the pie will update for the correct holdings but won’t sell them on your behalf.

How to invest:

  • Download the Trading 212 app. If you haven’t got it already, use this link and you will get a share worth up to £/$100. (full disclosure, I also get a share worth up to the same)
  • Sign up for an account
  • Go to the Pie Library
  • Go to the section ARKK and then pick which ARKK pie you want to invest in.

Let’s hope 2021 has the same return for ARKK funds as 2020. Let me know if you are investing in ARKKs ETFs and your thoughts on the above strategy.

Happy investing!

How to earn up to €/£300 in under 5 minutes by utilising sign up bonuses

Here’s a couple of cracking deals if I do say so myself!

The guys at FreeTrade and Trading 212 have a sign up promotion currently whereby if you create an account and deposit £1 they will give you a free share worth up to £100 with Trading 212 and £200 with FreeTrade! You don’t need to buy a share with your deposit so you can cash out without any risk of losing any money.

This means if you sign up to both you will get shares worth up to £300 in total!

They are both platforms to buy shares, ETFs and leveraged financial products. They both have no brokerage fees and they have a large list of stocks and ETFs you can buy on their platform.

Here’s how you can do it:

Trading 212 (UK, Europe, Asia, Australia)

  1. Follow this link and download the Trading 212 app www.trading212.com/invite/HYLZmh66  If the link doesn’t work use this code when signing up HYLZmh66
  2. Deposit £1 into your account
  3. Fill in the W-8BEN form (this is to exempt you from USA taxes)
  4. Your share should appear in your account within a few minutes

FreeTrade (UK Only)

  1. Follow this link and download the FreeTrade app https://magic.freetrade.io/join/shannon/b07badde  If the link doesn’t work use this code when signing up b07badde
  2. Deposit £1 into your account
  3. Fill in the W-8BEN form (this is to exempt you from USA taxes)
  4. Your share should appear in your account straight away

That’s it! 

If you are interested in investing in shares, check out my recent articles on Disney and Palantir as companies to investment in.

Let me know what share you get!

Is Palantir a good investment? My investment thesis for 2021

Palantir is a company that came onto my radar as it was one of the big direct listings of 2020.
The stock has also garnered somewhat of a meme status on different reddit communities such as r/wallstreetbets and r/stocks as a lot of fellow investors are hyping up the stock to be one of the shining lights of 2021.

So is Palantir a good investment?

Palantir meme wall street bets

The stock since debuting on the public markets has gone crazy, it debuted at around 9 dollars per share and in the space of around 2 months rocketed up to around 30 dollars per share.

Whilst this is super exciting for investors that got in early, previous performance of a stock doesn’t necessarily predict future performance.

In this post I want to cut through the noise and look a bit deeper into Palantir and see if it’s a good investment.

Palantir Meme


Overview of their business

Palantir is a big data analytics company. They operate in both the private and public sector and have been around for 17 years. They were founded by Peter Thiel who was also the founder of Paypal and one of the early investors in Facebook.

Palantir was founded to assist government agencies (think CIA and FBI) to allow them to bring multiple databases of information together and use this to provide more valuable insights and predict behaviours.

The company operates as a B2B software provider and mainly focuses either on large government agencies or Enterprise organisations.

They have been tied to the CIA as they apparently their software helped in the assasination of Osama Bin Laden.

More recently, Palantir were awarded a contract with the NHS (National Health Service) in England to help aggregate data relating to the Covid-19 pandemic which helps them to monitor bed capacity across Trusts and monitor the rollout of the Covid Vaccine. 

Primarily the majority of their revenue has come from these government contracts but in the past few years they have expanded their offering in the private sector with their “Foundry” product, which is apparently able to be rolled in out across a large enterprise in about 6 hours.

In September 2020 they closed a five-year contract renewal with a customer in the aerospace industry that is apparently worth $300 million in total contract value.

The Bull Case for an Investment in Palantir

The data analytics market is set to grow from a market size of 37 billion in 2018 to over 105 billion by 2027.

This puts Palantir in a great position to capitalise off of this.

Baked into their current valuation is an expectation that they will continue to grow aggressively so the tail winds of the overall market size increasing will benefit them.

Furthermore, the Covid-19 pandemic has more generally accelerated the trend of digitisation across the world and from this companies need to leverage data to make business decisions.

Palantir state that only in the past 3 years that they have started to invest into sales and marketing efforts to fuel their growth. Prior to this, they relied on word of mouth and networking to get their contracts.

As their customer base is generally large government agencies and enterprise companies, it’s no surprise that they only have around 100 customers to date. This has some positives and negatives associated with it.

On one hand, having so few customers means there is significant room to grow. A lot of the contracts they have are for long periods of time and with stable government organisations, those of which are not going to default on their payments.

By embedding deeply into organisations, their software will be “stickier” than others and thus it should mean they retain these clients for long periods of time.

From their recent earnings statement, they grew their average revenue per customer from 4.2 million per year to 5.8 million per year, representing a growth of 38% yearly which is quite impressive.

If they can continue to add new customers and grow revenues in the same fashion then they might be able to keep up or exceed analysts expectations which would make Palantir a pretty good investment.

They also have some large institutional investors including Morgan Stanley and the ARK innovation fund, which was the top performing active ETF of 2020. The share price actually rallied around 8% when Cathie Wood’s Fund bought shares.

I think Palantir has a bright future as I think in our modern world, data is only going to become more important and because data is so valuable now (think about how google’s business model basically runs off data alone), they have a lot of room to charge customers large sums of money.

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The Bear Case for an Investment in Palantir

The stock trades are a pretty high valuation currently, at around a price to sales ratio of 48 at the day of publishing this article. 

I think in this case, price to sales is a metric that is more relevant than say price to earnings or EBITDA margins because the company is not profitable at the moment as they are investing most of their money money into sales, marketing and product development to fuel growth.

This is typical for a company that is trying to become a leader in a market.

A price to sales ratio of 48 is pretty insane, to put this in perspective most traditional SaaS companies historically have traded at a price to sales ratio of around 10, so if you have a company that is 5x this, it means you need to be growing fast consistently otherwise the share price will eventually trade sideways or down.

As the old saying goes, the stock market is a voting machine short term but on a long term its a weighing machine. Time will tell if Palantir can justify the current valuation.

Analysts currently have consensus that the stock is currently overvalued and that it’s one year target price is 17.83

Having said that, most stocks at the moment are quite expensive on a relative basis.

Source

This is the historical Price to Earnings ratio of the S&P 500. As you can see, we are nearly at the same valuation as the .dom bubble and on a historical basis stocks are super expensive. Palantir is no different.

Whilst I don’t think necessarily it’s a deal breaker, you need to factor in the risk you are taking vs the reward you are likely to get. On this stock I feel like there is less upside than the risk I am willing to take as an investor.

One of the other things to consider with Palantir is because it was a directly listed stock, it means for the founders and shareholders of the company there is a lock up period where they can’t sell their shares for 3 months after the company goes public. That expires in February 2021 and so it will be quite interesting to see if a lot of the shareholders cash in on the high valuation.

The company has been private for 17 years now so I think a lot of their staff will want to cash out some of their shares, especially if the valuation is inflated.

My Strategy for Investing in Palantir

Overall I am bullish long term on Palantir’s business model and their product and I think as a long term investment, it’s a company that could provide some good returns.

However from an investment perspective I think the valuation is too expensive for me currently. Palantir is on my watch list and I will be following their earnings reports closely to see if they can maintain their revenue growth and gain more market share in the private sector.

With the current share price at 25.64 USD at the time of writing, I will be waiting until the lockup period ends and will try enter the market if the share price goes below 19-20 dollars.

Even at this valuation the price to sales ratio is pretty high but for a company who have the potential to be market leaders, which I think they can, at this price I would start a small position and then add over time if they continue to deliver good results. If you are interested in a company that I think offers good value check out my analysis of Disney here.

If you are interested in investing in Palantir and don’t have a trading account, I recommend FreeTrade. They have no brokerage fees and it’s a really easy app to use.
If you sign up with this link we will both get a share worth up to £200

Disclaimer: This article is written for entertainment purposes only. I advise you to seek out professional advice if you are looking to invest and do your own research.

An Easy way to live rent free by utilizing House Hacking

One of the most interesting concepts I’ve come across is the idea of “House Hacking”. House Hacking, when implemented means you can live essentially in a house without paying any rent or mortgage. This sounds pretty awesome right?

I first came across the idea of House Hacking when I got interested in the sharing economy around the time Airbnb became popular in the early 2010’s. I live in London, which if you also do you will know the rent prices here are crazy high. From working in the vacation rental industry for a number of years, House Hacking is something that I can verify works if you can find the right property and location. 

So what is House Hacking?

House Hacking is when you utilize an asset (your house) in order to cover some or all of the payments needed to live there (rent or mortgage). This can be implemented in the following ways:

Renting out a Room in your House

If you live in a house where you have a spare bedroom, by renting it out you can often cover at least 50% of the mortgage or rent payments. If you live in a city like London that is ripe with tourists (post covid) then you can list the property on the short let market on a platform like Airbnb and rent this out to tourists and make a killing. From personal experience you can easily achieve an average nightly price of £50 pounds or more over the summer. In the below example I will show you how you can decrease your rent costs using this method:

Example:

Rent for 2 bedroom flat: £1500 per month

Nightly Rate: £50-£70

Nights rented: 20 per month (66% occupancy)

Gross per month from Airbnb: £1000- £1400 

The above example assumes that you will be renting the room out only 66% of the time, meaning you will basically have a private flat to yourself for the rest of the month.

If you increased your occupancy from 66% to 85% (25 nights a month) you can expect to earn between £1250- £1750 per month! One other thing you can factor in on a per booking basis you can charge a cleaning fee, which for London can competively work out to be around £10-20 per booking. If you decided to do the cleaning yourself then you could easily make an additional £100 per month.

A few other comments about House Hacking:

Be compliant:

A lot of long let contracts will have clauses that don’t allow subletting of the property. It is best to be upfront with your landlord before you start to do this strategy to make sure you are able to do this within the agreement of your tenancy.

How to check nightly rates:


You can find out nightly rates by searching for properties in your area on Airbnb. You can filter for number of guests, type of room and then you will be able to find similar properties to yours to see what you should be able to rent it for.

One other tool you can use is Airdna.com as they scrape all of the Airbnb booking data and if you pay them a fee of around 25 USD per property they will be able to give you accurate projections of occupancy and nightly rate.

Rent a room scheme (UK only)

The government allows you to receive income from renting a room out up to £7500 per year, tax free. This is quite generous and with this strategy it means you can make a decent chunk of income from Airbnb guests without incurring any tax bills. Please make sure you speak to a licenced accountant before making any decisions about your specific tax situation.

The above example is based on property and booking data in the London market. The same concept and methodology can be used in any city in the world.

Let me know your thoughts, does anyone currently implement this strategy?

*Please note, this blog post is intended to provide commentary and not personal advice, please seek professional guidance to know if this strategy makes sense for you.*

Top 4 tips for saving for a house deposit

So you want to get on the property ladder eh? Owning your own home is still seen as one of the most important life goal for people. And there’s a good reason for this. Whether you aspire to retire early or just don’t want to have to worry about money during retirement owning your own property has a certain level of satisfaction.

In ths post, I want to share some tips and tricks that I have found from living in one of the worlds most expensive cities (London) that can help you with this.

Take advantage of government schemes

Lifetime ISA

As a first time buyer, you have the ability to build your deposit using a LISA (Lifetime ISA) account. This is an account that the government will contribute 25% of the deposits you make, up to £4000 in deposits per year. These funds can only be used for a first home or if you are over 60. There is other eligibility criteria below:

You can withdraw money from your ISA if you’re:

  • buying your first home
  • aged 60 or over
  • terminally ill, with less than 12 months to live

You’ll pay a withdrawal charge if you withdraw cash or assets for any other reason (also known as making an unauthorised withdrawal). This recovers the government bonus you received on your original savings.

The charge is currently 20%. It goes back up to 25% on 6 April 2021.

This is a surefire way of being able to generate a large deposit and these funds can also be invested in the share market if you also want to make a return on this.

Set yourself a goal

Having a goal in mind of when you want to buy a house is super important. For me, it really helped to be able to break down my goal into smaller steps so that when each time my salary was paid into my account, I could tangibly see what impact this was having on my goal. If you have a partner it’s critical your goals align with them so you can work towards this together.

Automate your savings

When you get paid your salary into your account, transfer your target savings into another account. This will mean psychologically you will think the money is not yours to spend and it will create at least a small barrier. I saved my money into a Stocks and Shares ISA which helped because it was more difficult to withdraw money and this helped me to ensure I didn’t spend this money.

Earn more money

I know this seems more simple than it really is but there will be a limit as to how much you can save, without impacting your ability to enjoy life. You should seriously consider trying to increase your income whether that’s through a side hustle or from upskilling at work and getting a promotion. One of the big advantages of being young and saving for a deposit is that you will have more time than the future version of yourself, because you are not tied down with raising children. So make use of this time!

By employing some of the above strategies, you can cut down the time it takes to save up that deposit and get onto the property ladder faster.

Have anymore tips I have missed? Let me know your thoughts!

Using Leverage through Money Transfer Credit Cards to generate easy wealth

One of the great things about investing is the idea of leverage. Leverage basically means that your gains (or losses) are amplified by using borrowed money. For example, if you made an investment of 10,000 into the stock market and generated a 10% return, you would have 11,000 by the end of the first year. However, if you got a loan for 100,000 and used the 10,000 as a deposit with a 2% interest rate with the same 10% return, you would have 108,000 at the end of the year, assuming you paid 2,000 in interest.

This amounts to an 80% return on your 10,000 vs a 10% return without leverage. Pretty cool huh?

Leverage is something that is not for the faint hearted. Whilst it can amplify gains, it can also amplify losses so this is something to consider. However leverage has been used for decades and every house that has a mortgage uses leverage under the same principle.

Using Credit Cards for Leverage:  

There are a number of credit cards in the UK that allow you to do a “money transfer”. This means you can transfer the credit limit off the card into your bank account. This money can then be used to invest in the share market. The cost of doing this “money transfer” varies but there are some providers who charge a flat 3% fee with over 2 years of interest free payments, as long as you make the min repayments. This means effectively you can get a loan for 1.5% annually.

Another way you can do this is to take out a card that has a promotional 0% interest free offer on purchases. You can then use this card to fund your regular living expenses and then invest the cash you would have spent on living expenses into the market. This might be a better alternative than paying the money transfer fee.

Historically, the S&P 500 has returned investors since inception an annualized return of 10% yearly. Assuming this continues, this means there is an arbitrage opportunity to make the difference between interest payments and the gains made on the investment. There are many low cost tracker funds available that allow you to invest in the USA or other global markets. I personally recommend Vanguard but there are loads available out there.

My Strategy:

1. Borrow 5000 using a money transfer credit card, 3% fee and interest free for 26 months- I used the Virgin Money card but check what the best card is for you

2. Invest in a Vanguard Lifestrategy 100% equities fund (I wanted to diversify across more markets to lower risk)

3. Make the minimum repayments necessary to pay down the credit card. For this I setup a direct debit to ensure I don’t mess this up.

4. At the end of the 26 months, I will either sell the holdings or balance transfer the remaining amount to another credit card. There are a number of credit cards that offer 0% or very low balance transfers with long interest free periods

With this strategy, I can help this money compound over time without having to outlay a large amount of capital to begin with.

A few notes about this strategy:

1. As with all things investing, understanding your risk tolerance is important. This strategy does carry more risk than regular investing so you should consider if it’s right for you.

2. I wouldn’t borrow more than I am comfortable paying back in full. This will shelter me from any large downturns in the market where if the value of my investments goes down I can leave this in the market to recover over time. Time in the market beats timing the market.

3. I wouldn’t recommend investing in individual stocks, unless you are an expert. I personally choose low index tracker funds because they are well diversified across lots of different markets and sectors.