Hello🌻

What is speculation?

Its definitions are:

1. the forming of a theory or conjecture without firm evidence
2. the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value

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For example, short term foreign currency trades are considered as speculation by many investors.

By looking at a chart, you think “it looks cheap, so should go up soon, maybe, most likely…”

But you have no firm evidence.

You may be able to make a good profit in a short term or lose a lot….

Definitely a speculation.

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So is speculation a bad thing to do?

It is risky, but not a bad thing.

High risk – High return…scary but attractive💕

You just need to be sure the maximum amount (or % out of the total) you are willing to put into speculation. And of course, you need to stick to it!

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When you are making a long term investment safely, you don’t need to worry much about short-term movement of the market. You need to check once in a while especially when there is a big movement, but that’s about it.

However, if you are speculating, you need to be at least aware of the market sentiments/direction.

If you can’t be bothered with that, DO NOT speculate.

If you like to study about the market (like me), a little speculation can be fun😉

You just need to know what works for you.

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For now, I’m planning to allocate about 10% of my savings into speculation. I like currency trading ! (I’m not a day trader though😅)

I’m aware that I could make a big loss for that portion, but I acknowledge the risk.

Once I pay off a bit more of my mortgage, maybe I can increase the %, but then I’ll need to think about the kids education, my age etc. So many things to consider.

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Rounding up….

If you are going to start investing (in this case mainly ETFs)

1. check the total amount of charges you need to pay to purchase the products & decide which broker/fund manager you are going to use.
2. Understand the difference between investment & speculation (your own understanding – not what the others tell you)
3. decide the % you will allocate for speculation (could be 0% depending on your circumstance & preference).

Let’s start investing!

My happy samurai life in London💫

Hello 🌻

Once you have researched into fees, you need to decide how you are going to make your investment. Is it bond, equity, commodity, ETFs, individual stocks etc??

Asset Allocation‼️

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Before you make this decision, it’s important to understand the difference between “investment & speculation”

I’m sure everyone has different opinion. Some people might say speculation is same as gambling etc.

The important thing is that you have your own understanding and definition of them.

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My idea of investment is

1. It is long term
2. Risk is diversified
3. Consider stable income such as dividends etc as well

If you consider these points, I still think ETFs are great way to invest in the market. For example, if you invest in S&P500ETF, your risk is already diversified among 500 companies (ignoring the USD currency risk for now)

You could, for example, buy some Apple or Microsoft shares considering the long term growth of the company. Since this is for a long-term & both companies are well established, it sounds like an investment.

However, I still think if I’m owning shares of one company, it starts to become more of a speculation as the risk is not diversified at all.

Who knows what will happen to one company in the future???

Even the professional research analysts often get their forecast wrong, so if you are just a private investor like me, how can you be so sure???

Whereas, if you purchase the shares of many different companies, you can be quite certain that not all of them are going to go bankrupt!

And most likely, the share prices of the market will go up over a very long period of time.

So this is an investment – my point of view😀

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I’ll finish here today.

It is important that you have your own idea about “investment & speculation” It doesn’t matter what other people say.

After all, it is your own money😉

My happy samurai life in London 💫

Hinata

Hello🌻

I’m planning to invest some money into ETF through my ISA account. I have been trying to understand the fee structure which turned out to be a little more complicated than I expected. https://samuraihinata.home.blog/2019/03/08/buying-etfs-why-is-it-so-hard-to-understand-the-fee-structure/

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If I decide to buy one of the Lyxor’s ETFs through Fidelity, I’ll pay…..

1. Annual management fee to Lyxor. This varies depending on the ETFs, but let’s say 0.07%/annum (their fees are very competitive!)
2. Transaction fee to Lyxor. Some of their ETFs don’t charge this fee, but some do. This is the cost associated with the daily trading activities within the fund (buying, selling of bonds etc) This fee again varies, but let’s say 0.02%/annum
3. Service fee to Fidlity. This is currently £45/annum if you are holding ETFs only.
4. Share dealing charges to Fidelity. This is currently £10. This is how much you pay every time you buy/sell ETFs through your ISA account. So more often you trade, more you pay.
5. These are the fees that I managed to find out, but I might have missed something….They really don’t make it clear for you. it is so hard to find out💦

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Why do I need to pay to both Lyxor & Fidelity??

Basically Lyxor is the ETF provider who creates this product, but they don’t sell this directly to a private investor. They sell this through a fund manager or a broker (in this case, Fidelity where you hold your ISA account with). That is why there are some fees that gets paid to Lyxor & some to fidelity.

If you see an advertisement saying something like….

“competitive management fee from Lyxor EFT. Only 0.07%/annun!!!”

You need to think, “What are the other fees then???”

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So if you are planning to buy ETFs through your ISA account, you will need to consider

1. The fee to the ETF provider
2. The fee to the fund manager/broker (where you hold your ISA account with)

If you can find an ETF that costs less than 1%/annum in total, that is a pretty good deal😉

So, I’m going to do more research now.

My happy samurai life in London💫

Hinanta

Hello🌻

I’m looking into buying ETFs in my ISA account. Today, I ended up spending hours looking at the fee structures… why is it so complicated?? It feels like the fund managers don’t want us to understand how much fee we actually pay in total as this could really put us off from investing 😅

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From what I have seen, there are ongoing cost, transaction cost, account fee, dealing charge etc. What are they and how do we know how much we pay in total?

If you don’t choose the right product, you could easily pay 1% (or more) cost for investing, and this cost is taken annually (yes, not one off. Annual! EVERY year!!!)

So, if you are new to buying ETFs in your ISA account (or if you have never thought about how much fee you are paying), you really need to look into this.

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I’m not a financial advisor. Although I was an analyst for a fund manager (long time ago), I never thought about how much the investors are paying to buy my company’s funds. So I’m a beginner & very new to this ETF investment.

But as a beginner, I’m going to look into all the information necessary to start investing in ETFs using my ISA account, and I would like to share this experience with you.

I’m not giving any advice. This is my personal opinion as a private investor.

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So fees, yes fees!!

Who offers the lowest fees??? Very hard to determine.

From what I have seen, these companies offer ETFs with very competitive fees.

1. Lyxor
2. Vanguard
3. iShares

For example, some of Lyxor’s ETFs management fees are as low as 0.04%/annum. Sounds very competitive💕

But the problem is, this is not the only fee that we pay because we can’t buy Lyxor’s ETF directly from them. We need to purchase them through a broker or a fund manager and they charge fees too!

So it gets very hard to understand how much we actually pay in total💦

This is getting a bit too long, so I’m going to stop here today. I’ll talk more about the fees next time. This is a big part of making an investment decision & having a full understanding of it is crucial.

Whatever it is, it is interesting to research and learn about new things.

My happy samurai life in London 💫

Hinata

Hello🌻

I’m thinking of putting some money back into the market 💰, and I’m trying to figure out where??

We bought a family home last year and spent a lot of our savings for that💦 We obviously need a bit of saving for rainy day, so what is left over isn’t much really…. & the money is in cash ISA at the moment.

But now the house is bought & the renovation is done, I really want to start investing again. Doesn’t really matter how small the amount is. You always need to start somewhere‼️

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My options are

1. Buy some UK index funds
2. Buy some Foreign index funds
3. Buy some foreign currency

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If I were to invest in shares, I only look at index funds, NOT active funds.

I’m a big fan of the index funds 💕 because

1. Fees are lower than active funds (quite a lot lower sometimes)
2. It is hard for a fund manager to keep beating the market (i.e perform better than the index funds)
3. You know exactly how your funds are performing because it just tracks the market (less monitoring required)

I used to be an analyst for a pension fund management company before I became a mum (oh gosh, so long ago…..) The most important thing that I learnt from that experience was that it was not worth paying a higher fee for an actively managed fund 😅 Of course, there are some exceptions. I’m just talking on average over median – long term. Plus I don’t know much about the hedge funds.

I saw how difficult it was for a fund manager to keep beating the market. If it was that easy, we would all be billionaires 😉

Even if you have a good performing fund manager for your active funds, there is no guarantee that he/she will keep managing this fund. At least with an index fund, you don’t need to worry who is managing it.

What I don’t understand is why some of the index funds fees are still high. It can all be done by a machine, so shouldn’t they be like 0.1% or less ???

Anyway, I will search for a low fee index funds in ISA.

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I also need to look into how to buy foreign currencies without investing in stocks/bonds/ commodities etc. What do you do if you just want to hold foreign currency in ISA? Is that possible? This is definitely a possibility as I’m not sure if I want to go into the stock market at the moment, but would like a FX exposure.

I will research & give you an update.

Money talk, boring??? I love it❤️

My happy samurai life in London💫

Hinata