| Real Life Strategies for Building Wealth
Why ISAs Are a Good Investment and How to Select the One for You

Why ISAs Are a Good Investment and How to Select the One for You

One question my readers seem to ask me regularly is whether ISAs are a good investment. Here I’d tell you why I  believe  ISAs are one of the best investments around and how you can select the ISA for you.

But let me tell you a story first.

The other day, I met and old friend of mine and, as often happens these days, our conversation over coffee turned to retirement dreams and the provisions we have made. (There was time when we didn’t talk about retirement and minor maladies but about nights spent partying and career ambitions. Oh well…). I mentioned my stocks and shares ISA with Nutmeg, proud that I maxed it out and hopeful that it is the foundation to a more secure future.

“But why are you doing this?” – my friend asked. “I didn’t put much in my ISA last year. The interest rates are so low now that it hardly matters whether you keep your cash in a savings account, under the mattress or in an ISA, right.”

Wrong.And it is time for some investment lessons.

Contributing to an ISA, and maxing it out when the opportunity is there, is still very much worth it. It is worth contributing even to a cash ISA though the interest this will bring is on the low side. According to Money Week, the best interest rate on a cash ISA today is 1.95% with building society Principality’s five-year bond and this is branch based and available only if you live in Wales or the Welsh borders. The next best is Paragon Bank’s five-year bond paying 1.75% which is online only. You get the picture.

Despite the low interest rates, cash ISA can be a great saving vehicle.

Now let’s talk about stocks and shares ISAs.

Here are four features that make stocks and shares ISAs a good investment:

#1. Stocks and shares ISAs are a good investment because they are very tax efficient. You know that profit from investments is taxed, right? Well, if you keep your ISA contribution within the tax-free ISA limit (for 2017-2018 this has gone up to £20,000 in case you didn’t know) you won’t pay any tax. This is how ISAs are ‘tax-free’ (remember though that the Government has already taken its cut because you contribute after tax income).

#2. Stocks and shares ISAs are very flexible. This is most easily understood by imagining your investment as a delicious piece of chocolate and the ISA as the rapper around it. You can do two things:

  1. Blend the chocolate and rap it in an ISA. This means that you can select the kind of investments that you can ‘rap’ in an ISA. There are some rules about what kind of investments are allowed but most stocks and shares play. (You are in full charge of selecting, rebalancing etc. your portfolio though it is in an ISA.)
  2. Get a Lindt Dark Chocolate (or another variety you like) that is already rapped. This is the case when you start stocks and shares ISA with a specialised provider and they look after your portfolio for you. You still have to let them know some of your preferences. (An example here will be the Nutmeg ISA; or Scalable Capital ISA.)

#3. Stocks and shares ISAs can start you investing. Okay, to be more specific, the ‘off the shelf’ stocks and shares ISA could start you investing because they take away some of the responsibility for selecting stocks and, through this, some of the paralysing fear of making a mistake. These ISAs also make investing a ‘low entry’ activity since you don’t really need to know much about the technicalities of investing to dip in.

#4. Stocks and shares ISAs are ‘untouchable’. Do you find that you do this on going moving of money between your savings account and your current account? (For my readers in the US ‘checking’ account.) So do I. And do you know why I do it? Because I can always replace the money in my savings account. Guess what? ISAs are not like that. Whatever happens you cannot put in it more than the yearly amount (tax free). As a result, I’ve never ever taken a single penny out of my ISA. This is why I say that ISAs are ‘untouchable’ (and this is exactly as it should be).

Four rules to select the ISA for you

Now that I hope to have convinced you that ISAs are a good investment, particularly stocks and shares ISAs, let me tell you the four things I believe you should consider to select the one for you.

These are not something that I’ve plucked out of thin air. Quite the reverse; these are the four rules that according to Tony Roberts (in his book Unshakable) ensure that our investments are sound without being overly conservative.

Rule 1: Risk awareness or what is the potential loss?

Before you go and open a stocks and shares ISA (never mind the provider) you have to be aware that it is extremely unlikely it will only make profits. There will be times when the value of your ISA (your investment) will go down.

You also need to be aware that I’m not talking about your ISA going a little bit down. Research shows that at least once per year there are dips of 10% or more. Scary stuff, uh?

Well, not really. Despite these steep drops most years the stock market recovers and finishes up (there are very few exceptions).

Apart from that, roughly every three-four years we experience what is known as ‘bear’ market. This is when the stock market drops by 40% or more. This is real scary…in the short run. Again, research shows that the market always recovers and over-recovers; but it may take couple of years or so.

Your ISA doesn’t have to behave so erratically but this will depend some of the things we’ll discuss later. What is important is that you know that dips are normal so that you can ‘sit them out’. The worse thing for you and your ISA would be to pull out of it during a dip.

Rule 2: Profit awareness or what is the potential return?

Profit awareness when selecting an ISA is important but not that easy to judge. One thing you could do – when opening an “off the shelf” stocks and shares ISA – is to look at the returns that the provider has achieved historically.

Not perfect but still something.

Rule 3: Tax/fee awareness or what tax and charges you have to pay?

Taxes and fees can obliterate your earned interest; when compounded it gets really scary.

When you select the ISA for you, please make sure that you understand all fees and taxes you’d incur. Remember when I told you that one of the best things about ISAs, is that they are tax-free?

True. You still need to watch these fees. Some managed ISAs can have rather steep fees and even digital wealth managers divide their fees in several categories.

Remember: the lower the fee, the more likely it is that your ISA is a good investment.

Rule 4: Diversity awareness or how diversified is your ISA?

Any investor, even a beginner, knows that diversification reduces risk (there are caveats but we won’t get into these now).

When selecting an ISA you should make sure that it is diversified across:

  1. Financial instruments: your ISA is a portfolio that can contain equities, bonds, real estate funds, commodities and cash. Usually the proportions would depend on your risk tolerance and the type of market.
  2. Industrial sectors. Having a stocks and shares portfolio of companies from one sector is risky.
  3. Location. Experience shows that the stock market rarely collapses globally at the same time. This means that if you own only UK companies (or US companies) you are exposed to rather severe drops in value. Owning shares in companies in different countries can lower the drop substantially.

The ideal stocks and shares ISA formula:

Ideal ISA = (Relatively) low risk + high (potential) returns + low fees + high diversity

I have to tell you, friends, that my Nutmeg stocks and shares ISA seems to be ideal; particularly given that it is also very low maintenance because it is fully managed by the Nutmeg team.

How does you ISA score on the ideal ISA formula? (If your ISA doesn’t match the ideal formula it may be time for you to start looking around.)

photo credit: BPPrice eggs via photopin (license)

Your Freedom Fund is the One Thing to Stop Life Happening to You

Your Freedom Fund is the One Thing to Stop Life Happening to You

Let me ask you a question:

Do you live your life or life keeps happening to you?

Life happens to you at least some of the time? I thought so.

This is the case with most of us; we inhabit a personal space – mental or physical – where our control over the events shaping our lives is fairly limited.

It doesn’t have to be like that. Moving away from ‘life just happens to me’ to ‘I live my life’ is a matter, I’d say, of maturity, confidence, self-esteem and a substantial freedom fund.

Life happened to my sister. I’ll never forget the hot summer day when she broke down in tears and told me what her married life is really like. It was a life of early passion, followed by drink, infidelity and psychological and physical abuse.

‘How long has this been going on?’ – I asked.

‘Over a decade.’ – she mumbled.

‘Why don’t you get out?’

‘I don’t have money to get divorced and how am I going to raise my daughter as a single mother?’

We helped her get out. We paid for her divorce, my parents supported her emotionally and psychologically and we pledged to pay for my niece’s university education (incidentally, one of the best investments we ever made including buying the apartment in Sofia for her to live in).

And if you think that finding yourself in the tight corners of life is exclusively for women, think again.

One of my friends – a man and a very high achiever at that – found himself with nothing but the clothes on his back and the cash in his wallet when he left his wife. He sorted it all out later, as it happens, but living his life was touch and go for some time.

Life used to happen to me as well.

Debt happened to me.

Worrying about how we’ll pay for our modest but fun wedding happened to me.

Heck, life still, occasionally, happens to me. Most of the time though I live my life.

What made the difference?

Many things. I’m older, have more experience, feel more secure and confident and have got to grips with my mortality. Even more importantly, I have choices in life sustained by having a rather generous freedom fund.

Guys, most people will tell you that to ‘take life by the horns’ you need to find yourself, to figure out who you are and what you stand for. This is true. Still, your ability to act on what you find depends on whether you are able to meet the money obligations that come with standing by your principles; in other words it comes down to you having a freedom fund.

Much has been written in personal finance about having an emergency fund; this is money that you keep to be able to pay for life events that may happen to you. A bit has been written about having a ‘f*ck you’ fund.

In my book, positivity rates very highly. So, I won’t be talking to you about starting and emergency fund or building up a f*ck you fund.

Today I’ll ask you to start a freedom fun; this is money that will give you the option to do what you want to do.

You know what the difference is? A freedom fund is about you and your level of control over your life; it is not about what may happen to you or getting your own back.

#1. What is a freedom fund?

A freedom fund is a fund that allows you to do what you want in your life; it allows you to plan and finance life events you value and welcome in your life. Incidentally, a freedom fund would afford you control over the emergencies, the do-dads, in your life as well.

Generally, a freedom fund does ‘exactly what it says on the tin’: it gives you the freedom to live your life on your own terms.

#2. Why do you need a freedom fund

Each and every one of us needs a freedom fund. It doesn’t matter whether you are a woman or a man, whether you have safe job that you enjoy or not. Your freedom fund is the one thing that stands between you and the unpleasantness of life that could happen. Having a freedom fund means that you have a level of control over your life; over what you keep and bring into it.

More specifically, you need a freedom fund because:

Things may change at work

Even if you love your job today employers have a way with changing conditions and doing away with the parts of the job you enjoy.

Employers change their goals, they can change the way in which they go about achieving these goals and this can have a large negative effect on your job and working conditions.

Now, the thing is that whenever your employer, their demands and your job description change you have three possible ways to react.

  • One, you may be completely attuned with the change and fit into the new job description like a hand in a well cut glove. If this were the case you are very lucky.
  • Another way to react, would be to decide that there are other things that matter. In other words, you are not attuned with the change, you have a problem with the new demands of the job but you think that you can still do it because there things on the fringes that still feel right.
  • And last, you can refuse to comply and adjust. In this case you have to leave immediately.

In my experience, when employers change their demands the latter two options are the more likely outcome. If you don’t have a freedom fund this can cause a lot of personal unhappiness and life disturbance.

If you have freedom fund, on the other hand, this can be the best opportunity that life threw you as a curveball.

Things may change at home

Okay, I get it!

You really, really love this guy/girl next to you and you have made public promises to stick by them for the rest of your life. You trust him/her. Until one day he/she gets so mad at you that they hit you.

He/she is apologetic; what’s more you shouldn’t have got him/her so mad, right?

Wrong. Abuse is abuse and you don’t have to put up with it for any length of time.

You don’t have to put up with it particularly and specifically because you don’t have the money to leave the relationship. Now here is where having a personal freedom fund can come very handy.

Oh, and abusers can be men or women.

Life will happen to you anyway

Do know what I mean?

There are life events that are difficult to avoid.

People get born.

People die.

People get married.

Are these emergencies? Not really. These are life events we know will happen (well most of them anyway) but we have no way of predicting when they will happen.

A freedom fund gives you peace of mind; when such events occur it is your choice to decide how to tackle them.

#3. How large should your freedom fund be

A good question but why do you ask me?

The size of your freedom fund is a very personal matter; a matter that only you can settle. How large or small your freedom fund needs to be, among other things, depends on:

  • how expensive is your lifestyle;
  • how long do you take to sort your sh*t out; and
  • your freedom purpose (what is the freedom you want, freedom from what and for what).

I intend to write more about the freedoms we crave and how to calculate how much these cost you. For now, I can only tell you how large is my freedom fund.

I have a personal freedom fund that would allow me to sort out my life were everything to go wrong (e.g. leave job, leave family). This fund is roughly 8 months of my personal living expenses (allowing for accommodation of course).

We also have a family freedom fund. This assumes that I stop working and we stay in the house we live in. We keep approximately a year worth of expenses above our monthly passive income (this is not yet large enough to cover all our expenses).

#4. How do you build a freedom fund

You do it just like you build up any other fund: with patience and persistence. You have to persist with the persistence of a drug addict.

Only caveat is that if you try to save this fund from what you normally bring home every month can be a stretch; and despite all dedication and persistence you may claim other savings and spending will easily take priority.

I’m a great believer in making more money. Build your freedom fund by thinking of side hustle, building it up and keeping at it.

I built my personal freedom fund from my site hustle – all money earned from activities other than my job were directed to build this fund. Our family freedom fund was built by our positive cash flow minus what we keep for investments.

There are novel and imaginative ways to build a freedom fund fast. Some have used GoFundMe.com to garner support and raise funds for their freedom.

While this can, and indeed does, work remember that there are severe limitation. To begin with, you will still depend on the benevolence of others for your freedom and this can be granted or withdrawn. Further, your success would depend greatly on your ability to ‘sell’ your story and not everyone has that. And lastly, you need considerable media savvy because crowd funding is a very noisy space.

In balance, it is better and easier to build your own freedom fund.


We all need a freedom fund. You need a freedom fund and you need it now.

So, stop surfing the net and go get yourself a side hustle; save the money from this side hustle; and very soon you’d have your freedom fund.

Start now. Trust me: it feels better than smooth chocolate melting on your tongue; better than running silk velvet through your fingers.

Do you have a freedom fund? How long did it take to build?

(Please don’t be shy and share.)

3 Ways to Ensure Buying a Business is Less Risky than Other Investments

3 Ways to Ensure Buying a Business is Less Risky than Other Investments

‘But isn’t this too risky? Why didn’t you put this money in index funds or something?’

This is what my friend Tom said after I told him that we bought 50% of a MOT and motor service garage.

(Before I go any further, I’d like to explain for the benefit of my readers outside the UK that ‘MOT’ is an annual vehicle safety, roadworthiness and exhaust emission test.)

Tom is a very financially literate guy; he knows a lot about investing. In fact, I can safely tell you that I wish my son grows up to be like Tom (and hope that this doesn’t sound spooky). Still, there was a bit of explaining to do; on my side, of course.

Why would a university professor be buying a business? And why would she be buying a business that has nothing at all in common with her core competence and expertise?

Frankly, I know next to nothing about cars; can’t be bothered to learn either. I suppose if I were to be buying a business you’d imagine it would be an academic journal; or a publishing house. Or even a blog.

Today, I’ll tell you why buying a business – in my case buying an MOT and motor service garage – is potentially less risky than almost any other investment around.

Okay, correction. This is potentially less risky than any other investment with the exception of the investment you make in yourself.

Now, we all know that investments vary immensely according to the level of risk they entail.

On the one hand of the risk spectrum, we get FX trading and spread betting. These are generally seen as fairly high risk; so much so that many people would tell you that FX trading is a big gamble and you should never do it. My take on this one?

Well, the difference between gambling and investing is about ‘knowledge and discipline’. FX trading can be high risk and you can lose a lot. You could also lower the risk by: a) not risking too much (remember that there is a very large margin); b) select a reliable platform and read carefully all the rules (to help you find a reliable Forex broker you can use different internet resources); and c) never trade currencies that are exposed to direct politics (like the Swiss franc).

Next you have the moderate risk and return investment instruments like stocks and shares, investment trusts and index funds.

On the other hand of the risk spectrum, you get the investment instruments that carry very low level of risk. These include certificates of deposit, different kinds of bonds and annuities. The problem with these is that they are low risk but also (usually) very low return. In most cases it really doesn’t matter whether you keep your money in a savings account or in one of these instruments.

And do you know what?

Buying a business that meets the three conditions I’ll tell you about – in our case, buying a MOT and car service garage – doesn’t fit anywhere in this groups of investment.

This is because it is very, very low risk and (potentially) very high return investment.

Here are the three ways in which you can ensure that buying a business works the same way for you as well.

Buying a Business Rule 1: Make sure the business meets at least one of The Money Principle Criteria

Do you remember when I told you about the three kinds of (nearly) fail-proof business?

Well, you probably don’t remember so if you’d like a refresher check it out here. To recap the three kinds of fail-proof business:

  • Turn rubbish into value (and get paid at both ends);
  • Provide the conditions for success (functioning) in another sphere or occupation; and
  • Ride on dreams, aspirations and vanity.

The MOT and car service garage we bought fits in the second group: it matters little what happens to the car industry or the economy there will be technical safety and other requirements that cars will have to meet. And it doesn’t matter whether the economy is in recession and people’s pockets are getting less deep: they’ll have to have their cars checked and mended if these are to stay on the road.

Buying a Business Rule 2: Keep maximum control

You know what usually bothers me with investing?

That apart from investing in myself, I have very little control over what happens to my investments.

For example, I take great pride in my Exelixis shares doing so well (approximately 75% up since I bought them four months ago) but let’s face it: I just chose a company with promise and was lucky that their trials turned out good.

When buying a business – or a considerable share of it – you have maximum control over how it develops. Growing it may take some learning, you may make some mistakes but it is up to you.

Remember that no one else will look after your business, as you can look after it.

Buying a Business Rule 3: Get all the help you could get

When buying a business – or buying into a business – you need to make sure that you identify what help you need and where best to get it if this investment is to be a great success.

And remember that it is not absolutely necessary that you know the business to invest in it. In my case, when I bought an internet based business I already knew how it works (and I still had people to help me figure it out) – this business returned the initial outlay in eight months (and have been making steady money since).

I don’t understand, or have any interest in, cars and we own 50% of an MOT and service garage. Mental?

Not really. We bought the garage in partnership with someone who knows everything about cars and is as eager as we are to grow the business and make it a great success. We contribute to the best of our competence. For instance, John deals with IT systems and regulation and I beautify the business.

Okay, just kidding – I contribute ideas and financial control.


Investing today is hard and the chances are most everyday investors will lose money. (I’m talking about the ‘traditional’ investment vehicles here.)

And while many would see buying a business, or starting one, as very risky I hope to have convinced you that it is much safer than most other investments: you just have to do the right things by keeping in mind the three ways to ensure that.

Women are Better Investors than Men…But Why Are They Not Investing?

Women are Better Investors than Men…But Why Are They Not Investing?

women are better investors than men

Investment – it’s a man’s world, right? Women are happy to have savings accounts, but when it comes to stocks, shares and other investments, it’s the men who get results, not women.

Thankfully, that previous statement is a complete mythology. There’s no evidence to support the statement that only men are adept at investment. In fact, according to recent research, it’s women who are better than men at investing – despite the popular conception that investment is purely for the boys. Here’s some more information.

Women are Better at Men than Investing – The Facts

Two academics at the University of California found that, when it came to investment, Women were more successful than their male counterparts. An analysis of 60,000 investors on an online investment-sharing platform showed that women got better returns than men – outpacing them by an average of 0.4 of a percentage point. It also demonstrated that women beat men by one percentage point per annum – not bad results, given that long-term results from the stock market average at approximately five percent a year.

Women aren’t just getting better returns either. When profits fall, women are losing less than men – an average of 2.4 percent, compared to 3.8 percent.

As if this wasn’t enough evidence in itself, further research from HFR (a hedge fund specialist) found that since 2007, funds managed by women had returned 59 percent. Funds managed by men during the same time period had returned just 37 percent. That’s a 22 percent difference!

In brief, investing women absolutely rock!

If Women Are Better than Men at Investing… Why Aren’t They Doing It?

Despite the fact that Women clearly have expertise in this field, far less women than men are actually getting involved in investment. Only 10 percent of women have a stocks and shares ISA. By contrast, 17 percent of men have one. A mere seven percent of Women have other investments or unit trusts – for men, this figure is 14 percent.

Why aren’t more women getting involved in investment? There’s a suggestion that Women are more risk-adverse than men, and equate investment with ‘gambling’ – which offers less guarantee of a return. Indeed, figures show that 53 percent of women would describe themselves as ‘uncomfortable’ with investing, with a further 32 percent saying they’re ‘unsure’.

Additionally, the world of investment is also perceived as a very ‘male’ realm – just look at any stock photo involving investing, and it’s likely to be a man in a suit that dominates the image! But there’s no reason why women shouldn’t invest – and research clearly proves that we’re able to get great results.

Getting Involved in Investment – Some Tips

Providing you know what you’re doing, investing your money can produce lucrative results. Here’s a few tips to get you started:

  • Only invest what you can afford. It goes without saying that you should never invest more than you can comfortably afford. Even low-risk investments still involve some element of risk, and there’s always a possibility you’ll make a loss, not a profit.
  • Know the options available. There are many different types of investment – including Forex trading and trading on the stock market. Do your research before you get started and find out which type of investment is right for your personal situation. Here’s a guide to help you.
  • Manage your money effectively. Before you get started, create a spreadsheet, detailing your monthly outgoings and salary. This will help you budget effectively; and identify just how much you can realistically invest each month. Apps like Account Tracker are particularly helpful, and help you manage your spending across multiple accounts.
  • Understand the investment potential. In addition to weighing up the risks, you’ll need to know how to work out potential returns. There are many useful investment calculators online; The Guardian’s version is just one of them.
  • Know the fees involved. A word of warning. Most investment products come with fees -and it’s important to factor these in when you’re deciding which product to invest in. Most of the time, it’s fairly easy to see what you’ll be paying, but in some cases, fees are hidden, so it’s vital to be aware when you’re making your choice.
  • A popular approach is to diversify your investments – which means you effectively spread your cash over a range of different investment products. The advantage of this? If one investment performs badly, you’ve got other investments to rely on instead.
  • Get to grips with your appetite for risk. Some investments are low-risk – which means you’re less likely to lose money, but your potential to make a big return is reduced. Conversely, high-risk investments offer a lot more potential to make serious money – but there’s also a greater risk that you’ll lose it all. You can work out your appetite for risk here.

Do You Think Women are Better than Men at Investing?

Have you recently got involved in investing? If so, how have you found the experience? Do you think it’s a world that’s still dominated by men, or do you know other women who enjoy investing and generate great returns from it?

If you don’t invest – what is it about investment that puts you off? We’d love to hear your thoughts!


Editor’s note: MoneyNuggets is a personal finance blog for women who want to take charge of their finances, achieve their financial goals and secure their financial future. We are passionate about empowering women.

photo credit: Froschperspektive via photopin (license)

When Did You Start Saving for Retirement?

When Did You Start Saving for Retirement?

Saving for retirement has not been on my mind recently.

I used to worry about saving for retirement in my 20s.

Started saving for retirement, through the extremely beneficial pension scheme of UK universities that has just been changed, in my 30s.

In my 40s I worried a bit about saving for retirement but as you, my friend, know what was on my mind was the rather embarrassingly large amount of debt we had accumulated and how to get rid of it. In fact, I thought that I will never have retirement for a short while back in 2010.

Now, I don’t concern myself with worry; I took action. Remember when I told you that we probably should stop worrying about pensions and start thinking about income in our later years? Well, I’ve been building income streams (as passive as one can get, really) like a woman possessed. This is why I don’t worry about pension and saving for retirement any longer: because I started investing for the future.

Anyhow, it matters little whether I concern myself with it or not. What matters is that all statistics show that people in the UK (and the US) have very little put aside for retirement. Which is a very bad place to be given the way state pensions appear to be going.

Did you know that approximately 40% of adults in the UK rely solely on the state pension and have made no other retirement provisions? Even worse 1.4 million of people have no pension savings and are within a decade of retirement.

It is not only about not making – or not being able to make – any retirement provisions. Saving for retirement is also about taking the reins, so to speak, and not delegating your retirement to anyone else. There is enough news about employers pension funds being broke either through mismanagement or through immoral greed.

In this light, researchers (supported by icount.co.uk) interviewed 1,000 people aged between 18 and 25 and asked them when they think they should start saving for retirement.

This Infographic shows the responses they got. The main takeaway from the results though is that people generally think they should start saving for retirement in their 20s but start saving in their 30s.

When did you start saving for retirement? Do you wish you started earlier?

saving for retirement

This is Why I Still Love Nutmeg Enough to Stay with Them

This is Why I Still Love Nutmeg Enough to Stay with Them

Yesterday I opened my Nutmeg account (for my readers in the US, Nutmeg is the UK ‘sister’ of Betterment) and the first thing I saw was a message saying:

In for the long run: history tells us that savvy investors stand firm when markets are choppy!

The next thing I noticed is that there is less money in my account than I’ve put in.

“This is no good” – I though. “This means I’m losing my hard earned cash.”

And you know what?

Smart investor or not, all I wanted to do is take my money out.

This is painful on too many levels.

Whenever I check my investment accounts at the moment, I feel the pain of:

  • Loss of the money it had made;
  • Loss of the money I had saved and invested; and
  • Loss of my hope for early and comfortable retirement.

Too much loss, you see. And I’m not a stranger to ‘loss aversion’ – this is the fear of loss which is, according to some studies, a much more powerful motivator than the hope of gain.

(I’m no economist and have absolutely no intention of becoming one. But ‘loss aversion’ is a very useful notion from behavioural economics encapsulating the tendency of people to prefer avoiding loss rather than expecting gains. Some studies show that the threat of loss is twice as powerful psychologically as the promise of gain.)

Well, I cannot avoid ‘loss aversion’ but I can resist succumbing to it.

If I succumb, I’ll cash my Nutmeg investment and ‘cut my loses’.

Many people have done that; many are pondering whether to do it and when.

I’ve decided to stick with it and here are the reasons why I still love Nutmeg enough to stay with them:

#1. What are the alternatives?


None. Apart from keeping my money under the mattress or in a savings account in the bank. Or I could have an ISA with another provider and get all of 0.8% annual interest. Which of course brings me back to keeping my money under the mattress.

I’m certainly not going back to spending all I earn because investing is a bit problematic.

#2. It is a matter of trust

Whether I decide to stay with Nutmeg or not is a matter of trust. I received several e-mail messages from readers who were so disappointed in the performance of their Nutmeg portfolio that they were considering pulling out. They also have lost their trust in Nutmeg.

I trust them. I was an early adopter but not one who is blindly following the latest fashion – I research things, analyse them and discuss decisions with John (who is rather risk averse and research oriented).

Nutmeg is a solid company during very hard time for investors and markets.

#3. They did return rather well when markets were buoyant

love Nutmeg

Did you notice something interesting on the picture?

This is a screen shot of my Nutmeg portfolio on 13 April 2015; it was returning over 12%. This lasted till August and since then my account has been going up and down so fast that it’s been giving me whiplash.

Apart from knee-jerk that is.

Still the point is that Nutmeg was returning rather well when the markets were buoyant.

Hopefully, the market will recover. If not, we are back to my first point – what are the alternatives?

#4. They have lost but not as much as others

Okay. My account has lost but it is in line with other investments. My Nutmeg account is down by about 13% which means that I’m 0.46% under what I put in it.

This is life and at the moment life in stocks and shares is a bit tough.

#5. My account will recover

Well, not only mine really. This is an overall expectation at the moment.

Statistics is on our side, friends: over the last 100 years the stock market has returned on average 10% annually. There has been only one decade when the return was negative – the one immediately preceding WWII.

I reckon if things are really that bad, my Nutmeg account – and staying with Nutmeg – may turn out to be a very small problem in a sea of misfortune. Now you see, why I’m betting that my Nutmeg account will recover.

#6. It is partially my fault

It is a matter of risk tolerance you see.

On Nutmeg you set the risk you are prepared to take. Risk is set between 1 (very, very low risk) and 10 (stupidly high risk).

Mine was set at 7; you see, this is moderately reckless risk. In the ‘good times’ my portfolio was doing well but when trouble struck it fell as fast as the body temperature of a marathon runner at the end of a race.

John, on the other hand, set his risk to 5 which is moderate. His portfolio is still 5.21% up.

Here we go! It is all about learning, isn’t it?


It is tempting to call it a day at the moment but please don’t. Just remember that in the long run portfolios will recover and returns will go up again.

As for me, I may be tempted as well; I may be starting other investing experiments. But I still love Nutmeg financial enough to stay with them; and to add to my portfolio. One thing I did though is to change my risk level to 5. Will let you know what happens.

Have you invested with one of the new investment platforms like Nutmeg and Betterment? What is your experience? Are you staying or are you leaving?