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We’re based in Ramsbottom, UK

Mark Sekree Posted:
2 years, 11 days ago (November 12th 2015)

Financial Advice

What’s your attitude to money?

It turns out money is freedom to me (exemplified by that holiday snap), what’s it to you?

Psychology, and particularly the psychology of money, fascinates me. EZ ISA isn’t designed just to make you richer, but to make you better off- more comfortable with your financial situation and more confident that your money is well handled and going to be there when you need it.

Our investment managers, SEI, are totally on board with this and at a recent conference had a Professor of Psychology speak. I would like to share with you one of the exercises I thought was brilliant.

It’s based around a two minute quiz which you can see as and image here or download as a spreadsheet here. It’s well worth taking a quick look at.

Not to ruin the surprise I’m going to put the results, and what they might mean, on a separate page. Just click through when you’ve got your score under each column!

Mark Sekree Posted:
2 years, 18 days ago (November 5th 2015)

Investment is not gambling!!

roulette wheel

I need to keep explaining this to my mates and it drives me a bit nuts, so explaining the difference here will hopefully help everyone.

Gambling is known as a ‘zero sum game’- i.e. if you add up all that everyone wins and all that everyone loses you come to zero (or less if gambling through an institution like a casino or bookie that takes a profit from you). Here it really is impossible to make money without someone else losing money.

If you sit down on a Saturday night for a game of poker with ten friends and you each chuck in £100 no matter what happens there won’t be more than £1,000 coming off the table; it doesn’t matter how it’s split, how good you all are at poker or how long you play for.

Investment is not like this. It is more like taking that £1,000 and giving it to a friend in business to make his business more profitable- maybe you help him buy a bigger van so he can do more deliveries in a route, buy supplies in bulk at a lower cost or employ someone to help them out. Whatever they do the idea is that it’s possible for them to make more money by spending some money- literally investing in their business. Once they are making more money they can pay you back plus some extra- they get more and you get more; everyone’s a winner.

Everyone winning is a brilliant thing, and this has driven economic growth and prosperity over the years. There are a couple of problems though. Firstly risk- you are not absolutely certain that giving the money to the friend will mean he makes more and can pay you back, let alone with profit. Secondly, the spoils of this growth go to the people who have money to invest in the first place.

The first problem can be overcome by expertise (effectively what investment ‘experts’ are doing is dishing out the money to the people who are mostly likely to be able to use it well and return it with profit), diversification (if you invest a little bit into loads of companies it’s unlikely they will all be unlucky) and acceptance (not all investments are going to come off all the time).

However risk can be overblown- yes investments can shoot up and down, especially in the short run, which can be scary, but to give an idea of ‘very bad case’ scenarios I looked at the total return over 10 years from the very worst fund in the very worst part of the world to have invested in- the Threadneedle Japan fund- and even this one has returned an extra 30% over an initial investment over the last 10 years, far from losing everything. In a more balanced sector (more reflective of SEI) the worst fund is up 75% over 10 years, the best 300% and the average 100%. So yes, there is risk but these days it tends to be shouted about more than the potential rewards.

The second problem can be overcome by educating people to the benefits of saving and investing rather than borrowing and gambling!!

Naturally EZ ISA is the perfect place to start…

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