ANDY BELL: Forget bitcoin, my advice is to get rich slowly

Greed and ignorance are the lubricants that make the investment world go round. Currently, I cannot present a credible thesis as to why someone should invest in cryptocurrencies. It defies logic.

In recent months, we have also seen numerous novice investors using GameStop and other shares to hit hedge funds with what is known as a ‘short squeeze’.

A short what? Basically, a group collectively buying shares in an ailing company to force the price up beyond any common-sense valuation. 

The hedge funds which had bet against the company (by taking a short position, which means borrowing shares they don’t own) then have to buy shares in the company to close out their position.

Margot Robbie explains how mortgage bonds work in the 2015 movie The Big Short

This drives the price even higher. The victims aren’t the hedge funds, but novice investors who are late to the party and are left holding the parcel when the music stops.

The Big Short, depicting the 2008 financial crisis, is one of my favourite films. Recognising the challenges of making a movie involving some very technical concepts, director Adam McKay enlisted Australian actress Margot Robbie to explain what a mortgage bond is, while sipping champagne naked in a bath.

Anthony Bourdain, the New York chef who died three years ago, also explained beautifully what a Collateralised Debt Obligation – or CDO – is: worthless offcuts of fish destined for the bin, mixed with some sauce and sold as an expensive seafood stew.

Far more interesting and insightful than a collection of sub-prime mortgages packaged together and sold as an AAA high quality mortgage-backed security.

When I set about writing my book The DIY Investor, I tried to follow the lead of Margot and Anthony. The best lecturers I had at university were those who could explain the most complex of subjects in a way that could be easily understood.

I reached a point where if I didn’t understand something, I concluded that the person explaining it probably didn’t understand it as well as they should. That means that readers of my book have an excuse that if they don’t understand something in it, it is my fault and not theirs.

So where do we start? One of the over-arching observations gained from the 26 years I’ve been running my online investment platform AJ Bell is that you can make investing as simple or as complicated as you want to. I favour simplicity and have always tried to make it as easy as possible for customers.

Admittedly, some rules and regulations do make things unnecessarily complex but investing is more accessible now than it has ever been.

There is no magic formula. The path to investment success will vary depending on your individual goals but there are several things I’ve learnt that I think all DIY investors should consider.

'It defies logic': AJ Bell co-founder Andy Bell on the cryptocurrency investment craze

‘It defies logic’: AJ Bell co-founder Andy Bell on the cryptocurrency investment craze

1. Be patient 

Investing is not a get rich quick scheme. In fact, it is a way to get rich slowly. 

2. Why invest?

Starting without a sensible set of objectives is like going for a drive without deciding where you are going. Think about what you want to achieve in the context of an outcome and a time-frame.

It may be to pay off your mortgage in 15 years, fund a world cruise when you are 60, or provide an annual income of £10,000 from age 55 in today’s money.

Starting without a sensible set of objectives is like going for a drive without deciding where you are going. Think about what you want to achieve in the context of an outcome and a time-frame. 

Don’t forget about inflation and be realistic. Also, think about what your investment strategy will be. 

Will you invest in shares directly or leave it to expert investment fund managers to look after your money?

Then consider how much risk you are willing to take, which is a bit more difficult to quantify, but most investment funds come with a risk rating of some form.

Think of your outcome as the destination, your investment strategy as the route you are going to take, and your risk appetite as how fast you are willing to drive to get there. 

3. Don’t miss out on valuable tax breaks 

You and your spouse or partner can each pay £20,000 each year into an Isa (tax-friendly individual savings account); £40,000 a year into a Sipp (self-invested personal pension); and don’t forget Junior Isas for the kids, where you can contribute £9,000 per child per annum.

If you are aged under 40, think about whether you should opt for the Lifetime Isa to take advantage of the 25 per cent Government bonus on up to £4,000 of annual investment.

Also, make the most of your annual £12,300 capital gains tax allowance by cashing in sufficient gains each tax year – not forgetting that you can freely move investments between spouses and civil partners. But don’t let the tax tail wag the investment dog.

Spread your risk: A common misunderstanding is mistaking owning several different funds for a diversified portfolio

Spread your risk: A common misunderstanding is mistaking owning several different funds for a diversified portfolio

4. Diversification doesn’t mean having lots of investments

If you were to follow one rule when investing, I recommend diversification – spread your risk and don’t put all your eggs in one basket. A common misunderstanding is mistaking owning several different funds for a diversified portfolio. Owning five UK equity funds does not mean you are properly diversified.

In fact, you are probably just buying the same underlying investments five times over.

Diversification is about understanding how different assets correlate with each other and spreading risk across asset classes and geographies.

Equities, gilts (UK Government bonds), bonds, property and cash are the five main asset classes and if you have a spread of these across different territories you are probably well diversified.

Most investment platforms now provide best-buy lists to help you filter the best funds, as well as X-ray tools that allow you to analyse a fund’s underlying holdings by asset class and geography.

5. Do not ignore charges

Costs eat into your investment returns like a moth eats your clothes. It is easier than ever to compare charges between different funds and investment platforms – and we are not talking about cost saving at the margin. 

One fund manager or investment platform may be charging two, three or more times what a comparable competitor may be charging.

Buying direct equities is probably the cheapest option, but comes with the most risk.

If you, like the majority of DIY investors, choose to invest in funds, then you can invest in active funds, where an investment manager makes calls on which investments to buy and sell.

Or you can invest in the far cheaper passive funds, where the fund just tracks an index or basket of indices.


1. It is important to take the emotion out of investing 

Human beings are psychologically programmed to be bad at investing. Buying at the top of the market or selling at the bottom are two classic mistakes that inexperienced investors make.

While not everyone can afford a financial adviser, one of the overlooked benefits is they help you hold your nerve in times of market volatility, and the good ones may even anticipate a market correction before it happens.

2. It is important to monitor your investments regularly, but be careful not to obsess over short-term stock market movements.

A ‘sneaky peak once a week’ is a good rule of thumb for a long-term portfolio.

3. Don’t invest in something you don’t understand. 

This is difficult to apply in practice, as even expert fund managers don’t truly understand the businesses they invest in. But the principle is a good one.

4. If you are investing in shares, you are buying a part of the company, so it is important to understand the basics of how it operates, how it makes money and the outlook for the business.

If you are investing in a fund, make sure you understand its investment objectives – then sit back and leave the fund manager to do what they do best.

5. Having a good understanding of the investments you hold and how they are expected to perform can take some of the mystery and emotion out of investing.

Simple is good. Set realistic goals and understand the level of risk you are comfortable with.

No one will take as much care of your money as you will, but don’t forget that as a DIY investor, if it all goes wrong there is only one person you can blame.

And remember, don’t be greedy and don’t be ignorant.

Now get his book for free 

Andy Bell is co-founder and chief executive of AJ Bell, one of the UK’s largest investment platforms. He has observed the investment journeys of thousands of DIY investors and is author of the much-acclaimed book The DIY Investor.

It is on sale from website and costs £17.99 (£14.99, ebook). But AJ Bell has teamed up with The Mail on Sunday to give away 500 FREE copies.

To request your copy, email: or write to Jeff Prestridge, The Mail on Sunday, 2 Derry Street, London W8 5TT.

You must provide your name and address, and stipulate whether you want the hardback or digital version of the book. 

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