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stories & adventures

How I invest 40% of my salary. What, when and where I buy.

. 7 min read .

Lots of people want you to think that investing is super hard. In all honesty, it is super simple and easy. It only requires some setup at the beginning and a few manual transactions per month.

I've been investing about 20-40% of my salary for the past 3 years in a mix of index funds, tech stocks and crypto. My cryptocurrency investments are currently at x30+ return. Index funds at 100+% and tech stocks at ~200%.

To put simply,  the money I invested in the past 5 years are now x10 in value.

I'll run you through everything I do and everything I guide my friends who want to start investing to do.

The only 5 terms you need to know to invest are:

  • stock: a piece of an individual company like Apple, Google, BP, Shake Shack
  • index fund: a collection of stocks. For example S&P500, DOW100, NASDAQ. These are grouped together according to geography(DOW = UK), nature of business (NASDAQ = tech) etc.
  • limit order: buying by setting the maximum value you are willing to buy at
  • market order: buying at the market value
  • cash: what you need to pay in return for a stock or index

Ali explains everything in such a brilliant way in the video below that I highly recommend watching before continuing.

The Stack

CORE: Investment Services

My salary is distributed to 3 investment branches: Vanguard, Degiro and Coinbase.

The choice of these platforms is a combination of the lowest fees available, availability of the financial products (like stocks and index funds) I want to invest in and good UX.

  • Vanguard for Index Funds Only
  • Degiro for Individual Stocks + NASDAQ (index fund)
  • Coinbase for cryptocurrencies (Bitcoin, Ethereum etc.)

INFRASTRUCTURE: Banking

Banking services enable money to flow between accounts and investment services.

  • A bank account. I use both a Singapore bank where my salary goes in and Natwest, that is used to make transfers in pounds into investment services.
  • Transferwise: to transfer Singapore $ to pounds and euros for the investment services that only accept trading with some base currencies like dollar and pound (if you have those, you won't need this step)
  • Revolut: to deposit money to Coinbase.

The strategy

Passive investing primarily based on Index Funds and supplemented by stocks and crypto.

Method: Passive Investing

Passive investing means that you buy and wait. Pretty much you don't sell for a long time (i.e. years). The opposite of passive is active investing, which means your buy and sell the assets frequently, over the course of a few weeks, days, hours, or even seconds.

Passive investing is what I do and what I recommend to most of my friends to follow. It requires minimal time investment and know-how. Buy and let them hatch.

Products: Index Funds, stocks + crypto

Index funds 'follow' a collection of companies. They are considered a safer and more straightforward way to invest compared to stocks. Index fund investing alone would be what I recommend to most of my friends. If you do one thing, focus on index fund passive investing. Stocks and crypto are bonuses.

Stocks are for the person who is a bit more knowledgeable and opinionated. They require some industry know-how and some business sense to pick the right stocks.

Crypto is for the rebels. The people who want to believe in a decentralised future where financial institutions are to be disrupted and have less control. I invest in crypto for ethical reasons as much as for the financial upside. The crypto market is highly volatile. Expect huge drops and spikes.

On a good day in the crypto market. Where stocks would fluctuate to up to 2% in a day, the crypto market can move 10% within hours. Bananas.

The flow

As soon as my salary is in every month I automate (standing order) a big transaction out to Transferwise that is equivalent of 40% of my income.

From there I make 2 manual transactions from the Transferwise app: to Revolut for 15% of those funds and Natwest for the rest. Thankfully, all of these transactions happen almost instantly with minimum fees.

So now we have money in the bank accounts, ready to transfer to the various investment services.

CRYPTO.
From Revolut I transfer cash to Coinbase manually. I use Revolut and not Natwest here because, some banks, like Natwest, will block the transaction. In Coinbase  I have setup automated purchases so a set amount automatically goes to Bitcoin and Ethereum purchases at a set date per month.

INDEXES.
From Natwest I have setup an automated monthly payment to Vanguard.
Vanguard purchase is also automated. The funds automatically go to a specified breakdown of index funds that I rarely change.

My current portfolio breakdown. I would say I am a bit too high on Emerging Markets & Small Cap.

STOCKS + INDEXES.
For Degiro I wait for the cash deposit email and then I manually invest in both individual stocks(~75%) and NASDAQ (~25%).

My investment breakdown in NASDAQ & individual -primarily tech- stocks.

This might sound complicated but it is nothing more than a couple of button presses. If you know how to make a bank transfer, you are all set.

How to set-up

Account Creation

  • Sign up for degiro and Vanguard
    If not check freeetrade
    If not check revolut
    If not check saxobank
    If not, Google it. You need something that mainly allows you to buy index funds.
  • Do all verifications they ask you. In 1-2 weeks you should be ready to go.
    Turn on 2FA in all of them.

Now it's time to buy invest!

Portfolio Allocation Strategies

NEWBIE | Index-only. NASDAQ + US Index Fund
Start with 100% Index Funds instead of individual stocks.
Your choices here should depend on your belief in that market for the future. For example:
– NASDAQ is if you believe in tech (I buy this from Degiro but I think it is also available via Revolut)

– S&P is if you believe in the American Economy (Degiro or Vanguard or Revolut)

I would recommend you start w 50-50 split of NASDAQ & S&P500 and/or US Equity Index Fund (Vanguard).

To do that either link your bank account and setup a monthly regular with Vanguard like below:

Here I am distributing investments in a number of indexes. More heavily on US ones less so in Asian and, EU, Emerging Markets and Small-Cap.

Alternatively deposit cash in your investment account in Degiro or Revolut via a manual transfer or by setting a standing order via your bank account and purchase manually when the cash is in your investment account. This is so easy you can do it in 30 seconds.

Process to buy index or stocks on Degiro app.

AMATEUR | Index-only. NASDAQ + US Index Fund
45% - US Equity Index Fund and/or S&P500
45% - NASDAQ
10% - FTSE Developed Asia/Europe or Emerging Markets.

NORMIE | Index + tech stocks.
40% - US Equity Index Fund and/or S&P500
40% - NASDAQ
20% - Tech Stocks

Reminder, you can use Degiro or Freetrade for individual stocks.

Big -monopoly- players like Apple, Amazon, Google are always a good bet. Ask yourself: what company will probably be around in the next 10 years. Buy that. Try to invest in an industry you are familiar with. If you don't have one, stick to indexes and you are golden.

RISK-TAKER | Index + tech stocks + crypto
35% - US Equity Index Fund and/or S&P500
35% - NASDAQ
20% - Tech Stocks
10% - Cryptoassets

Signup for Coinbase. Start with 100% Bitcoin. If you feel like diversifying, go for 80-20 split of Bitcoin - Ethereum. If you really want to do this properly, get a physical wallet and store the majority of your assets there.

Now... do the above steps religiously, no matter the ups and downs.

The psychological game

Rollercoaster

If you notice in the above Degiro video I made a loss of 36 pounds on that day. There were days that I woke up to see bitcoin skyrocketing and making my monthly salary's equivalent in a day. But some days I woke up to a red -400 change. That is more than I make in my job and I lost it in the stock market in a day. It doesn't matter. Do not panic sell at any point! You are playing the long game. Let it sit and accumulate.

A rather bad day, a very good day, today.

Regret

Also a note on regret. If you put your money on say bitcoin and the next day it exploded up, you will have regret for not buying more. If you put your money on say Facebook and the next day the stock plummeted 5%, you will have regret for buying a day earlier. By knowing this fact you can be a bit more peaceful and embrace this subtle regret. Just remember that a decision's quality cannot be judged in retrospect. At the time you took the decision that was the best you could do. That is more than enough.

Negative Visualisation & expectations

My attitude is this: I expect that by investing I am throwing money in a black hole dug in the ground and that that money I will never see again. I am mentally prepared to lose it all. Try to have a similar attitude.

Lower your expectations.
Be consistent.
Be patient.
Ride the roller coaster 🎢