Investing on a low income.

Binary trading scam: My epic takedown of binary trading

I hate binary trading – I even go as far as to call binary trading a scam Now you may be thinking ‘binary trading scam?’ isn’t that going a bit…

I hate binary trading – I even go as far as to call binary trading a scam

Now you may be thinking ‘binary trading scam?’ isn’t that going a bit far?

Well the dictionary definition of scam is;

‘A dishonest scheme’

And, I certainly feel that Binary trading is presented in a very dishonest way.

Just look at these messages that  pop up in my Twitter and Facebook inbox

Dishonest!

In this article I’m going to explain to you what binary trading is, why it’s a fool’s game and how dividend investing (the investing I advocate) is different.

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Share tips for christmas – Top 3

My 3 share tips for Christmas. Everyone loves share tips – especially if we have a little extra money from Farther Christmas to spend! It can be tough sometimes to…

My 3 share tips for Christmas.

Everyone loves share tips – especially if we have a little extra money from Farther Christmas to spend!

It can be tough sometimes to come across dividend stocks at attractive valuations so I’m going to give you a gift.

Here are my top 3 share tips for you this Christmas!

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What share to buy?

The first question I always get asked by newbie investors is focused around what share to buy. Through some seminars I’ve held at university recently I’ve had the opportunity to…

The first question I always get asked by newbie investors is focused around what share to buy.

Through some seminars I’ve held at university recently I’ve had the opportunity to gain valuable insight into how fellow students invest and what makes a share a buy for them.

But one thing has become clear – the last question newbie investors should ask is ‘what share to buy’.

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Christmas clean up – Sorting out my portfolio

My portfolio was a mess! With many of my early investing mistakes still present in my portfolio I finally decided to bite the bullet. I CLEANED UP! All investors evolve…

My portfolio was a mess! With many of my early investing mistakes still present in my portfolio I finally decided to bite the bullet.

I CLEANED UP!

All investors evolve over time. We learn from our mistakes and adapt our strategies accordingly. But, what should you do if past mistakes are still evident in your portfolio?

It can be a painful process, that costs money in the short term BUT if a stock’s fundamentals mean it no longer fits with your overall strategy, couldn’t the capital tied up in it be deployed somewhere else?

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“Investing is just like gambling” No. It really isn’t.

The first thing I often hear when people learn that I’m an investor is that’ “Isn’t that just glorified gambling?” Fed up of constantly explaining why it isn’t, I decided…

The first thing I often hear when people learn that I’m an investor is that’

“Isn’t that just glorified gambling?”

Fed up of constantly explaining why it isn’t, I decided a blog post was necessary.

The main reason why many think that investing is a form of gambling is because they don’t know the difference between trading and investing.

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Take pleasure when others spend big – Debunking their spending

  Sometimes, frugal living is tough, and one of the hardest things about frugal living is watching others spending big. It’s sometimes hard to watch as your friends go on…

 

Sometimes, frugal living is tough, and one of the hardest things about frugal living is watching others spending big.

It’s sometimes hard to watch as your friends go on expensive holidays, buy expensive cars (mostly on finance) and enjoy the finer things in life.

BUT, we should take pleasure when others spend big!

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6 tips to remain social at uni whilst saving money – Eating out.

One of the biggest challenges I face at uni is how to save money but remain social. I’m often asked by friends to go out for food, coffee, trips and…

One of the biggest challenges I face at uni is how to save money but remain social.

I’m often asked by friends to go out for food, coffee, trips and of course nights out!

If you say no in these situations, you’re going to spend your time in uni with little friends.

So here are three useful ways in which I save money whilst remaining social.

Eating out  

  1. When asked to eat out, always try to do so before 5:30pm.

    The vast majority of restaurants have great deals on between lunch time and the evening period. Take advantage of this.

  2. NEVER split the bill amongst friends.

There’s nothing more annoying than going out for food, ordering a salad and tap water then ending up paying for Sandra’s steak and glass of wine.

  1. Do your homework and bring the correct change.

    This is a great trick I learnt during my first year. By looking up the menu online you can bring the correct change (or really close) to the restaurant. This avoids the bartering of;

    “Let’s just split the bill, it’s easier”
    “ Yours was £8 so just chuck me a tenner”

    Simply give your share of the bill and relax.

  2. Don’t let anyone buy you a drink.

    This may seem counter-productive. I mean, who doesn’t want a free drink? The problem when someone buys you a drink is that it creates an atmosphere where you socially ‘owe’ the other person a drink.

    When it comes to the dessert and they fancy another pint or a coffee, guess who’s paying!

  3. Stick to tap water

I know, I know. It’s lame, but I’m seriously fed up of paying £2.50 for an orange juice or pint of coke.

  1. Stick to one course

Again, a lame choice but by sticking to one course you can cut your bill in half.

Some of these tips are more obvious than others but stick to these tips and you won’t bust your budget on dining out.

Being frugal doesn’t mean being unsocial.

Keep an eye out for my next article on frugality: How to remain social at uni whilst saving money: Nights out.

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A perfect storm, valuation + Brexit – Big declines are coming.

The market has been on an outstanding streak as of late. Shrugging of Brexit and an interest rate rise in the USA to get close to its all time 7000+…

The market has been on an outstanding streak as of late. Shrugging of Brexit and an interest rate rise in the USA to get close to its all time 7000+ high last Thursday. But, I feel that the market is about to enter an exciting period of decline.

Finally, it seems that common sense is prevailing and the market is waking up to realise that it’s grossly over valued.

JUST TAKE A LOOK AT THE FTSE’S 5 YEAR P/E!

screen-shot-2016-09-12-at-09-13-06

As we can see from the above graph, the FTSE’s price to earnings ratio has spiked massively from bumping around under 15 to over 35.

Simply put, the FTSE has been driven by demand as opposed to underlying earnings growth from its constituents.

A quick glance at some FTSE constituents valuations will further illustrate the eye watering prices being paid by investors for stocks in pursuit of yield and in hope of earnings growth.

Brexit will smash high p/e stocks.

Investors have shaken of Brexit nerves but this is only relative to pre-brexit market levels that were already overvalued. (As shown on the FTSE 100 5 year illustration above)

When investors buy high p/e stocks they are buying future growth prospects. These prospects and material. Simply best guesses. When these don’t deliver, these stocks will tank.

Why?

Consumer confidence has dipped since the Brexit vote but action by the BoE has helped steady nerves.

screen-shot-2016-09-12-at-09-25-06With a clear decline since Brexit, BoE action has led a recovery in consumer confidence since then, but confidence remains in negative territory.

Further to this, Brexit hasn’t even happened yet and the full effects of the vote are yet to be realised.

I believe that investors are relying on a false self sense of security simply hoping that the UK will get a good deal and that BoE action will avoid a recession. BUT, once article 55 is triggered and the negotiations properly begin consumer confidence will once again decline.

When consumers lack confidence they don’t tend to spend money on non-essentials. Instead, they consolidate.

With less money being spent by consumers, inflated p/e ratios suddenly become harder to justify as uncertainty weighs on forecasted earnings.

Just look at what happened to ABF’s share price on the news that Brexit related events would weigh on profits;

screen-shot-2016-09-12-at-09-30-46

 

So what do these two things have to do with each other?

The first section of this article outlined that the FTSE 100 was grossly overvalued on a historical basis even before Brexit.

The second section of the article outlined declining consumer confidence that will lead to lower consumer spending. With lower spending and more economic uncertainty due to Brexit, high p/e stocks will find it hard to meet their forward valuations.

Applying this logic one could conclude that the FTSE100 will find it hard to justify its high valuation and correct to a more historical average of a p/e ratio of around 15.

Kicking the FTSE while it’s down?

Another worry for the FTSE lies across the atlantic, in the USA.

I have argued for quite some time that the FTSE’s valuation is also being propped by income seekers buying high yielding stocks. This is why I sold BP.

Although future rate rises keep getting kicked down the road by the federal reserve, great unemployment data from the USA may lead to a rate rise sooner rather than later.

If US rates were to rise, investors may begin to switch their money from these risky high yielding stocks to safer bank accounts to fulfill their appetite for capital appreciation.

Conclusion

The lesson remains, never try to time the market. Even with p/e ratios this high, I have still been buying.

But, I think the declines of Friday and Monday are exciting signs of a correction that will hopefully lead to an over reaction on the downside for many excellent, but pricey, dividend stocks!

I’ve got my eye on picking up some stocks;

USA stocks: JNJ + MCD
UK stocks: RB, ULVR, WHTB

Don’t panic! This is an exciting time for dividend investors. TIME TO GO SHOPPING!

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Undervalued stock? Don’t wait for a correction BUY NOW!

Perceived ‘discounts’ obtained by waiting for a stock’s price to drop are often less than anticipated due to missed dividends Is the discount obtained from waiting for a stock to…

  • Perceived ‘discounts’ obtained by waiting for a stock’s price to drop are often less than anticipated due to missed dividends
  • Is the discount obtained from waiting for a stock to drop worth the risk of not owning it at all?
  • This article will show how waiting just 3 quarters for a 5.5% discount erodes the real discount by 2.2%
  • Investors waiting for a price to drop are fighting against time and the market.

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“The market is overvalued”

“A correction is looming”

“We’re going into recession”

These are some phrases I’ve become used to reading, especially over the past few months.

Some ‘investors’ it would seem, are putting of buying shares due to their perceived valuation of the market.

But investors should always remember that;

Time in the market beats timing the market”

Why you shouldn’t try time that market

When I first started investing, I went at it – trying to time the market and shares.

I would insist, for example, that I would only buy a stock, let’s say ‘stock x’ if it dropped from £1 to 90p (a 10% discount).

But what I soon realised is that most shares wouldn’t drop, and the market correction that I was predicting along with many analysts just wasn’t happening.

In fact, market corrections have been predicted for over two years now.

We’re still waiting.

If it’s undervalued buy it – even ‘if it has further to drop’.

Let’s take a real life example.

A friend of mine really wanted to buy some shares in Kraft Heinz in January last year. The shares, having just come back from a price below $70 looked attractive, but he told me that he’d wait until the shares dipped below $70 again before buying in.

That never happened and now the shares sit at close to $90.

A great company with an attractive yield missed, simply for a few $.

A current example is Flower Foods which currently sits at just above $15. At this price, the stock has a dividend yield of 4.2% and is trading at low p/e multiples compared to its history.

Yes, the company currently has a few issues but I was amazed to see investors saying they are “waiting for the price to drop further”.

Some speculators have noted a current legal issue facing the company and the way it employs its drivers as a factor for further price reductions.

This is a dangerous strategy which ignores the fact that the shares are currently overvalued. There’s a very simple message for these investors;

Let’s take a look at how much is saved by waiting for a mear 5% drop in the price of a stock.

 

 

Flower foods at $15.71 vs Flower foods at $14.85

 

Let’s say an investor will only buy Flower Foods below $15. I bought in at $15.71, therefore if the investor manages to predict the market (against the odds it would seem) and buy in at $14.85 then he/she has achieved a 5.5% right?

Wrong.

Here’s why that number is in fact only 3.3%

flower

 

 

Point one shows the shares at $23.50. At this price, I would not have considered purchasing the shares, deeming them to be too expensive.

At $15.71 on February 12th , the share’s are looking undervalued and I decide to pull the trigger and buy. (Let’s say 100 share to keep the maths simple).

Scenario 1 Buying in February ($15.71 a share)

In March I receive a dividend of $0.145 per share.

March income = $0.145 x 100 = $14.50

I reinvest the dividends on the 18th of March (payment date) to purchase 0.77 share’s of Flower foods.

In June I receive a dividend of $0.16 per share.

June income = 0.16 x 100.77 = $16.12

I reinvest the dividends on the 23rd of June to purchase 0.9 shares of Flower foods.

In September I received a dividend of $0.16 per share.

September income = 0.16 x 101.67 = $16.27

I reinvest the dividends on the 8th of September (for illustrative purposes as dividend is paid on the 9th) to purchase 1.07 shares of Flower Foods.

I now have 102.74 share’s of flower foods for my initial $1,571 investment.

Scenario 2 – Buying in August ($14.95 a share)

On August 11th share’s drop below $14.95 so investors who waited for the shares to drop below $15 buy.

They buy 100 shares for $1,495.

The investor receives the September dividend of $0.16

September income = $0.16 x 100 = $16

The investor reinvests the dividends to purchase 1.05 shares of flower foods.

The investor now has 101.05 shares of flower foods for their $1,495 investment.

Result

Cost per share;

Me: 1,571/102.74 = $15.29 a share
Investor 1: 1495/101.05 = $14.79 a share

% Difference

3.3% saving in favour of ‘investor 1’

So, it appears that taking the risk of the share price increasing has saved investor one a mere 3.3%,

But, extend this over a few more quarters and the margin of discount decreases.

Here was an example of three quarters of dividends, what if the wait was over 6 quarters.

The lesson is simple, the longer the time period, the more the cost of not investing is.

I like to be sure, so why not lock in that undervalued dividend paying stock and get your money to work!

This time investor 1 got lucky. But will Flower foods drop below $13.50 or $10. Who knows? Frankly, I don’t want to wait to find out.

Conclusion

The longer one waits before buying a dividend stock, the more the cost of not investing becomes.

The above example begs the question, Is waiting for the price to drop really worth risking a guaranteed purchase of an undervalued company?

Isn’t it better to lock in a deal and put my capital to work with a 4.2% yield as opposed to the close to 0% I’d get in the bank at current interest rates?

 

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The devastating effects of a damp student let.

There are so many things students need to get right before coming to uni. We have to make sure we have to make sure we have all the textbooks for…

There are so many things students need to get right before coming to uni.

We have to make sure we have to make sure we have all the textbooks for the year ahead, enough money to scrape by on and that we bring everything we need from home!

But, there’s one aspect of student life that’s often overlooked.

Housing.

Your student house is where you’ll inevitably spend most of your student life and getting the right house is key for health and in turn motivation.

Renting a damp house could have devastating effects on your health and finances, as I found out.

My single biggest mistake.

In June this year I made the biggest mistake of my student life.

I didn’t do the necessary checks, got excited by the size of a bedroom and ended up renting a damp house.

On the 8th of June I moved in, along with all my belongings to the new house.

What proceeded was the worst 2 months of my adult life.

 

First signs of damp

To start, everything appeared fine, I moved into a large space and all was well.

I unpacked, stored my things, opened a celebratory glass of wine and celebrated what I thought was a ‘gem’ of a find.

Smugly thinking I’d gotten a good space for the price I was paying, reality soon smacked me in the face.

Slowly but surely, over the next few weeks I found I was waking up feeling very tired.

I couldn’t help but feel like my mind was clouded and that I was slowly but surely losing my enthusiasm and edge.

Thinking this was just a case of a cold, flu or poor diet I soldiered on without knowing that the particles of bacteria filling the house could have been seriously affecting my health.

It was only when my parents visited that I became aware of the damp. When my mother visited the flat for the first time she immediately exclaimed that “It smells of damp in here”.

Unbeknownst to me, I had acclimatised to the horrible, stingy damp smell filling the house.

Further investigations with a damp meter showed very high levels of damp in the property, especially the living room.

 

Things get worse

After reporting the damp problems to the estate agents involved, it was weeks until they finally agreed that there was both penetrating and rising damp at the property.

Those terms, alien to many students, simply mean that there were two causes of damp tag-teaming my health!

After returning from a three week trip to China, (staying in a dry property) I was met with a stinky damp house ready to take on my health again.

The wallpaper in the living area began peeling, the tops and bottoms of the walls were visibly wet in the corners and sat in the middle of this room was me, breathing in damp that made the pollution in Shanghai feel like fresh country air.

As an asthmatic, my breathing became much more laboured over the coming weeks as the landlord eventually agreed to let me move out.

By now I was waking up tired, napping at 8pm and suffering from a very clouded memory, meaning that I was struggling to study for my dissertation.

Chesty coughs became a problem in the following weeks and I became a much less patient, irritable person to all.

I was going into work in damp smelling clothes, with baggy eyes and low energy levels. Not the impression I really want to be making to my peers.

Desperate to get out of the house, I would often sit for hours in coffee houses, the uni library and walk aimlessly around Swansea just to feel I could breathe. I spent tens of pounds on coffee and junk just to escape – not what the frugal student wants to be doing!

Moving out

Finally, just four days ago, I moved house.

Having to take the first dry suitable property we saw means I had no room to negotiate on price.

I also had to pay another admin fee and am now left with two lumps of money in deposit protection schemes as I eagerly await the inevitable unreasonable deposit reductions from the landlord of the property – that students inevitably suffer.

BUT, My first night sleeping in a dry room was pure bliss. Waking up a few days after I felt like I has been reborn. I had energy again, enthusiasm and most importantly the drive needed to complete a degree.

Whilst it would be very hard for me to prove that damp caused the symptoms I suffered over the past two months, I am convinced it was the source.

No student should be made to suffer damp housing – don’t get caught out!

 

Avoiding damp 

I viewed several properties before moving from the damp one, making sure I got it right this time.

I noticed two ‘tricks’ that may have been used by agents and landlords trying to mask damp.

It’s worth you keeping these in mind when viewing properties.

 

  1. Newly painted properties.
    If a property has been newly painted then this could make damp much harder to spot. The damp house I moved into had been freshly painted meaning that the damp patches weren’t visible upon viewing.
  2. Does the property smell strongly of anti-odour spray?
    Another trick that may make it harder for students to spot damp in a property is when the property has been sprayed with anti—odour sprays such as ‘oust!’ before viewing, thus masking the musty smell of damp.

Here are some signs of  damp that you may want to look out for;

  1. Visible algae and mould – especially in the corners of rooms. (Ask if you can move sofas and tables to check corners)
  2. A musty, damp odour
  3. ‘Lifting’ wallpaper
  4. Changes in plaster up to one meter above floor height

If you’re really keen you could even buy a damp meter although the accuracy of these varies (especially with cheap ones not used in the industry).

Lessons

As students we are faced with a mountain of challenges and a damp home will make this a lot worse.

The NHS has a useful page on the effects that damp can have on your health:

Having to move house mid-study can have devastating effects both financially and academically.
A damp house could be the difference in grades attained, I have no doubt that the ‘clouded’ mind I experienced affected my ability to perform academically (Luckily I had no exams).

Final word

This blog details my own experiences and it’s worth noting that I have absolutely no qualifications or experience in dealing with/detecting damp.

If you think your student let is suffering from damp then please seek advice from your Students’ Union/University advice centre, The housing charity Shelter or the Citizens advice Bureau.

The tips contained in this article are things that helped me and may not necessarily be helpful to others.

 

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