Are you ready to invest?

This is critically important. Don’t start investing till you have a solid base and are ready. The reason we say this is we have met people with investments earning 10% and debts costing them 24%. This is CRAZY and you need to get out of expensive debt, get an emergency fund in place before you get going.

The emergency fund prevents you from having to sell off assets at a bad time, when the market is down. This is an important step. Read Are you ready to invest to check you are ready to get going on the investing.

Why invest and not save?

You want to make your money work hard for you.

It is really common for people to put saved money in a high interest savings account. There’s nothing wrong with having savings and your emergency fund will need to be in an accessible account. This could be a savings account, premium bonds, or something else where you can get at it quickly. But cash is not inflation busting in fact, cash is a guaranteed way to lose money. If you invest in options like index funds, they work to grow your initial investment through the magic of compounding. You don’t need to earn a fortune; just start and let your money work for you and watch your wealth expand.

If you’re worried that you’re too young or too old to start investing, we’ve got you covered with our article Am I Too Young to Start Investing? and our video Am I Too Old to Invest?

How to start investing

Investing is when you buy an asset that is proven to bring an income with it. So you buy a business (shares) or rental property that gives you a return as well as the possibility of capital appreciation (they go up in value)

Katie and I learnt about the difference between an asset and a liability and it blew our minds. Our simple definition is that an asset puts money in your pocket and a liability takes money out of your pocket.

What are your options then? The path to wealth is to buy small liabilities and invest in assets.

Invest in assets

This blog posts covers many different types of assets that you can invest in including stocks and shares, property, gold, crypto and more. We initially thought property was our route to financial independence but we now prefer to invest in the stock market – specifically broad-based low cost index funds.

People get very excited about buying property as an investment especially in the UK and New Zealand. Use our property calculator to see if your investment property is an asset. We’ve also written What should I do with my savings, invest how? which covers the pros and cons of property investing.

The Donegans’ investment strategy

Our strategy is to buy index funds, specifically Vanguard ones. They’re easy to buy, it’s a simple strategy and the fees are very low. We’d rather be living our lives than spending all day every day thinking about our money and managing our investments.

We are NOT sponsored by Vanguard, we just believe in what they do!

How to invest in the stock market

People ask us this all the time! So we made a video to answer the question.

Spoiler alert. There are 3 ways to invest

  1. Stock Picking: Picking individual companies to invest in (aka gambling)
  2. Managed Funds: Paying expensive fees to get someone else to choose which companies to invest in (this is super expensive and they generally do a bad job)
  3. Index Investing: Buying every single company you can in a low cost index fund (this is what we do!)

We’ve also written a blog post that has information on the 3 ways to invest in the stock market.

Investing in index funds


We’ve written this series of articles to guide you through everything you need to know about index funds and how to get going. These articles complement Rebel Finance School which teaches you how to get out of debt, sort out your money and invest for a prosperous future.

Risk and volatility

You might be thinking “But Alan, the stock market is scary stuff, is it risky to invest in the stock market? How do I get over my fear of investing in stocks and shares?”

The financial industry has confused the terms “risk” (risk of losing money) and “volatile” (how much the value of your investment changes over time).

The market will always be volatile (see navigating the market’s ups and downs), but the risk depends on how you invest. Stock pick a handful of companies and your money is gambled on those specific companies in their specific industries doing well. This is where diversification comes in and why we choose low cost, broad-based index funds to invest in.

Impact of fees on investments

Impact of Fees


Before you start investing, the other thing you need to know is the impact of fees on investments, the low cost part of our low cost, broad-based index fund strategy. You could have a diversified (broad-based) index fund, which had high fees and that would make a huge difference in your investment yields. Choosing a low cost option gives compounding a better chance to work its wonderful magic.

The impact of fees tool

Katie created a tool that helps you analyse the impact of fees on your current investments. This tool can take two investments with different providers and analyse the difference over a 30-year period.

Look up the fees for your existing pensions (SJP, Aviva, Nest, etc) and see what impact they have.

Navigating the market’s ups and downs

If you invest in the stock market, which we suggest you do, then you need to be prepared for the rocky ride that is coming! Alan lost his life savings in the stock market when he was younger, we have seen Covid crashes, war in Ukraine, and so much more that has affected returns.

If you invest in a broad-based index fund then there is a danger that you might panic, sell and lose a LOT of money.

In It For The Long Term

For our strategy to work you have to be in this for the long term. This is not a short term get rich quick scheme. Slow and steady wins the race. Buy and hold and NEVER sell. Never kill the golden goose! You have to be prepared psychologically for WHEN the stock market crashes. If you panic and know that you won’t hold on WHEN the stock market drops, this strategy WILL NOT work for you. You also might want to read our post Should I Stop Investing?

Tax efficient investing

Every country has different accounts, taxes and providers. Navigating them all is tough but possible and there are amazing resources to help you.

United Kingdom

This is where Katie and I live, we know the tax laws backwards as we needed to figure them out for ourselves. We’re writing a series of articles to give you a quick start on how to get going. The articles will include information on:

USA

There are some incredible sources of information. If you live in the USA you live where financial independence started and you have some amazing resources:

New Zealand

Ruth the Happy Saver is our amazing friend in New Zealand. She wrote this incredible article about how to apply the Rebel Finance School methods in New Zealand and she has a whole blog and podcast dedicated to supporting you.

Final thoughts

You are doing all of this to set yourself up. If you get this investing stuff right then your investments will create returns for you and eventually that builds up so you can retire! Yay.

Move on to our next section; Guide to Financial Independence / Retire Early to work all of this out. It doesn’t really matter what age you want to retire, there is a simple way to work out if you have enough.

Congratulations on getting this far!