by elmads

Introduction

I made this blog to share what would I have done if I started to invest again from scratch, with only the very basic knowledge about investing and a simple goal of wanting my money to work for me over a long period of time. Also, Without requiring to exchange my time and effort for money, e.g. physical labour/work.

This will be a straightforward blog without too much additional content. As my purpose is to let you understand the simple steps I would have taken. Actually, the process I’ll be showing you is the same method that I also utilize to handle my wife’s investments.

Without further ado, I present to you the index fund cost averaging method which is in my own opinion the simplest and the easiest way to start investing and gain exposure in the equities markets.

Stock Broker

Before we start, we need first to understand the relationship of the stock market, stock broker, equities/company stocks, and the investors. Below are simple visuals that will help you clarify their relationship to one another.

As shown above, we are not able to buy shares of a company without having a broker account which acts as an intermediary between investors and the shares of a company. This is the reason why the first step is to open and register into a trusted broker account.

Broker Accounts

There are a lot of broker accounts both domestically and internationally, which just makes it harder for us to find which one will be the most suitable and trustworthy.

The wisest thing to do is to always do our own research first before deciding where to open an account, because our chosen broker will be the one holding our money and investments in our behalf. It is just like our own banks, where we trust them to keep safe our hard earned money.

Worldwide, there are 3 investment broker giants that people trust with their money and investments, these are The Vanguard Group, BlackRock and Fidelity Investments.

• The Vanguard Group – Handles 7.2 Trillion USD of public money worldwide, commonly known as their Assets Under Management (AUM)
• BlackRock – Has 9.5 Trillion USD Assets Under Management (AUM)
• Fidelity Investments – Has 4.2 Trillion USD Assets Under Management (AUM)

To give you context, J.P. Morgan’s (one of the top 10 banks globally) investment banking segment, a portion of their business that also acts as a stock broker, only has 3.1 Trillion USD Assets Under Management (AUM).

A broker’s amount of Assets Under Management (AUM), somehow reflects the trust of the people with their hard-earned money to them. It is not without risk, but it gives them higher credibility compared to other brokers.

On that note, we could already see the scale of trust by the public worldwide on the top 3 investment brokers globally. This is one of the reasons why I chose 1 of the 3, and that’s The Vanguard Group, which I disclose that I am actually using their services for both myself and my wife’s investments.

Plus, what I like about Vanguard compared to others is they have one of the lowest management fees in the investment world. It’s so low that it seems too good to be true. haha! Their founder, Jack Bogle has always been true to his vision and mandate to lower the fees ever since he started the said company. Vanguard has revolutionized the percentage fees on investments, without them probably the fees investors are paying today would have been the same as it was in the 90s. Sky high!

Opening a Vanguard Account

This is a personal choice, you don’t need to follow my path and open an investment broker account with Vanguard. Do your own research and look into other investment broker accounts in your country.

NOTE: Vanguard UK doesn’t have a mobile phone application, which is unfortunate. The only way we could access it is through their webpage. Vanguard: Helping you reach your investing goals | Vanguard (vanguardinvestor.co.uk)

Vanguard is a global investment company. They have a unique and specified web page interface for every country where they are present. For instance, the web page of Vanguard in the UK is different from the Vanguard in Australia, and the US. Also, not all countries have direct access to a Vanguard platform.

As of April 2022, countries who have access to invest directly in a vanguard platform, as an individual investor, are the following:

• Europe
  • Germany – https://www.de.vanguard/de
  • Italy – https://www.it.vanguard/investitori-privati
  • Switzerland – https://www.ch.vanguard/en/private-investor
  • UK – https://www.vanguardinvestor.co.uk/
• Americas
  • Canada – https://www.vanguard.ca/en/investor/home
  • Mexico – https://www.vanguardmexico.com/es/inicio
  • US – https://investor.vanguard.com/corporate-portal/
• Asia Pacific
  • China – https://www.vanguard.com.cn/
  • Australia – https://www.vanguard.com.au/personal/home/en

The photographs below are the web page interface of Vanguard UK, US and Australia, as of April of 2022.

The Steps

In here, I’ll only be able to show you the steps for Vanguard UK, as I reside in the United Kingdom. For the persons reading this, and resides in a country outside the UK, but has a direct access to invest in a Vanguard platform. Then the steps to open a Vanguard account will still be applicable for you as this is a straightforward process.

All of the steps below is done through online. We will only need a Mobile Device, or an iPad, or a Laptop, then a web browser and an internet access.

Step 1. Go to their log in Webpage. (https://secure.vanguardinvestor.co.uk/Login?intcmpgn=header_login_link), then click “Open an account”

Step 2. You’ll need the following requirements to open an account, which are your National Insurance Number (BRP), Debit card details and Bank details (if for regular direct debit payment). Afterwards, Click “Start Application”.

Step 3. You’ll need to choose an account type. Basically in the UK there are different account types, but in here they will only let you choose four, which are the Self Invested Personal Pension (SIPP), Stocks and Shares ISA, General Account and Junior ISA.

If you’re not aware of these 4, then you could check my blog titled “UK’s Tax Exempted Individual Savings Account” for a deeper dive about it.

If I’ll start all over again, I will always and still choose Stocks and Shares ISA, because all of the income received from this account type will NOT BE TAXED by the government. Nonetheless there are things that needs to be remembered here, like the max contribution for this account for each person is only £20,000 for the 2022/2023 Tax year. Read the blog that I’ve made about it so that you could understand some of the accounts listed in here.

Step 4. Read the Important Information section of this page as it discloses all of the things that we should know like the annual ongoing charges, it is the fee that we pay for the fund for keeping safe of our money, investment and on maintaining our account. You could also download the PDF forms of their “Key Features”, “ISA Declaration”, “Privacy Policy” and “Terms & Conditions”. I know that only a small number of people do this because it takes a lot of our time, and reading these stuffs are boring. But, why not read it so that we would know what we are getting into? isn’t it? 

Step 5. Once finished, Tick the given box provided then click “Proceed”

Step 6. Click “Add more investments”. Before I proceed, you’ll notice the amount worth £20,000 on the lower left portion of your screen. Remember that you opened a Stocks & Shares ISA, all of the income will not get taxed inside the account, but there is a maximum amount we can only invest which is £20,000 in a given tax year. So, as you’re just starting to invest, that will then be the available amount you can place into your Vanguard account. Don’t worry, you’re not required to reach that £20,000, and any amount you want to contribute is okay, as long as you don’t exceed that maximum capacity of money within the tax year.

Step 7. 4 rows will be shown to you, namely “Blended Funds”, “Equity Funds”, “Fixed Income Funds” and “Cash”. If you do not know anything yet about investing, then it’s better if we just first contribute money on the account and not invest it yet, so that you could grasp first the process. With this taken into consideration, click on “Cash” and enter the amount of money you are willing to put into the account.

Step 8. Enter the amount of money you are willing to contribute into the account. You’ll notice that there are two boxes in the “Cash” row, which are the “Single Payment” and “Regular Monthly Payment”. The decision is up to you. The difference of the two are the following;

• The Single Payment is a manual way of transferring money to your account while
• The Regular Monthly Payment is an automated time and date based contribution to your vanguard account via your chosen and linked Bank Account.

Just like what I’ve said, this is up to you. What I chose before was the single payment, this is because I prefer to transfer money on my vanguard investment account in my own time and pace. Plus, the contribution I put into my account varies, depending on my salary for that specific month.

PS: As a new investor, It is natural that you will be trying to test the waters of investing first. This means that you’ll want to invest the minimum amount of money initially, which is very understandable as you don’t have the knowledge and confidence yet.

The minimum amount to invest is £500 for single payment, while £100 monthly until it reaches £500, as shown in the photograph above. Once £500 has been reached, it is then up to you if how much will you be adding on your account weekly, monthly, or even yearly.

The time, amount and interval will again be dependent on your own choice. With myself, I would invest a portion of my salary every pay day, regularly, religiously and consistently over a long period of time.

Step 9. As you’ve entered the amount of number you want to contribute into your account as cash. It’s now time to fill up the online form provided with your personal details. Once finished, just click “Next” then read everything then fill it up. Subsequently you’ll finish the registration and your account will be opened for you.

You’re now a Vanguard account holder, or as what the Vanguard Group prefers to call us, “The Vanguard Shareholders”.

CONGRATULATIONS!! Welcome to the investment world and have a happy investing journey to you my dear friend. Let’s make a portion of our salary work for us over a long period of time, for our own personal financial goals and endeavours in the future. CHEERS!!

Now that you have an account and is now a shareholder of Vanguard. Let’s now go forward to where to invest our contributed cash. Remember that we only placed our money as cash in the process I showed you above? In my next blog, I’ll be talking about the mutual fund where I would invest as a starting investor. See link provided below to direct you to my next blog.

The FTSE Global All Cap Index Fund

If you have any questions, don’t hesitate to DM me on any of my social media accounts on Facebook, Instagram, LinkedIn, Twitter, Pinterest or you could send me an email. I’ll be more than happy to give you a hand to start your investment journey.

Knowledge is my Sword and Patience is my Shield,

elmads

This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.