Guest Article: Sade Taiwo

Edition Number: 4

Good morning,

For all the new readers, here at IT, i aim to collect guest articles from some of the interesting characters in the finance space to contribute towards the free articles i post for all newsletter readers. My aim is to grab a diverse range of perspectives and experiences to share with you all.

Today i am bringing you another superb guest to the IT Newsletter. This marks edition number 4 of the guest article series, and i am happy to report that i now have a few backlogged for the upcoming weeks. I typically aim for one guest per week, depending on sourcing and other variables.

Previous Guest Articles:

Edition 1: Jaxson B

Edition 2: David Belle

Edition 3: Curtis Davies

Sade Taiwo

Today’s guest is Sade Taiwo, the founder of Penny Pal, which is a social media based, graphics-led platform that does great work in educating and assisting millennials with financial literacy.

I am also immensely proud to say that we have our first female guest. It is one of my goals to collect a wide range of guest insights from a multifaceted range of backgrounds. There are a great number of strong female voices in the financial field, and i will do my best to share those voices. I am equally happy to say that i have three more female guests lined up in the short term.

Sade is one of those powerful female voices and has featured in publications such as Cosmopolitan, Glamour and Cleo.

Today Sade has chosen to write a piece titled “stop thinking that you need to break the bank to start investing”.

This piece touches upon the rational for buying indexes when you are in the early stages of your investing journey, as well as the benefits of fractional shares.

You can find more information on the work that Sade is doing via the link below, which includes links to Sade’s Twitter, Instagram, and various articles where she shares some super insights.

Sade Taiwo

Equally, you can find Penny Pal on Twitter (@thepennypal) and Instagram (thepennypal) too.

Introductions over, we can now jump into Sade’s guest article.

I hope you will enjoy it as much as i did.

“Stop thinking that you need to break the bank to start investing”

When you think of the term ‘investing’ what is the first thing that comes to mind for you? Excitement? Fear? Curiosity? Confusion? For many, it conjures up the idea of intimidation with the image of men in suits shouting random numbers across an office yelling numbers across an office (you know, The Wolf of Wall Street vibe). This blog post is here to remind you that you don’t have to reflect the dramatics of that film to get into investing. If you’re a beginner, think of yourself as the Mouse of Main Street.

“I want to start investing but I don’t think I can afford it”

The key to getting started is to get back to basics and develop a habit. This means getting into the habit of building a budget (and actually sticking to it), saving (and actually saving it), and managing your expenses on a regular basis. Despite popular opinion, when you first start investing, establishing the habit is more important than the amount you actually invest, this is crucial for when you come to scaling your investment contributions (for example, when you start earning via a side hustle or get a raise). However, knowing what you can afford is secondary to this so if you haven’t’ll need to build a budget. Luckily for us, there are many apps and resources out there to help with budgeting - check where your money is going and where you can cut back, and then you should have some money spare to start investing.

“I want to buy shares from companies like Amazon and Tesla but they are too expensive”

I hear you and I get it - at the moment that I am writing this share prices of some of this most desired companies are as below: 

  • An Amazon share is worth $3,139.92

  • A Netflix share is worth $1,413.48

  • An Alphabet share (the parent company of Google) is worth $1,487.30

So, if you have your eyes on a specific share… looking at current prices can make the reality of actually purchasing that share suddenly seem impossible.

Unsurprisingly, most of us do not have the cash lying around to buy multiple shares in these companies. But there is something to help get around then issues of cost and that is - fractional shares.

Now, whether you are interested in buying fractional shares or not, you should at least know about them and how they work. A fractional share does as it says on the tin - instead of owning one or multiple shares you own a fraction of one.This basically means that you can specify how much money you want to invest into a company as a pose to how many shares you want to own.

Long gone are the days where access to stocks of this caliber are limited. Changes that came alongside fractional shares like commission free trading have made entry to these kinds of stocks more accessible. You can literally get started with pennies if you wanted to.

One of the main pieces of advice you will come across when you start investing is to not put all your eggs into one basket (i.e. diversify your investments). Fractional shares allow you to do this and are especially beneficial if you are on a low budget. If you wanted to buy a share in Amazon, Netflix or Alphabet share you do not have to be $3,200 out of pocket just to purchase one share.

This flexibility that fractional shares offer are one of the main reasons that people purchase them and depending on the platform you use, they can be bought for a little as £5 and as you know, the earlier you start the more advantage you can take on compound interest.

“Okay, I now know how I can invest without breaking the bank - where do I get started?”

There are many online brokers that offer automatic investment plans so if you wanted, you could set up a standard amount every month and the broker will invest in as many individual, ETF, or mutual fund shares as possible (based on your investment amount). 

Here are a list of the best fractional share brokers:

*Nutmeg and Wealthsimple also offer fractional shares through ETFs.

We’re almost done but let’s quickly go back to the idea of wanting to buy into big company shares such as Amazon, Alphabet or Netflix (because this is often a desire of newbie investors). As a newbie, it probably makes more sense to invest in index funds such as the FTSE 100 (or S&P 500 in the US). Whilst I understand it doesn't have the same level of “prestige” as the likes of Amazon, investing in an index fund that includes you desired companies means that you will still benefit from the rise of any stocks and you get to benefit from the performance of a wider range of stocks rather than watching your handful of stock live or die or the market.

So, if you're wondering how to get started with investing without breaking the bank, consider doing your own research into fractional shares. While you invest, learn and start seeing returns you can tweak your strategy to the point where you are comfortable buying more expensive shares.

*Please note that with all investments your capital is act risk and the value of your investment could go down as well as up.

Closing Remarks

So, that concludes the guest article for the week.

Sade makes some great points in this piece. It can be daunting considering investment vehicles when you may not have a great wealth of experience on the subject, or perhaps don’t feel you have adequate capital to visualize the benefits of investing.

I am a huge believer in passive indexing. Passive instruments such as index funds or ETFs allow the novice (and experienced) investor to simply match the returns of the market or industry of their choice.

For anyone who may not understand how to read financial statements, or how to conduct efficient analysis on a company, an equity ETF is the perfect solution.

This way, the investor is not exposed to any single name, but instead can diversify their holdings across a broad base of companies, industries, and risk profiles.

Whilst many of you know, i run a fairly active equity portfolio, i also invest passively at the same time.

Some may argue that this is an ineffective use of capital.

I however, am comfortable allocating a certain % of my income towards a passive collection of ETFs via my tax shielded ISA. My readers will know i typically focus on the US market. However, i wish to capture the returns of the Japanese and UK market, thus invest passively in ETFs for those markets. Moreover, i also invest in an S&P 500 ETF. This is simply a way for me to allocate capital, at a low cost, and compound dividends at the same time as matching market returns, without having to think about it too much. These positions will be added to incrementally, and not sold for decades. All helping me reach the goal that includes setting up cash flows for later life.

In my active portfolio, i will spend copious amounts of time analysing the companies i select to allocate capital towards, thus am comfortable with the implied risk as i have done my research.

If you are not comfortable in security analysis, why play darts? Buy a basket instead.

I hope you enjoyed today’s guest article

I would like to wish a large thanks to Sade for taking the time to contribute today

As well as wishing her the best of luck in her future en-devours

Until next time,