Q2 2020 Investing Income

There are many paths to happiness and becoming financially independent is not a mandatory pre-requisite. However attaining financial independence +/- retiring early (FIRE) will enhance our lives as the choice opens up to continue pursuing your vocation or diverge into another area. Achieving FIRE is not a necessity for satisfaction in our lives but rather we should see that without financial stability it is difficult to fully enjoy wholesome life. For example the yearly General Medical Council (GMC) fee of £420 is about to be taken out of every UK doctor’s bank account this month along with numerous exam and course fees even during the COVID era, with no sign of any government material recognition for NHS workers during the past 3 – 4 months. The only person who can look after yourself and your family is you – whilst it is difficult to control expenses such as the GMC fee or a car breaking down, increasing your income is something anyone can do.

I started learning how to invest in late 2012 shortly after my first few pay checks. I read Rich Dad Poor Dad by Kiyosaki and The Millionaire Next Door by Stanley to understand the differences between assets and liabilities, and the habits of people with financial literacy, something that our schools rarely touch upon. I learnt how to invest by reading The Intelligent Investor by Graham and Smarter Investing by Hale to appreciate the importance of investing costs; the argument between passive versus active investing; and the value of compound interest. You can get any (or two if you’re a prime member) audiobook version of the above for free if you want to learn more about FIRE and investing. I think ultimately some people attain FI at a young age but choose to continue to work part time and it’s widely appreciated that RE is not a one-size-fits-all philosophy.

When I first started investing the monthly income was unimpressive but 8 years later in 2020 it adds a small but respectable sum to my NHS salary every month.

	income	expenses	total
p2p side hustle apr	£13.76 £239.02	- -	£13.76 £239.02
p2p side hustle may	£17.55 £168.76	- -	£17.55 £168.76
p2p side hustle dividends jun	£4.96 £289.36 £1,013.86	- £28.35 £48.40	£4.96 £261.01 £965.46
q2 2020 total			£1,670.52

My passive income in 2020 is £3,519 so far. My 2020 active income has been £3,552 so far – this is profit made from trading various stocks during the coronavirus pandemic i.e. buying stocks low and selling high. Similar to the Dec 2018 market dip (-20%) a significant number of people panicked during this COVID-19 stock bear market (circa -33%).

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What does this mean in reality? If we look at the first graph which for simplicity’s sake is the stock market (specifically the S&P500) a person who had £50,000 invested in late Feb 2020 until late Mar 2020 would’ve experienced a very sharp 33% paper loss roughly equating to £16,300. If that person had £100,000 or £300,000 invested those paper losses would’ve stacked up very quickly. I also think that the extremely and unusually steep market dip was one of the reasons so many people were frightened. If we look at the second graph, apart from in Dec 2018 where there was a dip, the stock market has served very well for investors over the last decade. Even taking a step back to the decade view, we can appreciate how steep the S&P500 tumbled in March compared to recent history.

However, humankind should never be underestimated when you think about how many things we’ve overcome, and people who bet against the stock market are essentially betting against human kind.

If you enjoyed this article and would like to learn more about investing, consider getting one of the recommended books in free audiobook version to kickstart your journey. I think it’s important to create alternative income streams for yourself to master your own destiny, make your life easier and also look after your loved ones. An extra £7,000 this year isn’t life-changing money by any means, but it’s an extra security blanket should something go wrong for you or your loved ones. Alternatively it shouldn’t be underestimated how many opportunities you can take advantage of when you have extra capital at your disposal.