Last updated: 23 September 2018
By Maynard Paton
I hope I can help inspire those of you who wish to join me as a full-time private investor.
I made the leap aged 43 back at the start of 2015, and I am convinced anyone with a passion for shares and the determination to give up the 9-to-5 can take the same path.
The text below has been extracted and adapted from my final article for my former employer, The Motley Fool UK.
I trust you find the article useful. Please leave any questions or feedback in the comment box at the bottom of the page.
How Shares Helped Me Quit The Day Job
12 December 2014
By Maynard Paton
I will get straight to the point — this is my last ever article for The Motley Fool.
Yes, after 15 years writing for the UK’s very best financial website, I have decided to go it alone and become a full-time private investor.
True, this decision is a bit of a gamble. Not having a regular salary coming through each month — at age 43 with a family to support — is not for the faint-hearted!
But I have done my sums, weighed up the pros and cons… and decided I now have enough money on hand to take the plunge.
Nothing I did was rocket science
For my final article, I thought it would be useful to recount some of the best investment choices I have made.
You see, I am hoping my experience may inspire you to work just that little bit harder with your own portfolio, which in turn may bring your own financial independence just that little bit closer!
You will be pleased to hear nothing I did was rocket science. In fact, you may have read it all before. Nonetheless, these ‘basics’ worked for me and I am sure they could work for you as well.
Anyway, here are my top decisions for you to consider.
Decision 1: I decided to start my portfolio early
Pretty obvious this, but the earlier you start investing, the more time you have to compound your gains into a substantial sum.
In my case, I caught the share-buying bug in my early 20s in 1994, so it has taken me 20 years to arrive at my current portfolio position.
For me at least, the best thing about investing early on in life is that you are committing relatively small amounts. So any major portfolio mistakes can be offset by your future employment earnings.
I certainly made loads of novice mistakes in my first few years of investing. But I persevered and found that time and a rising salary were on my side to help sort things out.
Decision 2: I decided to save hard to invest
I was born and bred in Yorkshire, so I have always felt being frugal with money was as natural as breathing.
Mind you, I still made a conscious decision to be careful with my expenditure. I mean, you will never make a lot of money from shares if you never have any money to invest in the first place.
Just so you know, my tightwad nature now involves running a 14-year-old car and having taken just one foreign holiday in the last ten years. It has also involved bringing in a packed lunch every day for the last 15 years at The Motley Fool.
I can’t begin to imagine the amount of motoring, holiday and sandwich money I have saved that went into winning shares instead. I can’t say I have missed spending that cash, either.
Decision 3: I decided the right way to invest for me
I have read countless investment books during the last 20 years.
But I was incredibly lucky that the very first one I read was about Warren Buffett, which explained how the billionaire alighted on quality stocks such as Coca-Cola.
From that day on, I was sold on the idea of buying great companies and simply holding them for years and then watching their prices (hopefully!) rise 10-fold or more.
Sure, my own portfolio over time has shifted from large-name brands to smaller UK companies. But the key Buffett approach — find quality businesses that boast owner-friendly managers, respectable competitive positions, conservative balance sheets, reasonable long-term prospects and lowly valuations — I still abide by to this day.
I admit, buying quality companies for the long run is no secret — I mean, I have banged that drum for 15 years at the Fool! Plus it requires patience, discipline and a bit of effort to get it to work.
But you must trust me here: the Buffett buy and hold way is, in my experience, far more likely to make you dependable returns than any of the more ‘exciting’ investing approaches you will inevitably encounter.
Decision 4: I decided to take advantage of PEPs and ISAs
Making full use tax-efficient PEPs and ISAs was an obvious decision for me.
I mean, my journey to 9-to-5 freedom was so much easier using PEPs and ISAs because they sheltered my share winners from capital gains tax (CGT). What’s more, I never had to fill in any tax forms as PEP and ISA investments were not covered by HMRC’s paperwork!
True, my early investing days would not have troubled the CGT calculator had I invested outside of PEPs and ISAs. But as I injected further cash into my portfolio and my gains compounded over time, hefty CGT bills would have quickly arrived had I not had the PEP/ISA foresight.
Of course, what I did not pay in tax was the reinvested back into shares — turbo-charging my returns even further.
Decision 5: I decided big bold bets were best
Sooner or later you will come across an investment opportunity that simply screams BUY ME. I certainly did during 2002 and 2003.
In this particular situation, I had to recall the words of Buffett, who said we should always buy a “meaningful amount of stock” when we find true quality bargains. In my view, betting bold on a big winner is a great way to fast-track yourself away from the 9-to-5.
For me, my big bold bet was on the shares of London Stock Exchange.
Back in 2002, the Exchange was a clear monopoly with some impressive accounts to match, but its profits had stagnated because of the dotcom crash. However, I assumed earnings would pick up in a bull run and sure enough, the credit boom emerged and the LSE eventually became a bid target.
All in all, I put a third of my portfolio into the LSE and I five-bagged my money within five years. That return certainly ignited my portfolio and definitely cut short my years as a full-time worker.
(Sadly my LSE write-ups that were documented on the Fool have disappeared from the site :-( )
Decision 6: I decided to avoid sleepless nights
I have always liked a good night’s sleep and believed worrying about my portfolio too much was a clear signal to act.
So pretty much the best investment decision I have ever made came from a few restless nights during 2007.
You see, back then I was living in rented accommodation and hoping one day to buy a house. Then came the run on Northern Rock, which told me the banking sector was in trouble and the effects on the housing market could be substantial (or at least I hoped they could).
So one week during the autumn of 2007, I sold pretty much all of my shares to ensure I was cashed up and ready to purchase a great home at a cheap price.
Thinking back, I was a bit fortunate to have sat in cash all through the banking crash of 2008. Nonetheless, you generally make your own luck with shares and I have found the ‘sleep factor’ has served me well.
Your dream of giving up the day job could come round just that bit quicker
Each day on my way into the Fool’s office, I walk past a big poster of Sir Chris Hoy celebrating a victory on his bike. The poster quotes the Olympic star by saying:
“Anybody can achieve great things in their lives if they are willing to work hard, make sacrifices and dedicate themselves to the dream they have.”
I am not saying we can all become great investing champions.
But I have found if you can commit to:
* working hard (by researching your shares thoroughly);
* making sacrifices (by living below your means), and;
* dedicating yourself (by investing regularly and in sizeable amounts)
…then any dream you may have of giving up the day job could come round just that bit quicker.
All I can say is that it has done for me. And I hope it can for you, too.
Disclosure: Maynard does not own any shares in Coca-Cola or London Stock Exchange.