My Journey with Passive Investing: Strategies and Insights

Hello young retail investor here. So far, I’ve been investing for 3 years into ETFs. This is not a financial advice, and investing comes with risk. If you lose or earn money, it is on you.

TLDR: Passive investing into CSPX

Congenration on Equity Asset Class

As of now, I’ve focused all my long-term savings into equities apart from my emergency fund. Although I plan to enter the real estate market in the future, I currently can't afford a rental property and don't want to get saddled in debt before I fully finish my education. This explains my investment preference.

Passive Approach

I am a passive investor. I don't attempt to outperform the broader stock market in terms of my returns. Instead, I try to mimic its performance by tracking the main stock market index.

ETFs

I use low-cost funds, traded on major stock exchanges, called ETFs to track the performance of a stock index. When choosing the right fund, I paid attention to the annual cost to investors (TER) as well as market liquidity. Costs can really eat into investment returns, especially when it comes to compound interest.

Concentration on the US Stock Market

My strategy assumes that I invest in international business operations, but I heavily overweight the US economy because I see its potential, especially in new technologies and innovation. The SP 500 is a good index for this, as it represents the performance of 500 large-cap stocks, many of which are US companies. However, there are also businesses here that operate all across the world, selling their products in different countries.

Dollar Cost Averaging

While building wealth, I contribute to my investments regularly. This approach allows me to take advantage of market dips and downturns, such as during the 2022 bear market. By putting as much money in knowing that it might not be a perfect moment but it definitely is good as I could, it paid off. I am over 30% up in my local currency, even with the depreciation of the US Dollar relative to my domestic currency.

ETFs that Accumulate Dividends

Dividends are a cool psychological feeling, but they can become a very expensive joy, leading to tax liabilities. I decided to use Accumulating ETFs, where the fund reinvests dividends on my behalf so that I do not have to pay taxes until the moment I sell. Furthermore, a lower tax burden means more funds reinvested to generate future returns.

Tax Advantaged Accounts

For investing, I also use tax-advantaged brokerage accounts. One account is exempt from capital gains tax only if withdrawn after the age of 60, an encouragement to save for retirement. I use it, depositing money there, and transfer the rest into a regular brokerage account, which is subject to capital gains tax if I sell assets. This way, I minimize my tax liability and retain more of my gains.

What I Actually Buy

The most interesting part of my strategy is that I invest into CSPX UK. This is an Accumulating SP500 ETF from iShares traded on the London stock exchange and quoted in dollars. This investment is simple, doesn't consume my time, and is cheaper and less costly because you don’t pay brokerage fees and taxes on every transaction. It also doesn't give me an illusion that a smart computer science student has any chance of competing against hedge fund analysts who have years of industrial experience and cutting-edge tools on their side.

I sincerely hope that you find this information helpful and achieve good returns as you embark on your investment journey. Wishing you the best in yours too! Gall Anonim