3 Fire-And-Forget Ways To Build Your Wealth

Published in Investing on 27 April 2012

That nest egg is closer than you think.

I'm fond of what I call 'fire-and-forget' ways of wealth-building -- regular sums invested in low-cost, tax-efficient investments. Over the years, it's a practice that's stood me in good stead, as a quick glance at my portfolio of investments regularly confirms.

£100 a month, for instance, put in a low-cost index tracker delivering a reasonably modest 6% return after charges, will grow to £69,646 over 20 years.

While that's not a life-changing sum, it's still not to be sneezed at. Put aside more each month, and the rewards will be commensurately higher.

And while ISAs are the tax-efficient wrapper of choice for many, SIPPs -- if appropriate for your circumstances -- can help your nest egg grow even faster.


Years back, there were fewer ways to carry out this kind of fire-and-forget investing than there are today.

The enticing advertisements were there, of course. But the prosaic reality was often high-cost unit trusts, generally with upfront charges -- or, worse, costly and opaque insurance-based products such as endowment policies.

These days, we've got tax-efficient wrappers such as ISAs and SIPPs, technology-driven fund supermarkets and share-trading platforms to drive trading costs down, and a reasonably rich choice of investments to plump for.

And so, without further ado, here are three of my favourite ways to use fire-and-forget investments to build your wealth.


Let's start with shares. When making small but regular purchases, the killer is commission. £11.95 on a £100 purchase, for instance, doesn't make much sense.

Thankfully, a number of brokers offer a 'share builder' service, where you can buy a share on, say, four set 'dealing days' each month. Your purchases are pooled with those of other buyers, which brings the cost down.

Here on the Motley Fool Share Dealing service, for instance, 'share builder' purchases cost just £2.00 -- low enough to make even a purchase of £100 worth of shares cost-effective.

Bigger monthly sums will be proportionately more cost-effective, of course, but there's nothing wrong with investing £100 a month this way. Better still, invest every month -- but buy every other month, or every third month.

Investment trusts

Buying individual shares isn't for everyone. Some people prefer the in-built diversification of collective investments such as funds and investment trusts.

Investment trusts, with their lower charges, are a particularly Fool-friendly form of fire-and-forget investing.

The names of some of these venerable investments may be a little quaint, but there's no arguing with their resilience: some trusts date from the mid- to late-1800s, and have a history of annual dividend increases that approaches 50 years.

Better still, some investment trusts offer share-buying plans -- inside an ISA, or outside an ISA -- that offer investors a way to buy their shares either without paying commission at all, or on payment of a very small commission.

The eight investment trusts managed by Baillie Gifford, for instance -- including its popular Scottish Mortgage (LSE: SMT) and Monks (LSE: MNKS) investment trusts -- can be bought entirely commission-free through a monthly savings plan.

Here's a fuller list of which trusts are available on monthly savings plans, and details of the appropriate charges.

Index trackers

Index trackers are another Fool-friendly investment. Low-cost bundles of shares representing major stock market indices, buying a tracker gets you exposure to indices such as London's flagship FTSE 100, the FTSE All-Share and the FTSE 250.

Where to buy? Many tracker providers offer low-cost regular savings schemes directly, usually within an ISA wrapper if required.

So do low-cost brokers and fund supermarkets, too -- although in the case of some brokers, you'll be buying an ETF, rather than a fund-based tracker.

Watch out, though, for the £2 per month platform fee levied by popular broker Hargreaves Lansdown (LSE: HL), which in my view makes a start-from-zero low-cost tracker investment uneconomic, unless the sums involved are fairly hefty.

Which tracker? Start with some of these, and you won't go far wrong.

Start now

So there we have it: three easy, low-cost and very effective ways of building wealth.

And even in these difficult economic times, the minimum monthly investments involved are so small that most of us can find the cash to put something extra aside -- even if we've other investment priorities elsewhere.

What's holding you back?

Are you looking to profit as a long-term investor? "10 Steps To Making A Million In The Market" is the very latest Motley Fool guide to help Britain invest. Better. We urge you to read the report today -- while it's still free and available. 

Further investment opportunities:

> Malcolm holds shares in Scottish Mortgage Trust. The Motley Fool owns shares in Hargreaves Lansdown.

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The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

ANuvver 28 Apr 2012 , 2:51pm

Step 1: Clear debts. Mortgage is unavoidable, but make sure you're getting the deal that's most appropriate to you - you'd be amazed how many people don't bother.

Step 2: Build up a rainy-day fund. This isn't really in case the roof blows off, it's more about having resources so you're less likely to have sell assets at distressed prices when the markets go into a sustained fug. Keep this rainy-day fund in some form of interest-bearing but accessible place, and treat it as though it doesn't exist.

Step 3: Build a diversified core of boring low-volatility assets that will generate an income stream, giving you the choice about when and where you allocate capital. Aim for a total return that outpaces inflation and beats the insulting returns available on retail saving products. Make sure your income stream includes some other currencies - at very least USD.

Step 4: Build a trading cash fund so you're always in a position to take advantage of opportunities, even if modestly. If you don't see an opportunity you like, wait for one and let the funds accumulate. If you want to play on aggressive growth prospects, this is the stage at which you can really afford it.

You now have the luxury of choice. You are now wealthy.

BrnzDrgn 01 May 2012 , 1:42pm

I'm the Magical Man from Happy-Land, in a gumdrop house on Lollipop Lane!

Well if someone would like to increase my income by about tenfold!

trevw100 01 May 2012 , 2:52pm
trevw100 01 May 2012 , 2:52pm
geeWCee 01 May 2012 , 2:55pm

ANuvver, you should have written the article...

dukindiva 01 May 2012 , 3:57pm

All very well Malcolm, but why do Self Select Share ISA's charge a management fee when the work is done by the investor, why do they charge £10/trade when the facility in the 'share builder' costs £2?
It seems that if you want to avoid CGT you have to pay TMT through the nose for the priviledge.

MDW1954 01 May 2012 , 4:56pm

Hello dukindiva,

I assume you're talking about the TMF Self Select ISA? Last time I looked, yes, there was the same £2 option.

Check again, and please come back to me if I'm wrong.

Malcolm (author)

ANuvver 01 May 2012 , 5:17pm

If the la-la-land happy man comment was aimed at me:

The principles are sound and each step represents a priority. You can't afford to save until you've tackled your debts, and you can't afford to invest until you have savings. And even the oiliest small-cap buccaneer is usually sitting on a bed of blue chips - they don't mention it because they regard it as a given.

The process is scaleable. I'm not saying start in clover with half a million quid to spare. It's about priorities not lollipops.

jaizan 01 May 2012 , 8:35pm

I invested in stocks 20 years ago. Then sold them to buy a house and didn't start investing again until the mortgage was paid off (5 years later).

With hindsight, I should have run the mortgage for slightly longer and started investing just enough to utilise PEP & ISA allowances. However, the principle of paying down debts early is a good one to follow.

nmmerri1 01 May 2012 , 9:41pm

ANuvver, you are at the stage of knowledge where I want to be. I will get there but in the meantime, please continue to share your experiences and wisdom. Anyone clever enough to a. be here and b. pay attention to the golden nuggets you and a very few others come out with definitely reap the rewards.

danguee 01 May 2012 , 10:10pm

The principle of paying down debts in my mind 'depends'....

I'm lucky to have a cheap tracker mortgage costing me 1% over base (ie 1.5% in total). Paying that off instead of investing would be crazy to me.
But in these days of falling markets and nothing seeming to be worth investing in, then if my mortgage cost me 5%, say, I'd probably agree that paying that off is not a bad idea - it's the same as having a 5% ROI and not to be sniffed at....

But in times when markets are low and crying out 'buy' then even the 5% mortgage is not worth paying off in my mind.

I agree with almost all of what ANuvver says. Plugging away at it, through market ups and downs, doing some judicious belt-tightening etc is surely the way of building wealth. And then at step 4 - who knows - get bold, get lucky or ride the odd wave up

eyeball08 02 May 2012 , 8:15am

A low-cost tracker with regular payments is a great way to save sufficient funds for later better investments. But 6% return after charges? Most High Yield income portfolios give a yield around 4 to 5%. Which low-cost tracker gives 6% return after charges please? Or am I confusing yield with long-term "return" here.

MDW1954 02 May 2012 , 9:25am

Hello eyeball08,

I was referring to "total return", not yield. That is, dividend plus capital appreciation.

Various long-term studies, taking into account "the lost decade", (eg Barclays annual Equity/ Gilt series) suggest 7%.

The FSA is consulting on a lower range -- see:



Malcolm (author)

HstG 02 May 2012 , 11:04am

I have been dabbling in the investment market ever since the days of PEPs & have to say that through laziness & ignorance I have not done well.
I have followed hunches & tips. Invested in collectives & individual shares - some have been held for over 10 years (RR) others I have bought & sold within months on a reasonable profit (AV). I have been totally wiped out (Woolies) & have drifted downwards, sideways (Sainsbury) & upwards. I have chosen companies where I liked the product (Sainsbury again) & many/most where I have no real in-depth knowledge at all. Investments have tended to be one-offs & have never exceeded £10k.
In addition I have contributed significant sums (by my terms) to various pension arrangements & continually monitored &, if necesary, adjusted the funds invested in. A lot has been in trackers. Again without really seeing any material improvement in the growth above my (gross) contributions.
Fortunately, many years ago, I invested in a few flats in Central London & these have grown in value & always produced a significant net income. Also, fortuitously, I switched my 2 very large, interest-only mortgages into trackers, just before the credit crunch & the cost of servicing these has dropped by a massive percentage. (I have not sold any properties.)
What does this reflection tell me?
Do not rely upon the stock market (in all its guises) unless you have a genuine interest in sitting at your computer for 2 hours per evening (every evening!) ie you have got to enjoy the process. Whether it pays for itself will be about timing & that for the vast majority will be down to luck. Operate in the knowledge that there is a vast army out there who will have more time & knowledge than you - it is probably a mistake to feel you will beat them to the punch, so the best option has to be to try to run along side them (looks like trackers again).
For those who like to pour over company accounts, this is not for me - not only because I have neither the time nor the experience to reach helpful conclusions but, through several first hand experiences, I have had of the 'little games' accountants are allowed to play, I am unconvinced that they are unlikely to tell one much more than what the Board want you to think. (One instant of this that comes to mind: the company in question had a product that they wished to market as being cheaper than their rivals. These products had an up-front charge & an annual charge. This company decided to delay their up-front product charge for 364 days thereby appearing to make their product cheaper than the others, as once hooked the punters would feel obliged to pay the initial fees. A clever ruse, with a downside effect of very significantly reducing the income on this product in the first 12 months, but for a sound financial reason (& hardly one that someone would glean from a reading of the accounts).
My final thought is if you want to be wealthy you need to be thrifty over a long period of time, but not to the extent that you lower the quality of your life - afterall you may not make it to retirement.

HstG 02 May 2012 , 11:09am

Apologies for the typo, the above should read...I am unconvinced that they are LIKELY to tell one much more than what the Board want you to think....

BrenNoBull 03 May 2012 , 12:16pm

Mmm is this another 'hey trading is always great' article from a broker?

'£100 a month, for instance, put in a low-cost index tracker delivering a reasonably modest 6% return after charges, will grow to £69,646 over 20 years'

Does this take into account the many minor crashes and dips that markets go through? Looking at the ftse100 its been a real mixed bag over the last 14 years. Depending on your timing you could end up with little or no growth with trackers other than the cash you put in yourself.

I suspect HstG's experience of investing is closer to reality for many of us.

So perhaps another sure way to build your wealth and not that of your broker is to trade less and research more?

dukindiva 08 May 2012 , 6:14pm

Hi Malcolm,

sorry for not replying sooner, I haven't looked at this article for a while.

It's not obviously stated in TMF SS ISA, is it what is described as 'planned investment' under 'charges'?

I still get miffed about Management Fees for self selecting though :-)

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