And now AI has ‘entered the chat’. This technology is the most powerful frontend to the library of everything there is to know about anything that we’ve ever seen. The only snag is the librarian can’t entirely be trusted, and they never seem to stop talking…

However you try to drink from it, this fire hose of human knowledge can quickly become a water cannon. Yet one of investing’s oft-neglected truisms is that the important stuff is actually very simple.

If you get the basics right and resist the urge to ‘optimise’ before you even know where to start, then you’re likely to do just fine.

Know why you’re doing it

Are you investing:

• For retirement? For financial independence?

• To pay off a mortgage?

• For your kids?

• To grow a nest egg?

Is investing success critical to your future happiness? Or would it just be nice to have?

Only by knowing how big the task is will you be able to calculate what it will take to achieve it.

Only by knowing how important it is will you find the gumption to stick with it.

Save enough to make a difference

Reaching a big goal – a comfortable retirement, for example – takes many years to achieve. It will soak up a lot of your financial firepower along the way, and you’ll have to cut your cloth accordingly.

But thanks to compound interest , the more you save now, the less money it will require overall.

Also, the more you save now, the less income you will need to live on, too – reducing the scale of the money mountain you need to climb.

Don’t listen to sticking-plaster merchants who bandy around some random percentage of your salary to put away. That kind of advice is aimed at winning your business, rather than helping you win your financial freedom.

It’s not hard to work out your own plan once you know how.

Keep costs low

The only worthwhile predictor of future investment performance is cost. That’s why we recommend most people narrow the field of investment options to low-cost index trackers.

The best trackers are cheap, simple, and will beat the majority of expensive alternatives.

You can buy them yourself using an online broker.

Diversify

Famously, diversification is the only free lunch in investing. Spreading your bets across the main asset classes is the best way to future-proof yourself against dire loss for any one of them.

Choose an asset allocation that sees your money put work across a range of funds, giving you broad exposure to equities and government bonds – the classic 60/40 portfolio. These assets have a long history of mostly solid returns so we can expect the same in the future.

Realise that all asset classes go through bad spells though. We suggest that once you find your feet, you ​further fortify​ your portfolio with other asset classes, perhaps including gold and commodities, and that you consider ​fine tuning​ your holding of bonds to best suit your circumstances.

Your equity fund(s) should invest across as many regions of the world and types of company as you can for a reasonable cost. For nearly everyone a low-cost global tracker fund gets the job done.

Don’t get sucked into believing that some guru can predict whether China will make you a killing next year. Or that an aging population means that drug companies are a sure-fire bet. Or any other hot trends.

If forecasters were any better than Mystic Meg then they would make a fortune by acting on their secrets for themselves, not sharing them.

Also understand there’s no special gain to be made from predicting future trends. Everyone else has the same information so it’s already factored into the price.

Take cover from tax

Use your pension options (workplace, SIPP, stakeholder and so on), employer matches, and ISA allowances to maximise your returns.

Every pound that someone gives you – or doesn’t nab from you – is a pound that’s working for you and not someone else.

Automate it

The less you interfere the better. Humans are psychologically geared to goof up investing.

• Use direct debits and your broker’s regular investment scheme to automatically invest monthly.

• Use accumulation funds to reinvest your dividends.

• Rebalance your funds once a year but otherwise leave your bread in the oven to rise.

The more you tinker, over-complicate, and second-guess the future, the more likely you are to end up making the wrong decisions.

Don’t panic

The world always seems to be on the brink of some disaster. Slowdowns and recessions lurk around the corner. Some region or other is gonna blow. War, Famine, Pestilence, and Death are always due in town.

Yet somehow civilisation soldiers on.

The media aims to feed our fears. Ignore it, or better still don’t listen to it and then it won’t bother you.

You can expect equities to fall often: one year in every three on average. But they have always bounced back. Your allocation of bonds is there to try to cushion the blow in the meantime.

Rebalancing is a self-righting mechanism that ensures you buy asset classes when they’re cheap and you cash in when they bounce back.

Despite two World Wars, the flu pandemic, the Great Depression, the Great Recession, the loss of Empire, stagflation and The Krankies, and Covid, UK equities have delivered annualised real growth of more than 5% over the long-term.

Stick to the plan, keep things simple, and remember investing is a long-term game.

Oh, and picking up a good book to help you learn more is a capital idea, too.

Take it steady,

The Accumulator

The post The investing basics that underpin success appeared first on Monevator.

What caught my eye this week.

The post Weekend reading: Budget, boom, and bust appeared first on Monevator.

Your fund manager may be lending your shares to people who are betting that those shares will fall. People often ask me if this share lending is something they should be worried about?

The post You should lend your shares to evil short sellers [Members] appeared first on Monevator.

Bankers get short thrift in post-apocalyptic storytelling. As our heroes sit around a wasteland campfire – burning dollar bills for warmth and one-upping each other with reminiscences about air travel and chicken nuggets and being able to breathe without a respirator – no-one ever says:

“Oh, and let’s remember the bankers. How I miss those guys!”

I mean, perhaps the bankers brought it on themselves?

Either way, we might soon discover how much we miss banks as we know them, if the latest AI-will-eat-your-hamster scare stories come true.

That’s because ever since the launch of Meta’s Muse AI agent a few weeks ago, people have been fretting about what will happen if when everyone has their own personal life-optimiser.

Picture a 24/7 digital slave working tirelessly to get you the best deals for your money, and freeing up more time for you to loaf on the sofa scrolling through cat videos.

It’ll be like having your own Robo Martin Lewis! Only instead of “dead or alive you’re coming with me” it’ll be more “pay me 5% interest or boost my air miles, otherwise I’m out the door.”

In such a war on the status quo, the High Street banks – big beneficiaries of what my co-blogger The Accumulator has generously called the superpower of human inertia – would be among the first to fall.

Agent on it

Remember: you and I are exceptional. We read personal finance blogs, watch our pennies, nurture our savings, and invest in low-cost index funds for the long-term.

But there are many other people out there who move through their financial lives with all the efficiency of a sloth jogging through treacle.

I’m not even talking about those who treat a 26.5% credit card charge for last month’s spending spree as a cost of business – let alone those with no money at all.

No, I mean the could’ve-been millionaires next door. The ones who don’t save or invest wisely, are tardy about remortgaging, and never make their spare change work harder for them.

For instance, a recent estimate found there’s £327bn sitting unproductively in bank accounts that pay less than 1.5% interest on savings.

Seriously?

2019 called and it wants its near-zero rate environment back.

24/7 banking

To be fair, I imagine most of those billions are made up of a few quid here and there. There can’t be many five-figure cash piles sitting around in a typical current account earning next to nothing, can there? (Or am I just hopelessly naive?)

I mean, even I’ve left a few hundred quid in a half-forgotten account for a time. We all lead busy lives. Those cat videos won’t watch themselves.

But what if you didn’t have to keep on top of any of this stuff anyway, because your personal AI agent could move your money for you?

All you’d do is mutter a suitable prompt –“Hey AI Marty, round up all my loose cash from my old bank accounts and stick it somewhere lucrative, but not at Betfair like you did last month because we’ve talked about that” – and now you’re making hay.

Meanwhile your legacy bank is making, well, nada.

You don’t need a super-intelligence to see that your money is better served in the challenger accounts to the left in the graphic below than the status quo offerings on the right:

Source: Apollo

True, moving a few quid out of a near-dormant account you only opened for a three-month 2% bonus five years ago won’t have JP Morgan’s Jamie Dimon quaking in his loafers.

But £300 here and £300 there across the entire population?

Soon you’re talking real money.

Block and tackle

The Financial Times ran the numbers for the US banks and – I hope you’re sitting down Jamie – it found that making all that idle cash work harder could cost the banking sector $500bn.

Yes, that’s billion with a ‘b’ for “Bugger!”

If you’re a banker.

To be clear, that’s not $500bn in lost income. Rather, it’s the hit to bank valuations should the $20 trillion in US bank accounts always goes to where it’s treated better, and hence profits fall.

But it’s likely a high estimate, because the banks won’t go down without a fight.

Who knows, perhaps they will respond with truly wonderful higher-value products that rightly earn their spread by giving excellent value to us customers?

Or maybe they’ll just block AI agents from accessing their bank accounts.

You won’t be surprised to learn which approach the banks have gone for first.

Although to be fair, if I ran a bank I’d want to keep any autonomous agent created by Mark Zuckerberg at arm’s length, too.

At least until it had learned its lessons first with someone else’s money.

Agents everywhere

Banning agents won’t be a long-term solution though, if agents really do proliferate. It’d be like banning phone calls, and insisting customers bring their passbooks to their local branch to withdraw their money.

In fact this parallel can go further, to the online and app-only bank accounts that for years have offered higher rates than on the High Street, leaving offline customers missing out.

Similarly, if powerful and trustworthy AI agents do work and spread as promised, then you’ll need to use them just to keep up with the Jones’ savings.

Abstaining won’t be costless.

Forget-me-not finance

Indeed it’s all a bit daunting if you play forward the consequences of agents everywhere.

Obviously nobody around these parts will complain if AI makes it effortless to get the highest interest rate on cash. Nor if personal finance agents invest someone’s monthly savings into a diversified passive portfolio faster than they can say: “I wonder if it’s time to buy Bitcoin?”

And on a related note, shares of media firms like The New York Times and Spotify fell after the Muse launch, on the grounds that in the agent era, nobody will pay for subscriptions they’ve forgotten about. (Something that never happens with Monevator membership, I hope…)

Gyms could suffer too if customers are reminded by their AI agent in March that they’re still paying for the good intentions of January – even though the only deadlift they’ve done since February was hoiking two party-sized boxes of Krispy Kremes onto the kitchen counter.

An AI agent won’t forget. What’s more it’ll go through all your bills, without getting bored or flagging, to keep checking you’re still into all your standing orders staying that way.

Know what you’re not doing

On the face of it then, promising stuff.

Though perhaps it could spell doom for personal finance and investing outlets like Monevator?

Already we are being choked off by AI-powered excerpts in Google that mean people don’t need to visit our actual articles so often for answers. ¹

I must admit that the possibility of AI ‘making it irrelevant for anyone to know how to manage their money because an agent does it all for them’ isn’t something that came up during my SWOT strategy sessions.

But actually, I don’t quite believe this is an extinction-level threat for us.

Consider driving as an analogy. It’s one thing not to understand how a car works. But you still need to know where you want to go to use a car properly.

Similarly, AI agents could well remove much of the legwork from managing money.

But that will leave more time for us all to think about our big picture financial independence planning and other higher-order matters.

Well, hopefully.

Costs and consequences

I also have some doubts about how far this agent revolution can run.

For one thing, there’s the privacy aspect.

I do appreciate that half the population is already living in their own opt-in Truman Show every day online.

But there’s a difference between carefully curating a social media image for the world, and letting a Californian oligarch gate-keep every penny that passes through your bank account.

We can also expect companies to fight back against any AI-enabled consumer empowerment.

Banning agents is only the crude first response. It will soon give way to packaging services in such a way that it’s even harder to unpick where you’re profiting and where a company benefits.

That’s a wrap

Consider an all-in package like Amazon Prime, for example.

By bundling together free shipping, video streaming, advertising, discounted movie tickets, and more, Prime turns pricing its services into more of a ‘vibe check’.

Your AI agent might tell you such a bundle is not worth the money. But faced with the right warm and fuzzy overall proposition, you might not believe it – or even care.

Less nefariously, the US wholesale grocer Costco has millions of fans who pay annually for the right to shop in its stores.

Costco members never tire of telling you about the bargains they get. Yet Costco has somehow still grown into a $445bn behemoth, so it’s making money somewhere.

And then there are those ever-looming existential issues.

True, the agent version of AI Armageddon doesn’t unleash backyard bioweapons upon us, let alone a Terminator.

But AI agents with the best of intentions could still be plenty disruptive.

Paging Adam Smith

What happens, say, when tens of billions of AI agents are all running around chasing the same products at the lowest prices, at the same time?

Capitalism breaks, perhaps?

An article in The Atlantic quotes the Wharton School professor Rory Van Loo:

“If, all of a sudden, people could purchase whatever they wanted at the lowest price with the perfect ability to see every possible option, there’d be a lot of volatility in the world. It would seem highly efficient from an economic standpoint, but it could have devastating effects.”

Picture one million personal agents all switching their consumers to a new brand of paper towels on Amazon because a markdown made them three cents cheaper.

The same Sweetgreen salad is $18 one week and $38 the next. Your electric bill is $150 one month and $450 the month after, and you’re uncertain with each payment whether your local utility is about to go bankrupt.

“Stocks are bought and sold fast; markets change and plummet – such that we have a stop button for it, because it can go off the rails,” Van Loo noted. “But we don’t have those kinds of protections in most other markets.”

I imagine straight sticker prices could eventually converge – because any retailer deviating from the current market norm would get no customers. The agents would just go elsewhere.

In such a world, the same model of toaster selling for different prices in different shops might seem as odd as if £10 in London was worth £20 in Glasgow.

This might sound utopian. But as The Atlantic points out, collateral damage could show up all over the place.

Including – to return to where we started – in banking.

Credit Crisis 2.0

Anyone over 40 who is reading this website will remember the queues outside Northern Rock during the Great Financial Crisis.

Customers of Northern Rock feared it might not be able to give them their savings back if the situation got worse. So they decided to jump the gun and take their money out, pronto:

The next bank run might not wear a comfy cardigan

This is essentially how all bank runs work. But at least in the old days you had to schlep down to the local branch with a bank statement to wave around – or to keep hitting refresh on a web browser to log into an overburdened home page – to do your bit to make the situation worse.

But AI agents can do this stuff in the blink of an eye. As a result, billions – trillions – could slosh from one bank to another, driven by whatever factor the agents deem most important.

Sure, that should be to secure better interest rates in the calm times.

But perhaps the agents too would be moved by rumours and miscommunications during the next global credit crisis, just like everyday humans but on industrial strength steroids. Banks could go bust on the back of a well-timed tweet.

Could that be prevented? Of course – banks could insist on minimum time lock-ups to gate much more of our money.

But this undoes the promise of that frictionless AI revolution. And if some banks opt out, then they might quickly amass the money of the others. The incentives are mind-bending.

You can see how it could all spiral in very unpredictable ways – and fast.

Buy now, pay later

Nearly four years on from the launch of ChatGPT, it seems to me that AI is following the template set by other revolutionary technologies and the futurist Roy Amara’s famous dictum:

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Maybe agents will never be reliable enough for true mass adoption. Tech-savvy nerds enjoy figuring out why their automated shopping assistant ordered five tons of horse manure to be dumped on their front lawn. Normal people just want things to work.

But if agents do eventually get inserted into all our transactions – and civilisation is brought to its knees because we cut human bankers out of the loop – then consider yourself warned.

Saving the bankers won’t draw many recruits to a Butlerian Jihad anytime soon.

Besides, before we can have a backlash against the AIs, we must fully lash ourselves to their masts.

But it does make you wonder if getting a higher interest rate while you sleep will ultimately prove to be worth it.

1. Which is why you wonderful people who become Monevator members are the ones keeping this site going! Please don’t forget it. Or, you know, maybe do forget it but keep paying. Just kidding!

The post Will AI agents like Muse mean the end of personal finance? appeared first on Monevator.

What caught my eye this week.

The post Weekend reading: When I’m telling myself I’m not really 64 appeared first on Monevator.

Risk is a tricky word to pin down. Some people might say “riding a bicycle on the road is too risky” or “I only have a cash ISA because shares are too risky”. Others will think those views are silly.

There isn’t a clear line between risky and acceptable. It’s a personal question of what you feel able to tolerate.

When it comes to investing, people fixate on the risks of the stock market:

• What if the market crashes?
• Will I get the return I expected?
• How much can I draw down from investments each year without running out of money?

Those are all valid concerns. But they are far from the only risks out there.

What’s more, if you spend too much time focusing on just one risk then you are liable to make poor decisions.

As The Investor wrote years ago in The first law of thermodynamics and investing risk:

“Investing risk cannot be created or destroyed. It can only be transformed from one form of risk to another.”

So what’s risky for you? That’s for you to decide.

Risky business

Many kinds of risks are familiar both to bankers and to freelance writers penning personal finance articles.

The risk of not getting paid, for instance.

But there are also more specialist ones from the world of finance that are worth us thinking about. These include:

• Market risk – the possibility that you don’t get the returns you were expecting, whether due to performance, interest rates, currencies, or commodity swings
• Credit or counterparty risk – someone else can’t pay you back
• Liquidity risk – when you can’t buy and sell assets as quickly as you’d like
• Operational risk – what happens if the day-to-day running of your business stops working properly?

These map quite easily across to personal finance:

• Market risk – when you don’t get the returns you were expecting
• Credit or counterparty risk – if the bank or broker you’re using goes bust, are you covered?
• Liquidity risk – relying on antique coins for emergencies? They might take a while to convert to cash
• Operational risk – what if you accidentally sell your entire portfolio when you’re half-asleep, swiping on your phone, or you lose your passwords?

These risks all sound clear enough, at least in theory. But other risks are more subtle.

With enough risks, no target is high enough

Maisie wants to retire early. She already has £1,000,000 in her stocks and shares ISA – invested in a global shares ETF – and her budgeting software informs her she spends £30,000 per year. 

After Maisie reads The Accumulator’s musings about the UK safe withdrawal rate, she realises that she can retire immediately, withdrawing 3.1% of her portfolio each year.

Great stuff!

But then Maisie tells some folk about her excitement on the Internet.

“Ah,” says EternalPessimist28, “but what if you live for another 50 years? You’ll need a bigger portfolio.”

“And what if you need a care home?” interjects LondonStockBroker. “You should be modelling for £100,000 spending per year after turning 80 to cover that.”

Maisie sighs deeply, and goes back to work for another decade.

Finding the balance

From a purely financial perspective, putting more years in might be the right move for Maisie.

But life is about more than just finances.

What if in the following decade, Maisie’s partner passes away? Or she develops a health condition related to her stressful job?

Clearly it’s not a good idea to retire without enough money invested. But waiting until you’ve minimised market-related risks could well increase your exposure to these other kinds of risks.

A little list of risks

Let’s dive into a few of these less commonly discussed uncertainties.

It’s worth taking the time to write out all of the risks that might impact you.

Are you weighting all of them in the same way? Are there others that you’ve forgotten about, or that you’ve deliberately swept under the carpet because they’re too painful to think about?

Or is there perhaps a risk that keeps you awake at night, when it’s really no more threatening than the other risks on your list?

Risk is not all the same

I find it crazy how some people dedicate most of their financial planning to market risk, and then barely give any thought to issues such as longevity, life insurance, or how much they should trust their broker.

You’ll read personal essays going into thousands of words about how somebody plans to minimise the risk of withdrawing too much from their portfolio – adjusting based on various market signals and statistics.

But then a day later the same author will confidently assert that everyone should invest 100% of their portfolio into equities and that nobody needs an Independent Financial Adviser (IFA).

That’s not to say that you can’t invest 100% of your wealth in equities, or that you need an IFA.

You do you.

Rather, the point is that people can get hyper-fixated on certain specific risks, which sometimes seems to crowd out the attention they might give to others.

Rushing roulette

Consider somebody who focuses every day on maximising the amount they put into their ISAs, but who suffers a serious injury and has to quit work. They will surely regret having skipped income protection insurance in order to slip an extra £50 into the ISA each month.

Or take someone who strips their expenditure back to the absolute bone so they can retire in a decade, when they plan to withdraw just 2% of their portfolio each year.

In theory they’ve put their finances on a solid track to FIRE. But if their spouse and kids hate living on Pot Noodles and wearing clothes from Oxfam, the retirement plan may collapse after a couple of years as divorce looms.

Alternatively, you might deal with one risk and forget about all the others.

I once spoke to an underwater welder who told me they didn’t need a retirement plan because they were almost guaranteed to die on the job.

I guess that’s one approach to longevity risk.

Early retirement remains an option

Personally, with each year that passes I am less worried about stock market risk.

That’s not to say that I don’t care about my investing returns or the next bear market. Of course I do.

The problem is that if that’s my only concern, then I’m leading myself down a path of wanting to save not 25 times my annual spending to retire, as per the famous 4% rule, but perhaps 33 or even 40 times that amount to feel more secure.

These days I’m more concerned about the opposite danger:

• What if I wait until I’m 58 to retire, and then find my health is completely wrecked?
• What if I miss the next decade of my children growing up whilst I’m in the office?
• What if I drop dead before I hit my number?

Sure, we all have to accept there are risks in life.

But if you’re striving to stash enough in investments to take a punt at early retirement, then you might try to mitigate the worst of these other risks too.

For example, if I’ve hit the point where my annual spending is equivalent to 4% of my assets and yet I choose to delay retiring for another five years to bring that down to 3%, am I really taking the less risky option?

It all depends what kind of risk I care most about.

One risk to rule them all

You cannot negate every financial risk out there. Instead, you must figure out what most matters to you.

Is it retiring with the (near) certainty that you’ll never run out of money?

Or perhaps you’re less bothered about never needing to work again  – rather, you just want to know that you’ve got enough invested to cover the bare essentials if you do lose your job.

Plan accordingly.

Or maybe the objective is to retire quickly, maybe before your kids move out, or whilst you’re still fit enough to hike around the world?

In that case it might be worth modelling a higher withdrawal rate – knowing you might have to go back to work one day – in order to experience your once-in-a-lifetime adventure.

I can’t tell you what retirement target is right for you, how much you need invested, nor the rate you should be withdrawing it at. (Though I know a guy who can help you with that.)

Nor can I tell you that you need to retire at 40, or that you should eat nothing but beans and rice to free up more cash to pay off your mortgage.

I’m just saying don’t lose sight of everything else in your life in pursuing a narrow financial goal.

That seems to me to be the biggest risk of all.

The post Why you can’t avoid risk when investing appeared first on Monevator.

Getting a grip on asset class behaviour can be hard when there’s a fire hose of data gushing in from all angles, often from sources unknown, typically quoted in nominal US dollars (USD), and sliced and diced to suit the author’s purposes, not yours.

So today we’ll try to swim against the tide by posting the long-term numbers for gold since 1900 – priced in pounds, fully cited, and accounting for inflation.

The post Gold GBP: historical asset class returns appeared first on Monevator.

What caught my eye this week.

The post Weekend reading: Knocking the covers off appeared first on Monevator.

What kinds of catastrophes would you hope to survive? Is preparing for an economic meltdown even on your To Do list?

Can you protect yourself from extreme events with judicious investment decisions? Is it even worth trying?

If it’s a giant meteor heading towards Slough then you’d want to go in the first impact. Slough might gain something aesthetically, but it wouldn’t leave a future to relish.

But what about a more modest society-rattling scenario? Some kind of economic collapse, say.

How might such a scenario unfold and what will it do to your investments?

My experience of economic meltdowns is modest. So rather than making up my own scenario, I’ll lean on someone else’s imagination.

The Mandibles

In her book, The Mandibles*, Lionel Shriver follows the plight of one family in their attempts to survive the mother of all economic meltdowns. It’s based in the US but it’s not too hard to imagine a UK parallel.

In the novel, runaway US debt turns international investors sour on Treasuries. The dollar loses its privileged position in favour of a new international reserve currency, the bancor. The US is excluded from the new currency bloc, however, and in a fit of presidential pique the US defaults on its debt.

Further beset by a wide-scale cyber failure, a flailing government turns to money printing and capital controls. The ensuing hyperinflation leads to nationwide economic and social breakdown.

Sounds plausible.

The permanent portfolio?

Faced with such a situation how would you like your investment portfolio to be positioned? Is there any mix of asset types that would help?

Who knows. But let’s look at what happened to the Mandibles.

Equity and Bonds

Mr Mandible senior started the book with a vast equity and bond portfolio, the inheritance of which had his offspring jockeying for position.

Unfortunately, the entire US finance system ground to a halt after the debt default. It never recovered in its original form. The value of the Mandible’s portfolio dropped to zero before the end of chapter one.

A complete and permanent failure of stock markets has happened before. The clearest examples required a communist revolution, as in Russia in 1917 and China in 1949.

Other examples often followed war. For example in Germany in the aftermath of WWII, where hyperinflation followed by currency reform effectively wiped-out pre-war investors.

In short, equity and bonds may not be the rock to cling to in a catastrophe.

Cash

Real-world examples of hyperinflation making cash next to meaningless are plentiful.

In post-WW1 Germany, workers were paid twice a day because cash was losing value so quickly. The price of bread went from 250 marks to 200 billion marks over the course of 1923, with subsequent (possibly apocryphal) tales of people taking wheelbarrows of cash to the bakers.

In 2009, after an intense bout of hyperinflation, the government of Zimbabwe released a 100 trillion-dollar note. Hopefully the wheelbarrows could be left at home for a few days.

The Mandibles suffered a similar fate. In the early stages of the crisis, the one remaining family member with any cash coming in needed to spend it on food the same day, as it wouldn’t be worth much a day later.

By the end of the book the dollar had disappeared entirely, to be replaced by the bancor.

Gold

For the Mandibles, gold was still very highly valued but that led to its own problems.

Any gold held by a nominee financial institution disappeared overnight, along with the equities and bonds.

Beyond that though, the US government outlawed the private ownership of gold. Enforcers went door to door to confiscate all gold items, from jewellery to gold teeth. Houses were ransacked and residents subjected to vigorous interrogations. Only those with the most secret hiding places, nerves of steel, and an impenetrable poker face managed to hold on to something.

Again, history suggests this is a credible response to currency and debt crises.

Whilst not quite the same brutal confiscation suffered by the Mandibles, both the US (1933) and the UK (1966) have previously deemed it necessary to restrict the private ownership of gold.

Property

Freehold property ownership proved a better investment for the Mandibles. Whilst in the short term they were thrown out of their house by gun-wielding squatters (who were later thrown out by even scarier gun-wielding squatters), once some sort of normality was restored a few years later, property ownership was reinstated.

Communist revolutions tend to be less kind to property rights, but if you can avoid those then it seems there’s a fair-to-middling chance you’ll get to keep your house by the end of any upheaval.

Although you may need to budget for a new kitchen and carpets by that point.

Guns

Guns often seem to play a key role in apocalyptic tales of human endurance, but starting gun fights is not a good survival strategy.

As we saw with the squatters, there’s always someone else with a bigger gun. It might be best to stay out of the arms race altogether.

Skills

Much more useful is to acquire some practical skills. If you can grow food, fix the roof, or dig a cess pit, you will find yourself in demand.

Developing a new skill is the greatest investment of all. It cannot be confiscated and will pay you dividends for ever. But you need to pick the right subject.

One of the older Mandibles was an economist back when the economy was still functioning. While his offspring fought for their collective survival, he dedicated himself to writing a thesis on why he was right about everything all along, despite not foreseeing the economic collapse.

Spoiler: he did not survive until the end of the book.

(Some less generous readers may think that economists aren’t of much use even when the economy is functioning.)

Survival

Some of the Mandibles did survive to see some sort of order restored. Key to this was joining a small community on a ranch owned by their uncle. Which was handy.

Survival is hard on your own. You need friends with complementary skills to make a go of it.

One of the Mandibles even managed to hang on to some gold throughout the whole ordeal. That helped them get back onto their feet.

Plan A

So there you have it. Own a property, bury some gold in your garden, practice your poker face, get some friends, and go to carpentry evening classes.

Survival guaranteed!

But what if the next real disaster doesn’t look like this? Will any of the above help you when it comes to the crunch?

Or maybe there won’t be a disaster, but you end up eating cat food because most of your portfolio is buried under the Hollyhock.

Plan B

I do not have gold buried in the garden (although of course I would say the same if I did). And I’m told my face always betrays exactly what I’m thinking – which can sometimes be embarrassing but more to the point means I would not fare well under interrogation.

I do own a property, and I maintain good relations with my daughter and her partner who live in a rural area and grow some of their own food. But my motivation for this was not related to surviving economic meltdown.

Whilst a cautious approach to investing – founded on diversification and a hefty cash buffer – will hopefully enable me to ride out the ups and downs of the market rollercoaster, I have no contingency plans for anything worse.

While the sun is shining, I will enjoy my good fortune in life and maybe go out for a walk. I’ll worry about the gun-toting squatters when they turn up at the door. If I’m lucky they never will.

Fingers crossed.

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There is nothing like investing when it comes to exposing yourself as a weak-minded gimboid.

I know all about buying stocks low and selling high. I understand the rationale behind Warren Buffett’s aphorism, “be fearful when others are greedy and greedy when others are fearful.”

Yet when my portfolio hits red, I fret. And when my return numbers glow green, I feel the pleasure centres in my brain light up like Vegas.

The uptick in fortune means it will cost me more every time I buy additional equities, of course. But hang the expense, I want to be a part of this now! The party’s on and I need to get my snout in the trough, quick.

I know this because despite being a good passive investor who pound-cost averages and rebalances annually, I am not an entirely mechanical man.

And oh, the flesh is weak.

Only flesh and blood

You see I long allowed myself a measure of freedom when investing – a certain amount of money to put into the market every year that wasn’t dictated by the calendar.

Don’t get me wrong. This was never a gambler’s float, used to punt on some company that’s rumoured to be on the verge of discovering cancer-curing jam.

I invested my discretionary dollop in index trackers. However I was free to do so whenever I wished.

Sounds good? The snag is that in reality I struggled to take the plunge when the market did. I wasn’t always been brave enough to blow my ammo when equities were relatively cheap. I held on and on until the upswings, and then I got less for my money.

Oh I had my excuses. Especially when I hadn’t yet escaped the rat race, and so was still subject to the whims of The Man as well as Mr Market.

Impure instinct

Especially before full-strength financial independence had my back, my brain was always on hand with self-justifications to reassure me that reason was actually in control, not instinct:

• I was worried about my job.

• My company was restructuring.

• My monthly drip-feed was already casting cash into the cavernous cake hole of the capital markets.

• “I better not throw in any more in case I’m axed! I’ll need every penny.”

The reality was that the overweening fear of loss was in charge.

What these optional investing side quests actually taught me was I am just one of the herd. A member of the cattle class.

I’m not special. I react and feel like everyone else who makes up the statistics that show this sort of irrational behaviour can cost investors dear.

Gorilla warfare

The truth is it takes willpower to overcome the apeman within, and there’s some evidence that willpower is in limited supply for all of us. We can’t bank on having enough in reserve when we need it.

This in turn means the fewer decisions that are left up to my meat-bag of a brain, the better.

Passive investing would be much easier if we could program a robot to handle it all for us and to physically prevent our continued interference, like some benevolent Dalek with a taser.

Perhaps the AI revolution will give us all the cold-blooded reptilian investing agent of our dreams?

Once it’s emerged from the primordial slop, I mean.

Well, perhaps. But until we can trust an agent to run our portfolio without it going rogue and selling the house to bet everything on pork futures, it’s up to us to manage our all-too-fallible frontal lobes.

Don’t just do something

Back when I still stacking my escape-stash, automatic investing droids were nowhere to be seen. So instead I automated as much of the investing process as possible.

You see, the one human behaviour that always worked for me is inertia.

• I never messed with the direct debit that funnelled money out of my bank account and into my broker’s.

• I kept hands-off the regular investment scheme that piped cash straight to my chosen funds.

• I dared not touch lock-in wrappers like ISAs, pensions, and fixed-term bank accounts, where a cost is imposed for premature evacuation.

Inertia is the great human pacifier. It’s a force that’s more powerful than fear in my world – especially if the fear is something intangible, like an investing loss.

Eliminate all carbon units

There are other weak points where human intervention can easily scupper the best plans.

For instance, you might fiddle with asset allocation every time you choose the next fund to buy. And, boy, what mischief you can get up to when it’s time to rebalance…

“Sell those lovely equities to buy more bloody bonds. In this market?!”

Putting my investing on rails did help me to resist the urge to keep thrashing my winners.

But it sometimes also took a stiffening of resolve, and a quick prayer of deliverance to the passive investing gods.

Older and colder

Since I declared myself FIRE – and declared to my bosses where they could shove The Accumulator’s Personal Growth and Development Plan V4.6 – I’ve found it easier to leave my portfolio to do its thing.

I suppose the same fully-funded sangfroid that enables me to do some work on the side without getting sucked back into the office is also helping me to ignore the market noise.

Have I then reached some state of investing transcendence?

Doubtful. So far so good, but I’m regularly tested and I’m still only a passive investor.

I stayed the course during the Covid crash, true, and I learned more than I lamented during the recent bond-a-geddon.

But who knows how a real humdinger of a bear market would hit me?

Better to stay humble and self-aware.

Automatic for the people

If you recognise these frailties in yourself, then there are various tools you could explore to take the human edge off – from automatic investment plans at online brokers, to all-in-one personal finance apps that limit your investing choices but also your horizons.

They can still be enablers when it comes to self-destructive fiddling, though. And they can be relatively expensive.

These days there’s a lot of talk that AI agents will soon do everything for us. In theory it sounds like automatic investing nirvana. But when you think about how obsequious the typical chatbot is, would you really trust one not to egg on your worst impulses?

Besides, from what I can see AI is so far mostly being deployed to tempt investors off the rational path.

All-in-one not one-for-all

Perhaps the closest proxy for a truly hands-off investing robot is a good multi-asset fund.

Made popular in the UK by Vanguard’s LifeStrategy products, a multi-asset fund is an index-tracking, fund-of-funds with built-in rebalancing features – truly automatic investing.

All you need do is pick the asset allocation of your choice, set-up a direct debit to keep it oiled, and then let the program run.

With this sort of investing the human being is taken off the table – which is the point of the exercise after all – and everything is left to the robot. No more pesky emotions.

Of course, you might eventually start to worry that your multi-asset fund hasn’t got all the assets you want. Not in the right doses, anyway.

Perhaps you’re being greedy or fearful, or perhaps you’ve become better informed. Humans are not incapable of judgement, after all. It’s the rash decisions we want to tamp down, not the strategic thinking.

At least with your investing machine whirring away in the background, you can take time to explore your options with the serenity of a wannabe Cyborg Buffett.

Batteries not included.

Take it steady,

The Accumulator

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What caught my eye this week.

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A recent Monevator piece about Gen Z and pensions quoted a young reader stating flatly: “I don’t believe that I’ll be a recipient of a State Pension.”

I’ve read a lot of responses to that sort of line. Mostly they’re some variation of “don’t worry, it’ll be fine”, which is unconvincing and slightly patronising because nobody actually knows the future.

Indeed while the recently-mooted shake-up of the State Pension’s triple-lock from 2030 is pitched as making it more sustainable for the long run, some people will instead see it as proof that politicians will always be tempted to tinker it away, or at least introduce means-testing for what’s now a universal benefit.

So let’s take concerns about the future of the State Pension seriously. Because if you genuinely think the State Pension won’t be there for you, the useful question is what your alternative plan will cost you if you’re proven right. Work that out and you’ll find out what you’re really arguing about.

I run a free pension calculator, which is how I ended up doing this arithmetic in the first place.

Be warned: the number is bracing!

What you’d replace with a DIY State Pension

For the purposes of this article we’ll assume the pension triple-lock continues in its existing form. We don’t know who’ll be governing the UK in 2030 – and thus we can’t be sure if and how the triple-lock will change. Modest tweaks don’t alter the central premise, anyway.

The full new State Pension is currently £241.30 a week for 2026/27, or £12,547.60 a year (Source: GOV.UK). Call it £12,548.

We should focus on the State Pension’s specification rather than that number, though, because the specification is the expensive part:

• The State Pension is paid for life, however long you live.
• It is currently uprated every year under the triple lock, by the highest of earnings growth, CPI, or 2.5% (Source: House of Commons Library).
• You’re not relying on an insurer or an investment fund to deliver the income.
• It isn’t means-tested.

If a private company sold this as a product, it would be the most conservative one on the shelf.

The market price

The nearest alternative to the State Pension you can buy is an RPI-linked annuity.

Hargreaves Lansdown publishes best buy rates. As at 17 September 2026, a single-life RPI-linked annuity with a five-year guarantee paid £5,566 a year per £100,000 at age 65. ¹

Hargreaves Lansdown doesn’t quote for age 68 – the State Pension age a 25-year-old is currently legislated to reach. Its table runs 65 then 70, at £5,566 and £6,338 respectively.

However interpolating those two numbers gives us roughly £6,029 per £100,000 at 68. (That’s my arithmetic, not a quote, so treat it as indicative.)

• Divide £12,548 by 6.03% and you get £208,000.

Thus £208,000 is what it costs, today, to buy the income the State Pension gives you, at the age you’d get it.

Note that a few weeks earlier the same table showed £5,585 at 65. The rate moved by around a percentage point over that short period, and the replacement cost by thousands of pounds with it. So please do take every number in this section as just a snapshot of one week’s pricing.

For more context, replacing the same income three years earlier at age 65 would cost about £225,000.

Or – if you’d settle for a level annuity that never rises – £156,000.

That last figure is the one people quote when they want the State Pension to look cheap. But it’s not a fair comparison, because inflation will eat a level annuity alive over a 25 year retirement.

And £208,000 is a low-ball estimate…

An RPI-linked annuity tracks RPI. But the State Pension currently tracks the triple lock, which is the highest of the three measures cited above. The State Pension has therefore generally run ahead of prices since the triple lock was introduced.

The Commons Library notes that the basic State Pension’s value relative to average earnings climbed from around 16% in the 2000s to roughly 26% under the triple lock. So an annuity that merely keeps pace with RPI is a worse product than the thing it’s replacing.

Also, RPI itself is changing.

From February 2030, RPI will be aligned with CPIH, which has historically run about a percentage point lower. Anyone buying an RPI-linked annuity today is therefore buying an index that is scheduled to become less generous within four years.

I suggest then it’s best we treat £208,000 as a floor.

What this all means if you’re 25

Here’s where the analysis gets more cheerful.

That £208,000 – in today’s money, 43 years away – is not an unthinkable number. You can achieve it through a monthly direct debit, wise investing, and a lot of patience.

How much your direct debit – your contribution – needs to be depends on what you assume about returns:

That’s a spread of more than two to one – from £90 to £205 – in terms of how much you’ll need to put away each month, just from changing the growth assumptions.

It’s an open question as to what the most accurate figure is to use. Anyone giving you a single number is probably trying to sell you something!

Many happy returns?

It’s worth saying where the return assumptions in my table above sit compared to the regulator’s:

• The FCA makes providers project pensions at 2%, 5% and 8% a year, with inflation assumed at 2%.

• That is roughly 0%, 2.9% and 5.9%, after inflation.

• My calculator’s ‘cautious’ 4% therefore sits above the regulator’s central case, and its ‘optimistic’ 6% sits above the regulator’s top one.

I’d rather be upfront about this here than have it pointed out in the comments.

Again, please read the three settings as a range to think about, not a forecast.

Tomorrow’s DIY pensioner today

Let’s now consider a 25-year-old on £39,000 (the ONS median for full-time employees in April 2025) who pays the auto-enrolment minimum of 8%, and who retires at 68.

Firstly a few things about how my tool turns the resultant pension pot into an income:

• The calculator assumes that you take the full 25% tax-free lump sum at retirement and then draw 4% a year from what’s left.
• The resultant retirement income figure includes a full State Pension.
• Everything is in today’s money.
• The tax-free lump sum sits outside this income figure, so it would be money on top.

Here’s the money shot:

Source: Pension Sprout

A pot of £620,000 could produce a retirement income of about £31,000 a year. Of this income, £12,548 – roughly 40% – is the State Pension.

That £31,000 is the number I’d put in front of anyone who thinks the State Pension is irrelevant to them. On this central case, it makes up two-fifths of their retirement income. Moreover it’s two-fifths that’s inflation-proofed and can’t run out.

Switch the same person to the cautious 4% setting and the pot falls to £488,000:

Source: Pension Sprout

We haven’t changed the contributions, but the final sum used to buy an income is £132,000 smaller due to lower investment growth. The State Pension share of our pensioner’s resultant income climbs to 46%.

What if our 25-year-old wants to self-fund the whole thing, so that losing the State Pension entirely wouldn’t change their retirement income?

In this case they will need to lift their own contribution from 5% to about 7.8%, which takes the total from 8% to 10.8%:

Source: Pension Sprout

The higher contributions add about £212,000 to the final pot in this forecast, which covers the £208,000 extra the market would charge. It would cost around £90 a month at today’s salary, rising with pay.

I think that’s manageable beginning at age 25. (It’s brutal if you’re starting at 55 – which is a whole other lesson!)

Buying into what the government is selling

Now we get to the comparison that made me want to write this article.

You can buy extra State Pension. A year of voluntary Class 3 National Insurance costs £18.40 a week, or £956.80 for a full year. For someone who needs 35 qualifying years for the full new State Pension, one additional year adds 1/35th of the full rate.

So £241.30 ÷ 35 = £6.89 a week, or £358.50 a year, index-linked by the triple lock, for life.

Work out the implied rate:

• £358.50 of annual income for £956.80 of capital is 37.5%. That is, it pays for itself in two years and eight months.

The open market offers around 6% on the equivalent product, whereas the state charges a price that implies about 37%.

We can push this further. If you could buy all 35 qualifying years at the price of voluntary contributions (spoiler: you can’t!) then it would cost just £33,488. The annuity market will charge you around £208,000 for the same income.

On this crude but illustrative comparison, the State Pension is available at roughly a sixth of what it’s worth, which is a strange thing to describe as the benefit nobody expects to receive.

But before anyone rushes off to their online banking, some important caveats:

• You cannot buy 35 years of State Pension. You can normally only fill gaps in the last six tax years. And only years that aren’t already qualifying.

• Paying doesn’t always increase your pension, particularly for anyone with a pre-2016 record or a history of being contracted out.

• Check with the Future Pension Centre before doing anything. These payments are an easy way to waste a four-figure sum on a pension decision.

My comparison is just made to show you again what the State Pension is really worth.

So is the Gen Z reader wrong?

Not exactly, but I’d argue their fear is aimed at the wrong target.

• “The State Pension will be abolished” is a low-probability outcome. Mostly because pensioners vote.
• “The State Pension age will keep moving” is already happening in legislation.
• “The triple lock should get watered down” is now the stated goal of our prime minister. It’s previously been suggested by the OBR and various think tanks, too.

In my opinion then, it’s the risk of changes to the State Pension rather than it going away entirely that we might want to plan for.

So what would I say to a 25-year-old who doesn’t believe in the State Pension?

Fine. Work out your plan as though you’ll never get it. My sums suggest this will cost you about £90 a month on the central case. Or £206 if you use the regulator’s return assumptions instead of mine. You can make up your own mind and do the maths for yourself.

Suppose you’re wrong about the politics and the State Pension endures?

Then you’ll simply retire considerably richer than you planned. There are worse mistakes!

Just don’t confuse “I don’t trust it” with “it isn’t worth anything”.

For most of us the State Pension will be the largest guaranteed ², inflation-linked income we will ever have.

That was why I built my calculator – to put the number on the screen so people can argue about it.

If you want to run these figures with your own assumptions, you’ll find it at Pension Sprout.

Sam Parkinson built Pension Sprout after failing to find a pension calculator that didn’t ask for his email address. Sam is not a financial adviser and none of the above is advice, just information for your ongoing research. Figures correct as at 17 September 2026. They will need rechecking against the current tax year whenever you read this.

1. Note: The State Pension doesn’t come with a five-year guarantee, which is an additional useful benefit to the annuity.
2. i.e. Government-backed.

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