Come along for a Hike with Francesca. Or How to Start Investing in 10 Steps.

Come along for a Hike with Francesca. Or How to Start Investing in 10 Steps.

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I could find a great stock market chart but I find the dramatic scenery from the hike more interesting

Last weekend I was on a hike with some local friends and after talking about some exciting topics like cycling the world the conversation ended up drifting towards investing.

Francesca recently discovered ETFs while Joanna heard about Tracking Funds from her friends.

Both were reluctant to deploy money in the Stock Market. While Francesca held significant amounts of cash for a number of years, Joanna thought there was no better investment than her home.

I promised to shortlist a couple of ETFs for Francesca to invest in. 

But I find it even more useful to relate parts of our conversation so that you can benefit from it too. 

Investing at the top of the market can be  overwhelming for beginners.

Here are the 10 Steps to start investing as a European.

It’s simple. Only #7 and #9 may require a bit of your time. 

1. On Average, You Double Your Money in 10 years

If you follow wise investing rules and take risks your portfolio may earn c. 7% per year. 

You could be unlucky and pick a lost decade to end up flat after 7-10 years. 

More often, you will double your money in the first 10 years. 

And then your portfolio increases exponentially. 

Do a simulation in my compounding calculator to understand the magic of investing early.

Warren Buffett reflected on his own success based on that concept: “My wealth has come from a combination of living in America, some lucky genes, and compound interest.” 


World ETF Benchmark Total Return (1988-2020)

2. You do NOT need Skills to Invest in the Stock Market

This is one of the biggest misconceptions about the Stock Market.

In fact, applying your knowledge may end up being a disadvantage. Read Rule #6.

I could turn Joanna’s argument against her. 

You actually need skills to invest in Real Estate. 

It requires time, research, oversight and maintenance.

3. You have Virtually No Chance of Losing Money

Joanna was concerned about losing money in the Stock Market and thought that Investing can’t compete with the Property Market. 

She must have heard of the most epic stock market crashes. 

But if you follow wise investing rules you won’t lose money in the long run. Remember to:

  • Ignore the Noise. The Financial Industry and Media have all the incentives to keep you excited and trading. Don’t fall for the trap. Do not look at your brokerage account more than once a quarter. 
  • Smooth out your Entry Point. In theory, investing in one go is most efficient. Psychologically, injecting on a regular basis over a 12-month period is a good strategy. Especially as a beginner in a bull market.
  • Plan for Contingencies. Make sure you don’t invest the money you will need in the short to medium term.
 Here is how to prepare for one of those worst-case scenarios and benefit from the next crisis.

4. You can Live off Your Stock Portfolio. Not off Your Own House.

If your Investment Portfolio has the size of 25x your annual expenses you may consider retiring early.

Or even better. Pursue less lucrative passions.

In 1994, William Bengen came up with the 4% Rule which means that you can safely spend 4% of your Investment Portfolio. This guy explains how.

5. Pick Your Colour. In This Game Both Red and Black Win.

Francesca currently has a portfolio of 4-5 ETFs covering specific countries and sectors.

She wants to maintain exposure to African countries. 

Country allocation maps can help. 

She was surprised to discover that you only need one Equity Fund to invest in most stocks. Worldwide. 

Here is how.

Which ETF Provider is safe?

If you are in for the long run, and are not interested in digging further pick one of those two:

  • Red – is the colour for Vanguard that made Index Investing popular amongst retail investors. Here is all you need to know about Vanguard.
  • Black – is the colour for BlackRock, the largest Asset Manager in the World. Its ETFs are known as iShares.

Can you lose your money with any of them?

Your shares are held in a custodial account so it’s bankruptcy-remote from the ETF provider.

My top two choices for Francesca are in the World ETF section. For an African ETF, you may want to allocate a tiny part separately. Tiny frontier markets are usually not covered in World ETFs. 

It takes a huge investment in introspection to learn that the thirty or more hours spent “studying” the news last month neither had any predictive ability during your activities of that month nor did it impact your current knowledge of the world.

Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

6. Don't Get Pregnant with Active Investing

1.2% of Stocks accounted for 75% of Total Wealth Creation for Investors

I suspect that neither Francesca nor Joanna will pick Stocks.

Stephan selects some of the hottest BioTech stocks for his readers.

Even some of the smartest Retail Investors are taking a gamble from time to time.

It’s fun. It’s educating. But it’s a loser’s game. 

By playing:

  • You lose Time. Your most precious resource.
  • Yesterday’s 1.18% of firms led by Exxon, Apple, General Electric or Altria drove 75% of stock market gains. Finding them is like looking for a needle in a haystack. Historically, 57.8% of firms have generated negative wealth for Investors.
  • Financial media will make you believe it’s easy to pick tomorrow’s winners. But individual stocks may never recover. The chart below shows the consequences. Buy the haystack. It always does.
  • Most people ignore all the work that will go into Active Investing. Until they are pregnant with it. Decided when to buy?  That one was easy. What is the intrinsic value of the Stock? When do I sell? How to size my investment? How do I optimize taxes and transaction costs? What is the correlation with the rest of my Portfolio? 
  • You compete with thousands of investors with cutting edge technology. You can’t be smarter. But you can be wiser than Wall Street

In the end, over 80% of Active Funds run by professionals can’t beat Mr Market.

That’s because luck plays a bigger role in Investing than some want to acknowledge.

If investing is entertaining, if you're having fun, you're probably not making any money.

George Soros, The man who broke the Bank of England

7. Good Investing is Boring

Francesca doesn’t like Bonds. 

Not even because of the low yield. But because Bonds are boring.

Having 5-10% of Portfolio in play money to buy Stocks is great to understand how markets work and make it entertaining.

But you can’t allow yourself to lose the remaining 90% invested in ETFs. There may be no come-back. 

The math is brutal. By losing money not only are you not making compounding work for you but you need exponential returns to just recoup your losses. 

If you invest  10,000 and you lose 50% you now start with  5,000 that needs to double (100% return) just to get back to the initial balance. 

Selling during a Market Crash is crystalising losses.

Markets move fast. Historically, six of the 10 best days occurred within two weeks of the 10 worst days. Missing out on them can have devastating consequences.

Your Only Homework

Now, here is the tricky part. Buy and Hold is probably the toughest investing strategy. 

Emotions always want to take control. Investors, whether sophisticated or regular savers think they can time the market. 

As a beginner, you have no idea if you will have the stomach not to sell.

Here is what you can do to increase your odds:

All this determines the part of Boring Assets – a mix of Cash, Bonds, Inflation-Linked Bonds or even some Gold.

If Francesca liked Bonds, I would have suggested an ETF that combines them with Equities

It’s the simplest portfolio for Europeans. A Boring Cash Cow.

Exponential Consequences of Losing Money

Nobel Prize winner William Sharpe found that a market timer must be right a staggering 82 percent of the time to match a buy and hold return. That’s a lot of work to achieve what could be achieved by taking a nap.

Christopher Browne, author of The Little Book of Value Investing

8. What About Bitcoin?

Cryptocurrencies as an asset class represent a $3 Trillion Market. 

Having an up to 5% allocation is not unreasonable and may boost your portfolio returns in the long run.

With one caveat. Be ready to lose it all.

9. Which Broker Should I Use?

This requires a bit of research depending on your country.

Fees are important but safety is even more. 

You will likely get your shares and money back in case the Broker goes bust. But there could be opportunity costs.

Learn how to choose a Safe Stock Broker. In certain cases, you may want to diversify across a few of them to take account of your country compensation scheme limits

10. Do I Need To Hire a Financial Advisor?

Most people are better off without a Financial Advisor.

It’s expensive and there is a lot of bad advice out there.

This may be different if your situation is complex and you need tax optimisation advice.  

Otherwise, grab an introductory Book. Then read through the materials on

Go through my Checklist before buying your first ETF.

Thank you for reading.

Happy Investing and keep’em* rolling !

(* Wheels & Dividends)



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All information found here, including any ideas, opinions, views, predictions expressed or implied herein, are for informational, entertainment or educational purposes only and do not constitute financial advice. Consider the appropriateness of the information having regard to your objectives, financial situation and needs, and seek professional advice where appropriate. Read our full terms and conditions.


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About Raph Antoine 83 Articles
Raph Antoine is a Portfolio Manager and Institutional Advisor that witnessed first-hand the 2008 Global Financial Crisis and the 2011 European Debt Crisis working for some of the most prestigious names in the financial industry. Raph has experience across multiple asset classes including Fixed Income and Equity products as well as Special Situations and Restructurings in multiple jurisdictions. Raph holds an MSc in Financial Engineering and is a CFA (Chartered Financial Analyst) Charterholder. He usually rides one of his two bikes. Rarely, a Canyon Ultimate CF SLX 8.0 (that is currently in family's attic) and most of the time a Gravel Pinnacle Arkose (his favourite) that he used to Cycle the World.
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1 month ago

Thank you, BoW for the amazing work you have done to collate and explain financial research that we’d take years to collate, understand, and implement.
I can personally attest to the success of your recommendations, as I’ve followed the same strategy over the past decades.
For your website, I have one suggestion for investors with some experience: Read just the bolded headings. That way, you’ll get the big picture quickly. If you wish, you can then dive deeper into data by reading the paragraphs under the bolded headings.
Thank you again!

1 month ago

Great stuff for beginners 🙂 I had many conversations with people – some of them skilled & well educated professionals – and I know that it is difficult to convince them that simple solutions can work. The funny thing is that quite often the same pepole are very loyal to toxic / high fee prodcuts which they already posses.

Ps. Waiting for your article on factor investing 🙂

1 month ago
Reply to  Raph Antoine

Fair enough 🙂 Will do.

1 month ago

Great blog, congrats!