Most important factors for accumulating wealth

There are four principle components that influence how much wealth you can accumulate over a working lifetime. Your ability to achieve financial independence will depend on how focused you are at managing them.

In order, these factors are:

  • Regular contribution
  • Maximising tax shelters
  • Temperament
  • Investment return

Inexperienced investors often assume that the last of these is the most important. In my case, when I stopped work at the age of 51, I would estimate that only 30-35% of my portfolio was attributable to investment return. Regular contribution was probably 40-50% and the balance due to tax free status.

And without temperament, none of it would have been possible at that age (although for sure the other three would have enabled me to stop working at some point).

Regular Contribution

The workhorse of wealth creation is to make regular contributions into the portfolio. This doesn’t have to be monthly – sometimes it makes sense to bundle up smaller amounts into bigger deposits to reduce trading fees.

But regular is the watch word, which means making them regardless of what the market is doing. It’s a marathon, not a sprint. You’ll be contributing for 20-30 years before you achieve financial independence so just bake the behaviour into your lifestyle and budget.

It needs to be sustainable, so don’t make compromises to “shovel more in”. You will naturally increase the total annual contribution anyway through both inflation and career related salary progression.

To make any contribution at all, you will need to consume less than you earn. This behaviour will also bring unexpected side benefits when it comes to life after financial independence, but for now, just recognise that creating headroom to enable regular investment contribution is the cornerstone of your future wealth.

Maximising tax shelters

The UK is one of the most generous tax havens in the world. I’m not aware of any other country that allows so much wealth to be accumulated at the expense of the tax payer.

Regardless of your politics, your fellow citizens have consistently voted for this state of affairs over the last 25 years (although admittedly you won’t find this at the top of manifestos). It makes a dramatic difference to the size of your portfolio, so you need to ruthlessly shelter as many of your assets as you can. Note that for the majority of working people, all their investments can fit comfortably inside tax free wrappers (at the time of writing in 2024).

There will be more details in other posts on this blog, but in broad terms you should be investing under SIPP (or workplace pension) which give the most tax benefit, and then ISA for future tax benefit from your post tax income.

The main benefits of the tax shelters are:

  • No tax paid on contributions from gross salary into pension/SIPP
  • No income tax paid on dividends received or capital gains tax on disposals
  • No tax paid when ISAs are withdrawn
  • Up to £400,000 of tax free withdrawal from a SIPP, depending on total pot size and age you start withdrawing

The eye catching benefits are obviously the immediate tax benefits. However, over the long term, not paying tax on investment income gets more significant with compounding. My first ISA contribution was in 1998 and first pension contribution was 1996. They are still earning tax free income today.


This takes many forms, and I will make other posts solely on this topic. But in essence it can be summarised by adhering to the following behaviours:

  • Stick to your investment strategy regardless of whatever the current fads floating around
  • Don’t fiddle with investment allocations
  • Don’t sell because of price (up or down)
  • Ignore large portfolio drops and carry on

The reality is that you don’t actually know if you have temperament until rocky times hit. You’ll experience at least three of them during your investment career, and maybe more.

The three major events in my investing history were dot com crash, global financial crisis and covid. It turned out I did possess temperament, but not because of any great vision. I just didn’t really know what I would do out of market so I stayed in.

If I had sold some, or all, of my portfolio during these moments, it would have had a detrimental impact on financial independence. Most people who sell at a loss are so scarred by the experience, they never re-enter the market and miss the subsequent returns.

Temperament is key … you can make all the regular contributions to all the tax shelters you like, but if you go and sell them just because the market fell 30%, it will have been all for nothing.

A common phrase is that if you can’t tolerate a 50% fall in your portfolio, then you have no business being in stocks in the first place. This is a harsh viewpoint, but if your temperament is poor, you will likely under perform the market over the long term.

Investment return

Everyone’s favourite topic.

Inexperienced investors will be looking to maximise return. They want the story of making 100% return over some time period to validate their investing prowess. They also desperately want to avoid losing 50% over some time period.

This leads to battle scars that have the potential to undermine your temperament. Or, you use those experiences to re-plan and slowly become an experienced investor.

Experienced investors aim first to beat inflation (the absolute minimum expectation from any investment strategy) and secondly to achieve market return over long time periods (20+ years).

Fees are also relevant here, because they can dramatically erode investment return over time. Index funds which passively track whole markets have the lowest fees. Active funds attract higher fees because you need to pay a guy in red braces to put his kids through private school.

I realised in 2004 that I didn’t possess enough information to beat the market over a twenty year period. So I sold the small amount of individual stocks I had in my portfolio and concentrated only on market return.

In other words, the more boring the strategy for investment return, the more likely it is to deliver a bigger pot over the long term.

Read more on this topic . . .

Thoughts from others

  1. An ephemeral list of articles I’d like to write about so I don’t feel like I have to keep the tab open in my browser as a reminder 😂 Maybe I’m not sure what to say about it, maybe I just need to think about it a little more, maybe it struck me and I’m…


I am not your financial adviser.

The information in this post relates to my financial journey. It may or may not be relevant to your own. You need to make your own decisions on your own financial strategy.

Do not buy or sell anything based solely on what you read.