Finish your plan
Today’s a little different. We’ll still ask questions, but today the answers will be unique to you. This is the final step in reviewing your initial investments, solidifying your plan of attack when things go wrong, and having something written down so you can refer to it if emotions start to get the better of you.
01 | 05
Adapt your strategy to your timeframe
Short term = low risk
Long term = higher risk
Many investors leave their short term savings (i.e money they’ll need in 5 years or less) in a savings account or term deposit so they can guarantee its value on any given day.
If you think you’ll need your money in 5+ years, you may want a mix of savings, ETFs and companies that YOU are comfortable with. Remember you can add more any time, it’s important that you only invest money you are comfortable investing. No one wants you to be up all night stressed!
02 | 05
There is no right or wrong way to pick!
Every investor has their own strategy, and every strategy has its pros and cons. Many Hatch investors invest the bulk of their money in ETFs that track the markets (aka passive index funds) and consider companies’ with 5-10% of their money.
Some new investors take a learn-by-doing approach, they put a small amount of money they are willing to risk losing (e.g. what they’d spend a month on takeaways) into one investment. This removes the mental barrier of getting started and allows them to monitor their investment and get comfortable watching it go up and down. As they get comfortable, they add more.
03 | 05
The correct plan is the plan that you’ll stick with
Some investors truly set and forget and do exactly the same thing all the time, regardless of market fluctuations, even during situations like a financial crisis. If this is you, try to imagine seeing 25% of your portfolio value wiped out and imagine how that will feel. If you think you’ll struggle to ignore it, think through what you can do to minimise the risk of panic selling!
Others invest in higher risk companies, but have a bottom price in mind. If the share price falls below it, they sell some or all of their shares to minimise their losses.
Value investors sometimes view a share price drop as an opportunity to buy (if they don’t believe the true value of the company has changed), the shares have just gone on sale!
04 | 05
Start small and grow!
Even if you have a decent amount sitting in savings, there’s no pressure to invest it all in the share markets on day one. Yes, you may pay a high percentage in fees if you are making a $50 investment, but $3 is still just $3. $3 is the cost of any trade on Hatch up to 300 shares, whichever the cost is, $50 or $5,000.
We know getting started can be scary, but as the age old saying goes “the best time to start investing is yesterday. The second best is today.” Time and time again, Hatch investors tell us their biggest investment regret was not getting started earlier, so the best amount to start with, is an amount you actually WILL start with.
05 | 05
Remember back to Day One
On day one, we talked about the returns on $5,000 invested 20 years ago. Flashback: in a savings account, you’d have wound up with $5,514 after inflation. If you’d put it in shares, you could have around $16,235.05 today.
But you don’t need to wait until you have $5k ready to go! By making smaller, regular investments, you can get it together in a few years or less. Not only does a dollar cost averaging approach usually result in a lower average share price, it also changes your mental calculation. Investing $1,000 may seem scary, but $20 a week? Well, that’s just a few coffees!