This week’s post is a little different. It’s a follow-up to my last article, and this time it’s an interview!
I had the chance to chat to Susie (who writes a blog called quitworkforlife.com) Susie blogs about her journey towards her ultimate goal of early retirement, and one of the ways she’s going about achieving that is via investing. After seeing her tweets about her automated investing plan, I decided to hit her up to learn more about how she invests.
Enjoy!

Ryan: Hey Susie, thanks so much for agreeing to share your thoughts on investing with me! 

Susie: No problem!

R: What do you like about investing in ETFs through Smartshares? [F.Y.I. neither I nor Susie has any affiliation with Smartshares]

S: I like the convenience. I buy units of the ETFs via direct debit, and there’s no brokerage fee. They are usually pretty good to deal with over email so I can adjust the amount I invest each month fairly easily. There’s a wide range of funds to choose from, and the fees are reasonable.

R: I agree, fees are the worst. I wish I’d known more about fees when I began investing years ago! How do you go about choosing an ETF?

S: When I first started buying ETFs, there wasn’t much on offer, and I didn’t know very much about investing. So I started off with just NZ ETFs as the companies were familiar to me. I decided on the NZ midcap fund  (which includes Mighty River Power, Trade Me, etc.) because they were smaller companies that I believed still had the potential for growth. The fund naturally acquires companies that are growing as they move up in value and drops companies when they are underperforming. I’ve been really happy with the performance of the mid-cap fund.
Since then I’ve also bought some units of the mid-cap Australian ETFs, total world fund, and a property fund. My primary goal is to diversify, i.e. to invest in a significant amount of companies!

Own (a very small piece of) the whole world!

Own (a minuscule piece of) the whole world!

R: Do you buy units of the same funds in the same amount every month?

S: Yes! So each month I buy the NZ mid-cap fund and the NZ dividend fund. I have invested lump sums into Australian ETFs, but I don’t contribute monthly to them.  It’s hard to save up those lump sums, so drip feeding into the investment each month works best for me. It’s worth noting that the dividends are reinvested into the funds automatically (you can opt out of this), this is a huge advantage for the small time investor. If you receive a $30 dividend what the hell are you going to do with that? If you’re like me, you’ll just waste it on craft beer!

Mmm... Dividends!

Mmm… Dividends!

If you don’t reinvest the dividend payment, it just sits in your brokerage account doing nothing until you have a large enough sum to make a share purchase again. Money not actively working for me drives me crazy! With Smartshares those small dividends are reinvested right away for no extra cost, your earnings go straight back to work for you.

R: This is so good, a lot of people think that they’ll never be able to save big amounts to invest so they may as well not bother! Regular small amounts add up over time. That’s another important point about reinvesting dividends. That’s something I have to be more diligent with…
So investing is great when everything is going well, but what about when the market is going down? Do you ever get tempted to sell low?

S: I feel pretty gloomy when the market goes down! It’s disheartening seeing your balance drop day after day. I try to ignore it, though. I first started buying ETFs just before the global financial crisis, and I saw the unit price go from around $3 to around $1 each. It was terrible, but I kept my automatic purchase for each month going. I knew I was well diversified in over 50 different companies, and they wouldn’t all go bust, so I just stopped looking at the price each day. I don’t think I checked those shares for over a year!
I wasn’t earning much money back then, but I still managed to buy quite a few shares at that low price. The shares are worth close to $4 each now, and I bought them every month while the price went back up from $1 to $4. Those are some sweet gains. I’m not sure why I wasn’t tempted to sell up and flee the market because it was an awful first-time experience! I guess I’m just stubborn. I refused to take the loss! I had read that a dip in share price is only loss on paper and that you only lock in the loss when you sell. I wasn’t very savvy back then (and I’m still learning heaps now), but that stuck with me and helped me hold the course.

R: This is why it’s so key to keep buying at regular intervals; you get bargains in down periods!
Like I said in my last article, it’s a really great idea to invest over a long period of time – and most importantly, not to panic if the markets seem like they’re going crazy. Just stick with it.

artwork-1507897_1920

As Jack Bogle (creator of the index fund) says: Stay the course!

How time-consuming would you say investing is for you?

S: Investing is not time-consuming at all, especially if you choose ETFs. The hardest part is setting up the accounts in the beginning. After that, you can set and forget your monthly payment. Occasionally I’ll do a bit of research in the companies I’m interested in and perhaps buy their individual stocks. This is fun and a bit more work, but it’s not my main way to invest.

R: That’s great, just goes to show that investing doesn’t have to be tedious and time-consuming. It’s cool that you occasionally invest small amounts on single company stocks, definitely a good way to make investing a bit more fun!
Do you think investing in ETFs is a good idea for someone who doesn’t earn a huge amount?

S: I believe that it’s the only way to go for people with a relatively small sum of money to invest. To risk all the money you have in a single stock is madness! I cringe when I see people online giving new investors advice on how to buy single stocks. I don’t think you should start like that! If you have a bad experience, it’s going to put you off for life! I’ve talked to some older folk who went through the 1987 stock market crash in NZ. They usually had all their money in only a couple of stocks and lost everything. Now they are reluctant ever to invest in shares again.
I think if you are just starting out investing ETFs are a brilliant way to go. With Smartshares, all you do have to do is save up an initial lump sum ($500-$1000 depending on the fund) but from then on it’s only $50 a month. The funds are traded on the share market so you can track the price and get a feel for how the sharemarket works. They are perfect for beginning investors as well as people with only a small amount to work with.

R: I agree, ETFs are an excellent way to dip your toes in without risking a huge amount of money, and there’s almost no way you’d ever lose it all.
Thanks again for taking the time to share your investment strategies, Susie!

S: No problem!
I really enjoyed having the chance to chat to Susie about the way she invests. It really emphasised how simple it is to get started with investing, especially if you’re not starting out with much.
Hopefully, it’s helped to shed some light on how you can come up with an investing plan of your own. It does take a little bit of time and effort initially, but once you’ve set it up you’re sorted!
Be sure to check out Susie’s website at quitworkforlife.com. Below are a couple of my favourite posts:

 

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