Pan(dem)ic Investing!
17 Jul, 2022
Do you like my dramatic title? Does it make you nervous?
Don’t be.
This week I was given the ultimate compliment. Someone said, “I like hearing what you have to say, Ruth. You have common sense”. It reminded me that I once wrote an essay on common sense because I believed it was a helpful characteristic. The gist was, “Can common sense be taught?”
It seems to me that every investment provider is telling me not to panic at the moment. Common sense tells me there is no need to; volatile times come and go, but hearing it so often repeated gives my common-sense approach a run for its money and makes me wonder if I should be concerned? It’s a bit like if someone says, “don’t think of a black cat”. Now all I can imagine is a black cat.
I would like to think I’m a common-sense investor, and this bumpy patch we find ourselves in has not thrown me off my stride. Today I’m going to give you an insight into how we have been investing in one of our ETF funds, the Smartshares US 500 (USF), since January 2020. This fund represents one slice of our investing pie.
Did we panic and stop investing when the share market dropped in March 2020? Ah, that would be no.
Quite the opposite, we realised that shares were now on sale, far cheaper than they have been for a long time. If only we could find some money to buy some more! But that was easier said than done, given that our income was also highly volatile during that time due to job uncertainty. Over the last two and a half years, we have adjusted to this period of full-on volatility and today's blog post shows you, in actual numbers, how that fund has progressed for us.
I always track our net worth
I’ve been consistently tracking our net worth since 2015 (it was a bit of a shambles before that ;-) and because it turns out I’m a bit of a PF nerd, I monitor it in a couple of ways:
Using a homemade spreadsheet on my computer
Using PocketSmith
On the 1st of every month, I note down the balances of each investment and each bank account. This way, I can deal with facts and not fantasy. I know my numbers, which prevents me from hearing the headline “US shares are taking a pounding” and feeling stressed. Instead, I can check-in and see the progression of our investments over the years. It calms any fears. In my view, it doesn’t matter HOW you track it, just that you do.
The S&P 500 only goes up over time
So, with all that in mind, how has my US 500 ETF been performing? What have I ‘lost’ given that we are in the grip of a Global Pandemic, an environmental tipping point and the Russian insanity?
In a word, nothing. In fact, I’ve been gaining more units in this fund month after month.
I’ve pulled together this spreadsheet to summarise our investment visually.
Graph showing each months balance, what was invested each month and the per unit/share price for the US 500 ETF.
In January 2020, the balance of this fund was about $23,000; we invested just $150 that month, paying $8.78 per unit/share. The intention of starting this fund has always been to build it up to $100,000, at which point I would stop and reassess how it fits within our portfolio.
In early 2020 the chatter about a global pandemic was starting to build, and Jonny and I needed to think about how this would impact our jobs and income. It was a juggling act of keeping money in our bank in case we needed a more significant emergency fund or took advantage of this share market drop in March/April 2020 down to $7.99 per unit when shares were much cheaper or “on-sale” as you will often hear it said. Unfortunately, these bargain prices coincided with us holding money back in case of an emergency.
What's a girl to do?
Play through.
My goal was always to get this fund to $100,000 and reassess it; my plan had not changed.
Short-term pain, long-term gain
Even though we had majorly tightened our belts, cutting any unnecessary spending (not hard to do when we went into lockdown anyway), there was one thing I committed to doing each month, and that was to invest. I vowed that I’d go without wine and coffee before I went without the US 500.
Throughout the last two and a half years, we have NEVER missed investing on the 20th of the month (the only day I can invest with this fund provider). You will see above that the amounts we invested changed every month, and this was because, just like before the pandemic, if all of our short and medium-term money goals were sorted, the remainder heads off to investments. Jonny and I have variable incomes meaning that some months we just invested hundreds, and some months it was thousands.
Be fearful when others are greedy and greedy when others are fearful (Warren Buffett)
All the while, I remember hearing snippets of the gloomy headlines regarding the share markets, and I know this made many people stop investing. I kept on investing. We didn’t have much surplus to throw in, but we invested what we could while keeping our financial life stable.
June of 2021 caused a blip on my spreadsheet when I finally sold off our Meridian Energy shares and plonked a fair chunk of that money into this fund. Units were worth around NZD $10.59 at that time. When writing this blog post, a unit is worth about $11.63.
Play through.
The share price has been volatile these last two and a half years. Each month the money I invested bought a differing amount of units. That is how it works. That is how money is made investing, both through dividends (yes, I received some of them too) and, over time, a rise in the value of every unit I hold.
Because we have been purchasing what we can, when we can, those units bought cheaply have now increased in value.
I always keep this graph in the back of my mind. Over time the share market goes up.
We are in it for the long haul
Our runway to retirement is still long; there is no need to worry about this short-term share market volatility. Instead, we should embrace it. And when these national and international events pass, which they will, sorry to tell you, but something else will replace them. That is life.
The graph I have created above is a mash-up of information from my homemade spreadsheet, Sharesight, and bank statements. I get a kick out of seeing the trend line of the share price tracking in sync with the value of our investments. When I look at Sharesight, the growth in this fund has undoubtedly slowed, but since I began investing in it, it's still sitting at over 8%.
It’s not binary
Katie Donegan from Rebel Business School often says “it’s not binary” when managing money. Cobbling together my graph is an illustration of this. There are so many moving parts to our money, and so many factors come into play and only by tracking the progression over time can I see whether we are moving forwards or backwards financially. I don’t think of our investments as a choice between Option A or Option B; it’s more that we have many factors in play, and we tweak the levers on all of them to move us in the right direction.
Creating this graph has shown me more than ever that my common sense approach of investing whatever I can, when I can, and whatever the market conditions have shown that in two and a half years, the balance has grown from $23,000 to $77,000. Much of this is from the money we have put into the fund, but that is the point; we have socked as much away as we can and will leave it to compound and grow over time.
Investing during this period is akin to me throwing another log on a smouldering fire. Nothing happens for a bit, but then it catches and grows. As long as I remember that the share market only goes up, then over time, all those logs we have been throwing onto the smouldering share market throughout 2020, 2021 and 2022 will catch on fire and grow in the years ahead.
I’m happy with where this fund is at because we are:
Investing for the long term (10+ years)
Have a habit and a routine of investing
Know how this particular ETF fits within our portfolio
Not timing the market
Not trying to “buy at the bottom.”
Not picking stocks
Not taking on debt to make money
I’m getting good vibes
I’ve said it before; it’s about the vibe for us. I’m not aiming to become the perfect investor because it simply does not exist. I know I'm not overly scientific, but my common sense approach to keeping our routine investing simple is paying off for us. There is not one iota of panic when I think of our investing, and I’m pleasantly surprised to have found myself feeling that way. Is our wealth (all of our investments combined) growing over time?
Yes, it is.
And I finally remembered the gist of my essay. I concluded that yes, I think that, to a degree, common sense can be taught, and I’d encourage you to keep life simple and block out all the irrelevant noise which is not helping you. Create your own plan and stick to it. What gets measured gets managed, so if you have not yet begun tracking your net worth, today is a good day to start.
