The share market is doing what it does, so JUST CHILL!
Mar 15, 2020
I’m aiming for the shortest blog post ever! Chances are I will fail, I generally do.
I had a coffee with a friend last week, we catch up every couple of months and we just talk about money and everything and anything that comes up in regards to it. I always look forward to these catch-ups and the opportunity to speak with someone who has a lot of knowledge in this area and I always learn something new.
Fast forward to this week and I woke up far too early but couldn’t be bothered getting out of bed, so I turned the radio on and listened to RNZ. Bit of a mistake as it turns out Tuesday 10th March was probably not the best day to listen because:
Russia and Saudi Arabia are arguing over the price of oil
Coronavirus panic is widespread
The US share market had apparently just had the worst day since 2008
These events seemed alarming and dominated the two hours I was listening (between dozing) and my overriding thought was what can I possibly do about this, do I even need to know any of this? And of course, as the week progressed, the snippets I caught of the news told me that nothing was improving.
All this reminded me of something my friend said over coffee. Back when he was younger, you would read the newspaper and it would say something along the lines of “the US share market had its biggest one day drop in the last 12 years”, and there might be a bit of further explanation, something about Russia and Saudi arguing over the price of oil, but that was about it and this event actually happened a week or two ago anyway, the information just took a while to reach New Zealand. So, what could he possibly do about it, did he have time to sell some shares, or buy some? Nope, that ship had sailed, all he could do was read about it and then move onto the next article.
But not today, now we are fully in the thick of every single minuscule decision that any government/industry/person is making at any given point in the day and they are all screaming at us to DO SOMETHING.
And it’s just far too much. It’s impossible to keep up with. And I don’t know about you, but it makes me anxious.
However, if I stop writing this and sit for just a moment and think seriously about what is going on in New Zealand and in my life at the moment, about what is in my realm of control, I suddenly have far less to worry about, or I have far more meaningful things to concern myself with:
My friends Mum just went to the hospital. Is she OK, I had better cook that freezer meal for her Dad that I promised I would
A family member has a specialist visit this week, must give her a call
The PTA is having a meet and greet at school, I don’t think I can make it but I hope some new parents come along because we need helpers at an event coming up in April
Must renew my car insurance as it expires this month
I’ve got to remember to keep running daily to keep my run streak going! Day #177...
Also, I’ve got a walk with a friend planned, phoning a few friends planned…
I acknowledge that other things are going on in the world and in New Zealand, but really, what am I honestly expected to do about the arguments over oil between dictatorships and international travel bans? And apart from practising good hygiene and making sure my friends and neighbours are OK, what can I really do about Coronavirus? Probably focussing on what is within my locus of control and refusing to panic would be a good start.
So, I’m unfazed about these current events because, to put it bluntly, shit has always gone down, all over this world every minute of the day and much of it used to pass us by because it took a week or two before it made it into a newspaper column. And once this season of the current drama has passed, something else will go wrong somewhere else and on and on it goes.
The Basics
So, bringing it back to money, this is a personal finance blog, after all, I’ve had a “conscious uncoupling” from worldwide events and am instead reflecting back on the basics of how Jonny and I operate to make sure we are steering our waka in roughly the right direction during these rough waters:
No debt. Ever. Debt increases risk, whether it be personal or business and that will get stress-tested, particularly in these uncertain times.
A rainy day fund. Money set aside for an emergency because there will always be one and we will never know what it is until it’s upon us.
Multiple streams of income - if one falters, a job loss, for example, we still have income coming in.
Minimal expenses and budgeting each dollar because that way we control our money and it does not control us.
Ongoing investment. Regular investment in our KiwiSaver and three funds with no notice taken of what the share market is up to. Never sell.
Ensure we are adequately insured.
Always show kindness to others. Be nice and help other people.
Take my dog for a run/walk. Exercise is good for me.
We learned a lot from going through the lengthy Christchurch earthquake experience, particularly that there is so much that is completely outside of our control (earthquakes and insurance companies for starters) but we learned that there are things that we can control and having a firm grip on our financial life is one of them as is helping those around us. It just gives a level of confidence and protection in uncertain times. This is the first more serious market dip I’ve been through but I’ve read enough and learned enough from those who have gone before to know that the right thing to do is just hold my course and hold my nerve. If you have found yourself a bit caught out at the moment, make sure you learn from this so you are better prepared next time would be my advice.
Because we have been working to this plan for many years now, current events are not irrelevant, but they don’t influence our choices and decision making and in the words of Jen, who emailed me and is an investor of just one year, “in a bizarre and detached way, I’m actually enjoying the ride”. Personally speaking, I can’t say as I’m “enjoying” the ride, but I’m certainly finding it mega interesting.
Finally, in the shortest blog post that never was, I just wanted to share some of my numbers because I just want to reassure people that the share market is just doing what it does; it’s reacting to the world via people selling shares they no longer want and buying shares they now think they need.
And on and on it goes.
And I always keep in my mind what I’ve heard several people I respect saying, something along the lines of “in the history of the share market, it only goes up”. And that is despite the outbreaks of disease and war over the decades. Remember that those companies that make up these funds are doing their best to keep functioning in somewhat difficult times and if they have been impacted by the Coronavirus, then they are working around their issues as best they can. Some may not be able to survive and that’s the reality of doing business, but on the flip side, there are others who will be thriving because they may supply products or services that are needed at this time. JL Collins says that a company can fail 100% and be wiped off the index, but its growth is without limit... 100%, 300%, 1000%, there is no limit on growth. So, let’s just see how this all shakes out over time, shall we?
The Numbers
So, what does this look like in reality for Jonny and I. As I have always said, we have a very simple investment portfolio:
We buy three funds NPF, FNZ, USF. We only buy, we NEVER sell and we don’t try to time the market.
We pay into our Simplicity Growth KiwiSavers each month without fail.
And this approach has not changed given this current market volatility and my only regret at the moment is that I don’t have as much surplus cash as I would like so I can invest more heavily, because, of the shares I have purchased over the last few weeks via Sharesies, I have paid LESS per unit than I did a month ago, this is often referred to as “shares being on sale”, so I snapped up a bargain or two for sure and now those shares are safely tucked up in our portfolio and are being put to work for us. I certainly don’t see this as a time to sell, it’s very much a time to buy but I’m being cautious here as I still need to keep cash on hand to pay for our day to day lives, I don’t want to invest and take advantage of the downturn, but not be able to afford our day to day living costs. Plus, our emergency fund remains untouched and intact.
Ben, a relatively new investor, had it sorted when he emailed and said “We've all had a nice easy run with the share market for a while now, but these kinds of corrections/recessions are inevitable, so it's a good test. I've read enough to know that we just need to hold onto our shares, sit back, trust in the plan, and wait for the curve to head back upwards in due course.” I could not have said it better myself.
Price history for the NZ Property Fund.
I bought on the way up, and I’ll be buying on the way down! This is dollar-cost averaging in action for sure
Sharesight screen showing our NZ Top 50 fund on March 13th.
This is our NZ Top 50 (FNZ) fund shown on March 13th that we have consistently bought directly with SmartShares, shown in Sharesight where I track how it is doing. It climbed and climbed, but the price has dropped back for sure. Such is life! Looks like our regular monthly investments might be bought at a cheaper price for a while.
Sharesight screen showing our US Top 500 fund on March 13th.
This is our US Top 500 (USF) fund on March 13th that we also buy directly with SmartShares once a month, shown in Sharesight where I track how it is doing. The price per unit has dropped back but is still higher than what it was when I first started purchasing it.
And how about our daughter, because she is an investor too?
On Friday, 13th March, I explained to my 12-year-old daughter that the share market has dropped and that while the value of her shares has gone down, it does not matter, because over time they will go up again BUT now is a good opportunity to buy some shares much more cheaply. I asked her if she had any cash laying around that she wanted to invest. So, bless her, she went to her money boxes/multiple purses/elaborate banking system that sits on the shelf and came up with $6.60, plus an additional $15 that she had as surplus in her bank account, all of which I then transferred onto her Sharesies account straight away. So she invested $21.60 into the US500 and she bought at $7.390 a share, whereas just a month ago they were $9.690 a share. What a steal! I’m just pleased that she could see it for the good idea that it was and didn’t panic like many others and tighten up her purse strings!
KiwiSaver
As for our KiwiSaver balances? Who knows, I only check it at month-end so I have not even looked because why would I bother? Jonny and I are 47 and 46 respectively so we have 18 years to go before we will access this money, therefore because it’s a long term investment, it’s in a growth portfolio, so my educated guess is that the balance has dropped significantly. What can I do about that? Nothing. What should I do about that? Nothing. And nor should you. If, just one month ago, you were in the right fund for your age and stage of life, then guess what, you are still in the right fund today.
So, calm the farm everyone and chillax, the share market is just doing what it does and it will take you along for the ride, this ride just happens to be quite the rollercoaster which is by no means over! So, just hang on and wait until it stops. And don’t forget to wash your hands.
