US shares now available on Sharesies
06 Sept, 2020
You may have noticed that Sharesies now offer you access to the American share market. So now we are faced with yet another choice for our investment dollar. And don’t get me wrong, the choice is great but it can add a layer of confusion too as this email I received illustrates:
I'm getting a bit swamped with options, fees etc. I've got accounts with Hatch, Kernel, Stake, Sharesies, SuperLife, InvestNow and E-Trade. But I'm at a loss, they all look great in their own way, but I'm confused as to what is the best option. SP
Where there used to be little or no options available for the DIY investor, now they are plentiful and you can use a range of providers to get you started. But I just wanted to remind you that you don’t need to invest with all of them, just one or two will suffice.
Sharesies have always had a good goal in mind, to “encourage everyone to become an investor”. I just wonder if they could have added “who makes money” onto the end of that phrase. My concern is that their platform is looking more like a Las Vegas dinner buffet, with a vast amount of choice and whereas if we were eating at home we would have a small serve of all the things that are good for us, when faced with the choice at a buffet we try and eat EVERYTHING.
I think that at the moment it can feel particularly confusing because Sharesies are actively trying to bring on board first-time investors and new investors obviously have little or no experience. I heard them mention in their Lunch Money podcast that 80% of New Zealanders don’t invest in shares, so from their point of view, they have a BIG prospective customer base to tap into.
It is very tempting to sign up to each new investment provider just to see how they work (I know that I do it myself so I can blog about it), but as a long term investment strategy it’s not a sound option for you, you will end up spreading your money around too thinly and often have it invested in the same or similar things anyway, plus like SP mentioned you are going to be paying fees to each provider along the way. Also, spare a thought for your tax return!!! You need to declare every single investment return remember, which is another motivator for keeping your investing simple.
For me, when I first signed up to Sharesies in June 2018, about a year after they started, it was more straightforward than it is now. I blogged about it at the time and I think the blog still reads OK, so go and check it out if you have the time. The main reason I wanted to read that blog post again is that I wanted to check back in and see what they were offering back then, because I remembered that it was just a small selection.
Their total offering was nine Smartshares funds and two Pathfinder Asset Management funds.
That’s all, just eleven options in total and that was enough choice to launch a new startup.
Today Sharesies are offering around 3,000+ options.
Individual shares or funds?
Because I was already (and still do) the bulk of my investing directly with Smartshares (I have the FNZ and USF funds) I started investing in just one thing, the Smartshares NZ Property fund (NPF) using Sharesies. Why that particular fund? Well, the options were limited which made choosing EASY and although I had no interest in investing in a residential rental property, I was still interested in taking advantage of the rising property market and this fund let me do it not with residential property, but with commercial. Plus, I had read JL Collins The Simple Path to Wealth (a must-read for every investor in my view) by then and I knew my fortunes were to be found in ETFs or index funds and not individual company shares.
So as far as I was concerned their very small offering was all I needed and perfect for my goals, which were and still are to invest in just a few diverse funds and to regularly add to them bit by bit over a long period of time. And never sell.
And two years later, the habit continues to stick because every Monday I invest a few more dollars into my Sharesies account and I enjoy logging in to buy. It was performing pretty well, right up until COVID-19 came along and gave it somewhat of a hammering, but “a few more dollars” still add up over time and here is how my investment is looking at the start of September 2020:
It just goes to show that drip-feeding money into just ONE thing regularly, even just a small amount, really does start to build and it fits with the Sharesies philosophy of giving someone with $5 the same opportunity to become an investor as someone with $500,000.
Of course, Sharesies has evolved enormously since they first began, adding the ability to buy into individual New Zealand companies and now the US share markets. I’ve watched this with interest and I like how my 12 year old daughter has the same opportunity to invest as her mum, her aunt and her grandma. Today’s investors will never have to face the complexities of dealing with a share broker and everything that comes with it and I think that’s excellent, but the one thing that is now harder to come by is someone helping you decide what to invest in. That is the only downside I can see of the move away from using traditional investment firms, there is no investment advisor giving you guidance anymore.
Despite the 165 New Zealand companies and funds I could have been investing in using Sharesies and the thousands of US options they have just added, I’ve purchased NONE* because I know my own stock-picking ability... and it is TERRIBLE!
*Actually, that’s a small lie right there. I did buy Ryman Healthcare shares so I could blog about it, but I then sold them and put that money into my New Zealand Property fund ETF.
I think I’ve learned enough now to know that if the people whose job it is to work for investment firms and actively follow companies and buy and sell at the right time for their clients, well if they can’t get it right, what hope have I?
None. So I just don’t bother.
I do think individual stocks have their place as a very very small component of a portfolio IF FOLLOWING AN INDIVIDUAL COMPANY is what floats your boat but it does absolutely nothing for me. I’m just not interested in scrolling through the list of New Zealand companies that are available and following every single move they:
Have made
Are making
Might make in the future
And then make the key decision to buy and sell accordingly.
Because that is the level of research you need to do if you are going to pick stocks with Sharesies, whether they be a NZ or a US company. You need to be dedicated, knowledgeable and attentive if you are going down the route of picking which company to invest in. Simply buying their product is not enough to give you an understanding of where they are headed as a company. For example, I could never have predicted that Air New Zealand’s profits would have been decimated by a pandemic. Could you? Had my number one investment been into their shares, I would be looking at a loss right now.
Becoming a share investor for the first time has an extra layer of confusion around it when I hear the comment: “Don’t invest money in the share market that you can’t afford to lose”
To be clear, they are talking about picking individual stocks. But this statement makes the share investment sound akin to gambling or a fun pastime, which I just don’t think it is if you are investing wisely and for the long term and I hate hearing that phrase trotted out because it gives the share market a bad rap.
Investing should be hands-off and boring
Currently, people are getting EXCITED by the share market and that’s a good thing but I’m concerned that there is quite a bit of gambling going on with new investors taking a punt on something in the hope that it all works out. I worry for these people because for me, becoming an investor has been a financially rewarding experience but it has not been “fun” with the excitement and fear that comes with gambling, I’m not looking for fun, I’m just trying to grow my wealth over a long period of time and when done correctly, it’s actually completely hands-off and boring!
I continue to drip-feed money into just three broad-based funds, where I buy not just one company but ALL of the companies and my investments are slowly building over time.
Too much choice?
Now that Sharesies has added another layer to their offering by giving access to over 2500 companies and 900 ETF’s in US share markets I thought two things:
It’s fantastic that a New Zealand company is growing and evolving.
Have they now added a layer of confusion by offering too much choice?
Sharesies makes it pretty clear that they don’t provide investment advice, they just give us the ability to invest. They have a constant disclaimer along the lines of “Sharesies don’t provide personalised advice or recommendations” and that you and I need to go and seek out that information ‘elsewhere’.
Education of Investors
So, while they and others like them have filled a gaping hole in the market - providing easy and affordable access to the share market - they have created another void and that is the education of investors. All providers are trying to not step on the toes of the Financial Markets Authority by giving out “advice” when they are not qualified to do so (myself included), but I think that if they want my investment dollar to flow through their business, then they HAVE to educate me and that I as an investor have to get off my butt and play an active part in my own education.
Lack of education has tripped me up a few times in the early days of becoming an investor when we took the crappy advice of “don’t invest money that you can’t afford to lose” and we invested in two tech companies, based on a headline and the recommendation of our, as it turned out, uniformed peers. We might as well just have stood in our own backyard and burned our money because we lost it all.
I think that if I were to ask Sharesies, Hatch, Kernel, InvestNow, SuperLife or any other provider you care to mention, they would have the same wish - to get people investing early in life and enjoy success while doing it. I don’t want people to get involved, lose money and never buy shares again. Have you heard the line “my parents lost everything in the 1987 sharemarket crash”? I don’t want today’s equivalent to be “I put everything I had in an up and coming cannabis stock and lost the lot and will never invest again”...
So, what’s the answer?
Using the tools and resources that providers put out, you have to teach yourself I’m afraid. Probably not the answer you wanted to hear.
Like it or not, progress relentlessly marches on and we each have to manage how we engage with it. While I would have been content for Sharesies to keep offering just 11 funds because I’m convinced that investing in just a couple of funds is the way to go, I’ve no doubt that Sharesies and every other provider will keep adding to their offering, keep building and keep growing in an effort to appeal to the wide range of investors out there.
I encourage you to dig into the information each provider puts out in blogs and podcasts like these ones BEFORE you make a single purchase:
Hatch Blog - Saving vs investing: A guide for when to save and when to invest
Hatch Blog - Investing 101: Where do Ii start?
ChooseFI podcast with JL Collins - The Stock Series
The book by JL Collins - The Simple Path to Wealth
The Happy Saver Podcast - when you listen to what each person is investing in you will get a feel that a simple strategy is the key
KiwiSaver provider Simplicity have a good learn centre: Classrooms
And while all of them will be telling you “this is not investment advice, please seek out a professional” - it is very rare that they tell who that professional actually is - they are each trying their best to put information out there to help people decide what the right investment pathway is for them. If you look for it you will find it and I’m here to tell you that with just a bit of research and reading, you can become a self-taught investor who can pick your own investment path.
I think it’s important for the likes of SP who emailed me to realise that you are suffering from FOMO if you invest a bit of money with everyone. I came to realise that choosing a provider is similar to choosing a supermarket. Although we have a range of great supermarket options, they all offer essentially the same thing, with some slight variations in the price and ways to shop, but over a period of time, it tends to even itself out. Who has the time to visit every supermarket to nail down the ultimate deal to optimise their grocery dollar? Not me.
And the same philosophy applies when Sharesies keep adding to their offering, or another provider pops up. Just because they offer it does not mean I have to buy it or that what I am already doing is wrong. I don’t go to my local supermarket and buy one of everything, do I?
So, I don’t beat myself up and second guess my decisions about what the optimal investment portfolio and provider looks like. I simply did some research into each, found a provider I was happy with and now I just get on with it and I have stopped wondering if the grass is greener on the other side of the fence.
Are you new to investing?
So, if you are new to investing and struggling to work out a direction to take, BEFORE you do anything, I want to share with you a few things I’ve learned about investing, that it is just one part of a giant puzzle but if you read down this list, you will see where it fits into your journey with money:
Consume less in order to always spend less than you earn. That way you will always be a saver.
Take on as little debt as you possibly can and pay it back as fast as you possibly can. If you buy it, make sure you own it. Debt is no good.
Have a rainy day fund of at least three months wages. And just to be clear - a holiday is not an emergency! Losing your job while on holiday, that is an emergency!
Whether self-employed or employed join a KiwiSaver scheme with the lowest fees possible. Every year invest at least the minimum of $1042, that way the government will give you $521 for free.
Actually read your credit card statement and pay it off in full every month. Or ditch your credit card in favour of a debit card.
Have insurance, but only what you need. Change it when your needs change.
Buy Index Funds - ETFs. Why buy one share in one company when you can buy the whole market and spread your risk?
Know your net worth, to do this you need to budget. Otherwise, how do you know if you are getting ahead?
We work for many years of our lives. Change career if you are unhappy at work. No one likes hearing you whine about work.
Educate yourself about money and don’t take financial advice off people who have no money.
It turns out that you don’t have to be a stock-picking genius at all to be a good investor and this list is what I refer back to when I am faced with a new headline grabbing investment provider and the thousands of choices available to me on their investment platforms. They are each good businesses and they are each providing good choices, but 99% of it is just background noise and at every turn I just keep my investments automated, simple and easy to understand and then I just get on with living, according to my list above.
