early January 2022
Just a reminder as to where we’re at with our persona-based scenario. Christchurch-based twenty-somethings Grace and Dave established their portfolio at the beginning of July 2021 with a $NZ10,000 investment. They purchased holdings in ETFs, Investment Trusts and direct shares through their online share trading platform, TradeDoor.
Right now, they’re at the beach enjoying a cracking summer. Over the last six months, they’ve regularly checked into their portfolio via the TradeDoor app. They have noticed some big movements (volatility), both up and down – they’ve both resisted the urge to react to those movements, keeping each other on the straight and narrow in sticking to their plan. There’s been lots of volatility more recently too.
investing is for the long-term, not for a week
FOMO (fear of missing out) and Worry
They did notice their own emotional reactions to those movements – Dave even surprised himself; as someone who is not really energised by direct investments in companies, he was a little surprised by his excitement of watching the steady rise in Rakon’s share price over the period.
Grace nearly sold their holding in EROAD (down 18%), but Dave thought that didn’t make sense – why sell at the ‘bottom’ of a cycle? They’d noticed that TradeDoor had sent them documentation about something called a Share Purchase Plan relating to EROAD, not long after they bought their shares. They decided not to participate – after all, they had already bought up to what they had allocated, so didn’t need any more shares. Plus, they didn’t have any more spare cash at that point to invest.
information matters
if a company sends you something, read it and understand the impacts on you
get help if you need it
Dave himself was keen to buy heaps more Wellington Drive Technology shares – they had more than doubled by the end of December, so why wouldn’t you buy more? Plus, loads of people were posting about buying them on TradeDoor’s social media.
Overall, though, Grace and Dave are happy that they have made a positive return during the initial 5-month period (4.9%). They have noted that they have performed better than the NZX Top 50 index (1.6%). They also noticed, though, that much of their return (and the NZX50) was achieved during December! Just in time for Christmas.
Given the diversified nature of their portfolio, they are not sure which indices would be most appropriate to compare returns to but for now, the NZ Top 50 index will do.
In percentage and absolute return terms, the biggest contributors to their portfolio’s performance were the direct holdings in Rakon and Wellington Drive Technologies. The market value of those two holdings more than doubled during the period. On the downside, they observed that their shares in EROAD (-17%) and IkeGPS (-30%) fell since the time of purchase.
The joys of diversification!
The best performing ETF’s were Smartshares Automation and Robotics and Smartshares US Equities ESG – both funds are invested in companies that are globally supported by their underlying theme. Grace noted (with some dismay) that the Healthcare Innovation ETF dropped in value, as did the holding in Templeton Emerging Markets Investment Trust.
Dividends
While the couple had intended to put more money in to their portfolio, they had not yet worked out just how much to put in. In the meantime, they had noticed that TradeDoor had an option on their app that allowed them to reinvest any dividends they received, even if that means they own part of a share. Grace and Dave have set that up for every share or fund they own – so while they don;’t receive cash dividends, they are gradually investing more in their portfolio.
From a performance perspective, across the portfolio, Grace and Dave saw that around 20% of their overall return had come from the dividends they received.
Dividends matter. Compounding dividends matter even more
Portfolio Summary
| Opening Value | $10,000.00 |
| Closing Value | $10,458.01 |
| Shares purchased (via dividend re-investment) | $55.50 |
| Return | 4.9% |
It is important to know that NZSA does not endorse any of the companies or funds highlighted in this article. ‘Grace’ and ‘Dave’ are fictional characters; any resemblance to any person, living or deceased, is not intentional. ‘TradeDoor’ is not an actual share trading platform.
The commentary in this article is for information and/or commentary purposes only. It is not an offer of financial products, or a proposal or invitation to make any such offer. It is not financial advice and does not take into account any real person’s individual circumstances or objectives.