September 2022
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. Their core goal in establishing an investment portfolio was to build up towards a deposit for a house.
The last time we caught up with them, things were looking pretty good for them. The strong markets of late 2021 had seen the value of their portfolio grow, without them putting in any additional cash.
How things have changed.
Since the beginning of 2022, they’ve watched the volatility in investment markets turn into a fully-fledged downturn. What used to be a conversation at least weekly in the strong market of 2021 has now turned into something that they just don’t talk about at all. The FOMO (fear of missing out) they felt at the beginning of the year has turned to FUD (fear, uncertainty and doubt) as 2022 has progressed.
(We all relate, right? If we don’t really want to know the truth, we just don’t put our minds to work asking the right question…sound familiar? )
great investment choices help your portfolio stay resilient
Grace and Dave are thankful for the decisions they made way back in the early stages of their investment journey. That has helped them as the emotional side of their brains “switched off” as the bad news started to roll in. What was a 4.9% return on their initial investment has turned into a 16.3% loss in value since January. They’re down a tick over 12.5% on their orginal investment – their $10,000 has turned into $8,720 as at September 30th.
Grace and Dave can’t even brag about beating the NZX50 – that’s dropped by only 11% since the beginning of the year.
They are now in a position where they can think about their reactions to the last 9 months. To be fair, there have been other factors getting in the way of having a conversation – work has been frantic for both Grace and Dave. Just like some of the companies they;re invested in, Dave is frustrated by a lack of his employer’s ability to get parts and equipment at the right time, meaning he is visiting the same customer sites to do re-work that should only take one visit. Grace’s multi-national employer is also facing supply chain restrictions, causing stress for Grace – as a Sales Rep, she can no longer meet the needs of her customers.
make the time to manage your investments
Grace and Dave have finally made the time to sit down and make some decisions. Do they still have the right portfolio or at his point, is it just a case of grinning and bearing it? They have always wanted to put additional money towards their portfolio – is now really the right time to do that, or is that throwing good money after bad?
To make matters worse, Dave thinks that house prices have actually increased in Christchurch since July 2021, making their dream of saving for a deposit even further away.
Grace has noticed some content from the Financial Markets Authority on the 5D’s of investment. One ‘D’ stands out: “Drip Feed your investments”. The “Don’t freak out when markets go down” feels relevant at this point as well. So, perhaps they should have been putting in a little bit of cash all along?
Grace thinks they should try to put in at least $500 a month between them. If they’re serious about saving for a house, it isn’t just about their investment. That additional saving will help them realise their future dreams; that has to be done regardless of their investment strategy.
Dave thinks they should keep on investing. It feels to him like the nature of what they are investing in hasn’t changed, it’s just cheaper than it was a year ago. Kind of like buying a toaster on sale compared with full price. But he also points out that they should take the time to review their portfolio.
A lot has changed since Grace and Dave made their investment decisions in 2021. A war between Russia and Ukraine, tensions between US and China and supply chain challenges. Here in New Zealand, it feels like costs keep on going up. Dave wants to talk to someone to help figure out what types of investment might withstand, and perhaps thrive, from the current challenges facing the world.
never lose sight of your investment goal
Portfolio Summary
| Opening Value | $10,458.01 |
| Closing Value | $ 8,716.20 |
| Shares purchased (via dividend re-investment) | $84.47 |
| Return | -16.3% |
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.