{"id":129365,"date":"2022-09-17T19:36:40","date_gmt":"2022-09-17T19:36:40","guid":{"rendered":"https:\/\/fin2me.com\/?p=129365"},"modified":"2022-09-17T19:36:40","modified_gmt":"2022-09-17T19:36:40","slug":"that-time-i-bought-shares-on-the-toilet-and-other-investing-tips","status":"publish","type":"post","link":"https:\/\/fin2me.com\/economy\/that-time-i-bought-shares-on-the-toilet-and-other-investing-tips\/","title":{"rendered":"That time I bought shares on the toilet… (and other investing tips!)"},"content":{"rendered":"

In this week\u2019s episode of our new podcast,\u201cIt All Adds Up\u201d <\/em>(look it up now!) I let slip the potentially embarrassing fact I once executed a sharemarket \u201cbuy\u201d order with my smartphone while sitting on the toilet.<\/p>\n

I say potentially embarrassing because there was method in my bathroom-based investing strategy, which I\u2019ll get to.<\/p>\n

<\/p>\n

I\u2019m convinced buying shares directly is not for everyone. It\u2019s crucial every investor first consider the myriad alternative uses for their money.<\/span>Credit:<\/span>Dionne Gain<\/cite><\/p>\n

First, let me be clear I am not recommending that you, too, buy shares on the toilet \u2013 or, even that you buy any shares directly at all.<\/p>\n

Most Australians already own shares indirectly via the significantly more sanitised route of having their superannuation fund invest some of their retirement savings in shares (at least, I assume they don\u2019t sit on the loo while they do it\u2026).<\/p>\n

About one-in-three Aussie adults \u2013 or 6.6 million people \u2013 do, however, also hold shares or other exchange-listed assets outside their super funds (although this figure includes people who own them through a self-managed super fund), according to the ASX\u2019s latest investor study<\/p>\n

But I\u2019m convinced buying shares directly is not for everyone. It\u2019s crucial every investor first consider the myriad alternative uses for their money, plus their own individual circumstances and financial goals.<\/p>\n

Many people, for example, would be better served by first paying off any high-interest debts they hold, such as credit cards or personal loans.<\/p>\n

Many renters would similarly be wise to consider keeping their home deposit savings in more liquid form (or exploring the government\u2019s First Home Super Saver Scheme).<\/p>\n

High-income earners should also consider the sweet tax breaks available on super and choose to invest that way. If you don\u2019t mind parting with your money until after 60, that is.<\/p>\n

You might also consider investing in property as an alternative to shares.<\/p>\n

Consider also if you have the appetite or ability to become a \u201cleveraged investor\u201d. Instead of using your monthly surplus savings to buy shares directly, you could use some of your excess cash to fund a loan which would enable you to purchase a large whack of assets up front \u2013 either property or shares.<\/p>\n

Yes, you\u2019ll pay interest on that loan, but you\u2019ll also enjoy potential gains on a larger asset base over a much longer period of time (or losses, of course \u2013 it\u2019s a two-way street). Something to consider, at least, noting that banks are generally far more comfortable lending larger sums against property than shares.<\/p>\n

Crucially, everyone needs to also make sure they are not investing money in the sharemarket that they need any time soon. Have you saved up for that quarterly water bill? Do you have an emergency fund of three to six months\u2019 of living expenses to cover life\u2019s unforeseen events?<\/p>\n

Do you have adequate insurances in place to protect you? Being forced to sell your shares at an inopportune time to fund consumption needs can lead to significant losses.<\/p>\n

You also have to consider your appetite for volatility. Are you someone who is going to freak out upon hearing the latest news about a sharemarket rout and fire-sale your shares at a loss? With term deposit rates nudging back above three per cent, perhaps you\u2019d sleep better at night with your money in the bank and no share-trading app to check the value of your portfolio.<\/p>\n

If you do invest in shares, you ought to be investing with at least a 7-10 year horizon in mind to ride out the volatility. Years of negative returns are not uncommon. If you\u2019re particularly unlucky, you could pick a decade to invest in which shares experience below-average annual gains.<\/p>\n

Share purchases should be made because you have surplus cash to deploy, and you want to build wealth over the long term.<\/p>\n

Do it because you understand what share investing actually is<\/em>. It\u2019s buying yourself a part-ownership in a business (or group of businesses) that should, over time, be able to pay you a share of their profits (called dividends).<\/p>\n

As humans become more efficient at combining the key inputs of labour and capital \u2013 thanks to technology and other gains \u2013 it\u2019s reasonable to expect the value of your shares to grow over the long run.<\/p>\n

When I first set out to invest in the sharemarket, I was curious to try a strategy of investing in single stocks across multiple industries.<\/p>\n

However, I quickly converted to a strategy of investing in low-cost exchange-traded funds, which passively track the returns of a broader sharemarket index. Today, my portfolio contains indices covering both Australian and international markets, to ensure I am diversified across different industries and geographic locations.<\/p>\n

My investing goal is to perhaps be able to retire \u2013 or at least become work optional \u2013 before age 60, when I can access my super. If not, no worries, Future Jess will just have to keep working. Investing is a risk I\u2019m willing to take to perhaps enjoy a higher return on my money than keeping it in the bank.<\/p>\n

So, after tracking my spending and income each month (including setting aside regular amounts for future big expenses such as holidays, a car and household costs) I sit down to calculate my budget surplus and decide how much of it I want to transfer to my brokerage account to invest.<\/p>\n

I still get a bit nervous each time it comes to actually converting my cash into the more abstract and risky business of an ownership stake in companies.<\/p>\n

To lend the situation some levity, I did once execute a share \u201cbuy\u201d order while on the loo. Share purchases only take a matter of seconds electronically these days (I place my orders at market price, rather than attempting limited orders below the buy-sell spread).<\/p>\n