Investing with my partner
My girlfriend recently entered the work force in the most brilliant way possible – she started her own business. A spring chicken at the age of 23 she has started a crèche for 2-4 year olds, and within half a year she already has a massive following and is teaching many kids on a daily basis. So it was time I decided to help her start investing.
With no prior personal investing experience it was a bit of a foreign concept for her finding out that she wasn’t just saving this money for a few months in order to spend it later. This is money she is saving for the very distant future.
Her interest was sparked when I showed her this investment calculator:
She was shocked that a little investment of R300 every month (escalated by 7% a year), with a return of 13% a year for 30 years would give her millions. Yes the buying power of that money will not be the same as it is today, but it is still amazing to see how so little can become so much over time.
So we started a very simple strategy to buy ETF’s in a Tax Free Savings Account with Easy Equities. This is a very cheap platform and is easy for her to navigate; they keep things simple and try to explain any jargon that they use on their website. This is perfect for someone just starting out.
Despite a still very modest net income for herself after all her schools expenses she is still managing to save at least 10% of her income into this account every month. She is splitting her money across the following ETF’s; 50% CSEW40, 25% DBXWD, 15% ASHMID, 10% PTXTEN. Buying 4 ETF’s each time does not mean extra transaction fees because Easy Equities charges fixed % fees on all investments no matter the amount invested.
After about 5 months there are a few things I have noticed:
1. She only checks her account once a month when buying more etf’s
This doesn’t sound like a big deal, but is actually quite important for someone just starting out. Spending a lot of time just watching your account’s daily fluctuations causes you to make irrational decision. It is more likely that you are going to sell some of your investments in an effort to protect yourself from further loses, and put that money elsewhere where you think you are going to get better performance. The market is not a completely rational place, and it will take you to the cleaners if you are always trying to time it.
2. Early loses have caused her to question her strategy
We all know the JSE hasn’t particularly shot the lights out in the last while, and her account is about 5% down after her first 5 months. Because it is the highest weighting, the CSEW40 has caused the most of this poor performance, and this has caused some reluctance to want to add more money to this ETF. I have assured her to continue with the strategy as the more money she adds at the lower price, the more potential for growth this money has.
3. Losing money is an important lesson
I was the one that told her that investing this way was going to give her money the best possible growth in the long term, and I would look like a real hero if she already had some awesome growth behind her investments. But I think losing some money teaches her some very valuable lessons about just how long she is going to need to stay at this for and that when there are difficult times it is often best to just do nothing but carry on.
Starting right from the very bottom is never easy and may seem daunting but I am happy to say she has really embraced it. When I have owed her money I have often asked if I can rather pay it into her investment account and I have rarely had a no in response.
So here is too a bright future ahead of a very determined young woman, who with a solid habit formed alongside her brilliant business she will do amazing things.