Do fees really matter when it comes to investing? I did the maths to really solidify what people in the FIRE community was saying. That fees matter hugely when it comes to long term investing. This is both with investing with index funds, but also with your kiwisaver account.
You can end up losing over $100k over 40 years on a $10k investment by investing in a 2% fee fund compared to a 0.2% fund. So, after doing the maths I had a look at my fees and decided that I had to sell some funds and buy some fund with lower fees. I will be doing a post on that later.
The other interesting thing I read this month is a recent survey on the investing attitudes of Kiwis. I was overly surprised that 63% thought that investing in shares was riskier than investing in property. In some instances, this may be true, but I would argue that investing in just one property is far riskier than investing in multiple companies through shares.
Again, I am not happy with how large our food expenses are. So I tried to figure out if I was we were spending a normal amount. There is a study done yearly from the University of Otago that tracks the average spending of people in NZ. From this, it seems that we are about right in spending, if not slightly higher, than a couple in NZ.
I think we can do better, although it’ll be hard convincing my other half to cut the food budget somehow. We will see how this will go. Ok, so how did the rest of my spending going?
Spending in August
I’ve built a second raised garden, and have planted lettuce, capsicums, and other vegetables for the oncoming spring. I’ve dug up a large section of lawn around the gardens to prepare for putting down some pavers that I managed to get second hand for 5 cents apiece.
Our income is basically static with us being on salary. So to get ahead, we need to focus on spending less and saving more. We managed to invest another $3800 this month. We ignore our weekly $1000 mortgage payments from this since we don’t really earn anything on this money. But it is part of our retirement plan since we will hopefully be mortgage-free when we retire. Killing one of the biggest living expense of housing.
I’ve continued to withdraw fund from peer to peer lending as there is always money sitting idle on the platforms I’ve been using. There seem to be less and fewer loans to fund on these platforms these days. So here is our spending for August.
- Groceries $488.79
- Utilities $365.03
- Rubbish Collection $100.00
- Mortgage $4000. Our monthly mortgage payment has increased from $3600.
- Investments $3800
- Dining out $0 We haven’t been out this month, work has been all-consuming
- Petrol $441.25
- Property Tax Rates $1671.68
We had to pay our next big expense of property tax rates mid-August. So our expenses account has dipped greatly.
We are continuing with the incremental approach to paying the mortgage and investments, Pay ourselves first when it comes to these.
Portfolio in August
Here is how my portfolio looks for August.
I have been continuing to diversifying away from Peer to peer investments. As I mentioned last month it needs to be more diversified as a large chunk is in Peer to peer lending, which hasn’t been performing well recently. The returns on the current lending are great, it’s just been difficult to fund new lending. There is a large chunk of cash not being utilized.
The size of my portfolio has also been growing well. This month saw a 9.6 % growth in size. I have rebalanced many of my funds to decrease my average fee of 0.94% to 0.42%. As well as decreasing the number of funds to 10 from 12. Still, I think I have too many funds. It’s diversified, but some are invested in the same underlying investments.
I’m not overly worried about having multiple overlapping funds. I am not contributing to all of them. And if I sell I could be timing the markets. Since the fees to all these funds are relatively low I think I will just keep them for the time being.
Goals for 2018
Increase my investment to $12,000 p.a
One of my main goals for 2018 was to increase my portfolio by $12,000. This was over and above my investment into my Mortgage. So far I have invested a total of $13,774. That is it! I’ve have reached my first goal with 4 months to spare! So I set a few more goals.
Total portfolio >$50,000
I have had another goal, that is by the time the year is through I am aiming for my portfolio to be greater than $50k. It’s currently sitting at $48K, so that shouldn’t be hard to reach either. I need to aim bigger.
Total Portfolio >100K by December 2019
I’ve made a plan to reach $100k invested by December 2019. To achieve this I need to invest another $55K needed. That is around $3500 per month I need to invest. My current investment plan consists of;
Monthly investment $1600 per month
Retirement Plan investments $500 per month
This makes me short of $1400 per month. So how am I going to cover this? I love the idea of paying myself first, but for this extra $1400 I am going to use an ad hoc method. Whenever I have extra cash leftover and my “emergency fund” is in good condition I am going to transfer the extra money into my investment account. This will allow for any unexpected expenses.
I know, this does leave me to the risk of not achieving the goal, which in some instance may be considered a lofty goal, but I think this risk is better than having no goal at all. Also, I am aiming for a total portfolio of $100k. So the ups and downs may help or hinder me achieving my goal.