Since early 2018 I’ve been drip-feeding money into InvestNow. I’ve scheduled an automatic payment the day after I get paid so I don’t get tempted to spend it. I thought it might be interesting for you to see how my investments are going, and to share with you some lessons I have learnt along the way.
In the Begining with RaboDirect
To be honest I started drip-feeding money into investment funds way before 2018. In fact, the first set of index funds I purchased were in 2014, with the now-defunct RaboDirect. All RaboDirect investors were given the choice to migrate over to InvestNow, which I ended up doing.
From 2014 to 2018, I didn’t have an automatic transfer set up for RaboDirect. Nor did I really know that much about fund investing. I figured I should just give it a go and over time I will learn. I read up a little and chose several funds that I liked for whatever reason and off we went.
The funds that I had selected were;
- Nikko AM Core Equity Fund,
- OneAnswer SAC New Zealand Share
- Fisher Funds NZ Growth Fund
- Nikko AM Concentrated Equity Fund
As I mentioned, I didn’t pay too much attention to the logistics of these funds. I figured that I was 90% there just by having them. Besides, I was more concentrated on paying my student loan and my mortgage as fast as I could at that time. Whenever I did feel flush with cash I would send some over to my RaboDirect account. By the time I transferred to InvestNow my total portfolio was $7,800.
The one piece of advice that took me a while to learn from those early years was that the only thing that is guaranteed with an investment fund are fees. And I stupidly choose funds with high fees. The fees were: 0.98%, 1.84%, 2.35%, and 1.84%. All very high. So I decided to sell them.
In the Present with InvestNow
When I transferred over to InvestNow a year ago, I went on a buying spree. I bought into 13 funds in total. With a total combined average fee of 0.94%. As mentioned above, I got rid of the 4 that had been transferred over from RaboDirect (the four funds listed above). I am now left with 9. ( I still want to simplify it further, and have started selling out of two of the fund last month)
So how have they been performing?
Below is a chart of the monthly per cent change of all the funds I have currently invested in. As you can see most of the fund’s track in almost the same way. That got me thinking. How correlated are they to each other?
I did some simple correlation calculations in excel where the resulting number would show how correlated the two different funds are through a correlation coefficient. The correlation coefficient, which is a value between -1 and +1, tells you how strongly the two funds are correlated to each other.
A correlation coefficient of +1 indicates a perfect positive correlation. As fund X increases, fund Y increases, and as fund X decreases, fund Y decreases. A correlation coefficient of -1 indicates a perfect negative correlation. As fund X increases, fund Y decreases. As fund X decreases, fund Y increases.
Below is a table of correlations between my different funds
All the funds seem to be positively correlated- they all moved in the same way. There are a few highly correlated funds thought- the one that is not surprising is the correlation between the Smartshares NZ top 50 fund and the AMP Capital fund with a correlation of 0.91. It’s not surprising because they track the same underlying index. I’ve been selling out of the Smartshare NZ top 50 and moving it over to the AMP capital.
Another none surprising correlation even stronger than the NZX50 one was the correlation between the Vanguard fund, Smartshares US500, and total world funds, all about a correlation of 0.92. The total world fund is another Smartshare fund I am selling out of due to Smartshares high fees.
The one fund that wasn’t very correlated to any other fund was the AMP property fund, and that makes sense- it’s investing in property and not shares.
That’s enough about correlations between funds. The weighted average return from all my fund for that last year was 9.47%. Which I am quite happy with.
Peer to Peer Investing
Harmoney
If you’ve been around here for a while you will know that I’ve been investing in Harmoney since 2016- at first just to see what it would be like. And so far my experience has been good. My net annual return for Harmoney has been sitting around 10%. This figure includes the income from lending (interest) and deducts the costs I have incurred (credit losses and Lender/Service fees), but does not include tax in its calculation, or any money that is sitting in my Harmoney account waiting to be invested into loans.
Net Interest: $1274.96
The problem with Harmoney, and why I have been slowly getting money out of the platform is that they seem to have no loans to fund. Either there are too many investors that snap up the loans really quickly or too few borrowers. In the early days, there would be at least several dozen loans a week to choose from. Now I might see once a week at best before they get snapped up by other investors.
Lending Crowd
My net average return for Lending Crowd has been sitting around 11.5%. The net average return is a calculated annualised rate of return that represents the net average return I’ve made on my investment portfolio. It’s calculated on the first day of every month and includes the net interest subtracting any loan write-offs and collection costs. but does not include tax in its calculation or any money that is sitting in my Lending Crowd account waiting to be invested into loans.
Similar story with Lending Crowd as with Harmoney- not enough loans to fund. I do suspect that there are too many investors in both platforms as everyone is trying to get a better return than the 3% term deposits are offering.
Impending Market Crash
I’m not afraid of investing in shares– I know that it’s a long term investment. But there are many people out there who are cautious when it comes to investing in shared. Think 2008, or 1987 stock market crashes. And remember back in 2018 there were numerous alarming headlines about the impending sharemarket crash. What actually happened?
Well, take a look at the graphs below. Can you see the 2008 share market crash? Can you see the 2018 market dip? And where is the market now?
If the graphs don’t convince you- take a look at a table of returns with averages for the NZX50.
As of late, I have heard more and more anecdotal stories that the market crash is around the corner. And it might be- I can’t see into the future. I would just like to point out that if you have a long enough time frame you can ride a market crash and grow your investment. Just look where the markets are now compared to 2008.
Investment Returns
As you know, my goal is to grow passive income so that eventually I can work less and do more of the things I love. Spend more time with family and friends. After the first year of taking this goal seriously, my portfolio has returned $5253.99. Not a bad effort I think- I mean I didn’t do much for that money, but it’s not enough to quit the day job just yet.
| Shares- Dividend | $732.90 |
| Shares – Equity | $2029.80 |
| Peer to Peer | $2491.29 |
| Total | $5253.99 |
Lessons Learned from One Year Investing
So what have I learned that you can take away and use however you feel like?
- Aim for low fees
- More funds do not equal more diversification
- Share investing is a long term investment
- Peer to peer lending is not passive
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When you say your investing has returned $5253.99 and that’s not enough to live on, you are talking about it appreciating in value by that amount but not returning cash to you through dividends right? So in order to us this appreciation in your daily life you would need to sell some of your portfolio?
Sorry about the basic question. I’m new to all this.
The return I get is a bit of both, dividends and share equity. Either way, you are right- it’s not cash because my dividends are mostly automatically re-invested. Yes- if I was to need the money I would sell units in my funds. I don’t think it’s worth chasing high dividend-paying shares to try and produce cash.