New year, new you, right? If one of your 2022 resolutions is to start investing in your future, it might be time to think about more than the weekend ahead.
But the world of investing can be pretty daunting, which is why you need to consider a strategy before starting: and while yes, that itself is daunting, I’m going to break down five ways people invest, and the pros and cons of each.
There’s no one perfect method or guaranteed path of success, but there are strategies that can work better for you, depending on what you want — and how you want it. For example, if you’re really into ethical investing, sustainable investing could be for you; if you’re keen to play the field and put your eggs into lots of baskets, dollar-cost averaging might be a goer. But we’re getting ahead of ourselves. Here’s a simple guide to investment strategies, inspired by Sharesies’ philosophy of making investing accessible to all. The Sharesies platform removes the barriers to investing by letting you buy shares & exchange-traded funds (ETFs) across Australian, New Zealand and US markets from one cent
This is probably the simplest method of investing, as it requires little intervention. Simply pick a group of investments, and then continue to invest in regular increments to each — say, weekly, monthly or yearly (though with the Sharesies platform, you can add as little or as much as you want, which means you could add as little as $1 or one cent a week, if you want).
It might feel a little counter-intuitive, as you’ll be buying no matter whether share prices are high or low: essentially, you’re not keeping up to date with the day-to-day changes, but instead focusing on long-term growth. So sure, you might miss out on the chance to buy while shares are low, but so long as there’s an overall trend of increase and growth, any losses or missed opportunities for buying at lower price could balance out over time.
To help you out with dollar-cost averaging, there’s now a feature on the Sharesies platform that lets you choose from a pre-made or DIY order of pre-selected ETFs: you hit auto-invest and it does the rest.
Blue chip approach
This refers to investing in blue chip companies, which are long-established public companies that are fairly stable and have maintained steady growth over previous years, if not decades. Think the major banks and big retailers (Woolworths, Coles, Telstra) — well-known entities that we rely on as a society.
Having said that, there’s no such thing as guaranteed stability: even blue chip companies can dip considerably or even bust, as happened in the 2008 GFC. You also have to consider how you want to invest in blue chips, and whether to throw your money behind one company or split it between several. Investing incrementally can also, like with dollar-cost averaging, offer more security, rather than buying up shares with all your investment money at once — these companies are also extremely liquid, meaning shares are bought and sold regularly, which can be difficult to keep up with.
Unlike our first two investment styles, fundamental analysis, like the name suggests, demands a bit more time and energy. This is when investors evaluate a company’s value themselves with their own research, looking into a company’s annual reports and revenue, cash flow and market capitalisation. Some people call this value investing.
The goal here is to make an educated guess at what the price of a company could be in the future — no matter how much research you do, you’re also trusting your belief in the company to grow, and think it is being undervalued by the share-market at the moment you buy. The risk, obviously, is that your educated guess isn’t right, which, in the world of investing, is entirely possible.
If you’re like me, technical analysis is what you think of when you imagine investing: people riding the dips and peaks of shares, selling and buying to turn a quick profit. Predicting these peaks and dips is incredibly difficult, and there’s no real science to it. No matter the research you do, the market ’is never guaranteed to follow what you expect.
There is more to it than having a ‘feel’ for what’s going to happen, though. The ‘analysis’ part comes in not by looking at annual reports, but by studying the shares’ history: its price, and how many have been traded. Traders try to pinpoint patterns and then predict either the next dip (time to buy) or a peak (time to sell).
It’s all in the name: sustainable investing is about supporting environmentally friendly or ethical companies and assessing your investment’s carbon footprint. This requires quite a lot of research thanks to the trend of greenwashing, where not all companies that purport to be green may actually match up with your expectation of what that means. But for some, investing in funds that don’t make money from gaming, mining or other industries that individuals may have issues with is really important.
The risk here is that you’re not investing with profit necessarily in the forefront and it’s likely that these sustainable choices won’t match up to other options. Then again, as questions of ethical consumption become louder, these companies could grow, too.
It’s a lot to take in, granted, so if you want more clarity around investing, you have plenty of options: you can read Sharesies guide on Investing 101 right HERE, or you can perk your earholes and listen to the new Unlikely Investors poddy:
Keen to invest too? Sign up to the Sharesies platform and use promo code “UINVEST” for $10 in your account, ready to invest.
All investing involves risk. T&Cs and fees apply for use of the platform provided by Sharesies Limited.
$10 applies to new accounts only. Promotion T&Cs apply and for use of the platform provided by Sharesies Limited. This series is sponsored by and promotion is provided by Sharesies AU Pty Limited, as an authorised representative of Sanlam Private Wealth Pty Limited (AFSL No. 337927).