When learning a new skill, taking that first step can be scary - especially when there are risks involved (like losing your hard-earned cash)! We chatted with seasoned Hatch investors about some of their tips for investing in the share market to help guide you on your way to becoming a seasoned investor yourself! If you’re dabbling in the share markets and looking for the need-to-knows about investing, read on!
#1 The best time to invest
The best time to invest … well, it doesn’t actually exist! Yup, you heard it here folks, there is no magical ‘best’ time to invest in the share markets. The GOAT Warren Buffett famously said, “The best time to invest is several years ago. The second-best time is now.” We all know that time can be a factor in growing our wealth and the sooner you start investing, the more time your money has to work towards your financial future.
Starting to invest early means you’ll have more time to ride out the highs and lows (ride the waves! 🤙) of the markets, and you’ll have longer to build compounding returns.
#2 Do the research, don't fall for the hype
Blindly following what others are doing rather than making your own decisions can lead to falling into the trap of herd mentality. Buying into the latest fads rather than focusing on a company’s performance has proven disastrous for some investors in the past. Investors who buy hyped stocks or follow trends tend to be overly optimistic about a potential share price increase. They’re driven by a fear of being left behind while others appear to be getting ‘huge returns’. But is it really worth jumping into hype stocks rather than those with less of a cult following? The data says, probably not! Many Hatch investors are looking to buy shares in solid, quality businesses – ones that, over time, they hope could see share price growth, dividends or both. That’s where research comes in!
The internet has a wealth of information about investing, which means you can research in a way that best suits you. Reading an annual report can be a great way to understand a company’s value. You can find a company’s annual report by searching Google with: ‘investor relations + company name’. Reports show a company's activities and financial performance, making it time well spent when you’re considering investing.
Closer to home, Hatch has an entire learn section on our website, on top of our Help Centre, and Instagram page for educational tidbits to nibble on as you scroll your feed.
#3 Long-term investing
When you’re investing for the long term, you’re investing in your future self. Buy and hold is an investing strategy where you buy stocks and leave them invested for a long period of time throughout market fluctuations. With investing, time is key, and you often get to reap the benefits of compounding returns when you’re in it for the long haul. Understanding that every dollar invested could be worth so much more over time can be motivating, and really gets the fire burning!
When investors buy and sell shares quickly and regularly rather than letting investments sit tight over the long term, they’re considered to be doing a form of day trading. There are a few reasons why day trading isn’t the best way to get started in investing. First of all, it takes a lot of time and energy to research and learn this method of investing, a big ask for a beginner investor! Secondly, it can up your investment costs when you buy and sell frequently. Lastly, day trading can increase the odds of losing more money. Some investors attempt to buy when the price is low and sell when the price is at its peak; this is called trying to ‘time’ the market. As we’ve already covered, the magical ‘best time’ to invest does not exist. The best timing of the market is actually time IN the market.
#4 Don’t let emotions guide you
A common answer we hear from Hatch investors when asked about their investing mistakes, was about checking their portfolios every day and panic selling. Many investment losses come from a mixture of impatience and impulsiveness - two very human conditions. You know that feeling when there’s chocolate in front of you so you continue to eat it even though you know you shouldn’t and then afterwards you’re full of regret (and chocolate)? The share markets can be similar! It can be overly tempting to look at your investments when the markets are open, but this can lead to emotion-driven reactions.
We suggest checking in on your investments every 1-2 weeks and in the meantime, let them do their thing. Investing might be the only time when it can pay to be lazy. Seriously. Don’t fixate on the day-to-day movements in share prices and stick to a plan, focusing on your long-term goals. As Paul Samuelson says, "Investing should be more like watching paint dry or watching grass grow.”
#5 Diversify your portfolio
Diversifying your investment portfolio is all about spreading your kai across multiple kete (the old eggs in baskets analogy). There are lots of ways to diversify your portfolio, and we’ll explain a few here.
A popular strategy with investors who want to diversify is to look at investing in exchange-traded funds (ETFs). By investing in ETFs, you’re spreading your money across a lot of investments at once, so you’re not relying on any one of them to do well. If you invest in a few different types of ETFs (for example, one that focuses on healthcare stocks, and another that focuses on tech companies) then boom! Your many kete are filled with all different kinds of kai!
Another way to diversify your investments is to invest at different times, in the same thing, which can lead to dollar-cost averaging. Put simply, this means picking a company or fund, and investing small amounts of money into it at regular intervals, over a period of time. By using this strategy you aren’t trying to ‘time the market’ (see point #3!) and can reduce the impact that market fluctuations have on your investments.
For many investors, building a diverse portfolio means sleeping soundly at night knowing their money is being put to work across the share markets and they’re not just relying on a handful of companies to succeed.
Just remember that you have total control over where you decide to put your money, and take pride in watching it work for you. 👊