We often get asked, who uses Hatch? Our investors aren’t so mysterious! They’re professionals, travelers, athletes and creators and range in age from 18 to 90 years old. Some of them are investing for the very first time and starting with $50 deposits, while others have years of experience after cutting their teeth on markets closer to home and are working with six-figure balances. Investors from our investor’s club have shared their stories and approaches to self-directed investing. We’ve grouped some common themes and thought we’d share them so you can see that there’s more than one way to approach investing on your own.
1. The newcomer
The newcomer understands that just getting started with investing is the first step on a journey to a better financial future. When starting out with Hatch, they know they’re coming to the platform with little experience, so they're investing in their financial literacy as well as the actual markets. They might’ve heard that investing in what you know is important so they often get started by buying shares in a company they know or like. They’re learn-as-you-go investors who are happy to ride the ups and downs of a share price as it’s all a part of financial education.
What do we mean by financial education? Let’s look at Apple. If you’d bought an Apple share over the last 12 months, you’d know that the share price has varied between $142 - $236 USD per share. That’s a big spread! You’d also have learned how the US/China trade tensions, broader share market volatility, or how their quarterly earnings results impacted the share price. Getting through these ups and downs by experiencing them can help provide vital information about the business, its financial health, and investing in general.
2. The passive investor
The passive investor is into exchange-traded funds (ETFs) because they offer an easy way to invest in broad segments of the market. Passive investors often buy ETFs across multiple industries, sectors, market capitalisation sizes, and even countries with a long-term view. They tend to regularly invest over time, averaging the purchase price over a long period (known as dollar-cost averaging).
These investors aim to match the performance of certain market indexes rather than trying to outperform them. They’re also happy to buy-and-hold and don’t feel the need to "do" something when the markets are all over the place. ETFs might be a lower risk, more diversified alternative to individual shares, but they've had a good run in this Bull market. For example, ten years ago, if you’d invested $10,000 in the Vanguard S&P 500 (VOO), a relatively common ETF that gives you exposure to the 500 leading companies in the US, you’d have over $32,000 in VOO today.
3. The growth investor
The growth investor is dabbling in megatrends, including electricity, sustainability, automobiles, the internet - and the future companies that may dominate these industries. Growth investors are looking for investments that they think will pay off over time and are willing to wait for it.
Growth investors on Hatch might be investing in Tesla or Amazon, or a Vegan ETF. They generally look for companies (or a basket of companies) that are investing in technology or infrastructure to face - or make - the future. Using Amazon as an example, their share price has climbed from around $340 to roughly $1750 USD over the last 5 years. With growth investing, these shares can be volatile. Bad news or missed earnings expectations can send share prices tumbling. But investors know that volatility is part of the growth game, and with higher potential upsides, it can be a roller coaster ride along the way.
4. The core-satellite investor
The core-satellite investor is an active investor who is looking to build a diversified portfolio that generally uses index funds as the "core" with carefully selected active investments as the “satellites”.
These investors start with the core, which represents the largest portion of their portfolio. They tend to build 30-50% of their portfolio with several exchange-traded funds, such as an S&P 500 ETF or a Large-Cap ETF. After they've established their core with different types of funds, they complete their portfolio with satellites. Satellites can include individual shares or more specialised funds intended to help the investor achieve higher returns than the benchmark or index. With satellites, the investor might want to express their conviction that tech shares will grow, or that international markets might have an edge. Typically, some of our more advanced investors, core-satellite investors are happy to construct their portfolios and put the time into research, analysis and monitoring their strategy.
5. The value investor
The value investor also takes a hands-on approach to build and manage their portfolios. Investing isn’t just something they dabble in – it’s one of their passions. They have no issues spending their time researching and analyzing particular shares, and they feel comfortable and confident buying and selling based on this research.
Value investors look to buy shares in companies that are trading at a price less than what they’re worth. Using some basic measurements of a company’s performance, they look to determine its intrinsic value, which is an estimate of the actual true value of a company. They can also determine a company’s market value by multiplying the price of one share by the total number of outstanding shares. Then, they compare the company’s intrinsic value against its market value to see if there’s a buying opportunity. Typically, value investors are willing to spend the time researching to take advantage of the ups and downs of a company’s share price with an active, buy-low, sell-high strategy. For them, it’s all about finding an outstanding company at a good price. Warren Buffett is considered a value investor, and his investment in Coca-Cola in 1988 is an example of a value investment.
So, what kind of investor are you? There’s no right or wrong answer here – your personal investing profile comes down to your personal preference and what suits your investment goals. Having a clear strategy in place is always a great first step in your investment journey, that and a willingness to learn. Happy investing!