Fierce Girl Finance

“Nobody in my family has ever bought shares. It’s all new to me. I’d like to be able to do it myself. Is there an ‘easy way’? Probably not.”

This is part of a message I got from an old friend recently. And I loved it!

I loved that she was taking an interest in investing. I loved that she was thinking about her future. I loved that she was stepping outside her comfort zone.

So … is there an easy way?

Yes and no.

The mechanics of it can be easy. Sign up to an online broker and make some trades.

A harder part is knowing what to buy (more on that below).

And the hardest part is feeling legit.

It’s a challenge, believing we have the right to be here, doing this thing that has always been done by “smarter/richer/more important” people – and mostly men.

But it’s time for you to join this world. And I’m here to give you your ticket.

I’ll admit: this post is kind long and involved. But hang in there.  

For many people, investing is a whole new world. New language, new ideas, new ways to think. It takes a while to feel comfortable.

It’s like learning anything though. If you ask the average bloke about the merits of skin serums vs moisturisers, he will look at you blankly. That’s because society hasn’t told men that skincare is important, or socialised them to believe that the way their skin looks is crucial to their social success. So they haven’t learnt about it.

But just because it’s new, doesn’t mean it’s beyond your skill or knowledge.

Don’t worry, Fierce Girl is here to help!

I thought a lot about my friend’s question and figured that if you’ve ever gone shopping for a particular outfit, it’s a similar process. Say you need something to wear to a wedding.

Step 1. The Brief

There are a bunch of things to consider. The time of year; the accessories you have and the ones you need to buy; if your stilettos will sink into the grass; the dress code (does formal mean a long dress?); how fat/skinny you feel right now. The list goes on.

There are also the practicalities. How much can you afford to spend? How many weekends do you have to go shopping? How many weeks do you have up your sleeve to buy online, get it delivered and return the five dresses you hate?

It’s a lot of thinking. But we do it, because we are competent, empowered women.

And that’s the energy we need to bring to investing.

When you’re in planning mode, some factors to consider are:

• Your goals – is the money for a general nest egg or ‘f*#k-off fund’; for a bigger purchase down the track (e.g. a home deposit); will it be part of your retirement savings? Being clear on that will help with the next point…
• Your timeframe – are you likely to need this money in the next five years? If so, maybe just stick it in a high-interest savings account. Shares can be too ‘up and down’ for a shorter period. But for a longer period, you can possibly tolerate a little risk and volatility – i.e. you have longer to ride those ups and downs, and let them smooth out over time.
• Your own mindset – financial advisers like to talk about ‘risk tolerance’. In one sense it’s determined by the timeframe – the more time on your side, the more risk you can handle. But there’s also your own personality. If the thought that your share portfolio could fall dramatically will keep you up  at night, then it’s probably better to go with a more ‘conservative’ portfolio. Don’t sell yourself short on this – some risk is needed to make money. At the same time, don’t go against your gut if it’s going to make you unhappy.

Step 2. The Research

The wedding outfit can require some serious thought, especially if you’re likely to see your ex-boyfriend or some chick from high-school who was mean to you.

Research is the answer. You scroll Instagram, makes wishlists on The Iconic, and wander the shopping mall at lunch. You also flick through a few fashion magazines for ideas – haha just kidding, what is this, 1997?

At some point you decide that ‘formal’ can definitely include cocktail length dresses, because, well, there’s a perfect one on sale at Rodeo Show.

You can apply this solid skillset to researching your investment options.

The first question is whether you want a DIY approach or someone to pick things for you.

The DIY Approach – Direct Share Investing

You can pick a few companies to invest in, then buy their shares (technically, they are called equities, but let’s stick with the common name here).  You do this directly through a real-life or online broker (discussed in this post).

Some challenges with this are:

• you don’t know if you’re paying a fair price  – unless you go deep into their financial statements and think about things like price-earnings ratios.
• It’s harder to spread the risk. The more companies you invest in, the less it matters when one goes badly. ‘Diversification’ is a key investment concept, and it’s hard to achieve it unless you have a lot of money to plough into shares.
• It can be more stressful – Related to the above point, owning just a handful of companies means you watch them more closely and get emotionally invested in their ups and downs.

Personally, I’m not a fan of direct investing. But some people are really attracted to it because they like the control it gives them, or they enjoy all the research and trading.

But if this doesn’t sound like you then, another option is a managed fund.

Pay someone else to be smart

Back when I got married, I would never have pulled my wedding dress off the rack when I was shopping for it. But the lady at Baccini & Hill has dressed a few brides in her time, and she knew exactly what would look good on me, because she’s a professional.

If you want your shares to be professionally managed, you have two main choices:

• Active Management – someone (usually a team) does all the research, selects the companies to buy and then does the buying/selling at the appropriate time. You pay fees to the manager for doing all this work (usually a percentage of the amount invested). Picking a fund manager is a whole topic in itself, which I’ll save for another time.
• Passive Investing – This is where your portfolio mimics the performance of the market, instead of someone picking the best shares for you. It means costs are much lower, but you don’t have a chance to ‘beat the market’ (i.e. make more than the average investor).

Passive investing – through Index Funds and Exchange Traded Funds (ETF) – has grown in popularity in recent years. It could be worth considering if:

• You’re not fussed about beating the market and are happy to earn the average
• You don’t like paying a lot in fees
• You want to start with a small amount (like, a spare fifty bucks or so)

It’s not as DIY as direct investing, but it’s also not as hands-on (or costly) as active management.

The cheapest way to access this type of investment is through an ETF provider – such as Vanguard, iShares or BetaShares. If this appeals to you, I recommend reading ASIC’s explanation, so you understand what you’re getting into.

You can also invest in Index Funds through a manager like Vanguard – i.e. you put in an application directly with the manager, rather than buying on the exchange. The difference between these approaches is subtle – check out this article for more details.

Still confused/scared/intimidated?

If you are baffled by how many products are on offer, and which one is right for you, a roboadviser can help.

Companies like Stockspot, Six Park and Raiz put together a basket of ETFs for you, based on your needs and preferences. There is a fee, but it’s generally a lot lower than paying a human adviser.

Speaking of humans, don’t rule out getting an adviser if you are really serious. Just like a personal trainer can get you over the fear or walking into a sweaty weights room full of men, an adviser can guide you through the world of investing.

You’ll pay for the privilege, but if they give you the confidence to step into investing, you could potentially make that money back over time.

Step 3: Get cracking!

I know this is a lot of information, and I’m not recommending you jump online and buy, buy, buy right now!

Do some more reading (or watching videos) to get your head in the game.

However, don’t wait to be an expert. Perfect is the enemy of done.

You can get started with a small amount of money, find your comfort factor, and then build from there.

And remember, if you can go shopping for clothes, you can go shopping for shares.

Here are some more of my articles to help you get started:

• The ultimate ‘get started’ guide to investing (and stuff)
• Why investing is just like wearing false eyelashes: the pep talk you’ve been waiting for
• I saved some money. How do I invest it? (And WTF is an ETF?)
• Buying shares is pretty much like choosing a husband