Going backwards

Hi Damien, you’re asking the right questions! Let’s run through a few things to weigh up as you think about whether to invest more or not.

So Micro is designed to be an alternative to CHESS sponsored shares, where there are $500 minimums, higher fees and complexities like dealing with registries and admin at tax time – all of which are hurdles to saving & investing regularly, no matter the market ups and downs.

But where Micro is fantastic for someone who wants to gradually build their portfolio with one or a few simple options, like with all investing, the early days can be relatively costly before your portfolio gets going and the power of compounding takes over.

As you point out, there is a portfolio size between $100 and circa $300-400 that the monthly fees could be more than what you earn via captial gains and dividends (I’ve used 7% p.a. return as an example). In my example, if you start with your $100 and contribute $50 a month, then 4-6 months down the track and assuming that 7% p.a. return, your earnings outweigh the fees.

To help here I’ve outlined 3 scenarios (and pros and cons) that could be worth considering – all of these are super common amongst the community!

1) Save in the bank and invest when you’ve got a large enough amount

Pros:

– Saving in the bank is simple and easy, you know your returns

– You can alwasy use those funds for other things (also maybe a con ;))

– You can keep watchin the market and ‘wait for the right time’ (not going to lie, lots of people find this a con)

Cons:

– Not learning by doing, a bit part of investing is staying commited and comfortable and not letting it stress you out

– You can keep pondering your portfolio choices and what’s right for you, which can just lead to more procrastination once you think you have a large enough balance

– The ongoing negative media causes you to lose momentum or you use those funds for other things that maybe you wouldn’t have if it wa

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The most important thing to learn is that even though shares are a great long term investment, just like property and other growth assets, none of these higher returning investments are guaranteed to perform well in the short term.

Welcome to the world of investing. To earn good long term returns, we need to accept that in the short run our investments may go down in value. That’s the trade off. The alternative is leaving money in the bank and accepting lower long term returns, especially after inflation and tax are accounted for.

So my suggestion would be to understand what you’re actually investing in – a diversified share fund which is a big collection of businesses. The price of those businesses can go up or down. But the long term is what matters. If we want to achieve results, we need to keep adding to our portfolio and focus on what our assets will do over the long term.

This recent article might help: https://pearler.com/explore/learn/blog/invest...