How $100 a month can transform your life
The start of a new year is a perfect time to consider investing rather than spending some of your monthly salary.
Depositing $100 amonth into a solid investment will probably deliver a lot of upside over 30 years when you consider compounding returns.
While the NZX remained flat in 2021, many locally managed funds reported 15 per cent plus and even 30 per cent plus returns as they looked for overseas and niche local opportunities.
I’ve begun pushing autoinvesting on MoneyHub as away for New Zealanders to become more financially secure. After all, as the CCCFA (Credit Contracts and Consumer Finance Act) wreaks havoc in the credit markets, a borrower who can demonstrate a consistent investing history may have a stronger footing when applying for credit.
In its simplest form, autoinvesting is the process of sending a set amount ofmoney every week, fortnight, month or quarter to an investing platform or fund manager. For example, you may want to send $100 amonth to a platform that invests your money into top US-listed companies (think Apple, Microsoft, Tesla,
Facebook, etc.).
Popular solutions have low (or no) fees and put as much of your money as possible into solid companies. It’s a long-term play, and while you can withdraw the money at any time, the aim is to keep contributing month after month to build up wealth.
Thanks to the bevy of investing platforms and direct fund manager offerings available, diverting some of your salary to an investment portfolio has never been cheaper or more convenient. I honestly believe there are no downsides to sacrificing money today to invest in your future.
I received a flurry of MoneyHub user emails around Christmas confirming just that – cutting back on takeaway coffee and cafe visits, dropping credit card limits and having regular automatic payments to investing platforms had all helped get people on track financially. Based on my experience and MoneyHub users’ reports, if you earn at least an average salary, you’re unlikely to miss $100 amonth.
You don’t need to ‘‘save up to invest’’ – some platforms let you invest as little as $1 a month, but for serious saving, $100 is a good start. This way, rather than delaying the benefits of investing by never having a ‘‘big enough’’ balance to start with, autoinvesting gets you up the investing ladder progressively. Your autoinvesting amount is treated as a bill, so you don’t notice the ‘‘cost’’ – this is critical to the success of your investing journey. If you’re too aggressive and go too high, it may become unaffordable and stressful.
The bestway is to start low and build up as you get comfortable with money leaving your account and investing balances going up.
Consider fractional shares: Many of the windfalls of late have been with US technology shares like Tesla, Apple and Microsoft but these shares can be really expensive. Most share apps, like Hatch, allow you to buy fractional shares, such as a tenth of a Tesla share, so if you invest directly, you can do so affordably.
Getting started with autoinvesting
Pick an investing platform and the investments you’d like to regularly contribute to. This takes the most time, soMoneyHub has put together a guide to help you look atwhat’s available. Generally, almost every fund manager in New Zealandwill take your money if you set up an automatic payment, so your options are extensive. Some, however, may have a ‘‘minimum deposit’’, which may be as high as $1000 per fund in some cases.
Set up your frequency and how much: This will take some time to ensure your cash flow remains intact and you’re not short of money. If in doubt, go low and stay low until you’re comfortable.
Set up an automatic payment with your bank to sendmoney to the investing platform: Once settled on the money you’ll ‘‘spend’’, log in to internet banking and set up the details.
Keep a healthy bank balance: Your payments need to clear month after month, so set up an alert to let you know a day or two in advance that your autopayment is due.
Whatever you decide to do, patience and commitment are the keys to growing a healthy investment balance that gives you choices and freedom later.
Diverting some of your salary to an investment portfolio has never been cheaper or more convenient.