Categories
Financial Literacy Investing

Managing Your Portfolio In The Information Age

Part III in our series on self-directed investing.

Welcome to the third and final installment of our series on self-directed investing.

In Taking Ownership Of Your Investments, we covered what it means to take charge of your investment portfolio, as opposed to trusting your financial future to a money manager.

In Choosing A Strategy & Assets For Your Portfolio, we looked at the main types of investment assets and portfolio management strategies at work in the markets today.

In this post, we’re showing you how building wealth today is more dependent than ever before on technology and data.

You’ll see why the old ways of analyzing your portfolio are now obsolete, and why we’re about to witness an explosion in software that helps investors harness the unprecedented amounts of financial data.

If you’ve not read parts one and two in this series, we encourage you to do so before reading this.

And if you’re new to Navexa, you should check out our homepage for a quick overview of the online portfolio tracker offer (and why!).

How Big Data Has
Changed Investing  

“There’s no avoiding the realities of the Information Age. Organisations that continue to use 20th Century tools in today’s complex environment do so at their own peril.”

— Retired United States Army General Stanley McChrystal

This is the Age of Information.

We’re living in a time when we’re more connected to the world through technology than ever before.

We’re also generating and consuming more data than ever before.

Retail, advertising, medicine — you’ll be hard pressed to find a market or industry that hasn’t been disrupted or transformed by what we often refer to as ‘big data’.

Funnily enough, however, the world of finance has been a little slower than other sectors in its adoption of — and disruption by — technology and data.

Maybe that’s because the financial markets and banking systems are massive and deeply dependent on government for regulation and oversight.

But, things are changing for investors now. Fast.

According to Forbes:

‘Making money is no longer viewed simply as the result of the insightful decision making of market wizards. Rather, returns in markets are seen to follow from rigorous research. Investing and trading are becoming increasingly evidence-based.’

How, exactly, is big data transforming investing?

The biggest factor in the shift toward data-driven investing is that now there is nowhere to hide.

There’s so much information available about the historical and relative performance of stocks, sectors and markets…

That there is no longer any excuse for making decisions based on ‘a gut feeling’ or an opinion.

Everything you need to know about a trade or trend is available to you in the form of digital information.

Consider that more than $4.6 billion changes hands on the ASX alone each day.

That’s more than a trillion dollars a year.

Every single transaction is now a datapoint in a huge, ever-growing big picture which you can look at to determine how best to position your own investments.

If, that is, you have the tools to do so…

(And you’re not clinging on to the old spreadsheet, thinking the old ways of tracking your stocks will be good enough in the Age of Information.)

How To Harness Data In
Managing Your Portfolio

“To beat the market, you’ll have to invest serious
bucks to dig up information no one else has yet.”

— American Economist Merton Miller

We like this quote from Merton Miller.

Knowledge, as they say, is power.

When you’re investing, the more information you can gather, the more knowledge you have.

And the more knowledge you have, the better you can understand a situation and take action.

The only thing Merton (who won the Nobel Prize in Economic Sciences in 1990) got wrong with this quote is that you have to invest serious bucks to dig up the information you need to beat the market.

Maybe 10 years ago, this was true.

But today, with a portfolio tracker like Navexa, you don’t have to invest serious bucks.

For zero cost (or for a meagre monthly payment, depending on your requirements), you can now access analytics tools that give you massive insight into how the markets — and your own portfolio — is behaving.

Here’s an example.

Portfolio Contributions

Navexa’s Portfolio Contributions Screen

This is just one tool we’ve created to help our users see at a glance one vital thing about their portfolio:

Which stocks are pushing your total returns higher, and which are dragging the portfolio down?

Twenty years ago working this out would have been a painstaking, manual process open to human error.

Today, with our service, you can literally see in one click how each holding in your portfolio is contributing to your overall performance.

This is one of many analytics tools we’ve built to help our users understand not only how their investments are performing, but how their entire portfolio compares to the wider market.

Use Navexa’s Online Portfolio Tracker To Make Smarter Decisions

Investing in the Age of Information, where big data makes it easier than ever to clearly see what your money is doing in the market, is arguably the best time ever to be building wealth.

The trends we’re seeing (and which we’re able to see because of data) show that more of us are ditching advisors and money managers to take ownership of our portfolios.

We have a huge number of assets and tactics to choose from on our wealth building journeys.

And by harnessing the power of data through modern portfolio tracking tools like Navexa, we can see more clearly the path to our financial future.

We hope this series on self-directed investing has been helpful to you!

Ready to start tracking your stocks smarter? Go here.

Categories
Financial Literacy Investing

The Truth About Ethical Investing

Ethical & unethical investments may not be what you think

Last month, Australia suffered destructive and widespread bushfires.

Debate around climate change, fossil fuels and sustainability heated up as large parts of New South Wales and Victoria burned.

But this debate is not new.

You might have seen the ‘clean money’ ads for Bank Australia, targeting customers who want to know their savings and investments are not funding destructive, unethical business activities.

The idea of ‘ethical’ investing is the idea of aligning your investments with your own ethical code.

In this post, we’re taking a quick look at what makes an investment ‘ethical’ or ‘unethical’.

Before we launch into it, a disclaimer: We’re not trying to tell you what you should do with your money.

(However you choose to invest, we provide a powerful portfolio tracker to help you track and analyze your portfolio.)

We’re exploring the question because we believe it’s beneficial to consider how your wealth building lines up with your personal — and your community’s — values.

So, pour yourself a glass of scotch or herbal tea (no judgment from us either way!) and let’s get into it.

Gambling, Drinking & Sex: Classic ‘Unethical’ Investments  

“A highly developed stock exchange cannot be a club for the cult of ethics.”

— Max Weber, German Economist

You can generally classify unethical investments as those which derive profits and returns from activities that harm or negatively influence people and the environment.

Making money from casino businesses, the sale of tobacco and alcohol, or prostitution are classic unethical investments.

Why?

Because those activities rely on consumers who are — in the case of tobacco — addicted to a significantly harmful product.

And yet, as the great Warren Buffett (who we seem to mention time and again in our posts — see the post that sparked a comment war on social media) says…

The sale of tobacco not only generates high profit margins.

It also cultivates a vast and loyal consumer base that supports business even as regulation and tax drives prices higher.

In other words, what makes that product unethical is the very thing which makes it a sound investment from a purely financial point of view.

As society has become more conscious of peoples’ impact on the planet and climate, the definition of unethical investing has evolved.

Today, you can say that any business that damages the planet is not an ethical investment.

Fossil fuels, logging, mining and other operations that seek to extract value from the earth by plundering natural resources for profit.

Again, though; these businesses can deliver huge returns.

Consider the returns rare earths and industrial metals mining have produced as we’ve moved through the industrial and technological ages.

As the German economist Max Weber pointed out, the market can be a tricky place to practice one’s ethics.

Because generally speaking, we enter the market to make money for ourselves.

But for many investors in the midst of the current generational shift, there are other considerations than simply maximising returns.

Protecting Planet And People:
Modern ‘Ethical’ Investments

“Being an economist is the least ethical profession,
closer to charlatanism than any science.”

— Nassim Nicholas Taleb

Ethical investing largely boils down to the idea that we should not make money from any business that profits from inflicting harm to living things.

People, animals, the environment; these things must be protected and respected at all costs.

So instead of investing in fossil fuels, you might put your money into renewables.

Instead of investing in aggressive property development that impacts the environment, you might invest instead into community-focused, sustainable housing projects.

Or, you’ll park your money with a fund or bank who pledges to manage it in line with a clear ethical code.

You might think that investing ethically would drastically compromise your potential to earn a good return.

But one look at Canstar’s managed funds comparison table and you’ll see one ethical Australian fund is vying with the established aggressive players.

History shows that some of the most unethical businesses — illicit drugs, gambling, mining and burning fossil fuels — are some of the most lucrative.

The way of the ethical investor has tended not to bring such generous returns.

That’s because ethical investing is an attempt to balance the inherent selfishness of wealth building with a broader minded, ecologically-driven attempt to give back — or at least to take sustainably.

But don’t underestimate the shift happening in the economy and broader society right now.

In Australia, you now have options for ethical investing from banking and superannuation through to investment funds and companies that are ‘B Corporation’ certified.

Would you have guessed that an ethical managed fund could offer an annual return within a few percent of the top performing ‘unethical’ fund?

The times they are a changing.

‘Ethical’ Doesn’t
Always Mean ‘Green’

As with most things, the ethical investing debate is not black-and-white.

There’s a grey area.

And it is vast and shaded.

When you break it down, an ethical code is an ethical code.

Whether that code is good or bad is subjective and open to debate between individuals and within the community.

One definition of unethical is any decision that goes against one’s own ethical code.

So if you believe that climate change is not real, that there is no cost to burning fossil fuels and so forth, but you invest in a business focused on planting sustainable forests, you could say that you are making an unethical investment.

Even though the place you’re putting your money is considered ethical based on its actions, your investing in it would be unethical because it doesn’t line up with your beliefs.

The debate around how we make money at this point in history, which businesses and organizations we choose to support, is more heated than it has ever been.

So where do you stand? To what extent do your beliefs inform your investments?

Today, more than ever, it might pay (financially and otherwise) to take a look at how your portfolio lines up with your own ethics.

Whatever your ethics, understanding how your money is performing in the modern financial market requires a specific set of digital tools.

Navexa provides these tools.

Go here to learn more.

Categories
Cryptocurrencies Investing

Is Warren Buffet Wrong About Bitcoin?

You might not know this about Navexa yet, but we don’t just offer portfolio tracking for traditional Australian investments.

We also provide full portfolio tracking for the cryptocurrency markets.

This isn’t because we’re Bitcoin fanatics or Blockchain evangelists.

It’s because about one in five Aussies will buy crypto assets in the next six months.

By 2025, more than half under the age of 40 will own cryptos.

That’s according to the Independent Reserve Cryptocurrency Index (and backed by our own user statistics).

We’re growing our service in line with what our growing community of customers requires.

The numbers show cryptos are becoming an increasingly significant part of Australians’ wealth building strategies.

So providing crypto analytics for Navexa users makes sense.

However, there are those who wouldn’t agree.

Top of the list in terms of influence would be the great Warren Buffett.

We’ve written about Buffett before.

The ‘Oracle of Omaha’ (worth approximately $90 billion USD) is a legend in value investing circles.

He’s renowned for making big bets on businesses that generate big long-term returns for investors.

But…

Warren Buffett Is Not
A Big Fan Of Crypto

“Warren Buffet just gave up on newspapers and sold his last investment in the industry after fighting the rise of the internet. It took him 20+ years.
No wonder he doesn’t see crypto coming.”

— Blockfolio

Buffett is known for avoiding the complex in favour of the simple.

He goes for relatively boring, traditional companies as opposed to speculative startups trying to take big technological or financial leaps.

So, you can understand why he believes cryptos will “come to a bad ending”.

You can’t deny Buffett’s approach has worked out well for him.

But that doesn’t mean he hasn’t made mistakes.

While the investment titan ideally prefers to hold a position “forever”, he recently bailed on an underperforming group of assets.

More than 20 years ago, Buffett’s Berkshire Hathaway bought a swathe of newspaper business across the United States.

You might recall that about 10 years ago, the print news industry started coming under serious pressure from digital media.

To many, the writing for newspapers was on the wall around the turn of the millennium.

Circulation and advertising revenues were plummeting.

Traditional publishers scrambled to find a way to move online and remain profitable.

But Buffett grimly held on to his newspaper businesses, believing the rise of digital news to be a fad and the challenges facing the print media to be temporary.

Ten years later, and Reuters reported last week that Buffett has finally dumped the struggling newspaper businesses.

In other words…

Buffett Just Admitted
He Was Wrong.

“[Bitcoin] is a remarkable cryptographic achievement…
Lots of people will build businesses on top of that.”

— Eric Schmidt, Executive Chairman, Google

Buffett’s anti-crypto stance squares with his long-term reliance on investing in simple, relatively traditional businesses.

He doesn’t put money into things he doesn’t understand.

You have to admire that. To a point.

But as his newspaper investment saga reveals, Buffett doesn’t always get it right when selecting assets and sectors.

Buffett was wrong.

Not only that, but he stuck with an investment that went nowhere for many years.

It’s possible he was blinded by his conviction that the traditional could withstand the pressure from new, disruptive digital competition.

So perhaps it’s worth entertaining the idea that Warren Buffett is wrong, too, about cryptocurrencies.

Bitcoin launched in 2013.

Between 2013 and today, the original cryptocurrency has rocketed more than 100,000% higher.

The newspaper business, in that time, has foundered.

Buffett made no money on his decades-long newspaper investment.

He lost about $2 million.

In contrast, you could have made $2 million from just a $2,000 investment into Bitcoin when it launched in 2013.

And right now, the numbers show that here in Australia, crypto adoption is progressing.

In just five years there will be a majority of investors under 40 holding crypto assets.

More broadly, in the next 10 years, Generations X and Y will control more than two thirds of the world’s financial assets (more on that here).

Cryptos would appear to be a big part of this generational shift.

And as Eric Schmidt says in the above quote, cryptocurrencies offer a platform for a whole new breed of digital businesses.

Just because people like Warren Buffett don’t understand or approve of disruptive new tech and the associated financial instruments they create…

…does not mean cryptos or blockchain technology is going to fade into obscurity and leave the current financial status quo untroubled and unchanged.

Categories
Financial Literacy Investing

Choosing An Investment Strategy & Assets For Your Portfolio

Part II in our series on self-directed investing.

Welcome to the second post in our series on self-directed investing.

Part one introduced the idea of taking ownership of your portfolio.

For those of us with the time, inclination and discipline, taking ownership of our portfolio makes more sense than trusting our financial future to fund managers who charge fees and who don’t always beat the market.

(Go here first if you haven’t read the post yet.)

In this second post, we’re going to discuss some of the important choices you need to make when creating and managing an investment portfolio.

These choices divide broadly into two major questions.

  1. How will you approach building your investment portfolio?
  2. Which assets will suit your approach?

There’s a lot to cover in this installment of the series, but we’re going to keep it simple to give you a broad overview (see the bottom of this page for a list of great in-depth articles we recommend for continued reading).

Before we get into the types of strategies and assets you might wish to consider, a quick word about investing in general.

No two investors are the same.

That might sound obvious, but it’s worth remembering that no single investment strategy can suit everyone.

In our experience, your best bet is to learn how different investors use various strategies to create and manage their portfolios…

Cherry pick the aspects that you identify with and that fit with your own goals…

And create a strategy that fits your own financial and personal situation.

This is better than trying to replicate what other people have done in the past.

Because they are not you. And now is not then.

There’s a vast number of factors to consider when forming your strategy and selecting investments for your portfolio.

Your financial goals, your obligations, your appetite for risk, the amount of time and energy you’re prepared to put into researching and monitoring your investments — these are just a few.

It’s important to be clear on where you’re at in your investment journey, your career and your life in order to build a strategy that will best serve your goals.

Your Game Plan: Buy And Hold, Value Investing And More

“You can’t adjust your portfolio based on the whims of the market, so you have to have a strategy in a position and stay true to that strategy and not pay attention to noise that could surround any particular investment.”

— John Paulson, Multi-Billionaire American Businessman

Like we said, our aim here is to give you a broad overview of the types of strategies you can deploy for your portfolio.

These portfolio management styles are by no means a comprehensive list of those at play in the markets today, but they do broadly represent the spectrum of approaches you’ll find among investors.

Buy & Hold Investing

‘Buy and hold’ investing is the ultimate slow and steady strategy.

This style of investing is exactly as it sounds: You buy investments with a view to holding them for a very long time — like decades.

This strategy hinges on the idea that, over the long term, stocks always go up and the returns are always good, if not spectacular.

You may have heard the phrase ‘time in the market is better than timing the market’.

Buy and hold investing is hands-off in that you make your decisions early, and then largely leave your portfolio to grow and generate income for a very long time.

Value Investing

A ‘value stock’ is a stock which an investor calculates to be trading at a lower price than it should be.

Value investors look to create portfolios full of assets that — according to their research and analysis — will rise over the medium term as the market price catches up to the true value of the business.

Warren Buffet is widely regarded as being one of the greatest at picking undervalued stocks and holding them long enough to generate substantial returns.

Value investing is more hands on than buy and hold.

But it is flexible, depending on what sorts of sectors and assets you dive into.

Growth Investing

Growth investing is more aggressive than the two strategies above.

The idea is to ‘buy high and sell higher’, using the momentum of a rising stock market to capture short and medium term gains from stocks riding high on a wave of optimism and economic growth.

Many tech companies can be classed as growth stocks.

Growth stocks tend to be smaller, faster growing businesses that are capturing market share.

Growth investing requires a higher tolerance for risk, and in most cases a more active approach to portfolio management (more frequent buying and selling).

Portfolio Theory

Portfolio theory is less about which types of stocks you invest in, and more about balancing the mix of assets you hold in a particular way.

The idea is to capture maximum upside from your portfolio while minimising the risk you take by being exposed to the market.

Key to this is diversification, which you no doubt have heard about before.

Diversification is a way to spread risk between distinctly different type of investments, like stocks, bonds, exchange traded funds and so forth.

Diversification is about creating a mix of investments that balance out gains and losses in the short term, and grows in value over the longer term. 

Choosing Investments
For Your Portfolio

“The secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one of two of ’em go up big time, you produce a fabulous result.”

— Peter Lynch, averaged 29.2% return for 23 years straight

There are many different types of assets you can invest in within your portfolio.

The sort you go for will depend on the strategy you pursue, which as we mentioned will depend on your goals, risk tolerance and so on.

We often talk about the types of assets and financial instruments in terms of a ‘risk ladder’.

At the bottom of the risk ladder is cash (or precious metals if you prefer, but we won’t discuss that here).

Cash

Cash in the bank is the simplest investment asset.

It guarantees your capital and gives you exact knowledge of your return (the interest rate).

It’s how most of us store our wealth by default.

The problem with cash, though, is that interest rates tend not to beat the inflation rate (meaning your cash’s value will diminish over time).

Bonds

Bonds are next up the risk ladder. A bond is a debt instrument.

You buy a bond from a government or business and they guarantee to pay you a fixed interest rate while you hold it.

Bonds are a common way for organizations to raise capital.

Interest rates on bonds tend to be better than what your cash will earn in the bank.

Stocks

Stocks essentially let you participate in a company’s activities.

You own a shares in a business. Those shares can rise, fall and pay income in the form of dividends.

Within stocks (or equities), there is another risk ladder, which spans from the bottom to the top of the business world.

Big, established companies that pay good dividends and have a record of climbing over the long term are known as blue-chip stocks, or sometimes income stocks.

Growth stocks are smaller businesses on an upward trajectory. They are riskier but can deliver bigger, faster returns.

Risker and more dynamic again are small-cap and penny stocks — small, unproven companies aiming to capture market share.

These stocks can rise and fall dramatically, meaning investors who hold their shares stand to gain and lose proportionally.

Mutual funds & ETFs

A mutual fund is an investment fund where many investors pool their capital and allow a professional fund manager to control it.

Mutual funds focus on certain sectors or types of investments.

Some mimic particular markets and all aim to deliver solid, reliable returns.

These funds do charge management fees, though, and require you to allow a third party to select the assets the fund invests in.

An ETF — or exchange traded fund — tracks an underlying index, like the ASX200, for example.

Owning shares in an ETF exposes your capital to a specific mix of assets.

Like stocks, ETFs vary greatly in risk depending on the sector or market they track.

Their popularity has exploded in the past few years.

The approach ETFs allow you to take — essentially buying an entire market or sector with low fees — appeals to some of the heaviest hitters in the financial world.

Buffett told CNBC he thinks using ETFs “makes the most sense practically all of the time”.

Mark Cuban, another billionaire rockstar of the investing world, also likes cheap index funds as a way for new investors to start building their wealth.

The growing FIRE (Financial Independence & Retiring Early) community is also quite fond of ETFs as a wealth building tool.

Again, this isn’t an exhaustive list of the types of assets available to Australian investors — we haven’t covered commodities and derivatives — but this gives you an idea of the basic options you have when creating a portfolio.

Selecting The Right Mix Of
Assets For Your Chosen Strategy

Choosing an investment strategy and a mix of assets for your portfolio requires, above all else, clarity.

You need clarity on what you want to achieve, what you’re prepared to risk, and how much time and energy you want to put into managing your portfolio.

Building a portfolio is a lot like buying a new car.

No car is going to suit two drivers the same.

Maybe you want a people mover that offers great fuel economy so you and your family can take a long, relaxing drive.

On the other hand, perhaps you want a high performance sports car that costs loads to fuel but which delivers extreme speed and handling.

Carefully consider your goals and what you’re prepared to do to hit those goals.

If you’ve never bought a stock before, go read about my experience buying my first shares and how a careful, deliberate approach has allowed me to more than triple my investment.

Recommended articles for further reading:

https://www.thebalance.com/top-investing-strategies-2466844

https://investormint.com/investing/types-of-stocks

Categories
Financial Literacy Investing

How To Become A Self-Directed Investor

Part I in our series on self-directed investing.

Do you trust your financial future to someone else, or do you take charge yourself?

It’s a fundamental question you have to answer on your journey to building wealth.

If you’re just getting into investing, or you’re considering taking over control of your portfolio for the first time, there’s a lot of information to get your head around.

In this series of posts, we aim to introduce you to the ideas, skills and discipline involved with taking ownership of your own portfolio.

Never has grasping the principles of self-directed investing been more important.

According to Canstar, ‘we are in the midst of the most significant shift of power in the finance world of the past decade’.

What is this shift?

It’s the rise of the self-directed investor.

Generation X and Y will control about 70% of financial assets within the next 10 years.

We’ll control these assets amid unprecedented trends using new technology and services as we create wealth and build our financial future.

So, will you leave your investments and wealth building to a third-party advisor or manager?

Or…

Take Ownership Of Your
Portfolio Management

“The better you understand yourself, the better you’ll become.
You’ll be better. You’ll do better.” — Jocko Willink

Managing your own portfolio is a way of taking direct control of your financial future.

You choose what to buy, what to sell and when to buy and sell it.

You choose your asset allocation.

You choose the types of stocks you invest in.

If you have a vision for how you want your life to be — especially when you retire — then it makes sense that you should steer your investments instead of paying someone else to do so.

But, it only makes sense if you have…

The time, the inclination and the discipline.

Portfolio management requires focus and energy.

But when you look at how those whose full-time job it is to manage other people’s money perform; you can see why it can be worth taking ownership.

This article from Liberated Stock Trader reveals that more than 60% of fund managers failed to beat the wider market over a 12-month period.

Over three years, a staggering 92.91% failed to beat the market index.

Now, if the market is rising, it’s not the end of the world if a fund manager fails to beat it.

If stocks rise 10%, you theoretically increase your portfolio’s value by the same amount.

The thing is, you’ll pay the advisor or fund manager a percentage for achieving nothing more than the broader market did anyway.

Worse, you’ll pay them for a return that is actually below what you would have made simply investing in an indexed fund.

And worse still…

You won’t gain the knowledge and understanding that comes from taking ownership of your own investing.

As retired Navy SEAL commander, Jocko Willink, points out, the better you understand yourself, the better you’ll do.

In other words, by taking ownership of your own investments rather than paying someone else (who probably won’t beat the market)…

You can directly guide the investments that will determine your financial future.

Are you ready for that?

Great. Next, you’ll want to…

Learn From The Portfolio Management Masters.

“Someone is sitting in the shade today because someone
planted a tree a long time ago.” — Warren Buffett

Taking ownership means you will need to take guidance from others who have done the same.

You can save yourself having to learn hard lessons by studying those who’ve learned them before you.

You will have at least heard the name Warren Buffett.

The finance world generally regards Buffett as the king of investing.

Buffett followed the principles set out by Benjamin Graham to amass a multibillion dollar fortune.

If you’d invested $10,000 with Buffet’s Berkshire Hathaway in 1965, that investment would now be worth more than $50 million.

But more amazing than the gargantuan long-term gains the man has achieved are the simple principles he has followed to get them.

Buffett researches his investments in depth, sticks to a proven formula for selecting sectors and companies, and doesn’t let emotion or hype dictate his decisions.

He’s also deeply patient, claiming his favourite holding period for an investment is ‘forever’.

He has built his wealth by thinking about the long term.

His mentor, Benjamin Graham, is the man behind the ‘value investing’ idea so central to Buffett’s success.

This is the idea that an investment should be worth a lot more than you pay for it.

Graham believed in fundamental analysis. He looked for companies with strong balance sheets, little debt, above-average profit margins, and ample cash flow.

In other words, good companies with favourable outlooks. Simple, right?

Buffett and Graham are just two investing masters you can learn a lot from.

But the list of intelligent, wealthy investors willing to share their knowledge is long and worth diving into as you create your own strategy.

Check out Ray Dalio, John Templeton and Peter Lynch (and feel free to suggest your personal favourites in the comments!)

Three Questions To Ask
Yourself Before Becoming
A Self-Directed Investor

OK, so you know you’re living in a time of massive change.

Generation X and Y are becoming the dominant forces in the financial markets.

The way we invest — our values, objectives, the tools and tech we’re using — is changing rapidly.

Financial advisors and mutual funds tend not to deliver great returns (especially when you take their fees into account).

The masters like Buffett and Graham prove that self-directed investors can flourish if they deploy strategy, patience and critical thinking in a disciplined fashion.

You want to take ownership and start managing your own portfolio.

This great article from Forbes suggests you ask yourself four key questions before you take the reins.

Are you truly motivated to
become a self-directed investor?

This isn’t as simple as yes or no.

Rather, define the precise nature of your motivation.

Maybe you’re taking control back from a financial manager and want to maintain a certain performance level while saving on fees.

(Consider that a $1 million portfolio might cost up to $12,000 in fees a year.)

Perhaps you want to test out a particular strategy to boost your returns and take on more risk.

Or, maybe you’re looking to invest in a specific area of the market you understand and are passionate about.

Whatever your motivation, be clear about it from the outset of managing your own investments.

Will you make the time to manage your portfolio?

Managing your portfolio isn’t a full-time job.

But it will take a serious commitment of both time and energy.

If you’re just learning about investing your money and implementing a strategy, be patient and prepared to dig in — especially at the start.

Your investing style will also affect how much time you need to commit week to week.

If you’re a buy-and-hold type of investor, you might not need to keep tabs on your portfolio as much as you would if you were a day trader.

Either way, understand that taking ownership of your investments like this requires a significant time commitment. 

What knowledge do you already have — 
and how much will you learn as you go?

You don’t need a finance degree to manage your own portfolio.

But, you do need to be able to interpret large amounts of information — about the markets, the business world, your own financial goals — to make good decisions.

Don’t invest beyond your current level of knowledge.

Seek guidance from those more experienced.

Use second and third opinions to your advantage.

But most of all…

Turn every experience you have managing your own portfolio into a lesson you can implement next time you make a decision.

Taking ownership of your invested wealth means making a commitment to learning all the time.

I hope this first part in our self-directed investing series has been helpful to you.

Please let us know your thoughts and opinions in the comments.

And keep an eye out for part two, coming soon.

Categories
Financial Literacy Investing

True Story: My First Investment

Back in 2013, I became interested in the idea of investing.

I was watching a tv show that featured a brief clip about how Warren Buffet had started investing at a young age and was now worth $40 billion dollars!

Hearing this piqued my interest.

I was 25 and envisaging a wealthy future for myself based on a long-term, systematic wealth building method.

So, I started a search for knowledge on everything I could about Buffet.

I read The Intelligent Investor by Benjamin Graham — the man who taught Buffet in the beginning of his career.

It was a dry read if I’m honest, but a necessary one to get the basics of investing into my head.

With just enough knowledge to be dangerous, I thought I’d try my hand at the real thing and buy some shares!

But in what exactly?

I knew you had to value a stock to see if it was trading at a good price, but I had no idea how to do it.

So off I went Googling ‘how to value a stock’ and reading website after website on various methods and techniques.

I arrived at a valuation method called Discounted Cash Flow (DCF).

The DCF is a classic valuation method used to value stocks as well as entire businesses.

It seemed like a good place to start.

Now I just had to find a stock that had a DCF value about 20% less than the current trading price.

Easy… not!

I decided I would stick with companies I knew, so I started valuing all the big companies I could think of.

Banks, insurance companies, technology companies. But everything at the time was overvalued… according to my calculations.

Then, I arrived at a stock that had a valuation 20% lower than what it was trading for.

Webjet (ASX:WEB).

I knew Webjet. I knew what the company did so I felt I could easily explain it to other people.

But I still felt uneasy about buying their shares.

I had read various books and spent hours trawling investing articles online.

But I still had no idea if I was doing it right.

What if I invested my money but then the price went down!?

What if I lost all my money!?

But I thought back to what I had learned from Buffet.

The price is going to go up and down every day.

I wouldn’t sell my house just because every day someone came to the door and told me its valuation had gone down.

So, I just had to trust in the process.

I took the leap.

I logged onto my broker and put in the buy trade for WEB at $4.050.

Not long after that the trade was executed, and I became a real-life stock investor!

I’ll freely admit I did check my portfolio every five minutes for the next few days (*cough* weeks).

Lucky for me, the price went up fairly quickly, so I was able to sleep easy each night.

Looking back though…

I had accidentally bought myself a winner.

Despite not knowing nearly enough to confidently buy the stock in the first place.

Yes, it was 20% undervalued, but I did not investigate enough about the business’s future plans, what the industry performance looked like, what the competition was, and so on.

But lucky for me all of that worked out and WEB is currently trading at $14.38, seven years later.

At the time of writing, that’s a 255% increase (I still haven’t sold my shares).

Since then, I have bought other stocks to build up my portfolio, but none ever taught me as much as that first trade.

As with anything in life, the first time you do something can be extremely tough.

The uncertainty and hesitation will never be as great as it was buying my first shares.

I trusted in the process.

But today, I have the proof to match that trust.

You’ll never have 100% confidence in what you are doing if you’ve never done it before.

Taking my first dip into the investing world taught me about the process, emotions, resilience and confidence.

All of those lessons helped shape me into the investor I am today.

And I don’t say this as someone who thinks they’ve somehow mastered investing.

The more I learn, the more I know I need to learn.

No two days in the financial markets are the same.

No two investments play out the same.

I’m always having my ideas and opinions challenged by the markets and by fellow investors.

But, thanks to the research I did before buying my first stock…

And the solid triple-digit gains that investment has achieved so far…

I can now buy stocks with confidence in my process — and sleep easy every time.

Categories
Financial Literacy Financial Technology Investing

Stop Using Spreadsheets To Track Your Portfolio

Welcome to the first Navexa blog post.

We’re going to use our first expedition into the blogosphere to address a serious, widespread and frankly dangerous problem that might be stalking you as you read this.

This is the problem we are on a mission to solve as we develop and grow our investment portfolio analytics project.

Its name?

Spreadsheets.

Yeah, I know, they’re so useful and easy to customize…

Maybe you’ve used them for decades…

Maybe you can’t imagine using anything else to keep track of your investments, or your personal budgeting.

But, perhaps you don’t know this.

Spreadsheets are dangerous.

In fact, you could say that…

Spreadsheets Are
Wealth’s Silent Killers.

If you’re using a spreadsheet to keep track of the stocks in your portfolio, listen up.

Ever heard of Bargain Booze?

It’s a discount alcohol chain in the UK.

In 2018, the company that owned Bargain Booze, Conviviality Plc, imploded in a financial mismanagement fiasco.

Take a look…

A map with text Description automatically generated

After three years of rising share prices, Conviviality made the shock announcement to its shareholders that it needed to raise £125 million to avoid going into administration.

The cause of this fiasco?

A single spreadsheet error.

Someone on Conviviality’s finance team screwed up.

It was a tiny screw up.

But the consequences of that error were, well, refer to the chart above.

Now, this is just one (severe) example of what can happen when we trust spreadsheets with important and complex tasks.

For a long and damning litany of spreadsheet crimes, head over to eusprig.org.

There, you’ll find horror story after horror story of people and businesses — even governments — committing spreadsheeticide and losing mountains of money.

€100 million here. $8 million there.

A regulatory sanction against a pharmaceutical giant.

Overstated oil reserves.

A lead witness in a fraud case found dead in Orlando (think I’m joking? Scroll down to POB1501 on the website).

The point is, using spreadsheets for tracking crucial information is dangerous — and the results can be disastrous.

Why Would You Track Your
Portfolio In A Format
That Wreaks Such Havoc?

Most self-directed Australian investors have become comfortable using spreadsheets to track their portfolio.

They’ve either created their own, or used a template some else has set up.

It works for them.

At least they believe it does.

Firstly, because they, or a trusted friend, has set up the equations in the spreadsheet.

Meaning the calculations the sheet performs to show returns, income, long-term performance and so on must be correct, right?.

(Hint: Wrong.)

Second, they trust the spreadsheet because they personally enter the information on each trade.

So again, they figure that must be right.

But if spreadsheet misuse has the power to sink a business because of one error…

Cost companies millions…

Trigger damaging legal proceedings…

And even lead to the death of a star witness in one such case…

It’s fair to say there’s a clear and present danger to those who trust spreadsheets to track their investment portfolios.

Danger of what, exactly?

Well, say one of the formulae within your spreadsheet is wrong.

You could have been miscalculating your returns or income since you started using it.

That might have led you to incorrectly report your returns at tax time.

Or, it could have caused you to make a major financial decision like buying a house or borrowing money because your spreadsheet said you had plenty of spare cash in your investment account.

On the other hand, you might have sold out of a profitable position because your spreadsheet showed poor performance.

Or maybe you mis-valued a company’s shares.

You get the idea.

When the formulae and the data entry are in your human hands, they are both naturally vulnerable to human error.

And humans make errors all the time.

(Refer to the long list of spreadsheet disasters on the eusprig website if you’re still not convinced.)

Bottom line: Your investment portfolio is too important to trust to a spreadsheet.

That’s why we at Navexa have created…

A Smarter, Safer, More Sensible Way To Track Your Portfolio
Without Costly Errors

The evidence shows spreadsheets have caused a litany of financial and legal disasters.

And those are just the ones we know about.

So, if you’re a self-directed investor and you want to track your portfolio in a way that not only greatly reduces the risk of human error causing havoc in your financial life…

But also gives you a sense of your invested wealth that goes far beyond numbers in a table…

Then it’s time to trade this:

A screenshot of a cell phone Description automatically generated

Source: oldschoolvalue.com

For this:

A person sitting at a table using a computer Description automatically generated
Navexa: Start tracking your stocks smarter.

It’s the second decade of the 21st century.

The spreadsheet was invented last millennium.

So it’s time to start tracking your portfolio in a manner befitting of a modern investor building wealth in the Information Age.

In other words, by using an online portfolio tracker.

Like the one we’ve made — Navexa. 

In our opinion, it’s the best portfolio tracking software in Australia.

But we would say that, wouldn’t we?

Of course we would.

So don’t take us at our word.

Make up your own mind.

Create your own Navexa account (all you need is a valid email address).

In place of a clunky spreadsheet that demands an unattainable level of manual data-entry perfection and, frankly, just isn’t that interesting to look at (its limitations stop you seeing lots of valuable information)…

You’ll enjoy advanced portfolio management tools that hand you a commanding overview and a deep, detailed understanding of your invested wealth.

For example…

  • Comprehensive Portfolio Performance Reporting: Responsive charts help you track capital gains and income.
  • Focused Single Stock & Crypto Analysis: Easily monitor individual stocks and crypto assets.
  • Real-Time Dividend Performance Monitoring: Map each dividend payment and chart cumulative income returns over time.
  • Comprehensive Tax Reporting: Easily generate reports on capital gains and dividend income when preparing your tax return.
  • Benchmark Your Portfolio Against The ASX & ETFs: Easily compare your portfolio performance with the wider Australian market and exchange traded funds.
  • Monitor Your Cash Account When You Sell Shares: Navexa monitors your whole portfolio — even when you cash out of a position.
  • Calculate A Stock’s Value With Ease: Use your account’s built-in discounted cash flow value calculator to evaluate if a stock is worth buying.

We Want To Help Australian Investors Build Their Wealth
In The Age Of Big Data

We believe the era of tracking your stocks with a spreadsheet is over.

Today, it’s high time you started using an online portfolio tracker to monitor and analyse your investments.

The reasons are obvious (see above).

The Information Age gives you more data than ever before about your investments, the markets and how best to plot your course to a wealthier future.

It’s up to you to make the most of that data.

And it’s up to companies like us to help you do that.

Thanks for tuning into this first Navexa blog.