My experience investing

I’ve had an interesting life with many twists and turns, but I have always been curious about the world and asked questions.  I am passionate about building a better world for all Australians and for a long time seen that this would be best achieved through investment.  I studied three years of civil engineering, had a baby, then went back and  studied science while working and being a parent.  Now I’m completing a Master of Economics, and have never felt it more possible, that in the not so distant future I might help shape and implement ideas make positive change in the world.

 

I have long believed that to grow a strong economy for future generations, to continue to be one of the richest nations per capita in the world, vision of the future and direction for investment is needed.  Future wealth needs to come from the industries and infrastructure that we invest in to make Australia strong, so we have a future — and this is what I am passionate about.

 

I am excited about some of the amazing new industries like renewable energy and solar tech, carbon capture tech, and quantum computing, that could bring huge returns for Australia in the future.  I am passionate about getting the right infrastructure and housing mix, to support our industry, people and cities.  To foster creativity and build future wealth.

 

I love to read about companies, follow markets, and macroeconomic news (read: world, national, business and political current events).  I invest my own money and although I know I have made mistakes, overall, I have made money on my investments and I have learned so much by actually investing some of my own savings.  I am learning about building a resilient and diverse portfolio.  At this point in history, there have been so many challenges. Just in the last few years we have had the US-Sino Trade War, Escalations of tensions around the world, between Russia and Europe, The Middle East, and South America.  There have been wild fires that ravaged the globe, the omnipresent threat of climate change, the coronavirus pandemic, and now internal tensions over police and state treatment of African American people in the United States, that have led to solidarity protests echoed around the world just this last week.

I had thought about investing for several years, probably I first thought about doing it when I was in year 11 or 12 studying economics at high school, but back then I had no idea really how to even make an investment.  There was a stock market game my high school economics teacher, Mr Young, tried to get me involved with but I felt quite overwhelmed by the task with out any additional guidance, even though it wasn’t real money, the whole idea stressed me out!  Finally after many years debating with myself, I took the plunge, the market had been strong for several years, I had watched stocks have returns wildly above what I was earning in bank savings account interest.  I felt I should at least try the stock market, now I had educated my self a little.  The week after I made my first ever investment in the Australian Stock Exchange (ASX), was the last week of September 2018…you might not even remember now, but it was just before the stock market suddenly dived due to trade tensions and tariffs put up between the US and China.  I lost 6 – 10 % in a couple of weeks and was pulling my hair out trying to salvage the situation.  I was thrown into the deep end and I had to pull out everything I had learned to pull my investments out of dire straits.

 

It was both exhilarating and terrifying.  I used everything I knew, listened to the best advice and managed to make back everything I had lost and more.  At one point I was up about 30% but I had to learn the hard lesson of not locking in my gains when the market began to falter.  Although I was ahead, I had losses that diminished my possible gains. During the crisis this year I had learned something from experience and pulled most of my investments as things got ugly, in hindsight I would have pulled them much sooner and done a few things differently.  Presently, my return since I started investing sits approximately 8.12% above XAO, and 8.37% above XJO. If I had invested in an ASX-200 ETF tracker, I would today be 8.37% worse off.  I am proud I have achieved that with the little experience I had going in.

Looking back, we would laugh to think I thought 6– 10 % was a big loss!  The ASX with most markets around the world, fell almost 40 % this year between 24 February and 23 March this year, after it became apparent that coronavirus Covid-19 was unstoppable and would turn into a worldwide pandemic.  The Australian stock market All Ordinaries fell from a peak of around 7230.445 on Monday 24 February, to a low of around 4564.129 by Monday 23 March (Figure 1). This was a loss of 36.89%.  Those numbers ‘7230.445’ and ‘4564.129’ are the index numbers, indicating the relative ‘height’ of the stock market as a total weighted average of al listed companies.

AXO Australian Stock Market Pandemic 2020 Feb March

Figure: AXO Australian Stock Market Pandemic Dec 2019 – June 2020, source:  ASX charts (1)

To calculate this stock market loss mathematically, first we divide the ‘new low’ by the ‘old high’ or (4564.129/7230.445) = 0.6312, meaning the market was at 63.12% of its previous height.  This is basically like buying a glorious gelato in a cone, your favourite flavour too,  walking outside the shop, and being immediately bumped by someone passing you in the street.  The gelato scoop falling on the pavement, leaving you holding just the cone.  Well, over those few weeks, the world was left just holding their respective cones, gobsmacked.  Gelato splattered all over the footpath.  The loss is found by taking the size of the ‘gelato cone’ away from the original size of the gelato scoop and the cone, which has been normalised in this case to ‘one’ , so the amount of gelato lost is equal to ‘One gelato minus the Gelato Cone’ = 1 – 0.6312 = 0.3687 =  36.89%.

As you can see in the chart the market has partially recovered from it’s lows, but it is a very uncertain time, and anything can happen, it’s not necessarily a real recovery.  We could be in for a prolonged downturn that could stretch for years, and we just don’t quite see it at this stage.  It took a few years to reach market bottoms in the past after stock crashes, after 2008 and 1929.  It’s likely I think this will again happen this time.  We have seen so many events together that some people wouldn’t see in their entire lifetime.  Or at least once in a lifetime events.  It’s a time to come together (virtually or over the phone of course) with friends and love ones.  Take care of yourself, your family, friends, and show care about your community.  Humans are communal creatures, and we can get through this if we pull together and work in unison, rather than letting our differences divide us.

 

1. ASX Charts, URL: https://www.asx.com.au/prices/charting/index.html?code=XAO&compareCode=&chartType=line&priceMovingAverage1=0&priceMovingAverage2=0&volumeIndicator=Bar&volumeMovingAverage=0&timeframe=, date viewed 7 June, 2020.

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