I’ve said it time and time again, and I will say it again. Stop wasting your time on small impact decisions.
Instead, focus on the big wins
Recently I have been witnessing more and more people turning their brains inside out trying to analyse the best investment funds for their situation. Should I go with Simplicity growth or InvestNow vanguard international or Smartshares world fund? Or should I invest direct through Hatch? How will I be taxed? Is it better to move funds once I reach the FIF tax threshold of $50,000?
Sound familiar?
Going around in circles trying to make the absolute best decision.
The small stuff can make a difference over time, but no where near as much of an impact as our bigger decisions.
The reality is the index fund providers are all much of the same. There are small fee and tax treatment differences which can be important. But no where near as important as just starting. If you can’t make a decision just pick something.
If you are in the 33% tax bracket and have $10,000 to invest in international funds for example, and you are trying to decide between the InvestNow Vanguard world fund and the Sharesies total world fund, and the InvestNow total world fund, your fees in one year may look like this (assuming 5% returns; half of which are dividends):
InvestNow Vanguard – $111 (More if you sell due to sell fee)
Sharesies - $123
Investnow total world- $112
I have seen many people wasting their valuable time comparing the options, and in the example above over a difference of about $10.
These are the small impact decisions I am talking about.
The most important thing is deciding on the right asset allocations between growth and defensive so you aren’t taking on too much or too little risk. Once you have decided on that mix and low cost index funds, the differences are negligible.
If you could manage to save an extra $5 a week by buying one less coffee you would be $260 better off. Yes I went there. The classic coffee analogy. But substitute coffee for any other $5 purchase as you wish.
Or $20 a week getting one less takeout meal you would be over $1,000 a year better off.
Or making a few phone calls to different insurance, electricity and internet providers. You may be able to save well over $1,000 a year.
Or if you are 10% underinvested in growth you could miss out on thousands of dollars in returns.
Some people agonise over the small $10 decisions, yet have no problem with high discretionary spending and poor portfolio construction.
I have a theory in that people don’t like to make the big decisions because then it is on them to carry it through. Reducing our spending becomes our responsibility. It can be difficult to implement as it requires discipline.
Whereas if our choice of fund doesn’t live up to our expectations we can blame multiple things. The responsibility for our fund not performing is on someone else. It requires no discipline on our part once we have made our choices.
Get the big things right and the small time wasters won’t matter so much. Both would be better, but if the small stuff is getting in the way of your big wins, then it is not worth it.
Not only will you be financially better off, but your mind and time will be in abundance too.
If you need an investment plan or recommendations , then get in touch today.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here