Oh Snap(chat)!
By Clayton Daniel.
I’m
sure you heard the news. Snapchat listed on the US stock exchange this month.
This
was a pretty big deal. A company which built itself on a scandalous premise has
just turned it’s founder and CEO Evan Spiegel into the world’s youngest
self-made billionaire.
This
nineties kid has shown the world that eyes are what matters the most. Not early
sales, not the barriers to entry – but simply attention. And if you can pull it
off, riches and super model fiancés await.
Things
couldn’t be better for Evan. But what about the investors since Snapchat listed?
Well
we’ve seen a lot of volatility. In March alone the stock price has bounced
around between $19 and $30. This isn’t completely out of the ordinary for such
a high profile IPO, but I’m sure the market is still deciding on whether
Snapchat is the next Myspace or the next Facebook.
But
imagine all those people who waited patiently for this stock to list, bought at
the top, freaked out and sold when it bottomed out, and sat there looking at
their bank account with 30% in it only a few days later.
I
promise you this happened.
Do
you know why? Because unless you are an investment expert, unless
investments are your day to day job, investing is controlled by emotion. The
old Wallstreet adage is still true “financial markets are driven by two
powerful emotions – greed and fear.”
And
I’m not slamming those who did it. More than likely it was those hoping to
learn more about investing, were aware of Snapchat, so took the plunge.
Emotions would have completely driven the entire experience.
I’ve
been there. All investors have. Controlling your emotions while investing is
one of the hardest – yet most pivotal things to master. The problem is, unless
you want to spend many hours trading for either yourself or a large
institution, you’re always going to be emotionally involved.
Another
option is an investment strategy that has been outrageously popular since the
GFC, outsourcing your investment decisions to an algorithm. This
trading algorithm doesn’t suffer from emotional involvement, isn’t swept up in
the latest craze, or sell at the worst time possible.
It
is simply designed to follow investment instructions. It’s called an ETF. There
are many different types, but the most popular simply hold a tiny piece of the
biggest companies in the world. For example, if you had owned an S&P500
ETF, you would have automatically invested around 0.2% of your portfolio in
Snapchat regardless.
No
effort. No research. No getting swept up in the emotion of the trade.
However now Snapchat will play a roll in your overall performance. Not a
massive roll, but an appropriate sized roll. It would sit relatively equally
among 500 other large and profitable businesses.
And
this is the beauty of ETF investing. It is emotionless investing, the best
kind of investing. And unless you become a full time investor, it will be the
best way to unemotionally invest over many years. So unless you are a
professional investor, any head-space you put towards investing is simply going
to create decision fatigue. And the best way to
invest without emotion, without the effort, and without the need to become an
investment expert – invest in ETFs. Luckily for you, that’s all Raiz
uses. For more information on Raiz fees, click here.
By Clayton Daniel of Fund Your Ideal Lifestyle
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