The following chart lays down the Rask ETF strategy in a simple – but effective – way.
A simple ETF investing strategy
If you’re confused, don’t stress — you’re not alone…
Keep reading…
How a budget plays nice with ETFs…
Below, I’ve included an image of the Rask Budget from our Money Basics education course. It’s a basic budget I designed for Aussies to follow to take back control of their financial destiny – and invest in a ‘no fuss’ way.
You can enrol in the course to learn the basics of money management but if you’re investing in ETFs, all you really need to know is that I think it’s good practice to save and invest 20% of your take-home pay for long-term wealth creation.
For example, if your take-home pay is $60k per year, 20% of your income is $12,000 per year — or $1,000 each month. Use Rask’s Income Tax/Pay Calculator to know how much you’re taking home, after-tax, each month.
I know what you’re saying…
“Owen, my friend, mate… 20% is a lotta dough.”
Me: I know, bro.
I hear ya, Sheila.
So here’s the good news: if you’re overwhelmed by my 20% savings target, you’re definitely not the only one who can’t make it work. However, you can start by saving 1% this week, 2% next week… and so on.
Take our money course to get a handle on your money flow.
Where do I put the 20% of savings I make?
Okay, so you are saving money. So do you keep it in your savings account or automate it to transfer somewhere else, like a brokerage account?
In Australia, investors need to buy shares and ETFs in minimum ‘chunks’ of $500.
On top of the $500 minimum investment, there’s a fee to buy and sell your ETFs, it’s called brokerage. It comes out of your investment automatically. Brokerage costs you about $10 to $20 each time you trade a few thousand dollars of shares or ETFs.
To avoid getting slugged with a hefty brokerage fee (as a percentage of your investment), consider buying your ETFs or shares in $1,000 or $2,000 chunks.
Why am I saying this?
If you invest only $500 at a time, the $10 brokerage fee added to $500 investment is a lot, in percentage terms (2%).
While you save up for your investment ‘chunk’ (e.g. $2,000), consider putting your money in a separate bank account or — like I do — transfer it into your stock brokerage account. Moving the money away from your transaction bank account makes it harder to ‘dip in’ every time you’re low on cash or want a new TV — keep your mitts off the savings!
Please note: you can set up a brokerage account without investing anything — almost all online broker accounts are free to create. Find one that doesn’t charge monthly fees.
Example: Paul & Simon
Paul & Simon have figured out they can save $250 per week that they want to invest for their future.
$250 in weekly savings becomes $1,000 invested every month.
Let’s say they save $250 per week to put towards investing in ETFs. They can transfer the money into a separate “investing” bank account or directly into their brokerage account.
After one month (4 weeks), Paul & Simon will have saved $1,000 which can be invested into their favourite ETF. If they chose to wait, after 8 weeks they would have $2,000.
Don’t ‘buy and sell’ — just accumulate
I reckon it’s best to think of investing as ‘accumulating’.
One of the worst things you can do is think of investing as ‘buy low, sell high’. To do that requires you to make two potentially costly decisions: buy and sell. Then, you’ll pay tax on your profits and — worst of all — you’ll constantly feel like you need to act.
But it’s such a scary time to invest…
Every day, news headline writers are conspiring to make you feel fearful, greedy or sell you on a dream. Trust me, I’d know. Take these headlines:
- 2016: “Brexit could trigger European stock market crash” – CNN (it didn’t crash)
- 2016: “US Election 2016: Markets meltdown fails to materialise” – BBC (the stock market rallied)
- 2020: “CBA warns Australia risks 32 per cent house price crash in a ‘prolonged downturn’” – ABC (property prices in some suburbs rose 30% in one year!). See my podcast, below.
- 2021: “A Year on From the Covid Crash, Here’s Where the Market Stands” – Bloomberg (result: the MSCI World Index went up 18% between COVID and Jan 2020)
Bottom line: don’t bother constantly buying and selling your assets based on what might happen. The news headlines are not written to give you good advice: they just need you to click so they can score advertising revenue.
So instead of listening to them, do some research on your favourite ETF, or let us help you with our models, and keep tipping money into the portfolio.
Do it religiously.
Rain. Hail. Shine.
No matter what the headlines say.
Whether the market is up, down, sideways, inverted or perverted…
Just, accumulate.
This is what investors call dollar-cost averaging.
The simplest way to use Rask ETFs is to invest in one ETF each and every month.
For this to run effortlessly, use the next 20 minutes to automate your budget and set a recurring reminder in your Google/Microsoft/Apple calendar to invest the money you save into a new ETF.
For example, imagine you’re paid on the 28th of every month. Set your bank account to automatically transfer $1,000 (or however much you can afford) into your brokerage account two days later.
Then, set your calendar reminder to actually invest that money (via your brokerage) another two days after that.
That’s all folks!
That’s really all there is to it.
Save. Automate. Invest. Repeat.
I promised it would be simple.
See our tutorials on dollar-cost averaging, rebalancing and making your first investment.
– Owen
