Ask Paul: I want to start investing in ETFs but I can't shake the guilt


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Q. I'm 23, single and currently living at home. I have $30,000 in cash and $3000 in NAB and CBA shares (bought during the royal commission) and no debt.

I keep telling myself I need to diversify into exchange traded funds (ETFs), but every time I go to buy them I feel guilty that I didn't do it in 2018 because they have jumped in price (in particular the Vanguard Australian Shares Index ETF).

I earn an average wage and haven't thought about travelling or buying a home.

Emily wants to diversify into ETFs, but feels guilty that she didn't do it in 2018 because they have jumped so much in price.

I am just so insecure about the fact that I went to university, studied and in the past three years since graduating I have had several different jobs, which isn't ideal (looks like a millennial mindset, I know, but it wasn't intentional).

Any advice?

A. Yes. Stop worrying, Emily!

You are 23, so you have in all likelihood some 60-plus years in front of you.

Most 23-year-olds, as I was at that age, are flat broke and quite often carry credit card debt.

You are killing it. You have a uni degree and experience from several jobs, not to mention some $33,000 in assets.

I agree that regular investment in a sound ETF is a good plan for you. But you can't look backwards.

I wish I had bought more CSL shares at the float for about 20 cents.

But thankfully I bought more at $30, $50 and more recently at $160. Like a good ETF, they are a good investment.

And I think people buying today at around $200 will do well over the longer term. We can only buy good investments at today's value, not yesterday's.

So no guilt, please, Emily.

Why not put a regular monthly amount into an ETF and use dollar cost averaging.

You'll buy more in months when the market is down and fewer when it is up.

This automatically means you do what investors should do: buy more when cheap, less when expensive.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
July 20, 2019 12.15pm

Is someone able to explain dollar cost averaging to me please? Also, Emily you're doing better at 23 than I'm doing at 31. Keep going!

August 11, 2019 10.52pm

say you bought 100 shares of XYZ today at $90 each, total outlay = 100 shares x $90 = $9,000

the following week you buy another 100 shares but now the price is $100, total outlay week 2 = 100 shares x $100 = $10,000

the "average cost" of the shares you now hold = $9,000 + $10,000 / 200 shares = $95 each.

dollar cost averaging takes the guess work out of trying to time the market and buying the dips.