3 steps to implement the Passive Investing strategy

Understand how to create and maintain a passive portfolio, using New Zealand eXchange´s ETFs.

Take the full course in an 1 hour video.

Take the course in an 1 minute video.

WHY PASSIVE INVESTING?

3 STEPS TO IMPLEMENT THE PASSIVE STRATEGY:

Step 1: Objectives, profile and portfolio

Define your investment goals (ex: 10% return per year) and build a portfolio with assets that have the capacity to achieve these goals but that also fits your profile as an investor (conservative, moderate, aggressive, etc.).
 

Step 2: Stay invested

Contribute periodically to your portfolio (and re-balance whenever needed), using the broker of your choice. 
 

Step 3: Time and opportunities

Do not panic about crises or negative news: take advantage of opportunities and market conditions/cycles.
Let the time (ie. compound interest!) to act, protecting and monetizing your capital in the long run.

STEP 1: Profile, Goals and Portfolio

Step 1.1: Investor Profile

 Identify (or validate) your investor profile.

There are basically 3 investor profiles:
-Conservative,
-Moderate,
-Aggressive.

In fact, each profile reflects the following:
- A certain return expectation (the more conservative, the lower the return expectation)
- A certain exposure to risk (the more conservative, the lower the "appetite" for risk)
- A given portfolio: the constituent asset classes, the assets themselves, the allocation in each one of them and the correlation between the asset classes.

Step 1.2: Investment Objectives

 Define your investment goals.

In other words, what is the purpose of your investments?
-Preserving your capital?
-Protect yourself from inflation?
-Protect yourself against the devaluation of the currency?
-Have an extra income?
-Monetize your capital?

Define your investment goal (aligned with your investor profile and investment objectives).

Example: In the long run, to achieve an average return of 10% per year.

Step 1.3: Build your passive portfolio

Build a passive investment portfolio that has the capacity to achieve these goals and objectives but that also suits your profile as an investor.

Consider which asset classes (and the actual assets in each one of them) to build a passive, balanced and diversified portfolio.

Example: International equity ETFs traded on NZX tend to monetize your capital just as they tend to protect against the devaluation of the local currency.

Another example: fixed income financial assets tend to preserve your capital and some of them tend to protect you against inflation.

Consider the expectations for return and volatility (ie. risk) of the asset classes and the assets themselves.

Example: Historically, NZX's ETFs that follow the S&P 500 had an average return of 13% per year, but remember that past returns are no guarantee of future returns.

Consider correlations between asset classes seeking to allocate to poorly (or uncorrelated) asset classes.

STEP 2: STAY INVESTED

STEP 3: TIME AND OPPORTUNITIES

IS THIS ALL?

Yes, it is. Follow the 3 steps. It's all you need.

EXAMPLE: A SIMPLE NZ-BASED PASSIVE PORTFOLIO, WITH ONLY 4 ETFs:

25% in New Zealand Equities

Invest in the local New Zealand listed companies.

Examples of possible assets: Smartshares S&P/NZX 50 ETF (NZG) or Smartshares NZ TOP 50 ETF (FNZ).


25% in Australian Equities

Invest in Australian listed companies.

Examples of possible assets: Smartshares S&P/ASX 200 ETF (AUS) or Smartshares AUS TOP 20 ETF (OZY).


25% in Developed Markets Equities

Invest in listed companies from developed markets: US, Europe, Japan, etc

Examples of possible assets: Vanguard International Shares Select Exclusions Index Fund, Smartshares Global ESG ETF (ESG), Smartshares US Equities ESG ETF (USA) or Smartshares US 500 ETF (USF).

25% in Emerging Markets Equities

Invest in listed companies from Emerging Markets: China, South Korea, Russia, Mexico, etc

Examples of possible assets: Smartshares Emerging Markets Equities ESG ETF (EMG) or Smartshares Emerging Markets ETF (EMF).

WHO WE ARE:

TRENDSET Financial Education.
www.trendsetconsulting.com/en
Hamilton, New Zealand
+64 212284022
arthur@trendset.com.br

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HOW TO PUT A "BUY" ORDER IN THE BROKER (example: Investnow)

Find the financial asset

  • You should look for the financial asset, such as Smartshares S&P ASX 200 (AUS). Please do not consider the images here.
  • Once this is done, click on the "Invest" button (or the sell button, if this is your choice). 
     

Set the amount

  • Enter the amount you want to invest in that specific asset. In case of a sale, inform the quantity of shares you want to sell. 

Confirm your order

  • Check the information and if everything is right, confirm the placement of your order. It will be processed later on by the broker.