We've spoken a lot this year about 'vaccine hesitancy'. Not to be confused with the anti-vaxx movement, this is delaying a vaccine despite its availability. I will get a vaccine but I need more data; I want to see how the rollout goes.

As investors, 'hesitancy' is something we're all-too familiar with. For every Redditor taking TSLA to the moon 🚀, there's a risk-averse onlooker, envious of the gains but fearful of the situation's sheer insanity.

When I decided to invest I set aside a couple of grand and there it sat, for years. It didn't matter how many 'get started' or 'time in the market' articles I read; I couldn't bring myself to take the plunge. I opened a brokerage account, transferred my cash across, but still I couldn't do it. Every time I thought ok today is the day, the 'what ifs' crept in. What if I lose it all? What if I make the wrong decisions? Maybe I should wait for 'the dip' everyone says is coming. The enormity of the whole thing got the better of me and each year I watched as the market delivered exceptional returns while my savings withered away in the bank.

A few pointers that helped me eventually take the first step:

Physiological distance yourself from your investments. When it comes to money, for me there are different buckets – there's money I need for a coffee today, rent this month, and car service this year. I recommend separating money for investing from your daily transaction account or short-term savings.

By mentally separating this money, I felt comfortable that when I invested it, I wouldn't put my other spending needs at risk. I use the 20/30/50 budgeting rule - 50% for living expenses and essentials, 30% for 'wants' and 20% for savings (half of which I put into the market).

This is not the same as 'setting aside money you can afford to lose'. Yes, all investments carry risk but you don't have to bet it all on GameStop or Ethereum. Wild speculation isn't the only way to invest. Think about it as money you're comfortable locking up for the medium to long-term.

Start small, don't overcomplicate. Anyone that tells you investing is easy is disingenuous. Buying and selling stocks is easy (almost too easy these days), but that isn't the hard part. The hard part is deciding what to invest in and managing your investments. Anyone can become a good investor but it takes practice.  

I recommend starting small and simple. Your first investment doesn't have to be a $50,000 multi-asset portfolio filled with companies you've spent months researching. Take a leaf out of Buffett's playbook – stick to the basics, take a portion of what you've saved up and invest in a cheap, well-diversified total market index fund.

There's so much good in going through the motions of making your first investment and experiencing the rush of it changing in value. We have been known to knock micro-investing platforms for the relatively high fees they charge, but if that's the way you can get started, don't let it be a hurdle.

Be realistic. We've all read the articles about teenagers making millions betting on Bitcoin. But constant extreme whiplash is not part and parcel of investing. These stories make for good headlines but they obscure that most investing is a marathon, not a sprint. This brand of wild speculation by a vocal minority intimidates the more risk-averse among us. Success is whether an investor meets their goals. Before you invest, think about why you're investing, what you're hoping to achieve and when you want to get there. This will help you stay the course when you inevitably encounter rough seas.

Find a buddy. Investing for the first time is daunting, especially if you're the first one among your friends and family to do it. But doing it with someone you trust can be the crutch you need, even if it's just someone to run ideas by. You might also learn a thing or two. 

How you get your start in the market is important but it shouldn’t paralyse you. If you're fortunate enough to have a bit stashed away, use this lockdown to kick-start your investing habit.

How did you first start investing and what advice would you give to people sitting on the fence? We'd love to hear from you editorialAU@morningstar.com.

Thought bubbles

Investors in Australia's buy-now-pay-later sector got the shock of their lives this week as two global heavyweights announced their entry into the market. PayPal will offer Pay in 4, allowing existing users to pay for purchases in four instalments with no late fees, while Apple’s new service will let consumers pay for any Apple Pay purchase in instalments. The news sent shares in high-flying BNPL firms like AfterPay and Zip tumbling, down 7.7 per cent and 7.6 per cent respectively in early trade.

This flurry of activity is a reminder of how competitive this space is. I'd eat my hat if you could name all the local BNPL players. These big tech firms have scale, users and brand names. Watch for local players to try and increase the "stickiness" of their products via bank accounts, discounts or loyalty programs. Morningstar equity analyst Shaun Ler doesn't think any of the BNPL ASX companies have economic moats, which means other companies can compete with them and erode their margin and market share.

We all thought Netflix was untouchable but I've spent lockdown touring Stan and Disney+.

Wild ride for Zip Co (Z1P) investors in 2021

Zip Co

Source: Morningstar

Last week's editor's note covered the rise of direct indexing – a product that allows investors to construct a custom portfolio that mirrors the composition of an index. This is of particular interest to socially responsible investors who want broad market exposure but also the option to remove particular stocks or sectors where they have ethical or religious objections. News broke this week that Vanguard has moved into the custom indexing business with the first acquisition in its 46-year history. The world's second-largest asset manager snapped up US start-up Just Invest that builds bespoke portfolios for individual investors.

Vanguard Australia's head of personal investor Balaji Gopal says there are no plans at this stage to bring the product down under, adding that it will be restricted to the firm’s high-net-worth advised clients. However, it follows in the footsteps of similar deals by rivals BlackRock and JPMorgan. No doubt it will reach the mass market soon enough.

Behind all the debate over inflation lies a simple question: when will rates rise? New Zealand got an answer this week. The Reserve Bank of New Zealand (RBNZ) announced on Wednesday it would halt its bond buying program by month end. A rate hike is likely to follow, with markets pricing a 76 per cent chance it happens in August; it would be the first developed country to do so.

Lewis Jackson advises you to note the speed of change. "In May the RBNZ planned rate hikes in the second half of 2022. Now it’s saying that the risk of “high unemployment” has receded and is withdrawing stimulus. Canary in the coal mine? Maybe. Covid outbreaks will probably setback the Australian recovery and while house prices are up, they’re not to the same degree as New Zealand."

In Your Money Weekly, Peter Warnes looks at the $22 billion bid for Sydney Airport by a consortium of super funds and private equity. He thinks it highlights the appeal of these types of assets in an environment awash with liquidity looking for a safe and secure long-term home.

In Firstlinks, Graham Hand asks what the heck is going on in financial markets? "Rising virus cases with a new strain amid all-time market highs. Falling long-term bond rates amid rising inflation. Loss-making companies valued in the billions. We have witnessed a year of incredible stockmarket returns, despite headlines on one day saying the Dow's best week since 1938 and 16 million Americans have lost jobs."

My colleague Amy Arnott stepped where other analysts won't dare to tread, explaining Ethereum to people who haven't been paying close attention and worry they could be missing something important. This is part one of a two-part series. Next, she'll look at Ether as an investment asset.

The Vanguard/Investment Trends annual SMSF report is something I look forward to every year. It is one of the most insightful surveys on how trustees are feeling about markets and where they're investing their retirement savings. Check out Lewis Jackson's article on this years' findings. It seems trustees are risk on. 

Finally, we are gearing up for the annual Morningstar Individual Investor Conference in October. Each year you bring your enthusiasm, hunger for knowledge, and insightful questions for our speakers. It's a truly special experience to host you, and to have the opportunity to show you the best of what we do at Morningstar.

This year, we want to do one better. We’re giving you a bigger say in what major topics we’ll cover and which exciting guests we’ll have on the day. We have some exciting changes in store for the conference. That’s why your input is even more valuable this year. Who would you like to hear from, and what are the topics most important to you? Let us know.

More from Morningstar: 

Investors divided on Vanguard platform fee change

Investment lessons from the first half of 2021

3 equity ETFs to get you started