First Time Investor - Gradual Investment Options

Oxenfree123 on 19/01/2021 - 14:14
Last edited 19/01/2021 - 14:15

My partner and I are in our mid 20's, and currently we both have steady jobs. Each week, we put aside around $200 in savings that sits in a joint savings account. This system has worked fine and we wouldn't have any issues continuing this system.

Recently we upsized and moved to a larger house which sucked up the majority of our savings (new furniture, removalists etc). I found, during this process, the temptation to spend more than we needed was greater because we had funds readily available.

Rather than putting money aside each week into a bank account, are there any options or suggestions for investments to put that money into? This isn't a general question of "what should I invest in", more a question of, are there avenues for incremental investment opportunities? Is it better to continue to put the money into an account then invest in bulk? This money isn't our only savings, but just money we put aside for holidays/moving house and things of that nature, so it doesn't need to be overly safe. Any suggestions would be greatly appreciated.

TL:DR - Are there any suggestions for investing $10000 a year, with money saved incrementally? Is it smarter to wait till there is a bulk amount?

Financial

Comments

  • Drakesy on 19/01/2021 - 14:19
    +12

    Vanguard stocks
    buy in $5000 blocks

    /thread

    • netjock on 19/01/2021 - 15:05
      +4

      Or use Vanguard personal investor, $0 brokerage on Vanguard ETFs. Drip it in weekly. Never miss an ATH or crash.

      • deme on 19/01/2021 - 16:54

        Isn't there a account keeping fee?

        • netjock on 19/01/2021 - 16:56

          Believe there is.

          An Account Fee of 0.20% per annum, based on the total portfolio value of your account, including any cash held, capped at $600 per annum, per account.

          Consider this. If you are only going to be investing $10k in 2x $5k blocks. How likely are you to buy at the bottom of the market? 1 in 100 chance (2x $5k and 200 trading days). Plus you also got trading fees.

          You can try your luck at roulette table. They don't recommend dollar cost averaging for nothing.

          • deme on 19/01/2021 - 17:03
            +2

            @netjock: I disagree with your probability calculations but that is moot.

            Those are high fees, just use Open Trader or Self Wealth and buy the vanguard etf

            • crentist on 19/01/2021 - 17:06

              @deme: I believe higher fees are built into the vanguard ETFs. Direct purchases were better last I checked (many years ago)
              I still went with the ETFs though

            • netjock on 19/01/2021 - 17:11

              @deme: For starting out.

              2x $5k trades is $16

              $10k balance on Vanguard at 0.2% is $20 and because you won't be dropping $10k in lump sum you are more likely to incur $10 for first year. You won't be ahead until somewhere in year 1.5. At that point liquidate and transfer out.

              Fees aren't actually the problem when starting out, it is getting yourself to a balance when fees matter.

              IF you keep spending your savings fees don't matter.

              • deme on 19/01/2021 - 17:13

                @netjock: That's 0.2% per annum on top of the the ETF vs a once off brokerage

                • netjock on 19/01/2021 - 17:14
                  +1

                  @deme: Did you not read?

                  Once you get to a balance where fees outweigh brokerage.

                  At that point liquidate and transfer out.

                  Guess you are not good at math.

                  • deme on 19/01/2021 - 19:33

                    @netjock: Nah that's a fair point I didn't consider that.

                  • Autonomic on 20/01/2021 - 10:12

                    @netjock: But then you're paying tax on any gains. That would outweigh any brokerage. Also if you're selling out just to put it back into an ETF you're then spending more on brokerage again. So the real cost of your example would always be more than the brokerage regardless.

                    • netjock on 20/01/2021 - 13:14

                      @Autonomic:

                      But then you're paying tax on any gains. That would outweigh any brokerage.

                      Why do people have a problem with taking profits? If tax is a problem you will never sell. Theory is you should flip your shares every 12 months so you can capitalise on the 50% capital gains discount and re-enter at a lower price due to volatility. Brokerage is irrelevant vs the discount on taxes you are getting. If you are fussing over $10 in brokerage then you probably aren't making enough money.

                      Plus there is no cost to sell in Vanguard.

                      Also if you're selling out just to put it back into an ETF you're then spending more on brokerage again.

                      More? you didn't spend on brokerage in the first place. Yes there is some fees but that is less than if you paid up front brokerage. You are just moving it out when there is significant enough amount to pay for brokerage rather than fees.

                      • Autonomic on 20/01/2021 - 16:48
                        +2

                        @netjock:

                        Why do people have a problem with taking profits? If tax is a problem you will never sell.

                        If you're reinvesting it instantly into the ETF equivalent then you're not taking profits.

                        Theory is you should flip your shares every 12 months so you can capitalise on the 50% capital gains discount and re-enter at a lower price due to volatility.

                        I don't follow. Never heard of this theory.

                        You are just moving it out when there is significant enough amount to pay for brokerage rather than fees.

                        Let's puzzle out your example:

                        ETF cost after 1.5 years: 2x $8 in brokerage.
                        Fund + Rebuying ETF: Fund fees for 1.5 years + $8 brokerage.

                        Now lets assume you've made $1k profit in a capital gain. You're gonna pay ~$150 in tax after the CGT discount. So rebuying you now have:

                        $11k in ETF (cost base $10k)

                        $10850 in ETF (cost base $10850)

                        You now have that extra $150 compounding away as opposed to being given to the ATO.

                        In no way is your method to save a measly few $ in brokerage worth it.

                        • netjock on 20/01/2021 - 18:59
                          -1

                          @Autonomic: People go wild over the difference between $8 (think markets) and $10 brokerage (selfwealth) on OzB. So suddenly saving a few bucks isn't money at all.

                          I can't be bothered debating with you.

                          Giving tax to ATO isn't a problem long as you made money.

                          • Autonomic on 20/01/2021 - 23:56
                            +1

                            @netjock:

                            Giving tax to ATO isn't a problem long as you made money.

                            It is when the alternative is that you can delay the tax and have it sit in your ETF and compound for you.

                            People go wild over the difference between $8 (think markets) and $10 brokerage (selfwealth) on OzB. So suddenly saving a few bucks isn't money at all.

                            You're going to LOSE money.

                            • netjock on 21/01/2021 - 11:38

                              @Autonomic:

                              It is when the alternative is that you can delay the tax and have it sit in your ETF and compound for you.

                              It isn't compounding mate. It only happens with bank interest.

                              What you are talking about is capital gain. Difference here is capital gains on shares is driven by increase in profits of underlying companies. This is subject to volatility.

                              Therefore taking gains is purely a cash flow implication. You actually have more of a benefit by taking your 50% capital gains discount every year, topping it up and reinvesting the gross amount. Work it out on spreadsheet if you don't believe it.

                              Plus if you CHESS transfer there is no capital gains tax but you like to run with that for all it is worth.

                              • Autonomic on 21/01/2021 - 12:16

                                @netjock:

                                It isn't compounding mate. It only happens with bank interest.

                                Compounding happens with shares. Here's a whole page talking about compounding with shares:

                                https://www.investors.asn.au/education/investment-basics/pow….

                                Therefore taking gains is purely a cash flow implication. You actually have more of a benefit by taking your 50% capital gains discount every year, topping it up and reinvesting the gross amount. Work it out on spreadsheet if you don't believe it.

                                I'm curious to see your working.

                                $10k at 10% annual growth over 10 years:

                                100001.1^10 = 25937. Assuming taxed at 15% on sale: (25937-10000)0.85=$13546.45

                                $10k at 10% annual growth over 10 years, selling and rebuying every 12 months:

                                10000*1.085^10 = 22609. Total gain = 22609-10000 = $12600

          • macrocephalic on 19/01/2021 - 17:36

            @netjock: Put it in there and then move them to a CHESS held account when you've accumulated enough.

  • Adredocto on 19/01/2021 - 14:56
    +2

    By vanguard meaning ETFs which track the overall performance of the stock market. Google ETFs to learn a bit more then you can buy through a normal broker like CommSec.

    Vanguard's VGS is a very popular standard fund

  • dasher86 on 19/01/2021 - 15:04
    +2

    decide what money you want to invest. and what money you want to use as holidays / slush fund / help i'm in trouble money/
    Keep that in a separate bank account ideally one that takes a couple of days to clear to avoid temptation of using.

    move the rest into index funds.

  • toniyellow on 19/01/2021 - 15:15
    +5

    https://www.ozbargain.com.au/deals/spaceshipinvest.com.au is an option if you want to invest weekly.
    There is also Raiz but they have higher fees, or Vanguard Personal Investor but they have an annual fee on top of the management fees

    https://www.ozbargain.com.au/deals/selfwealth.com.au
    https://www.ozbargain.com.au/deals/thinkmarkets.com
    https://www.ozbargain.com.au/deals/opentrader.com.au
    and Commsec Pocket are some of the more competitive CHESS sponsored brokers. You would want to wait for large chunks to minimise brokerage, unless you have a freebie from a referral or another deal.

    https://passiveinvestingaustralia.com/what-should-i-do-if-i-… is a good resource.

    • netjock on 19/01/2021 - 17:50
      +2

      Or Spaceship.

      First $5k no management fee

      Then only 0.05% on their cheapest option (performs like ASX200 tracker).

      Other options are 0.1%

      Depends on whether you believe in their stock picking abilities.

      • toniyellow on 19/01/2021 - 20:12

        Spaceship is the first one I linked…

      • OzFrugie on 19/01/2021 - 22:02

        Is spaceship chess sponsored?
        If they go bust, will the investors be protected ?

        • netjock on 19/01/2021 - 23:21

          Buying an ETF through CHESS sponsored but if Vanguard does a WorldCom / Enron you still got nothing.

  • tio on 19/01/2021 - 15:19
    +5

    are you willing to do without that money for 30 odd years? If yes, super can be a much better option.

    • redfox1200 on 19/01/2021 - 15:43
      +2

      40+ years

      probably better off using that money outside of super at the moment (as long as it's still being invested in an asset like property or shares)

      whats the point in having 1 million in super at 50 years old, when you can't retire until 67+

      • Autonomic on 19/01/2021 - 16:24
        +1

        You should be utilising both. Ideally as soon as the clock ticks over and you can draw down on super you would have $0 outside of super.

        • redfox1200 on 19/01/2021 - 17:00
          +1

          stuff that!

          i would prefer to have enough assets by the time i can draw down on super that i don't need the super.

          • netjock on 19/01/2021 - 17:20

            @redfox1200: Thought super is an asset. You not mixing it up with pension are you?

            • redfox1200 on 19/01/2021 - 20:00

              @netjock: Got the dates mixed up, super is an asset that you cant really use until 60+

          • Autonomic on 19/01/2021 - 19:06
            +1

            @redfox1200: Think of having two buckets of money. One is the amount of money you need before you reach retirement and one is the money you need after retirement. That second bucket should entirely comprised of super since it's far more tax efficient.

            • redfox1200 on 19/01/2021 - 20:03

              @Autonomic: Yes true, but that doesnt take into account the time value or lost opportunity of that money now.

              For a passive investor super is great, but for an active investor you are giving up the opportunity to earn multiples on that now.

              I.e 10k in super now is 30k when you retire. But if you used that 10k to invest in a property that could be 300k when you retire

              • Autonomic on 19/01/2021 - 20:12

                @redfox1200: The return for property and shares are generally very similar. If you're investing in property you can also do that via a SMSF.

                • redfox1200 on 19/01/2021 - 20:30
                  -2

                  @Autonomic: You can't invest in property in super unless you have a decent balance due to limited gearing.

                  I agree shares and property have simular returns, but id prefer a 10% return on 300k worth of property vs 10% of 10k of shares.

                  Not that i advocate property over shares, but 10k in TSLA, or BTC or any of the US tech stocks this year would have netted over 100% return.

                  • tio on 19/01/2021 - 22:03
                    +1

                    @redfox1200:

                    I.e 10k in super now is 30k when you retire. But if you used that 10k to invest in a property that could be 300k when you retire

                    benefit of hindsight is awesome, but it rarely works in real life. Also, I assume OP is looking for passive investment option. To my knowledge, for 30+ year investment option, super is as best for passive as it gets, up to 25K/yr (or 125K/yr if you can).

                    Also, not sure what gives you the idea of 30X growth in real estate when investing passively. From median house price figures, in the 1990-2020 period, the strongest growth happened in Darwin: from $101,500 in 1990 to $631,862 in Sep 2020, averaging less than 6.3% annual growth in 30 years. The AU share market on the other hand has been averaging 9.4% annual growth in the 1989-2019 period.

                    I'm not saying 30X growth in real estate in 30 years span is impossible, but it's extremely unlikely for passive investment approach.

                    • redfox1200 on 20/01/2021 - 08:31

                      @tio: If a house goes from 300k to 600k with your 10k deposit you have turned 10k into 300k i.e 30x

                      • tio on 20/01/2021 - 09:03

                        @redfox1200: sure, it's not impossible. But with your example - 3% lvr, 12% annual growth for 30 years AFTER bank fees and interest - I'd say extremely unlikely.

                        • tio on 20/01/2021 - 10:24
                          +1

                          @tio: Edit: sorry, mix up the math, the annual growth only needed to be ~2.3% after bank fees and interest, so it's likely, provided you can service that loan.

              • netjock on 19/01/2021 - 23:19

                @redfox1200:

                For a passive investor super is great, but for an active investor you are giving up the opportunity to earn multiples on that now.

                Most actively managed funds perform below the index (the case for passives). Most people are lucky to break stock picking.

      • tio on 19/01/2021 - 16:33
        +3

        any chance you reference the retirement age? You can access your super at 60, provided you meet certain conditions.

        "whats the point in having 1 million in super at 50 years old"

        if you can, why not?

        "when you can't retire until 67?"

        you can retire early, there's no rule against that.

        • redfox1200 on 19/01/2021 - 17:04

          ok, retire at 60, which is also fine. but what if you wanted to retire at 45 or 50? but all your money is in super.

          theres no guarantee that the gov wont change the retirement age to 70 or 80 by the time you reach 60 too

          • tio on 19/01/2021 - 17:32
            +2

            @redfox1200:

            theres no guarantee that the gov wont change the retirement age to 70 or 80 by the time you reach 60 too

            that's not relevant if the preservation age isn't changed.

            • whooah1979 on 19/01/2021 - 17:38

              @tio: They will. People can always trust the government to change the rule to better protect people from their 💵.

      • deme on 19/01/2021 - 16:54
        +2

        You can access super at 60 seriously though look at the tax incentives.

        https://www.ato.gov.au/individuals/super/growing-your-super/…

      • netjock on 19/01/2021 - 17:22
        +3

        whats the point in having 1 million in super at 50 years old, when you can't retire until 67+

        Super you can access from 55 - 60 depending on whether you elect to fit the criteria.

        67+ is the age you can access pension from the government.

        Two different things.

      • whooah1979 on 19/01/2021 - 17:35

        Covid gave people two $10000 tax-free withdrawals. It would take a lot of black 🦢 to get the full $1m out.

    • AustriaBargain on 19/01/2021 - 18:36

      Of course you could die before then, but your parents could die before then too and you'd inherit their super. So it all balances out. Provided you have parents with a significant amount of super or other investments.

      • Donaldhump on 19/01/2021 - 19:21

        Hopefully ur parents withdraw their super before they die so their is no tax on it.

  • Seraphin7 on 19/01/2021 - 15:53
    +2

    There's a lot to talk about here, but two things you need to consider …

    1. Conventional wisdom is that it is simply better to pay off your home before investing in other assets … there are arguments to and fro on that, that I won't go into, but you need to consider it.

    2. If you going to invest (and not pay off the house), make sure you structure it so that you funding the investment from borrowings such that the interest on that part becomes tax deductible. Speak with your accountant.

    • macrocephalic on 19/01/2021 - 17:53

      Conventional wisdom was predicated on interest rates being a lot higher. When you're home loan interest is only 2%, and long term returns on the market at 7%+, then there's a definite advantage to being in the market now if you can stomach the risk. With debt recycling you can even claim the excess interest as an investment cost - so a tax deductions.

  • avoidfullprice on 19/01/2021 - 16:42
    +1

    Managed fund allows that incremental investment, with some platforms not charging brokerage or account fees. This may be negated by the fund's management fees thou. DYOR.

    Or, to negate the temptation to spend, save them into something like a Notice Saver where you get penalised if you want to impulse withdraw. Interest rate is tiny so again DYOR

  • Travis J on 19/01/2021 - 17:21
    +1

    so it doesn't need to be overly safe.

    bitcoin

    • cloudy on 20/01/2021 - 19:40

      He said not overly safe, not"wish to gamble for fun"

  • whooah1979 on 19/01/2021 - 17:31

    People shouldn't go all or 2x $5000 unless they're willing to actively tracking the performance of the assets over a period time. DCA is the best option for noobs with 💵 to burn.

    • macrocephalic on 19/01/2021 - 17:40

      It's only 10K, a few percent here or there won't matter - just make sure you put it into a stable asset (ETF most likely). Timing the market isn't as important as 'time in the market'.

      • whooah1979 on 19/01/2021 - 17:52

        Time in the market like going long in a bull run and thinking wth when the 🐻 comes a few months later. The SPX and the XAO have been pumping since March 2020, but could take a 3% dump this Friday.

        Noobs are the first ones to scream when their PnL is -1% the first day after they go long. DCA helps reduce their stress.

        • macrocephalic on 19/01/2021 - 17:54

          You could suffer a 3% fall, but the ASX was up about 1.5% today - if you'd waited then you'd have missed that. ETFs are a long term investment.

          • whooah1979 on 19/01/2021 - 18:03

            @macrocephalic: Up 1.5% today doesn't help if they're planning to buy tomorrow. Set an automatic DCA every payday, day of the week or month and come back then the full amount has been spent.

            They could always start to actively trade when they get more comfortable with the process.

            • macrocephalic on 20/01/2021 - 10:25

              @whooah1979:

              Up 1.5% today doesn't help if they're planning to buy tomorrow.

              Huh? That's the point I was arguing, there's no point worrying about spreading your payments out if you already have a lump sum sitting waiting. The market could go down and you lose some [on paper], or the market could go up and you make some [on paper]. The market goes up more than it goes down, so you're better off getting the money in there sooner. Transfering it in every pay day is a good plan (as long as you're not paying a trade fee), but don't feel the need to hold back the money you already have if you're planning to put it into a well diversified fund.

    • netjock on 19/01/2021 - 17:53

      Call me a noob but I got money to burn which is more money than a lot of other people

      If I had a dollar for every time people called me stupid I would be a millionaire 10x over

      • whooah1979 on 19/01/2021 - 17:56

        There is another term used for noobs with 💵 which I assume you know that isn't as nice.

      • AustriaBargain on 19/01/2021 - 18:37

        I'd have been a millionaire before I hit third grade!

    • Autonomic on 20/01/2021 - 10:06
      +1

      If you have the cash now then a lump sum investment is better than DCA, statistically speaking. Vanguard did research into this themselves.

      • whooah1979 on 20/01/2021 - 10:47

        Vanguard did research into this themselves.

        Their clients should hope that their advice is better than their fund's performance. Most of the funds show single digits with only a handful in the 10s. That is terrible returns considering how many times their name get dropped in an investment discussion.
        https://www.vanguard.com.au/personal/products/en/overview/et…

        • Autonomic on 20/01/2021 - 11:29
          +1

          Almost all of Vanguards funds just track an index. They don't have any influence on the returns. (Except management fees, which are quite small)

        • macrocephalic on 20/01/2021 - 12:49

          Show me a fund which has better performance over the long term (excluding fees). The truth is that less than 1% of active "day" traders beat the market in the long term. Most of them actively lose money.

          • whooah1979 on 20/01/2021 - 14:02

            @macrocephalic: Vanguards funds are for people that don't have time to manage their own portfolio and are satisfied with single digit returns. People that want their money to work harder is more open-minded and is rewarded for that. I have a trust in mind but is currently not within OP's budget (USD 50000 minimum).
            https://www.barchart.com/stocks/quotes/GBTC/performance

            This market will grow even more in 2021 with Sweden, Switzerland, Canada, Hong Kong and Canada joining the game with their high risk/high gains funds and products.

            • macrocephalic on 20/01/2021 - 15:24

              @whooah1979: LOL your solution to a relatively safe fund which almost always beats day traders is "bitcoin". Thanks for that laugh.

      • netjock on 20/01/2021 - 13:19
        +1

        Here is the genius comment.

        If you had lump sum then you wouldn't be DCA would you.

        Donald Trump could have had a few extra billion but then he wouldn't call himself a business man.

        Trump could be worth almost $9bn more if he invested in the index

        • Autonomic on 21/01/2021 - 12:34

          People who are just learning about investing after building up savings or those who have had a windfall often have lump sums to invest.

          • netjock on 21/01/2021 - 15:14

            @Autonomic: then … spending a whole year to build up a lump sum is better than DCA. Genius I say, genius!

      • Donaldhump on 20/01/2021 - 17:24

        where are these statistics

        • Autonomic on 21/01/2021 - 12:35

          Our research indicates that it's prudent to invest a lump sum immediately.

          https://investor.vanguard.com/investing/online-trading/inves…

          There was originally a full study linked in there but I can only find the PDF:

          https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJ….

          JPmorgan also has their own research:

          https://am.jpmorgan.com/us/en/asset-management/adv/insights/…

        • netjock on 21/01/2021 - 15:32

          We've been here before. If you read the PDF there are these gems:

          On average, by how much does LSI outperform DCA?
          To calculate the average magnitude of LSI outperformance, we calculated the average ending values for a 60%/40% portfolio following rolling 10-year investment periods. In the United States,12 month DCA led to an average ending portfolio value of $2,395,824, while LSI led to an average
          ending value of $2,450,264, or 2.3% more. The results were similar in the United Kingdom and
          Australia: U.K. investors would have ended with 2.2% more and Australian investors with 1.3%
          more          , on average

          Out of the 1,021 rolling 12-month investment periods we analyzed for the U.S. markets, LSI
          investors would have seen their portfolios decline in value during 229 periods (22.4%), while DCA investors would have seen such declines during only 180 periods (17.6%). Furthermore, the average loss during those 229 LSI periods was $84,001, versus only $56,947 in the 180 DCA periods. The allocation to cash during the DCA investment period decreases the risk level of the portfolio, helping to insulate it from a declining market.

          Fundamentally flawed study
          They assume lump sum vs 12 months of DCA to full investment of $1m. First you need to have all the money, people DCA because they don't have the lump sum. If you had $1m you would in DCA scenario have it in a term deposit which would close the 2% gap over lifetime. In addition if you look at the likelihood of market fluctuations throughout the year if you catch a minor correction then the 2% difference can be easily closed.

  • OzHunterNSW on 20/01/2021 - 10:20

    $200 put aside per week from two individuals in not much money at all. Surely you must have extra beyond this amount as left over cash.

    I would simply combine both incomes into one account, and watch your spending. That left over each week simply accumulates to build a balance.

    This is what "partners" would do

    • Oxenfree123 on 20/01/2021 - 10:25

      As mentioned, this is not our only savings, this is just an amount of money we set aside each we that gets put into a specific bank account for miscellaneous spending.

      We also allocate money for other saving purposes like house deposits and whatnot, this money is extra.

      • macrocephalic on 20/01/2021 - 10:27

        You should consider keeping it all together and doing something constructuve with it. Money sitting in the bank (any amount) is losing value (inflation).

        • Oxenfree123 on 20/01/2021 - 10:30

          Agreed, the ease of access to the money also in my eyes causes an issue. This is where my question stems from and why I think it would be better to tie the money up elsewhere.

  • Indiana1501 on 20/01/2021 - 15:22
    +3

    Maybe renegotiate with your home loan lender & place it in an offset account to assist with lowering interest? My 2 cents.

  • whooah1979 on 20/01/2021 - 22:05

    “Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen, a former Federal Reserve chair, said in prepared remarks to the Senate finance committee.

    “I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time,” she said in the statement, which was obtained by Reuters.

    'No time to waste': Biden unveils $1.9tn coronavirus stimulus package
    Plan includes $160bn in vaccination funds and $1tn in relief to families, including $1,400 stimulus checks

    If adopted, the proposal would tack on $1,400 to the $600 in direct payments for individuals that Congress approved most recently. “We will finish the job of getting a total of $2,000 in relief to people who need it the most,” Biden said.

    Supplemental unemployment insurance would also increase to $400 a week from $300 a week and would be extended to September.

    People may want to get their fiat bags ready and start accelerating more digital assets. 2021 could be a great year to add another a few more 0 and 1s. 👍

    • netjock on 21/01/2021 - 16:36

      If you look at QE in Australia, JobKeeper and JobSeeker there is hardly any inflation except for certain sectors where people are panic buying.

      • whooah1979 on 22/01/2021 - 10:31

        Australians doesn't have enough 💵 to pump the SPX. The SPX on the other hand can dump on the XJO.

        American households will use some of the USD 1.9t to pump their bags this time just as they did last year. Australians can get on the train before that happens.

        • netjock on 22/01/2021 - 10:41

          Stock market inflation not the same as super market shelf inflation. It is like bond yields. Only matters if you invest in the bond market.

          Stock market inflation is only a problem if you want to make a quick buck. For most people living pay check to pay check it is super market shelf prices that really matter.

          • whooah1979 on 22/01/2021 - 11:10

            @netjock: There are reports that a portion of the 2020 covid money went to pumping bags.
            https://www.techradar.com/news/coronavirus-stimulus-checks-u…

            During the week in mid-April when most stimulus checks were issued, more than 80% of people who received money increased their spending.

            Notably, much of that spending went towards stock trades. Americans earning between $35,000 and $75,000 per year, who were eligible for $1,200 in stimulus payments, increased stock trading activity by 90% compared to early April.

            https://www.thesun.co.uk/news/11682804/americans-used-corona…

            Trading stocks was among the most common uses for the government stimulus checks in nearly every income bracket, according to software and data aggregation company Envestnet Yodlee.
            People earning between $35,000 and $75,000 annually traded stocks about 90% more than the week prior to receiving their stimulus check.
            “There’s clearly a correlation between Covid and people being reengaged with their money,” Bill Parsons, Group President, Data Analytics at Envestnet Yodlee told CNBC.
            The coronavirus rout also appeared to bring a copious amount of new accounts to online brokers in the first quarter

            They will do the same thing in 2021. People that are not in-game are on the sideline watching others make gains.
            https://www.bloomberg.com/news/articles/2021-01-05/stimulus-…

            Albert Lewis III, a 19-year-old Iowa State University student who grew up in Chicago, has already decided where the money is going: into his Robinhood investment account.

            “The $600 isn’t needed at this moment,” Lewis said. “I’m investing it hopefully to turn it into something more than that by the time I’ll need it. $600 in a year isn’t going to turn into $10,000, but if I invest it now, in 40 years it’s going to be worth way more.”

            Once Hailey Wiggins, a 25-year-old business owner from Houston, receives the $600 check, she’s probably going to keep 10% in cash, invest 60% in stocks and 30% in cryptocurrencies.

            “We’re about to get flooded with all of this extra money that’s just going to stimulate the market,” says Wiggins, who entered the stock market in March of last year. “I’ve been investing and had this crazy return because of the pandemic and what it’s done to the stock market. I don’t see $600, I see way more money.”

            • netjock on 22/01/2021 - 13:13

              @whooah1979: LOL you really fell for it didn't you?

              Look at Japan. They've had ZIRP and QE for the last decade. Big banks have borrowed money in Japan to invest elsewhere (carry trade) and you know what. No inflation.

              Don't worry I fell for that at one point also. The BoE in 2015 kept on saying they will increase interest rates and they couldn't get inflation up.

            • macrocephalic on 24/01/2021 - 09:10

              @whooah1979:

              Once Hailey Wiggins, a 25-year-old business owner from Houston, receives the $600 check, she’s probably going to keep 10% in cash, invest 60% in stocks and 30% in cryptocurrencies.

              So she's going to invest $360 onto the stock market? It will take her a year just to pay off the cost of the trades! She'd be better off spending that money on her business.

    • macrocephalic on 22/01/2021 - 10:49

      Except that in circumstances where QE is used it tends to simply negate deflation rather than cause hyperinflation. https://www.investopedia.com/articles/investing/022615/why-d…

      • netjock on 22/01/2021 - 13:22
        +1

        The article is correct. QE is simply to replace the lost economic output from recession / depression not adding fuel to the fire.

        What people also doesn't realise is QE isn't helicopter money. If we added a zero to everyone's bank account inflation will go up tomorrow. It is selectively targeted. You still need good credit standing and cash flow to access borrowing, JobKeeper and JobSeeker is means tested.

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