My twin sister and I are turning 30 this month. To celebrate, we decided to travel, and to let equity markets help us pay for it. This put us on a three-year investing journey that forced me to let go of some deeply held principles.
At the start of 2020, just weeks before the pandemic, both of us were bingeing on the reality TV show "Below Deck." It's set on a yacht, and got us daydreaming about sailing on one of those ourselves one day. What if we could save enough to charter a boat for a week?
Risk
We committed to setting aside 1,000 Swedish kronor each month (roughly £75), but a quick calculation dashed our hopes of scraping together enough money by our birthday that way. To have any hope of achieving our goal, we needed to expose our savings to risk. A risk that included possibly having to stay at home. But it was a risk we were willing to take.
We decided to put our savings to work in an investment fund. The responsibility of choosing the fund fell on me, the financial journalist, though my sister, a career pilot, is no stranger to risk herself. I set out to find one with low fees and global exposure. I could have mitigated risk by diversifying into multiple funds, but given the experimental, one-off nature of it all, I opted for a single fund that still holds thousands of different assets.
The chosen fund on which our big birthday trip would depend, was Storebrand Global All Countries, an index tracker with a 0.30% management fee. It has a 4-star Morningstar Rating and sits in the cheapest quintile of its Morningstar Category. Its low expense ratio and solid People, Process, and Parent Pillars earn it a Morningstar Medalist Rating of Silver, suggesting this share class should be able to deliver positive alpha against the lesser of its median category peer or the category benchmark.
The start of a wild ride
January 2020 made for an interesting starting point. The fastest stock market decline in history, supply chain disruptions, surging inflation, unseen rate hike cycles and a war in Ukraine came in the three years since. Throughout it all, our steadfast commitment to setting aside 1,000 kronor in the fund has remained solid. And despite many shocks, the stock market has rebounded time and time again.
In the past year, the historically weak krona has worked in our favour too, at least in terms of the fund's performance (our purchasing power abroad is a different story). Funds invested in markets where the local currency strengthens against the krona will have their krona-denominated returns amplified.
The secret sauce to coming out on top? It turns out, do nothing and enjoy the ride.
The payoff
In the years since, we've put a total of 90,000 kronor into the fund. By mid-September, our investments had grown by 45.60%, resulting in an additional 26,000 kronor boost. We didn't go for the yacht in the end, opting instead to extend our journey. Neither of us have been to Japan before, so that's where we're going first. After two weeks, it's onwards to Bali, where the rest of our family will join in on the birthday bash.
There have been drawbacks here: Sweden's currency has been battered by a real estate crisis, a weak economic outlook and the limited scope of further central bank action. If its slide continues, we may need to draw on other savings during our trip. Nonetheless, our little investing project will pay for the bulk of it.
It's nice to mix things up
Such a speculative endeavour is best kept separate from your long-term financial plans. But departing from my usual long-termism and risk aversion was, in simple terms, quite fun, and afforded me a little luxury that might have otherwise been out of reach.
Don’t get me wrong, long-dated investments are important. Personally, I find a balance far more fulfilling. It gives me the opportunity to fully appreciate life here and now.
The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.
