Back to (Investing) School

Andrew McCormick, Head of eToro US

I recently had the chaotic joy of taking my four kids back-to-school shopping. We ditched the typical online deliveries and kicked it old school at Target with printed checklists of supplies to purchase. While there were fewer Trapper Keepers and Smurf notebooks, I was comforted to find the lists were generally the same as the prehistoric days of the 20th Century. The National Retail Federation recently reported back-to-school shopping estimates to produce a total of $38.8 billion. While slightly lower than last year’s estimates, and paired with cooling inflation, consumers clearly remain eager to participate in the fall ritual.

Perhaps less exciting than an Iron Man lunchbox or neon highlighters, the back-to-school season can ignite similar refresh and renewal vibes for our investment portfolios. But do we have the proper supplies?! A helpful question to consider before fantasy football, pumpkin spice, and the holidays dominate our thoughts, wallets, and calendars. Each retail investor’s checklist will be different, but here are a few ideas to consider with the dawn of another school year:

ETFs: The Pencils and Paper of Portfolios?

As evidenced by my cluttered countertops, kids still use a TON of paper. My millennial heart is glad to know that paper and pencils are still the bedrock of any school supply list. Likewise, retail investors may turn to ETFs as a staple of their long-term investment strategy. In fact, approximately 20% of eToro customers hold ETFs in their eToro accounts, and BlackRock reported earlier this year that the amount of U.S. ETF asset holdings had doubled during the past five years from $3.5 trillion to $7.1 trillion. The ability to access a collection of stocks rather than investing in a single company generally offers diversification while lowering risk exposure. ETFs can also help simplify building a portfolio even if some upside is limited. Think of ETFs as a notebook, choose one with narrow, wide, or graph lines inside. ETFs allow you to invest in different size companies, various geographic regions, specific industries, or even particular technologies. Bitcoin and Ether ETFs recently hit the marketplace, allowing customers to invest in cryptocurrencies through the traditional rails of a brokerage account. Investors may use this as a way to gain exposure to the new asset class without feeling the need to dive deep into the blockchain. Whether you ultimately choose to invest in ETFs or not, an ETF that simply invests in the S&P 500 is up nearly 200% during the past 10 years, and just like a history class in school, that is a lesson we should not ignore.

Don’t Forget the Scissors: I cringed seeing scissors on my youngest’s shopping list as a vision of giving a kindergarten classmate a creative haircut flooded my memory. Cutting things proves to be a challenging experience for kids and investors alike. We often focus on investments to buy while forgetting about cutting some of our existing portfolio. Whether it’s performance, market developments, cash needs, or taxes, there are lots of issues to consider when evaluating whether it is time to do some portfolio cutting. Even if it might ultimately be best to ditch the scissors, considering whether investments need a fresh trim is a good exercise.

Headphones?!? Now a staple of elementary school supply lists, headphones and other technological products are part of normal life for kids. The importance of trying to keep up with trends, as an investor and as a parent, is undeniable. Whether it's the current AI rage, blockchain, or the digitization of everything, consumer behaviors and how we spend our money are evolving rapidly. In fact, nine out of the top ten most held stocks on eToro are in the technology sector. While technology, cryptoassets, or the newest trend might not be the right investment for you, educating yourself about the tech is always a wise investment. I wish I’d taken my own advice when I first read about Bitcoin in 2012 as the price bounced around $100. I quickly dismissed the novel concept due to lack of understanding. I picked up Bitcoin research once again five years later only to be greeted by $10,000 per Bitcoin.

Live, Laugh, Love to Invest: The final supply is FUN. Our favorite school experiences usually don’t involve textbooks. We cherished those priceless memories made with friends in hallways or on practice fields. Investing can be treated the same way. Whether over dinner, at practice, or through an online community like eToro, try talking to your community about investing. It is a topic with a massive impact on us all and engaging others is a fun way to learn. I invest in products that I love, which makes it not only more entertaining and engaging but also easier to explain to my kids. Our family spends a lot of time and dollars on burritos, coffee, and sneakers so we like to invest accordingly. It is fun explaining to my kids that we own a really tiny part of the company as our family herd moves through the burrito line after softball practice (and it helps justify the extra guac expense because we own the company and all). Just like school, the math and academics of investing are critical, but it should hopefully be fun too.

May you all have a great, fun, and rewarding investing school year.

[sips tea from a company where I am an infinitesimally small owner]