Can you eat your lunch and have it?

The conventional wisdom in the financial independence community is that index funds are the slow but sure way to wealth and I agree with that. Consequently, the vast majority of our investments are in Exchange Traded Funds (ETFs). Because we are in “growth” KiwiSaver funds, our provider invests the majority of our retirement money in ETFs. The majority of our Sharesies investments are also in ETFs. But, we have specialised on a couple of companies recently and I want to share why.

The first company we’ve invested in is Eat My Lunch. The second is Auckland Airport. I’ll cover our rationale for the Eat My Lunch investment in this post, but before I do I need to emphasise that I view all investments in individual companies to be more or less “play money”. It’s a very small percentage of our overall net worth (less than 1% at the moment). If we were to lose all the money we’ve invested in individual companies, it wouldn’t really set us back at all. So while it’s still early days on our journey, we’re essentially doing this from a position of strength. If you’re investing your first dollar, think very hard before putting it into a single company. Again, index funds are the conventional wisdom.

With that out of the way, we’ve invested $500 in Eat My Lunch, via PledgeMe. There were a few things about this that convinced us to take the plunge:

  • Firstly, the minimum investment was $500. I’ve always been curious about investing in companies via the platform, but often you need a couple grand to get in on the ground floor and that’s more money than I’m prepared to put on the line. $500 is money we could withstand losing if it came to that.
  • The company is something of a known quantity in NZ. Unlike many companies raising capital via PledgeMe, Eat My Lunch have brand recognition in NZ and already have achieved good success. None of this is to say we’ll get a return on our money! They may have already reached the top. But if we were to pick a company so we could play around with this kind of investing, better Eat My Lunch than a complete unknown.
  • Their stated goals for how they would use the capital to grow the business seemed like they had realistic potential. We are not investment experts and may just be dreaming here, but it doesn’t seem out of this world to imagine that their plans for bricks and mortar stores could produce success. The idea of global franchising may be a little more farfetched, but we live in the era of social justice these days so if there were ever a time when a concept like Eat My Lunch could catch on, now is that time. We’ll see!

There are of course enormous risks:

  • As it’s a private investment, selling our stake is not a simple proposition. If we want out, we have to hope Eat My Lunch have some interested buyers on their books that would be willing to pay enough for our shares to see us get a sensible profit. It would almost be easier to hope the company sees so much success that a large buyer comes sweeping in to purchase a large stake or that they go public. But neither of those scenarios seem likely right now. For our piddly $500 it doesn’t really matter thankfully.
  • As previously stated, we could lose all our money.
  • For the above reasons, it’s also nearly impossible to value the shares, so they will forever sit on our books as a $500 investment until we finally divest one day and find we’ve either lost most of that or will receive a massive windfall, or anywhere in between those two points.

So in summary, we could make a lot of money, we could make a little bit of money, or we could lose $500. This is not a high stakes investment. It’s a bit of fun. And it’s also a bit of a feel good factor because Eat My Lunch are a social enterprise giving away food to hungry kids and we’re helping grow that. For those reasons we were quite keen to give it a go, while keeping the vast majority of our KiwiSaver and non-KiwiSaver investments in ETFs. Next time I’ll explain why we’ve invested in Auckland Airport.

Comment Policy: For this blog, I’ve implemented a Comment with Kindness policy. You can read more about it here, but the gist of it is: Follow what I call the “Grandma Rule”. If you wouldn’t take that tone with your grandma, your comment probably won’t make it through moderation.

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