Our investments take flight

As anyone who’s read any financial independence blog will know, investing in index funds is the most surefire way to achieve reliable gains over time. But it can be fun to invest in the odd individual company on the side as a hobby or an experiment. I don’t recommend making such investments a large portion of your portfolio, but some people do try this.

Last week I discussed our decision to invest $500 in Eat My Lunch. Like I said, we’re talking small fry here. Our major investments are in more tried-and-true methods. This week I’ll discuss our investment in Auckland Airport.

For those reading outside Kiwiland, Auckland Airport is New Zealand’s major international gateway, with passenger numbers expected to more than double in the coming decades, and it has kicked off a $2b development program to get its infrastructure ready for these passengers.

Not coincidentally, this is not my first foray into investing in the company. Back in 2012, I invested $250 into Auckland Airport for much the same reasons as we chose it this time (the difference being I knew nothing about financial independence – it was my only investment!) I had to sell the holding a year later to help pay for our wedding and thankfully my gains paid for one of the brokerage fees (remember you pay when you buy and when you sell). So all up I made a loss thanks to those nasty little fees.

That is one of the major differences, as this time I was able to invest via Sharesies, who have just launched the ability to invest in individual companies. So I paid just cents in fees, whereas last time using ASB Securities and it was $30 per transaction! No wonder I lost money. Thank goodness for all I’ve learned since then.

So why such a commitment to investing in Auckland Airport? Well, the reasons mentioned earlier basically mean the company is on a growth trajectory for at least 20 years. Had I been able to hold onto the shares from the first time I invested, I would have quadrupled my money by now.

It’s not risk-free of course. The growth trajectory is no secret. Everyone in the NZ investment community will know about it, so it will already have been factored into the share price to a certain extent. I’m relying on short-sighted day traders to keep the price down. If everyone investing in the company was buying and holding for 20 years waiting for the growth to run its course, the share price would be much higher as the expected growth would be fully factored in.

There are other risks as well. As the climate emergency becomes more and more dire (not to say it already isn’t dire, just that people will increasingly treat it as such), air travel as an industry is at risk of people choosing not to fly, or even potentially governments regulating to make travel pay its way in terms of emissions, which would dramatically raise barriers to flying for people on average incomes. NZ is separated from the rest of the world by thousands of kilometres of ocean in all directions, so airlines enjoy a certain lack of competition but if a country like China decided to suddenly get a green conscience and take a long hard look at the impact of its outbound tourists, things could be bad for NZ.

Or who knows. Antibiotic resistance could cause a global pandemic and shut down international aviation for an unspecified period of time. Seems unlikely, but the point I’m making is that no investment is a sure bet. That’s why being diversified is important and index funds are the kings and queens of all investment vehicles. That’s why we only have $113 invested in Auckland Airport. It’s a bit of fun. We have thousands invested elsewhere.

As we made the investment through Sharesies, I’ll include it in the Sharesies balance in our monthly net worth updates instead of giving it its own line. Eat My Lunch gets its own line as we invested in that directly.

What are your thoughts? Has anyone else out there invested in Auckland Airport? I’d be curious to hear your reasons.

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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