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RTC18: How to invest if you have short-term money goals · The Curve

• 0:00
  Welcome to season two of Raising the Curve, a conversation for women who want to
• 0:06
  learn more about money, via money. For the future they want to have. The pursuit
• 0:11
  for financial confidence and increasing your wealth should be a simple one. So
• 0:16
  this is a place for you to learn about investing in finance in a non-scary or
• 0:20
  intimidating way. Thank you for being here and for listening. Because together we
• 0:25
  really can raise the curve. I'm scared about this episode and it's because of
• 0:30
  seeing the title, Capital Preservation. Oh my god, it sounds foreign language.
• 0:35
  It's not just sounds very boring. Well, let's try and make it lighthearted and fun.
• 0:40
  I'm fine at seeing you. Okay. So I'm going to start with the question. So if you had a
• 0:45
  thousand dollars invested and your investment fell by 25%, how much would you
• 0:51
  have? How much did I have? $750. Nice. So now you have $750. What percentage does
• 1:04
  that investment now have to increase to to get back to a thousand dollars? I was in
• 1:09
  the alternative math class. So this is not a question I feel comfortable
• 1:14
  answering. You're trying to give me the answers by like writing it in the air. You
• 1:20
  know that I'm facing the opposite way, do you? 25%. No, but that's what a lot of
• 1:26
  people think. You know, if I, if I, oh wait, because 25% of $750. It's not 100. But
• 1:34
  people think, okay, cool. I've started with a thousand and it's 425. So to get it back
• 1:37
  up there, I just need to grow by 25 again, but it doesn't. Because you're coming off a
• 1:42
  smaller base, you need to grow by over 30%. Wow. So this is why capital
• 1:50
  preservation is, is, is really important at an insert in types of investment
• 1:54
  strategies. The less you fall, the less you have to make up again. Yes, exactly. So
• 1:59
  people think, hey, well, if it's 425%, then it's going to be 25% to get back up. But
• 2:03
  it's not. It's actually a bigger climb, even though the fall is less, if that makes
• 2:08
  sense. So the less you can fall, the less you have to climb back up. So there's an analogy
• 2:12
  that we're using industry. It's like stocks always take the elevator down, but the stairs up.
• 2:18
  And if you see any corrections, like Ella COVID. Ella? Ella COVID. Yeah. We'll go with that. Yeah.
• 2:25
  So COVID took all of the stocks down in the elevator. Yes. Any charts they go, you're going up
• 2:30
  stairs and you go down the elevator and then now the climb back up the stairs. And now they're up
• 2:34
  above where they were previously. But I guess what I'm saying is that don't just think because
• 2:39
  your stocks have fallen or your investments fall in 25% that it's going to take 25% to get back
• 2:43
  to where you were. So the more you can try and preserve your capital, then the more it can grow.
• 2:49
  This means that the lesser investments fall, the less they have to increase again. Does that
• 2:54
  kind of make sense? You just want to stay at the top of the hill. Yes. You want to say don't,
• 2:59
  don't fall down the hill. Easy said thing done. But look, I know I've given you a lot of
• 3:04
  ships about keeping your money in the bank, but it's still on there. But this episode is all
• 3:11
  around having a more low risk investment strategy. So you're preserving your capital,
• 3:16
  rather than growing your capital. But I thought the whole point was because I'm 30 and I've got
• 3:21
  a long time horizon and I can invest for the long term that I'm better to go risky. Yes.
• 3:26
  Yes, you are. So the younger time horizon, the more risk you can take, therefore invest in
• 3:31
  riskier assets or invest in more riskier shares. But what we're talking about today is that say you
• 3:38
  want to buy a car in two years' time. You're going to take more of a capital preservation approach
• 3:43
  or a lower risk approach. So we're just talking about different investing strategies.
• 3:47
  So this is kind of an episode one when we briefly touch on the idea of having different
• 3:51
  investing goals and you might have different investing buckets. Yes. So it might be say I had a
• 3:56
  short-term goal of buying a car or paying for a wedding. Yeah, need a boyfriend first, but
• 4:02
  then you know I think the discussion from the day of you don't want to be interested.
• 4:07
  It's like we love because we all live true. It's got a date today though.
• 4:13
  I just knew driving it that that was going to come up in today's episode.
• 4:25
  It's a part of a day guy like a book. Oh gosh. You look hot though, you know. I've got a
• 4:30
  spray tin. You're looking fire. Thanks. Okay, so. So yeah, I know I give you shit about keeping
• 4:37
  running the bank and that's but that's fine. A lot of people have a portion of their portfolio
• 4:43
  with a capital preservation approach. So a lower risk approach and a larger portion and more high
• 4:47
  risk because we're younger, we should have a greater skew to more of a higher risk approach. But
• 4:54
  if your investing goal is shorter than five years or if you're older and you have only
• 5:02
  less than five years into retirement, then you're going to be more taking more conservative
• 5:06
  approach and taking more of a capital preservation approach rather than the opposite, which is a
• 5:12
  capital appreciation approach. Capital appreciation is essentially knowing that it's going to fall
• 5:19
  probably quite a bit in the short term, right? And that then in the long term, it's going to
• 5:23
  like climate's way back. Capital appreciation. Yes. Yeah. So if we looked at say if we took an
• 5:29
  example, so say you had $10,000 and you needed this in two years time, which in the scheme of things
• 5:35
  is short term. So you had a goal of you want to buy a car or go overseas. Then if you put that in
• 5:41
  a term deposit, right now, they're kind of about 2% less than 2% per year. So ANZ is like 1.85%
• 5:50
  per year at the moment, which is pretty low than after two. Why bother? Honestly, I remember
• 5:56
  it's like calling you and being like, Hey, I'm thinking of a term deposit. You should have just
• 6:00
  been like, absolutely not. I thought I sounded quite smart, being like, I know what a term deposit
• 6:06
  is. I mean, for some people, it's great. They're defensive, stable, low risk. But at the end of
• 6:12
  that two years, you're only going to have like $10,300. So you're going to have very, very low,
• 6:17
  you know, you would have only made $3 to $400 on your investment after two years. Whereas if you
• 6:22
  invested in the stock market, so the ANZX50, the New Zealand stock market. I know what that is now.
• 6:28
  Why that? Listen to season episode two. Listen to episode two.
• 6:32
  Then last year, the market was up 11%. But this year, so far, it's down 4%. So,
• 6:40
  this is what I mean, but it's increased risk, increased volatility. And if you're worried about
• 6:45
  preserving your capital, not growing it, then you might not want to take that extra risk.
• 6:52
  And you at the end of that period, you'd have $10,600. So you should have a bit more,
• 6:57
  but you could be sitting on the edge of your seat going, oh my gosh, oh my gosh, please,
• 7:00
  don't go down any further because you can't afford it. Yeah. So it's balancing up what is
• 7:05
  your investing goal? And if it's shorter term, maybe take more of a capital preservation approach.
• 7:11
  If it's longer term, then you can take more risk. So it's just a different, different investing
• 7:17
  strategy. It's kind of like capital preservation is the goalie on a soccer field. And capital
• 7:24
  appreciation or growing your portfolio investment is the rest of the team. So I'm in charge of the
• 7:30
  goal nobody can get in. And so it's kind of taking that that approach of protecting what you've
• 7:36
  got. Do you think it's rather an offence? Yes. Yeah, slam dunk. Got it. We shouldn't have a
• 7:43
  use for this analogy. So yeah, if you're time rising as shorter, then you might be a goalie instead
• 7:49
  of a team player. Exactly. Exactly. So how do you figure out what you want, what bucket or how much
• 7:54
  to put in each with you doing appreciation or preservation? Preservation. Yeah. So it really
• 8:01
  comes down to your risk appetite. And we keep coming back to this and it's so subjective about what
• 8:05
  how much risk you want to take. But what we spoke about in episode one around depends on your
• 8:11
  time horizon. And with this, it's really important to define what your time horizon is. And work
• 8:17
  backwards. So figure out, okay, how much it might be that you want to remodel your kitchen.
• 8:21
  Okay, how much do I need to remodel my kitchen? Okay, you need how much do you even need to remodel
• 8:26
  your kitchen? I'm going to close. It's 50 grand or is it less than that? I mean, yeah, 50 grand
• 8:30
  would give you a very, very decent kitchen. I mean, you could do it for 20 grand, but say you wanted
• 8:35
  a really fancy remodeled kitchen, $50,000, then you'd work back and go, okay, I say you have 43 at
• 8:42
  the moment. Yes, then what do I need to achieve that 50,000? I might need to take a bit more risk
• 8:48
  or am I happy to just keep that 43,000 in a term deposit and not get much for it and save up the rest.
• 8:57
  You know, do I not want to take the risk? You've just got it's completely up to you. You just
• 9:01
  need to weigh up. There's so many different options though it sucks that there's not like a one-size-fits-all
• 9:06
  or this is the answer. Because everybody's different. You know, one-size-fits-all for you might not fit
• 9:11
  me. I hate it when clothes say one-size-fits-all. It's quite like it because you know it's
• 9:17
  being fun and it's not mean to be fun. Oh, it's begging on you. Oh, come on. You know, I am just
• 9:23
  milking more compliments. There is nothing worse though than being in tight jeans and feeling like
• 9:28
  a sausage and a casing that's too small. So I've came round to put another night. I put a
• 9:33
  dinner party. In the afternoon, she's like, can I just go? No, mid, midway. I feel like a sausage
• 9:39
  and a sausage casing. Can I borrow a spence? I went into the next wardrobe and just had to get
• 9:44
  changed because I was so uncomfortable. It's like anxiety-inducing being in clothes that are too tight.
• 9:49
  Oh, totally. You can't really hold a conversation. You can't focus. You think everyone's looking at you.
• 9:53
  And you get winded. I swear it's like it's like cutting into all your organs. Yeah.
• 9:57
  Sorry, but I've taken it way off track. I can't remember. My fault as well. Something about, oh,
• 10:03
  it's annoying that you don't have like a one-size-fits-all. No. And you can't, with investing,
• 10:08
  you know, some people might get frustrated if I don't give you correct answers on things,
• 10:13
  but it totally depends on your situation, what you're investing in, what you're,
• 10:18
  what your risk tolerance is. There's just so many different factors when it comes to,
• 10:23
  we're all individuals. So therefore, no two portfolios are going to look the same.
• 10:29
  And we need to figure out what our goals are and work back from there. If we've got a 30-year
• 10:33
  goal, we work back from there. We've got a two-year goal. We work back from there. And it's all about
• 10:38
  putting those, you know, processes and goals and targets in place so that you can, you can get it.
• 10:45
  Make a plan from there. Yeah. And not be like, oh shit, I'm 64 and I need to start saving from
• 10:49
  our retirement. You know, you want to start that now? Let's get out of it. Well, we're supposed to
• 10:55
  be doing it in my chest. Yes. So with capital preservation, would it be most important with short-term
• 11:03
  goals? Yes. Yes. So if you're trying to have a financial goal around five years or less,
• 11:10
  or you're trying to, yeah, you've got a time horizon goal that's just in five years or you've got
• 11:14
  a dollar figure goal that's less than five years. So say you wanted to get to 10,000 or you just
• 11:20
  like, look, I want to take this all out in five years. And the reason is because there's
• 11:26
  volatility within, say, if you're in shares, that you may have two or five bad years. And therefore,
• 11:33
  if you're really needing X amount of money, you can't afford to weather the volatility. Exactly.
• 11:38
  And we've seen in episode one how if you zoom out, you know, over time, she markets go up and
• 11:45
  they go up to the right. So they're increasing. But if you zoom in in the short term, like I said,
• 11:51
  might be some shark. Yeah. You have one good year and then one bad year. And that bad year might
• 11:56
  be a worse year than the better year if we end up with less. And you've lost your capital. And
• 12:00
  you haven't preserved your capital. Exactly. One other thing though, it's really important with
• 12:06
  capital preservation is to at least get some return because of inflation. This is why my money
• 12:12
  in the back is a terrible idea. Exactly. Yeah. Because inflation is eating away, you'll
• 12:16
  purchasing power. So you may have a hundred dollars in there and then in 12 months time, you
• 12:21
  might have a hundred dollars in there and be able to buy X amount of groceries without a hundred
• 12:25
  dollars in 12 months time. That hundred dollars is going to be able to buy you less groceries
• 12:29
  because they're more expensive. Well inflation ever go to deflation? Possibly. Yeah. Yeah. If we
• 12:35
  would be so good. Not really. No. It's not good for stimulating the economy and in growth.
• 12:43
  And it's usually when the world is not in a good place. But yeah. So. So that was so selfish,
• 12:51
  wasn't it? Yeah. I just want more money so that I can buy more things. You've got to think about
• 12:54
  number one. I take it back. I don't want the world to go backwards. Yeah. So it's just all around
• 13:00
  playing it a bit more safe. The opposite of risk it to get the biscuit. What should we call that?
• 13:04
  Capital preservation. What the title of the episode is called?
• 13:11
  Oh, really sinking in. Really listen to everything I just see. No, I am getting it.
• 13:17
  But there is there is actually if you wanted to get both, there is a way to get both and that's if
• 13:22
  you gave your money to an active fund manager. So we talk about fund managers and we throw them
• 13:28
  around, you know, we talk about fund managers in general, but there's actually two buckets. There's
• 13:32
  these kind of passive fund managers and active fund managers. Now an active fund manager is
• 13:36
  someone that's literally sitting there. It's what I do. You're literally sitting there and they're
• 13:40
  actively trying to preserve your capital and grow your capital at the same time. So they should
• 13:44
  do both. You're so clever. Just loving all these compliments. Great. So they're constantly trading,
• 13:52
  they're checking market indicators, they're monitoring a whole lot of things to try and make sure
• 13:58
  they're growing your portfolio. I think you should not be so humble. We are doing this. We are
• 14:02
  doing this. So to make sure that you get the best return because the less you fall, the less you
• 14:09
  have to climb up. So that's what they're constantly doing. So that's why you pay them a fee to be in
• 14:14
  there constantly trying to grow your investment as much as they can to beat the market or to do better
• 14:22
  than the index like we talked about in the previous episode. So what's a passive fund manager?
• 14:26
  So a passive fund manager. So that's where they just follow the index. So they're just investing
• 14:32
  in these and P500 and no matter what that index does, your money will do. So they're not worried
• 14:37
  about capital preservation. No, it's literally just going to mirror the market. They're not trying to
• 14:43
  jump in and jump out and trade around timing the market, timing the market. No, they're very much
• 14:50
  just. What are they even doing? I feel like they don't deserve it. But you tell them. But I mean,
• 14:56
  if you're just following along, sure. Well, that's why you pay like minimal, minimal fees because
• 15:01
  it's pretty much computers and they're not really doing much to be honest. And some people just don't
• 15:05
  mind that. Some investors just want access to the US or they just want access to Europe or Asia and
• 15:10
  they just will buy the index through an ETF, which is an exchange traded fund. Which is a bundle
• 15:18
  of lots of different shares and lots of different areas. So it's very good for diversification.
• 15:25
  Such a good student. A plus student. And so that's why if you're choosing an active manager or
• 15:32
  passive manager, you just look at the fees because passive managers should not be charging large fees
• 15:37
  because they're, you're right, they're not doing a lot. So you're not, they're not taking too much
• 15:42
  of a return because so like as in the fees are less and therefore your return might be higher.
• 15:49
  Yes. So it depends how the index performs. But with an active manager, there are bad active managers.
• 15:56
  So you give your bad. Are you bad? I mean, I have my days. If anyone has ever used Victoria before
• 16:02
  and she's been disappointing, please get into. Please let us know. No, please don't. Surely you
• 16:07
  wouldn't have a job if you were bad. If you have, you always have bad periods where it's a month,
• 16:12
  six month, a year. But if you're consistently bad, then you're not going to get money. People aren't
• 16:17
  going to invest with you. Therefore you've really got no business or no fund. Whereas if you're
• 16:22
  consistently good and you consistently beat the market, which is what we call about, you know, doing
• 16:29
  better than the market or doing better than the passive investors, then you're going to be the
• 16:34
  fund manager that people want to invest with. That's so cool. Yeah. And so people would Google
• 16:38
  different fund managers and see what they've. Yes. So you need to look at their long-term
• 16:42
  performance because you want that consistency in that ability. When I Google you. Well, I'm not
• 16:47
  a fund manager. I'm not a fund manager. I'm not a fund manager. I'm a portfolio manager.
• 16:57
  Ad a fund manager. Okay. Yeah. So I did come up with some stuff. All the curve. No, actually.
• 17:05
  So amazing. Devon funds, here we go. So essentially you can do your research though to find out
• 17:12
  yes. Wow, your face is big. Look at that. Oh, that is your first. That's your top Google search
• 17:21
  page. Wow. Look at that. It's like you're coming out of the computer screen. Yeah. So active
• 17:29
  fund managers, they do charge you a higher fee. So it's really important to make sure that you're
• 17:33
  looking after fees performance because then that'll give you a good indication of whether that
• 17:39
  fund manager is actually doing a good job for you. And look at it in relation to the index
• 17:43
  performance or the benchmark of what they call it. If the fund manager, the active fund manager,
• 17:49
  you still giggling me. Actually, she just bought a top online and I had to reply saying sold
• 17:55
  transfer. It was tie-dye. It was cool. I really didn't want to start. I'm so sorry. I'm concentrating
• 18:01
  now. Are you? You know, I promise. I'm back. Here I am. So as I was saying, which is much
• 18:08
  interesting than online shopping, is that with active fund managers, you need to make sure that
• 18:15
  you're looking after fees performance because they do charge a higher fee than passive fund managers
• 18:20
  because they're actually doing more for you. They're not. I'm happy to pay more. If you're doing
• 18:25
  a good job, if you're running around and they outperform the market for me, then you want to be
• 18:29
  but that's the key thing. They have to be outperforming the market for you. Otherwise,
• 18:34
  you're just paying them for doing nothing, doing nothing. So if they are consistently underperforming
• 18:38
  the market, how do you measure that? So you just they should have a benchmark that they a benchmark
• 18:43
  themselves against, which would be the NZX50, for example, or the S&P500. And so would that be say,
• 18:49
  for that year, the S&P500 went up 7% say, and your return went up 6%, so it didn't beat the market.
• 18:58
  Yeah. So if that was after fees, you got 6%, then you'd be like, hang on a sec. Why am I paying you to...
• 19:03
  When you're doing worse than that? When I could just invest passively and get 7%.
• 19:08
  And that's fine. If it's like, it's fine managers usually have off years or off months,
• 19:13
  that's why it's really important to look at the most historical performance that you can get.
• 19:17
  So amount, so amount, so amount, so amount. Always amount. If they've constantly done that,
• 19:21
  then that's a big red flag. I take my money out of your fund. And I won't long to a new one.
• 19:29
  And I drop it in the passive fund? Yeah. Or just find somebody else.
• 19:33
  Or find somebody else. Exactly. So it's just really important that you look at after fees as well.
• 19:36
  And the long-term performance. What's the difference in, say, DIY investing?
• 19:42
  So for example, stake, hatch, share, z's, versus using a fund manager. Is it really worth DIY
• 19:52
  investing in terms of you do make more and you get to keep a decent amount more returns? Or is it
• 19:57
  much of a muchness? It completely depends what you invest in. You might invest in handful of stocks
• 20:03
  that you think are really interesting. I might invest in handful that I think are really interesting.
• 20:07
  They're going to be completely different stocks. So therefore, you're not going to know who's doing
• 20:10
  better. What I mean is there is benefit in learning how to do it yourself.
• 20:17
  Totally. Because that margin that you would lose by going through somebody else is worth keeping
• 20:23
  if you can. Yeah, it depends. I mean, I do both. I give some of my money to someone else to look
• 20:29
  after. And then I also do some myself because it's diversification. So DIY investing and using
• 20:35
  the platforms that are available are great because it's a great way to learn. And you can invest
• 20:40
  in the companies you want and you can pick and choose. You can get in and out when you want.
• 20:45
  There's more liquidity I guess, right? Because you can pull it straight out if you want. Exactly.
• 20:49
  Whereas with a fund manager, you give your money to a fund manager. It's like on a ship to
• 20:54
  England that takes six weeks. You can't just be there in a second. It's a lot slower.
• 21:00
  I mean, it's got a lot quicker, but you can't keep withdrawing and depositing because they
• 21:07
  get frustrated because they please leave. Can I get $5 out because I need five coffee?
• 21:13
  Absolutely not. Take your $1,000 and go. But it's good because you're giving it to an expert
• 21:21
  and you can learn a lot from them too. So they give you monthly updates and you can see what they
• 21:25
  invest in and why and you can use it as a research tool as well. But the key thing with a fund manager
• 21:33
  is that another big thing with investing with a fund manager, whether it's passive or active,
• 21:39
  is that you can't choose what you want to invest in. You're pulled together in a fund with
• 21:45
  hundreds, thousands of other investors in their money and then the portfolio manager,
• 21:50
  which is what I do, makes those decisions on behalf of everyone. So that's why you own a portion
• 21:58
  of company X, a portion of company Y, but you can't be like, hey, Vic, I want to be more in Facebook.
• 22:03
  I'd be like, it's stuffed. Right. Yeah, because it's a collective whole.
• 22:08
  Imagine how annoying that would be if everyone invests in your fund with that. Hey, I've just got
• 22:12
  a little top tip for you. What do you think about investing in this? Yes. So annoying.
• 22:17
  Yeah, so. But essentially being able to DIY invest plus give your money to fund managers plus,
• 22:23
  you know, if you're able to invest in property, all of those things are diversifying, diversifying,
• 22:28
  diversifying. And I also think there's something really amazing about learning to do it yourself,
• 22:32
  so that you can understand what's going on, because it's great to think like, I'm going to dump
• 22:37
  all my money with a fund manager. But if you have no idea or you don't understand it at all,
• 22:43
  I don't know if it's like it takes the power away a little. Totally. And some people,
• 22:46
  look, some people just want to kind of give it to a fund manager and forget about it and watch
• 22:51
  it grow. And that's fine. But a lot of other investors, they actually want to get in there and
• 22:56
  buy companies that they see around them, that they know that they can be on the journey with.
• 23:03
  And so it's completely up to you what your preference is in terms of investing. But if you are
• 23:10
  trying to preserve your capital, then you need to be aware of when you're investing in the
• 23:15
  share market, that it's risky in that. It's probably not the best approach if you are preserving
• 23:21
  your capital. So potentially if I was looking to buy a new car in four years, I'd be best maybe
• 23:29
  to give my $10,000, $15,000 to a fund manager so that I can maybe buy better car in five years,
• 23:36
  knowing that I'm probably not going to lose too much of my capital. Or keep the majority of it
• 23:41
  in a lower risk investment, so a term deposit. I mean, I think this is the first and only time I'll
• 23:46
  ever say. But it's because I know you and I know that your time horizon is much longer than four
• 23:52
  years is why I've been harping on about getting it out of the bank. But if you had a goal yet that
• 23:57
  was four years time, then you need to look at the makeup of your investments. So you might
• 24:02
  increase the amount in a lower risk cash type investment and have less with a fund manager or
• 24:10
  a DOI. So it's just about balancing that. And hey, once you've bought your car in four years time
• 24:16
  and you're like, right, cool, now I've got a 20 year horizon, then you can just go all guns blazing
• 24:21
  into high risk shares. I want to even take off the bank. You need to make some goals. Yeah.
• 24:26
  I really need to figure out what I actually want to say for what I need because I feel like a bit
• 24:31
  of a blind bat wandering around with no clue what's going on. So you can either preserve capital
• 24:36
  by giving it to an active fund manager and putting it in a lower risk fund with them and then that's
• 24:42
  their job to preserve capital for you or you can do it yourself and you can do that through the DOI
• 24:46
  platforms by really low and also with really low risk stocks. Yes. And you could put maybe a
• 24:52
  maybe a bit in the DOI platforms and maybe keep a keep majority in cash or term deposits.
• 24:57
  But you can also you can invest in low risk companies on the DOI platform. So we call them
• 25:04
  blue chip companies. Didn't blue chip go totally bus? No, it's not a company. Oh,
• 25:10
  it's because wasn't there blue chip or chip or something that went like terribly wrong?
• 25:14
  Like 15, 20 years ago. Oh, I have a feeling my granddad invested in it and it was really,
• 25:20
  really bad. One moment please while we just have a quick Google bankrupt. Blue chip bankrupt.
• 25:26
  Oh, there was. Yeah. Well, that's terrible. Blue chip is believed to be New Zealand's biggest
• 25:32
  bankrupt C. Wow. Because I think my granddad had invested a lot of shares in it when
• 25:38
  it totally bad. Well, we're not talking about that blue chip in. Capital
• 25:43
  reservations guys. Invest in bankrupt companies. No, we are talking about blue chip companies in
• 25:50
  general. And what I mean by this is they are companies that have very stable earnings growth
• 25:56
  and they've got earnings growth of a several decades. So they're companies that have been
• 26:01
  around friever. They pay dividends. They've got stable earnings. So it's like a granddad stock.
• 26:06
  It's like a boring, but it's a Microsoft, isn't it? Surely it's a Microsoft. It's a Walmart.
• 26:14
  It's Coca-Cola. It's Costco. It's all those long standing brands. Yeah, those kind of
• 26:20
  consumer staples are a lot of them. You know, Johnson and Johnson, all those kind of companies.
• 26:26
  And I actually want to, I was like, why are they called blue chip? I've always just called
• 26:30
  them blue chip and I was like, why? I'm going to Google this. And it comes from poker,
• 26:35
  which I don't play. So I don't know. I was begotten when I found out this definition because
• 26:39
  I thought it was just black and red. Is that blue? Yeah. So apparently it's the most valuable
• 26:43
  playing chip color. Really? Yeah. That's so bad that they're associating. I know, gambling
• 26:50
  and investing. Yeah. We do not condone that. That's interesting though. So obviously it's like
• 26:55
  the go to the easy money maker. Yeah. A lot of older people because they want to, they're
• 27:02
  nearing their retirement age and they want to preserve their capital. A lot of older people
• 27:06
  invest in these blue chip companies. It's sensible to. Yes. Yeah. And so if you want to buy a new
• 27:12
  Nissan leaf in four years time, I'd love one. I'd just anything but the Honda Jazz.
• 27:18
  Then oh my god, I got the name wrong. I thought the Honda Jazz. Do you think I want to buy a
• 27:25
  new Honda Jazz? Well, I just so you know, I'm definitely upgrading when I can. Then you might
• 27:30
  invest in blue chip companies because you've got a shorter time horizon. So it's just adjusting
• 27:34
  your portfolio slightly. You can still invest in some of the companies you want, just maybe not as
• 27:39
  many higher risk ones and find ones that are more in the blue chip kind of kind of camp.
• 27:44
  The other way that you can diversify and preserve your capital. Me specifically or anyone?
• 27:48
  You in the general way. Yeah. The people in the preserve my capital camp
• 27:55
  is invest in different regions. So it's always coming back to diversifying.
• 28:00
  diversifying is a way of preserving your capital. So if I looked at the past year,
• 28:06
  so the S&P 500 or the US stock market is up 30%. Is it 30%? I know. Wow, that's massive.
• 28:12
  The ASX is up 15%. And New Zealand's down 4. Yeah. Got it. Good memory. Thank you.
• 28:21
  Yeah, so that's what I mean. Is that anything to do with the COVID government handouts, etc?
• 28:27
  And there's a lot of tech companies like Tesla is up, you know, 40% or 40% and that makes up a lot
• 28:32
  of the index in the US. So you can get skewed by certain companies, yeah. But this is what I
• 28:38
  mean. That if you had a capital preservation approach and you'd just invest in the New Zealand
• 28:43
  stock market, you'd be down 4%. So it's kind of saying, okay, well, maybe I'll be some in New Zealand
• 28:49
  and some in the US and diversify. This is why diversification. This is a great example of why
• 28:55
  diversification and cross-different regions. We were talking about companies and asset classes,
• 28:58
  but different regions as well. You can diversify. You can diversify. And then you can diversify
• 29:06
  more. That's gracious. Yeah. That's a great example though. Up 30% in America, up 20% in Australia
• 29:12
  and down 4% in New Zealand. If you've had companies in all three stock exchanges.
• 29:19
  You would have had a much more balanced portfolio and a better return than if you just put
• 29:24
  all your eggs in the New Zealand basket and you would have been down 4%. Yeah, you can diversify
• 29:29
  different companies, different regions, different asset classes. So say you've got a goal that's
• 29:33
  in four years time and you're going to contribute $2,000 every couple of months to that investment
• 29:39
  because you're trying to get that investment goal and you're going to invest in a really conservative
• 29:43
  fund or really conservative blue chip companies because you want to achieve that target.
• 29:48
  Another approach might be insurance, taking out insurance. But aren't you paying for insurance?
• 29:53
  You're paying for insurance, but if you lose your income, you're not going to be able to achieve
• 29:57
  that goal. So it's just another way when you're thinking about limiting the downside is that
• 30:05
  yeah, what would happen if you lost your job, especially if you're a mother or like you're the
• 30:09
  sole owner of your household, your investing journey and your investing goals are really going
• 30:14
  to be hampered if you don't have that income coming in to achieve them. So it's just another
• 30:19
  little thing to think about. I mean, we don't really talk about insurance a lot. We just talk about
• 30:23
  investing, growing your wealth, but it's really hard to do that if you don't have any income.
• 30:28
  So it's basically what you're saying is it's a risk that you should, it's not a risk you should
• 30:32
  take. You'll better be losing some of that money to paying for insurance than what might happen if
• 30:39
  you lost your job or. Yes, yeah, it's just another way of protecting your wealth.
• 30:44
  I really don't want to weigh insurance too much longer because it's so boring.
• 30:48
  I know. Do you have insurance? I do. Do you? Yeah. You have finance insurance? I mean,
• 30:55
  income. Really? No, I don't have income insurance, but I do have insurance on my assets.
• 31:02
  Yes, I don't even have insurance on my go. Well, it's quite, oh, I know, I thought that was like
• 31:08
  a non-reaction. It's still up. It's a long story that we don't need to go into, but you have
• 31:12
  insurance on your assets. And I also think if you don't have any dependence, like for me,
• 31:18
  I mean, me so would probably just be in the world for anyone that has not seen her on Instagram.
• 31:23
  I think she would be absolutely fine if I was to. You're not leaving the house to me so far.
• 31:30
  No, I feel like she would be totally fine if I if I lost my job. It would be more about me.
• 31:34
  You know, but if I had three or four children that I needed to provide for, then yes, I would
• 31:39
  definitely have income insurance because that needs to be considered about their well-being
• 31:44
  and how I'm going to look after them. So it's kind of when you have dependence or people that rely
• 31:49
  on you, then you should be thinking about insurance to preserve capital as well.
• 31:55
  Preserving capital. Be the goalie. Be the goalie. Protect your goal.
• 32:00
  All situations, though, only if that you've got a short-term goal, though, right?
• 32:03
  Yes, only if you've got a short-term goal. Otherwise, the goal is wide open
• 32:07
  for attacking towards it, trying to get the ball in the net. Do you know I had a soccer team at
• 32:13
  school that I was in for an entire season. It was a social team and we didn't get one goal across
• 32:19
  all of our games. Like we literally were goalless. We didn't get one ball in a net.
• 32:24
  And that's why so far is not in all ways. We're investing queen yet. Yet. Yet on my way.
• 32:32
  So if you've got a shorter-term goal, so say you want to buy a car or pay for that wedding
• 32:37
  in less than five years, or if you're going to reach your time in age in less than five years,
• 32:41
  then yes, it's probably good to take more of a capital preservation approach. And just remember,
• 32:47
  if your investment falls by 25%, then it takes more than 25% to get back up to where it was.
• 32:54
  Should we do a quick Q&A because we haven't done that. We're on episode three and I feel
• 32:58
  I've done an idea. So there was one. Should I invest? This is a good idea. Should I invest in an
• 33:05
  active fund with a fund manager or in an ETF via stake? That is a great one. And we've just
• 33:12
  kind of been talking about it. So good question. So again, that's saying should I invest
• 33:17
  passively or actively? Now again, it completely depends on what you're trying to achieve.
• 33:23
  Are you trying to outperform the market and have capital preservation and growth,
• 33:28
  or are you just trying to ride the wave? Long-term. So riding the wave long-term would maybe be a stake
• 33:35
  ETF approach, right? Yes, so that's the passive approach. So again, low fees and you're riding the
• 33:41
  waves of the market. You have no, you're just on the boat riding the wave. You can't get off
• 33:46
  on, you're there and you're on the boat. Whereas an active fund and a fund manager, they're trying
• 33:52
  to get the best performance for you and you're paying a fee for that. So over the long term, if
• 33:57
  they're a good active fund manager, then they will be able to outperform the market on the way down
• 34:02
  and outperform the market on the way up. So it depends what your goal is, what you're trying to achieve,
• 34:06
  are your goals short, long-term. And the great thing with an ETF is that you can get exposure to
• 34:11
  different regions. So with the example we had earlier, with the S&P up 30 and the NZX down 4,
• 34:20
  you might invest in the ETF via stake that is just the US and then you've got 30, you've got
• 34:26
  30% return on your investment. Can you get ETFs that are companies in the US, companies in Australia,
• 34:30
  companies in New Zealand? You can get global ETFs. How on earth would you decide what one to go on?
• 34:34
  There's so many. I feel like that would be overwhelming. I think ETFs that play themes as well.
• 34:39
  So you could get a cybersecurity ETF. Conscious investing. Conscious investing. You can get a
• 34:45
  health care. And there'd be millions in each one there. There's ETFs that invest only
• 34:52
  in women-led businesses. There's ETFs on everything pretty much. So what was your answer to
• 34:57
  the question? So it depends on what your goal is really. So if your goal is that you want growth
• 35:06
  and capital appreciation, then you can invest in an active fund manager, but remember you're
• 35:12
  paying a fee for that, but your performance might be better. Whereas if you're investing in an ETF
• 35:18
  via stake, then you're just riding the way for the market. And if you're happy with that and you're
• 35:23
  taking a long-term approach, then that might be better for you because you'll remember the zoom
• 35:28
  out thing over time, markets go up. So if you're taking a 2030 of you, maybe an ETF is better because
• 35:35
  you're paying this fees. But also if you're with a good active fund manager, that return might actually
• 35:40
  be better over the long-term as well. So there's no... There's no right or wrong. There's no
• 35:46
  right or right. It depends on your success. And they're both if you want it. So you could diversify
• 35:50
  and invest in an active fund with a fund manager and invest in an ETF by stake. You could do both.
• 35:55
  There's so many debates out there at the moment in the industry and they have been for many,
• 35:59
  many years about where the passive or active investing is better. And I think it just completely depends
• 36:06
  what your view is on investing and what you're trying to achieve. I mean, I'm biased. I'm an
• 36:11
  active fund manager. She's not going to be like, yeah, let's all just like, we're out of a job now.
• 36:17
  We're redundant. I don't have to say this, but I do believe that if you give your money to a good
• 36:25
  fund manager, you can get superior returns over the long term. When it makes sense, you've studied it.
• 36:30
  You look at the markets every day. You've been looking at different companies for 10 plus years.
• 36:35
  Of course, your view and your decisions are going to be somewhat superior to the Sophie Hall
• 36:40
  rights of the world. You know, I mean, it makes sense. Yes. Yeah. I don't think we've got time
• 36:46
  to answer any more questions. No. However, if you do want to ask one, you can either slide into our
• 36:51
  messages on Instagram. You can send us an email or like go to our website, the curve.co.nz.
• 36:56
  Fick, what are we going to be talking about in the next episode?
• 36:58
  No, so exciting. We're going to do a stock story.
• 37:01
  So this is basically when we choose a stock and we look at whether or not it should be a buy
• 37:07
  hold or sell. Yes, buy hold or sell. Are we going to do a New Zealand Australia or
• 37:10
  something from the S&P 500? Let's do the S&P 500. Yes, I would love to do one in the states.
• 37:18
  Yeah, okay. I get my thinking ahead on. Great. If you've got any suggestions on stocks,
• 37:23
  you want us to look at to definitely get in touch. Yes. Okay, bye.
• 37:27
  Thank you so much for joining us for today's episode of Raising the Curve. Please subscribe and
• 37:33
  leave a review on whatever platform you're listening on. We would also love for you to share this
• 37:37
  podcast with anyone you think would benefit from it. For more information about the curve and how
• 37:42
  you can learn more, head to the curve.co.nz or find us on socials at the underscore curve nz.