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ETFs Explained: Everything You Need to Know Before You Buy Your First One · She's On The Money

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Speaker 1: My name's Tatasha Bamblet. I'm a proud First Nations woman
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Speaker 1: and I'm here to acknowledge country. Te Glenn Young Ganya Niana,
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Speaker 1: Kaka Yah yen Beinahwaka Nian our guy in Nimbina, yak
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Speaker 1: um Jar, Doumayama, Domagahawakaman, damon Immalan Bumba bang Gadabomba in
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Speaker 1: and now in Waka ghana on yak rum Jar Watanadaa. Hello,
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Speaker 1: beautiful friends, we gather on the lands of the Aboriginal people.
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Speaker 2: She's on the Money.
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Speaker 3: She's on the Money. Hello and welcome to She's on
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Speaker 3: the Money. The podcast is going to make you feel
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Speaker 3: like the smartest person in the room. The next time
0:56
Speaker 3: someone brings up investing at a dinner party, it sounds
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Speaker 3: like fun by already funded in a party. Hey, that's
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Speaker 3: what happens in my house. Sorry, Oh my god, sat
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Speaker 3: down see, I'm excited, and today we're tackling the word
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Speaker 3: that the entire Internet has decided is the answer to
1:10
Speaker 3: every single money question. Just buy an ETF. They do,
1:15
Speaker 3: they do, and you know what it could be? Could
1:17
Speaker 3: be the answer. If I had a dollar for every
1:19
Speaker 3: time I've seen that in a comment section, I would
1:21
Speaker 3: have enough money to buy a very confusing ETF that
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Speaker 3: I don't fully understand. Because here's my problem. Everyone says it,
1:27
Speaker 3: nobody explains it. What is an ETF? What is actually
1:30
Speaker 3: inside one? How do you buy it? What happens after
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Speaker 3: you buy it? Do you just wait? Today we are
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Speaker 3: answering all of it. Here's what we're covering, what an
1:38
Speaker 3: ETF actually is in plain English. Why ETFs have become
1:41
Speaker 3: the investing tool of choice for everyday Australians. A proper
1:45
Speaker 3: look at two of the most popular ETFs in the
1:47
Speaker 3: She's in the money community, and what is actually inside
1:50
Speaker 3: of them? How to physically buy your first one, and
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Speaker 3: what to do and what not to do once you
1:54
Speaker 3: have with me? As always is victoria divide my victoria divison.
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Speaker 4: Hello, I'm very excited about this. I've tested out a
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Speaker 4: new model. So someone messaged and was like I really
2:06
Speaker 4: wish that you would explain at the start of an
2:08
Speaker 4: episode exactly what you're covering before getting into it. And
2:10
Speaker 4: I was like, oh, okay, how to tell you this,
2:12
Speaker 4: But that's what the show notes are for. Oh but yes,
2:15
Speaker 4: I tried it. You just summarized everything we're going to
2:18
Speaker 4: go over. So if people like that, slide into our
2:20
Speaker 4: DMS and let us know, we're open to feedback. Absolutely,
2:24
Speaker 4: contrary to popular belief, I actually don't know what I'm doing.
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Speaker 3: I have just been making it up and so far.
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Speaker 4: So good.
2:31
Speaker 3: Well you're a money girl, Yeah, I'm not a content girl. No, exactly,
2:34
Speaker 3: we need feedback. If you guys have anything that you
2:37
Speaker 3: want me to change my hair or my voice, I
2:39
Speaker 3: can do that. No, no, we can't.
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Speaker 4: We used to get feedback of people saying, oh my god,
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Speaker 4: Victoria's voice is so annoying.
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Speaker 3: It's a choice to listen to my podcast. That's true,
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Speaker 3: and unfortunately voices aren't choices. Yeah, voices are choices back, Sorry, guys.
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Speaker 4: Oh well, I'm really excited for this one because ETFs
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Speaker 4: are obviously one of my favorite topics because they've made
3:00
Speaker 4: investing incredibly accessible for our community in a way that
3:04
Speaker 4: just was not possible twenty years ago. I mean, the
3:07
Speaker 4: fact that you can invest in three hundred different like
3:12
Speaker 4: Australian companies for as little as you want from your
3:15
Speaker 4: phone in like five minutes is actually remarkable.
3:19
Speaker 3: Yeah, that's so true. Like if you go back, I
3:22
Speaker 3: know that you.
3:22
Speaker 4: Weren't in the investing world then, but like ten fifteen
3:25
Speaker 4: years ago, which is kind of scary because I was
3:28
Speaker 4: working then.
3:29
Speaker 3: Isn't that scary? You're like three.
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Speaker 4: It just wasn't an option for me, and it wasn't
3:33
Speaker 4: an option for anyone in our community. I mean I
3:36
Speaker 4: remember selling managed funds as a financial advisor. I'm not
3:40
Speaker 4: selling them, but like setting clients up into them, and
3:42
Speaker 4: even me as the advisor being like, oh, one day
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Speaker 4: I might have enough money to be able to access
3:48
Speaker 4: that investing option. Yeah, because it was a minimum investment
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Speaker 4: of ten thousand dollars.
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Speaker 3: Oo my goodness.
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Speaker 4: And not only did I not have that money, yeah,
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Speaker 4: I also would have if I did have that money,
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Speaker 4: been really scared to make the jump. Just dumping ten
4:01
Speaker 4: grand into one thing at one time totally wes being
4:05
Speaker 4: able to chuck five bucks in chaseas that feels pretty reasonable. Yeah,
4:09
Speaker 4: from little things, big things grow exactly. And when you
4:12
Speaker 4: say like that, it does sound remarkable, but also something
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Speaker 4: that's within our realm of extality.
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Speaker 3: So where do we actually start? So we start with
4:19
Speaker 3: the name.
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Speaker 4: And we have done this before, so they say, in
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Speaker 4: our first ETF for Udio, we have done a whole
4:24
Speaker 4: many investing series. We've done you know what ETFs are,
4:28
Speaker 4: how they work before. But this time I've collated all
4:32
Speaker 4: your questions from the Facebook group. I've been deep diving
4:35
Speaker 4: into like why are people still confused? Like, not only
4:38
Speaker 4: why are we still confused? Why have we got analysis
4:40
Speaker 4: paralysis over buying our first ETF if that's a decision
4:43
Speaker 4: that we've made. So we're just wiping the slate clean.
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Speaker 4: This is your ETF episode.
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Speaker 3: Let's go.
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Speaker 4: We're gonna start with the name. What does ETF actually
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Speaker 4: stand for? ETF is an exchange traded fund. Okay, it
4:58
Speaker 4: doesn't sound that exciting, No, not here to pitch that,
5:01
Speaker 4: But if we break those three words apart, it really
5:05
Speaker 4: tells you everything.
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Speaker 3: That you need to know. Beck, Okay, exchange traded fund. Yes,
5:09
Speaker 3: I'm struggling to figure out how it relates here, but
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Speaker 3: break it down for me.
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Speaker 4: Okay, So let's start with fund first, So a fund
5:18
Speaker 4: big pool of money back, and it's from lots of
5:20
Speaker 4: different investors.
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Speaker 3: It's not just from your I.
5:22
Speaker 4: There's thousands, sometimes hundreds of thousands, sometimes millions of people's
5:26
Speaker 4: money used to buy a collection of investments. So think
5:30
Speaker 4: of it kind of like I always use the coals
5:32
Speaker 4: and Willies example. So we're going to still keep along
5:35
Speaker 4: the road of that analogy. Think of it like a
5:37
Speaker 4: giant shared shopping trolley and instead of going to the
5:41
Speaker 4: supermarket to buy like one item, you've called all your
5:44
Speaker 4: mates and you've.
5:45
Speaker 3: Asked them do you need anything? Wellies, like what do
5:47
Speaker 3: you need?
5:47
Speaker 4: You're going to see it as everybody has pulled all
5:50
Speaker 4: of their money together and they've filled the trolley with
5:53
Speaker 4: hundreds of different things. And the idea is that you're
5:56
Speaker 4: not just going to the shopping center and buying flour.
5:59
Speaker 4: You're going and buying a whole heap of things and
6:00
Speaker 4: getting a bigger, more diverse experience back than just popping
6:04
Speaker 4: into the shops getting your flower and leaving.
6:06
Speaker 3: Go to every single aisle.
6:08
Speaker 4: You're going to go to the frozen food, You're going
6:10
Speaker 4: to the fruit and veggies, like you're gonna get everything
6:12
Speaker 4: and you're gonna put it in your bucket or in
6:14
Speaker 4: your trolley, right, and so the idea is to get
6:17
Speaker 4: exposure to all of those things. But maybe you only
6:20
Speaker 4: had money for flour. But if all your mates have
6:23
Speaker 4: put money in, maybe we could make some cookies together
6:27
Speaker 4: because they could afford the different ingredients, and maybe like
6:30
Speaker 4: we could have some fruit before our cookies and have
6:32
Speaker 4: a more balanced diet because you wouldn't just eat flour,
6:35
Speaker 4: would you, Hey, would put it?
6:38
Speaker 3: Don't put it past us? That does make a lot
6:41
Speaker 3: of sense, okay, okay, okay, So instead of buying one
6:43
Speaker 3: company's shares, I'm buying a little bit of lots of
6:46
Speaker 3: companies exactly. Yes, And I say all the time, I
6:50
Speaker 3: would prefer a smaller piece of a bigger pie. Just
6:54
Speaker 3: give me a slipper, like little yeah, yeah, yeah, Like
6:56
Speaker 3: I prefer like a little slice instead of a whole
6:58
Speaker 3: teeny tiny pie that's not that good, like yeah, slice
7:01
Speaker 3: of the good one, you know.
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Speaker 4: So here, okay, Now let's talk about the word traded.
7:06
Speaker 4: The fund is traded on a stock exchange, and I
7:09
Speaker 4: feel like exchange traded fund. When you put those together,
7:12
Speaker 4: it just feels kind of overwhelming and you're like, oh,
7:13
Speaker 4: holy dooly.
7:14
Speaker 2: That's not for me.
7:15
Speaker 4: But a fund is traded on a stock exchange, just
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Speaker 4: like a regular company is, so you can buy and
7:21
Speaker 4: sell it during market hours. You can see the price
7:23
Speaker 4: move in real time. And it's literally the exact same
7:27
Speaker 4: process to buy a direct share as it is to
7:30
Speaker 4: gone by an ETF. Like, it doesn't take you more time,
7:32
Speaker 4: it doesn't take you more energy, it doesn't take you
7:34
Speaker 4: more research, like you literally just tick a different box,
7:37
Speaker 4: if that makes sense.
7:38
Speaker 3: Absolutely, and exchange, So.
7:41
Speaker 4: Exchange just means that it lives on the share market. Okay,
7:44
Speaker 4: so it just lives on the ASX, And I mean
7:46
Speaker 4: in Australia it lives on the AX, which is called
7:49
Speaker 4: so it's as cross like as in X, but it
7:53
Speaker 4: actually means the Australian Securities Exchange. Oh so instead of AS,
7:59
Speaker 4: it's ASX. And take the second letter of the last word,
8:02
Speaker 4: because like X exchange does that make sense? And I
8:05
Speaker 4: feel like lots of people get a little bit like, well,
8:06
Speaker 4: what's the X stand for exchange? So when you see
8:10
Speaker 4: something listed, it might be like and I'm going to
8:12
Speaker 4: use these two examples throughout this episode just because they
8:16
Speaker 4: are the two most popular ETFs with our community so
8:19
Speaker 4: VAS and VDHG, which are two vanguard ETFs that are
8:24
Speaker 4: listed on the Australian Securities Exchange. And that is kind
8:27
Speaker 4: of like your address for finding them. Okay, so you
8:31
Speaker 4: know where you may live, like you remember where they live,
8:34
Speaker 4: but it's like the address that you put in the map.
8:37
Speaker 3: Yeah, does that make sense? Absolutely? Absolutely, Okay. So it's
8:40
Speaker 3: literally fun that is traded on an exchange. Yeah, and
8:44
Speaker 3: the name is the description. Yeah, yes, understood. Yeah, so
8:47
Speaker 3: the name is the description.
8:48
Speaker 4: And the reason ETFs, I would say, have become so
8:51
Speaker 4: popular more recently is they like combine two of my
8:55
Speaker 4: favorite things. I don't know, I shouldn't get as excited
8:58
Speaker 4: about this episode. I'm like a girl, I love an ETF.
9:01
Speaker 4: But they combined diversifications, so the diversification that you get
9:05
Speaker 4: from a managed fund with the ease and the transparency
9:09
Speaker 4: of buying a share, so like it's the same, but
9:11
Speaker 4: you get diversification. And before ETFs existed, if you wanted
9:16
Speaker 4: to get like a broad exposure to the Australian market
9:20
Speaker 4: and you were like, I will want lots of shares,
9:23
Speaker 4: you would have needed to go and purchase what they
9:25
Speaker 4: called a managed fund, and that was just a fund
9:28
Speaker 4: that was similar to an ETF, but it had like
9:31
Speaker 4: a head honcho. It was really smart and charged lots
9:34
Speaker 4: of fees to manage your fund. You might have gone
9:36
Speaker 4: and seen a financial advisor who might have picked like
9:39
Speaker 4: individual shares to make up your personal fund or your
9:42
Speaker 4: personal portfolio, but they often had high fees. And then,
9:46
Speaker 4: as I was mentioning before, really high minimum investment amounts
9:49
Speaker 4: like ten grand sometimes, which obviously is not that accessible. Yeah,
9:54
Speaker 4: and now you can do it basically with the price
9:57
Speaker 4: of one unit on a lot of platforms which you
10:00
Speaker 4: know VIDHG and vas so trading just over seventy dollars
10:05
Speaker 4: a share at the moment. But if you're on a
10:07
Speaker 4: platform and this is not promo, but like it is
10:09
Speaker 4: promo in a way, if you're on a platform like
10:11
Speaker 4: shares Is, who offer fractional investing, you can buy five
10:15
Speaker 4: dollars worth of that totally.
10:17
Speaker 3: Okay, this has saved me because I tell you what,
10:19
Speaker 3: that's the only way that some of us are investing.
10:21
Speaker 4: Well, yeah, so that's kind of helpful, right because you
10:24
Speaker 4: get the thing that you want. Yeah, But if I
10:26
Speaker 4: said to you back, well, to get you know vas,
10:28
Speaker 4: which is just like the Vanguard's very stereotypical, like exposure
10:33
Speaker 4: to the top two hundred companies in Australia go sexy. Oh,
10:36
Speaker 4: the minimum investments seventy dollars for a lot of people
10:39
Speaker 4: in our community. Not only is that not something that
10:41
Speaker 4: they can do right this moment, also it feels like
10:44
Speaker 4: a lot of money. For the first time that you're investing.
10:46
Speaker 4: You're like, oh, well, you know, we all feel like
10:49
Speaker 4: the share market's going to lose us money, so you're
10:51
Speaker 4: already apprehensive about putting it in.
10:54
Speaker 3: And then yeah, I just feel like five bargs so
10:56
Speaker 3: much easier. That's so true, And it just feels like
10:59
Speaker 3: clean something like that coffee costs more these days. Yeah,
11:02
Speaker 3: that genuinely is quite a big deal.
11:04
Speaker 4: Beck, We've done a real quick recap on what an
11:06
Speaker 4: ETF is. But why has everyone from your I guess
11:10
Speaker 4: financially savvy best friend to Every Money podcast decided that
11:15
Speaker 4: ETF's are the big dog move like everybody has? And girl,
11:20
Speaker 4: I have three very compelling reasons. Okay, do tell all right,
11:24
Speaker 4: So one, you're not going to be surprised. I already
11:26
Speaker 4: touched on this. I've spoiled my own surprise. It's diversification, and.
11:30
Speaker 3: I would say this is the biggest one.
11:32
Speaker 4: This is like if anyone is like, quickly, why a
11:35
Speaker 4: ETF so important, I'd be like, diversification. So if you
11:38
Speaker 4: buy shares in a single company and that company has
11:40
Speaker 4: a really awful year, your investment takes the full hit,
11:45
Speaker 4: like they have the most awful year ever beck and
11:48
Speaker 4: they lose twenty percent of their share price. Cool, that's
11:51
Speaker 4: what your portfolio lost too. That gives me the ick.
11:56
Speaker 4: But if you bought or you owned a broad ETF
12:00
Speaker 4: that holds like let's just say, like two or three
12:02
Speaker 4: hundred different companies, and one of them has a terrible year,
12:06
Speaker 4: it barely moves the needle on your overall investment because
12:10
Speaker 4: the other wins of the two hundred and ninety nine
12:14
Speaker 4: they kind of cushion it, so instead of you feeling
12:17
Speaker 4: a twenty percent drop, which does happen to some companies
12:19
Speaker 4: and you cannot predict. Unfortunately. This is what people, I
12:24
Speaker 4: guess mean when they say, don't put all your eggs
12:25
Speaker 4: in one basket. So don't take your three hundred eggs
12:29
Speaker 4: that you might have and put them all in, you know,
12:32
Speaker 4: west farmer's basket, because if West Farmers has a.
12:34
Speaker 3: Bad year, you're gonna feel the wrath.
12:37
Speaker 4: Yeah, But an ETF is basically a basket that has
12:40
Speaker 4: three hundred different eggs in it, and like, if one breaks.
12:44
Speaker 3: We've still got two hundred ninety nine eggs right such,
12:46
Speaker 3: it's dropping the ocean. Okay.
12:48
Speaker 4: I feel like that's just the analogy that everybody in
12:51
Speaker 4: this industry uses.
12:52
Speaker 3: I love it. Okay, it's such a good way to
12:54
Speaker 3: put it. That makes a lot of sense.
12:55
Speaker 4: Reason too, Yeah, money cost. Like literally most ETFs are
13:01
Speaker 4: what we call passively managed. So you know how I
13:03
Speaker 4: was saying before, Oh, you would have to buy a
13:05
Speaker 4: managed fund. They are what's called actively managed. That's expensive.
13:10
Speaker 3: I see.
13:10
Speaker 4: Passively managed, on the other hand, is a little bit cheaper.
13:14
Speaker 4: So instead of having a really expensive team of fund
13:16
Speaker 4: managers who are trying to pick winning stocks, and ETF
13:20
Speaker 4: will track an index. It's simply just a list of
13:23
Speaker 4: companies who meet certain criteria. Like it's actually not that deep.
13:27
Speaker 4: So for example, you've heard me say, heybag the SMP
13:30
Speaker 4: three hundred or the ASX three hundred. Every time you
13:35
Speaker 4: hear ASX or SMP and a number that is just
13:38
Speaker 4: the top number of companies on a particular exchange. So
13:43
Speaker 4: ASX three hundred is the top three hundred companies in Australia,
13:47
Speaker 4: SMP five hundred is the top three hundred companies in America.
13:51
Speaker 3: And that is just how it works.
13:53
Speaker 4: So the ETF's job is just to buy every single
13:56
Speaker 4: three hundred like one of those companies in proportion to
13:59
Speaker 4: their site. So there's no guessing. They just follow a list.
14:03
Speaker 4: There's no like, oh, should we trade this for that
14:05
Speaker 4: and make active decisions and have some really expensive like
14:09
Speaker 4: research analyst who goes out and does heaps of research
14:12
Speaker 4: and like you know, digs deep and goes pick. I
14:14
Speaker 4: think this is a good investment for these really valid reasons. Yeah,
14:18
Speaker 4: that's expensive. No, no, no, just buy the top three
14:20
Speaker 4: hundred companies and will.
14:21
Speaker 3: Work it out later. Like it's not that deep.
14:24
Speaker 4: And because there's little active management, because we're not asking
14:27
Speaker 4: someone to go out and do a heap of grunt work.
14:29
Speaker 4: They don't have a whole team being paid hundreds of
14:31
Speaker 4: thousands of dollars a year. The fees are really low,
14:34
Speaker 4: so vas they charge zero point one four percent per year. Okay,
14:41
Speaker 4: that's postable. What's that actually mean? If you made a
14:44
Speaker 4: ten thousand dollars investment, your investment fees are fourteen dollars.
14:48
Speaker 4: Oh yeah, it's not bad. Actually, So a traditional managed fund,
14:51
Speaker 4: though BECK would charge one to two percent, and so
14:56
Speaker 4: one percent of ten thousand dollars is a lot more
14:58
Speaker 4: than fourteen dollars.
15:00
Speaker 2: Yeah.
15:00
Speaker 4: So that difference over you know, the life of your investments,
15:04
Speaker 4: so over decades is enormous.
15:07
Speaker 3: Yeah, So fourteen dollars versus potentially two hundred dollars a year. Yeah,
15:11
Speaker 3: Like that's that's big.
15:13
Speaker 4: And don't get me wrong, some people will be like, oh, well,
15:16
Speaker 4: two hundred bucks might be worth it, but the performance, yes,
15:20
Speaker 4: is about the same the same. But then on the
15:22
Speaker 4: flip side, two hundred dollars consistently is a really huge
15:26
Speaker 4: deal over time, like back stuff compounds. So then the
15:30
Speaker 4: other thing that I really like about them, and the
15:32
Speaker 4: other reason I think every man in his dog thinks
15:35
Speaker 4: this is a good idea, pretty simple, Like there's actually
15:40
Speaker 4: when you start digging into it, they're kinda boring, and
15:44
Speaker 4: we love that in the investment or like simplicity is key.
15:48
Speaker 4: How many times have you heard teachers when you're at
15:50
Speaker 4: school being like, keep it simple, stupid?
15:52
Speaker 3: He's the kids kiss method, and you'd just be like, okay, cool.
15:55
Speaker 4: Like it has been drilled into us that simplicity is key,
15:58
Speaker 4: and the same thing exist here, Like ultimately buying an
16:03
Speaker 4: ETF means that you beck don't have to go out
16:06
Speaker 4: and research individual companies or watch the news for quarterly earnings,
16:09
Speaker 4: or read market reports or you know, read people's annual reports.
16:13
Speaker 4: You ultimately end up owning the whole market and let
16:16
Speaker 4: the overall growth of the economy just do the work.
16:19
Speaker 4: Like the economy is growing great, no worries things will
16:21
Speaker 4: start popping off. The data consistently shows and this annoys
16:25
Speaker 4: me because, like, as somebody who used to work as
16:27
Speaker 4: a financial advisor who would pick individual stocks.
16:30
Speaker 3: Hmmm, maybe I should just put all my clients in ETFs.
16:33
Speaker 4: But the data consistently shows that the most professional fund
16:37
Speaker 4: managers failed to beat a simple index over the long term.
16:42
Speaker 3: Is that right?
16:43
Speaker 4: So the boring approach arguably is actually the smartest apprice Okay.
16:47
Speaker 3: Okay, So that makes you feel a lot better about
16:48
Speaker 3: not understanding individual companies. Yeah, like you didn't have to
16:52
Speaker 3: do the work. You don't need to just get an
16:53
Speaker 3: ETF exactly like keep it simple, stupid, Yeah, hell, yeah,
16:58
Speaker 3: that was pretty good from you know, my nine English teacher.
17:02
Speaker 3: She knew she she they they knew what they were
17:06
Speaker 3: talking about. I can't even remember who it was, my
17:08
Speaker 3: U nine English teacher.
17:09
Speaker 4: That's actually no, I can, oh, yeah, okay, if you
17:12
Speaker 4: went to school with me, it was mister Gavin.
17:14
Speaker 3: Mister Gavin Hu.
17:16
Speaker 4: Anyway, let's get into I guess the two ETFs that
17:20
Speaker 4: our community actually love the most, because I feel like
17:23
Speaker 4: we always talk about get an ETF, get an ETF,
17:26
Speaker 4: and then you guys are like, but what one? And
17:29
Speaker 4: we cannot give that advice. That would be giving you
17:31
Speaker 4: financial advice, and you need to look into these things yourself.
17:33
Speaker 4: But what I can do is I can deep dive
17:36
Speaker 4: into our Facebook group. I can deep dive into everything
17:38
Speaker 4: that I've surveyed you guys on, and I can tell
17:41
Speaker 4: you the two most popular ETFs that our community invests in.
17:45
Speaker 3: Okay, So this is not.
17:47
Speaker 4: A recommendation, and I feel like I have to like
17:49
Speaker 4: disclaimer it just because I don't want you going up
17:51
Speaker 4: and being like, well, that's the one Victoria recommended.
17:54
Speaker 3: I did not recommend it.
17:55
Speaker 4: No, we are just talking about it to give you
17:58
Speaker 4: a well balanced education and You're go out and you're
18:00
Speaker 4: gonna do your own research, aren't you exactly, Yes, yes, absolutely,
18:03
Speaker 4: And Beck's like, yes, I'm just gonna buy it. I will.
18:06
Speaker 3: And the first one I'm gonna buy is vas Vas
18:10
Speaker 3: Vas Vas.
18:11
Speaker 4: You're not gonna buy it, You're gonna go research it,
18:13
Speaker 4: research it, Yes, yes, and you research it.
18:15
Speaker 3: You would never.
18:16
Speaker 4: So VAS is the Vanguard Australian Shares Index ETF. So
18:22
Speaker 4: VAS it literally just has a tiny slice of the
18:26
Speaker 4: top three hundred companies in Australia and it trades on
18:29
Speaker 4: the Australian Stock Exchange like everything else that is issued
18:32
Speaker 4: in Australia, and it has the ticker code like if
18:36
Speaker 4: you're looking it up on your shares's app, you would
18:38
Speaker 4: key in the as and it would come up, and
18:41
Speaker 4: a ticker code is basically like their postcode, like their address.
18:45
Speaker 4: Every single ETF and every single direct share and every
18:48
Speaker 4: single bond that is traded on the Australian Stock Exchange
18:52
Speaker 4: will have its own ticker code and it's just basically
18:54
Speaker 4: it's address.
18:55
Speaker 3: Right.
18:55
Speaker 4: So when you buy VAS, as I said, you are
18:58
Speaker 4: buying a teeny tiny slush of three hundred of Australia's
19:02
Speaker 4: biggest companies, So that would include all the names we've
19:05
Speaker 4: already heard and walked past on the way to work
19:07
Speaker 4: this morning, Combank, BHP, CSL, Westpac, NAB, Woolies, so West
19:15
Speaker 4: Farmers I mentioned West Farmers before, they're in it as well,
19:17
Speaker 4: all of them. And when you make that purchase, you're
19:20
Speaker 4: buying all of those in that one purchase. So I'm
19:23
Speaker 4: not betting on any one of those companies doing well.
19:25
Speaker 4: I kind of own a bit of.
19:26
Speaker 3: All of them. Yeah.
19:27
Speaker 4: Yeah, Like it's kind of like making no decision. At
19:31
Speaker 4: the same time, it's like being like, oh, I'm not
19:34
Speaker 4: going to make a decision. I'm not going to bet
19:35
Speaker 4: on anybody. I'm agnostic. I'm just gonna believe in everybody.
19:39
Speaker 3: Like yeah, I'm so nice. I'm gonna believe in everybody.
19:42
Speaker 3: It's like you're like, you can't decide what to eat
19:43
Speaker 3: on Uberitz. So it's gonna be very single thing that
19:45
Speaker 3: would be expensive though ef ETF cheap.
19:49
Speaker 4: Yeah exactly, but good analogy, and the companies are weighted
19:53
Speaker 4: by their size in the market. So I feel like
19:56
Speaker 4: now we're getting into the like nitty gritty of it.
19:58
Speaker 4: You get all three hundred but different percentages.
20:01
Speaker 1: Got you?
20:02
Speaker 4: So the bigger the company the largest slice of the ETF,
20:06
Speaker 4: VHP alone makes up ten percent of vs. Oh wow,
20:10
Speaker 4: they really apt dog company. It's not about faith, it's
20:14
Speaker 4: just about how big that company is in our market.
20:17
Speaker 1: Got there?
20:17
Speaker 4: Four, The ETF has picked ten percent as being the
20:20
Speaker 4: right amount, and then stepping back, Combank, for example, has
20:24
Speaker 4: eight percent of that ETF. But then there's another two
20:28
Speaker 4: hundred and ninety companies that make up the rest.
20:31
Speaker 3: They squeeze it all in.
20:32
Speaker 4: So not every single company's bad day is going to
20:35
Speaker 4: ruin your day. Yeah, but you squeeze it in by
20:38
Speaker 4: even having like zero point one percent of a company
20:40
Speaker 4: inside that ETF.
20:41
Speaker 3: Okay, got you? So what does it actually cost to
20:44
Speaker 3: own it? Like the management fee?
20:45
Speaker 4: So Vas specifically has a management expense ratio which we
20:51
Speaker 4: call an meer so management expense ratio of point one
20:54
Speaker 4: four percent, which I mentioned before. So on ten grand
20:58
Speaker 4: a year, you're paying fourteen dollars or teen grand investment
21:01
Speaker 4: to be more clear, you would pay fourteen dollars in
21:04
Speaker 4: management fees. So you also don't get like a bill.
21:08
Speaker 4: They're not going to be like, hey, bang 's fourteen dollars.
21:10
Speaker 4: That's just kind of factored into the funds performance. Yeah,
21:14
Speaker 4: so when they're making money, they kind of take it
21:16
Speaker 4: out of that before you get your profit.
21:18
Speaker 3: I see, that's good to see.
21:21
Speaker 4: Never see it leave your account. That's just kind of
21:22
Speaker 4: what they take off the top before you get it.
21:24
Speaker 4: And I really like when people make it simple for me.
21:27
Speaker 4: I know, absolutely me too, and that's quite's quite cheap,
21:30
Speaker 4: less bills, more better.
21:31
Speaker 2: Yeah.
21:31
Speaker 4: And one thing I guess worth knowing about with VAS
21:35
Speaker 4: specifically is that I would say it's quite concentrated in
21:39
Speaker 4: two sectors. So financials so you've got all the big
21:43
Speaker 4: banks in there, and then resources so then you've got
21:47
Speaker 4: all of the big miners. So those two sectors make
21:50
Speaker 4: up a very very very large chunk of the Australian
21:53
Speaker 4: share market. So VAS actually gives you great Australian exposure,
21:57
Speaker 4: but it's quite tied to how.
21:59
Speaker 3: Banking and my mind is performing. If that makes sense. Yeah, definitely, Okay,
22:04
Speaker 3: is that a problem?
22:06
Speaker 4: I don't think it's a problem, and not necessarily a problem,
22:11
Speaker 4: but it's also why a lot of investors will go, oh,
22:14
Speaker 4: I'm definitely going to buy VAS. That makes sense, yes,
22:17
Speaker 4: but I also don't want exposure just to Australian I
22:22
Speaker 4: want some international exposure, and they might go, I'll do
22:26
Speaker 4: some vas and I might also purchase some international shares
22:32
Speaker 4: as well, to give me even further diversification, not just
22:35
Speaker 4: on companies you hold, but on economies. So instead of
22:39
Speaker 4: just having access to Australian economies, you also have access
22:42
Speaker 4: to like America or China or whatever you're picking right,
22:47
Speaker 4: which I think is the perfect lead in to the
22:50
Speaker 4: community's other favorite ETF, which is VDHG VDHG VDHG, which
22:56
Speaker 4: I really find high growth high growth, which is not
23:00
Speaker 4: Victoria Divine High Growth. But how sick would it be
23:03
Speaker 4: to one day have my own AHF. That would be
23:04
Speaker 4: a would cool and also kind of cute. Nobody else
23:08
Speaker 4: would care, but I'd be like, I've made it. Oh
23:10
Speaker 4: my god, didn't you think that you made it when
23:12
Speaker 4: you wrote a book. I'd be like, no, I got
23:13
Speaker 4: my own ATF, big Dog. So VDHD is not Victoria
23:17
Speaker 4: Divine Diversified High Growth Fund. It's actually the Vanguard Diversified
23:21
Speaker 4: High Growth Fund, and it is often called an ETF
23:25
Speaker 4: of vtfs. Okay, okay, So it's not like BAS which
23:31
Speaker 4: holds the top three hundred, but When you purchase VDHG,
23:36
Speaker 4: you're buying a fund that itself kind of holds a
23:38
Speaker 4: whole collection of other Vanguard funds in Australia. It also
23:42
Speaker 4: holds internationally developed markets and emerging markets and a really
23:45
Speaker 4: small slice of bonds because it lacks a little bit
23:48
Speaker 4: of stability, and all of it is sitting inside one
23:51
Speaker 4: investment that is like automatically rebalanced for you.
23:54
Speaker 3: Okay, So an ETF that owns other ETFs. Yes, something
23:58
Speaker 3: very that's something very satisfying about this, Like, yes, feeling nice.
24:02
Speaker 4: So we explained diversification. It's like, oh, we took your
24:06
Speaker 4: diversification and we doubled it and passed it on to
24:08
Speaker 4: the next person.
24:09
Speaker 3: Yeah yeah, yeah.
24:10
Speaker 4: So think of it like this vas is ordering a
24:14
Speaker 4: really good meal from one restaurant. This goes back to
24:16
Speaker 4: like I don't know your Uber eats, okay, but VDHG
24:20
Speaker 4: is like a meal delivery. It's like uber eats that
24:23
Speaker 4: sources dishes from different restaurants, but from all around the
24:27
Speaker 4: entire world, and then it like brings them to your
24:30
Speaker 4: house and puts them on the table as like an
24:32
Speaker 4: entire spread. So you're not just ordering from one restaurant
24:35
Speaker 4: and different recipes and different like meals, Like you get
24:39
Speaker 4: global diversification without having to do any of the sourcing yourself,
24:43
Speaker 4: and you get to stay.
24:43
Speaker 3: On your couch. Oh okay, that sounds great. Yeah, you
24:45
Speaker 3: didn't have to do much perfect, Okay, So I just
24:48
Speaker 3: buy one thing and I get all of it. Absolutely. Yeah,
24:50
Speaker 3: you do pay a bit more for it.
24:52
Speaker 4: I'm not saying it's expensive, but you, like, we've obviously
24:55
Speaker 4: just explained that it's a bit more complex than VAS,
24:58
Speaker 4: so it's more expensive for you know, some times you
25:00
Speaker 4: get what you pay for. And I've said before, and
25:02
Speaker 4: I think I wrote in my book, you pay peanuts,
25:03
Speaker 4: you get monkeys. Yes, So the management fee for VDHG
25:08
Speaker 4: is point two seven percent per year, which is a
25:12
Speaker 4: little bit higher, but it's literally because there's more going
25:15
Speaker 4: on inside, more decisions, there's more people that work on this.
25:18
Speaker 4: But still I would say incredibly cheap in comparison to
25:22
Speaker 4: other managed funds. And when I say in comparison to
25:25
Speaker 4: other managed funds, I would say the average of managed
25:28
Speaker 4: funds is about one percent okay, zero point two seven percent.
25:31
Speaker 4: That's pretty good.
25:32
Speaker 3: So it's kind of like the truly hands off, really
25:36
Speaker 3: care free, hands off I know everything about it option yeah,
25:39
Speaker 3: and a lot of people do pick it for that reason. Sure.
25:43
Speaker 4: The way that Vanguard has designed it is so that
25:47
Speaker 4: it's like a complete set and forget portfolio, all in
25:50
Speaker 4: one ETF, which is why it's literally so popular with
25:54
Speaker 4: our community and with people who are starting out and
25:56
Speaker 4: just go, I really want something simple.
25:58
Speaker 3: I want something that gives me an instant put flo that.
26:01
Speaker 4: You know, hypothetically, if I didn't want to go shopping
26:04
Speaker 4: for any other ETFs like that one would be enough,
26:07
Speaker 4: and they pick that. I would say the trade off here, though,
26:11
Speaker 4: is that you don't have any control over the specific mix.
26:15
Speaker 4: You just get what VDHG gives you, and they can
26:18
Speaker 4: make decisions on what they pull out of and put
26:21
Speaker 4: into that portfolio. But for most people they don't care,
26:24
Speaker 4: and they're like, that's absolutely fine. Sure, I'm happy for
26:26
Speaker 4: you guys to make those decisions for me.
26:28
Speaker 3: Sure, okay. So VAS versus VDHG, how do you choose?
26:34
Speaker 3: How do you choose?
26:35
Speaker 1: So?
26:35
Speaker 4: I get asked that all the time, and I cannot
26:38
Speaker 4: tell you which one to choose, but I can tell
26:40
Speaker 4: you the thought process and why you would pick one
26:42
Speaker 4: over the other. And this then extrapolates out to other
26:46
Speaker 4: like investment houses. Right, So when I talk about Vanguard,
26:51
Speaker 4: Vanguard at an investment house, but you would have like
26:54
Speaker 4: a Beta shares as well. So there's like lots of
26:56
Speaker 4: different other investment houses and they're kind of like the
26:59
Speaker 4: brand of ETA, if that makes sense.
27:01
Speaker 3: So honestly, neither option is bad.
27:05
Speaker 4: Like I don't look at any ETF on the Australian
27:08
Speaker 4: Stock Exchange and go, oh, that's terrible. Like I think
27:10
Speaker 4: all of them have their purpose and their reasoning and
27:14
Speaker 4: good reasons behind why people might purchase them. But VAS,
27:18
Speaker 4: I would say, has been seen to be a good
27:21
Speaker 4: decision when you just specifically want Australian shares. Yeah, when
27:25
Speaker 4: you just like give me Australian shares, I want a
27:27
Speaker 4: really cheap fee, and I'm really happy to you know,
27:31
Speaker 4: talk about international exposure later or buy something different later
27:34
Speaker 4: and you know, manage that in a different way. You're
27:39
Speaker 4: kind of starting with Australia first. So a lot of people,
27:42
Speaker 4: if they're entering their like investment journey, They'm like, oh, oh,
27:46
Speaker 4: I just really like VAS because like it's just Australia
27:49
Speaker 4: and I'm just gonna buy home and I'm just gonna
27:52
Speaker 4: buy that and then I'll see what I add later. Yeah,
27:54
Speaker 4: that it makes sense absolutely, But then VDHG is a
27:58
Speaker 4: great choice if you want global diversification immediately and you
28:02
Speaker 4: want to keep it relatively simple. And when I say simple,
28:05
Speaker 4: I don't mean ADHD is simple. I mean the decision
28:07
Speaker 4: to buy it is simple because you don't have to
28:09
Speaker 4: lift a finger. Yeah, but you're also happy paying a
28:11
Speaker 4: slightly higher fee for the.
28:13
Speaker 3: All in one convenience. Yeah, okay, okay.
28:16
Speaker 4: And a lot of people in our community actually own
28:18
Speaker 4: both and mix it and change it and like they go, oh, yeah,
28:22
Speaker 4: I really want both, and that's a really good idea.
28:24
Speaker 3: Personally, I own both. I like both.
28:28
Speaker 4: Okay, I'm not saying that that's my entire portfolio, but like,
28:32
Speaker 4: you don't have to just pick one, if that makes
28:34
Speaker 4: sense anythink a lot of people go, oh, which ETF.
28:36
Speaker 3: Did you pick?
28:37
Speaker 4: I don't know.
28:37
Speaker 3: Add dabble, yeah, dabble. Well, it's like one right answer
28:42
Speaker 3: because you don't want to regret. You don't want to
28:43
Speaker 3: get to the end of your life and be like
28:44
Speaker 3: I should have done this.
28:45
Speaker 4: Exactly, And there genuinely isn't one right answer. Like I
28:49
Speaker 4: feel like everyone comes to us back and goes, oh,
28:51
Speaker 4: what's the right answer, like, what's the best ATF?
28:54
Speaker 3: There isn't one.
28:55
Speaker 4: It's just what's aligned to your goals and your values
28:58
Speaker 4: and what you want to achieve. What matters more than
29:01
Speaker 4: which ETF you pick is actually just picking one and starting.
29:04
Speaker 4: So let's take a really quick break because I feel
29:06
Speaker 4: like I have yapped about ETFs for a while, and
29:10
Speaker 4: when we come back, I want to walk you through
29:11
Speaker 4: exactly what happens when you do go to buy an
29:14
Speaker 4: ETF for the very first time.
29:15
Speaker 3: I would say, the practical steps and the kind of
29:18
Speaker 3: like what you're.
29:19
Speaker 4: Going to see on screen and what that means, and
29:21
Speaker 4: the very common mistake I want you to avoid, so
29:24
Speaker 4: please don't go anywhere.
29:29
Speaker 3: Welcome back back.
29:30
Speaker 4: Before the break, you and I covered again exactly what
29:34
Speaker 4: an ETF is, why passive index ETFs beat most active
29:37
Speaker 4: funds on cost and then on long term performance, and
29:41
Speaker 4: we chatted specifically about VAS and VDHG. So I thought
29:45
Speaker 4: we would get into the practicalities because a lot of
29:48
Speaker 4: people start asking questions about like, well, how do you
29:51
Speaker 4: buy it?
29:51
Speaker 3: What does that mean?
29:52
Speaker 4: And I feel like knowing what an ETF is is good,
29:55
Speaker 4: but actually buying one is a different story. Like educate you,
30:00
Speaker 4: Beck till the cows come home. I could be like, oh,
30:02
Speaker 4: this is what this holds, and this holds in rahrah.
30:04
Speaker 4: But like analysis, paralysis kicks in. Many of us have
30:09
Speaker 4: taken so long to make the jump into purchasing our
30:12
Speaker 4: first ETF.
30:13
Speaker 3: Totally. But also you're like, you might give someone all
30:15
Speaker 3: the tools on how to farm, and then you're like, okay,
30:18
Speaker 3: how do I get to the farm? Yeah? Yeah, yeah,
30:20
Speaker 3: how do I?
30:20
Speaker 2: Like?
30:21
Speaker 4: Cool, I've done all of this research. I even did
30:23
Speaker 4: an agriculture degree.
30:24
Speaker 3: Yeah where farm though? Where is it has got cow?
30:30
Speaker 1: Yeah?
30:30
Speaker 3: That's so true.
30:31
Speaker 4: So let's talk about actually buying an ETF. Okay in
30:35
Speaker 4: Australia specifically because spoiler where Australian. So you need a
30:40
Speaker 4: brokerage account, Beck, You need to pick a brokerage account
30:43
Speaker 4: and that is just an account on a platform that
30:46
Speaker 4: lets you buy and sell things that are listed on
30:47
Speaker 4: the Australian Stock Exchange. Okay, there are so many different
30:52
Speaker 4: options in Australia at a lot of different price points,
30:56
Speaker 4: with a lot of different options. Everybody already knows what
30:59
Speaker 4: I'm about to say. The most popular investing platform in
31:04
Speaker 4: the Sheese on the Money community is Chazya's and there's
31:07
Speaker 4: a number of different reasons for that. The biggest one
31:09
Speaker 4: is accessibility, so they do fractional investing. They allow you
31:13
Speaker 4: to invest with as little as like one cent if
31:16
Speaker 4: you really wanted to. We obviously work with them as well,
31:20
Speaker 4: but we work with them because they are the most popular.
31:23
Speaker 3: Yeah, does that make sense.
31:24
Speaker 4: I'm kind of like, how lucky We've made friends with
31:27
Speaker 4: the most popular investing platform and now they help us
31:31
Speaker 4: bring the show to life. But then also everybody loves them,
31:34
Speaker 4: so it's a win win totally. But there are lots
31:36
Speaker 4: of different options in Australia, and I'm not saying, oh,
31:39
Speaker 4: you have to pick the one that's the most popular.
31:41
Speaker 4: Some are designed more for beginners, for example a charez Ease,
31:46
Speaker 4: but then a Chazy's is also set up for you
31:48
Speaker 4: to manage millions and I know a number of people
31:50
Speaker 4: who are managing millions on shares eas and some I
31:53
Speaker 4: would say are for more I hate the term more
31:56
Speaker 4: experienced investors. Yeah, it's just like a more technical platform.
32:00
Speaker 4: So for example, if you went to like a self Wealth,
32:03
Speaker 4: I'm not saying they're bad. I still have a self
32:05
Speaker 4: wealth account because that's what I used to use as
32:07
Speaker 4: my primary investment platform. But they have a minimum investment
32:11
Speaker 4: of five hundred dollars. They're very like, I don't know.
32:14
Speaker 4: You go to the website and immediately you just go
32:17
Speaker 4: that is a finance brew website, finance bro like.
32:20
Speaker 3: They're very technical.
32:21
Speaker 4: It's a bit more clunky, Like it's just not the
32:24
Speaker 4: user experience of you know, having a really nice overlay
32:28
Speaker 4: that it helps make it pretty like getting your graphs,
32:31
Speaker 4: getting your performance is a lot more finicky. That makes sense.
32:34
Speaker 3: I'm not saying it's bad. No, you prefer that, Yeah,
32:36
Speaker 3: hop off, go do that.
32:38
Speaker 4: I still use mine because I'm not going to remove
32:40
Speaker 4: something from a platform that I already own, Like I
32:43
Speaker 4: was just like, I'm just going to leave that there
32:44
Speaker 4: for a while.
32:45
Speaker 3: I might make a decision one day.
32:46
Speaker 4: But the main thing here is that you need to
32:48
Speaker 4: find a platform that works for you personally. And we've
32:52
Speaker 4: done a lot of comparisons on our website, done blogs,
32:55
Speaker 4: et cetera. So you can go find them. We'll even
32:57
Speaker 4: link them in the show notes.
32:58
Speaker 3: Okay, And so the term brokeridge account sounds so scary,
33:02
Speaker 3: but really it's just like setting up an account that
33:04
Speaker 3: you would anywhere else Netflix whatever.
33:07
Speaker 4: Netflix account, Mecha account, like you just setting it up
33:10
Speaker 4: so that you can purchase stuff from them, and all
33:12
Speaker 4: your infos saved so that when you're ordering from meccha online,
33:15
Speaker 4: they just ship it straight to you. Like absolutely, you
33:18
Speaker 4: just need an account. I promise, It's not scary. But
33:20
Speaker 4: they will ask you for like a lot more information
33:23
Speaker 4: than Mecca would. Like They're going to want access to
33:26
Speaker 4: your like ID and your tax file number and stuff.
33:29
Speaker 3: And that's actually completely okay, totally, so okay. Now we
33:33
Speaker 3: have an account set up. What comes next.
33:35
Speaker 4: The next is you've got your account set up, You've
33:38
Speaker 4: put some cash in it because you just direct debited
33:40
Speaker 4: it from your account. I want you to then search
33:44
Speaker 4: the ETF by its ticker code. I mean on something
33:47
Speaker 4: like Chaz's because they've got their AI search. I feel
33:49
Speaker 4: like I'm such like chezy Stan. This party isn't sponsored,
33:53
Speaker 4: I promised. But you could just type in Vanguard High
33:57
Speaker 4: Growth and it would come up, because like that mays sense.
34:00
Speaker 4: But you would usually just search for the company's ticker code,
34:03
Speaker 4: so you would type in the AS or for VDHD,
34:06
Speaker 4: you would type in VDHD and you'll see the current price,
34:10
Speaker 4: and then you'll literally be able to tap or purchase
34:13
Speaker 4: this or purchase that, and I want this many shares
34:16
Speaker 4: or I want this many dollars of this asset, and
34:18
Speaker 4: then you place an order in the same way you
34:21
Speaker 4: would click play on a Netflix movie or on the
34:24
Speaker 4: same way that you would hit order on your Meca account.
34:28
Speaker 3: It is not complex, yes, and I guess like this
34:31
Speaker 3: maybe depends on the platform, But is there a minimum
34:32
Speaker 3: amount you have to invest for specific ETFs.
34:36
Speaker 4: Yeah, so that's where it starts to get important as
34:40
Speaker 4: to what platform you picked.
34:41
Speaker 3: So like if you picked a self wealth back.
34:44
Speaker 4: And then you're like, I'm so excited to start investing,
34:46
Speaker 4: or they have a minimum investment amount of five hundred
34:48
Speaker 4: dollars and yeah, like I remember when you started, you
34:50
Speaker 4: started with like the first ten dollars you got with
34:52
Speaker 4: the SotM code, So that wouldn't get you any investments
34:57
Speaker 4: on that platform, whereas it shares is like, yeah, that
35:00
Speaker 4: gets you minimum investments. Something like a VAS is roughly
35:04
Speaker 4: ninety to one hundred bucks a unit if you're buying
35:07
Speaker 4: a whole unit and VDHG right now, in my brain,
35:10
Speaker 4: I think it's like as of recording seventy two dollars
35:12
Speaker 4: because I checked my portfolio this, So you genuinely could
35:15
Speaker 4: start with less than one hundred dollars on most platforms,
35:18
Speaker 4: but check their minimums. Okay, got you, got you, and
35:21
Speaker 4: then you can just buy like an eighth of that
35:23
Speaker 4: seventy dollars if you wanted to invest less. Okay, amazing.
35:26
Speaker 3: So that is so different to I guess, like what
35:29
Speaker 3: I assumed I thought you needed like a significant lub sum.
35:32
Speaker 3: So it is really good to know that you can
35:34
Speaker 3: just go in with whatever or depending on the platform.
35:37
Speaker 4: Yeah, and going back to the example that I used
35:38
Speaker 4: at the very start of the episode, like no longer
35:41
Speaker 4: do you have to have ten thousand dollars to get
35:44
Speaker 4: into a managed fund, but then also had ridiculously high fees.
35:48
Speaker 3: What about brokerage fees?
35:51
Speaker 4: So again important one we've talked about the fees on
35:54
Speaker 4: the actual fund. Most platforms are going to charge you brokerage,
35:58
Speaker 4: or they have to charge you brokerage because that's how
36:00
Speaker 4: the platforms make money. And they charge your brokerage when
36:03
Speaker 4: you buy something or sell something, which is separate from
36:06
Speaker 4: the ETF's management fee. So for smaller purchases, this is
36:10
Speaker 4: where I start to go. Guys, this really really matters
36:13
Speaker 4: because if you're paying a ten dollar brokerage fee, you
36:16
Speaker 4: might go whatever, it's ten dollars, But ten dollar fee
36:19
Speaker 4: on one hundred dollar purchase immediately wipes out ten percent
36:22
Speaker 4: of what you could invest. And if I said to you, babe,
36:25
Speaker 4: ten percent returns, you'd be like, yeah, great. So let's
36:28
Speaker 4: care about our brokerage fees and compare platforms before you
36:32
Speaker 4: actually open an account, looking at their fee structure for regular,
36:35
Speaker 4: smaller purchases specifically, especially if that's your plan. Okay, And
36:40
Speaker 4: so once I buy my ETF what does.
36:42
Speaker 3: It actually look like? Does anything happen?
36:44
Speaker 4: It depends if the market's are open or closed when
36:46
Speaker 4: you purchase it. If you try and purchase it when
36:49
Speaker 4: the market is closed, it'll be put through as an
36:51
Speaker 4: order and it will be fulfilled once the market opens
36:54
Speaker 4: again and it's open Monday to Friday ten or four pm,
36:58
Speaker 4: and then you'll see the units a pr in your account,
37:01
Speaker 4: usually within two business days, because it's like a little
37:03
Speaker 4: transaction that still has to happen, which is standard. So
37:07
Speaker 4: that's the standard settlement period in Australia, and the prices
37:10
Speaker 4: will go up and down day to day depending on
37:12
Speaker 4: the underlying companies, share pricing movements, and like, you'll receive
37:17
Speaker 4: what's called distributions pretty periodically, which are basically just your
37:22
Speaker 4: share of the money that those companies have made over
37:26
Speaker 4: that period of time, and then you just mostly I
37:28
Speaker 4: would say this where it gets boring.
37:30
Speaker 3: You leave it alone. You just leave it alone. No touchy, Okay, Okay,
37:33
Speaker 3: we can do that. You just leave it alone. And
37:35
Speaker 3: I cannot stress this enough.
37:36
Speaker 4: Beck That's where it gets complicated, because no one wants
37:39
Speaker 4: to leave their stuff alone.
37:41
Speaker 3: No.
37:42
Speaker 4: The single best advantage of an ETF buying strategy is
37:46
Speaker 4: the power of it being able to compound over time,
37:50
Speaker 4: and every distribution you receive, every dollar that you add
37:53
Speaker 4: every year that goes by with your money invested and
37:56
Speaker 4: growing is really important because compound only works if you
38:01
Speaker 4: know touchy. It only works if you let it work.
38:05
Speaker 4: If you sell and buy and sell, you're not helping yourself.
38:11
Speaker 4: If you're checking obsessively, you're probably just weighing heavily on
38:14
Speaker 4: your mental health. If you're reacting to news, if you're
38:19
Speaker 4: seeing stuff online and going, oh maybe I should sell,
38:22
Speaker 4: That is all chipping away at the very thing that
38:25
Speaker 4: is making your portfolio powerful. Yeah, okay, you'll stop this
38:28
Speaker 4: so hard, but you take one thing from this segment
38:31
Speaker 4: of the podcast.
38:32
Speaker 3: Yes, no touchy, no touchy, okay, touchy, we'll try all right. Now,
38:37
Speaker 3: let's really quickly touch on strategy. Okay, because buying an
38:40
Speaker 3: ETF once it's not really the point. Like, don't go
38:43
Speaker 3: in and just buy one ETF and be like Tuta,
38:47
Speaker 3: like my two year old. Every time he does something
38:49
Speaker 3: and I.
38:49
Speaker 4: Go, wow, you're done, he goes Tuda like so cute,
38:53
Speaker 4: really cute, But so you're not done. All you did
38:57
Speaker 4: was put your socks on. You have to get dressed completely.
39:00
Speaker 4: But the strategy of buying doesn't stop the second you've
39:04
Speaker 4: purchased your first one. Buying your ETFs regularly over a
39:09
Speaker 4: long period of time is what's going to create you wealth.
39:13
Speaker 4: This is called dollar cost averaging. So you pick an
39:16
Speaker 4: amount and you commit to it. I don't care if
39:19
Speaker 4: it's five dollars a month, five hundred dollars a month,
39:22
Speaker 4: two hundred dollars a fortnight, Like, I don't care what
39:25
Speaker 4: your plan is, but make a plan and try and
39:28
Speaker 4: stick to it. Because like the plan with dollar cost
39:31
Speaker 4: averaging is you invest regularly regardless of what the market
39:36
Speaker 4: is doing. I do not care what the market is doing. Beck,
39:38
Speaker 4: I don't care what your friend said. I don't care
39:39
Speaker 4: what you saw on the news.
39:41
Speaker 3: I do not care.
39:43
Speaker 4: You are still investing. Okay, market's bad invest market's good
39:46
Speaker 4: invest markets? Beck invest?
39:49
Speaker 3: When do we not invest? Beck?
39:51
Speaker 4: Never exactly? That was a truck question past with flying
39:55
Speaker 4: colors that scared me. But over time, your entry price
39:59
Speaker 4: is going to even out. Okay.
40:01
Speaker 3: I can't predict when the market's going to be good.
40:03
Speaker 3: I can't predict when the market's going to be bad.
40:05
Speaker 3: But if I buy it consistently and then average it
40:07
Speaker 3: out over time, it completely removes the temptation to time
40:11
Speaker 3: the market, which literally nobody can do reliably anyway. Yeah,
40:14
Speaker 3: that's so true on every other podcast. I'd be so
40:18
Speaker 3: rich if I could. And I've tried. I've tried, And
40:23
Speaker 3: if you can't do it, no one can. And it's not.
40:25
Speaker 4: Because I think, oh if I can't do it, no
40:27
Speaker 4: one can, Like literally no one can. And I was
40:28
Speaker 4: told no one can, and then I thought I was
40:30
Speaker 4: smarter than everybody else, and I thought I'd have a crack,
40:32
Speaker 4: and then I couldn't you couldn't I even tried. Like,
40:34
Speaker 4: if you try and you work it.
40:35
Speaker 3: Out, let me know. Okay, call me up. I'll try.
40:38
Speaker 4: If you call me up and say I can time
40:40
Speaker 4: the market, I will pay you a significant amount of money.
40:42
Speaker 3: Oh okay, well just know that's going to be my
40:45
Speaker 3: new hyperfixation. Yeah, go for it. So no one can
40:47
Speaker 3: do it? Okay, literally, no one can do it. What
40:49
Speaker 3: are the mistakes? You see? People make big mistakes, huge mistakes.
40:53
Speaker 4: Oh massive, No, The biggest mistake is not understanding what
41:00
Speaker 4: your ETF is made up of. And so you go
41:02
Speaker 4: on by a few different ETFs and then you find
41:05
Speaker 4: out they're the same. So you and I were talking
41:07
Speaker 4: before this episode. You were like, oh, V, what's the
41:09
Speaker 4: difference between like A vs. Yes, and like an A
41:12
Speaker 4: two hundred yeah or an A three hundred? And the
41:16
Speaker 4: answer is nothing nothing the investment house that has released it.
41:21
Speaker 4: And this goes back to my supermarket analogy of it
41:24
Speaker 4: being like a coals versus woolies. So you go to
41:27
Speaker 4: the supermarket and you've got blueber muffins on your list
41:31
Speaker 4: of things that you need to buy because your toddler's
41:33
Speaker 4: obsessed with them. You go to the bakery section and
41:36
Speaker 4: you pick up the packet of Blueberrie muffins, the coals
41:38
Speaker 4: ones fantastic. You could go to Woolies probably exactly the
41:42
Speaker 4: same price, five bucks four muffins, money win. But the ingredients,
41:48
Speaker 4: the way they've baked it slightly different. Same product, same
41:52
Speaker 4: exact ingredients. They might have put a little bit more
41:54
Speaker 4: flour here and there, or maybe like there's an extra
41:56
Speaker 4: egg in one, or like maybe you really like the
41:58
Speaker 4: Woolies ones.
41:59
Speaker 3: Because they have slightly more blueberries. Yeah, but like it's
42:02
Speaker 3: the same product.
42:03
Speaker 4: It's the same exact ingredients, it's just put together slightly differently.
42:08
Speaker 4: And that's where you know, I said before, You know,
42:11
Speaker 4: people in Australia or people in our community really like Vanguard,
42:15
Speaker 4: probably because they just have a really strong reputation, they've
42:18
Speaker 4: been around for a really long time. They also really
42:21
Speaker 4: like Beta Shares. They're cooking the same stuff, yeah, but
42:24
Speaker 4: they have slightly different fees, sometimes slightly different methodologies of
42:28
Speaker 4: putting different percentages of things in. But if something says
42:32
Speaker 4: A three hundred and then you've got vas and that's
42:34
Speaker 4: the top three hundred companies in Australia, maybe're cooking the
42:38
Speaker 4: same ingredients. And that's where I see people go wrong
42:41
Speaker 4: because if someone says, oh, I bought vas and A
42:44
Speaker 4: two hundred, well, why are we buying the same blueberry
42:48
Speaker 4: muffins from two different supermarkets? Yes, like, you're not actually
42:52
Speaker 4: creating the diversification that you think you are. And more
42:56
Speaker 4: ETFs doesn't mean more diversification if they hold the same thing.
43:02
Speaker 3: Yeah, okay, so you might think you're diversified but actually
43:05
Speaker 3: just have a lot of the same thing.
43:06
Speaker 4: Yeah, you need to actually understand what's inside each every
43:09
Speaker 4: single one of them. The other thing that I would
43:11
Speaker 4: say people make a mistake with is like being scared
43:15
Speaker 4: of the news, being scared of what happens when the
43:18
Speaker 4: market drops all my goodness, should I sell? And I
43:20
Speaker 4: talk about this all the time, and it is so tempting.
43:23
Speaker 4: When everything is red and your portfolio is down and
43:26
Speaker 4: you're like, oh my goodness, what have I done? The
43:28
Speaker 4: instinct is immediately going to be don't invest more, like
43:32
Speaker 4: I don't want to lose more. But we should be
43:34
Speaker 4: reframing that into sun sale sale money winn advice. Stopping
43:40
Speaker 4: means you're going to miss the recovery. Stopping means you're
43:42
Speaker 4: kind of shooting yourself in the foot. Yeah, keep on
43:44
Speaker 4: keeping on. Yeah, stop listening to what Trump is saying.
43:47
Speaker 4: It's not advice, but don't sell. Well, it's like less
43:50
Speaker 4: than what you paid for it.
43:52
Speaker 3: Keep going. We have a whole episode on that, but yeah, exactly.
43:55
Speaker 3: And we have also on Spotify a whole plainly of
44:00
Speaker 3: all of our investing episodes. So if you're like, oh,
44:03
Speaker 3: v I kind of don't want to listen to your
44:04
Speaker 3: Friday drinks or your money stories or whatever. I just
44:06
Speaker 3: want deep dive on investing, we pulled it together for you. Okay,
44:10
Speaker 3: So what are our takeaways?
44:12
Speaker 4: Okay, so first things first, you are and I'm going
44:14
Speaker 4: to give this to you as kind of like a
44:16
Speaker 4: list of stuff that you're going to do this week, okay,
44:20
Speaker 4: because I can almost guarantee that a lot of people
44:22
Speaker 4: listening haven't done this, and they're listening to this because
44:26
Speaker 4: like me, I just really need to get it together.
44:28
Speaker 3: And if you're listening and you have got it together,
44:30
Speaker 3: pop off queen.
44:30
Speaker 4: Maybe you want to buy another ETF, Maybe you want
44:32
Speaker 4: to look at whether your ETFs are overlapping what your
44:36
Speaker 4: strategy is moving forward. But first things first, you're going
44:39
Speaker 4: to research brokerage platforms. This week, you're going to look
44:42
Speaker 4: at their fee structures.
44:44
Speaker 3: Pick one, Okay, do you know what? Who cares if
44:47
Speaker 3: you picked the wrong one?
44:49
Speaker 4: Who cares if you went with the wrong one and
44:51
Speaker 4: you invest for a year and then you're like, this
44:52
Speaker 4: one's not the one for me and you change.
44:55
Speaker 3: You're allowed to change. Fine.
44:57
Speaker 4: Picking is putting you a head of most people. Yep,
45:01
Speaker 4: that's where people don't go. That's like the gateway, open
45:04
Speaker 4: the gates. Just download an app.
45:06
Speaker 3: Pick one.
45:07
Speaker 4: I don't care if you changed later. We're allowed to
45:09
Speaker 4: make mistakes. We're allowed to change our minds.
45:12
Speaker 3: And what's number two?
45:12
Speaker 4: And then the next is where are you gonna put
45:15
Speaker 4: your moneys? Are you going to just get pure Australian exposure?
45:21
Speaker 4: Is the plan to go with a vas or something similar?
45:24
Speaker 4: Or do you want global diversification? Like what's that look like?
45:29
Speaker 4: Maybe you pick both. Maybe you're like, I really liked
45:31
Speaker 4: the idea of like having two ETFs.
45:33
Speaker 3: Cool, buy two.
45:35
Speaker 4: I don't care, just buy something back, get in the market.
45:39
Speaker 4: Because the wrong answer here is actually not buying. The
45:42
Speaker 4: wrong answer is not starting. It's not oh hey, we
45:46
Speaker 4: go to brunch and at the start you said, Oh,
45:48
Speaker 4: I'm gonna be the coolest person at the dinner party.
45:50
Speaker 3: Yeah you are.
45:50
Speaker 4: No one's going to go to a dinner party and
45:52
Speaker 4: be like, oh, Beck, what ETF do you own? And
45:55
Speaker 4: then they go ooh, that's the wrong one. Like nobody
45:57
Speaker 4: ever says that. They will be like, oh, why did
45:59
Speaker 4: you pick one? I want you to be able to
46:01
Speaker 4: tell me why you picked your ETF. Okay, Oh I
46:04
Speaker 4: just picked it. Be like, oh I really liked it's
46:06
Speaker 4: holdings where I really liked the company, or you know,
46:09
Speaker 4: to be honest, I just heard a lot about it.
46:11
Speaker 4: I don't care pick. I'm just gonna push you off
46:15
Speaker 4: the edge. Oh now jump, Yeah, okay, we can do that.
46:20
Speaker 4: And then you're gonna pick a regular contribution amount, Beck,
46:23
Speaker 4: So we're gonna commit to something, something that you can
46:25
Speaker 4: genuinely afford. And it's actually okay in this economy to
46:28
Speaker 4: not be able to afford much, even if you're investing
46:31
Speaker 4: in two bucks. I don't care. I just want you
46:34
Speaker 4: to set up the behavior to put yourself in the
46:36
Speaker 4: best possible position. Paidare comes money comes in, done, take
46:40
Speaker 4: the decision out of your hands entirely. I can almost
46:43
Speaker 4: guarantee that you won't miss it. Obviously, if you were
46:46
Speaker 4: picking something like five hundred bucks, you're gonna miss that.
46:48
Speaker 4: We need a bigger strategy there. But we are making
46:51
Speaker 4: a strategy and sticking to it. I feel like I
46:54
Speaker 4: need to disclaim it that more because like people are
46:56
Speaker 4: gonna be like, but I can't afford to invest because
46:58
Speaker 4: you know, I'm like Beck and I don't have a
46:59
Speaker 4: solid right now. That is okay, but we're making a plan. Yeah,
47:02
Speaker 4: that is more than okay.
47:04
Speaker 3: Yeah. And then the last thing, you know what I'm
47:05
Speaker 3: going to say, Yeah, no touchy. Oh, it's really hard
47:09
Speaker 3: this we're touching. Leave it alone alone.
47:11
Speaker 4: You can set like quarterly check ins and check your calendar,
47:14
Speaker 4: but like, let compounding do its thing. I don't want
47:17
Speaker 4: to ruin this for you, but this is actually about
47:19
Speaker 4: delayed gratification and the magic of compound interests back. Yeah,
47:24
Speaker 4: takes at least seven to ten years to really kick in. God,
47:29
Speaker 4: so many of us have never condmitted to anything for
47:31
Speaker 4: seven to ten years.
47:32
Speaker 3: And I get it, But you have to commit to this.
47:34
Speaker 3: The self control, right, The magic of.
47:36
Speaker 4: An ETF is almost entirely in leaving it alone and
47:40
Speaker 4: no touchy.
47:41
Speaker 3: It's a gorgeous lesson, I tell you what I've got.
47:44
Speaker 3: I'd been putting it off for a little bit because
47:45
Speaker 3: I didn't really understand it, but now I can, and
47:48
Speaker 3: hopefully the people listening is they're also ready. Let's talk together,
47:51
Speaker 3: go do it.
47:52
Speaker 4: And then no touchy, because right now so many of
47:54
Speaker 4: you are no touchy, haven't done it? Okay, so like,
47:57
Speaker 4: let's slip that anyway.
47:59
Speaker 3: That's hard. That's everything from us.
48:01
Speaker 4: If this episode finally got you going and ETF is
48:03
Speaker 4: for me or I really want to start investing, please
48:06
Speaker 4: share it with one of your friends who is also
48:08
Speaker 4: in the same position as you, and we'll see you
48:10
Speaker 4: back here on Friday for Friday drinks with all the fam.
48:13
Speaker 3: Bye, guys.
48:19
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48:22
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48:25
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48:29
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