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Bricks vs Shares: Here's how the new tax regime changed the maths · The Money Puzzle

• 0:10
  Speaker 1: Welcome to The Money Puzzle. I'm your host, Julianne Sprague,
• 0:14
  Speaker 1: a wealth editor at The Australian. I am filling in
• 0:16
  Speaker 1: for James Kirby today, and we thought we could get
• 0:19
  Speaker 1: stuck into the great Australian debate. What is better, investing
• 0:24
  Speaker 1: in property or shares? Now, maybe you've invested in both,
• 0:28
  Speaker 1: but I think many of us like to have a
• 0:30
  Speaker 1: chat with our friends and our family about which asset
• 0:34
  Speaker 1: class has done better. Now, over the journey, property, of course,
• 0:38
  Speaker 1: we know has done exceptionally well. So too have international stocks.
• 0:43
  Speaker 1: But if you had to put all of your money
• 0:45
  Speaker 1: on one, which one are you going to bet on? Well,
• 0:49
  Speaker 1: Anthony Albanese and his treasurer, Jim Chalmers, they have turned
• 0:53
  Speaker 1: the debate on its head. The massive changes to capital
• 0:56
  Speaker 1: gains tax and negative gearing means the rules have shifted.
• 1:01
  Speaker 1: And so what does that mean for investment outcomes? Are
• 1:04
  Speaker 1: you better off backing property still, even with the changes?
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  Speaker 1: Or should you pivot and should you be buying shares?
• 1:12
  Speaker 1: And if you're buying shares, where should you be focusing?
• 1:16
  Speaker 1: How do you build your future wealth? Someone who's incredibly
• 1:20
  Speaker 1: curious about this and has spent some time doing some
• 1:23
  Speaker 1: analysis on which is better, property or shares, is StockSpot
• 1:27
  Speaker 1: founder and CEO, Chris Breike. Now, he is one of
• 1:31
  Speaker 1: the most trusted voices in Australian finance. He bought his
• 1:35
  Speaker 1: first share when he was just 10 years old. I
• 1:38
  Speaker 1: don't know about you, but I reckon I was investing
• 1:40
  Speaker 1: in lolly bags, but Chris was buying shares at 10.
• 1:44
  Speaker 1: He became a portfolio manager at UBS and then, as
• 1:47
  Speaker 1: I mentioned, is now the founder and CEO at StockSpot. Chris,
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  Speaker 1: thanks so much for joining us today on The Money Puzzle.
• 1:52
  Speaker 2: Thanks for having me back on and that very kind intro.
• 1:55
  Speaker 1: Now, before we get stuck into all of the numbers
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  Speaker 1: and this analysis that you've recently done, I did mention
• 2:01
  Speaker 1: that you were buying shares as a 10-year-old. How on
• 2:04
  Speaker 1: earth do you decide that you're buying shares at 10?
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  Speaker 1: How do you know? a company called Savage Resources is
• 2:10
  Speaker 1: worth an investment and how much money are you spending
• 2:13
  Speaker 1: as a 10-year-old buying it?
• 2:15
  Speaker 2: Well, yeah, it's a funny story. I didn't know that
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  Speaker 2: Savage Resources was going to be a good investment, but
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  Speaker 2: I think when I was 10 and my brother was
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  Speaker 2: even a bit younger, he was eight at the time,
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  Speaker 2: I remember my old man sat us down and explained
• 2:27
  Speaker 2: in a very basic way what the share market was,
• 2:29
  Speaker 2: that you got to invest any savings that you have
• 2:32
  Speaker 2: rather than putting it into the bank account. You could
• 2:35
  Speaker 2: basically give it to businesses in Australia and around the
• 2:37
  Speaker 2: world to help them grow. And then in return, you
• 2:40
  Speaker 2: can share in their growth and their profits. And I
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  Speaker 2: thought it was a pretty fascinating idea as a kid.
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  Speaker 1: But you could also buy like lollies at the local
• 2:48
  Speaker 1: store or something with it as well. You could see
• 2:51
  Speaker 1: the benefit of not doing that.
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  Speaker 2: Ultimately, that probably kind of made me more interested in
• 2:55
  Speaker 2: the market as it made me realize, wait, this is
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  Speaker 2: a way I can save up not having to go
• 2:58
  Speaker 2: work at Woolies or do babysitting, which I did a
• 3:01
  Speaker 2: bit of babysitting on the side as well. But I
• 3:04
  Speaker 2: had four younger siblings and so I very much wanted
• 3:06
  Speaker 2: to be able to move out one day and get
• 3:09
  Speaker 2: out of a bit of a hectic household and just
• 3:12
  Speaker 2: visit once a week rather than be there all the time.
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  Speaker 2: So I thought the share market was my way out
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  Speaker 2: of the house into my own life.
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  Speaker 1: Oh my gosh. So maybe we have your siblings to
• 3:22
  Speaker 1: thank for StockSpot. Like if you hadn't been so motivated
• 3:24
  Speaker 1: to not live with them, maybe you wouldn't have created
• 3:26
  Speaker 1: this digital investment advisor.
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  Speaker 2: Maybe a bit. I mean, I think I have, yeah,
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  Speaker 2: I've got a great relationship with all my siblings and
• 3:32
  Speaker 2: maybe I was a bit harsh on them as a kid,
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  Speaker 2: but yeah, I was the eldest of five kids and
• 3:37
  Speaker 2: in a pretty hectic household where we were doing sport
• 3:39
  Speaker 2: and all sorts of things every day. And my very
• 3:42
  Speaker 2: kind parents were driving us around to all of that.
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  Speaker 2: So yeah, it was pretty hectic as a kid. And
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  Speaker 2: this was just a little side hobby I found and
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  Speaker 2: became pretty fascinated in. And it was in the late
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  Speaker 2: nineties when, you know, it was sort of a similar
• 3:53
  Speaker 2: environment to now. There were tech stocks that were flying
• 3:56
  Speaker 2: at There are a few sectors of the resources kind
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  Speaker 2: of that were on fire. And yeah, I was reading
• 4:01
  Speaker 2: the paper every day, trying to learn about what companies did.
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  Speaker 2: And then dad said, look, you can, to me and
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  Speaker 2: my brother, you can both have a thousand dollars to
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  Speaker 2: invest into any company you choose on the ASX. So
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  Speaker 2: I'd remember at soccer practice on the weekdays and on
• 4:15
  Speaker 2: the weekends, I'd get the newspaper out and scroll down
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  Speaker 2: all of the companies and read about them. And I'd
• 4:19
  Speaker 2: still got my diary with cutouts of newspaper articles where
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  Speaker 2: I was reading about these companies. And yeah, as you
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  Speaker 2: sort of called out the first one, I picked was
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  Speaker 2: a little resource company called Savage Resources. I think from memory,
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  Speaker 2: it kind of was an explorer and mine copper and
• 4:33
  Speaker 2: coal and a few other sort of, you know, minerals.
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  Speaker 2: And I diarized, you know, when I bought it and
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  Speaker 2: at what price and I tracked it every week. And
• 4:40
  Speaker 2: whenever there was an article about it, I'd cut out
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  Speaker 2: the snipping and put it in my little diary.
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  Speaker 1: And how'd you go?
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  Speaker 2: I keep the diary at my desk because it's a
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  Speaker 2: good reminder for me of like where it all started.
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  Speaker 1: And does the diary reveal? How did the investment go?
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  Speaker 2: So the Savage one went all right. And I think,
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  Speaker 2: I mean, it's kind of like the, I think it's
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  Speaker 2: like the gambler's fallacy. If you win at the casino
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  Speaker 2: the first time, it's dangerous because you get hooked and
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  Speaker 2: you want to do more. And also you think your
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  Speaker 2: skill that determined the result rather than just blind luck.
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  Speaker 2: And I mean, retrospectively, it was obviously blind luck that
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  Speaker 2: I made any money at all and I could have
• 5:12
  Speaker 2: easily lost it. But on that particular one, I think
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  Speaker 2: I made 20% or so. And I, you know, a
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  Speaker 2: few months later sold it and then rolled it into,
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  Speaker 2: I think at the time, MIM, you know, Mount Isa Mining, which...
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  Speaker 2: I think eventually got bought by Extrata and it was
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  Speaker 2: a big copper miner. I think mining was really where
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  Speaker 2: I first kind of was interested. Funnily enough, my brother,
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  Speaker 2: maybe he's a bit more conservative. He put his thousand
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  Speaker 2: dollars into Woolworths. He thought that was a safer bet
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  Speaker 2: and it probably was, but maybe that was a sign
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  Speaker 2: of things to come. I was the entrepreneurial risk taker
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  Speaker 2: and he was a bit more conservative.
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  Speaker 1: But did he sell out or did he leave your
• 5:45
  Speaker 1: thousand dollars invested in the 90s in Woolworths? Because maybe
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  Speaker 1: he's going all right here.
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  Speaker 2: The rub at the end of this was when we
• 5:50
  Speaker 2: wanted to cash out, we told Dan, okay, we're ready
• 5:52
  Speaker 2: to take our money out. And then he told us
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  Speaker 2: after all of that, oh, boys, sorry to tell you this,
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  Speaker 2: but it was just an exercise. I didn't actually invest
• 5:59
  Speaker 2: any money into those companies. It was only paper profits.
• 6:03
  Speaker 2: And it made me so furious. I decided that I
• 6:06
  Speaker 2: could never trust him for one. But then also, yeah,
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  Speaker 2: if I was going to make money in this area,
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  Speaker 2: I had to have my own portfolio and be able
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  Speaker 2: to control it myself.
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  Speaker 1: I love that so much.
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  Speaker 2: So, yeah, I reminded dad of that. It was probably
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  Speaker 2: him rather than my siblings.
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  Speaker 1: I'm sure you do.
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  Speaker 2: Because, you know, I was pretty fired up. And I
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  Speaker 2: think my brother did, to be fair, even better on
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  Speaker 2: Woolworths and it was the same outcome. So, yeah, we
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  Speaker 2: were very careful to get some documented facts about our
• 6:34
  Speaker 2: portfolios after that.
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  Speaker 1: Character building exercise. All right. Let's jump into some of
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  Speaker 1: the numbers that you've run for this column you wrote
• 6:42
  Speaker 1: for The Australian. So you had a look at property
• 6:46
  Speaker 1: V shares but also properties tried to determine what these
• 6:49
  Speaker 1: new rules do to the investment landscaping. It's captured front
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  Speaker 1: pages now for months. There's been a change to capital
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  Speaker 1: gains tax and then a crackdown on negative gearing. So
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  Speaker 1: you can only use negative gearing benefits for new properties only,
• 7:03
  Speaker 1: not established properties. We've seen the housing market, I wouldn't
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  Speaker 1: say fall off a cliff, but it is slowing quite
• 7:12
  Speaker 1: a lot as everyone tries to digest what's going on.
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  Speaker 1: Investors have abandoned the market completely. So you went in
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  Speaker 1: and you decided to think, how are we going to
• 7:18
  Speaker 1: work out which one is now better? So how do
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  Speaker 1: you tackle that, Chris?
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  Speaker 2: Well, yeah, I think it's a question a lot. I mean,
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  Speaker 2: our clients are asking all the time, and I know
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  Speaker 2: even I've discussed with my teammates and friends is the
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  Speaker 2: age old question, property versus shares. I think for most people,
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  Speaker 2: it's a given that if you can afford to own
• 7:34
  Speaker 2: your primary residence, it's worthwhile. And definitely in Australia with
• 7:37
  Speaker 2: the tax benefit of no capital gains tax on your
• 7:40
  Speaker 2: primary residence, there's a huge tax benefit that's not actually
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  Speaker 2: disappearing after the budget. And You know, this is one
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  Speaker 2: of the points I've been making that, you know, a
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  Speaker 2: policy that's intentionally, you know, being designed to help property
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  Speaker 2: investors is actually prioritizing, you know, most of our residential market,
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  Speaker 2: which isn't, you know, isn't investors. It's, you know, primarily
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  Speaker 2: owned by people living in their own homes. So that
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  Speaker 2: isn't impacted. But what we've always wondered is, you know,
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  Speaker 2: once people own their own home and they're looking at
• 8:08
  Speaker 2: incremental money that they're going to invest and thinking, should
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  Speaker 2: I put it in the share market? Or should I
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  Speaker 2: buy an investment property? I think the natural tendency of
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  Speaker 2: Aussies is always, for those that aren't sort of ingrained
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  Speaker 2: in markets, is to go for investment property. It's tangible. It's,
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  Speaker 2: you know, it's always there. It's sort of simple to understand.
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  Speaker 1: Is it also, it's simple to understand, because you make
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  Speaker 1: a point that you've bought your own home, so then
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  Speaker 1: you've built up equity in your own home. So it feels,
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  Speaker 1: I don't want to say it's an easy strategy, but
• 8:35
  Speaker 1: it's sort of, you can tap your home equity. Like
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  Speaker 1: you said, you can see a property Even if the
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  Speaker 1: property value is slump, you sort of still know there's
• 8:42
  Speaker 1: a valuable asset there compared to there's stocks on a market.
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  Speaker 1: If a stock crashes or a company goes bust, you
• 8:47
  Speaker 1: feel like you've done your dough completely.
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  Speaker 2: Well, that's right. I mean, the volatility in the share
• 8:52
  Speaker 2: market is a lot more visible, and I think that's
• 8:53
  Speaker 2: what turns a lot of people off shares. And look,
• 8:56
  Speaker 2: over the last 10 years, ETFs have helped that because
• 8:58
  Speaker 2: they diversify people and there's less ups and downs. But
• 9:01
  Speaker 2: just generally... Because you don't see the price of an
• 9:04
  Speaker 2: investment property every day, there's this idea that it's less
• 9:06
  Speaker 2: volatile and less risky. And like you say, people have
• 9:08
  Speaker 2: already had an experience buying their own home. They know
• 9:11
  Speaker 2: how it works. They know there's a bit of maintenance involved,
• 9:14
  Speaker 2: but it's often hard to quantify. And so we actually
• 9:17
  Speaker 2: started this about a year ago. We started to build
• 9:20
  Speaker 2: a calculator to help people work out based on their
• 9:22
  Speaker 2: own assumptions. And some of those things like, what's the
• 9:26
  Speaker 2: stamp duty in each state, for instance, and You know,
• 9:28
  Speaker 2: is it worth buying an investment property or putting that
• 9:31
  Speaker 2: money into, you know, a diversified mix of listed investments instead?
• 9:36
  Speaker 2: As we kind of went down the rabbit hole, we
• 9:37
  Speaker 2: realized there is a lot of assumptions that go behind
• 9:39
  Speaker 2: these calculations. So, you know, no wonder it's hard for
• 9:42
  Speaker 2: people to calculate. You know, there are so many variables
• 9:45
  Speaker 2: like how the cost of maintaining, you know, the investment
• 9:48
  Speaker 2: property every year, how much are you paying agents to
• 9:50
  Speaker 2: lease it out? You know, the stamp duty, as we mentioned,
• 9:53
  Speaker 2: you know, all of these and also renovations that you
• 9:56
  Speaker 2: might need to do in the future. So all of
• 9:58
  Speaker 2: these factor into the, you know, the decision, but a
• 10:00
  Speaker 2: lot of people find it hard to quantify. So we've
• 10:04
  Speaker 2: now thought, okay, now that the budget's out and more
• 10:06
  Speaker 2: people are thinking about this, we better go off and
• 10:08
  Speaker 2: actually build this and get it out there so people
• 10:10
  Speaker 2: can work it out themselves, but also see how the
• 10:13
  Speaker 2: budget actually impacts it. And because the budget, first of all,
• 10:17
  Speaker 2: it hurts both shares and property pretty equally when it
• 10:20
  Speaker 2: comes to capital gains tax because it's going to increase
• 10:23
  Speaker 2: for both of them. But it hurts property more because
• 10:26
  Speaker 2: of the loss of negative gearing. And, you know, having
• 10:30
  Speaker 2: built this calculator now, I've realized I underestimated the benefit
• 10:34
  Speaker 2: of negative gearing for people that owned investment properties just because,
• 10:38
  Speaker 2: you know, for a lot of properties, the rental yield
• 10:41
  Speaker 2: that you earn doesn't make up for your interest cost
• 10:43
  Speaker 2: and other expenses every year. And if you're having to
• 10:46
  Speaker 2: fund even more cash flow every year, you're basically missing
• 10:49
  Speaker 2: out on investment returns somewhere else. And that's what the
• 10:52
  Speaker 2: calculator shows.
• 10:53
  Speaker 1: So in one example, you used a $ 1 million established
• 10:58
  Speaker 1: investment property. The investor was on a 39% tax rate,
• 11:03
  Speaker 1: but they're out of pocket $ 27, 600 in the first year.
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  Speaker 1: That's under the old regime. And so negative gearing helps
• 11:12
  Speaker 1: offset some of this. So how does the new rules
• 11:14
  Speaker 1: change for that particular investor? How much more money have
• 11:19
  Speaker 1: they got to go find?
• 11:21
  Speaker 2: So for that investor, because they could benefit from negative gearing,
• 11:24
  Speaker 2: like the cash they had to contribute each year was
• 11:27
  Speaker 2: not as much as it is now because now they
• 11:30
  Speaker 2: basically don't get the tax shield of being able to
• 11:33
  Speaker 2: negatively gear or basically, you know, write off the difference
• 11:36
  Speaker 2: between what they're earning and what they're renting the property
• 11:40
  Speaker 2: out for. you know, that, that isn't lost entirely. And
• 11:42
  Speaker 2: so a lot of people that I speak to unaware
• 11:44
  Speaker 2: that you eventually can use that loss later on when
• 11:47
  Speaker 2: you sell the property, but it's really a cashflow issue
• 11:50
  Speaker 2: because the value of negative gearing is your ability to
• 11:52
  Speaker 2: go and use that money today. So in that example
• 11:55
  Speaker 2: that I've written about this, you know, and I think
• 11:57
  Speaker 2: it's a pretty typical example, buying an investment property for
• 12:00
  Speaker 2: a million dollars. I'm sure there's ones from a couple
• 12:03
  Speaker 2: of hundred thousand up to a couple of million, if
• 12:05
  Speaker 2: you're lucky enough in one of the big cities to
• 12:07
  Speaker 2: buy an investment property. But the investor is basically having
• 12:10
  Speaker 2: to fund an extra $ 11, 500 or so a year out
• 12:15
  Speaker 2: of pocket. And that's got to come out of obviously
• 12:17
  Speaker 2: their salaries or other earnings. And I've quantified it by saying, look,
• 12:21
  Speaker 2: if they try to recover that entirely from rent, they'd
• 12:25
  Speaker 2: actually have to increase rents by $ 221 a week. Now,
• 12:29
  Speaker 2: obviously there's no chance that you're going to be able
• 12:30
  Speaker 2: to get that through because most tenants will happily move
• 12:34
  Speaker 2: out if you try and crank up rents by $ 221.
• 12:35
  Speaker 2: So landlords are going to win.
• 12:39
  Speaker 1: You say that, yes, I think $ 221, but rental markets
• 12:42
  Speaker 1: are very tight and you can see why there's warnings
• 12:44
  Speaker 1: from the property industry that rents will go up as
• 12:46
  Speaker 1: a result because one, investors are leaving the market, but two,
• 12:50
  Speaker 1: if you need the numbers to stack up, you're probably
• 12:52
  Speaker 1: going to want to hire rent for the property.
• 12:56
  Speaker 2: Well, exactly. I mean, the government was helping to subsidize
• 13:00
  Speaker 2: lower rents effectively through negative gearing because landlords didn't require
• 13:04
  Speaker 2: the same return. And by pulling that away for anyone
• 13:07
  Speaker 2: buying a new property, obviously there is grandfathering of negative gearing.
• 13:11
  Speaker 2: So anyone that's currently leasing out a property that already
• 13:14
  Speaker 2: owned it pre-budget, you know, they're not affected. But once
• 13:17
  Speaker 2: they sell that property, if they go and buy another
• 13:19
  Speaker 2: one in the future, they basically don't get this benefit. So,
• 13:22
  Speaker 2: you know, for any incremental money, if someone now has
• 13:25
  Speaker 2: $ 100, 000 and they're deciding, should I go buy an investment property?
• 13:28
  Speaker 2: Like the numbers don't look very good at all. And so,
• 13:31
  Speaker 2: you know, new rental properties coming onto the market, I
• 13:34
  Speaker 2: would have thought, you know, there'll be a lot less
• 13:37
  Speaker 2: and their rents will be much higher because the landlords
• 13:39
  Speaker 2: need to recover that difference somehow.
• 13:42
  Speaker 1: So given, so you've developed the calculator at StockSpot, so
• 13:45
  Speaker 1: you can put a whole bunch of different figures in there.
• 13:47
  Speaker 1: You put different tax rates, different property values. You can
• 13:49
  Speaker 1: run all sorts of scenarios, but you're of the belief
• 13:52
  Speaker 1: that if you run an investment property versus an ETF
• 13:55
  Speaker 1: share portfolio, the numbers will show you that you should
• 13:58
  Speaker 1: go and invest in an ETF portfolio.
• 14:01
  Speaker 2: Well, yeah, so an important, thing that we incorporated into
• 14:04
  Speaker 2: this calculator that's worth pointing out to listeners is a
• 14:07
  Speaker 2: big miss for people when they're comparing property to shares
• 14:10
  Speaker 2: is when you have an investment property, you are having
• 14:13
  Speaker 2: to fund this cashflow every year, the difference between the
• 14:15
  Speaker 2: rent you're earning versus the interest costs. And that's money
• 14:20
  Speaker 2: that can potentially be invested elsewhere. So what we've basically said, okay,
• 14:24
  Speaker 2: is if you've got the same $ 200, 000 upfront to invest,
• 14:28
  Speaker 2: And then any negative cash flow that the property investor
• 14:31
  Speaker 2: is incurring year after year, imagine that money you're instead
• 14:35
  Speaker 2: plonking into the share market because that's money that the
• 14:37
  Speaker 2: property investors have to put into the property. And we've
• 14:40
  Speaker 2: compared that like for like over, and you can pick
• 14:42
  Speaker 2: your timeframe. We picked, I think, 30 years as the
• 14:44
  Speaker 2: default figure. Now, interestingly, prior to the budget's changes on
• 14:49
  Speaker 2: capital gains tax and negative gearing, the investment property actually
• 14:53
  Speaker 2: came out ahead by $ 300 or so thousand dollars. And
• 14:57
  Speaker 2: You know, this was largely due to the negative gearing
• 14:59
  Speaker 2: benefits more than anything, because that's the biggest difference. Now,
• 15:04
  Speaker 2: losing the negative gearing benefits for a new investor of a,
• 15:07
  Speaker 2: you know, not a new property, because obviously negative gearing,
• 15:10
  Speaker 2: you can still access for, you know, new builds. But
• 15:13
  Speaker 2: for someone buying an investment property that's an existing unit
• 15:16
  Speaker 2: and an existing block, you know, the same assumptions show
• 15:19
  Speaker 2: that they're going to be, you know, over $ 300, 000 worse off.
• 15:21
  Speaker 2: And so... The net difference of all of this is
• 15:25
  Speaker 2: about $ 635, 000 over that 30 years. So it really flips
• 15:31
  Speaker 2: property from being the most attractive to shares. All right.
• 15:35
  Speaker 1: So if it flips it, and for people to think
• 15:38
  Speaker 1: about then building their wealth, they need to start thinking
• 15:41
  Speaker 1: about shares. I mean, we were just chatting earlier about
• 15:43
  Speaker 1: Savage Resources, and really, you would say that was sort
• 15:46
  Speaker 1: of potluck. A lot of people get scared. Not scared
• 15:48
  Speaker 1: by markets, but find markets complicated, confusing. Lots of people
• 15:51
  Speaker 1: are busy investing. Do not have time to research every
• 15:54
  Speaker 1: individual company's, appreciate what you're saying about ETFs, but there's
• 15:59
  Speaker 1: all different themes that people might want to jump on board.
• 16:03
  Speaker 1: The most hyped one at the moment has been AI
• 16:05
  Speaker 1: and everything going on around that. And we've just seen
• 16:07
  Speaker 1: an absolute collapse in some of the share prices of
• 16:10
  Speaker 1: companies exposed to that. Next DC, the latest one down 40%
• 16:15
  Speaker 1: because oops, there's a problem with power supply to a
• 16:17
  Speaker 1: data center, major issue for them. So I do want
• 16:20
  Speaker 1: to have a chat to you about the themes that
• 16:22
  Speaker 1: you're advising clients and what people need to think about
• 16:25
  Speaker 1: so that they can determine what's a good story from
• 16:28
  Speaker 1: a good investment. It's a different way of thinking about it.
• 16:32
  Speaker 1: So we'll take a short break. And when we come back,
• 16:34
  Speaker 1: I want to get your top themes for investors. Welcome
• 16:52
  Speaker 1: back to The Money Puzzle. I'm Julianne Sprague, Wealth Editor
• 16:55
  Speaker 1: at The Australian, filling in for James Kirby. And we
• 16:58
  Speaker 1: are speaking to Chris Breike, Founder and Chief Executive of StockSpot.
• 17:02
  Speaker 1: His company has put out a pretty clever calculator, so
• 17:05
  Speaker 1: you can put all sorts of things in there to
• 17:06
  Speaker 1: work out what's better, property or shares. But after the
• 17:10
  Speaker 1: budget changes, it's actually becoming pretty clear, shares are going
• 17:14
  Speaker 1: to win out. So if that's where people need to
• 17:16
  Speaker 1: focus on, if that's where you've got to build wealth now,
• 17:19
  Speaker 1: what should you be looking at. There's been incredible gains
• 17:27
  Speaker 1: from AI companies or those related to AI companies, but
• 17:32
  Speaker 1: I don't know. The wheels, I won't say they're falling off,
• 17:35
  Speaker 1: but the cracks have emerged. NextDC being the latest to
• 17:38
  Speaker 1: offer up a 40% share price plunge after telling investors
• 17:42
  Speaker 1: it has a slight problem. That's an understatement, a fairly
• 17:46
  Speaker 1: big problem because it has to delay one of its
• 17:49
  Speaker 1: key data centers after a power issue. and community concerns. Chris,
• 17:54
  Speaker 1: you've been following this pretty closely. I mean, it's fair
• 17:57
  Speaker 1: sometimes for investors to shake their heads, isn't it? Because
• 17:59
  Speaker 1: you think this is the theme. It's meant to be
• 18:00
  Speaker 1: the next revolution. We can get on board. Tech is
• 18:03
  Speaker 1: where things are at. And now it looks like some
• 18:06
  Speaker 1: people are nursing some pretty heavy losses.
• 18:08
  Speaker 2: I think, I mean, you see it every cycle and
• 18:10
  Speaker 2: I've seen a few over the last 20 years or
• 18:13
  Speaker 2: so of cycles that come and go and, you know,
• 18:15
  Speaker 2: always investors get really swept up with the latest and
• 18:19
  Speaker 2: greatest investment trend, whether it's, you know, private credit or
• 18:22
  Speaker 2: AI at the moment, or, you know, years ago there
• 18:25
  Speaker 2: was crypto was hard or before that, you know, different
• 18:28
  Speaker 2: types of mining shares. So I think the problem with chasing,
• 18:32
  Speaker 2: you know, whatever's kind of in the news and what's
• 18:33
  Speaker 2: hot is you need to get a few things right.
• 18:36
  Speaker 2: And with these technology companies that you mentioned, you know,
• 18:38
  Speaker 2: not only do you need to be eventually right that
• 18:40
  Speaker 2: the technology is going to succeed, but you actually have
• 18:43
  Speaker 2: to be right that this company that you're investing is
• 18:45
  Speaker 2: the one that's going to capture the benefits of that success.
• 18:48
  Speaker 2: And also you have to be confident that investors aren't
• 18:51
  Speaker 2: overpaying for that future right now, because if everyone already
• 18:54
  Speaker 2: believes that and they're all jumping over themselves to buy it, then,
• 18:58
  Speaker 2: you know, you could be right that it's the right technology,
• 19:00
  Speaker 2: the right business, but the price is wrong. And, you know,
• 19:03
  Speaker 2: my favorite historical example of that's always Amazon, It ended
• 19:07
  Speaker 2: up being an absolutely brilliant business, one of the biggest
• 19:10
  Speaker 2: in the world now. But between 2000 and 2001, over
• 19:16
  Speaker 2: about an 18-month period, its share price fell 95%. And
• 19:20
  Speaker 2: so our advice always to clients is regardless of if
• 19:22
  Speaker 2: you're right about the future trend, you need to be
• 19:25
  Speaker 2: diversified because not many people can have a conversation with
• 19:29
  Speaker 2: their partner and say, hey, sorry, I've lost 95% of
• 19:32
  Speaker 2: our money, but don't worry, it will work out over
• 19:34
  Speaker 2: the long run. So You know, the calculator we built
• 19:38
  Speaker 2: assumes a growth rate of about 8% a year because
• 19:41
  Speaker 2: this is the broad market sort of index return over
• 19:44
  Speaker 2: the long run. Actually, it's a little bit higher than that.
• 19:46
  Speaker 2: we're a bit conservative in the calculator but you know
• 19:49
  Speaker 2: our recommendation always to clients is look if a theme
• 19:51
  Speaker 2: works out correctly if you're invested in the whole market
• 19:54
  Speaker 2: via an ETF you're going to benefit from it because
• 19:57
  Speaker 2: that index is going to grow those companies are going
• 19:59
  Speaker 2: to grow as a proportion of the market and the
• 20:01
  Speaker 2: economy and you'll benefit but if you're wrong you know
• 20:05
  Speaker 2: you're not going to be overly exposed to that either
• 20:07
  Speaker 2: and so And we do allow clients to have a
• 20:10
  Speaker 2: small tilt to different thematics, and we can talk about that.
• 20:13
  Speaker 2: But we've limited it to quite a small part of
• 20:15
  Speaker 2: your portfolio so that it can't hurt your ability to
• 20:18
  Speaker 2: earn good returns over the long run.
• 20:20
  Speaker 1: When you say limited, so what percentage of your portfolio
• 20:22
  Speaker 1: would be, are we calling it play money, fun money?
• 20:26
  Speaker 2: What is it? So we allow clients, if you imagine
• 20:28
  Speaker 2: you've got a portfolio that is globally diversified and has
• 20:31
  Speaker 2: different ETFs across countries and sectors, we allow about 20%
• 20:35
  Speaker 2: of the portfolio to be put into you know, more
• 20:38
  Speaker 2: niche type themes. And this isn't individual stocks. This is
• 20:42
  Speaker 2: like ETFs that might have 30 or 50 or 100
• 20:45
  Speaker 2: stocks in one area. And that might be a country
• 20:48
  Speaker 2: like India or Japan, or it might be a sector like,
• 20:51
  Speaker 2: you know, robotics or AI. And this allows you to,
• 20:54
  Speaker 2: you know, have a view about something. But if you
• 20:56
  Speaker 2: end up being wrong about it, each theme in our
• 20:58
  Speaker 2: portfolios is only around 6%. And so if it falls
• 21:02
  Speaker 2: by 50%, it does impact your portfolio. You might lose 3%.
• 21:06
  Speaker 2: But you won't lose all of your money and it's
• 21:08
  Speaker 2: something that you won't lose in your sleepover either.
• 21:11
  Speaker 1: So is the trick to just have broad-based.
• 21:15
  Speaker 2: ETS?
• 21:16
  Speaker 1: So it's almost index-hugging ETS and then sprinkle through some
• 21:19
  Speaker 1: of these themes. I guess what I'm trying to get
• 21:22
  Speaker 1: at here is I think property investing– it's not that
• 21:26
  Speaker 1: it seems simple but people can understand it so they
• 21:29
  Speaker 1: can tap their home equity and then it's about finding
• 21:30
  Speaker 1: the right suburb and so there's all these things that
• 21:32
  Speaker 1: go into that they want to have you know somewhere
• 21:34
  Speaker 1: that's close to infrastructure is it growth like there's all
• 21:36
  Speaker 1: these metrics you can put into determining what's a good
• 21:38
  Speaker 1: suburb to deliver the returns for an investment property we're
• 21:41
  Speaker 1: talking stocks like how do you determine what's the best theme.
• 21:45
  Speaker 2: How do you do it chris Well, I mean, if
• 21:48
  Speaker 2: you think of the job of an active fund manager
• 21:50
  Speaker 2: in the market, their whole job is to try and
• 21:51
  Speaker 2: work out what's the big macro themes that are happening
• 21:54
  Speaker 2: and what are the stocks that are going to succeed. Like, unfortunately,
• 21:57
  Speaker 2: all the evidence that comes out year after year, and
• 21:59
  Speaker 2: there's some great studies like the S & P Spiva study,
• 22:02
  Speaker 2: shows that these brilliant fund managers that have finance degrees
• 22:05
  Speaker 2: and doctorates still can't get it right because it is
• 22:08
  Speaker 2: bloody hard. It's very hard to work out what are
• 22:10
  Speaker 2: the best stocks. Are they going to succeed? Are the
• 22:12
  Speaker 2: sectors going to succeed? And are investors not overpaying for
• 22:15
  Speaker 2: them already? So Our view is most people, and I'd
• 22:18
  Speaker 2: say about 90% of our clients don't even bother by
• 22:21
  Speaker 2: picking thematics. They just say, look, give me a broad
• 22:23
  Speaker 2: spectrum of companies and assets. You know, give me some
• 22:26
  Speaker 2: Australian shares, global shares. And what happens is if you
• 22:29
  Speaker 2: own some global shares in your portfolio, naturally as companies
• 22:32
  Speaker 2: like NVIDIA do well because of AI and semiconductors, you benefit.
• 22:37
  Speaker 2: And I think in our global ETF that we have,
• 22:40
  Speaker 2: NVIDIA is now by far the biggest holding within that ETF.
• 22:43
  Speaker 2: And that's just happened gradually over time. So you do
• 22:46
  Speaker 2: end up with big parts of your portfolio exposed to
• 22:49
  Speaker 2: sectors that are doing well naturally, but you don't need
• 22:52
  Speaker 2: to kind of pick them individually. And over the long run,
• 22:55
  Speaker 2: we don't think our clients that pick things are going
• 22:57
  Speaker 2: to do any better than the ones that don't. So
• 22:59
  Speaker 2: I think that's a key point we say. However, a
• 23:02
  Speaker 2: lot of people feel happier if they've got a bit
• 23:04
  Speaker 2: more choice. And so really, it's just giving people a
• 23:07
  Speaker 2: bit more choice without allowing them to hurt their financial goals.
• 23:13
  Speaker 1: Probably the psychology of investing, right? You want to think
• 23:15
  Speaker 1: that you thought something through and you've been proven right
• 23:19
  Speaker 1: or maybe proven wrong I don't know.
• 23:21
  Speaker 2: Well yeah you only usually hear in the barbecue conversations
• 23:24
  Speaker 2: when people have had success so you know I yeah
• 23:26
  Speaker 2: you know I know when my friends haven't made money
• 23:28
  Speaker 2: because I you know at Christmas when I catch up
• 23:30
  Speaker 2: with them I don't hear about all their investments but
• 23:32
  Speaker 2: yeah I think themes allow you to you know have
• 23:35
  Speaker 2: the ability to say hey I got that one right
• 23:37
  Speaker 2: I picked that sector and it's done very well but
• 23:39
  Speaker 2: it's it's not embarrassing to have the conversation with your
• 23:42
  Speaker 2: partner when you've put a lot of your savings into
• 23:45
  Speaker 2: something and it hasn't done well, which is likely to
• 23:47
  Speaker 2: happen just as often.
• 23:49
  Speaker 1: So how do you make sure you're properly diversified though?
• 23:52
  Speaker 1: Because I think there can be, I don't know if
• 23:53
  Speaker 1: it's a trap within ETFs, but maybe you get a
• 23:55
  Speaker 1: basket of different ETFs and you assume to, well, you
• 23:58
  Speaker 1: tell yourself that because you have a range of ETFs
• 24:01
  Speaker 1: that you have a diversified portfolio. But say you've got
• 24:04
  Speaker 1: a semiconductor ETF, a robotics ETF, a few different things.
• 24:08
  Speaker 1: It's like, just because you've got three different ETFs doesn't
• 24:12
  Speaker 1: mean you're necessarily diversified?
• 24:14
  Speaker 2: No, that's right. I mean, a lot of ETFs these days,
• 24:16
  Speaker 2: and there's hundreds on the ASX, I think we just
• 24:19
  Speaker 2: hit something like 380 billion of ETFs in total. But
• 24:23
  Speaker 2: with a lot of them, the underlying holdings, which are
• 24:25
  Speaker 2: the shares or the bonds or the things within them,
• 24:28
  Speaker 2: are the same. And I think this is something a
• 24:29
  Speaker 2: lot of investors don't appreciate is if you have three
• 24:32
  Speaker 2: ETFs in your portfolio, but let's say you have an
• 24:35
  Speaker 2: Australian shares ETF and then an Australian dividend shares ETF,
• 24:39
  Speaker 2: If you actually look at the underlying holdings, they're going
• 24:41
  Speaker 2: to be very similar. The weightings might be slightly different,
• 24:44
  Speaker 2: but you're missing out on a lot of other asset
• 24:47
  Speaker 2: classes and currencies and sectors of the market. And so
• 24:51
  Speaker 2: when we think about diversification, it's diversifying across companies at
• 24:55
  Speaker 2: the basic level, like you want a broad spectrum of businesses,
• 24:58
  Speaker 2: then across sectors of the market, then across countries of
• 25:01
  Speaker 2: the world, and then across asset classes, and then across currencies.
• 25:06
  Speaker 2: And so there's lots of different aspects of diversification. And
• 25:09
  Speaker 2: if you have a good mix of all of those,
• 25:12
  Speaker 2: it doesn't guarantee a great huge return every year, but
• 25:14
  Speaker 2: it reduces a lot of risk in your portfolio because
• 25:17
  Speaker 2: if any one sector doesn't do well, and technology in
• 25:21
  Speaker 2: the early 2000s was a good example that the NASDAQ,
• 25:23
  Speaker 2: the US market focused on technology fell 80% over a
• 25:27
  Speaker 2: couple of years. If you had all of your money
• 25:29
  Speaker 2: in that sector, it would really hurt. But if you
• 25:31
  Speaker 2: had some in Australia as well, because our market did
• 25:33
  Speaker 2: relatively well during that downturn, you'd be in a much
• 25:36
  Speaker 2: better position. Okay. Noted.
• 25:40
  Speaker 1: Now you've told your investors, you sent 10 themes, I think.
• 25:43
  Speaker 1: You basically said like, these are the themes that we
• 25:44
  Speaker 1: think are emerging over the next 12 months. You can
• 25:47
  Speaker 1: tell me what it is.
• 25:48
  Speaker 2: Yeah. So we, I mean, we offer clients like a
• 25:49
  Speaker 2: curated list of different themes they can pick from. There's
• 25:52
  Speaker 2: a lot on the ASX and you can pick from
• 25:54
  Speaker 2: hundreds on the ASX, but what we do is try
• 25:56
  Speaker 2: and fine tune that list to a bunch of ETFs
• 25:59
  Speaker 2: that we think have you know, reasonable pricing, liquidity, you know,
• 26:03
  Speaker 2: that they diversify, that they're, you know, they're basically solid
• 26:07
  Speaker 2: products that are going to last over the long run
• 26:09
  Speaker 2: because some ETFs actually shut down. They don't get enough
• 26:12
  Speaker 2: interest and traction and they shut down. So we do
• 26:15
  Speaker 2: some research to work out what are the ETFs we
• 26:17
  Speaker 2: think are going to survive and, you know, provide good
• 26:20
  Speaker 2: exposure to a certain area. It doesn't mean every area
• 26:23
  Speaker 2: does well concurrently. So over the last year, you know,
• 26:26
  Speaker 2: semiconductors is a good example. I think that ETF was
• 26:29
  Speaker 2: up 100%. But there's other thematic ETFs like Australian Property
• 26:33
  Speaker 2: that didn't do well over the last 12 months. So
• 26:35
  Speaker 2: it's up to clients to choose them. And some have
• 26:38
  Speaker 2: done well and picked some of these technology themes. Some,
• 26:41
  Speaker 2: we've offered cryptocurrency as a theme as well. And if
• 26:45
  Speaker 2: you look at Bitcoin's return over the last year, it's
• 26:48
  Speaker 2: down 30%.
• 26:49
  Speaker 1: But I wanted to ask you about that because I
• 26:50
  Speaker 1: think another one is the NDIA ETF, which plays the
• 26:56
  Speaker 1: Indian economic story.
• 26:58
  Speaker 2: It's the Indian market, yeah. Yeah.
• 27:00
  Speaker 1: So it hasn't performed terribly well over the past 12 months,
• 27:02
  Speaker 1: but you obviously believe that this is an area that
• 27:05
  Speaker 1: perhaps will deliver for investors at some point?
• 27:08
  Speaker 2: Well, yeah. So we offer a few individual country options.
• 27:11
  Speaker 2: Like we have a European option, but also a Japanese option,
• 27:14
  Speaker 2: a Chinese share option. A lot of these are actually
• 27:17
  Speaker 2: built into our portfolios anyway. So India fits within the
• 27:20
  Speaker 2: emerging markets section of our portfolios. But we have some
• 27:24
  Speaker 2: clients that ask us, hey, Hat, you know, I really
• 27:26
  Speaker 2: believe in the Indian growth story. I think it's an
• 27:28
  Speaker 2: economy that's going to, you know, really succeed over the
• 27:31
  Speaker 2: next 20 years, you know, rather than only having 1%
• 27:34
  Speaker 2: of my portfolio in India, how can I have a
• 27:36
  Speaker 2: bit more? And that's where a theme would fit in
• 27:38
  Speaker 2: like this India ETF. I mean, it's interesting over the
• 27:42
  Speaker 2: last year, the reason India hasn't done well is partially
• 27:45
  Speaker 2: due to the reason AI and semiconductors have done well,
• 27:48
  Speaker 2: which is like India's great strength, but one of its
• 27:51
  Speaker 2: great strengths is its low cost of labor. But AI
• 27:54
  Speaker 2: is actually a threat to low labor costs because rather
• 27:57
  Speaker 2: than outsourcing to a call center in the past, you
• 28:00
  Speaker 2: can actually automate this through an AI agent. And so
• 28:04
  Speaker 2: I think some of those AI trends have actually hurt India.
• 28:07
  Speaker 2: And again, this shows the benefit of diversification. If, let's say,
• 28:10
  Speaker 2: for some reason, AI and those trends slow, the beneficiary
• 28:13
  Speaker 2: may be India in the future. And that's why someone
• 28:16
  Speaker 2: might want to have both an AI exposure and an
• 28:18
  Speaker 2: Indian exposure so they're diversified.
• 28:21
  Speaker 1: Well, given that you've just chatted about diversification, we'll take
• 28:24
  Speaker 1: a short break. And I reckon that this question that's
• 28:27
  Speaker 1: come through from Josh is right up your alley. Welcome
• 28:46
  Speaker 1: back to The Money Puzzle. We're chatting to StockSpot founder
• 28:49
  Speaker 1: and CEO, Chris Breikey. And we have a few listener questions, Chris.
• 28:54
  Speaker 1: Our first one comes from Josh. And now, Josh, I
• 28:58
  Speaker 1: know you've sent this through to James and I apologize
• 29:00
  Speaker 1: that I'm going to have to do this one. I'm
• 29:02
  Speaker 1: sure James will have read it and James will have
• 29:04
  Speaker 1: approved that we think that Chris Breike is the best
• 29:06
  Speaker 1: bloke to put this to because Josh says, Hi, James.
• 29:11
  Speaker 1: I've done well from playing the AI trade and have
• 29:13
  Speaker 1: large positions in Microsoft and Google. The two stocks represent 40%
• 29:18
  Speaker 1: of my portfolio. That's okay. Chris's face didn't contort too much, Josh,
• 29:25
  Speaker 1: when I said that. The two stocks represent 40% of
• 29:27
  Speaker 1: my portfolio, and I'm aware that exposure leads to large
• 29:32
  Speaker 1: concentration risk. The upcoming US midterm elections have me worried
• 29:36
  Speaker 1: about the Democrats taking both houses and what this may
• 29:39
  Speaker 1: do to tech stocks. Thanks, and love the show. Thanks
• 29:32
  Speaker 1: for sending that in, Josh. All right, Chris. He's saying
• 29:34
  Speaker 1: he's done very well. This strategy has served him quite well.
• 29:55
  Speaker 2: Well, yeah, the question, I mean, perfectly relates to what
• 29:57
  Speaker 2: we were talking about. And I think, I mean, Josh's
• 29:59
  Speaker 2: situation is quite common where it could be an ETF
• 30:02
  Speaker 2: or shares within your portfolio have grown and they've been
• 30:04
  Speaker 2: so successful, they've become a really big part of your portfolio. And,
• 30:08
  Speaker 2: you know, we see it all the time with our
• 30:09
  Speaker 2: clients because, you know, some of them have had CBA
• 30:11
  Speaker 2: shares for 20 or 30 years and said, look, this
• 30:14
  Speaker 2: is 80% of my portfolio now. And they're in a
• 30:16
  Speaker 2: bit of a similar situation because there's often tax consequences
• 30:20
  Speaker 2: for selling and you've got to weigh off. And I
• 30:22
  Speaker 2: think Josh recognizes there's a concentration risk of having you know,
• 30:25
  Speaker 2: such a large allocation to two businesses, but also, you know,
• 30:28
  Speaker 2: I'm sure there's tax consequences to selling and there's other,
• 30:30
  Speaker 2: you know, considerations as well. I think, you know, those
• 30:33
  Speaker 2: two businesses themselves, although, you know, they are only two
• 30:36
  Speaker 2: listed companies, they're broadly diversified across different areas, you know, which,
• 30:41
  Speaker 2: you know, helps to some extent. So although the diversification
• 30:44
  Speaker 2: is generally within this sort of technology sector, you know,
• 30:47
  Speaker 2: they've both benefited from this AI theme and just the
• 30:50
  Speaker 2: broad technology theme over the last decade. I think the
• 30:53
  Speaker 2: challenge that Josh needs to consider is, let's say there
• 30:56
  Speaker 2: is a big pullback in technology at some point in
• 30:58
  Speaker 2: the next five years. It may happen. And if 2000
• 31:02
  Speaker 2: is anything to go by, the NASDAQ, which was probably
• 31:05
  Speaker 2: quite representative of his two holdings here, fell by 80%.
• 31:09
  Speaker 2: How would he feel about that? Is that something he's
• 31:11
  Speaker 2: comfortable with? If those two parts of his portfolio fell
• 31:14
  Speaker 2: by 80%, that means he'd lose something like 30% that
• 31:17
  Speaker 2: year of his portfolio. you know, if he's comfortable that
• 31:20
  Speaker 2: because he's done so well out of these holdings and
• 31:22
  Speaker 2: his timeframe is very long, it may be appropriate to
• 31:24
  Speaker 2: keep on holding them. You know, otherwise there's other ways
• 31:27
  Speaker 2: that we help our clients diversify when they're very concentrated
• 31:30
  Speaker 2: outside of StockSpot. And, you know, one of them is
• 31:32
  Speaker 2: making sure any new contributions you're making to your portfolio
• 31:35
  Speaker 2: and diversifying. So obviously not putting any more into those two,
• 31:39
  Speaker 2: because they're already a big part of your portfolio. And
• 31:41
  Speaker 2: that's one way, but also, you know, considering from a,
• 31:45
  Speaker 2: you know, an overall diversification and tax perspective, you know,
• 31:48
  Speaker 2: when the right time might be to rebalance out of
• 31:50
  Speaker 2: some of those two to lock a bit of profits in. And,
• 31:53
  Speaker 2: you know, one of the sayings I've always been told
• 31:55
  Speaker 2: when I was trading originally and investing is like, you'll
• 31:58
  Speaker 2: never be unhappy taking a profit. And so locking in
• 32:01
  Speaker 2: something helps you avoid regret in the future, because if
• 32:04
  Speaker 2: it falls, you'll be like thinking, well, at least I
• 32:06
  Speaker 2: sold something. And if it goes up, you'll be happy
• 32:09
  Speaker 2: that you still held on to most of it.
• 32:10
  Speaker 1: Rather than being like a, what is it? Like woulda, coulda, shoulda.
• 32:14
  Speaker 1: It's sort of after the event, you knew you probably
• 32:16
  Speaker 1: should have sold out and you didn't because you were
• 32:17
  Speaker 1: holding on and then you've only got yourself to blame.
• 32:19
  Speaker 2: Mentally, yeah, I see a lot of clients anchoring and say, look,
• 32:22
  Speaker 2: I bought this share and it went up by 10x,
• 32:23
  Speaker 2: but now it's halved. I'm just going to wait for
• 32:25
  Speaker 2: it to go back up to where it was. And,
• 32:27
  Speaker 2: you know, I think that's often dangerous because it may
• 32:29
  Speaker 2: never get there. And, you know, I think for Josh,
• 32:31
  Speaker 2: I'd just be thinking about your overall portfolio risk. Is
• 32:34
  Speaker 2: this risk you're comfortable with? And if not, like what's
• 32:37
  Speaker 2: a sensible way of, just reducing the risk. And you
• 32:40
  Speaker 2: might still be right on these two companies performing very well,
• 32:43
  Speaker 2: but it will help you sleep better at night if
• 32:45
  Speaker 2: you're a bit better diversified.
• 32:46
  Speaker 1: So if he's going to diversify, what's the opposite of tech?
• 32:51
  Speaker 2: Well, I mean, yeah. So other sectors of the market
• 32:54
  Speaker 2: that often go well when tech's not going well. So
• 32:57
  Speaker 2: tech tends to do well, actually, in the long run
• 32:59
  Speaker 2: when interest rates are falling because they are high growth,
• 33:02
  Speaker 2: they have cash flows well out into the future and
• 33:04
  Speaker 2: a lower discount rate of those cash flows is better.
• 33:08
  Speaker 2: So you're wanting, I guess, exposure to assets that are
• 33:12
  Speaker 2: more inflation-tilted, potentially. So hard assets, you might be looking
• 33:17
  Speaker 2: at resources or gold. Interestingly, yeah, gold and technology have
• 33:21
  Speaker 2: often moved in opposite directions. And gold was a big
• 33:24
  Speaker 2: beneficiary for the years immediately after the tech wreck, from
• 33:28
  Speaker 2: early 2000s to 2010. And it had a great decade
• 33:32
  Speaker 2: after tech. So gold would be one area. And We
• 33:35
  Speaker 2: have it in all of our portfolios for clients. It
• 33:37
  Speaker 2: diversifies shares and particularly tech shares pretty well.
• 33:40
  Speaker 1: All right. Go for gold, Josh. Thanks for the question.
• 33:45
  Speaker 1: One final question and then we'll need to wrap up.
• 33:47
  Speaker 1: But I reckon Tom might not be alone here in
• 33:50
  Speaker 1: this debate. So he and his partner are obviously considering investing.
• 33:54
  Speaker 1: I'm not sure if they've got investments already, but he
• 33:56
  Speaker 1: sent her a question that says, my partner and I
• 33:59
  Speaker 1: want to start building a a long-term share portfolio, but
• 34:02
  Speaker 1: we're disagreeing on how to do it. I want to
• 34:04
  Speaker 1: invest $ 20, 000 all at once to maximize the return, but
• 34:07
  Speaker 1: my partner thinks we should just automate $ 250 out of
• 34:10
  Speaker 1: every pay packet and just do it straight away. What's
• 34:13
  Speaker 1: the better strategy to grow wealth over time? Save and
• 34:16
  Speaker 1: invest a big sum or invest small amounts regularly? So
• 34:20
  Speaker 1: I'd say this is the number one question we get
• 34:22
  Speaker 1: from all of our clients. So we have to answer
• 34:24
  Speaker 1: this one a lot, which is, should I put all
• 34:26
  Speaker 1: my money in at once or what we call dollar
• 34:28
  Speaker 1: cost average, like slowly drip feed it into markets? And
• 34:32
  Speaker 1: there's two answers to this. So there's a technical answer,
• 34:35
  Speaker 1: and there's been a lot of research that's done on this,
• 34:37
  Speaker 1: and that's considered over different periods of time, which one
• 34:40
  Speaker 1: works better financially. And I saw Vanguard a few years
• 34:43
  Speaker 1: ago put out a good research piece on this, and
• 34:44
  Speaker 1: they basically looked at every time in history and said, okay,
• 34:47
  Speaker 1: if your dollar cost averaged over.
• 34:49
  Speaker 2: A few months versus invested immediately, who would be better off?
• 34:53
  Speaker 2: And they found two-thirds of the time, you're better off
• 34:55
  Speaker 2: lump sum investing, just putting it all in at once.
• 34:58
  Speaker 2: And the reason is that markets are trending up over time.
• 35:01
  Speaker 2: So More often than not, when you invest at lump sum,
• 35:04
  Speaker 2: you're going to be getting at a lower price because
• 35:06
  Speaker 2: you're probably going to be having to buy the pieces
• 35:08
  Speaker 2: at a higher price if you don't. Okay.
• 35:11
  Speaker 1: So you invest the lump sum, but you get the
• 35:13
  Speaker 1: benefits of the compounding and you invest it for longer.
• 35:15
  Speaker 1: But it sounds like what Tom's doing is maybe that
• 35:17
  Speaker 1: he wants to save that money and then do it
• 35:18
  Speaker 1: as a lump sum. I think so.
• 35:20
  Speaker 2: Well, I think, I mean, the flip side really is
• 35:22
  Speaker 2: of lump sum is like, is regret because I think
• 35:24
  Speaker 2: that maybe Tom's concern here and a lot of our clients'
• 35:27
  Speaker 2: concern is if you invest it all on day one
• 35:29
  Speaker 2: and there's a market crash and the market falls 20% tomorrow,
• 35:32
  Speaker 2: you're going to feel pretty stupid and you're going to
• 35:34
  Speaker 2: be a bit annoyed that you didn't wait a couple
• 35:36
  Speaker 2: of days to invest. And so for a lot of
• 35:39
  Speaker 2: our clients where they're worried about short-term market volatility or
• 35:43
  Speaker 2: they're reluctant to invest because they're just worried about the
• 35:46
  Speaker 2: market timing aspect, Like mentally, I think dollar cost averaging
• 35:50
  Speaker 2: can be a great strategy because, you know, although, you know,
• 35:53
  Speaker 2: you can know that you're probably going to be worse off,
• 35:56
  Speaker 2: you're going to be happy if the market falls because
• 35:58
  Speaker 2: you'll say, okay, well, at least I got to buy
• 36:00
  Speaker 2: some at lower prices and, you know, I'm getting into
• 36:02
  Speaker 2: markets a bit lower. And so regardless of what happens
• 36:05
  Speaker 2: to markets over that period, you'll feel good about yourself.
• 36:08
  Speaker 1: Maybe it's a hybrid strategy. Maybe you should do half
• 36:10
  Speaker 1: what he was thinking for the lump sum, 10K, whatever,
• 36:13
  Speaker 1: and then drip feed out.
• 36:15
  Speaker 2: Potentially. Yeah. So without giving personal advice, yeah, that's also
• 36:18
  Speaker 2: a common strategy, which is put some into the market.
• 36:21
  Speaker 2: And also it's not clear, Tom, from your question, so
• 36:24
  Speaker 2: sorry if we've misinterpreted it, but I'm not sure whether
• 36:26
  Speaker 2: that $ 250 would be available to invest now, or what
• 36:30
  Speaker 2: you're saying is I don't even have it now, so
• 36:32
  Speaker 2: I'm only going to get it in the future. And
• 36:33
  Speaker 2: in that case, it's perfectly fine to invest it in
• 36:36
  Speaker 2: the future. I think when we've looked at something like
• 36:39
  Speaker 2: 30 or 40% of our clients are doing exactly what
• 36:42
  Speaker 2: you're saying, which is putting you know, an amount out
• 36:45
  Speaker 2: of their salary into the market every month. And that's
• 36:47
  Speaker 2: a great long-term compounding strategy.
• 36:50
  Speaker 1: Yes. And we should make a very clear point that
• 36:52
  Speaker 1: this is not financial advice. We're just here to offer
• 36:56
  Speaker 1: up general thoughts, aren't we, Chris?
• 36:58
  Speaker 2: Yeah, that's right. I mean, if clients come to us
• 37:01
  Speaker 2: with this, we'll obviously look at a lot of other
• 37:03
  Speaker 2: factors to help them work out what's best. But yeah,
• 37:05
  Speaker 2: there are a few of the factors we'd look at.
• 37:08
  Speaker 1: All right. Chris, it's always a pleasure having a chat
• 37:10
  Speaker 1: with you. Thanks so much for joining us on The
• 37:12
  Speaker 1: Money Puzzle.
• 37:13
  Speaker 2: Anytime. Thanks for having me.
• 37:15
  Speaker 1: Thanks for joining us. For more wealth insights, go to
• 37:17
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• 37:22
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• 37:26
  Speaker 1: You can find all the details at The Australian. Thanks
• 37:28
  Speaker 1: for your time.