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Back to Basics Of Investing · She's On The Money

• 0:00
  Speaker 1: Hello.
• 0:01
  Speaker 2: My name's Santasha Nabananga Bamblet. I'm a proud yr the
• 0:05
  Speaker 2: Order Kerney Whoalbury and a waddery woman. And before we
• 0:08
  Speaker 2: get started on She's on the Money podcast, I would
• 0:11
  Speaker 2: like to acknowledge the traditional custodians of the land of
• 0:14
  Speaker 2: which this podcast is recorded on a wondery country, acknowledging
• 0:18
  Speaker 2: the elders, the ancestors and the next generation coming through
• 0:23
  Speaker 2: as this podcast is about connecting, empowering, knowledge sharing and
• 0:27
  Speaker 2: the storytelling of you to make a difference for today
• 0:31
  Speaker 2: and lasting impact for tomorrow.
• 0:33
  Speaker 1: Let's get into it.
• 0:34
  Speaker 3: She's on the Money, She's on the Money.
• 0:57
  Speaker 4: Hello, and welcome to She's on the Money, the podcast
• 1:01
  Speaker 4: for millennials who want financial freedom. My name is Beckside
• 1:05
  Speaker 4: and with me is Victoria Devine. Hello, we are going
• 1:08
  Speaker 4: back to investing basics today.
• 1:11
  Speaker 1: Sexy very excited about this topic.
• 1:15
  Speaker 2: Lat.
• 1:15
  Speaker 1: I'm worried that you'll be really annoyed by all my questions.
• 1:18
  Speaker 1: I don't know, only so excited. I'm so excited because
• 1:21
  Speaker 1: I feel like there have been so many community questions
• 1:25
  Speaker 1: being like, hey, you know, I wanted to understand this, this,
• 1:27
  Speaker 1: this and this, and while we have done a mini
• 1:29
  Speaker 1: investing series and a whole host of episodes on it.
• 1:32
  Speaker 1: I feel like back to Basics episode is kind of
• 1:34
  Speaker 1: like the reset all of us need. But hello, Beck,
• 1:38
  Speaker 1: sorry that I'm very excited about this. This episode is
• 1:42
  Speaker 1: for you. If you've had investing as a goal that
• 1:45
  Speaker 1: just keeps getting pushed to the back of your to
• 1:47
  Speaker 1: do list because you don't really know where to begin,
• 1:49
  Speaker 1: or if you're worried that you'll make the wrong decisions,
• 1:53
  Speaker 1: or maybe you get overwhelmed with all the research and
• 1:55
  Speaker 1: information and jargon that is out there. We honestly have
• 1:59
  Speaker 1: all been there. The worst place to be is at
• 2:01
  Speaker 1: the start of a journey and feeling really overwhelmed by
• 2:04
  Speaker 1: all of it and you just don't know what to do.
• 2:06
  Speaker 1: But please don't think that you're the only one there,
• 2:09
  Speaker 1: and don't let that stop you. That's why we're here
• 2:12
  Speaker 1: and taking you back to the basics of investing today.
• 2:15
  Speaker 2: Beck.
• 2:15
  Speaker 4: Yes, yes, yes, I'm so here for this. So, as
• 2:18
  Speaker 4: you know, my knowledge is entry level for sure, love it.
• 2:21
  Speaker 1: So I do have lots.
• 2:22
  Speaker 4: Of questions for you, v So in the first half
• 2:24
  Speaker 4: of the show, we're going to get you to explain
• 2:26
  Speaker 4: some of the absolute basics like what is a share,
• 2:31
  Speaker 4: types of shares, how you earn money from shares, risk profiles,
• 2:35
  Speaker 4: and then in the second half you tell us about
• 2:36
  Speaker 4: compound interest, and we'll talk about some common concerns about
• 2:39
  Speaker 4: investing and some questions we should be asking ourselves at
• 2:42
  Speaker 4: the start of our journey to determine next step.
• 2:45
  Speaker 1: Sexy am I the only one that's like really excited
• 2:48
  Speaker 1: about this, then to dive straight back in. I know
• 2:51
  Speaker 1: so many of you might be following along and go, oh,
• 2:53
  Speaker 1: this is stuff I know, But I would actually encourage
• 2:56
  Speaker 1: you to still listen because there's no such thing as
• 2:59
  Speaker 1: too much information, and there's also no such thing as
• 3:02
  Speaker 1: knowing absolutely everything. So there could be a tidbit that
• 3:04
  Speaker 1: you learn or something else, or a different point of
• 3:06
  Speaker 1: view or a way of seeing things that you hadn't
• 3:09
  Speaker 1: seen it before that can actually be really helpful on
• 3:11
  Speaker 1: your investing journey. So while you might go, well, I
• 3:14
  Speaker 1: know what a share is, full stop, end of story,
• 3:16
  Speaker 1: like this conversation can actually be a really empowering one
• 3:19
  Speaker 1: to either remind you of how well you're doing or
• 3:22
  Speaker 1: to make you feel really empowered about taking the next step.
• 3:25
  Speaker 4: Absolutely wouldn't hurt so I'm going to ask first what
• 3:30
  Speaker 4: is a share?
• 3:32
  Speaker 1: What a share and what a stock? So a share
• 3:35
  Speaker 1: in a stock same thing. A share is more of
• 3:37
  Speaker 1: an Australian term, and a stock is more of an
• 3:40
  Speaker 1: American term, but in Australia they are used interchangeably. So
• 3:45
  Speaker 1: a share is essentially a very small part of a business. Beck.
• 3:49
  Speaker 1: So what happens is a company goes to market and
• 3:52
  Speaker 1: say I want to be on the share market. I
• 3:54
  Speaker 1: want to be able to sell parts of my business
• 3:56
  Speaker 1: to the general public. And you go, all right, no worries.
• 3:58
  Speaker 1: And they might break it up, and they might say,
• 4:00
  Speaker 1: all right, let's issue forty percent of our company to
• 4:03
  Speaker 1: the public. So we'll keep sixty percent of it. We're
• 4:05
  Speaker 1: going to issue forty percent of it to the public,
• 4:08
  Speaker 1: but we're going to break it up. So you can't
• 4:10
  Speaker 1: just go buy one share and get forty percent, right.
• 4:12
  Speaker 1: They might break it up into one hundred thousand pieces,
• 4:15
  Speaker 1: and therefore there might be one hundred thousand shares in
• 4:17
  Speaker 1: the market that could be bought. They might break it
• 4:20
  Speaker 1: up into a million pieces, and therefore you get a
• 4:22
  Speaker 1: million to forty percent, which is obviously not even one percent.
• 4:25
  Speaker 1: But you have a very small fraction of that company,
• 4:28
  Speaker 1: and when you buy a share, you become an owner
• 4:31
  Speaker 1: of that company. It might be very, very small, but
• 4:34
  Speaker 1: with that ownership comes voting, right, so you could vote
• 4:37
  Speaker 1: if you really wanted to, oh, when their board makes decisions.
• 4:40
  Speaker 1: But it also entitles you to a portion of the
• 4:44
  Speaker 1: profits if there are some in some shares. So if
• 4:47
  Speaker 1: you go and you say, all right, I'm going to
• 4:48
  Speaker 1: give you ten dollars for this share that I purchased.
• 4:51
  Speaker 1: And it might be in a bank, it might be
• 4:53
  Speaker 1: in something else, but we're going to use a bank
• 4:54
  Speaker 1: share as an example because they are kind of like
• 4:57
  Speaker 1: tried and true blue chip boring stock that basically everyone's
• 5:01
  Speaker 1: heard of. Right. You hear about them on the news
• 5:03
  Speaker 1: all the time. You hear about them when people are
• 5:05
  Speaker 1: talking about oh, hands is down or up, or a
• 5:07
  Speaker 1: bought NAB shares or a bought Combank, like everyone talks
• 5:10
  Speaker 1: about it. Right, But if you went and bought a
• 5:12
  Speaker 1: Combank share, how much do you think a share is worth?
• 5:15
  Speaker 2: Oh?
• 5:17
  Speaker 1: It depends, it does depend. It's okay, it does depend.
• 5:20
  Speaker 1: And one share one share in Combank in Combank, Yeah,
• 5:25
  Speaker 1: I'm going to say twenty dollars. Oh, if they were
• 5:29
  Speaker 1: twenty bucks, I would be going and buying so many
• 5:32
  Speaker 1: of them because back today there are one hundred and
• 5:34
  Speaker 1: ten dollars a share, right, a lot more than a
• 5:38
  Speaker 1: lot of people think they are, which is why fractionized
• 5:40
  Speaker 1: investing has become popular, where you buy like a fraction
• 5:43
  Speaker 1: of share so you can still have exposure, but you
• 5:45
  Speaker 1: might not be able to afford the full share at
• 5:47
  Speaker 1: one hundred and ten dollars each, right, But essentially if
• 5:50
  Speaker 1: you went and bought that share, it entitles you to
• 5:52
  Speaker 1: some of the profit but then also some of the
• 5:55
  Speaker 1: gain over time. So one hundred and ten dollars is
• 5:57
  Speaker 1: what Combank is worth today as of record. However, maybe
• 6:01
  Speaker 1: in a couple of years that Combank share might increase
• 6:04
  Speaker 1: in value because they've grown their business model and they're
• 6:08
  Speaker 1: a far more profitable bank and they're a lot sexier
• 6:10
  Speaker 1: than they currently. They're a standard share today, and banking
• 6:13
  Speaker 1: shares in Australia don't have a lot of flexibility, like
• 6:16
  Speaker 1: they don't go up and down in the same way
• 6:18
  Speaker 1: a lot of other shares do that we talk about
• 6:20
  Speaker 1: because they are a blue chip stock, which means they
• 6:23
  Speaker 1: are tried and true and have existed for a long time,
• 6:25
  Speaker 1: so their fluctuation in price usually stays similar. If their
• 6:29
  Speaker 1: business increases in price, will your share price increases, which
• 6:32
  Speaker 1: means if you go to sell that share, you can
• 6:34
  Speaker 1: then see a piece of that profit because the share
• 6:36
  Speaker 1: that you sold is now today worth more than it
• 6:38
  Speaker 1: was when you bought it yesterday. Right. But then along
• 6:41
  Speaker 1: the way, as the company says, okay, well we've had
• 6:44
  Speaker 1: a really good year back or we've had a really
• 6:46
  Speaker 1: good six months. We've done all of our banking, we've
• 6:49
  Speaker 1: done all of our bookkeeping, we have, you know, a
• 6:52
  Speaker 1: million dollars profit, they will then divide that among their shareholders,
• 6:56
  Speaker 1: so you'll get a payment which is called a dividend
• 6:58
  Speaker 1: just for owning the stock because you're a part owner
• 7:01
  Speaker 1: of the business and therefore the money that you've put
• 7:04
  Speaker 1: into the share market is making you money in a
• 7:06
  Speaker 1: number of ways. So one is that capital growth, so
• 7:09
  Speaker 1: the business increasing in value over time. But also two,
• 7:13
  Speaker 1: you're getting paid a percentage of the profit that that
• 7:16
  Speaker 1: business makes each and every single year because you're a
• 7:18
  Speaker 1: part owner. And as to get.
• 7:19
  Speaker 4: Paid, So what is the benefit to the companies, Like
• 7:22
  Speaker 4: why do they do this so often? You would go
• 7:24
  Speaker 4: public so that you can raise more capital so that
• 7:27
  Speaker 4: you have more working capital, because that company right then goes, oh,
• 7:31
  Speaker 4: we arewn one hundred percent of our company, and we
• 7:34
  Speaker 4: want millions of dollars to expand this part of our
• 7:36
  Speaker 4: business or grow this part of our business, or we
• 7:38
  Speaker 4: need more cash coming in so we can lend it out.
• 7:41
  Speaker 1: And that is often why they end up on a
• 7:43
  Speaker 1: stock exchange because they go, well, we need BEX money
• 7:45
  Speaker 1: because we don't have any of our own right now.
• 7:48
  Speaker 1: And that's basically why you would go on the stock exchange,
• 7:51
  Speaker 1: just to make money as a business so that you
• 7:53
  Speaker 1: can continue to trade and continue to grow and build.
• 7:55
  Speaker 4: Okay, that makes a lot of sense. Honestly, you know,
• 7:59
  Speaker 4: I'm at LACE entry level. So tell me, are there
• 8:01
  Speaker 4: any terms to do with investing? I should know yes.
• 8:05
  Speaker 1: So first things first, I feel like in our community,
• 8:08
  Speaker 1: I have a laundry list of five terms that we
• 8:11
  Speaker 1: talk about most often, and we're going to go through them.
• 8:14
  Speaker 1: So the first one is ETF and that is an
• 8:17
  Speaker 1: exchange traded fund, and an exchange traded fund sounds really complicated,
• 8:22
  Speaker 1: but strip it back, it is a pulled investment. That's
• 8:26
  Speaker 1: probably too complicated still, so think of it as a basket.
• 8:30
  Speaker 1: So essentially an ETF isn't an individual share that you've
• 8:33
  Speaker 1: gone and bought one share of Combank because it was
• 8:35
  Speaker 1: one hundred and ten dollars. You might go, fee, I
• 8:38
  Speaker 1: have one hundred and ten dollars, but I don't want
• 8:40
  Speaker 1: to only own one asset because then I only own Combank.
• 8:44
  Speaker 1: I want to own a lot of different things so
• 8:45
  Speaker 1: I get good diversification in my portfolio. Because if you
• 8:50
  Speaker 1: know Combank crashed tomorrow, well that's my whole portfolio. That's
• 8:54
  Speaker 1: one hundred percent of what I own. But if I
• 8:56
  Speaker 1: owned a lot of different banks, and I owned you know,
• 8:58
  Speaker 1: a few different other industry if one crashes, it's not
• 9:01
  Speaker 1: going to be felt as harshly because I own one
• 9:04
  Speaker 1: hundred different companies. So instead of buying a stock, an
• 9:07
  Speaker 1: individual stock, you might go and buy what's called an ETF.
• 9:11
  Speaker 1: So that's an exchange traded fund, and it's essentially a
• 9:14
  Speaker 1: fund that exists that has bought maybe one hundred or
• 9:17
  Speaker 1: two hundred companies, or it could be an ASX top
• 9:20
  Speaker 1: two hundred, so it could be the top two hundred
• 9:22
  Speaker 1: companies in the share market, and it just holds that
• 9:26
  Speaker 1: and you go and buy one share in that basket
• 9:30
  Speaker 1: as opposed to buying the share directly. So you go,
• 9:33
  Speaker 1: I want to own an exchange traded fund, an ETF,
• 9:36
  Speaker 1: And that's a type of pulled investment where instead of
• 9:39
  Speaker 1: you giving your money to combat and saying thank you,
• 9:42
  Speaker 1: I would like one of your shares, you give your
• 9:44
  Speaker 1: money to the fund. So the exchange traded fund and
• 9:47
  Speaker 1: the manager there say can you put my money in
• 9:50
  Speaker 1: the basket with everybody else's money, And then collectively we
• 9:53
  Speaker 1: all own a lot of different stocks. So essentially it's
• 9:57
  Speaker 1: a pulled investment security holds lots of different underlying assets
• 10:02
  Speaker 1: rather than just one individual stock. So that makes sense.
• 10:06
  Speaker 4: That does make sense. So files to user in a sentence,
• 10:08
  Speaker 4: I would say I own a share in an ETF.
• 10:12
  Speaker 1: Yeah you could. You absolutely could do that. And you
• 10:16
  Speaker 1: buy and sell ETFs in exactly the same way you
• 10:18
  Speaker 1: buy and sell shares. They are on the ASX as well,
• 10:22
  Speaker 1: so you go and it might have different code, and
• 10:24
  Speaker 1: you go and purchase. In Australia, one of the biggest
• 10:27
  Speaker 1: issuers of or two of the biggest issuers of ETF's
• 10:31
  Speaker 1: a Vanguard which you might have heard about, and Beta shares,
• 10:34
  Speaker 1: which both do ETFs and the cool thing about ETFs
• 10:38
  Speaker 1: these days is there's basically an ETF for everything. So
• 10:41
  Speaker 1: if you're like, well, I'm an ethical investor, I really
• 10:43
  Speaker 1: want to own ethical shares, well, you can go get
• 10:45
  Speaker 1: an ethical ETF. Or if you go, i'm really into
• 10:48
  Speaker 1: tech Victoria, like I just want to invest in different
• 10:51
  Speaker 1: tech companies, go buy a tech ETF. Or you could go,
• 10:55
  Speaker 1: you know what, I only want to own American tech companies.
• 10:58
  Speaker 1: There's an ETF for that. There's literally ETFs for everything that.
• 11:02
  Speaker 1: A couple of years ago, I was online obviously looking
• 11:05
  Speaker 1: love ETFs because I was bored and it was fun.
• 11:08
  Speaker 1: I found an ETF that only invests or only holds
• 11:11
  Speaker 1: businesses that have one hundred percent women on their board.
• 11:14
  Speaker 1: That is really cool. I think it is very cool.
• 11:17
  Speaker 1: I'm very biased because I love this space, but I
• 11:20
  Speaker 1: think it's an interesting concept to wrap your head around
• 11:22
  Speaker 1: as well, because I feel like a lot of people
• 11:24
  Speaker 1: will say things like, oh, on, ETF's a bit too complex,
• 11:27
  Speaker 1: when in reality, they can be really good for beginners
• 11:30
  Speaker 1: who are like, well, I don't know where to invest,
• 11:32
  Speaker 1: but they might know their values or they might know
• 11:34
  Speaker 1: where they want to start, and it's a good place
• 11:37
  Speaker 1: to get instant diversification, because diversification is really important. It's
• 11:42
  Speaker 1: making sure that you don't have all your eggs in
• 11:44
  Speaker 1: one basket. Instead of just having exposure to CBA, you
• 11:47
  Speaker 1: have exposure to heaps of things. So if one thing crashes,
• 11:50
  Speaker 1: I guarantee something else is doing well, and then maybe
• 11:53
  Speaker 1: other things are just coasting along. So your returns are
• 11:56
  Speaker 1: an average of that bucket of shares as opposed to
• 11:59
  Speaker 1: just that dire one share. Does that make sense? That
• 12:02
  Speaker 1: does make sense? Okay, So what's the next one? All right?
• 12:05
  Speaker 1: So we've just talked about ETFs, and I feel like
• 12:07
  Speaker 1: in our community we've been talking a lot about the
• 12:10
  Speaker 1: difference between an ETF and a managed fund, and sometimes
• 12:13
  Speaker 1: they're compared like apples for apples, because people think it's
• 12:16
  Speaker 1: one or the other, but they're actually completely different products,
• 12:19
  Speaker 1: and that's like comparing apples with oranges, which is a
• 12:22
  Speaker 1: bit silly. So a managed fund is an alternative to
• 12:25
  Speaker 1: individual shares or an ETF, and a managed fund is
• 12:28
  Speaker 1: basically just what it sounds like. It's an investment fund
• 12:31
  Speaker 1: that is managed by a fund manager, whereas an ETF
• 12:35
  Speaker 1: often is not. If you put your money into a
• 12:38
  Speaker 1: managed fund. You're essentially giving your money to them to
• 12:40
  Speaker 1: invest on your behalf, so you often have very little
• 12:44
  Speaker 1: say over what they do with your money, which is
• 12:46
  Speaker 1: fine because you're not going to pick a fund manager
• 12:48
  Speaker 1: that you don't believe in, right, You're not going to
• 12:49
  Speaker 1: go give it to Beck if you think that Beck
• 12:51
  Speaker 1: is not going to use it wisely, So you do
• 12:53
  Speaker 1: have to hope that they will invest it wisely. And
• 12:56
  Speaker 1: one of the key differences between the managed fund and
• 13:00
  Speaker 1: an ETF is that a managed fund is unlisted, so
• 13:04
  Speaker 1: it is not going to be on the ASX like
• 13:07
  Speaker 1: an ETF that you go and buy in the same
• 13:09
  Speaker 1: way that you purchase a share, So unlike an ETF,
• 13:12
  Speaker 1: managed funds don't usually trade on the share market. In fact,
• 13:14
  Speaker 1: they only trade once a day. So right now, if
• 13:17
  Speaker 1: you googled any share, you could get today's right now
• 13:20
  Speaker 1: current market price, because in Australia the market opens at
• 13:24
  Speaker 1: ten am and it closes at four pm. Surprise, but
• 13:27
  Speaker 1: she don't know that. No, but we trade between ten
• 13:30
  Speaker 1: and for every single day, which means you can get
• 13:32
  Speaker 1: a live price, whereas a managed fund only trades once
• 13:35
  Speaker 1: a day and often it is ten am or eleven am.
• 13:38
  Speaker 1: Depending on what the company is. Thus, you do have
• 13:42
  Speaker 1: to wait until the end of a trading day if
• 13:44
  Speaker 1: you want to buy or sell your units, so you
• 13:46
  Speaker 1: can't do it throughout the day. It's not something that
• 13:48
  Speaker 1: people would become, you know how we talk about the
• 13:50
  Speaker 1: concept of share traders, where they're online all day and
• 13:53
  Speaker 1: they're like buying and selling shares through really small amounts.
• 13:55
  Speaker 1: You can't do that with managed funds. So one of
• 13:58
  Speaker 1: the benefits of a managed fund, and this is very
• 14:01
  Speaker 1: similar to an ETF, is that allows investors to pull
• 14:05
  Speaker 1: their money together with other investors, and the more money
• 14:09
  Speaker 1: you have, the more power you have when it comes
• 14:11
  Speaker 1: to purchasing and by doing so, opportunities that might not
• 14:15
  Speaker 1: actually be available to a retail investor because we just
• 14:18
  Speaker 1: don't have enough money can then be opened up. So
• 14:21
  Speaker 1: many managed funds will invest in assets like property or
• 14:24
  Speaker 1: the government, or corporate bonds or private equity that is
• 14:28
  Speaker 1: usually completely out of reach, but you can do so
• 14:31
  Speaker 1: by buying a portion of a managed fund get access
• 14:35
  Speaker 1: to an alternative asset class, which can for a lot
• 14:38
  Speaker 1: of people be really exciting. But as I'm explaining this,
• 14:42
  Speaker 1: I think I can see your brain working going this
• 14:44
  Speaker 1: is a little bit more complex than an EF. You
• 14:46
  Speaker 1: don't just go and buy it and then you can
• 14:48
  Speaker 1: sell it whenever you want. You absolutely can buy it,
• 14:50
  Speaker 1: you can absolutely sell it. That makes sense, but there
• 14:53
  Speaker 1: is a bit more complexity behind it, which is why
• 14:56
  Speaker 1: some people in the shehese on the money community don't
• 14:59
  Speaker 1: lean on it in immediately as one of their first
• 15:01
  Speaker 1: investing decisions. Right. So obviously there are a whole heap
• 15:06
  Speaker 1: of other benefits. Another one of them is that the
• 15:09
  Speaker 1: fund manager's expertise plays into it. So I'm someone who
• 15:12
  Speaker 1: does own a managed fund, but the reason I own
• 15:15
  Speaker 1: the managed fund is because I'm a little creep beck
• 15:18
  Speaker 1: and I know exactly who that fund manager is, and
• 15:21
  Speaker 1: I've actually followed them from a couple of different asset
• 15:24
  Speaker 1: of houses. I've been like, I like that guy, I
• 15:26
  Speaker 1: like his decisions. I'm very interested to see what he
• 15:28
  Speaker 1: does at this new company, and that's why I'm following him,
• 15:31
  Speaker 1: and that's why I've invested. So if you like a
• 15:34
  Speaker 1: track record of a particular fund manager, you can go
• 15:37
  Speaker 1: with them. But that's obviously not that common to know
• 15:40
  Speaker 1: that information and it's quite in depth. But the benefit
• 15:43
  Speaker 1: of having a fund manager is that you don't have
• 15:45
  Speaker 1: to do any of the hard work of researching, of
• 15:47
  Speaker 1: identifying and tracking potentially high performing companies that might provide
• 15:51
  Speaker 1: outsized returns, because you'll be paying a manager and a
• 15:54
  Speaker 1: team to do that. Managed funds are more expensive than ETFs.
• 15:58
  Speaker 1: ETFs are usually automatically created, whereas managed funds have a
• 16:02
  Speaker 1: whole team of researchers behind them. Does that make sense?
• 16:06
  Speaker 1: It does.
• 16:06
  Speaker 4: And I assume that if you're putting, say one hundred
• 16:09
  Speaker 4: dollars into a managed fund, only a portion of that
• 16:11
  Speaker 4: is actually going to shares. Most of it will go
• 16:14
  Speaker 4: to shares, but the fees on that are going to
• 16:16
  Speaker 4: be higher. So managed funds normally charge management fees that
• 16:21
  Speaker 4: are more expensive than an ETF, So you need to
• 16:24
  Speaker 4: make sure that your fund is justifying their fees by
• 16:27
  Speaker 4: delivering consistent, market crushing performances, otherwise that fee does really
• 16:31
  Speaker 4: eat into your long term returns.
• 16:33
  Speaker 1: And I think it's really important to know the difference
• 16:35
  Speaker 1: between the two because sometimes it can be easy to
• 16:39
  Speaker 1: be taken away with, oh, well, that managed fund has
• 16:41
  Speaker 1: the same performance and it sounds cooler, but you haven't
• 16:44
  Speaker 1: actually looked at fees. Because apples are not apples. In
• 16:47
  Speaker 1: their circumstance. Does that make sense? Does make sense? What
• 16:51
  Speaker 1: else you got on that little list of yours? All right?
• 16:54
  Speaker 1: So the next list I have number three. I feel
• 16:57
  Speaker 1: like this is taking me ages to get through them,
• 16:58
  Speaker 1: but it's because I'm passionate. I am so sorry. The
• 17:01
  Speaker 1: next is an index fund, and this is really sexy
• 17:05
  Speaker 1: because it tracks an index. So an index fund is
• 17:08
  Speaker 1: basically a portfolio of shares or bonds that exists to
• 17:12
  Speaker 1: mimic or copy the composition and performance of a financial
• 17:16
  Speaker 1: market or index. So that sounds confusing, but essentially it
• 17:20
  Speaker 1: exists to copy something that already exists. So you might
• 17:25
  Speaker 1: create an ASX Top two hundred ETF and that will
• 17:30
  Speaker 1: take the top two hundred companies on the ASX list
• 17:35
  Speaker 1: and pop them into a fund and it will just
• 17:37
  Speaker 1: track the average of that. So the idea of an
• 17:40
  Speaker 1: index fund is not to outperform the market. It's actually
• 17:42
  Speaker 1: to meet the market returns and the market benchmarks. So
• 17:46
  Speaker 1: index funds usually have way lower expenses and fees than
• 17:50
  Speaker 1: actively managed funds because there's no one managing it in
• 17:53
  Speaker 1: the same way that a managed fund exists. So in
• 17:55
  Speaker 1: a managed fund, you've got somebody going out there doing
• 17:57
  Speaker 1: the work, maybe surveying the company, seeing if it's worth
• 18:00
  Speaker 1: putting into the portfolio. An index fund actually follows what
• 18:03
  Speaker 1: we call a passive investment strategy, where you just go,
• 18:06
  Speaker 1: all right, I'll take the top two hundred and get
• 18:08
  Speaker 1: the average of that. Wham bam, thank you, ma'am. That
• 18:11
  Speaker 1: absolutely makes sense. So an index fund is an investment
• 18:14
  Speaker 1: type that just wants to track the market average. And
• 18:19
  Speaker 1: usually if you're talking about an index fund, we're just
• 18:22
  Speaker 1: looking for the average of the average. That's all I want,
• 18:24
  Speaker 1: that's it. But I just want a consistent return. And
• 18:27
  Speaker 1: index funds typically invest in all the components that are
• 18:31
  Speaker 1: included in the index that they track, and they have
• 18:34
  Speaker 1: fund managers whose job it is to make sure that
• 18:37
  Speaker 1: the index fund performs the same as the index. So
• 18:41
  Speaker 1: the index is the measure, and the index fund has
• 18:44
  Speaker 1: basically cut and paste everything from the index to own
• 18:47
  Speaker 1: it in that asset. Does that make sense? I think
• 18:50
  Speaker 1: it's not making sense? Is that? I think so?
• 18:52
  Speaker 4: I guess my question is what's really difference between ETF
• 18:55
  Speaker 4: and an index If the index is kind of trying
• 18:58
  Speaker 4: to mimic like an ASX two yea.
• 19:00
  Speaker 1: So essentially the biggest difference between ETFs and index funds
• 19:04
  Speaker 1: is that ETFs can be traded throughout the day like
• 19:06
  Speaker 1: shares can be, whereas index funds can be bought and
• 19:09
  Speaker 1: sold only for the price that is set at the
• 19:12
  Speaker 1: end of the trading day. So obviously for long term
• 19:14
  Speaker 1: investors this isn't an issue. But essentially something like the
• 19:18
  Speaker 1: ASX Top two hundred ETF could be bought and sold
• 19:22
  Speaker 1: throughout the day, whereas the ASX Top two hundred index
• 19:26
  Speaker 1: fund couldn't be, and both of them employ different strategies.
• 19:31
  Speaker 1: But essentially that from my perspective, is the main difference. Okay,
• 19:35
  Speaker 1: that is one of the main differences. The other thing is,
• 19:37
  Speaker 1: I would say, is fees and expenses. So the primary
• 19:40
  Speaker 1: difference between ETFs and index funds is, as I said before,
• 19:43
  Speaker 1: how they're bought and sold. But this actually translates to fees.
• 19:47
  Speaker 1: So ETFs, as we were saying before, trader on an exchange,
• 19:51
  Speaker 1: just like shares do, and you buy and sell them
• 19:53
  Speaker 1: through a broker, which means that you could potentially be
• 19:56
  Speaker 1: paying broking costs, whereas index funds are usually bought direct
• 20:00
  Speaker 1: with the fund manager, so there isn't that intermediate body.
• 20:03
  Speaker 1: So there's just different fees and charges that need to
• 20:06
  Speaker 1: be taken into consideration. And I don't think it's like
• 20:09
  Speaker 1: for like, but I also think that they can be
• 20:12
  Speaker 1: quite similar, especially to a beginner. And do not fear
• 20:16
  Speaker 1: if you're in a position where you're like, this is
• 20:17
  Speaker 1: a lot of information and I feel really overwhelmed. We
• 20:20
  Speaker 1: all do. I have a book that goes into this
• 20:23
  Speaker 1: even more comprehensively so you can digest it. And you
• 20:26
  Speaker 1: know what, there's absolutely no shame in listening to this
• 20:28
  Speaker 1: portion of the episode a few times so you can
• 20:31
  Speaker 1: really wrap your head around it, because lord knows, it
• 20:33
  Speaker 1: takes me like three or four goals to understand something
• 20:37
  Speaker 1: for the first time, and then it finally clicks and
• 20:38
  Speaker 1: I go, oh, okay, now I get it.
• 20:41
  Speaker 4: I think I'm going to be listening to this first
• 20:43
  Speaker 4: portion of the episode about twenty times. I said, what's
• 20:47
  Speaker 4: the next one on your list?
• 20:48
  Speaker 2: Fee?
• 20:49
  Speaker 1: What's an asset class? Okay, So in Australia there are
• 20:52
  Speaker 1: four main types of asset classes. There's cash, fixed interest, property,
• 20:57
  Speaker 1: and shares, which I'm sure you've heard of all of them.
• 21:00
  Speaker 1: So the first is actually an investment cash it would
• 21:02
  Speaker 1: be whatever's in your bank account right now, whether it
• 21:04
  Speaker 1: is one dollar or one million dollars, it is an
• 21:07
  Speaker 1: investment that might not be returning all of that much money,
• 21:10
  Speaker 1: but it is an investment nonetheless. The next is fixed interests,
• 21:13
  Speaker 1: so these are things like bonds or you would have
• 21:15
  Speaker 1: heard of a term deposit where you can kind of
• 21:17
  Speaker 1: lock your money away At the moment, it's not that
• 21:19
  Speaker 1: popular because obviously interest rates are going wild and the
• 21:22
  Speaker 1: bank is not going to pay you that much so
• 21:23
  Speaker 1: that they can hold onto your money. The next is
• 21:26
  Speaker 1: the Great Australian Dream. So that's property. We've all heard
• 21:28
  Speaker 1: of property investing, and we have an entire podcast called
• 21:31
  Speaker 1: the Property Playbook on property if you want to deep
• 21:34
  Speaker 1: dive more into that asset class. And the last, which
• 21:37
  Speaker 1: is unsurprisingly my favorite, is shares and shares essentially, as
• 21:42
  Speaker 1: we explained, makes sense, but each asset class is expected
• 21:45
  Speaker 1: to have different risk and return characteristics, and the right
• 21:48
  Speaker 1: asset mix for you at any given point in time
• 21:51
  Speaker 1: is actually going to really depend on how much time
• 21:54
  Speaker 1: you have to be investing. So obviously cash might be
• 21:57
  Speaker 1: better for a short term goal. You might be saving
• 22:00
  Speaker 1: for a holiday or a car, but if you're working
• 22:02
  Speaker 1: towards financial freedom back and you're like, oh, my gosh,
• 22:04
  Speaker 1: I really want to be investing for the next thirty
• 22:06
  Speaker 1: forty years. Well, cash is probably not the best place
• 22:09
  Speaker 1: to put your money because you've got a larger time horizon,
• 22:13
  Speaker 1: and if you're investing for the next twenty thirty forty years,
• 22:16
  Speaker 1: maybe shares is a better option for you. And the
• 22:18
  Speaker 1: same goes for fixed interest and property. It all depends
• 22:22
  Speaker 1: on who you are and how much risk you want
• 22:24
  Speaker 1: to take on. And that leads me, actually beck into
• 22:27
  Speaker 1: the last thing I wanted to talk about, and that
• 22:30
  Speaker 1: is actually the word portfolio. I feel like it gets
• 22:32
  Speaker 1: thrown around a lot, and the second you maybe sign
• 22:36
  Speaker 1: up for shares Is, or you might have signed up
• 22:38
  Speaker 1: for six Park, or you might have gone through self Wealth,
• 22:41
  Speaker 1: or you might be with Rais, or you might be
• 22:42
  Speaker 1: with Spaceship. It really doesn't matter what one. But you
• 22:46
  Speaker 1: might assume that that's your only portfolio because you go, oh,
• 22:49
  Speaker 1: they've used the term portfolio. But essentially, a portfolio is
• 22:53
  Speaker 1: a collection of financial investments. Like it could be shares,
• 22:56
  Speaker 1: it could be bonds, it could be commodities, it could
• 22:59
  Speaker 1: be cash, it could be your jewelry. But essentially it's
• 23:01
  Speaker 1: everything that Beck individually owns. So my personal portfolio, it's
• 23:05
  Speaker 1: made up of some shares, I own, property, I have,
• 23:08
  Speaker 1: you know, some assets at home that I ensure through
• 23:11
  Speaker 1: my home and contents. I have a car, and all
• 23:13
  Speaker 1: of that collectively becomes my portfolio. And I think a
• 23:17
  Speaker 1: lot of the time, and it was the reason I
• 23:18
  Speaker 1: wanted to include portfolio in this list, is we just
• 23:22
  Speaker 1: assume it's only referring to a share, or we just
• 23:24
  Speaker 1: assume it's only referring to one asset class, whereas that's
• 23:28
  Speaker 1: not the case. So, for example, if you bought an
• 23:31
  Speaker 1: investment property, that would become part of your portfolio. And
• 23:34
  Speaker 1: when we talk about that, I think it's important to
• 23:36
  Speaker 1: take into consideration because a lot of people will say
• 23:39
  Speaker 1: I have nothing. It's like, well, let's actually step back.
• 23:42
  Speaker 1: Do you own a car, do you have jewelry, do
• 23:44
  Speaker 1: you have this? Do you have that?
• 23:46
  Speaker 2: Go?
• 23:46
  Speaker 1: Yeah, okay, well that's actually made up of what your
• 23:48
  Speaker 1: net worth is. And I think we really need to
• 23:51
  Speaker 1: see it from a more holistic point of view. OKAYV
• 23:54
  Speaker 1: I think we need to go to a quick break.
• 23:56
  Speaker 2: We do.
• 23:57
  Speaker 1: I feel like there's a lot of information to digest.
• 23:59
  Speaker 1: I literally just vomited all over you guys. I need
• 24:01
  Speaker 1: to go clean up. Sorry, sorry, sorry, see you on
• 24:04
  Speaker 1: the flip side.
• 24:04
  Speaker 4: See soon. We are back in going back to basics
• 24:12
  Speaker 4: on investing. At the end of the day, V isn't
• 24:14
  Speaker 4: it safe to have money in a saving.
• 24:16
  Speaker 1: No, sit down. Absolutely, Look, it's true. Savings accounts and
• 24:22
  Speaker 1: term deposits are a less risky type of investment, and
• 24:26
  Speaker 1: it's generally recommended that you keep some of your money
• 24:29
  Speaker 1: in these assets. So when it comes to and you
• 24:32
  Speaker 1: and I have talked about this a lot, emergency savings,
• 24:35
  Speaker 1: emergency fund that is always in cash, we never invest
• 24:39
  Speaker 1: that because we never want to lose or have no
• 24:42
  Speaker 1: access to that. I want you to have access to
• 24:45
  Speaker 1: your emergency fund, day or night, anytime of the day.
• 24:48
  Speaker 1: You shouldn't have to sell something down to access that.
• 24:51
  Speaker 1: But investing in shares can give your money the chance
• 24:55
  Speaker 1: to earn better returns than it would have if you
• 24:58
  Speaker 1: left it in your bank account over the long term.
• 25:01
  Speaker 1: So over ten years, the ASX two hundred index, which
• 25:04
  Speaker 1: we discussed in the first half of this episode, had
• 25:07
  Speaker 1: an average total return of nine point three percent each year,
• 25:12
  Speaker 1: and the total return combines the price return, so the
• 25:15
  Speaker 1: capital growth, So how much that asset has increased in
• 25:18
  Speaker 1: price over time? And the income yield, so how much
• 25:22
  Speaker 1: you got paid for owning that Almost half the total
• 25:26
  Speaker 1: return came from yield. So how much you got paid
• 25:29
  Speaker 1: for owning that shared, not how much it increased in value.
• 25:32
  Speaker 1: In fact, you could own a sharebeck today that is
• 25:35
  Speaker 1: worth ten dollars, and you could own that same share
• 25:38
  Speaker 1: in twenty years and it could still be worth ten dollars,
• 25:40
  Speaker 1: but it might have paid you one hundred dollars over
• 25:42
  Speaker 1: that period of time just for owning it, because you
• 25:45
  Speaker 1: get a portion of that profit. But the company was
• 25:47
  Speaker 1: just consistent, it didn't increase in value. Because maybe they're
• 25:50
  Speaker 1: a potato chip company. Yeah, and they just make these
• 25:52
  Speaker 1: great potato chips and they have the same customer base
• 25:55
  Speaker 1: over that you know, ten twenty years. They buy their
• 25:58
  Speaker 1: potato chips regularly, they make it profit, they distribute it
• 26:01
  Speaker 1: to their company. But is that company worth more in
• 26:04
  Speaker 1: ten years than it was today if they haven't increased
• 26:06
  Speaker 1: their customer base. Now it's still worth ten bucks a share.
• 26:09
  Speaker 1: But you got paid every year for owning that share.
• 26:12
  Speaker 1: So we need to take that into consideration because a
• 26:14
  Speaker 1: lot of people might look at their portfolio and go, oh,
• 26:17
  Speaker 1: I bought that share for ten bucks and it's still
• 26:19
  Speaker 1: only worth ten dollars, and they completely forget the dividend
• 26:23
  Speaker 1: that was paid out during that time, which is the
• 26:25
  Speaker 1: money that you get paid to own that share.
• 26:28
  Speaker 4: Right, Okay, okay, So let's talk about money in a
• 26:32
  Speaker 4: savings account.
• 26:33
  Speaker 1: Yeah sexy. Have we spoken about compound interest before?
• 26:37
  Speaker 4: Beck, notn you, but I've talked about how sexy it
• 26:43
  Speaker 4: is before, right, Like you've heard me say yeah, because
• 26:46
  Speaker 4: it is.
• 26:46
  Speaker 1: Right. So, compound interest is the money that you made
• 26:49
  Speaker 1: making money, and then that money making money, which is
• 26:52
  Speaker 1: obviously very very attractive. So compound interest is when you
• 26:55
  Speaker 1: earn interest on both the money that you've saved and
• 26:59
  Speaker 1: the interest that you you earned. So it is literally
• 27:02
  Speaker 1: your money working for you, which we love. We want
• 27:04
  Speaker 1: all of our dollars to be working as hard as
• 27:06
  Speaker 1: we did for it, if not harder. Let's be honest.
• 27:09
  Speaker 1: I want it to continue making money while I'm not working.
• 27:12
  Speaker 1: And I will make sure that we link to the
• 27:14
  Speaker 1: money Smart Compound interest calculator in the show notes because
• 27:16
  Speaker 1: I talk about it all the time and it's basically
• 27:18
  Speaker 1: my favorite resource on the internet. I have a bookmarked.
• 27:21
  Speaker 1: If I start typing in my search bar compound, it
• 27:23
  Speaker 1: will literally come out compound Interest Calculator, Money Smart, and
• 27:26
  Speaker 1: like it knows what I'm looking for because I go
• 27:28
  Speaker 1: on there so often. But I did a little example
• 27:32
  Speaker 1: for you. So let's say, Beck, you invest five hundred
• 27:35
  Speaker 1: dollars and then every single month you go and invest
• 27:38
  Speaker 1: fifty dollars into this account for the next ten years.
• 27:40
  Speaker 1: And we're going to use the example before of the
• 27:42
  Speaker 1: asx two hundred index of nine point three percent return
• 27:46
  Speaker 1: over the last ten years, because that makes sense. That's
• 27:49
  Speaker 1: where we're pulling our stats from following following. So at
• 27:52
  Speaker 1: an annual interest rate or an annual rate of return
• 27:55
  Speaker 1: of nine point three percent over that period of time, Beck,
• 27:58
  Speaker 1: if you just saved it and put that money, that
• 28:00
  Speaker 1: five hundred dollars and then fifty dollars each and every
• 28:03
  Speaker 1: single month into your savings account, you would have saved
• 28:05
  Speaker 1: six thousand dollars. Wow, that's pretty good. But if you
• 28:09
  Speaker 1: had invested it at a rate of return of nine
• 28:12
  Speaker 1: point three percent, you would have eleven thousand, one hundred
• 28:16
  Speaker 1: and four dollars, which is four thousand, six hundred and
• 28:20
  Speaker 1: four dollars more money than if you had saved it instead.
• 28:25
  Speaker 1: That is four thousand, six hundred dollars from my perspective,
• 28:30
  Speaker 1: free money that you didn't have to work for money
• 28:33
  Speaker 1: exactly because the money that your money makes makes money,
• 28:36
  Speaker 1: and then that compounds, and the power of compounding actually
• 28:40
  Speaker 1: doesn't exist just over ten years. Ten years is about
• 28:43
  Speaker 1: the time frame from my perspective. It's the minimum timeframe
• 28:47
  Speaker 1: when compounding actually starts to take in effect. So if
• 28:51
  Speaker 1: we look at it, maybe let's zoom out a little
• 28:53
  Speaker 1: bit further and look at twenty years. So let's just
• 28:56
  Speaker 1: double the time frame. Your initial deposit was five hundred dollars.
• 28:59
  Speaker 1: You know, over ten years, we said that you'd earned
• 29:02
  Speaker 1: six thousand dollars in your savings account. If we doubled it,
• 29:04
  Speaker 1: that's twelve thousand dollars. That makes sense. But if you
• 29:09
  Speaker 1: had invested it at that rate of return of nine
• 29:12
  Speaker 1: point three percent each year, beck, you'd have thirty seven thousand,
• 29:16
  Speaker 1: eight hundred and eighty five dollars over that period of time,
• 29:19
  Speaker 1: which compares to that twelve thousand dollars you would have saved. Otherwise,
• 29:23
  Speaker 1: we're just twenty five thousand, five hundred and eighty five
• 29:26
  Speaker 1: dollars more horee money that you have. Whoa, isn't that cool?
• 29:31
  Speaker 1: And if you extrapolate it out even further, because you're young,
• 29:35
  Speaker 1: you're in a position where you know, I wouldn't say
• 29:37
  Speaker 1: that you're retiring in the next ten, twenty or thirty years.
• 29:40
  Speaker 1: I'd say there's a minimum of forty years before you
• 29:43
  Speaker 1: consider that because you're a young dog, right, you're a baby.
• 29:46
  Speaker 1: But if we did that over the long term and said,
• 29:49
  Speaker 1: all right, well it's going to be forty years in
• 29:51
  Speaker 1: the sheer market, that first year of you earning six
• 29:55
  Speaker 1: thousand dollars, if you'd saved it, then we had twelve
• 29:57
  Speaker 1: thousand dollars over forty years, would have saved twenty four
• 30:01
  Speaker 1: thousand dollars if you just kept doing that, right, Like,
• 30:03
  Speaker 1: that's basic maths. Compounding is actually really hard for the
• 30:07
  Speaker 1: human brain to understand because it kind of goes along
• 30:10
  Speaker 1: level and then it projects upwards. And we don't think
• 30:14
  Speaker 1: that way. We actually think in a really linear way,
• 30:16
  Speaker 1: which is one plus one equals two, and then two
• 30:18
  Speaker 1: plus two equals four and four plus four equals eight.
• 30:21
  Speaker 1: And like we think in a linear way, we don't
• 30:24
  Speaker 1: actually have the mental and I'm not saying we're silly.
• 30:26
  Speaker 1: It's not the case. It's just the way our brains work.
• 30:29
  Speaker 1: We don't compound in our brains, right, So I think
• 30:32
  Speaker 1: this is really going to shock you, and it makes
• 30:33
  Speaker 1: me so excited because over forty years, just starting with
• 30:38
  Speaker 1: five hundred bucks, we're just talking about fifty dollars per month,
• 30:40
  Speaker 1: which if you're in that position, that is fantastic. The
• 30:43
  Speaker 1: sooner you can start, the better. If you're not in
• 30:45
  Speaker 1: the position to start yet, that is totally okay too,
• 30:47
  Speaker 1: because we can always come back to this at a
• 30:50
  Speaker 1: time that suits you. But had you saved over that
• 30:53
  Speaker 1: period of time, it would have been twenty four thousand
• 30:55
  Speaker 1: dollars back. Had you invested it instead, it would be
• 30:58
  Speaker 1: two hundred and seventy six three hundred and eighteen. Really,
• 31:02
  Speaker 1: that is two hundred and fifty one, eight hundred and
• 31:05
  Speaker 1: eighteen dollars free money for waiting. That is so our
• 31:10
  Speaker 1: is so much money. And see the like I'm just
• 31:13
  Speaker 1: showing Beck the graph. If you look at the graph
• 31:16
  Speaker 1: this down here, so the bottom blue part on your
• 31:19
  Speaker 1: money smart calculator is going to show you how much
• 31:22
  Speaker 1: you saved. And that's that linear line that we expect
• 31:25
  Speaker 1: one plus one equals to two plus two equals for right.
• 31:28
  Speaker 1: But you can see that above that it has what
• 31:31
  Speaker 1: compounds because the money that your money makes starts making money,
• 31:35
  Speaker 1: and then that money starts making money, and at some
• 31:38
  Speaker 1: point the money that your money makes actually becomes more
• 31:41
  Speaker 1: money than what you're contributing. So what you're contributing does
• 31:45
  Speaker 1: compound a little bit, yeah, but what your compound interest
• 31:48
  Speaker 1: does is actually compound massively over time. So the light
• 31:53
  Speaker 1: blue bar that you can see above and if you
• 31:56
  Speaker 1: guys go and have look at it, it'll make sense.
• 31:58
  Speaker 1: You can see in the very last year that your
• 32:01
  Speaker 1: initial deposit is still fifty dollars, but you're literally making
• 32:05
  Speaker 1: twenty four thousand dollars on that in a year. So
• 32:09
  Speaker 1: it's one of those things that over time we think
• 32:12
  Speaker 1: it doesn't matter, but from little things, big things really
• 32:15
  Speaker 1: do grow. Because if we strip that back to that
• 32:17
  Speaker 1: ten year example again, I go, it's eleven one hundred
• 32:21
  Speaker 1: and four dollars. Back go, that's pretty good, but like
• 32:24
  Speaker 1: not life changing. But if we go back to that
• 32:27
  Speaker 1: forty years, that's life changing. Yeah. So the power in
• 32:31
  Speaker 1: investing isn't necessarily in getting the highest interest rate it's
• 32:36
  Speaker 1: actually having time in the market, which a lot of us,
• 32:40
  Speaker 1: especially if you're listening to Sheese on the Money, have
• 32:42
  Speaker 1: the grace of that is mind blowing. It's fun right
• 32:46
  Speaker 1: when you start extrapolating it out and go, Wow, this
• 32:48
  Speaker 1: is what I could do, This is what I could create,
• 32:51
  Speaker 1: And that example is fifty dollars a month, and for
• 32:54
  Speaker 1: some people that might not be enough. For some people
• 32:56
  Speaker 1: that's actually inconceivable. They just don't have that available right now.
• 33:00
  Speaker 1: And it's not about shame. It's not about whether you
• 33:02
  Speaker 1: can or can't do it. It's not about what is
• 33:05
  Speaker 1: quote enough because from my perspective, even if you have
• 33:08
  Speaker 1: a dollar a month to invest, from my perspective, that's
• 33:12
  Speaker 1: enough because I want you to be investing because you
• 33:15
  Speaker 1: understand compound interest, because you understand what that can create.
• 33:19
  Speaker 1: And while today you might only have a dollar, well,
• 33:21
  Speaker 1: next month you might be able to find two. In
• 33:24
  Speaker 1: a couple of months, you might be able to find five.
• 33:26
  Speaker 1: In a couple of years, you might be in a
• 33:28
  Speaker 1: different situation where fifty dollars a month is conceivable. So Beck,
• 33:32
  Speaker 1: that's why I'm so passionate about it, because from little things,
• 33:35
  Speaker 1: big things really do grow. And if we even just
• 33:38
  Speaker 1: take it back to what women earn in general, we
• 33:41
  Speaker 1: already know we're at a disadvantage. We already know that
• 33:45
  Speaker 1: women are retiring with less superanuation than men and less
• 33:49
  Speaker 1: to actually retire in general. And given that number I
• 33:52
  Speaker 1: just gave you, do you know that women who are
• 33:55
  Speaker 1: seventy five years and older on average retire with only
• 33:59
  Speaker 1: three hundred fourteen thousand dollars in superanuation. And if you
• 34:03
  Speaker 1: strip that back to what quote retirement age is, and
• 34:06
  Speaker 1: retirement age is usually sixty five, the average female who
• 34:10
  Speaker 1: is sixty five years old has a superranuation balance of
• 34:13
  Speaker 1: three hundred and eighty one thousand dollars. By investing five
• 34:16
  Speaker 1: hundred dollars and then potentially investing fifty dollars each and
• 34:19
  Speaker 1: every single month, you double that. Is that not wild?
• 34:22
  Speaker 1: To think that with education we could change our lives?
• 34:25
  Speaker 1: That is wild. I can't believe it's not more commonly
• 34:28
  Speaker 1: known exactly. So for me, this is why I'm so
• 34:31
  Speaker 1: passionate about it, but also why I don't think that
• 34:33
  Speaker 1: there is a minimum amount that's quote not worth it.
• 34:36
  Speaker 1: I don't think it's ever not worth investing, because it's
• 34:39
  Speaker 1: actually about mindset and creating that mindset of abundance and
• 34:43
  Speaker 1: going well, actually, I might not have a lot, but
• 34:46
  Speaker 1: what I do have is working for future me. And
• 34:49
  Speaker 1: what I do have is putting me in a position
• 34:51
  Speaker 1: where in the future I can invest more. And instead
• 34:54
  Speaker 1: of going all right, well i'll invest when I have money,
• 34:57
  Speaker 1: you're already doing it today. So if ever you do
• 34:59
  Speaker 1: come into money, or if ever your situation does change,
• 35:01
  Speaker 1: you go All I have to do is change my
• 35:03
  Speaker 1: contribution amount because I know who I am, I know
• 35:05
  Speaker 1: what I'm investing, and I know where I'm investing, as
• 35:08
  Speaker 1: opposed to having to start from scratch. Quote, when you
• 35:10
  Speaker 1: have money, that's the same thing as going, yeah, i'll
• 35:13
  Speaker 1: start dating when I get married. Like that makes no sense.
• 35:16
  Speaker 1: Why would you start investing once you're rich. You're not
• 35:20
  Speaker 1: going to get rich unless you start investing, right right,
• 35:23
  Speaker 1: This is really motivating me. I hope so, I hope
• 35:25
  Speaker 1: so because I really love investing, and I also have
• 35:28
  Speaker 1: just started redating my husband and I can recommend it. Yeah,
• 35:31
  Speaker 1: take your husband on dates, so V.
• 35:33
  Speaker 4: A lot of my friends have said that shares are
• 35:34
  Speaker 4: a little bit risky because some risks go up and down.
• 35:37
  Speaker 1: Everything carries risk, But yeah, prices do go up and
• 35:40
  Speaker 1: down over time. That's how the market performs, and it's
• 35:44
  Speaker 1: actually not something that you should worry about in the
• 35:47
  Speaker 1: short term. So when I first started investing, I checked
• 35:50
  Speaker 1: my share portfolio literally every day, and I was so
• 35:53
  Speaker 1: stressed if I saw it go down by even zero
• 35:55
  Speaker 1: point one percent, because of it's on the way down,
• 35:57
  Speaker 1: like what have I done? I've made the wrong decision,
• 35:59
  Speaker 1: And that's just not the case. The advice I have
• 36:02
  Speaker 1: here is zoom out. Investments should be for a long time,
• 36:05
  Speaker 1: and don't worry if your stock does go down. The
• 36:08
  Speaker 1: one thing that you need to remember is if you
• 36:10
  Speaker 1: went and bought ten shares in a company, and you
• 36:14
  Speaker 1: spent one dollar on each share, so you had ten
• 36:17
  Speaker 1: dollars worth of stock beck and then in a couple
• 36:19
  Speaker 1: of months, because we have a predicted recession coming up,
• 36:23
  Speaker 1: that stock has dropped down to being worth five dollars,
• 36:27
  Speaker 1: You're gonna absolutely worry, right, you go, Oh my god,
• 36:30
  Speaker 1: I bought ten dollars worth of stock. I got ten shares,
• 36:33
  Speaker 1: and now it's worth five bucks. It's worth half of
• 36:36
  Speaker 1: what I paid for it. What you're not remembering is
• 36:39
  Speaker 1: that's just what the market's valuing it at today. They're
• 36:42
  Speaker 1: not saying, Beck, you only have five dollars. They're saying, Beck,
• 36:45
  Speaker 1: you will have five dollars if you sell this asset today.
• 36:49
  Speaker 1: What you own right now is ten shares in this company.
• 36:53
  Speaker 1: And the market might be off, it might only now
• 36:55
  Speaker 1: be worth five dollars instead of ten dollars today. But
• 36:58
  Speaker 1: if you wait and the market it recovers, it might
• 37:01
  Speaker 1: get back to that ten dollars. It might even go
• 37:02
  Speaker 1: to fifteen or twenty dollars, but you still own those
• 37:06
  Speaker 1: ten shares. It's really important to understand that. During the
• 37:09
  Speaker 1: global financial crisis in two thousand and eight two thousand
• 37:12
  Speaker 1: and nine, obviously a lot of people lost a lot
• 37:15
  Speaker 1: of money for a lot of different reasons, but one
• 37:17
  Speaker 1: of the main reasons was people being really scared of
• 37:20
  Speaker 1: the market, and if they had shares, they sold it
• 37:24
  Speaker 1: because they were like, I just want to save whatever
• 37:25
  Speaker 1: I have. And one of the best investment opportunities was
• 37:29
  Speaker 1: actually when the market was completely down because shares were
• 37:32
  Speaker 1: on sale Beck, So essentially the market crashed, everything was cheaper,
• 37:36
  Speaker 1: and those who were in the market for the long
• 37:38
  Speaker 1: term saw it as an opportunity to stock up on
• 37:41
  Speaker 1: stocks that they liked for a little bit cheaper. So
• 37:44
  Speaker 1: I think before you sell a stock, I would really
• 37:46
  Speaker 1: do a little bit of a check and go, why
• 37:48
  Speaker 1: am I selling this stock? Is it out of fear?
• 37:51
  Speaker 1: Am I selling this because I'm anxious? Or am I
• 37:53
  Speaker 1: selling this because I need the cash? Those two are
• 37:55
  Speaker 1: different conversations. If it's because you're anxious, please before you
• 38:00
  Speaker 1: do that, cell do a bit of research to make
• 38:03
  Speaker 1: sure that you aren't just triggering something. That means in
• 38:06
  Speaker 1: six or twelve months, when you go I want to
• 38:08
  Speaker 1: invest again, you don't then have to buy back in
• 38:10
  Speaker 1: at a dollar per share again and have lost five
• 38:13
  Speaker 1: dollars in the process. Does that make sense? Yeah, that
• 38:16
  Speaker 1: does make sense. I was also watching on Netflix at
• 38:18
  Speaker 1: the moment, you know, that Bernie Madoff documentary that you've
• 38:21
  Speaker 1: probably got absolutely no interest in, but I was so excited. Right, Okay,
• 38:25
  Speaker 1: So there's this documentary about essentially the biggest Ponzi scheme
• 38:29
  Speaker 1: on Wall Street, and it's, from my perspective, very interesting.
• 38:32
  Speaker 1: I don't think I could pay you to sit through it.
• 38:35
  Speaker 1: But essentially one of the red flags that investigators found
• 38:39
  Speaker 1: when looking into this made Off case was actually that
• 38:42
  Speaker 1: he had never reported a bad year. It was impossible.
• 38:46
  Speaker 1: Over the period of time. I think it was seventeen
• 38:48
  Speaker 1: years that he said he was investing. They were like,
• 38:50
  Speaker 1: he just never had a bad year, and even the best,
• 38:53
  Speaker 1: if the best investors over a seventeen year period, have
• 38:57
  Speaker 1: bad years. A flag. Yeah, it was a Ponzi scheme.
• 39:01
  Speaker 1: He never actually invested any of his investors' money. It's
• 39:05
  Speaker 1: actually wild, like he stole so anyway, it's actually cooked.
• 39:08
  Speaker 1: I'll tell you all about it after something I would
• 39:10
  Speaker 1: want to watch. Yeah, I think you would find no, no, no,
• 39:14
  Speaker 1: there's no financial nous that needs to exist there. He's
• 39:17
  Speaker 1: running a Ponzi scheme. He's doing the wrong thing. There's
• 39:19
  Speaker 1: lots of money. It's very interesting, but essentially the best
• 39:23
  Speaker 1: investors actually expect to lose money over time, but they
• 39:28
  Speaker 1: know that it will come back because over our lifetime,
• 39:31
  Speaker 1: back over the average human beings lifetime, they will see
• 39:35
  Speaker 1: seven very large market dips. They'll see things like the GFC,
• 39:40
  Speaker 1: they'll see things like the recession that our market is
• 39:42
  Speaker 1: currently talking about, and the best investors try to keep
• 39:46
  Speaker 1: up and try learning and get up when they fail,
• 39:49
  Speaker 1: not run away when they're anxious. So I think it's
• 39:52
  Speaker 1: really important to talk about the fact that if in doubt,
• 39:55
  Speaker 1: zoom out. Instead of looking at what's going on for
• 39:58
  Speaker 1: this year or what the performance on your p follow
• 40:00
  Speaker 1: you was for the last six months, let's look at five, ten, twenty,
• 40:03
  Speaker 1: even thirty years into the future, and I promise it
• 40:05
  Speaker 1: looks a lot more bright. Okay, they I am so ready.
• 40:08
  Speaker 1: So what do I do? First? Do I pay off
• 40:10
  Speaker 1: debt or just start saving? All right? So first things first,
• 40:14
  Speaker 1: I would make sure you have your financial house in
• 40:17
  Speaker 1: order before you start investing, because there's no point investing
• 40:20
  Speaker 1: money that you then have to pull out for something else.
• 40:22
  Speaker 1: So the first thing I would get in order is
• 40:24
  Speaker 1: making sure you have an emergency fund. And I genuinely
• 40:28
  Speaker 1: believe that whether you are in debt or not in
• 40:30
  Speaker 1: personal debt in a mortgage, I don't care what you are.
• 40:32
  Speaker 1: I still think you need an emergency fund as a priority,
• 40:35
  Speaker 1: because to me, that is the first ticket to financial
• 40:38
  Speaker 1: freedom is making sure that you don't have to go
• 40:41
  Speaker 1: further into debt fund expected expenses, that you don't have
• 40:44
  Speaker 1: to rely on anybody else for money, that you don't
• 40:46
  Speaker 1: have to ask for things, and that you feel completely
• 40:49
  Speaker 1: empowered in your financial journey, so having an emergency fund.
• 40:53
  Speaker 1: The next thing I would do is prioritize paying off
• 40:55
  Speaker 1: consumer debt first. So paying off debt, from my perspective,
• 41:00
  Speaker 1: is an investment in itself because you're not paying interest
• 41:03
  Speaker 1: on that and most consumer debts actually carry really high
• 41:06
  Speaker 1: interest rates. So we're not talking about, you know, the
• 41:09
  Speaker 1: four percent interest rate you have on your mortgage, because
• 41:11
  Speaker 1: as we said before, the ASX index has averaged a
• 41:14
  Speaker 1: total return of nine point three percent, so obviously one
• 41:18
  Speaker 1: of these things is not like the other. But if
• 41:21
  Speaker 1: you have a credit card that's fourteen to twenty two percent,
• 41:24
  Speaker 1: I would absolutely prioritize paying that off because the sooner
• 41:28
  Speaker 1: you pay that off, the less interest you're paying, and
• 41:30
  Speaker 1: that's money win. So I would get rid of that first.
• 41:33
  Speaker 1: And then once you've got that rid of and you
• 41:35
  Speaker 1: have your emergency fund, from my perspective, if you want
• 41:39
  Speaker 1: to invest, my friend, you are ready to invest. The
• 41:42
  Speaker 1: thing I would do, though, is making sure that you
• 41:44
  Speaker 1: have enough education. But you're listening to this podcast, so
• 41:47
  Speaker 1: you're on the right path, aren't you amazing. I feel
• 41:50
  Speaker 1: like I've got a long redhead of me, but I
• 41:52
  Speaker 1: am pretty bloody motivated after all of this. I'm really
• 41:55
  Speaker 1: excited because I feel like you've just clicked on what
• 41:57
  Speaker 1: compound interest is and the power it has to change
• 41:59
  Speaker 1: your life life over the long term. So I'm very
• 42:01
  Speaker 1: excited to continue this conversation.
• 42:03
  Speaker 4: Absolutely, let's do it. I think that's plenty for today.
• 42:06
  Speaker 4: What are you reckon?
• 42:07
  Speaker 1: I am definitely all investing basics out, So as always,
• 42:11
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• 42:13
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• 42:16
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• 42:20
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• 42:24
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• 42:27
  Speaker 1: on the Money. Please join us. We cannot wait to
• 42:29
  Speaker 1: see you on Friday. See later, guys. Bye.
• 42:37
  Speaker 3: The advice shared on She's on the Money is general
• 42:40
  Speaker 3: in nature and does not consider your individual circumstances. She's
• 42:44
  Speaker 3: on the Money exists purely for educational purposes and should
• 42:47
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• 42:51
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• 42:54
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