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Diversification Explained · 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 Kerni 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.
• 0:58
  Speaker 4: Hello, and welcome to She's on the Money, the podcast
• 1:00
  Speaker 4: for millennials who won financial freedom. My name is Beckside
• 1:04
  Speaker 4: and with me as always is Victoria Divine.
• 1:07
  Speaker 5: Hello Bear, Hello VD.
• 1:09
  Speaker 1: I'm excited for this one, but I feel like there's
• 1:11
  Speaker 1: a little bit of pressure there is.
• 1:13
  Speaker 5: I'm gonna say a little bit of a challenge.
• 1:14
  Speaker 4: Yeah all right, and I don't know if you offer it,
• 1:16
  Speaker 4: but we're gonna try, well, me being the listener and
• 1:20
  Speaker 4: you being the actual person with knowledge, try and explain
• 1:23
  Speaker 4: diversification in thirty minutes.
• 1:25
  Speaker 1: Yeah, because that sounded like a good podcast title, and
• 1:28
  Speaker 1: we picked it before we actually recorded this episode. So
• 1:32
  Speaker 1: now we have to kind of like adhere to that.
• 1:34
  Speaker 4: We literally have to what if we fail? Do we
• 1:36
  Speaker 4: just cut bits out if we fail?
• 1:39
  Speaker 1: Yeah?
• 1:39
  Speaker 5: It actually sucks to be the listener.
• 1:41
  Speaker 1: Also, low key funny if you like clicked on the
• 1:43
  Speaker 1: episode diversification in thirty minutes and then you see it's
• 1:46
  Speaker 1: like a forty two minute episode exactly.
• 1:49
  Speaker 5: It's gonna be very hard time. Let's get into it then,
• 1:51
  Speaker 5: so let's try.
• 1:51
  Speaker 4: Okay, the producers popped as Stopwatch on fantastic.
• 1:55
  Speaker 1: Let's go, no pressure, all right, So just.
• 1:57
  Speaker 4: Really quickly after the break, we will give you guys
• 1:59
  Speaker 4: four tips on how to diversify your portfolio and how
• 2:01
  Speaker 4: to keep it that way. But first VI, what is diversification.
• 2:05
  Speaker 1: I love talking about diversification and you've heard me talk
• 2:08
  Speaker 1: about it before, and it's when I say, you wouldn't
• 2:11
  Speaker 1: want to put all your eggs in one basket, right,
• 2:13
  Speaker 1: And you wouldn't want to do that, y beck, because
• 2:15
  Speaker 1: if you put all your eggs in one basket and trip,
• 2:19
  Speaker 1: you're going to break all of your eggs. Whereas if
• 2:22
  Speaker 1: we put them in multiple baskets, and you're just carrying
• 2:24
  Speaker 1: one of your baskets because we have lots of little
• 2:27
  Speaker 1: loads to do, and you trip in one brakes, well,
• 2:29
  Speaker 1: all of the other ones they're okay for now, unless
• 2:31
  Speaker 1: you're like real clumsy and you tripped every single time,
• 2:34
  Speaker 1: which case I really can't help you. But diversification is
• 2:38
  Speaker 1: an investment strategy that essentially lowers your portfolio's risk and
• 2:43
  Speaker 1: then helps you gain more stable returns because obviously, if
• 2:47
  Speaker 1: you have your eggs in lots of different baskets, that's
• 2:50
  Speaker 1: an analogy. We're not actually buying eggs. Beck If we
• 2:54
  Speaker 1: have lots of different investments, if one of them performs
• 2:58
  Speaker 1: not so well, something else else is going to perform well,
• 3:01
  Speaker 1: and then your average portfolio return becomes a bit more
• 3:05
  Speaker 1: average instead of seeing the return of just one company.
• 3:07
  Speaker 1: And you often see this with things like ETFs. Right, So,
• 3:11
  Speaker 1: an ETF is an exchange traded fund. We have talked
• 3:13
  Speaker 1: about these things before. I like them because they give
• 3:16
  Speaker 1: you instant diversification because they're essentially a really big basket
• 3:21
  Speaker 1: of lots of different types of shares. But if you
• 3:24
  Speaker 1: deep dive into an ETF and have a look at
• 3:26
  Speaker 1: all their holdings. Most ETFs hold fifty plus shares because
• 3:31
  Speaker 1: they like to have a lot. I mean a lot
• 3:33
  Speaker 1: of ETFs might be the top two hundred companies on
• 3:35
  Speaker 1: the Australian share market. But you will look at it
• 3:38
  Speaker 1: and some companies have you know, returned to really good
• 3:41
  Speaker 1: looking forty two percent, some companies have been like negative
• 3:44
  Speaker 1: fourteen percent, and it all comes out to be about
• 3:48
  Speaker 1: an average of the market, which is what we're aiming
• 3:51
  Speaker 1: for because to be honest, when we're investing, I just
• 3:54
  Speaker 1: want you to have consistent, reliable returns over the long
• 3:58
  Speaker 1: term to build wealth because unfortunately, get rich quick schemes
• 4:02
  Speaker 1: don't work and they're kind of irresponsible. Like when we're
• 4:05
  Speaker 1: investing and we're investing properly, we're in it for the
• 4:08
  Speaker 1: long haul and it ultimately should be a little bit boring.
• 4:11
  Speaker 1: But when you dive in, diversification is a really important
• 4:15
  Speaker 1: point because it kind of makes things more stable. Does
• 4:18
  Speaker 1: that make sense?
• 4:19
  Speaker 4: That does make sense, But can you kind of explain
• 4:22
  Speaker 4: more to me, like how that actually lowers risk?
• 4:25
  Speaker 1: Yeah, So obviously again with the different baskets having different
• 4:29
  Speaker 1: eggs in them, diversification is going to lower your risk
• 4:33
  Speaker 1: because different asset classes perform differently at different times, so
• 4:37
  Speaker 1: you're not just looking at oh, well, maybe if by
• 4:41
  Speaker 1: chance this performs really well, and if by chance something
• 4:45
  Speaker 1: doesn't perform well, will be okay. It's actually more because
• 4:49
  Speaker 1: we know that different asset classes perform differently during different
• 4:53
  Speaker 1: periods of time. So the best example I can think
• 4:56
  Speaker 1: of off the top of my head is during Covidi
• 5:00
  Speaker 1: paper sales did really well. Right, So during times of
• 5:04
  Speaker 1: economic turmoil, we will see staples do really well, so supermarkets,
• 5:10
  Speaker 1: you know, thrive. All of those things that are essentially
• 5:14
  Speaker 1: human essentials tend to do a little bit better than
• 5:18
  Speaker 1: things that are more luxurious.
• 5:19
  Speaker 3: Right.
• 5:20
  Speaker 1: So I think it's important to make sure that when
• 5:22
  Speaker 1: you're picking your portfolio, you're not just picking it because
• 5:25
  Speaker 1: you're like, oh, I need to diversify, because if one
• 5:28
  Speaker 1: doesn't do well, the other well, and that's just luck
• 5:31
  Speaker 1: of the draw. It's not necessarily luck of the draw.
• 5:33
  Speaker 1: It's picking different asset classes. Look, if the market's not
• 5:36
  Speaker 1: so good, beck, we know there's a few tried and
• 5:39
  Speaker 1: true assets in your portfolio that are going to stand
• 5:41
  Speaker 1: the test of time and do well. But also during
• 5:45
  Speaker 1: times of economic growth, you're going to see other asset
• 5:48
  Speaker 1: classes do well like infrastructure or you might see more
• 5:51
  Speaker 1: roads being built, or you might see you know, more
• 5:53
  Speaker 1: buildings being built, or even you know, luxuries. So you know,
• 5:57
  Speaker 1: if you're going to invest in LVMH, which owns a
• 6:00
  Speaker 1: lot of the luxury brands around the world, obviously they're
• 6:04
  Speaker 1: going to do really well during booming times because everyone's
• 6:06
  Speaker 1: buying their wife a handbag, you know, gotcha. So we
• 6:09
  Speaker 1: want to make sure that we're not just diversified by
• 6:12
  Speaker 1: having lots of assets, we're diversified by having them across
• 6:16
  Speaker 1: lots of different classes. Does that make sense?
• 6:20
  Speaker 4: Yeah, I think it's starting to sink in for me
• 6:23
  Speaker 4: and hopefully for listeners. But if you have to backtrack
• 6:25
  Speaker 4: a few times, I don't blame you so ver you
• 6:28
  Speaker 4: mention asset classes before and we have talked about them
• 6:31
  Speaker 4: on the show. But can we get a quick little refresher.
• 6:34
  Speaker 1: Yes, so we have discussed it before, so definitely look
• 6:37
  Speaker 1: for it in the podcast feed if you haven't heard
• 6:40
  Speaker 1: this episode. But here in Australia there are four main
• 6:43
  Speaker 1: types of asset classes. You've got cash, you've got bonds,
• 6:46
  Speaker 1: you've got property, and then you've got shares. Obviously I
• 6:49
  Speaker 1: love shares, and when we're talking about a diversified investment portfolio,
• 6:53
  Speaker 1: we're more talking about shares, bonds, and cash and the
• 6:57
  Speaker 1: mix of those things. So the best example is your supranuation, right.
• 7:02
  Speaker 1: Most of us who have been employed are going to
• 7:04
  Speaker 1: have a subranuation account, right, and you would have your
• 7:08
  Speaker 1: investment portfolio. And your investment portfolio is not just made
• 7:12
  Speaker 1: up of picking a diversified amount of shares. It's also
• 7:15
  Speaker 1: got some cash in it to bring some stability. You'll
• 7:18
  Speaker 1: have access to bonds. So a bond is like a
• 7:21
  Speaker 1: government IOU is my favorite way to explain it. You'll
• 7:25
  Speaker 1: have one of those because during times when interest rates fall,
• 7:29
  Speaker 1: bond prices actually rise because they're seen to be a
• 7:32
  Speaker 1: little bit more of a stable investment. And when shares
• 7:36
  Speaker 1: are doing poorly, bonds usually perform pretty well. So again,
• 7:40
  Speaker 1: it brings a bit more stability to your portfolio.
• 7:43
  Speaker 4: Right.
• 7:43
  Speaker 1: It's kind of like having a seesaw and you're putting,
• 7:46
  Speaker 1: you know, some shares on one end and you're like, oh,
• 7:48
  Speaker 1: I need to put something else on the other end
• 7:50
  Speaker 1: to make sure that this sits evenly, right, Right, So
• 7:53
  Speaker 1: this is what diversification is going to do. It's going
• 7:56
  Speaker 1: to make the seesawce sit evenly. But you're doing this
• 7:59
  Speaker 1: not just for your overall share portfolio, which could have cash,
• 8:03
  Speaker 1: it could have fixed interest assets, it could have property,
• 8:06
  Speaker 1: it could have shares. You're doing this inside your share
• 8:10
  Speaker 1: portfolio as well, because essentially we just want to spread
• 8:13
  Speaker 1: out our money in a way that means it's working
• 8:16
  Speaker 1: as hard as we do for it, but also it's
• 8:19
  Speaker 1: at less risk, and less risk means more assets.
• 8:23
  Speaker 5: Okay, that is a lot of information to digest.
• 8:25
  Speaker 1: Just a little bit. I mean, there were only four
• 8:26
  Speaker 1: asset classes we discussed. What were they? Beck cashons?
• 8:30
  Speaker 4: Oh yeah, bonds, bonds, cash, Yeah, genuinely, I've forgotten property, property,
• 8:35
  Speaker 4: and shares shares.
• 8:36
  Speaker 5: Okay, thank you so much, You've got it.
• 8:38
  Speaker 1: I feel like I talk so quickly that sometimes I
• 8:41
  Speaker 1: forget that other people don't keep up. But also you've
• 8:44
  Speaker 1: got to remember this is like a second language to me.
• 8:48
  Speaker 1: Lots of people speak second languages and I do not,
• 8:50
  Speaker 1: But finance is a language I speak, so it makes
• 8:53
  Speaker 1: sense to me. And if it doesn't make sense to you,
• 8:55
  Speaker 1: that kind of makes sense because you didn't go to
• 8:57
  Speaker 1: school and study any of this, which is why I
• 8:59
  Speaker 1: exist totally.
• 9:01
  Speaker 4: And that's totally okay because here I am being on
• 9:03
  Speaker 4: the show for like more than a year now and
• 9:05
  Speaker 4: still struggling.
• 9:06
  Speaker 1: So you are, Oh, thank you, You're doing so well. No,
• 9:11
  Speaker 1: I think it's good. Let's go to a really quick break.
• 9:13
  Speaker 4: Let's take some time to digest it and then have
• 9:16
  Speaker 4: a coffee.
• 9:17
  Speaker 1: And on the other side, we have another fifteen minutes
• 9:20
  Speaker 1: to talk more about diversification.
• 9:22
  Speaker 5: Oh okay, we're doing well. Welcome back everyone.
• 9:29
  Speaker 4: Since there is a time limit on this show, let's
• 9:31
  Speaker 4: quickly dive back into it. Today we are learning about diversification.
• 9:35
  Speaker 4: V is diversification just a matter of mixing up the
• 9:38
  Speaker 4: types of things I'm investing in, for example, like it
• 9:41
  Speaker 4: blue chip health, et cetera.
• 9:43
  Speaker 5: How do you diversify? Is what I'm trying to say,
• 9:46
  Speaker 5: you do?
• 9:47
  Speaker 1: And I like to think of having a share portfolio
• 9:50
  Speaker 1: like having a smoothie, right, Like it's maybe a little
• 9:54
  Speaker 1: bit of a niche example, but like you don't just
• 9:56
  Speaker 1: have a smoothie and you just have milk in it, right,
• 9:59
  Speaker 1: Like you could have a beenana smoothie, or you could
• 10:01
  Speaker 1: meet someone who hates bananas and doesn't want banana in
• 10:04
  Speaker 1: their smoothie. And wants a blueberry smoothie, right, or they
• 10:07
  Speaker 1: could be an absolute health freak and they've got like
• 10:10
  Speaker 1: LCA and G seeds and all the stuff that gets
• 10:13
  Speaker 1: stuck in your teeth. It's not for a freebody, right.
• 10:16
  Speaker 1: So you're picking a smoothie with all the ingredients that
• 10:20
  Speaker 1: you want, but you can't have a smoothie with just
• 10:22
  Speaker 1: one ingredient otherwise it's not smoothie, right, And that's the
• 10:26
  Speaker 1: way we should be seeing our investment portfolio. It is
• 10:29
  Speaker 1: not an investment portfolio or a proper one if you
• 10:32
  Speaker 1: only have one asset class in it, because it'd be
• 10:35
  Speaker 1: pretty trash smoothie, right, like no one's gonna want to
• 10:38
  Speaker 1: drink it, not really good. So essentially beg to diversify, well,
• 10:42
  Speaker 1: you're gonna need to invest across lots of different asset classes.
• 10:45
  Speaker 1: We went through them before the break. We had cash,
• 10:48
  Speaker 1: fixed interest, property and shares. And while those four asset
• 10:53
  Speaker 1: classes are the four that are recognized here in Australia,
• 10:56
  Speaker 1: we're just going to talk now about how to diversify
• 10:59
  Speaker 1: inside your share portfolio. Because most of us Rudy have
• 11:03
  Speaker 1: cash and understand that well, bonds they're more of a
• 11:06
  Speaker 1: fixed interest asset class. They're not too complicated, but they're
• 11:10
  Speaker 1: also not as popular property. I think we all understand
• 11:14
  Speaker 1: the Great Australian dream. You know what that means. But
• 11:16
  Speaker 1: did you know you can buy shares that are giving
• 11:19
  Speaker 1: you exposure to the property market. Okay, So there are
• 11:22
  Speaker 1: companies that you can invest in that they invest in
• 11:26
  Speaker 1: purchasing like skyrise buildings and renting them out corporately to
• 11:31
  Speaker 1: like office buildings, or they might have a whole building
• 11:33
  Speaker 1: and lease out the properties to individuals and then you
• 11:37
  Speaker 1: can purchase shares in their company and get exposure to
• 11:40
  Speaker 1: the property market by investing in them. Kind of cool
• 11:43
  Speaker 1: if you're interested in property but also don't want to
• 11:45
  Speaker 1: own your own. Yeah, okay, so there's lots of different ways.
• 11:49
  Speaker 1: So to make sure that you're properly diversifying, I've written
• 11:52
  Speaker 1: down four things that you need to make sure your
• 11:54
  Speaker 1: investments have so that you're well diversified. Are you ready?
• 11:58
  Speaker 5: I'm so ready?
• 11:58
  Speaker 1: Okay, So first things first, we want to review our investments.
• 12:01
  Speaker 3: Ye.
• 12:02
  Speaker 1: That feels really boring because it is, and sometimes the
• 12:05
  Speaker 1: best parts of investing are really bland, and they should
• 12:08
  Speaker 1: be because if they're too aggressive, maybe we shouldn't be
• 12:12
  Speaker 1: there because we don't want that aggression for the long term.
• 12:15
  Speaker 1: So I want you to list down all your investments
• 12:18
  Speaker 1: and what they're worth. So, for example, do you have
• 12:22
  Speaker 1: cash in a savings account? List that out, Do you
• 12:25
  Speaker 1: have some shares? Do you have a managed fund? Do
• 12:28
  Speaker 1: you have not in this economy, an investment property? Do
• 12:32
  Speaker 1: you have your family home? Your supranuation is an investment
• 12:37
  Speaker 1: list that down. This is going to show you which
• 12:40
  Speaker 1: asset classes you currently have exposure to, where you're investing,
• 12:44
  Speaker 1: and where you could spend a bit more time. So,
• 12:47
  Speaker 1: for example, if I sat down with somebody and they said, oh,
• 12:51
  Speaker 1: v I'm really interested in diversifying my portfolio, and great, great,
• 12:55
  Speaker 1: what have you got? And they say, well, I own
• 12:57
  Speaker 1: my home and I've just bought my first investment proper,
• 13:00
  Speaker 1: that is fantastic. If we were doing a graph, we'd
• 13:04
  Speaker 1: have a look and be like, how much cash do
• 13:05
  Speaker 1: you have? And they go, look, not much because I've
• 13:07
  Speaker 1: just bought my first investment property. Or at do you
• 13:09
  Speaker 1: have any bonds or fixed interest? No? None, never prioritized it.
• 13:13
  Speaker 1: That's cool. Where's property property graph is up here? Because
• 13:17
  Speaker 1: they have their home plus their investment property. Do you
• 13:20
  Speaker 1: have shares? No, of course not. I've spent all my
• 13:22
  Speaker 1: money on property and their shares are down there, so
• 13:25
  Speaker 1: you kind of go all right, Well, obviously, if you're
• 13:27
  Speaker 1: super passionate about just property, you don't like shares, you
• 13:30
  Speaker 1: don't like fixed interest? Who am I to judge?
• 13:33
  Speaker 2: Like?
• 13:33
  Speaker 1: Who am I to tell you have to have an
• 13:35
  Speaker 1: asset class? You don't have to. But what I would
• 13:38
  Speaker 1: be looking at is going okay, cool, So do we
• 13:41
  Speaker 1: want to kind of increase that bar of cash or
• 13:44
  Speaker 1: fixed interest or shares because you have a lot of
• 13:47
  Speaker 1: exposure to property. So maybe they say, yeah, V I'd
• 13:50
  Speaker 1: really like to look at shares, at which point you go, fantastic,
• 13:54
  Speaker 1: that's another great way of diversifying your investment portfolio as
• 13:57
  Speaker 1: a whole. And then we would pick up the conversation
• 14:00
  Speaker 1: of well what shares At that point, we're probably not
• 14:04
  Speaker 1: looking at shares in those property companies we were talking about,
• 14:08
  Speaker 1: because they actually already have heaps of exposure to property directly.
• 14:12
  Speaker 1: So I'm not going to then set up a share
• 14:14
  Speaker 1: portfolio for somebody and then give them more exposure to property.
• 14:18
  Speaker 1: That doesn't create good diversification. We would be looking at
• 14:21
  Speaker 1: the examples you listed. Are we looking at healthcare it?
• 14:25
  Speaker 1: Are we looking at you know, some blue chip banks
• 14:28
  Speaker 1: that are going to kind of balance out that property
• 14:32
  Speaker 1: that they already have. Does that make sense?
• 14:34
  Speaker 5: Yeah?
• 14:34
  Speaker 1: Absolutely, So that leads into the second one because we
• 14:37
  Speaker 1: all know that when I make a list, I just
• 14:39
  Speaker 1: go rogue. Anyway, we're going to identify gaps and research
• 14:43
  Speaker 1: other asset classes. So that's where we're going to look
• 14:46
  Speaker 1: at those bars that we've hypothetically made up, and that's
• 14:49
  Speaker 1: where we go. Yeah, they don't have shares, they don't
• 14:51
  Speaker 1: have fixed interests, they don't have much cash. Where could
• 14:54
  Speaker 1: we increase this to kind of balance it out?
• 14:56
  Speaker 5: Yeah?
• 14:57
  Speaker 1: And if most of your money is in two asset
• 14:59
  Speaker 1: classes or one asset class, like, let's have a look
• 15:02
  Speaker 1: at the other asset classes to make sure that you
• 15:05
  Speaker 1: do have diversification, because, as I said before, you might
• 15:09
  Speaker 1: be absolutely fine right now. Like Beck, let's pretend that
• 15:13
  Speaker 1: the economy isn't cooked and you have two investment properties.
• 15:17
  Speaker 1: Interest rates are going really well, and you look at
• 15:20
  Speaker 1: me like I've got you know, mud on my face
• 15:23
  Speaker 1: because you're like, ve, that makes no sense. Look at
• 15:26
  Speaker 1: my investment properties. My tenants are paying rent I'm fine. Yeah,
• 15:30
  Speaker 1: that was five years ago. Come into now economy. Your
• 15:35
  Speaker 1: interest rates have increased. Property isn't looking as good. That investment,
• 15:39
  Speaker 1: even though your tenants are paying the same amount of rent,
• 15:42
  Speaker 1: isn't returning as much because your interest rates are now
• 15:44
  Speaker 1: costing you more and actually owning those investment properties is
• 15:47
  Speaker 1: costing you more money than it's making for sure, So
• 15:51
  Speaker 1: returns are going to EBB and flow over time. But
• 15:54
  Speaker 1: if we had looked at your investment portfolio and gone
• 15:57
  Speaker 1: all right, you've got property, we're going to look at
• 15:59
  Speaker 1: some diverse to fight options here, they could be boosting
• 16:02
  Speaker 1: your overall portfolio up because even though the property is
• 16:05
  Speaker 1: not making you heaps, it's being balanced out by your
• 16:08
  Speaker 1: share portfolio. And in your share portfolio, perhaps you chose
• 16:12
  Speaker 1: a whole heap of stable things puhich. In this economy,
• 16:15
  Speaker 1: we all know Cosmoli's are doing really well. It's all
• 16:17
  Speaker 1: over the news. So those might be the things that
• 16:21
  Speaker 1: we've put into your portfolio to kind of balance everything out.
• 16:24
  Speaker 1: So ideally, the point of balancing things out is when
• 16:28
  Speaker 1: one's not doing well something else is so that we
• 16:30
  Speaker 1: get an average return of the market, not necessarily blowing
• 16:35
  Speaker 1: it out of the water, but we're making sure that
• 16:37
  Speaker 1: we are safe.
• 16:37
  Speaker 2: Okay.
• 16:38
  Speaker 1: Does that make sense?
• 16:39
  Speaker 2: Yeah?
• 16:39
  Speaker 5: Absolutely.
• 16:39
  Speaker 1: I feel like I keep saying does that make sense?
• 16:42
  Speaker 1: And I hate when people do that, So I do apologize.
• 16:45
  Speaker 5: No, I don't apologize. I like that you're checking in
• 16:47
  Speaker 5: with me. All right, Okay, what next? All right?
• 16:49
  Speaker 1: So the third thing I've written down is invest overseas.
• 16:53
  Speaker 1: So we love the Australian share market. She's real cute.
• 16:57
  Speaker 1: She is very well diversified, but she's small, so like
• 17:02
  Speaker 1: she's not very tall, and we need to get a
• 17:04
  Speaker 1: tall friend. And Australia essentially has a really small share
• 17:09
  Speaker 1: market in comparison to the rest of the world's investment opportunities.
• 17:12
  Speaker 1: So investing some of your money overseas is actually going
• 17:16
  Speaker 1: to lower the risk of investing in a single market. So,
• 17:21
  Speaker 1: for example, investments in Asian or European investments might perform
• 17:26
  Speaker 1: well when the Australian market is falling.
• 17:29
  Speaker 4: Okay.
• 17:29
  Speaker 1: So this comes into currency as well. So we know
• 17:33
  Speaker 1: right now, if you wanted to travel to America, not
• 17:36
  Speaker 1: only is America really expensive, it's more expensive for you
• 17:40
  Speaker 1: beck because the exchange rate is going to screw you
• 17:43
  Speaker 1: a little bit. When you go over there, Yeah, right,
• 17:45
  Speaker 1: Like we went over last year for work, and the
• 17:48
  Speaker 1: exchange rate blew my mind. Like I was paying like
• 17:51
  Speaker 1: fifteen dollars for a coffee Australian even though American. That's
• 17:55
  Speaker 1: clearly not what it costs. But my exchange rate just
• 17:59
  Speaker 1: put me a little bit backwards. Sure, but if you're
• 18:02
  Speaker 1: investing overseas, we're making sure that things are a bit
• 18:05
  Speaker 1: more balanced. So, for example, I have spoken about this
• 18:09
  Speaker 1: on the podcast before. I mainly invest in ETFs, and
• 18:13
  Speaker 1: I think a lot of people are really shocked to
• 18:15
  Speaker 1: hear that because they go, but Victoria, you were a
• 18:17
  Speaker 1: financial advisor, like you know how to do big dog investing,
• 18:21
  Speaker 1: and I do. But I'm also lazy. And why would
• 18:26
  Speaker 1: I spend hours upon hours upon hours picking out what
• 18:31
  Speaker 1: I deem to be a perfect investment portfolio. Do you
• 18:35
  Speaker 1: have to rebalance it after twelve months and redo that
• 18:37
  Speaker 1: whole process when and this is just personal opinion, this
• 18:41
  Speaker 1: is not advice. When I could go and buy an
• 18:44
  Speaker 1: ETF or a managed fund that has a professional investment
• 18:48
  Speaker 1: manager who manages those investments and the shares that are
• 18:51
  Speaker 1: inside that bucket for me, true, I'll just give you
• 18:55
  Speaker 1: my money you're way smarter at this than I am. Yes,
• 18:58
  Speaker 1: I'm really good at investing. And when I was a
• 19:00
  Speaker 1: financial advisor, I had the absolute privilege of talking to
• 19:04
  Speaker 1: investment managers basically on a daily basis. I would check
• 19:07
  Speaker 1: in with them, I would make trades on behalf of
• 19:09
  Speaker 1: my clients and do all of that for forty plus
• 19:12
  Speaker 1: hours a week. I don't do that anymore, Gods, So
• 19:16
  Speaker 1: I focus more on content for shees on the money,
• 19:19
  Speaker 1: I focus more on other stuff. I have a baby.
• 19:22
  Speaker 1: I'm focusing on him. So I think it's really important
• 19:25
  Speaker 1: to make sure that we are working out. Is that
• 19:28
  Speaker 1: the best use of my time? Or am I going
• 19:31
  Speaker 1: to invest in something where it's semi managed for me?
• 19:34
  Speaker 1: Like I know that if a share is performing not
• 19:37
  Speaker 1: so well, that's okay, that's how the market does. But
• 19:40
  Speaker 1: if it's performing not so well and it was actually
• 19:42
  Speaker 1: about investment, my investment manager is going to kick it
• 19:44
  Speaker 1: out of the portfolio. Yeah, they can make that decision
• 19:47
  Speaker 1: for me. But as you know, because I've spoken about
• 19:50
  Speaker 1: it on the show before, I don't just have one ETF.
• 19:53
  Speaker 1: I haven't just picked an Australian ETF and been like
• 19:55
  Speaker 1: wam bam, thank you, ma'am. I have an Australian ETF
• 19:58
  Speaker 1: and I have an International ETF to make sure because
• 20:02
  Speaker 1: obviously I've purchased an ETF diversification immediately, because I've got
• 20:06
  Speaker 1: access to so many different assets inside that share portfolio,
• 20:10
  Speaker 1: right yeah. But then I have a second ETF, which
• 20:14
  Speaker 1: is international. Not only is that well diversified because it's
• 20:17
  Speaker 1: got lots of different shares in it and lots of
• 20:19
  Speaker 1: different I guess industries. I have Australian versus International. So
• 20:24
  Speaker 1: then I've kind of like double stacked my diversification. We
• 20:28
  Speaker 1: love a double stack. Like tell me that double coated
• 20:32
  Speaker 1: timtams aren't the best type.
• 20:33
  Speaker 4: I mean they are exactly objectively objectively speaking, double coded
• 20:38
  Speaker 4: timtams are the best.
• 20:39
  Speaker 1: Therefore, double stacking our diversification obviously makes more sense. So
• 20:44
  Speaker 1: not only have I diversified inside each ETF, I've also
• 20:47
  Speaker 1: diversified so that if the Australian market's doing well, the
• 20:51
  Speaker 1: international market might be a little bit more rocky. And
• 20:53
  Speaker 1: if the international market's doing really well, maybe Australia isn't.
• 20:57
  Speaker 1: So I've kind of balanced it out that if one
• 20:59
  Speaker 1: ETF's before well, maybe the other isn't. And vice versa.
• 21:02
  Speaker 5: Sure, does that make sense totally much.
• 21:05
  Speaker 1: I love the double stack because it makes me feel
• 21:07
  Speaker 1: really confident, and that's why maybe you would too.
• 21:11
  Speaker 4: It's beautiful portfolio, double stacked, double coded. T Oh, that
• 21:15
  Speaker 4: sounds delicious. Okay, is there anything else to keep in mind?
• 21:19
  Speaker 1: One more? But I've actually jumped ahead and explained it
• 21:22
  Speaker 1: to you already, and that is investing through managed funds,
• 21:26
  Speaker 1: managed to counsel ETFs. Right, So, as we said before,
• 21:30
  Speaker 1: a really simple way to diversify is to invest directly
• 21:34
  Speaker 1: in something like in exchange traded fund, where not only
• 21:37
  Speaker 1: is somebody else managing it, but they've created a basket
• 21:40
  Speaker 1: of shares that gives you diversification immediately. Now the thing
• 21:44
  Speaker 1: you have to be careful of here is while an
• 21:47
  Speaker 1: ETF gives you diversification, it might be an industry specific ETF,
• 21:54
  Speaker 1: and that's totally okay.
• 21:55
  Speaker 5: Sure, But if you.
• 21:57
  Speaker 1: Go beck and go all right, I really want to
• 21:59
  Speaker 1: invest INTF and then you find a tech ETF that
• 22:02
  Speaker 1: tickles your fancy and you go, I really want to
• 22:05
  Speaker 1: purchase that, you need to remember that even though there
• 22:08
  Speaker 1: are a number of companies inside that ETF, you know
• 22:11
  Speaker 1: there might be thirty of them that ETF is only
• 22:14
  Speaker 1: giving you exposure to one industry, and that is tech,
• 22:18
  Speaker 1: and you might go, okay, well, in that case, I
• 22:21
  Speaker 1: might pick a couple of ETFs in different industries to
• 22:25
  Speaker 1: make sure I've got diversification, because if Tech's not doing well,
• 22:30
  Speaker 1: something else might be. Does that make sense?
• 22:32
  Speaker 2: Yeah?
• 22:32
  Speaker 5: Where is?
• 22:33
  Speaker 1: The ETFs I've picked are not industry specific. And the
• 22:36
  Speaker 1: reason I've done that is because I wanted to keep
• 22:38
  Speaker 1: it simple and sometimes the simplest things work, right. Yeah,
• 22:44
  Speaker 1: I mean they're not double coated tim tams. But like
• 22:47
  Speaker 1: when you're not, well, what do you want? Just buttered toast?
• 22:49
  Speaker 5: Absolutely, it's tried. It's true.
• 22:52
  Speaker 1: I'm going to want that for the rest of my life.
• 22:54
  Speaker 1: And that's how I kind of see my investment portfolio.
• 22:56
  Speaker 5: It's a good way to look at it.
• 22:57
  Speaker 1: Actually, I really like buttered toast. You put like a
• 22:59
  Speaker 1: little bit of salt on your buttered toast.
• 23:01
  Speaker 5: I do, Oh yes.
• 23:04
  Speaker 4: After talking about eggs and timms and buttered toast, I'm
• 23:08
  Speaker 4: I'm ravenous, But.
• 23:09
  Speaker 1: I actually could go a double coated tim tam.
• 23:12
  Speaker 5: Let's do it straight after this, all right? All right,
• 23:13
  Speaker 5: all right, all right? Is there anything else?
• 23:15
  Speaker 4: No?
• 23:15
  Speaker 1: Yes, maybe how much time have we got left?
• 23:18
  Speaker 5: We've got a little bit of time left. I'm very
• 23:20
  Speaker 5: proud of us.
• 23:20
  Speaker 1: Actually, all right, I'm always proud of us, Like we
• 23:22
  Speaker 1: don't even have to do anything, and I'm proud of us.
• 23:24
  Speaker 1: It's so good, Like did you exist today?
• 23:27
  Speaker 2: Wow?
• 23:28
  Speaker 1: Wasting time? This is so bad?
• 23:30
  Speaker 2: Oh my?
• 23:30
  Speaker 5: All right.
• 23:30
  Speaker 1: So what I want you to do is keep an
• 23:33
  Speaker 1: eye on your portfolio. So diversification really important, but it's
• 23:37
  Speaker 1: not set and forget. As much as we want it
• 23:40
  Speaker 1: to be boring and not that exciting when we're picking
• 23:42
  Speaker 1: our investments, we do still want to keep an eye
• 23:45
  Speaker 1: on it because as your investments rise or full, you
• 23:48
  Speaker 1: could have more money in one asset class than when
• 23:52
  Speaker 1: you started investing, and this could become less diversified. So
• 23:58
  Speaker 1: an example of this is I I've recently rebalanced my
• 24:01
  Speaker 1: investment portfolio. What does that mean? Don't worry. I'll do
• 24:05
  Speaker 1: a whole episode on rebalancing. We have spoken about it
• 24:08
  Speaker 1: on the podcast before. But essentially I sat down and
• 24:11
  Speaker 1: I looked at my investment portfolio. I do have a
• 24:13
  Speaker 1: lot of what we call satellite investments, which is investments
• 24:16
  Speaker 1: sitting around these two main ETFs that I own. But
• 24:20
  Speaker 1: what happened was one of my ETFs had performed significantly
• 24:24
  Speaker 1: better than my other ETF, and it meant that instead
• 24:27
  Speaker 1: of being fifty to fifty in ownership, which is what
• 24:30
  Speaker 1: I started with, I was at like thirty seventy because
• 24:33
  Speaker 1: of how well one had performed. Sure, so what are
• 24:36
  Speaker 1: you do in that circumstance? What I did was I
• 24:39
  Speaker 1: sold down some of the portfolio who had gotten up
• 24:43
  Speaker 1: to that seventy percent, because I was like, well, you're
• 24:45
  Speaker 1: doing well. What I'm gonna do is take some money
• 24:48
  Speaker 1: off the table. We're not gonna take it all off
• 24:50
  Speaker 1: the table. I'm not taking it out and putting it
• 24:52
  Speaker 1: in my bank account. But I sold down some of
• 24:55
  Speaker 1: the shares and put that money into my other ETF
• 25:00
  Speaker 1: at fifty to fifty.
• 25:01
  Speaker 5: Sure.
• 25:01
  Speaker 1: And the reason I did that is not because the
• 25:03
  Speaker 1: other one wasn't performing, because you might go v well,
• 25:05
  Speaker 1: if the other one wasn't performing, why on earth did
• 25:08
  Speaker 1: you put more cash into it. It's because the market
• 25:10
  Speaker 1: was off and essentially that ETF was a little bit cheaper.
• 25:14
  Speaker 1: So if something has done really well and it's performing
• 25:18
  Speaker 1: really well, I'm going to take the profits and I'm
• 25:20
  Speaker 1: going to tip them back into the ETF that right
• 25:23
  Speaker 1: now I saw as a really good price to pay
• 25:26
  Speaker 1: per share. Does that make sense? So that then later
• 25:30
  Speaker 1: I'm still at fifty to fifty. Hopefully one of them
• 25:32
  Speaker 1: tops up again and I will rebalance and tip from
• 25:35
  Speaker 1: one jug to the other so that we're always a
• 25:37
  Speaker 1: bit even. But over time, yes, I'm tipping from one
• 25:41
  Speaker 1: to the other. But they're still going up, aren't they.
• 25:43
  Speaker 1: They're going up evenly though.
• 25:46
  Speaker 5: Oh my god, it's really really smart.
• 25:47
  Speaker 1: Actually, So that's my last point, because I think we're
• 25:49
  Speaker 1: out of time.
• 25:50
  Speaker 5: Okay, oh my gosh, I think we made it.
• 25:51
  Speaker 1: I think we made it, but like we also aren't
• 25:54
  Speaker 1: the editors. So our podcast producer and our podcast editor,
• 25:59
  Speaker 1: you know what, make half an hour? Thanks guys, thank you.
• 26:02
  Speaker 1: Don't cut out any of the stuff about Tim Tams.
• 26:04
  Speaker 1: We love you.
• 26:05
  Speaker 5: Do what you gotta do, all right.
• 26:06
  Speaker 1: I think it's exciting. So obviously before we go, just
• 26:09
  Speaker 1: wanted to reiterate one, double coded Tim Tams are the
• 26:13
  Speaker 1: superior Tim Tam, but two, it can actually be quite
• 26:16
  Speaker 1: hard to find the right investments. Obviously, it could be
• 26:20
  Speaker 1: as simple as picking too ETFs that makes sense for
• 26:22
  Speaker 1: you and starting your journey there. But if you are
• 26:25
  Speaker 1: really overwhelmed or you don't know what to do, definitely
• 26:28
  Speaker 1: have a chat with a financial advisor or someone who
• 26:31
  Speaker 1: can set you up. And you can be matched with
• 26:33
  Speaker 1: a good financial advisor via my website because look, I
• 26:36
  Speaker 1: don't trust a lot of people, but I do trust
• 26:38
  Speaker 1: my own crew. So if you would like to meet
• 26:40
  Speaker 1: one of those delightful humans, head to my website and
• 26:42
  Speaker 1: I can tee you up. It doesn't cost you anything.
• 26:44
  Speaker 5: That's nice.
• 26:45
  Speaker 1: I mean the advice will cost you something. It's not
• 26:47
  Speaker 1: just free, but you know what I mean. I'm not
• 26:48
  Speaker 1: gonna charge you to get advice from me. Let's go
• 26:52
  Speaker 1: have a double coded tim tamps.
• 26:54
  Speaker 5: Oh my god, let's go. All right, bye everyone Bye.
• 27:03
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• 27:06
  Speaker 3: in nature and does not consider your individual circumstances. She's
• 27:09
  Speaker 3: on the Money exists purely for educational purposes and should
• 27:13
  Speaker 3: not be relied upon to make an investment or financial decision.
• 27:16
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• 27:19
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