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How to build your own ETF portfolio · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to the Australian's Money Pozitle podcast. I'm
0:13
Speaker 1: James Kirkby, Welcome aboard. You know, we get more questions
0:16
Speaker 1: from listeners about ETFs exchange traded funds, I think, than
0:21
Speaker 1: almost anything else, and we answer them as they arrive.
0:26
Speaker 1: But I've realized that many listeners what they want now
0:30
Speaker 1: is to move a little bit beyond that. What are
0:33
Speaker 1: they how do they work to perhaps constructing an entire
0:38
Speaker 1: portfolio of ETFs, or maybe more commonly having a core
0:43
Speaker 1: portfolio of ETFs, and then they build their other assets
0:47
Speaker 1: and investments around that. So you might have a core
0:49
Speaker 1: portfolio of ETFs, then you might have shares, and you
0:52
Speaker 1: might have bonds, you might have property, you might have alternatives,
0:55
Speaker 1: but that business of how you construct the portfolio of ETFs.
1:02
Speaker 1: I wanted someone to talk to us about it, and
1:04
Speaker 1: I didn't want someone who was selling ETFs per se,
1:06
Speaker 1: because we want an independent voice. And my guest Deady
1:11
Speaker 1: Chris Spikey of the stock Spot Group, has been on
1:14
Speaker 1: before his operation Stockspot online investment service. It actually offers
1:21
Speaker 1: two like preset menus if you like model portfolios of
1:24
Speaker 1: ETF so they have actually been through the business of
1:26
Speaker 1: constructing for the everyday investor a variety of portfolios around ETFs,
1:32
Speaker 1: and I thought he would be ideal. How are you, Chris?
1:35
Speaker 2: Very well, James, thanks for having me back.
1:37
Speaker 1: Great to have you back. A lot has happened since
1:40
Speaker 1: you've been on the show. I don't think you've been
1:41
Speaker 1: on since the budget. Have you No.
1:44
Speaker 2: We can I'm sure do a whole that.
1:47
Speaker 1: I'm sure we could. Well, you've been quite active. I
1:50
Speaker 1: mean you were up there in Parliament House with Jeff Wilson,
1:52
Speaker 1: of course, on various issues. And it is by no
1:55
Speaker 1: means over yet though, as I've said on the show,
1:57
Speaker 1: we've met it very plain folks. CGT and negative gearing changes,
2:01
Speaker 1: they're through. They're legislated. Same with the ban on borrowing
2:05
Speaker 1: an SMSF. So I mean take it as read. Okay,
2:07
Speaker 1: maybe the family trusts. We'll see what happens there, but
2:09
Speaker 1: really we have to work with the world we have,
2:12
Speaker 1: so putting together an ETF portfolio. I'm just wondering how
2:17
Speaker 1: we start here, Chris. Let's just take the person you
2:21
Speaker 1: know who basically have their they want to try this.
2:25
Speaker 1: Let's talk about just first principles that everyone should have
2:28
Speaker 1: your diversification, efficiency, the tax aspects of ETFs, why they
2:34
Speaker 1: might be suitable in the first place to be the
2:36
Speaker 1: heart of a contemporary investment portfolio.
2:40
Speaker 2: Yeah sure, And I mean I think it's great to
2:42
Speaker 2: hear at the start that so many people are interested
2:44
Speaker 2: these days, because I remember ten or fifteen years ago,
2:46
Speaker 2: most people didn't even know what an ETF is.
2:48
Speaker 1: So yeah, no, that's well passed I think for US East.
2:50
Speaker 2: Yeah, people have come a long way. I mean maybe
2:53
Speaker 2: to start off with, Like, the thing that I always
2:55
Speaker 2: like to understand before talking about ETFs with the client
2:58
Speaker 2: is always the time horizon and their comfort with risk,
3:01
Speaker 2: because ultimately that's what determines what we recommend. But to
3:05
Speaker 2: those principles that you're talking about, I mean, diversification isn't
3:08
Speaker 2: just a principle with ets. It's for all sort of investing,
3:11
Speaker 2: and it's just about making sure that you've got different investments.
3:14
Speaker 2: I would describe it as that respond to events in
3:17
Speaker 2: a different way. So you don't want a whole portfolio
3:20
Speaker 2: that all are exposed to a recession in Australia or
3:23
Speaker 2: all exposed to AI stocks in the US. You want
3:27
Speaker 2: different assets that perform differently so that when one's going up,
3:30
Speaker 2: one might not be going up, and they all help
3:32
Speaker 2: to counterbalance and give you a bit of a smoother ride.
3:35
Speaker 2: And a smoother ride ultimately helps people stay invested and
3:38
Speaker 2: stay confident and not lose sleep at night. And we
3:41
Speaker 2: saw it during COVID. If you just owned let's say,
3:44
Speaker 2: only Australian shares or only US shares, you know at
3:47
Speaker 2: some point you were staring down the barrel of a
3:49
Speaker 2: thirty five or forty percent loss in your portfolio. But
3:53
Speaker 2: if you're diversified and have some other assets like bonds
3:56
Speaker 2: or gold, it actually reduced your exposure to losses by
4:01
Speaker 2: quite a lot. And that's at the heart of it
4:02
Speaker 2: what diversification is. It's not about maximizing your gains, but
4:06
Speaker 2: it's about reducing your risk.
4:08
Speaker 1: And I expect that is It's always important, but I
4:12
Speaker 1: think it's particularly important right now, folks. And if you've
4:15
Speaker 1: listened to recent shows we have dealt with this issue
4:19
Speaker 1: that there is a considerable weight of an argument to
4:23
Speaker 1: say that the global share market is at elevated levels,
4:27
Speaker 1: particularly the US, particularly the AI and tech sector, and
4:31
Speaker 1: it is ripe for a correction or something deeper than
4:36
Speaker 1: a correction. We can't tell you when that's going to happen.
4:39
Speaker 1: We can tell you it will happen, and diversification is
4:42
Speaker 1: terribly important. One other thing, just to get the lines clear, Chris,
4:46
Speaker 1: when we're talking today about ETFs, I think we will
4:49
Speaker 1: for our listener's purposes, we will restrict it to traditional ETFs,
4:53
Speaker 1: that is, literally ETFs at mirror indices or indexes, rather
4:57
Speaker 1: than new breed ETFs that are active or whatever. Does
5:00
Speaker 1: that sound or a reasonable approach or does it limit us? Yeah?
5:04
Speaker 2: I mean when I'm talking about ETFs, although there's like
5:07
Speaker 2: three hundred and fifty these days, so there's a whole
5:08
Speaker 2: bunch of them on the market. And you're right, most
5:11
Speaker 2: of the new listings aren't these traditional market following ETFs.
5:15
Speaker 2: They're either following niche areas of the market or they're
5:18
Speaker 2: active ETFs. But yeah, from my perspective, and ETF is
5:21
Speaker 2: a you know, a broad, low cost market following product.
5:26
Speaker 1: Yeah, I agree, And let's just mother than we're not
5:28
Speaker 1: going to pick one over the other, but to let
5:30
Speaker 1: people know who are just again beginning to enter this area.
5:33
Speaker 1: So the ETF basically is a basket of shares and
5:38
Speaker 1: you might buy the ASX two hundred, and if you
5:40
Speaker 1: buy that ETF, it perfectly mirrors the asx two hundred.
5:44
Speaker 1: If the A sx hundred minus three percent one year,
5:47
Speaker 1: that's what you'll get. If it does plus ten percent
5:49
Speaker 1: the next year, that's what you'll get. You won't basically,
5:53
Speaker 1: you will never shoot the lights out because that doesn't
5:57
Speaker 1: really happen when you have a broadly diversify basket of stocks.
6:01
Speaker 1: Neither will you fall through the floor. And I think
6:03
Speaker 1: we're going right back to Jack Bogel and the people
6:06
Speaker 1: who were behind the early days and pioneers of ETFs.
6:08
Speaker 1: That was the idea. The other core idea is that
6:12
Speaker 1: the majority of active fund managers don't beat the index,
6:15
Speaker 1: and if they don't beat the index, then the index
6:18
Speaker 1: should be good enough for you. It's very appealing theory
6:21
Speaker 1: in many ways for many people. Chris. I mean, let's
6:25
Speaker 1: just talk about the suite of what's out there. I
6:27
Speaker 1: noticed that I had to look at your model portfolios,
6:29
Speaker 1: and you seem to be quite agnostic. By that, I
6:31
Speaker 1: mean usefully agnostic. You don't pick this that doesn't seem
6:34
Speaker 1: to be one ETF house favored over another. But could
6:38
Speaker 1: you just mention who the main players are for the
6:40
Speaker 1: Australian investor, who the main etf houses are.
6:44
Speaker 2: If you like, yeah, sure, I mean there's more and
6:46
Speaker 2: more players entering. But the biggest players in the space,
6:49
Speaker 2: it's a combination of some of the big global players
6:52
Speaker 2: like Vanguard and black Rock owns the I shares brand.
6:55
Speaker 2: State Street is another big player. So these are some
6:58
Speaker 2: of the big global brands. And then you've got some
7:00
Speaker 2: local players like Beata Shares, a fantastically successful local business
7:04
Speaker 2: that I think is now the second largest player in
7:06
Speaker 2: Australia after Vanguard Global X you know, a global player
7:10
Speaker 2: as well. And so there's a range of players and
7:13
Speaker 2: when I've done some analysis recently that I think it's
7:16
Speaker 2: the top sort of half a dozen or so players,
7:19
Speaker 2: you know, manage ninety percent of the assets, and then
7:21
Speaker 2: there's a smaller managers.
7:23
Speaker 1: Yes, so the main names and you've mentioned most of
7:26
Speaker 1: them the business and that's worth knowing, folks. So if
7:30
Speaker 1: you're going beyond that, you're going to beyond the mainstream. Okay, Now,
7:34
Speaker 1: when you're putting those modern portfolios together, and we get
7:36
Speaker 1: into some really interesting questions in the second segment. Before
7:39
Speaker 1: you're putting those portfolios together, it seems to me the ETFs,
7:44
Speaker 1: their whole product proposal is that they're cheap, terribly cheap.
7:48
Speaker 1: I can remember when fund managers used to charge you know,
7:51
Speaker 1: two percent, three percent pick a bag of stocks. Sometimes
7:56
Speaker 1: they did well, sometimes they did not do well. People
7:58
Speaker 1: who were happy with that. ETFs completely flattened these guys, okay,
8:02
Speaker 1: because they offer the index are super low commissions or
8:06
Speaker 1: at least percentages. So if there if the percentages when
8:11
Speaker 1: you glanced at them, they're so tiny, how do you
8:13
Speaker 1: pick one over the other if you're trying to find
8:14
Speaker 1: the cheapest one. I mean, it seems to be like
8:17
Speaker 1: micro digits between them.
8:20
Speaker 2: I mean, I think you're right in like going to
8:21
Speaker 2: your kind of earlier example. I think the challenge in
8:24
Speaker 2: the past with these fund managers that would charge one
8:26
Speaker 2: or two percent is that investing against the market is
8:29
Speaker 2: a zero some game. So for every manager that won,
8:32
Speaker 2: there was going to be one that lost, and I
8:33
Speaker 2: think people realized that over time. You're right. These days
8:37
Speaker 2: it's so hyper competitive in the ETF space, and again
8:41
Speaker 2: talking about the broad market ETFs, that there's you know,
8:45
Speaker 2: basically a fight to get down to almost zero cost.
8:48
Speaker 2: You know, in the Australian ETF space. I remember when
8:51
Speaker 2: I launched stock spot that the cheapest product out there
8:53
Speaker 2: was actually a State Street product that charged zero point
8:56
Speaker 2: two nine percent.
8:58
Speaker 1: It would have been spectacular time.
9:00
Speaker 2: At the time, it was awesome, and then Vanguard came
9:03
Speaker 2: out and halved that and charged around zero point I
9:06
Speaker 2: think one to five at the time, and it's only
9:09
Speaker 2: got lower from them. You know, Beta shares came out
9:11
Speaker 2: and then halve that again. You know, then global X
9:14
Speaker 2: came out and came underneath, so everyone is basically fighting
9:17
Speaker 2: to have the lowest headline fee. I think you're right
9:19
Speaker 2: at once you're down to the low basis points, there
9:22
Speaker 2: are sort of other factors that you need to consider,
9:24
Speaker 2: like how closely they're tracking the index, you know, the
9:27
Speaker 2: spread that you're crossing on, you know when you go
9:29
Speaker 2: to your online broker and they you know, crossing the
9:32
Speaker 2: buyer cell spread, which means, you know, what's the how
9:34
Speaker 2: tight is it between the buyer and the seller in
9:36
Speaker 2: the market. All of these ultimately are even bigger factors
9:40
Speaker 2: than price, and so you know that's what we see
9:42
Speaker 2: at stockspot is you know, if you're comparing an ETF
9:45
Speaker 2: that's charging zero point zero five or zero point zero four,
9:49
Speaker 2: that's not the factor that's driving it.
9:52
Speaker 1: So for the everyday investor, how are these guys making
9:55
Speaker 1: money if it gets down to zero are almost zero?
9:59
Speaker 2: Well?
9:59
Speaker 1: Through two?
10:00
Speaker 2: I would say one is through scale. So you know,
10:02
Speaker 2: even if you're charging five basis points, you know if
10:05
Speaker 2: you have twenty billion under management, that they sustainable product.
10:09
Speaker 2: I think the challenge is if you've got a low
10:11
Speaker 2: fee and you don't have any assets, it doesn't work out,
10:13
Speaker 2: and we do see ETFs that shut down. The other way,
10:16
Speaker 2: I think is a more interesting one, And you know,
10:18
Speaker 2: I go back to the famous example my parents would
10:21
Speaker 2: always share with me at McDonald's is the thirty cent cone.
10:24
Speaker 2: You know, the thirty cent cone was there to get
10:26
Speaker 2: you in to the store and so they could upsell
10:28
Speaker 2: you on the burgers and the fries. You know. I
10:30
Speaker 2: think a lot of these ETFs positioned cheaply in the
10:33
Speaker 2: broad market space, and so the ETFs actually have a
10:37
Speaker 2: way to communicate to you a battle of their higher
10:39
Speaker 2: fee offering. So it's actually an opportunity to have a
10:42
Speaker 2: conversation with consumers and then upsell them where their margins
10:46
Speaker 2: are higher.
10:46
Speaker 1: And that would take you when too activity tfs.
10:50
Speaker 2: Not necessarily so active is one area, So that one's
10:54
Speaker 2: where there's actually a sort of I guess an active
10:57
Speaker 2: decision around.
10:58
Speaker 1: Some sort of stuff picking for the every day but
11:01
Speaker 1: also les explanation.
11:03
Speaker 2: Yeah, so thematic, James, would be the other id the
11:05
Speaker 2: area which isn't active but basically follows a more niche
11:08
Speaker 2: theme within the market, and those one to have much
11:11
Speaker 2: higher fees, so rather than it could be sometimes higher,
11:14
Speaker 2: it could be zero point five or zero point six percent.
11:16
Speaker 1: I'm sorry, Yeah, that's ten times. They're still being very
11:21
Speaker 1: low by the numbers we used to know. But that's
11:23
Speaker 1: the issue, folks, Just in case you need to in
11:26
Speaker 1: case you were wondering about that. Okay, Now I've kept
11:29
Speaker 1: some questions that I've always had myself about ETFs for
11:32
Speaker 1: Chris and if I was putting together in an ETF portfolio.
11:35
Speaker 1: We're going to deal with it in a moment. We'll
11:36
Speaker 1: be back in a second. Hello, Welcome back to the
11:53
Speaker 1: Australian's Money Puzzled podcast. James Kirby here with Chris Bichey
11:57
Speaker 1: of the Stark Spark Group online investment service which specializes
12:02
Speaker 1: in offering menus if you like of preordained model portfolios
12:07
Speaker 1: based on ETFs, and I thought it was the perfect
12:10
Speaker 1: person to talk to us about constructing an ETF portfolio.
12:15
Speaker 1: I want to start at the very start, okay, And
12:17
Speaker 1: I want to say, okay, I've got a figure ten grand,
12:20
Speaker 1: one hundred grand, a million, it doesn't matter, and I
12:23
Speaker 1: want to split it. Where would I begaining, Chris, I mean,
12:28
Speaker 1: once upon a time when you went into a broker
12:29
Speaker 1: you said I want to start, and they'd say, okay, well,
12:31
Speaker 1: look by two banks and two miners and two industrios
12:33
Speaker 1: and we'll see where we go from there. What would
12:35
Speaker 1: be the failing Chris of me just walking in and saying,
12:39
Speaker 1: can I just buy the entire global stock market? The
12:42
Speaker 1: MSCIM Augus Stanley Capital International Index? Can I just buy that?
12:46
Speaker 1: Can I put my hundred grand into that? I'm buying
12:49
Speaker 1: the entire world share market, gorgeously beautifully diversified, at least
12:53
Speaker 1: from a regional perspective. But we'll be wrong with that.
12:57
Speaker 2: Well, I'd say, first of all, it's a much better
12:59
Speaker 2: starting point than in the past. I think you know.
13:01
Speaker 2: I remember actually sitting at home and my dad would
13:03
Speaker 2: get his facts through with a six or so shares
13:05
Speaker 2: at he owned, and it would pretty much reflect what
13:07
Speaker 2: you've described there.
13:08
Speaker 1: So yeah, I know it was so concentrated and it
13:10
Speaker 1: was so yeah all time. Really yeah.
13:13
Speaker 2: Unfortunately, if just one of those shares did badly and
13:15
Speaker 2: I remember, yeah, in my dad's portfolio, some went up
13:17
Speaker 2: and some went bust, like, it has a big impact.
13:20
Speaker 2: And so the diversification. Now you get through the MISKY
13:23
Speaker 2: World Index, and that's one of the most broad indices
13:25
Speaker 2: you can find. It's basically, you know, every country in
13:28
Speaker 2: the world according to their size and lots of companies.
13:32
Speaker 2: You know, it is a great starting point and I
13:35
Speaker 2: think for you know, for a lot of people's it
13:37
Speaker 2: can start off as the core or something like it
13:39
Speaker 2: can start off at the core. But I'd say it's
13:41
Speaker 2: not a complete portfolio. What it's missing really is diversification
13:46
Speaker 2: into other assets. And also it also misses that Australian investors.
13:51
Speaker 2: If you're only investing into global indices, and granted, even
13:55
Speaker 2: in that MISKY Index, Australia maybe has a two percent weight,
13:58
Speaker 2: but it's quite small. You actually face a lot more
14:02
Speaker 2: volatility than if you had a bit more a little
14:04
Speaker 2: bit more in Australia. So maybe an analogy is that
14:07
Speaker 2: misky index for your portfolio is a great engine, but
14:10
Speaker 2: you need some breaks and suspension as well. And that's
14:13
Speaker 2: where you know things like bonds and gold and you know,
14:17
Speaker 2: a slightly higher allocation to Australian chairs can actually give
14:21
Speaker 2: you us through the ride.
14:23
Speaker 1: So let's say someone said, Okay, I want to do
14:25
Speaker 1: the usual thing, sixty forty. Okay, I want to do
14:28
Speaker 1: sixty forty, sixty percent forty percent defensive. For want of
14:32
Speaker 1: a better word, I've got my one hundred grand. Again,
14:35
Speaker 1: I'm saying to you, that's all I've got. How would
14:38
Speaker 1: you split it up? Very roughly. We're not going to
14:39
Speaker 1: hold you to this, but just give someone a guide
14:41
Speaker 1: as to how they might begin.
14:43
Speaker 2: Well, yeah, I think sixty forty is often debated, but
14:46
Speaker 2: mainly debated in financial advisor circles because I think they
14:49
Speaker 2: want to add more complexity. I actually think it's a
14:51
Speaker 2: great starting point, and our portfolios aren't too different. You know,
14:54
Speaker 2: we actually have a portfolio that's sixty forty and we
14:56
Speaker 2: only have five ETFs.
14:58
Speaker 1: Okay, what are they? You remember what they are in nature?
15:02
Speaker 2: Yeah, so we so within the so we split it
15:05
Speaker 2: by growth assets and defensive assets. On the growth asset side,
15:09
Speaker 2: we have three, which is an Australian shares ETF, so
15:12
Speaker 2: we have one that follows the ASX three hundred, the
15:14
Speaker 2: biggest three hundred companies in Australia. We have a global
15:17
Speaker 2: one hundred ETF, so similar to the misky one you've described,
15:21
Speaker 2: only that the Miski one has, yeah, has a much
15:24
Speaker 2: broader spread of.
15:26
Speaker 1: It has the whole kitchen sink in it. Yeah, And
15:28
Speaker 1: this one just has what the world is top under stocks.
15:30
Speaker 2: Yeah, the top hundred listed companies in the world. And
15:33
Speaker 2: then the third one we have is an Emerging market's ETF,
15:36
Speaker 2: and that one, you know, provides diversification in a different
15:39
Speaker 2: way because that has a biger allocation to India and
15:42
Speaker 2: China and South Korea and country. So that's the growth side,
15:46
Speaker 2: and then the defensive side, it's very simple. We have
15:48
Speaker 2: one ETF that covers Australian government and high quality bonds,
15:52
Speaker 2: so it's a interest one, and then a goal ETF
15:55
Speaker 2: that just follows you know, the goal price, and that's
15:58
Speaker 2: really all that you know, we think clients need.
16:00
Speaker 1: To some extent, folks, We can also go so deep
16:02
Speaker 1: here obviously, and the ratios that you would apply there
16:05
Speaker 1: by that, I mean the particular carve op you could
16:09
Speaker 1: to some extent figure out yourself. Then what that catches
16:13
Speaker 1: my eye as gold? Some people think you shouldn't have
16:16
Speaker 1: gold at all in a diversity portfolio. It's almost a
16:18
Speaker 1: debatable item in there was that a more a contemp
16:22
Speaker 1: was that is that a more a contemporary a location
16:25
Speaker 1: by tactical to some degree, Chris, that reflects the times
16:28
Speaker 1: we're in. Would you have had that, you know, ten
16:31
Speaker 1: years ago or ten years in the future.
16:34
Speaker 2: So yeah, it's probably one of the more common questions
16:35
Speaker 2: where you get from clients as well, because it is
16:37
Speaker 2: quite different to what other advisors have or even what
16:39
Speaker 2: other super funds have in Australia. The history actually as
16:42
Speaker 2: gold's always been part of our portfolio since we launched
16:45
Speaker 2: in twenty fourteen, so it's been there for twelve years.
16:48
Speaker 2: Our allocation has always been between ten to fifteen percent
16:51
Speaker 2: of the portfolio and it's not tactical at all. Actually,
16:55
Speaker 2: all of our portfolios are based on trying to give
16:57
Speaker 2: you the best return for the amount of risk that
16:59
Speaker 2: you're accepting. And what we've found through all of our
17:02
Speaker 2: research is that gold has this amazing quality that it
17:05
Speaker 2: doesn't mean that it always goes up, but it helps
17:07
Speaker 2: to improve the quality of your returns. And so often
17:10
Speaker 2: in periods, and we saw it in twenty twenty two
17:13
Speaker 2: and again last year. There's periods when both shares and bonds,
17:17
Speaker 2: which usually move in opposite directions or you know, good
17:20
Speaker 2: diversification qualities, they actually move in the same direction. And
17:24
Speaker 2: that typically is when inflation expectations are rising, and particularly
17:29
Speaker 2: when they rise above three percent. And there's some great
17:31
Speaker 2: research to support this. And actually in those periods, gold
17:35
Speaker 2: tends to do very well, particularly relative to those other
17:38
Speaker 2: two assets. And last year was a great example. Gold
17:41
Speaker 2: was up fifty percent in Australian dollar terms, even though
17:45
Speaker 2: there's other assets didn't go very well, and it draw
17:47
Speaker 2: most of our returns in our portfolios. Was that relatively
17:50
Speaker 2: small allocation.
17:51
Speaker 1: So those years then that when everything's falling, it rises, yeah,
17:57
Speaker 1: where it's less popular.
17:58
Speaker 2: I remember in twenty fifteen had a terrible year and
18:01
Speaker 2: our clients were complaining, hey, please give me more Australian
18:04
Speaker 2: shares and more global shares. This gold investments terribly. I
18:07
Speaker 2: mean our answer that's actually perfect. That means diversification is working.
18:12
Speaker 2: You don't want everything to go up at the same time.
18:14
Speaker 1: So gold, you don't. Your investors probably do.
18:19
Speaker 2: Part of the education process for clients is that you know,
18:21
Speaker 2: if you have a share portfolio in the past, you're
18:23
Speaker 2: hoping all of them go up. If you have a
18:25
Speaker 2: diversified portfolio of ETFs, you actually want some counterbalancing because
18:30
Speaker 2: that means that they're going to protect you as well.
18:33
Speaker 1: Of course, by the way, I'm completely in agreement here
18:35
Speaker 1: with Chris on the diversification argument. I mean, I think
18:38
Speaker 1: it was it the year before last. If we didn't
18:40
Speaker 1: have gold, you know, then you couldn't possibly have got
18:43
Speaker 1: that sort of premium return because it was real it
18:47
Speaker 1: was the outstanding asset of the year. But it's not
18:49
Speaker 1: the outstanding asset this year by any stretch of the imagination.
18:52
Speaker 1: I mean, that's how it works, isn't it really?
18:55
Speaker 2: Yeah, that's right, and I mean in our system also,
18:57
Speaker 2: I think this is another key point is you know,
19:00
Speaker 2: if you just sort of chase what's hot in the market,
19:02
Speaker 2: you're often going to get in at the wrong time.
19:03
Speaker 2: And what we saw is a lot of money flatting
19:06
Speaker 2: into gold end of last year in January when it
19:08
Speaker 2: had that big blow off top from you know, four
19:11
Speaker 2: thousand US dollars to five six hundred reached in January.
19:15
Speaker 2: Our system is actually doing the opposite is when an
19:17
Speaker 2: asset gets too big in our portfolios, and gold in
19:21
Speaker 2: a lot of our client portfolios because it had done
19:23
Speaker 2: so well, grew from you know, fifteen or so percent
19:26
Speaker 2: up to over twenty percent, we were automatically selling some
19:29
Speaker 2: gold to actually get it back to its target allocation.
19:32
Speaker 2: So you can actually do the opposite of the crowd.
19:35
Speaker 2: And when everyone else is jumping over each other to
19:37
Speaker 2: line up at ABC Bullion in Mardin Place, we were
19:40
Speaker 2: the ones selling to all of those people because it
19:42
Speaker 2: had already had a great run, is it?
19:44
Speaker 1: Joe Joe Kennedy, John F. Kennedy's dad Joe Kennedy, who
19:51
Speaker 1: was the famous Wall Street trader who said, you know
19:53
Speaker 1: the time, if the shoe shine boys are in the market,
19:56
Speaker 1: it's time to get out, and I mean the cues
19:58
Speaker 1: out say that if you see billion were We knew
20:01
Speaker 1: it was a landmark moment, and we knew we weren't
20:04
Speaker 1: quite sure as always what exact type landmarket was, but
20:07
Speaker 1: it was, don't you know, no, we knew with hindsight
20:10
Speaker 1: the top are certainly the most recent top of the
20:12
Speaker 1: door market, and that is often the way when you
20:14
Speaker 1: get people running in like AI at the moment, people
20:16
Speaker 1: absolutely rushing into the AI tech stuff.
20:18
Speaker 2: Yeah, we've seen the exact same. I mean that it's
20:20
Speaker 2: almost a replay of what happened in January with gold
20:23
Speaker 2: and I'm playing it's a long term top, but certainly
20:25
Speaker 2: when there's that sort of exuberance with retail investors that
20:27
Speaker 2: there's a short morning signal. We've seen the same recently
20:30
Speaker 2: with all the AI stocks. And you know, any of
20:32
Speaker 2: the listeners that go and pull up a chart of
20:34
Speaker 2: the Korean share market, it's quite fascinating because it's fallen
20:37
Speaker 2: almost forty percent in the last couple of months because
20:40
Speaker 2: everyone got so infatuated with their AI stock and then
20:44
Speaker 2: just last night they one of them had a poor
20:46
Speaker 2: earnings result and their share marketers, you know, come back
20:49
Speaker 2: a long way because of it.
20:50
Speaker 1: And the irony is it's when the everyday investor hears
20:53
Speaker 1: about how hot these markets are, it is invariably elevated
20:58
Speaker 1: and by definition more risky. Okay, But to keep on
21:01
Speaker 1: our theme a couple of things, I'm gonna just kick
21:04
Speaker 1: her at this around. Now. One of the things, for instance,
21:07
Speaker 1: about ETFs, I wonder the argument that there's no point
21:13
Speaker 1: in trying to beat the market average. Is it as
21:16
Speaker 1: true for non equities as it is you know? Is
21:19
Speaker 1: it as true for bonds? Is it as true for
21:22
Speaker 1: gold specialized gold trader for instance? Is it as true
21:25
Speaker 1: in the other party your portfolio as it is for shares?
21:29
Speaker 2: Look, the best research in this area, I think is
21:31
Speaker 2: done by SMP in Australia, and because they look at
21:34
Speaker 2: every fund manager in every asset class and compare it
21:37
Speaker 2: to the index of that asset class, and they account
21:40
Speaker 2: for something that a lot of research doesn't, which is
21:42
Speaker 2: survivorship because typically four performers disappear, but if you don't
21:47
Speaker 2: include them in your research, So it because great research.
21:50
Speaker 2: I've put up their long term research on bond fund
21:53
Speaker 2: managers and it's found that seventy seven percent have underperformed
21:57
Speaker 2: the bond index over the last fIF day year. Is
22:00
Speaker 2: although you know it does change yet to year. So
22:02
Speaker 2: last year about two thirds of fund managers in the
22:05
Speaker 2: bond space beat the market. So the year to year
22:09
Speaker 2: results can vary a lot, but the long term results
22:12
Speaker 2: are quite conclusive. In almost all asset classes, which is
22:15
Speaker 2: it's very hard to make up the costs that you're
22:17
Speaker 2: charging clients in outperformance. And it's actually harder in bonds
22:21
Speaker 2: for actively trading, because bonds are not very volatile. I mean,
22:25
Speaker 2: you can play around with things like duration and risk.
22:28
Speaker 2: And actually that's something that often masks performance in the
22:31
Speaker 2: bond space, is a fund manager can take more risk
22:34
Speaker 2: and show more returns from the risk, but ultimately, you know,
22:38
Speaker 2: it wasn't due to their stop their bond selection that
22:41
Speaker 2: drove turns. That was just by you know, jacking up
22:44
Speaker 2: the risk in their portfolio.
22:45
Speaker 1: Yeah, which is of course the problem has always been
22:47
Speaker 1: the problem in funds management and shares. Somebody gets a
22:50
Speaker 1: piece headline and they say, oh, this operator did so
22:53
Speaker 1: well last year. You know, they did forty percent and
22:56
Speaker 1: everyone else did ten. And then you look and you go, yeah,
22:58
Speaker 1: well they took two huge bets. It doesn't matter what
23:01
Speaker 1: the bets are. So two huge bets they paid off,
23:03
Speaker 1: and if they hadn't, they would have been at the
23:05
Speaker 1: bottom of the heap. Okay, what about the argument that
23:08
Speaker 1: the ets mindlessly followed the markets and would follow bull markets.
23:12
Speaker 1: So if we have a serious downturn, they're going to
23:15
Speaker 1: go with it, and if you had someone who was
23:16
Speaker 1: selecting more carefully, you might be more insulated from a
23:21
Speaker 1: correction or a crash.
23:23
Speaker 2: I mean, this is one of my favorites, and I'm
23:25
Speaker 2: sure we would have discussed it in the past as well,
23:27
Speaker 2: and it's I think one of the favorite lines of
23:29
Speaker 2: active fund managers is you know, ETFs are bull markets
23:32
Speaker 2: but will help to protect you and markets are volatile
23:35
Speaker 2: or they're falling. You know. There's also been great research
23:37
Speaker 2: done in this space, and my favorite article was won
23:40
Speaker 2: by a writer in the US, Jason's Wig, who looked
23:43
Speaker 2: at brilliant Writer on Finance, and he's looked at all
23:45
Speaker 2: of the research and found that actually, in big market
23:49
Speaker 2: down periods, whether it was the eighty seven crash or
23:51
Speaker 2: the financial crisis, or the dot com bust or COVID,
23:55
Speaker 2: there's no evidence that the average fund manager did any
23:58
Speaker 2: better than the market index. In fact, they did worse.
24:00
Speaker 2: And so it's actually very hard to predict market downturns
24:04
Speaker 2: after there they're going to be how long they're going
24:06
Speaker 2: to last. And actually, you know, I think a more
24:10
Speaker 2: relevant you know, article for listeners to find is one
24:13
Speaker 2: of my favorites, which is called that even God couldn't
24:16
Speaker 2: beat dollar cost averaging. And it's a really interesting research
24:19
Speaker 2: piece that looks at if you had perfect hindsight, could
24:23
Speaker 2: you actually you know, pick the bottoms and tops of
24:25
Speaker 2: the market. And the research maybe counterintuitively finds it if
24:29
Speaker 2: you simply drop the same amount of money into the
24:32
Speaker 2: market week after a week, you would have actually beaten
24:35
Speaker 2: someone that was saving up their money and perfectly could
24:38
Speaker 2: pick each dip along the way.
24:40
Speaker 1: And perfectly picked the dips. Interesting, and I suppose to
24:44
Speaker 1: an extent, our composory super innuation system is a reflection
24:49
Speaker 1: of that, right, because everyone puts their super end whether
24:52
Speaker 1: they like it or not, and it's dollar cost averaging.
24:56
Speaker 1: It's a legislation, so it's composory, but it is really,
24:59
Speaker 1: isn't it. Oh?
25:00
Speaker 2: It is, and it works very well like that. So
25:02
Speaker 2: I think the summaries markets do get overheated, and absolutely
25:05
Speaker 2: they can go too far, but it's so hard to
25:07
Speaker 2: always pick what the tops or bottoms are and get
25:09
Speaker 2: back in at the right time. And so you know,
25:11
Speaker 2: a sensible strategy is just owning everything and just being
25:15
Speaker 2: patient and realizing that markets do get overheated and they
25:17
Speaker 2: get undercooked, and that's just what markets do.
25:20
Speaker 1: One last thing I want to ask you before, and
25:22
Speaker 1: I've kept some great questions for you that have come in,
25:26
Speaker 1: but I want to ask you myself. Are you picking
25:29
Speaker 1: a stock who're always able to look at the PE ratio?
25:32
Speaker 1: And when you're picking an ETF? Is there really equivalent measured?
25:37
Speaker 1: And where would I find it? So let's say you know,
25:40
Speaker 1: I'm thinking, okay, let's be really simple about I'm thinking
25:42
Speaker 1: about buying Australian mining. And I look at REO and
25:45
Speaker 1: PSP and four to skew, and I look at their
25:48
Speaker 1: ps and I look at a couple of other sort
25:50
Speaker 1: of mid caps. I look at their p's, and I
25:52
Speaker 1: have a fairly good idea what the PE is four
25:55
Speaker 1: miners these these okay, that is they are and whatever
25:58
Speaker 1: they are way lower still than say tech stocs. But
26:02
Speaker 1: if I want to get an ETF on Australian miners,
26:05
Speaker 1: where would I find what would be the equivalent value measure?
26:11
Speaker 2: So I mean, exactly what you can do with individual shares,
26:14
Speaker 2: you can also calculate on an ETF basis. Because an
26:17
Speaker 2: ETF really is just an aggregation of multiple individual shares.
26:21
Speaker 2: The first place probably for listeners to find this is
26:23
Speaker 2: if you know, using your example, there are actually four
26:25
Speaker 2: or five Australian mining shares ETFs, and if you I mean,
26:29
Speaker 2: you can search them online and if you go to
26:31
Speaker 2: their websites and it's often the issuer's website, so you know,
26:34
Speaker 2: Beta shares as one, you know, I think Bank has one.
26:36
Speaker 2: In that space, you can actually find measures like the
26:39
Speaker 2: dividend yield of that ETF P ratio. I think you
26:44
Speaker 2: can sometimes find not all of them publish it otherwise
26:46
Speaker 2: often morning Star I found shows the pe ratio of
26:49
Speaker 2: underlying ETFs. You have to dig a bit, Yeah, you
26:53
Speaker 2: do have to dig a bit, and it's obviously a
26:55
Speaker 2: calculation that goes on behind the scenes. So we do
26:58
Speaker 2: it for our clients and it's a bit of a
26:59
Speaker 2: complex even to look at the geographic split of someone's portfolio.
27:03
Speaker 2: And what we do is we suck in all the
27:05
Speaker 2: data points of all of the ETFs a client holes
27:08
Speaker 2: and then we multiply that out by all of their
27:11
Speaker 2: underlying exposures and we can work up you know, you
27:13
Speaker 2: have you know, eight point three percent exposure into you know,
27:17
Speaker 2: Japanese shares for instance, right right.
27:19
Speaker 1: But it is a bit. It is unfortunate because the
27:22
Speaker 1: everyday investor if they could just see a one stuff
27:25
Speaker 1: shop when they're going in to buy an ETF. If
27:28
Speaker 1: you're going into buy an ETF today on let's say
27:31
Speaker 1: Australian real estate stocks, but you're probably it's probably quite
27:35
Speaker 1: reasonable compared to a us AI specialist fund, but it's
27:43
Speaker 1: difficult to compare just how much you're paying for the
27:46
Speaker 1: underlying stocks in that. Even though it is complex and
27:49
Speaker 1: it's a pity you can't.
27:50
Speaker 2: One of the place chains people can find it. Just
27:52
Speaker 2: a last call out is on the ASX website. They
27:55
Speaker 2: have a fantastic downloadable document every month. I don't think
27:58
Speaker 2: most people know about it called the fund Statistics. You
28:01
Speaker 2: can actually download a spreadsheet of every single ATF and
28:04
Speaker 2: all of their p ratios and returns and all of
28:07
Speaker 2: that data from the Maltics as well. So that's another part.
28:09
Speaker 1: There you are, folks, if you're prepared to do that,
28:14
Speaker 1: off you go the famous ASEX website, which we will
28:17
Speaker 1: leave to one side for the moment. All right back
28:19
Speaker 1: in the moment, Hello, Welcome back to the Australians Money
28:32
Speaker 1: Puzzle Podcast. James Krably with Chris Spreichy of the Stockspot Group,
28:37
Speaker 1: and we're talking today about constructing an ETF portfolio. I
28:40
Speaker 1: hope the first segments were useful to you, and I
28:43
Speaker 1: thought it was great that Chris actually explained that basic,
28:46
Speaker 1: that really simple five part I think it was portfolio,
28:51
Speaker 1: but to give you something to sort of start with.
28:53
Speaker 1: And the sixty Look, you know, there's all these academic
28:56
Speaker 1: debates about sixty forty, but really, if you're putting a
28:58
Speaker 1: portfolio together and you don't owe an awful lot just yet,
29:01
Speaker 1: there's not a lot wrong with the core concept of
29:04
Speaker 1: sixty forty and being sixty percent growth in forty percent defensive.
29:08
Speaker 1: We can argue about that all day long. When markets
29:10
Speaker 1: are hot, everyone thinks it's a bit conservative. When markets
29:13
Speaker 1: are shockingly bad, everyone thinks, thank god, we did that.
29:16
Speaker 1: It's as simple as that, as far as I can
29:17
Speaker 1: see over a long period of time. Okay, First question,
29:21
Speaker 1: Danielle da n I E. L A. Everyone talks about
29:26
Speaker 1: the CGT impact on property, but how does the new
29:29
Speaker 1: CGT capital gains tax rules affect the individual investors post
29:33
Speaker 1: tax returns from ETFs heal for long periods? Will it
29:37
Speaker 1: make investing in growth shairs a thing of the past.
29:40
Speaker 1: Before you say, I think, Chris, I see the market
29:43
Speaker 1: is issuing dividend and income funds at a rate of
29:46
Speaker 1: notts State Street. I see just issued one this morning.
29:49
Speaker 1: So there is a sense that it's going to be
29:52
Speaker 1: more tax effective to invest in income than in growth.
29:55
Speaker 1: It's not a sense, it's a mathematical fact because of
29:57
Speaker 1: the way of the new tax. But what do you
29:59
Speaker 1: think with daniel question.
30:01
Speaker 2: I mean, I think the answer is yes, it's going
30:03
Speaker 2: to have profound changes on how people invest, and I
30:06
Speaker 2: think in a few main areas. You know, the income
30:08
Speaker 2: one we can talk about, but there's probably two other
30:10
Speaker 2: ones to mention. First one is that in the past,
30:13
Speaker 2: from a tax perspective, investors were in different owning a
30:16
Speaker 2: bunch of individual shares versus a pool structure like an
30:19
Speaker 2: ETA for a managed fund, because your tax consequences are
30:23
Speaker 2: on the sort of total some of your winners and
30:25
Speaker 2: losers in that portfolio. You know, one of the nuances
30:29
Speaker 2: of this new tax that was discovered after the budget
30:31
Speaker 2: is actually that the treatment of tax now is going
30:35
Speaker 2: to be significantly different if you own a basket of
30:37
Speaker 2: individual shares versus eat and that's because you don't. It's
30:41
Speaker 2: a bit technical, but you don't get to use the
30:44
Speaker 2: real losses, which means is you're underperformance versus inflation on
30:47
Speaker 2: any losers in your portfolio. And you know, myself and others,
30:51
Speaker 2: including a former Treasury official, have done the numbers and
30:54
Speaker 2: found that it massively increases your tax rate on the
30:57
Speaker 2: basket of shares. So I think that's one thing is
30:59
Speaker 2: it's to push people out of individual shares into any
31:03
Speaker 2: form of pooled structure, it doesn't have to be an ETF.
31:07
Speaker 2: Another one I would say a big change is just
31:10
Speaker 2: the structure in which you own your investments is going
31:12
Speaker 2: to matter more. Obviously, superannuation keeps a concessional treatment that
31:17
Speaker 2: it had before, but investing outside of super or in
31:20
Speaker 2: a family trust is going to incur a lot more tax.
31:25
Speaker 2: And then the final one is what you mentioned upfront,
31:27
Speaker 2: which is the issue around distributions. I think a simple
31:31
Speaker 2: example would be, you know a company makes one hundred
31:33
Speaker 2: dollars profit, they had their seventy dollars left after company
31:36
Speaker 2: tax to distribute. If they distribute that now as a
31:40
Speaker 2: dividend to their shareholders, investors still have access to franking credits,
31:45
Speaker 2: and so if you're on a low marginal tax rate,
31:47
Speaker 2: you essentially get some credits and you have already had
31:51
Speaker 2: the company tax paid for you and you're only paying
31:53
Speaker 2: the difference essentially. However, now if that company reinvests that
31:58
Speaker 2: money into new projects or growth and delivers that same
32:02
Speaker 2: seventy dollars as capital growth, then investors are now going
32:06
Speaker 2: to incur a minimum thirty percent tax and potentially a
32:09
Speaker 2: lot more. And what I think this will lead to
32:12
Speaker 2: it I've written an opinion piece in The Australian about
32:14
Speaker 2: it is first of all, a lot more demand for
32:17
Speaker 2: dividends over capital growth from an investor perspective. But then
32:21
Speaker 2: boards I think in Australia are going to be under
32:23
Speaker 2: increasing pressure to increase their dividend payout ratios because of
32:28
Speaker 2: this as well, which has big economic consequences.
32:30
Speaker 1: Because absolutely it's upside down, isn't it really? I mean's
32:34
Speaker 1: standing back from it, it's upside down. It's encouraging big
32:38
Speaker 1: incumbent companies to go for dividends other than economic growth
32:45
Speaker 1: growth that would lead to economic rualths.
32:48
Speaker 2: I mean it would seem that way, you know. And
32:49
Speaker 2: if Daniella is a young person looking to compound your
32:53
Speaker 2: investment over many years. You know, dividends probably don't suit
32:56
Speaker 2: your investment goals either. You probably want investment growth as well.
33:00
Speaker 2: So it really is kind of, I guess, encouraging. You know,
33:03
Speaker 2: probably not the behaviors we want from an investor perspective
33:06
Speaker 2: and a corporate perspective, but definitely we're already seeing it.
33:10
Speaker 2: You know, post budget is more demand for our income
33:13
Speaker 2: flavored strategies over our growth flavored strategies.
33:17
Speaker 1: And yeah, and everyone, that's what everyone is saying at
33:19
Speaker 1: every level. All right, we are running our time because,
33:23
Speaker 1: as is often the case for Chris, it's so good
33:25
Speaker 1: to have him on the show that the clock takes
33:27
Speaker 1: faster than I expect. I'll just do one more question
33:30
Speaker 1: because it's the other ETF question, and it's from Darren
33:34
Speaker 1: with what or d r N Could you discuss the
33:39
Speaker 1: pluses and minuses with dividend reinvestment plans? This is really interesting.
33:43
Speaker 1: I recently commenced an ETF and have gone with the
33:47
Speaker 1: dividend reinvestment plan to grow this investment. Folks. You know,
33:50
Speaker 1: we didn't say it, but obviously you would know. With
33:52
Speaker 1: ETFs you get all the usuers, you know, you get
33:54
Speaker 1: dividends and you get franking, you can reinvest just like
33:57
Speaker 1: a share. But he says, I'd be interested in your thought.
34:01
Speaker 1: I'm sure exactly whether this is the best. So I
34:04
Speaker 1: think perhaps what Daron's driving at tell me if I
34:06
Speaker 1: got it on here, But d you or P's which
34:10
Speaker 1: we're a very good discipline always to you know, to
34:13
Speaker 1: redeploy your money. And the old argument, you know, if
34:15
Speaker 1: ESP is good enough to have your money, and it's
34:17
Speaker 1: good enough to reinvest your d orps in. But Chris
34:21
Speaker 1: on that thing about CGT, if you sign up through
34:24
Speaker 1: the d ORP, you're kind of walking towards that higher
34:27
Speaker 1: tax in very simple times. Is that true?
34:31
Speaker 2: Yes, it is, so I think. I mean the word
34:32
Speaker 2: discipline is probably the best way to describe the benefits,
34:35
Speaker 2: which is that leads to you ensuring that money keeps
34:37
Speaker 2: on compounding and growing. And I think about BROKERAAG is
34:40
Speaker 2: another reason people used to pay com sect twenty dollars
34:42
Speaker 2: every time you keep on reinvesting. I think under the
34:46
Speaker 2: new CGD changes it also adds, you know, some problems.
34:49
Speaker 2: So first of all, when you sign up to a DP,
34:51
Speaker 2: you still are taxed as if you receive that diven
34:54
Speaker 2: end and so you're going to need to find that
34:56
Speaker 2: money somewhere to pay the tax bill, so it doesn't
34:59
Speaker 2: avoid the tax receiving the distribution. The other complexity is
35:02
Speaker 2: probably one you might not have thought about, Darren, which
35:04
Speaker 2: is that every reinvestment you're making creates a new parcel
35:07
Speaker 2: of shares, its own purchase daid, its own cost base,
35:10
Speaker 2: and under indexation of cost bass. That's going to add
35:13
Speaker 2: a whole lot more complexity from an administrative perspective.
35:16
Speaker 1: That's someone else's problem, though, isn't it really Well, yeah,
35:19
Speaker 1: it became my problem recently.
35:21
Speaker 2: My grandma wanted to sell some Westpac shares that she bought,
35:24
Speaker 2: you know, decades ago, and said, hey, Chris, here's on
35:27
Speaker 2: my paperwork. Can you help me work out the tax?
35:29
Speaker 2: And you know, she had been part of a DRP
35:31
Speaker 2: and calculating the cost bases on many parcels. It took
35:35
Speaker 2: me more time than I want to talk about.
35:36
Speaker 1: So I would have told them was an AI program
35:39
Speaker 1: for all that now has to be your talents? Does
35:42
Speaker 1: it Meanwhile?
35:43
Speaker 2: Yeah, when you're scanning grandma's documents and it's pretty into
35:46
Speaker 2: a strateshet, I could eventually use AI. But there was
35:48
Speaker 2: a bit of manual work first, so I think she's shocking, yes, Darren,
35:51
Speaker 2: keeping the admin side in mind. And then maybe the
35:54
Speaker 2: last point is concentration. You know, when we're receiving dividends
35:57
Speaker 2: for clients, were often reinvesting it into for an ETFs
36:00
Speaker 2: to help to rebalance the portfolio. If you're signing up
36:03
Speaker 2: to a DMP, it just means more and more money
36:05
Speaker 2: is going into that particular fund. You know, that might
36:08
Speaker 2: be a good thing, but it's just something to be
36:10
Speaker 2: aware of too.
36:11
Speaker 1: Just to wrap on that dividend reinvestment plans, and obviously
36:14
Speaker 1: they're good if you want to reinvest in the company.
36:17
Speaker 1: They're simple, as you said, they have a discipline, they're
36:20
Speaker 1: good on brokeraage fees. On the CGT side. If dividends
36:26
Speaker 1: are now taxed more lightly.
36:30
Speaker 2: So dividends the same way, so you'll still get the
36:32
Speaker 2: same tax on that dividend that you would have in
36:34
Speaker 2: the past, and you're basically reinvesting that after tax money
36:38
Speaker 2: then into the market.
36:39
Speaker 1: Yeah yes, yeah, but the if income is taxed more
36:43
Speaker 1: likely than growth, then what how does that affect your
36:45
Speaker 1: p decisions?
36:48
Speaker 2: I mean, you're reinvesting essentially for capital growth, but you've
36:51
Speaker 2: got to put that money somewhere, So I guess it depends.
36:54
Speaker 2: You know, now capital growth has a more punitive tax rate,
36:57
Speaker 2: so you want to avoid it. But you ultimately, you know,
36:59
Speaker 2: you want to invest in that company as well, So
37:02
Speaker 2: it's a bit of a chicken and egg problem. I
37:03
Speaker 2: think if you ultimately invest, it's an efficient way of
37:06
Speaker 2: doing it.
37:06
Speaker 1: Still, Okay, that's interesting, very good. Okay, Okay, thank you,
37:10
Speaker 1: Chris Bracky. That was terrific. I see you're you're out there,
37:13
Speaker 1: you're you're lobbying the government on some aspects of the budget.
37:17
Speaker 1: I don't know if you'd get any particular progress. You
37:20
Speaker 1: think you've made progress, and any particular front has anting changed.
37:24
Speaker 2: I think from a government perspective, no, but that was
37:27
Speaker 2: always known. I think the government had made their deceasion.
37:29
Speaker 2: But I think from an awareness and education perspective, I
37:32
Speaker 2: think more people are realizing about all the second order consequences.
37:35
Speaker 1: In fact, that's what every Second Show has been about
37:37
Speaker 1: for a couple of weeks, the second order consequences. Because
37:39
Speaker 1: there was so much negative gearing, capital gains, family trusts, smsfs.
37:44
Speaker 1: There is so much for people to find out, and
37:47
Speaker 1: it's reflected in the flow of emails we're getting, including
37:50
Speaker 1: those todays, so thank you very much folks. I didn't
37:52
Speaker 1: get through them all, but I will put them back
37:54
Speaker 1: in and we will get to them. The money posit
37:57
Speaker 1: at the Australian dot com dot au is the address.
38:01
Speaker 1: Today's show was produced by Leah Sam mcglue. Thank you
38:03
Speaker 1: very much, Chris talk again.
38:05
Speaker 2: Thank you,