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Investing 101: The name's bond, ASX bond · She's On The Money

0:01
Speaker 1: She's on the Money.
0:03
Speaker 2: She's on the Money.
0:18
Speaker 1: Hello, and welcome to She's on the Money, the podcast
0:21
Speaker 1: for Millennials who Want Financial Freedom. Today is part two
0:25
Speaker 1: of our four part deep dive series into investing, and
0:28
Speaker 1: ever so excitingly, today's focus is all on fixed interest.
0:32
Speaker 3: Don't be dream, Georgia King, Well, it is a.
0:34
Speaker 1: Dream and judging from the conversations being had in our
0:37
Speaker 1: Facebook group, this is the form of investing. Of the
0:40
Speaker 1: four that we're going to be talking about that collectively,
0:42
Speaker 1: we just seem to know the very least about so
0:45
Speaker 1: big things ahead now. I know, I definitely have a
0:48
Speaker 1: lot to learn in this space. As full disclosure, when
0:51
Speaker 1: we were having this chat with Ryan, John and Jess
0:53
Speaker 1: a couple of weeks back, when you spoke about bonds,
0:55
Speaker 1: I was like, does she mean like house rental bonds?
0:59
Speaker 1: Don't ask that question. That question, that's a question.
1:02
Speaker 3: So in the bond that I give for my Prodigy legit.
1:06
Speaker 1: So if you're listening and you're like, that's where your
1:08
Speaker 1: mind went, I'm with you. But by the end of today,
1:11
Speaker 1: you will be a certified fixed interest pro rattling off
1:15
Speaker 1: the difference between corporate and government bonds as well as
1:17
Speaker 1: why their face value price can fluctuate. People will genuinely
1:21
Speaker 1: mistake you as a financial advisor, so that could be
1:24
Speaker 1: in trouble.
1:25
Speaker 3: Yeah, I could get in a whole heap of trouble.
1:27
Speaker 3: Imagine if they actually thought that crazy. I feel like
1:31
Speaker 3: it's a dead giveaway though.
1:33
Speaker 1: Yeah. Having a disclaimer at the end of the podcast. Yeah,
1:35
Speaker 1: that's true. That's okay, true, that's okay, okay. So we
1:38
Speaker 1: should get into introductions. In case you don't know who
1:41
Speaker 1: we are. My name is Georgia King. I'm a copywriter
1:44
Speaker 1: and journalism student, and as always I'm joined by financial
1:48
Speaker 1: advisor millennial money expert Victoria Define.
1:51
Speaker 3: Thank you legit financial advisor. By the way, if you
1:54
Speaker 3: knew around here, friend.
1:55
Speaker 1: We promise as we say at the end of every episode.
1:59
Speaker 1: We're also joined by odds Delightful community engagement specialist Lucy
2:03
Speaker 1: the sheep Doodle, who is in the background wolfing along
2:07
Speaker 1: his she is let's get her on. How are you Liz?
2:10
Speaker 1: Just kidding? She can't talk, She's a dog anyway, great
2:13
Speaker 1: start to today's show. To kick us off, Fee, can
2:16
Speaker 1: you give us a little recap of what fixed interest
2:19
Speaker 1: is before we get right into it. As I said,
2:21
Speaker 1: what a dream.
2:22
Speaker 3: Of course I can so fixed interest it refers to
2:25
Speaker 3: fixed interest income assets friends, and they are government and
2:29
Speaker 3: corporate bonds which are generally colassified as pretty damn stable,
2:33
Speaker 3: low risk returns to the basic gist of these bonds
2:36
Speaker 3: is you basically can lend money to the government. It's
2:39
Speaker 3: not when you pay money for your bond when you
2:41
Speaker 3: get your first rental property and then you might not
2:44
Speaker 3: get it back if you forgot to steam clean the
2:45
Speaker 3: car or your dog chewed the wall. But they pay
2:49
Speaker 3: back with interest and that interest is paid back in
2:52
Speaker 3: regular installments over the life of that bond. So in
2:55
Speaker 3: the ASX Russell Investment Report, Australian bonds average six point
2:59
Speaker 3: two percent in gross returns per year over the last
3:02
Speaker 3: ten years.
3:03
Speaker 1: That's pretty good.
3:04
Speaker 3: I think that's not bad, not bad. So I think
3:07
Speaker 3: it's one of those things that we don't know a
3:09
Speaker 3: lot about but could actually be a really powerful asset
3:12
Speaker 3: to us in our investment portfolios if it matches our
3:15
Speaker 3: risk profiles. So these are super popular because they commonly
3:19
Speaker 3: have super high liquidity, which is just a fancy word
3:21
Speaker 3: for being able to pull your money out quickly, as
3:23
Speaker 3: they're easy to sell, and I think that that's really important.
3:26
Speaker 3: So liquidity is going to be the word of the
3:29
Speaker 3: week this week because it's one of those words that
3:32
Speaker 3: people throw around because it does actually have an impact
3:35
Speaker 3: on the stability of your investment portfolio. For example, if
3:39
Speaker 3: you have property that's pretty hard to pull your money
3:42
Speaker 3: straight out, you can't just sell a bathroom and be like, hey,
3:46
Speaker 3: I'd like another twenty thousand dollars, So I can I
3:48
Speaker 3: go on a holiday or I have an emergency that
3:51
Speaker 3: I do require a large amount of cash for and
3:54
Speaker 3: can I sell the kitchen sink?
3:55
Speaker 4: Like?
3:56
Speaker 3: That's not an option with property. In fact, property is
3:59
Speaker 3: only word what somebody is going to pay you for it,
4:03
Speaker 3: and that's at point of sale. So you could have
4:06
Speaker 3: to go through an entire real estate campaign once or
4:08
Speaker 3: twice to even sell a property. And I think that's
4:11
Speaker 3: really worthy of taking into consideration. Where with a bond
4:14
Speaker 3: you can essentially just elect to sell it and in
4:17
Speaker 3: three business days on average that money will be back
4:20
Speaker 3: in your account. Worth taking to consideration. So the level
4:24
Speaker 3: of risk is small in this space. However, when choosing
4:27
Speaker 3: a company rather than an Australian government, that risk does increase,
4:31
Speaker 3: so as we said before, there are like corporate and
4:33
Speaker 3: government bonds. Government bonds are where you lend money to
4:36
Speaker 3: the government. Corporate bonds are where you lend money to corporates.
4:39
Speaker 3: So all bonds have what we call a face value,
4:42
Speaker 3: which is essentially the set value when they are first distributed,
4:45
Speaker 3: and that is how much you're going to pay for
4:46
Speaker 3: the bond. So that could typically be between one hundred
4:49
Speaker 3: and thousand dollars per bond, and you'll get that amount
4:53
Speaker 3: back plus the interest when the bond has reached maturity.
4:56
Speaker 3: So when I say reached maturity, we're talking about if
4:59
Speaker 3: you buy a three your bond, you're just.
5:01
Speaker 1: Finishing that entire term.
5:03
Speaker 3: So if you sell early, though, you'll just receive the
5:06
Speaker 3: market value back. So if you buy one hundred dollar
5:08
Speaker 3: bond and you're expecting you know, three percent return, you'll
5:11
Speaker 3: get you three dollars on that bond. But if you
5:14
Speaker 3: cancel it and want your money back early, yes it's liquid,
5:17
Speaker 3: but you won't get that three dollars. You'll just get
5:19
Speaker 3: what you put in back, which more or less puts
5:22
Speaker 3: you in the position you started in initially.
5:24
Speaker 1: So not the worst outcome is literally chewing the table,
5:30
Speaker 1: chewing the table, girl, do your job. You meant to
5:32
Speaker 1: be monitoring the community.
5:35
Speaker 3: You guys said you wanted a community manager. You did
5:38
Speaker 3: not say what type of community manager you want it.
5:40
Speaker 3: You've got to be more specific.
5:42
Speaker 1: At least she's stunning, you know.
5:43
Speaker 3: So the price of the bond comes down to supply
5:45
Speaker 3: and demand essentially, with market interest rates impacting the price
5:49
Speaker 3: most significantly. The duration of a bond and the credit
5:52
Speaker 3: risk of the issuer also play a part in the
5:54
Speaker 3: price of the bond, which is important as well. So
5:57
Speaker 3: fixed interest bonds and indexed bonds in the other direction
6:01
Speaker 3: to the market interest rates. So if market interest rates rise,
6:04
Speaker 3: the price of these bonds full and vice versa, which
6:08
Speaker 3: is kind of interesting.
6:09
Speaker 1: So how long do these bonds? How long do you
6:12
Speaker 1: need to be locked into them? Is it a one
6:14
Speaker 1: year thing like a term deposit kind of duration, or
6:18
Speaker 1: is it like twenty years?
6:19
Speaker 3: So this actually varies significantly based on which bond you purchase. So,
6:24
Speaker 3: I know, you can purchase bonds which are one year,
6:27
Speaker 3: you could purchase a five year bond, or you could
6:29
Speaker 3: even purchase.
6:29
Speaker 1: A ten year bond.
6:30
Speaker 3: It completely depends on what bond that was issued for
6:34
Speaker 3: and how that actually works.
6:35
Speaker 4: Out.
6:36
Speaker 3: So there are lots and lots of them on the market.
6:38
Speaker 3: You just have to know.
6:39
Speaker 1: Where to look. Okay, So well, speaking of, how do
6:42
Speaker 1: you actually do it? If someone is like this sounds
6:44
Speaker 1: like a hot deal. Bonds aren't what I thought. They
6:47
Speaker 1: weren't double O seven Yeah, what do they do?
6:49
Speaker 3: A bit more setty than you thought.
6:51
Speaker 1: My friends? Speaking of I had a Martini over the weekend.
6:53
Speaker 1: Course putrid, but really it hit me hard anyway, that's
6:57
Speaker 1: beside the board.
6:57
Speaker 3: Actually like Martini's olives in something.
7:01
Speaker 1: I had it was Olive Brian Formooth olives and gin.
7:05
Speaker 3: I you drank that.
7:07
Speaker 1: I felt sophisticated, but after five minutes I was pretty
7:11
Speaker 1: much passed out on the couch. They are strong.
7:13
Speaker 3: I don't want to drink Olive Brian like that's the
7:16
Speaker 3: stuff was the best part, though, serious, I'm not terrible.
7:21
Speaker 1: They're not great. I am.
7:22
Speaker 3: I am partial to Margarita, though I feel like that's yeah,
7:25
Speaker 3: that's a better option, and maybe next time you should.
7:27
Speaker 1: Have remove yes for our Friday drink episode.
7:31
Speaker 3: Yeah exactly. I mean it is a Bond episode though,
7:34
Speaker 3: so you probably should stick to them.
7:36
Speaker 1: Yeah, you're right, all right?
7:36
Speaker 3: Back to I'm sorry, so when it comes to starting
7:40
Speaker 3: with bonds, the first thing you need to do is
7:42
Speaker 3: choose what way you're going to do it, and you
7:45
Speaker 3: do have a few options. You can invest in individual bonds,
7:48
Speaker 3: you can also invest in ETFs, which sometimes hold bonds,
7:52
Speaker 3: and you can also do it with your super or
7:53
Speaker 3: you can do it in managed funds. There are lots
7:56
Speaker 3: and lots of different ways. There is not just one way.
7:58
Speaker 3: And I'm going to recap what because I think that
8:01
Speaker 3: when over the heads of a lot of people, first
8:04
Speaker 3: thing that I think we maybe wouldn't have understood, not
8:07
Speaker 3: because we're idiots, literally, just because we've never spoken about
8:11
Speaker 3: this properly on the podcast before and it's not something
8:14
Speaker 3: that we discussed regularly at all in our community. And
8:17
Speaker 3: that is a managed fund. This is different to an ETF.
8:21
Speaker 3: These are not the same things. The method is similar
8:24
Speaker 3: to bond ETFs, the only difference being you have a
8:27
Speaker 3: fund manager looking after you and selecting the bonds and
8:30
Speaker 3: other securities to suit your needs. So an ETF often
8:33
Speaker 3: follows an index or follows you know, a market average,
8:36
Speaker 3: or is a collective of a lot of different shares
8:39
Speaker 3: that make up that portfolio. A managed fund is more
8:43
Speaker 3: active and it has a specific fund manager running it.
8:46
Speaker 3: That's a person who runs the fund and they are
8:50
Speaker 3: in charge of essentially getting really good performance. But the
8:54
Speaker 3: fees on these funds are often higher than the fees on.
8:58
Speaker 1: ETF because you're paying for that service.
9:00
Speaker 3: Yes, And so an ETF is often a more accessible
9:04
Speaker 3: way to start investing, whereas a managed fund often has
9:08
Speaker 3: higher prices that you need to be paying to get in.
9:11
Speaker 3: So a managed fund might have a minimum investment of
9:14
Speaker 3: ten thousand dollars to begin, whereas an ETF you can
9:17
Speaker 3: kind of just go and buy into an ETF for
9:20
Speaker 3: a very low price.
9:21
Speaker 1: Point, right, And is that so managed funds do you
9:24
Speaker 1: access those on the ASX as well or do you
9:26
Speaker 1: need is your financial advisor?
9:28
Speaker 3: So your financial advisor or broker, So a financial advisor
9:32
Speaker 3: is not your fund manager. Yeah, they had different. Your
9:35
Speaker 3: financial advisor will help you pick a managed fund that
9:39
Speaker 3: is right for you, and they will actually oversee the
9:41
Speaker 3: whole process and make sure that fund managers doing what
9:44
Speaker 3: they're doing, and they will compare the fund managers together
9:46
Speaker 3: and make sure that you're always getting the best deal.
9:48
Speaker 3: So for me, managed funds are really cool, but they
9:51
Speaker 3: are more expensive. They definitely have a higher level of,
9:55
Speaker 3: you know, activeness. They're actually a lot more active than
10:01
Speaker 3: what an ETF is in terms of switching things out
10:03
Speaker 3: and changing things and you know what's going on internally.
10:07
Speaker 3: You do pay a premium for it, though, however, more
10:10
Speaker 3: often than not, performance is there. Okay, it's completely up
10:13
Speaker 3: to you, but I think it's important to understand the
10:15
Speaker 3: difference between the two. So individual bonds are the next
10:18
Speaker 3: thing I want to talk about, where you buy directly
10:21
Speaker 3: from the issuer or the company. This is a similar
10:23
Speaker 3: purchase to purchasing an IPO, which I know you're looking at.
10:27
Speaker 1: Me strangely, don't know what that is. That's a lot
10:31
Speaker 1: of this episode I don't know, but now I'm understanding.
10:35
Speaker 3: So to talk me through, I'm trying to start introducing
10:38
Speaker 3: more words that you guys will see because I know
10:41
Speaker 3: that we distill things down, but there's a lot.
10:43
Speaker 1: Of jargon in this set.
10:44
Speaker 3: This reason we're talking about investment, and if we're going
10:47
Speaker 3: to start talking about investment, we need to use the
10:49
Speaker 3: right terms and you guys need to understand them properly.
10:53
Speaker 3: So an IPO is an initial public offering, So that
10:56
Speaker 3: is the process of offering shares from a private company
11:00
Speaker 3: to the public.
11:01
Speaker 1: In a new stock issuance.
11:03
Speaker 3: So it's like if they're being listed, like that's super
11:06
Speaker 3: exciting for them, but it will be the very first
11:08
Speaker 3: time that they'd list on the market.
11:10
Speaker 1: Therefore, more often than.
11:11
Speaker 3: Not, people see a really great opportunity to buy a
11:15
Speaker 3: share of a company that is just listing on the
11:17
Speaker 3: market for the very first time because they feel like
11:20
Speaker 3: maybe that shares either undervalued or going to perform really well,
11:23
Speaker 3: or there might be some other really shiny benefits to
11:26
Speaker 3: buying into an IPO. But an IPO is an initial
11:29
Speaker 3: public offering and it's essentially buying a share for the
11:31
Speaker 3: very first.
11:32
Speaker 1: Time it hits the share market. Cool, yeah, it kinder, Yeah,
11:36
Speaker 1: kind of fun.
11:36
Speaker 3: Anyway, it's fun following stuff like that because seeing companies
11:40
Speaker 3: list on the share market is literally so exciting because
11:43
Speaker 3: the growth behind them, and like I'm going to get
11:45
Speaker 3: off on a tangent because I'm genuinely just passionate about
11:48
Speaker 3: this area.
11:49
Speaker 1: But like last year, Adore.
11:51
Speaker 3: Beauty listed on the share market, so they went through
11:55
Speaker 3: the IPO process and just really fun to watch and
11:58
Speaker 3: just other people getting involved talking about what shares they're buying.
12:01
Speaker 3: And how many you can buy, and often there's like
12:03
Speaker 3: a cap of what initial investors can actually purchase in
12:06
Speaker 3: with So to me as a financial advisor and someone
12:10
Speaker 3: who is really interested in this space, like I wanted
12:13
Speaker 3: to know the n needy gritty. What are they offering?
12:15
Speaker 3: Why are they only offering that? Like what's their initial
12:17
Speaker 3: share price? How does that work? Like what does that
12:20
Speaker 3: compare to in comparison to other companies that might be
12:23
Speaker 3: somewhat similar.
12:24
Speaker 1: I remember when we were doing our beauty episode with
12:27
Speaker 1: Hannah and Joe. You were talking to Hannah or Joe
12:30
Speaker 1: can't remember, and I think I assumed you were talking
12:32
Speaker 1: about a beauty product and I was just like glazed over.
12:34
Speaker 1: But there you go it with stock stuff, there you go.
12:38
Speaker 3: But it is actually really cool. Anyway, that's a bit
12:41
Speaker 3: off tangent, But my friends, you now know what an
12:43
Speaker 3: IPO is, right, and it's actually a really cool process.
12:47
Speaker 3: Like and if we start putting examples into what these
12:51
Speaker 3: terms are, I think they make more sense to uses.
12:54
Speaker 3: Like it's one of those things where you might have
12:55
Speaker 3: heard that before or you might have seen it somewhere,
12:58
Speaker 3: but you just go hell, like I don't understand, Like
13:01
Speaker 3: who cares about an IPO like it was all over
13:03
Speaker 3: the news. Nobody explains it or lets you know why
13:06
Speaker 3: that might be actually of interest to you, or why
13:09
Speaker 3: that might be of interest in general.
13:10
Speaker 1: Do you know what I mean?
13:11
Speaker 3: Like, it's actually really fun when you get down to it,
13:14
Speaker 3: you know what it means. Yeah, And people actually take
13:16
Speaker 3: away the dug and they go, Okay, cool, this is
13:17
Speaker 3: what it's called.
13:18
Speaker 1: But this is actually how it works. Moving on, Yeah,
13:23
Speaker 1: So individual bonds can anyone buy them?
13:26
Speaker 3: Yes, you can go and purchase a bond. If you've
13:28
Speaker 3: got some money and you'd like to put it into
13:30
Speaker 3: a bond. You can buy direct from the person issuing
13:33
Speaker 3: them or the company issuing them, and it is a
13:36
Speaker 3: non issue.
13:37
Speaker 1: Beautiful all right? So what would the other two ways?
13:40
Speaker 1: We have super ETFs? I think we do.
13:42
Speaker 3: We've got superannuation, so you can access bonds through your
13:45
Speaker 3: super and it's also highly probable that you already own
13:49
Speaker 3: a bond in your superannuation because a lot of super
13:52
Speaker 3: companies see bonds is a really stable way to introduce
13:56
Speaker 3: some income into your portfolio with less risk and a
14:00
Speaker 3: lot of you I know because there's a very popular
14:03
Speaker 3: finance book that exists that recommends a certain super fund
14:08
Speaker 3: that also recommends a certain profile. That profile has bonds
14:12
Speaker 3: in it, and it's not a bad thing at all.
14:15
Speaker 3: It gives you a bit more stability. So often and
14:18
Speaker 3: I talk about risk profiling all the time, and I
14:21
Speaker 3: get so many messages about it. It is coming friends.
14:23
Speaker 3: I'm putting something together about risk profiling so we can
14:26
Speaker 3: fully understand it together. But essentially, if you have a
14:32
Speaker 3: if you have a share portfolio, right, I'm going off
14:35
Speaker 3: on a tangent again because this is like, this is
14:37
Speaker 3: my time to shine, friends, Like I love this stuff.
14:41
Speaker 3: If you have a share portfolio and you're a high
14:44
Speaker 3: risk investor, it sounds risky, I promise you it's not
14:48
Speaker 3: often your portfolio is just made up of a lot
14:51
Speaker 3: of shares. You maybe won't have too many bonds, you
14:54
Speaker 3: won't have much cash sitting in there. Because risk means
14:58
Speaker 3: you're more willing to put your money into the share
15:01
Speaker 3: market than you are to put it in cash. Whereas
15:04
Speaker 3: someone who is a more conservative investor, like they don't
15:07
Speaker 3: actually want all their money exposed to the share market.
15:11
Speaker 3: They want their money, you know, very very well diversified.
15:14
Speaker 3: It's not to say the high risk person is not diversified,
15:17
Speaker 3: because they'd be diversified well in the share market. But
15:20
Speaker 3: when you are a lower risk person or profile, you
15:24
Speaker 3: get put into this bucket where you have just a
15:26
Speaker 3: different mix of assets that provide a lower income.
15:29
Speaker 1: But hold low lower risk.
15:31
Speaker 3: So often someone who is low risk will actually hold
15:35
Speaker 3: identical shares to someone who is high risk. It's just
15:39
Speaker 3: that that high risk person holds let's say ninety nine
15:42
Speaker 3: percent shares, and maybe your share portfolio only holds thirty percent,
15:46
Speaker 3: and then you maybe have thirty percent bonds and like
15:48
Speaker 3: the rest of your portfolio is made up in cash.
15:50
Speaker 3: So I think it's important to understand that just because
15:55
Speaker 3: someone is high risk, it doesn't mean they're buying risky shares.
15:58
Speaker 3: And that's why, and I say this to my clients.
16:00
Speaker 3: That's why I say I am a very conservative high
16:03
Speaker 3: risk investor. So I am high risk because I want
16:08
Speaker 3: a lot of my assets and my wealth to be
16:10
Speaker 3: exposed to the shed market because i want that growth,
16:13
Speaker 3: and I've got time to actually put behind that. But
16:17
Speaker 3: I only want to buy tried, true tested companies. I'm
16:20
Speaker 3: not here to take a punt. I'm not here to
16:23
Speaker 3: buy into new companies because to me that risk is
16:26
Speaker 3: far too great. I actually just want to see capital
16:29
Speaker 3: stable businesses that have really great future prospects that give
16:33
Speaker 3: me growth and income, even if that means that share
16:36
Speaker 3: isn't Tesla.
16:37
Speaker 1: Or everything you've done matches your risk profile, right. Yes,
16:41
Speaker 1: I just feel like I've never really thought about it
16:43
Speaker 1: like that. I wouldn't have thought of you as like
16:45
Speaker 1: a high risk investor. But you're saying that it's in
16:47
Speaker 1: a conservative way. It just makes so much more sense now.
16:50
Speaker 3: Yeah, Like I am very conservative because I'm here for
16:52
Speaker 3: the long term and I actually want things to be stable,
16:55
Speaker 3: but I want a higher level of return than having
16:59
Speaker 3: just a bond. And that's why we're talking about these things,
17:02
Speaker 3: because I think it's important for you to understand they
17:04
Speaker 3: suit me because I do own bonds, but I own
17:06
Speaker 3: a small percentage of bonds in comparison to shares. But
17:09
Speaker 3: I also have clients who solely own bonds, like I
17:12
Speaker 3: was doing a webinar last week with Glenn James from
17:15
Speaker 3: my Millennial Money. One of my friends love him to death,
17:18
Speaker 3: but he owns bonds because that suits him. His entire
17:23
Speaker 3: investment portfolio is majority bonds.
17:26
Speaker 1: Did you talk about that.
17:27
Speaker 3: Yeah, we spoke about that on the webinar, but also
17:30
Speaker 3: just giving away his financial situation. No, so he loves bonds,
17:35
Speaker 3: but there's also just different types of bonds.
17:37
Speaker 1: That are issued.
17:39
Speaker 3: So they are a really great option. If shares maybe
17:42
Speaker 3: scare you a little bit too much and you want
17:45
Speaker 3: to be a little bit more conservative, these are an
17:47
Speaker 3: option that I want you to take into consideration. Not
17:49
Speaker 3: because I'm here selling them being like, oh my god,
17:51
Speaker 3: buy a bond. I'm actually here saying, could you please
17:55
Speaker 3: understand every single aspect of your opportunity so that you
18:00
Speaker 3: make the right decision for you. You might say, look,
18:03
Speaker 3: shares aren't my thing, Victoria, but you know what, my friend.
18:05
Speaker 3: At least you know they exist, and that is an
18:07
Speaker 3: active choice. I do not want any of you getting
18:10
Speaker 3: to sixty five and going, oh, I'm considering retiring. Oh
18:13
Speaker 3: my gosh, I wish i'd known about investment. You're making
18:16
Speaker 3: the right choice for you and only you can do that.
18:19
Speaker 1: Feeling inspired over here, The last one is ETFs that
18:22
Speaker 1: we want to chat about quickly. B give us a
18:24
Speaker 1: little summary ATF.
18:26
Speaker 3: I feel like you could give me a spiel on
18:29
Speaker 3: this that is okay. So an ETF is an exchange
18:33
Speaker 3: traded fund and they are a low cost way to
18:38
Speaker 3: start investing in a well diversified way. Did that rhymes?
18:42
Speaker 3: That was pretty good, Thank you, thank you. But it's
18:44
Speaker 3: essentially you buying a basket of shares or assets that
18:48
Speaker 3: are already pre allocated and already pre diversified. So if
18:52
Speaker 3: you go and purchase one individual share, you've only got
18:55
Speaker 3: exposure to that one company and that one industry, Whereas
19:00
Speaker 3: if you go and buy an ETF, that's often made
19:02
Speaker 3: up of a lot of different shares from a lot
19:04
Speaker 3: of different industries. So if like mining, for example, and
19:08
Speaker 3: I don't actually invest in mining, so that's probably a
19:10
Speaker 3: really bad example. We'll also do an episode on ethical
19:14
Speaker 3: investing because that's something I'm really wildly passionate about. But
19:18
Speaker 3: let's just say, for example, you're investing in mining, because
19:21
Speaker 3: I think when we say investment, a lot of people
19:23
Speaker 3: think that if that's not performing well, another part of
19:26
Speaker 3: our economy usually is and vice versa. When you buy
19:29
Speaker 3: an individual share in mining, right, you are not getting
19:33
Speaker 3: exposure to the rest of it. So if mining crashes
19:36
Speaker 3: for some reason, your entire share portfolio crashes because that's
19:40
Speaker 3: all you hold. Whereas if you hold a whole range
19:42
Speaker 3: of different shares from different industries, which is what you
19:45
Speaker 3: get access to when you purchase an ETF and mining crashes, Well,
19:50
Speaker 3: that was only two or three percent of your portfolio,
19:52
Speaker 3: and there's other things that are performing at all evens out,
19:55
Speaker 3: so that you don't feel all of the highs and
19:58
Speaker 3: super lows of the market, but you get generally a
20:01
Speaker 3: pretty stable return.
20:03
Speaker 1: That summary, Yeah, that was great, Thank you. Thank good
20:06
Speaker 1: way of not having all of your eggs in one basket.
20:08
Speaker 1: I think that's how you put it in our overview
20:10
Speaker 1: episodes a few weeks ago.
20:11
Speaker 3: No eggs, no baskets. We'll get into ETFs again though,
20:14
Speaker 3: because I think that we really need an entire episode
20:16
Speaker 3: on that. But summarizing all of that, how do you
20:20
Speaker 3: do it? We've spoken about the ways to do it.
20:22
Speaker 3: If you're going to go down the corporate bond route,
20:24
Speaker 3: you can buy them when they're on the primary market,
20:27
Speaker 3: aka when they're first issued, or you could go buy
20:29
Speaker 3: ones that are listed on the stock exchange and just
20:32
Speaker 3: purchase them as you normally would a share, which is
20:34
Speaker 3: kind of cool. Government bonds are also able to be
20:37
Speaker 3: purchased on the AX, which you can do through your
20:39
Speaker 3: broker or financial advisor, or just buy yourself via your
20:42
Speaker 3: online share trading account if you have one, and you
20:45
Speaker 3: can see what is available at the ASX website, which
20:48
Speaker 3: we're going to put in the show notes of our
20:50
Speaker 3: show this week because that, to me is a really
20:53
Speaker 3: reliable source of information because the AX is essentially the
20:57
Speaker 3: Australian Stock Exchange and this is like the place that
21:01
Speaker 3: you get shares here in Australia and if you haven't
21:05
Speaker 3: heard of it, living under a rock, because every single
21:07
Speaker 3: day on the TV they will talk about the AX,
21:10
Speaker 3: and they will talk about the Dow Jones and all
21:13
Speaker 3: of that, but essentially it is the Australian version of
21:16
Speaker 3: Wall Street or the Dow Jones, which is an overseas version.
21:19
Speaker 1: Yeah see, I always used to tune out and cosh
21:22
Speaker 1: you chatted about that on Sunrise, But now.
21:24
Speaker 3: Koshi, I'm coming for your job. Watch out Sunrise.
21:27
Speaker 1: Is there anything else we need to take into account
21:29
Speaker 1: with bonds? V?
21:31
Speaker 3: Absolutely? There are a number of things quickly. Time frame.
21:35
Speaker 3: How long do you want to be invested for? So
21:38
Speaker 3: we said that some bonds can be ten years. Are
21:41
Speaker 3: you happy to lock your money away for a whole
21:43
Speaker 3: ten years or are you wanting to access that early
21:46
Speaker 3: because if you do access it early, you're actually going
21:48
Speaker 3: to lose the interest that you would have earned. Interest rates.
21:52
Speaker 3: What is the interest rate that is going to be
21:53
Speaker 3: paid if you purchase this bond? And is it going
21:56
Speaker 3: to be fixed? Like is it a set rate or
21:58
Speaker 3: does that change based on industry or performance or something
22:02
Speaker 3: like that. Interest payments? How often are you getting paid?
22:05
Speaker 3: Do you have to wait until the bond matures i e.
22:08
Speaker 3: The end of the bond, So if it's a three
22:11
Speaker 3: year bond, you have to wait three years to get
22:12
Speaker 3: paid or will you be paid throughout the year based
22:16
Speaker 3: on how much your bond is worth? Diversification Does the
22:21
Speaker 3: bond actually help diversify your investment portfolio? So this is
22:24
Speaker 3: really important here regardless of whether you are a conservative
22:29
Speaker 3: investor or a high risk investor. Diversification is the key.
22:33
Speaker 3: And you want to make sure that you don't have
22:35
Speaker 3: all your eggs in one basket and you own a
22:37
Speaker 3: number of different assets. And then how safe is the issuer?
22:41
Speaker 3: The company needs to be financially strong enough to maintain
22:44
Speaker 3: the interest payments back to you, Like if you're buying
22:46
Speaker 3: a bond, let's just be dramatic for a second. If
22:49
Speaker 3: you're buying a bond from a really dodgy company gonna
22:52
Speaker 3: pay you back. So yeah, Like, I think you just
22:54
Speaker 3: need to be thoughtful when purchasing a bond. Government bonds
22:59
Speaker 3: in Australia triple A rated, which is a really good thing,
23:03
Speaker 3: but it's also something that you know doesn't not carry risk.
23:07
Speaker 3: But Australia has never not paid back its government bonds. Yeah,
23:12
Speaker 3: so that's a pretty good track record. That's a pretty
23:14
Speaker 3: nice thing to know, especially if you are conservative. You
23:18
Speaker 3: want to know with certainty that something has happened. Whereas
23:22
Speaker 3: you look at the economic environment, let's say in Greece,
23:24
Speaker 3: which a couple of years ago that absolutely went through
23:27
Speaker 3: the fall, Like I would not be buying bonds from
23:30
Speaker 3: a government like Greece's government because there's no guarantee they
23:34
Speaker 3: even have any money. They're in lots and lots of debt.
23:38
Speaker 3: And then market value, So how will you be impacted
23:42
Speaker 3: by changes in market value? Will that increase, will that decrease?
23:46
Speaker 3: Is this the right thing for you?
23:48
Speaker 1: Before we do get to the second part of today's
23:51
Speaker 1: show and hear from some of our listeners who have
23:53
Speaker 1: a couple of questions. Let's hear a quick word from
23:56
Speaker 1: the friends who made today's show possible. Alrighty guys, now,
24:05
Speaker 1: before we do dive straight back into our fixed interest chat,
24:09
Speaker 1: please do remember that conversations like the one Vicki D
24:11
Speaker 1: and I are having it right now.
24:13
Speaker 3: You just stop calling me Vicki D. All right, you
24:15
Speaker 3: don't care, you have no respect.
24:17
Speaker 1: It's just kind of stuck. Now, it's stuck. People in
24:19
Speaker 1: the Facebook group are calling you that as Wow, I'm aware. Anyway,
24:24
Speaker 1: do join us over there if you're not there already.
24:26
Speaker 1: There's one hundred and twenty probably like one hundred and
24:28
Speaker 1: fifty zousand by the time, you know.
24:30
Speaker 3: This year wildly dramatic. Also, just to be a little
24:33
Speaker 3: bit more specific, because I'm obsessed with my own community. Yeah,
24:36
Speaker 3: it's one hundred and twenty five.
24:37
Speaker 1: One hundred and twenty five. Okay, that's not bad? Is
24:41
Speaker 1: it not bad?
24:41
Speaker 3: Good?
24:41
Speaker 1: So anyway, we're also on Instagram, TikTok, YouTube, We've got
24:45
Speaker 1: a newsletter. What else we got just everything. We've got
24:48
Speaker 1: just a dog. We got an office dog. So yeah,
24:51
Speaker 1: get involved, guys, because there is much more Tsheese on
24:54
Speaker 1: the Money than just the little old podcast.
24:56
Speaker 3: Now V.
24:57
Speaker 1: I know you told us last week that you do
24:59
Speaker 1: invest in bonds, and you told us just before as well.
25:01
Speaker 1: So can you explain why you've chosen to do that,
25:04
Speaker 1: and is this something that you actually see a lot
25:06
Speaker 1: of your client's doing. Glenn James is doing it.
25:07
Speaker 3: Glen James is doing it, and here he's doing it.
25:09
Speaker 3: It must be the right thing, right, he's the OG.
25:12
Speaker 3: It is actually just really important for you to understand
25:14
Speaker 3: what your risk profile is and if it's something that
25:16
Speaker 3: actually suits you, and bonds is something that do make
25:19
Speaker 3: up a really great part of a portfolio to help
25:22
Speaker 3: diversify it and lower the risk and all of those
25:25
Speaker 3: other things. I think people get really caught up in
25:29
Speaker 3: high return shares and it frustrates me slightly because I
25:34
Speaker 3: can see that you're excited about it, and that's really great,
25:37
Speaker 3: But the euphoria associated with you seeing an epic share return,
25:43
Speaker 3: we need to make it consistent. And that is why
25:46
Speaker 3: when people are like, oh my gosh, did you see
25:47
Speaker 3: how much Tesla has increased? I've made so much money, Like,
25:50
Speaker 3: I'm not envious because I'm very comfortable and very happy
25:55
Speaker 3: with the decision I've made for my share portfolio, which
25:58
Speaker 3: you know, over the last couple of years, I think
26:00
Speaker 3: returned about eleven percent, which I think is pretty damn good.
26:04
Speaker 3: I'm really happy with consistent returns over taking the risk
26:07
Speaker 3: of having massive returns and maybe not having it the
26:09
Speaker 3: next year. And when you start to educate yourself and
26:12
Speaker 3: understand what is right for you personally, you'll actually not
26:16
Speaker 3: feel that sense of fomo that we get when other
26:18
Speaker 3: people talk about this opportunity that they seized, because for
26:22
Speaker 3: every opportunity that someone seeses, there's also an opportunity that
26:25
Speaker 3: someone lost. Yeah, so you know, they might have invested
26:28
Speaker 3: in Tesla, but like what other things have they invested
26:31
Speaker 3: in historically that actually have failed?
26:33
Speaker 1: They're not talking about that, are they.
26:34
Speaker 3: And it's like Zoom, right, Like I wish I had
26:37
Speaker 3: invested in Zoom and toilet paper, oh my gosh, like
26:40
Speaker 3: so many things that we could have invested in, But
26:42
Speaker 3: for me, financial security was more important than doing that.
26:46
Speaker 1: Yeah.
26:46
Speaker 3: Please, don't get me wrong. I have said that I
26:48
Speaker 3: do sometimes like to take a little bit of a punt,
26:51
Speaker 3: but when I do purchase a share that is not
26:55
Speaker 3: within my share portfolio, I'm not purchasing it in the portfolio,
27:00
Speaker 3: not risking that I'm not changing that. It's actually just
27:03
Speaker 3: an amount of money that I will put on something
27:05
Speaker 3: because I genuinely believe in that business and I genuinely
27:08
Speaker 3: think it is going to over the long term, succeed.
27:11
Speaker 3: So I'm not talking about short term stuff here.
27:14
Speaker 1: I'm talking about long term.
27:15
Speaker 3: And the reason I do that is because I would
27:17
Speaker 3: argue that I'm very well educated in this space, and
27:20
Speaker 3: I'm surrounded by people who are also very well educated
27:24
Speaker 3: in this space. It is definitely not something for everybody.
27:27
Speaker 1: As a financial advisor. Are you checking the AX every day?
27:31
Speaker 3: Yeah? Absolutely, the first thing I look at.
27:33
Speaker 1: But we don't let it impact your emotions if you're like, ah,
27:36
Speaker 1: that's not performing that well because you're in it for
27:38
Speaker 1: like ten years.
27:39
Speaker 3: No, No, absolutely not, And I think it's important to
27:42
Speaker 3: understand that as a financial advisor, I have clients that
27:47
Speaker 3: I want to make sure I'm always on top of things.
27:49
Speaker 3: So right now we're recording, it's eight fifty seven am,
27:52
Speaker 3: Georgia King and the ASEX is actually closed, so the
27:55
Speaker 3: market is only open from ten to.
27:57
Speaker 1: Four every day.
27:58
Speaker 3: Betched in know that did not know that in Australia
28:01
Speaker 3: that's the only time you can officially train each good hours.
28:04
Speaker 1: Everyone should operate by those hours.
28:05
Speaker 3: I'm not going to change the shase on the many
28:07
Speaker 3: hours your job.
28:08
Speaker 1: Good try. Okay, very good answer there. Let's move on
28:12
Speaker 1: to a couple of questions from our community. First one
28:15
Speaker 1: here is from m loved this one. How do you
28:18
Speaker 1: keep track of all of your investments feed when you
28:21
Speaker 1: have a micro trading platform here, a few shares there, etcetera, etcetera.
28:25
Speaker 1: I'd love to know suggestions on how to keep it
28:27
Speaker 1: all straight. I feel like there is no better person
28:29
Speaker 1: to ask this question too.
28:30
Speaker 3: So yeah, literally, So this is really tricky because when
28:35
Speaker 3: you are micro trading or micro investing, you're choosing their platform,
28:41
Speaker 3: and if you have a number of different platforms, like,
28:43
Speaker 3: there's no actual real way to bring them all together
28:46
Speaker 3: because they are their own entities. So for me, I've
28:49
Speaker 3: got a spreadsheet, so I understand what's everywhere. But at
28:53
Speaker 3: the same time, that's where it does get really messy.
28:55
Speaker 3: So personally, if you looked at my stuff, you'd be like, Victoria,
28:59
Speaker 3: you're a shamble. Because I do have race, I do
29:01
Speaker 3: have Spaceship, I do play with those things. I have
29:03
Speaker 3: a number of other investment apps that I've been playing
29:06
Speaker 3: around with and trying, and I've got fifty dollars here
29:08
Speaker 3: or one hundred dollars there, because I want to know
29:11
Speaker 3: what is going on in our community, and if you
29:13
Speaker 3: guys recommend something, it's very likely that I'll go and
29:15
Speaker 3: you know, give it a crack, just so that I
29:17
Speaker 3: can understand their portfolio, is their investment methodologies, their fees
29:21
Speaker 3: and charges, and actually get a feel for the platform.
29:23
Speaker 3: Because while I never make recommendations for personally specific products,
29:28
Speaker 3: I think it's important that you guys get a real
29:30
Speaker 3: opinion from me, not just like, oh yeah, I read
29:32
Speaker 3: the website and like that's just not good enough, because
29:35
Speaker 3: you guys do genuinely look to me, and I'm so
29:37
Speaker 3: grateful for it, but you look to me for guidance
29:39
Speaker 3: on these things. And if I say I don't know,
29:41
Speaker 3: it's genuinely because I actually don't feel educated enough to
29:45
Speaker 3: have an opinion on that topic. And I think that
29:47
Speaker 3: that's really important for me to point out. I'm not
29:49
Speaker 3: going to joke about it or just make it up
29:52
Speaker 3: because I think it makes me sound smart, like I'll
29:54
Speaker 3: just be like, I don't know, I've never used that.
29:56
Speaker 3: Let me get back to you. So for me, it
29:59
Speaker 3: is the very hard to keep track of all of
30:01
Speaker 3: your different portfolios if you're using different platforms. For me personally,
30:06
Speaker 3: my main investment is on one platform and I just
30:09
Speaker 3: transact there, so I would say that a majority of
30:13
Speaker 3: my wealth is sitting there, whereas these micro investment platforms
30:16
Speaker 3: for me are playing around with investment, and that's why
30:19
Speaker 3: it looks like a bit of a shamble. But as
30:22
Speaker 3: your investment grows and you graduate off microinvesting platforms, it's
30:26
Speaker 3: very likely that you'll choose just one share trading platform,
30:29
Speaker 3: whether that is through your financial advisor or you choose
30:32
Speaker 3: it personally and invest individually. It will look a lot clearer,
30:37
Speaker 3: so I would recommend doing that. But you can hold
30:39
Speaker 3: your bonds, You can hold your assets on the share
30:41
Speaker 3: platform that I've got, which is only accessible through financial advisers,
30:44
Speaker 3: so I to apologize. On that platform, I'm actually able
30:47
Speaker 3: to add other assets, so it won't track it properly
30:50
Speaker 3: in real time, but I can just add at the bottom, like, oh,
30:53
Speaker 3: I have my raised portfolio and it's got two hundred
30:55
Speaker 3: dollars in it, so I put it down the bottom
30:57
Speaker 3: so that when I look at my quote net worth
30:59
Speaker 3: the kind of puts it all together, which is handy,
31:02
Speaker 3: and some other platforms have that feature, so it won't
31:05
Speaker 3: keep track of it in real time because they don't
31:07
Speaker 3: have access to the data. But if you've got savings,
31:11
Speaker 3: you can put the savings there because that's part of
31:13
Speaker 3: your net wealth.
31:14
Speaker 1: Okay, very good. Hopefully that helped you out there. M
31:17
Speaker 1: next question here is from jocev So, how do you
31:20
Speaker 1: identify a good investment bond and what is reasonable to
31:24
Speaker 1: expect for fees and returns?
31:26
Speaker 3: So for me, that is so hard to answer because
31:30
Speaker 3: everyone is different and every bond is going to carry
31:33
Speaker 3: a different level of risk, It's going to carry a
31:35
Speaker 3: different fee structure. I think you just need to look
31:39
Speaker 3: into it. At the end of the day, some have
31:41
Speaker 3: higher fees because they have higher returns or they're a
31:43
Speaker 3: little bit more safe. But yeah, I can't I can't
31:46
Speaker 3: give an actual accurate answer, and I know that that's
31:49
Speaker 3: so frustrating, But it would just be about googling what
31:52
Speaker 3: a bond is, how it works, what bond works for you,
31:55
Speaker 3: and actually looking into it and weighing up whether that
31:58
Speaker 3: benefit works. That does get really overwhelming for some people
32:02
Speaker 3: when they start to look into fees for investments, whether
32:06
Speaker 3: that is atfs or bonds, they feel overwhelmed because they're like, oh,
32:11
Speaker 3: my gosh, I didn't realize fees come out of here, here,
32:13
Speaker 3: and here. You really need to calculate that, because sometimes
32:17
Speaker 3: they'll say, oh, there's a performance fee or oh there's
32:19
Speaker 3: a adminal management fee, and you're like, wow, there's so
32:22
Speaker 3: many fees. But a lot of the time when you
32:25
Speaker 3: work it out, it actually becomes really reasonable.
32:28
Speaker 1: Okay, well said, And okay, So to finish off here,
32:32
Speaker 1: if the listeners had to take away just one thing
32:35
Speaker 1: from today's episode, what would it be.
32:37
Speaker 3: Vickid take us away obviously that a bond is a
32:42
Speaker 3: very sexy way of investing as well, my friends, and
32:45
Speaker 3: that it is something that you should take into consideration
32:48
Speaker 3: when thinking about your future wealth, and it is something
32:50
Speaker 3: that can actually really help you create a well diversified
32:53
Speaker 3: investment portfolio. And if shares aren't, you think they might
32:57
Speaker 3: be a really great option that sits between having a
33:00
Speaker 3: savings account and having shares. You feel like, I'm not
33:03
Speaker 3: sure what I want to do. Some people feel like
33:06
Speaker 3: they are safer, and I think that they could be
33:07
Speaker 3: something that you could look into also IPO Initial Public Offering.
33:11
Speaker 1: Not UFO. Alright, I think it is time to wrap
33:15
Speaker 1: it up here, VICKI.
33:15
Speaker 3: D Just before we head off, we'd like to acknowledge
33:18
Speaker 3: and pay respects to Australia's Aboriginal and Torres Strait islander peoples,
33:22
Speaker 3: the traditional custodians of the lands, the waterways and the
33:24
Speaker 3: skies all across Australia. We thank you for sharing and
33:27
Speaker 3: for caring on the land which we are all able
33:30
Speaker 3: to learn. We pay respects to elders past and present,
33:33
Speaker 3: and we share our friendship and our kindness.
33:36
Speaker 1: And now for the boring stuff that you can all
33:38
Speaker 1: tune out for the advice shared on she is on
33:41
Speaker 1: the Money is general in nature and does not consider
33:43
Speaker 1: your individual circumstances. She's on the Money exists purely for
33:47
Speaker 1: educational purposes and should not be relied upon to make
33:50
Speaker 1: an investment or a financial decision. And we promise Victoria
33:53
Speaker 1: Divine is an authorized representative of Australia Pacific Funds Management,
33:57
Speaker 1: but prior Toly Limited ABN three four one three two
34:00
Speaker 1: four six three two five seven AFS L three three
34:03
Speaker 1: nine one five one, and a big thank you to
34:05
Speaker 1: Ryan and Beck our producers and to the gorgeous Jessica Richie.
34:10
Speaker 1: I think that's where we got to last week for
34:12
Speaker 1: putting it. Also shad shout out.
34:14
Speaker 3: To Lucy the sheer Doodle, who has slept under the
34:18
Speaker 3: desk for a majority of this episode recording.
34:21
Speaker 1: But if you do hear a couple of nibbles, a
34:22
Speaker 1: couple of woof woofs that it wasn't it wasn't Georgia,
34:27
Speaker 1: it was loose. Where else can you find us, as
34:29
Speaker 1: we said before, Facebook, Group, Instagram, literally everywhere.
34:34
Speaker 3: Just Google us friends.
34:36
Speaker 1: Yeah we're on there.
34:37
Speaker 3: Yeah, we're on Google.
34:39
Speaker 4: See you next week, guys.
35:00
Speaker 1: Assass