welcome to the September, um, webinar for my 2024 money webinar series. Uh, this month's topic is. It's actually interesting. I set these topics up at the beginning of the year when I planned everything out. But it seems particularly relevant to talk about investing now. Partly, it's spring, so we start to kind of think of it differently, but also with the way things are, investing is becoming even more important.
And I've been having a lot of conversations with people around investing, and it's still not something that we teach, and it's difficult, uh, to find out the specifics about how to do it, um, and what it entails. So today's topic is investing basics for wealth creation. Because ultimately, that's what we're investing for, is to build wealth, and wealth will then lead us to the lifestyle that we want.
Um, I will, because it's the nature of how I do things. I will be doing a little bit of the mindset side as well, and a little bit of lifestyle clarity, because it's really important to be clear on what you want. So I will launch in to a little bit of an intro.
I can get this. Okay, so my name is Alpha. That is actually my name. I do get asked that, especially working in the money space and being female. My mum had an epiphany, uh, when she was pregnant with me, and that is my name. Um, so I work predominantly with women in business to help them understand their mindset, improve it, and then manage it going forward, and then help with the next step, which is actually managing money.
Um, I started out as a corporate tax accountant, ah, many years ago, and while I really enjoyed working with the clients, tax is pretty dry. M but when I started then on my own personal financial journey, I was amazed at how much I didn't actually know about personal finances, investing, all of the things that go with that.
So I then went on and studied financial planning because I had a financial planner that turned out to really just be a salesperson. And I also realized on that journey, too, that I wanted to understand what was going on. I didn't want to just outsource this to someone else.
So that's very much what I focus on, is sharing the information and a certain degree of education so that you can be empowered to go off and do this on your own. So this was me as a little grad when I started out at KPMG, one of the accounting.
They're still around, actually one of the, um, bigger accounting firms. And this is me about two years ago. With my little girl. Um, we took a trip to Uluru. It was something I've always wanted to do. Um, and we took a helicopter ride. And it really. I felt the magnitude on that trip that I was able to be able to do something like that.
My daughter has, hopefully one day she appreciates the life that she has and the things that she's done and the places that she's been, but it, um. And that's part of the journey of parents as well. Um, but that's where. Where I've sort of come from is this very insecure.
I'm, um, not a big risk taker when it comes to money, so I felt very nervous about first gain. Getting into investing, and my dad was trying to push me down the property investment path, but I'll get more into my story as we go as well. So what we're going to cover today is the impact of money mindset on why we do or don't invest.
So quite often there's a certain degree of fear there. Sometimes it's because we just lack the knowledge. Um, but sometimes there's also something else holding us back. So it's important to delve into that a little bit to understand what that is, because otherwise we're just going to find barriers and there'll be a certain degree of self sabotage, as the, uh, terminology goes, that goes on along the way.
So we need to delve into that a bit to understand what's going on. Then we'll look at what actually is investing and how do you actually invest? This is something that I. Yeah. And it's, it's really not complex once you figure out what is right for you. And I'll go through the different options today, um, it really, it, to be honest, actually becomes quite.
The mechanics of it become really boring, the result become exciting. So that's what we'll touch on today. And then what's the impact of investing, and how do you make sure that you're doing the right things? That's often, um, I get that a lot from the women that I work with is, well, how do I know I'm making the right decision?
What if it doesn't work? What if I lose money? All these scenarios that kind of go on in our brain, um, which leads me to this. I don't know if any of you have children or younger children, if you do. Um, but there's a Pixar movie called Inside out, and they brought out a sequel to that during the previous school holidays.
And I took my daughter to go see it. And I have to admit, I'm watching this movie just going, this is really exciting. There's all these different emotions, and we've got joy, we've got sadness, we've got disgust, we've got fear. And what came out, inside out, too, was as we grow as humans and we go through puberty, we end up with things like anxiety.
Um, and I see this happening a lot when it comes to money, is a certain level of anxiety. And that so many scenarios of everything that could go wrong. So we don't do anything just in case, but our belief systems are built up around that as well. So it's, how do we reframe this to make sure that our belief systems are supporting us so that our anxiety doesn't take over and so that we can live together.
So if you know the characters, this one is joy, the one with the blue hair and the orange one is anxiety. So we're trying to get them to work together because we're never going to get rid of one or the other. And each of them has their place. It's what can we do to make sure that we're actually moving forwards and not holding ourselves back because we're scared?
Just move picture down there. All right, so this is. I'll go through, um, the mindset part relatively quickly because, um, I want to get to the content and also then allow you to ask questions. So I have what I call the formation cycle, which is where we have our identity, our sense of self, who we believe we are as a person.
Whether we believe we are, um, an introvert or extrovert, there's terminology around that too. But whether we think that we are shy or we take risks, even I've started to talk about that in that languaging as well. There's so many things that we take on as, uh. As humans, especially during our childhood, and because a lot of our sense of self is still very fluid, we take on what other people have said to us.
Now, I had some very fear mongering family members growing up, so, um, my family are all from overseas, so I'm first generation here in Australia, and my mum and my grandma are from m Austria. My grandmother was born in 1920. So very tumultuous. Just at the end of World War one, and lived through World War two, tail end of world War two, living in Vienna.
Um, my mother was born, and then, so there was a whole lot of turmoil, you know, money, scarcity, all of that kind of stuff. My father was born in, um, Bitola in Macedonia, and has a lot of, you know, he was the youngest of five. His father left when he was quite young, so it was his single mom raising five kids in a one bedroom apartment.
So he also has all scarcity stuff and very. That classic kind of fomo, oh, we have to do this and we have to do that, otherwise you miss out. Um, but don't take too many risks at the same time. So it was a lot of stuff going on, so trying to figure all that out.
And it was only when I started to become aware of this, as I was on my personal development journey, alongside my financial journey, that a lot of this started to come out, and I became aware and clear about where some of my decisions were coming from and my lack of action in some cases.
Um, so from that sense of identity and that sense of self, we then also have our belief system. Like I was saying, every. Every bit of experience, things that we witness, and, uh, a lot of it isn't even necessarily stuff that we personally experience. We can watch it, we can see other people, what they do, how things have worked or not worked for them, and we're not aware of the fact that they've also got their own money stories.
So there's so many layers of complexity that go into this that if we, uh, are not aware, if it's all unconscious, then so much is happening to us that we tend to just let somebody else in. We tend to blame ourselves, you know, and we look for things that are wrong with us, and we have a negativity bias.
I could go down so many rabbit holes on that, but I won't. I'll stay on path. So then we look at our behaviors, so our identity impacts what we believe about ourselves, and that then impacts the things we do, which is our behaviors. And then the things that we do and think repeatedly become our habits.
So habits is another whole big thing as well. And so for the person who just joined, I'm just going through a little bit of mindset first before I get into the actual mechanics of investing, because it's important to understand where we're coming from. And then those repeated habits then reinforce our identity and we get that whole, uh.
Yep, see, I knew it. That always happens to me. If you notice these sorts of thoughts happening to yourself, and we all do it. I catch myself with it as well. Sometimes it's words I say out loud, other times it's something I think. And I'm like, oh, hang on a minute, I just did it.
I need to catch myself, become aware of that thought and go, why did that come up? And we get over it a lot faster once we become aware of it. And you can go a little bit too deep sometimes with some of this. We just need to still get along, get on with it.
But awareness is key, so I'll just keep us moving. Where you're headed is also really important, particularly with investing and money in general. I find it's very. It's very interesting when I. When I work with people and we sort of figure out, well, what is it that you actually even want money for?
And if you're interested, I have a replay on what I did, a webinar on that just towards the beginning of the year, if you're interested in that one. But it's like, why? How much do you need? Quite often, we don't even know what we're aiming for, so it feels really overwhelming because we're not clear on what it is and the type of lifestyle we want.
If you sit down and actually think about it, feel it, I make it very sensory. Um, what do you want? Do you want the big mansion on the river with the yacht and, you know, the fancy car and access to a private, like, do you want that kind of world, or do you want a plot of land with a tiny home on it and something really, really simple that's off grid?
I've given two completely extreme examples there, but kind of get what I mean. Do you need a really big house? Um, do you have a big family? Do you want to downsize and have less to clean or less to take care of? Do you want to cleaner? Do you want a housekeeper?
These sorts of things. So it really does impact the sort of life that you want now and then. What do you want to do in retirement? Do you want to have a caravan and, you know, drive around, you know, either Australia or overseas somewhere? Do you want to go on cruises?
That was my dad's dream. He just loved it. He just loved cruising. Um, and that was more expensive than he anticipated. But if he kind of planned for that ahead of time, it would have made it a little bit easier to budget for and maybe he could have done more of it.
Um, so it's really, really important to have that kind of view, and it doesn't have to be absolutely 100% crystal clear, and it can change, but having that as a guide makes it a lot easier to be able to plan for your future and then invest until you know how much you need.
And that also impacts the type of risk that you take as well. So your retirement number, this is one, because, again, how do we know how much we will need? There are indicative numbers out there that, um, the government agencies do produce. Um, and they change, um, usually every year because.
Because inflation happens. And it depends whether you're a single or a couple as to how much you're going to need. But that's very much like the base level. If you start to think about what you want to do in retirement, maybe you want a big overseas trip every couple of years.
You need to factor that in. Do you want to just, you know, live comfortably and you're happy, you know, in your local area? That's fine, too. Do you love camping? In which case your holidays will be cheaper? Um, I know my mum, about two years into retirement, went on a big, like, railway tour thing around Europe and, um, it was something she'd always dreamed of doing and she'd sort of lived very frugally for the first few years of her retirement, so she could afford to do that.
Um, but she didn't have the benefit. My mother's eighties, so she didn't have the benefit of any kind of superannuation or retirement fund, really. So she had to then, like, save her what she did have in order to fund that. But the things to think about when you're looking at your retirement is how old are you now?
Um, what age do you want to be when you retiree? Do you want to be part of the fire generation, which is the financial independent, retire early? Um, or do you, are you, do you love what you do and you're happy to keep on working, maybe full time until you're 60, and then part time here and there after that, it really depends.
And then how much you think you're going to need. So what sort of lifestyle you want, um, what you have in your super or your retirement fund now, uh, and then how much you're contributing to that every year. And there are some calculators out there. If you're in Australia, the money Smart website, it's australian government website is actually really great for calculators.
So it's just moneysmart dot gov dot au dot. Um, so I find some pretty good ones on there. So that'll give you a bit of a trajectory as to where you're heading. Based on what you have now and what you've been putting in. It'll look at your investment returns as well.
That one's hard to predict because they go up and down. Um, the fees, that's a really big one with whatever funds that you're in is to make sure that you're aware of what the fees are. Um, because light has been shone on this a lot more in the last few years.
They're all becoming a bit more competitive, but it's still important to know, and it's also important to know that's not just the fund that you're in, but the product that you have within the fund, because some funds, they all are supposed to have something that's comparable in Australia anyway.
But then other funds will have products that are more actively managed in terms of the investments, so they cost more because there's a human managing them. If they're more indexed, which we'll talk about, um, a little bit later, then they're a bit cheaper to run. So it's important to be aware of what fees you're paying because that eats away at your returns.
So knowing where you're heading, it's having that clarity of direction, which is really important. Financial resilience is part of where the investing. So there's a number of different pillars to this, but the one we're going to talk about and focus on today is the investing side. But you need to understand or align your values with it.
Um, the income that you have now and the income that you want from your investments, how your spending is supporting your investing, and then are you able to save to then invest as well? Because it's important to have savings and investments as well. Um, I have a visual which puts some of this together, and then legacy.
These are things like your estates. Do you want to be able to hand things over to your children, um, or to somebody else when you die or when, um. Um. What's his name? Warren Buffett. He's a big investor. I don't even want to hazard a guess as to what he's worth, but he lives in the same house he's been in for about 30 years, and he's planning on giving everything to charity when he goes.
He's like, my kids. They can take care of themselves. So that's his plan. That's not the same for everybody. Obviously, it has to suit what you want, but you need to be, uh, at least aware of it and think about it and plan for it. So this is where I'm just going to move this out of the way so you can see that better.
The concept of what I call wealth in motion. So, the left hand side here is generally how we're all kind of taught by osmosis. So it's the, uh. It's sort of the thing that we make, which is very linear. Um, the reason I kind of got a curve there is because I can't fit it on the.
On the screen, but we still. Start. We grow up, we get a job. We kind of dabble in things here and there with money. We might invest a little bit, or try to, but ultimately we save. We save for a home. We buy our home. We then pay off the debt that goes with that home.
We may have bought an investment property in there or not, but there's still debt to pay off. But we're waiting until we've done all of that before we start investing. Then we retire. And that's kind of it. That is nothing going to actually help you build wealth if you're literally just doing one thing in sequence after the other.
You have to do things in together. So looking at your money as a system, looking at saving how much you earn, um, paying off debt at the same time, then managing your money, so you're saving it for different things. Like, for instance, if you need to buy a car, putting money aside for that school fees.
If you're paying school fees, put money aside for that. Holidays, very important to put money aside for holidays. Life needs holidays. We need fun. So making sure you put money aside for those so you don't feel guilty about taking them. And then you could take bigger ones if you want, and then investing.
So all of this. So your money system, however you're managing your money, needs to take all of this into account so that you're doing everything all at once. And that doesn't mean that things get sacrificed here and there. But when you're very focused and purposeful with your money, it's amazing how much further it can stretch.
I remember as just a little segway story. I'm an ex accountant, so I don't like, um, borrowing to buy a car. It's a depreciating asset. Um, and so I bought a little Toyota Corolla. It was two years old, and this was when I was relatively new into the workforce.
And I had that car for 20 years, I knew about. So it was 22 years until by the time I had to let it go, um, but I knew about two years beforehand that it was starting to. Starting to. It was on its way out. It was starting to cost a little bit too much to fix.
So I started saving money. You know, I put money aside every month to. And I had, I had the end goal of what I wanted to save within two years. And then I had to put a certain amount a month, every away every month. And sometimes some months were more or less depending on my, um, earnings, because business owners, our, uh, income fluctuates.
Um, but by the time I got to those two years. And it's really, it's amazing how this happened. It was probably september. I got to that goal in December. The car, like, completely died. It's like it was, it knew. Oh, you, you know, you had this money, you had this plan.
I'm. I can die peacefully. I don't know. That sounds weird because it's a machine. Um, but then, yeah, so I had to go get another car. I got another Corolla, a two year old, uh, which hopefully we'll see how this goes. The plan is that it'll last 20 years as well.
Um, but after that, the money that I'd been saving for that car, which I no longer needed anymore because I had the cardinal, it just disappeared. I was amazed at how quickly that happened. I was like, I even teach this stuff, and this is. Oh, my gosh. So I had to rein it back in and took me a good few months before I realized what was happening.
So that's why I'm very, very passionate about making sure you give every dollar a purpose. Because if you don't, it's amazing how it just fizzles away. So. All right, I'm going to keep it up. Uh, sorry, I'm going back a bit. So now we talk about what investing actually is.
So investing is essentially the process of buying an asset that increases in value. So this is why I call, like a car is not really an asset because it decreases in value. But an asset is something that increases in value over time and that can provide you with a return.
So that return can either be regular income payments. So if it's like a rental return or dividends, we'll get into that a bit as well. Um, or what they call capital gains. So capital gains is where the actual underlying value of the asset has increased. So say, for example, you buy a house, and that house was $500,000 when you bought it.
It increases over time and becomes 750,000. That's the capital, the actual asset itself, the underlying value of that asset has increased. So that's the capital gain and then the returns that you get from it, which is why, depending on who you talk to, your home is actually not really classed as an asset per se because it's not generating income for you.
It can, however, provide a capital gain, but that's only when you sell it. So it's an interesting, um, discussion that one different money people will have different views on that. When I work with my clients and we look at the concept of net worth and you look at your assets as part of that, and we'll get into that a little bit later as well, I actually do both.
I calculate your net worth with and without your home, because if you want to stay in your home, you still need another way to earn money. And so this is where the different types of investing comes in, which is what we'll do next. There we go. So different ways to invest.
There's quite a few, which I think is what often holds a lot of us back is like, there's so much choice. It's a little bit like going to the milk aisle in the supermarket and just going. I remember the very first time I, um, traveled to New York, and it was November, so it was cold.
And we didn't have Starbucks in Australia at that point, which is, you know, an indication of how long ago this was. And I walked in and I was just, I was freezing. I'd been walking around all day and I'd heard of this Starbucks place, and I like hot chocolate.
So I walked in and I was like, can I have a hot chocolate, please? And because I looked at the menu and it was just, there's so many choices to make. And the guy's like, well, do you want half? Uh, foam, whatever. And I was just hot chocolate, just however it comes.
So, um, but that was because I really wanted the hot chocolate. Quite often we'll just sit back and go, I don't know what to do, so I just don't do anything. So hopefully this will start to demystify that a little bit. So just in terms of, like, the options, you have a retirement fund.
So in Australia we call that superannuation. If you're in the US, that's a 401k. Different countries have different retirement funds. That means you're already an investor because that money is invested in shares and stocks and things. So it's. You're an investor already in that regard. However, you don't want to just rely on that.
So this is where it's important to know what else is available to you. You can also invest in property, and there's two different sort of streams of that. There's your commercial property, so businesses, and then all the land that businesses are on, and then there's resources. Residential. Residential. You usually buy the building and the land.
When it comes to commercial, you can sometimes just buy the land, but it's also a lot more expensive to get into commercial real estate. Um, property itself is. Yeah, the value to sort of ratio of earnings and all of that these days has changed quite a lot. Unfortunately, property prices have gone up dramatically over m the last ten years.
And, um, the, uh, Covid era seems to have really escalated that as well. So property is available, but it's, um, um, not as affordable as some of the other elements of, of all options of investing. You've got shares in companies also known as stocks. Stocks, shares. It's the same thing.
Um, um, again, where the jargon kind of comes in, it just, it becomes a bit mind boggling. So we have, we can buy an element of a company and, uh, because of that, you become a shareholder. And companies, when they produce a profit, they will share that profit with their shareholders, and that comes out in the form of dividends, and that's the income component.
You can reinvest those dividends or you can actually take them as income. And that depends on what you actually want it for. Do you want the income? What age are you, etcetera. But that's what a share in a company is. But you then have to choose the companies that you want to invest in.
Which, again, I went down the path of, uh, looking at share investing, and there were candlestick charts and technical analysis and all of this stuff. And I have to. I went down this rabbit hole for a bit and I found it so overwhelming, I thought, I don't really want to do.
So I went down the next path, which is what they call the bundles of assets. So you have managed funds, which are. And then ETF's, I'll talk about. So ETF's are exchange traded funds. So they're basically the managed funds that get carved up into little bits. And then you can, they trade those little bits like their shares on a share market or a stock exchange.
So that's. And they can be, you know, you can be, um, a property ETF. So this is another way. You could still invest in property, but you're buying a portion of the property and you're paying just a slice of, um, a pooled investment, so to speak. You can buy into infrastructure, you can get access to assets that you generally would not be able to get access to through an ETF or a managed fund.
Um, you can even get like the whole bundle of what they call an index. So if you've heard of things like the Australian Stock Exchange or the Nasdaq or the FTSE. Those are indices, and you can buy a bit of. Or everything that's in there. And those ones are very passive.
You can also, um, get access to companies, again, that you wouldn't be able to afford normally. Like, you could buy Apple, you can buy into Microsoft. And individually, those companies are very expensive if you bought a share in that company, but you can get access to them through an ETF.
So the bundles and the managed funds, they're being used less and less. They usually have a higher buy in rate. So I think the lowest I've ever seen is like, $2,000 to buy into the managed funds. And you're buying units, and they kind of. They kind of operate a little bit like a trust.
Um, but ETF's are becoming a lot more popular. Because they're a lot more liquid too. You can buy and sell them on a stock exchange very easily. Um, and you don't actually need to go through another party to do it. You can just go direct to a stock exchange, sorry, to, um, a brokerage to do that.
And I'll give you some tips on that a bit later as well. So that's where it's actually really handy now to like ETF's makes investing so much easier, and they're a lot lower cost entry point. If you want to buy a complete ETf yourself, you can, I think, well, it's $50 upwards, perhaps, to buy one.
So the barrier to entry, or the cost to entry there, is dramatically reduced. Then you can also invest in foreign exchange or forex trading. They call this, um, so if you want to. And this, this. If you were going to go down this path, I would highly recommend you get very educated by somebody who knows what they're doing.
Because when I started to look at this, it's, it's very much, to me, it felt like gambling, um, but then my risk profile is quite somewhat high. I have a low tolerance for risk, um, where you're trying to anticipate the direction that a company's, um, currency, um, is going to go.
So if you think that the australian dollar is going to appreciate, um, you can bet on that, essentially, or if you think another country's currency is going to depreciate or reduce in value, you can kind of bet on that in a way. So, yeah, that one's very particular. So if, um, you're interested in that, then I'm not the person to help you with it.
Um, but there are people out there who do help with education in that space. Then come the digital assets, and I use the word asset very loosely. Um, they're actually not considered an official asset class by the australian stock exchange. Um, but they're things like your cryptocurrencies, your bitcoins, um, erythrium, all of those sorts of things.
Then you've got nfts, which are non fungible tokens, which I still struggle to understand. These you can buy a pixel in a piece of artwork and it's worth hundreds of thousands of dollars. I don't really understand how that works, to be honest. And crypto and nfts are very much based on what someone sees as a value.
They don't have underlying, um, assets or value in themselves. So they're not a company that's making anything or doing anything or providing any service. They're just in and of themselves. So if somebody else sees that that has value and you see it as value, then great, you can exchange it.
But if no one else sees it has value, it's the same as standing on the side of the road, um, and selling old cheats. If nobody else sees that they have value, they're not going to buy them. Um, cryptocurrencies are obviously not all sheets. And there's a lot of countries, there's a few countries out there that are actually starting to look at making them legal tender.
Um, and maybe that will increase over time, but right now they're still very volatile. And then you've got other assets as well. These are more things that are going to provide potential capital growth rather than income. So you can buy gold, um, you can buy silver, you can, um, buy art and antiquities, gemstones, jewelry, coins, stamps.
My, my grandfather was a philatelist, so he used to collect stamps and they were actually quite valuable and, but he used to do, he was very strategic in how he did it. But that's, that's a, um, that's probably a bit of a dying up by now, I suppose. I haven't heard much about it recently, but they're, they're still an asset as well, so they're the different ways.
Like I said, risk profile is really important to, to consider. Um, there are surveys that you can take, but you're going to have a sense of this yourself. So you look at your personality, how you are with other areas of life, um, the age, the lower your age, the more risk that you can take because you've got time to ride things out, like the ups and downs in markets, how you tolerate or react to market changes.
So I, um, was at an expo once and I had this lady come up to me and she was just like, almost like shaking with panic. And she's like, oh, um, my, um, retirement fund, it's going down, it goes up, it keeps going down. And I said to her, I said, well, um, do you need much of that money right now?
And she's like, well, no, I'm getting my pension and I've got the income that I need to live on right now. And I said, well, how often are you looking at your balance? She's like, oh, every day. So I said, well, my suggestion is stop looking unless you need it right now.
Then being in something that's going to be really volatile is probably not for you. Um, so consider that, like anytime if you've got a little bit of money in the stock market and the market crashes, do you panic? Um, I've seen people who do, and some people have lost a lot of money because they've sold.
When things are down, because they're panicking that they might miss the bottom, it's like, well, if you don't need it, hang on to it and I will show you a chart shortly that, um, explains this exactly very well. So that's one thing then. The length of time you have a lot of investing requires a minimum of seven years because seven year swings, that's generally if there's going to be an up or a down cycle, it, you know, obviously can't predict the future.
But historically we've seen a lot of these swings take about seven years to recover. So if you happen to buy at the bottom of something, which is always a good thing because it means it's cheaper, it's like, you know, things go on sale. So at my stage of life now, whenever I see some of the ETF's that I invest in and there's a, uh, there's a market crash, I'm like, oh great.
I always have some cash sitting there because I'm like, I'm going to buy them now because they're cheaper. So I actually get excited when things go down. Obviously my balances will go down too, but I can also buy more. So it's only going to be more of an issue for me when I get closer to retirement, in which case I will have changed my portfolio, which I'll talk about as well.
So how complex. So complexity of your investments also forms part of this. So if you don't understand it, I wouldn't do it. I was getting into, I was looking to get into some property development, uh, about probably twelve years ago. And it just got to the point where it was so complicated.
And I had my lawyer and he looked at it and he's like, he actually cautioned me against the person that I was working with as well. Um, but it was just getting too much. And I was like, no, before this goes too far, I need to pull the pen because it's just too complex and there was too much risk involved as well.
Liquidity is another one. Liquidity means how quickly you can turn that asset into cash. So obviously cash in a bank account, cash in your home obviously is the most liquid because you can literally go and access it straight away if it's in your wallet. Bank, um, is another one.
Generally you can go to an ATM and get your cash out. Although this day and age there's less and less ATM's around and less and less places that take cash. Or, and then if you're going to sell, for example, for example, a share, you can sell a share and the money's in your bank account generally within about three business days.
Uh, uh, if you're going to sell a house. Back in the old days, I remember when I was growing up, it was like minimum, like 90 days was the settlement period. And it would take a good six to twelve months to even sell a property, see someone else wanting to win.
Um, um, so it was actually really an interesting process. So it's a lot more liquid now, but it's still not like if you needed money in the next two weeks, property is not going to be liquid enough for you for that. So that's, that's how to consider your risk profile.
So how to get, how to look at your returns. This is, and this is um, how to see the value or the impact that compounding. Um, and so compounding means money growing on money over time. Um, it can work in reverse when it comes to paying interest, but when you're earning returns, this is when it really starts to kick in in a positive way.
So just as an example, if you're putting aside a hundred, or you're investing $100 every month, every month over ten years, and we're going to assume an 8% per annum return, which is pretty realistic, depends, um, on obviously swings can go downwards as well, and they can also go upwards.
I've seen some funds making like 25%. So 8% is just sort of like a bit of a median, um, rate there, just for illustrative purposes. So after that you have nothing to start with. So there's no deposit at all. You've put in $12,000 because that's how much you would do if it was $10 a month.
Over ten years, this is interest. But the return you've made is 6000, almost 300. So you'd have about $18,000, which you wouldn't have had if you'd done nothing. Then if you actually start looking at increasing that and then how time starts to really play out. So this is only, this is dollar, 200 a month.
So it's doubling the amount you're investing. Same amount of return, and this time it's 15 years. Look how much that's gone up. It's now nearly $70,000. So it's really, really important to, so when we sit back and we think and we contemplate, when it comes to investing, you really need to just get started.
Um, and there are smaller ways to do that. We'll look at micro investing because that's another interesting one as well. But looking at ETF's, for example, or looking at some way, if you've only got a small amount of money, even just saving the money, um, you won't get the 8% return right now, but it'll be, depending on where you are, you'll probably get around 5%.
Um, just at least putting that away. But again, give it a purpose, because like I said, it will disappear if it doesn't. So this is a really good chart. Um, vanguard do this every year. They literally just. Released their 2024 one, which shows how things have performed over time.
So I don't know if you can see what these are here, but we've got CPI, which is the red line, that's consumer price index, that's essentially inflation or the value of money over time. So this is, it takes in 30 years. So if we look back at 1994 over time, money is down here.
Then we look at cash. So um, money that like for instance, you can earn in a term deposit or debentures or something like that, that's still higher than CPI, which is good. So even that will give you a little bit more. But then when you start to get into this is very australian oriented.
So it looks at the australian bond market, listed property, which is where you can buy property without having to spend hundreds of thousands of dollars and getting into debt to buy a single asset, a single property. So buying an element of listed property, um, is doing pretty well. But when you look at um, the better performer here is us shares.
But you can see the dips. So this big dip here, this was the GFC, this dip here, this was Covid. So you can start to see. But even with these big dips at the time, they felt really dramatic. And depending on where you are in your, your life journey and how close you are to retirement, those dips can be pretty intense.
I had a friend's father who was looking to retire around here. He had to end up going back to work and working for another five years. So they can have a significant impact. Happens at the wrong time, but over time the value then does increase. So if we look at CPI and we look at the value here, it just keeps on going.
So over time it does actually make sense to invest.
Uh, so I talked about the concept of a portfolio before. So again, there is a bit of jargon to understand, but it is important to understand it because no matter where you go, these terms will come up. So we talk about, so I talked about sort of interchangeable words like stocks and shares, same thing.
Asset allocation and portfolio diversification are essentially the same thing. So if you hear either one of those terms, it's talking about how the mix of investments that you have inside what is like, if you think of it like a bank account, but it's a collection of things under the one sort of umbrella of your finances.
So there are all these accounts in your name. So again, depending on your risk profile and your age, when you want to retire, how much you want in retirement, it depends how you're going to do this. So the younger you are, the more risk you can handle. And recently, um, Vanguard started a super fund, and it was interesting because they actually self adjust this asset allocation or this diversification over time.
So I personally like to be a bit more in control of how things are. But, um, just as an example, if you're in your twenties, you could have like, 80%, and we've got the tutor from, like, defensive and growth, but you have like, 80% growth, which are, ah, more risky assets, things like your properties and your shares, funds, etfs, crypto, all of that.
So you could have like 80% of your investing portfolio. And this is aside from things like cash, um. Yeah you can have other bits and pieces on the side too, but uh your cash is included in defensive but your growth you can have like 80% and then 20% defensive that can flick over.
When you get into your thirties it might be you know 70% growth, 30% defensive and then by the time you get to your forties and fifties you might start to go 60 40, then 50 50 and then by the time you get a bit older it starts to flip around so that 80 20 eventually will move to 2080.
So like my parents are both in their eighties, they still have 20% of their portfolio sitting in growth and they have 80% of it sitting in cash so that they still have money to live on. And I'm constantly monitoring that to make sure that the growth part is still actually providing them with enough value to remain there.
Um, so that's how that diversification happens. So again you have to look at everything overall and which is why I find it really interesting when people focus purely on property it's like you're putting a lot of money in one asset class. So when rents go up or interest rates go up it really, really impacts you.
Ive heard some horrific stories over the last couple of years with uh the interest rate rises and how theyve impacted people and theyve had to sell things and uh anyway so having a bit of a balance is very important. But again like I said im precursoring that with the fact that I have quite a low risk tolerance so im much more interested in the diversification concept.
So micro investing is something I mentioned before and if you're, if you literally just wanted to have a dabble to start with and you're not clear, micro investing is really really important. Um I'm going to put in the chat very shortly. I've got a, actually I see if I can grab the chat now.
I have a couple of um, it didn't come up here. Um I have a couple of freebies. So this is, this is an investing basics checklist. I'm also going to grab a um, can't grab it from there so I'll grab it from up here. Um I've also got a micro investing guide.
I'll put a link to that one there as well. So this lists out some of these. It gives you a little bit of the differences between the um different providers. So there are a lot more providers than this now because it just keeps on growing because everybody's getting on the bandwagon.
Um but these are kind of the main ones and it'll give you a bit of a difference as to what they do. I personally like raise. They started out being called acorns. And I did it as an experiment, to be honest, because I thought, oh, I linked bank accounts and it literally rounds up everything I spend, pools it and invests it.
It doesn't really call it, it is pooled investments, but that's a terminology that's probably more well known in the United States than it is, um, here in Australia. Um, but it gets you access to assets that you wouldn't get access to if you didn't have that money. Um, so just as an example, I started this probably about seven years ago.
I have nearly $8,000 sitting in this account now. Um, about twelve months ago, I started to go from purely roundups. Purely roundups got to me to about six and a half thousand. And then I started to do an auto top up of $10. A month. So it's very small, but it's given me an amount of money that I just.
I wouldn't have had that if I hadn't started that seven, um, years ago. Ah. And it might not sound like a lot, but it builds quite quickly. Um, and then. So that's raise. I like them because they have that roundup function. These other ones don't have that option, but they do allow you to pool funds.
So, for instance, this first one, you can get started with a dollar. Another one is five. Others are targeted to children. So there's people who use these to help their kids learn about investing without having to obviously, you know, have a huge amount of money to start. So they all have a different focus.
Um, so if you're interested in that, then. And I, to be honest, like, I still have, because I like diversification. So I have a micro investing account, actually, two different ones. I have one that's focused on fixed interest as well. I even have a subset inside my raise, one for my daughter.
So I have a couple of direct shares that I want to invest in. So I invest in a. In her name in there for her. I have other investments for her as well. But I was like, oh, it's fun to dabble. Um, and you're not going to lose too much.
If you want to try something out, that's a really good sandbox to kind of try it out without using too much money. So if you have any questions, please feel free. I will have a q and a session at the end, but if something I'm saying and you really want to ask a question, please just feel free to.
So, net worth is where. This is what I was talking about before. Um, um. And understanding where you're sitting in totality and your investing comes within that. So I know we were talking a little bit about mindset and a little bit of clarity about what you want and how much you need.
This is kind of the. The other end of that. So when you look at the assets that you have, so that's. It's what you own versus what you owe. So this is literally, if you're in business, this is kind of like your balance sheet. Um, um. If you know what that means.
If you don't, it doesn't matter. Um, but it's listing out all of the assets that you have. And we. I do have a car in there as well, mainly because they. You could sell it and get some money. It's not going to appreciate in value, but you could sell it and get money if you wanted to.
So things like your home, your investment property, anything that has, if you. You could sell it for money, that's what an asset is. The liabilities is anything that you owe on any of those assets. So if you've got a home loan, uh, an investment property loan, you, um, owe money on your car or on a boat or a caravan, all of that.
They're usually things that will have a debt attached to them, potentially. So you put that all in there and then you see what your net worth actually is. It's important to do this on a regular basis because then you can start to track your progress. So if you, at the moment, don't have anything sitting inside your shares, ETF's or other investments or managements or anything like that, but you start to do this in six months, twelve months, you'll start to see an improvement.
And that in itself is a motivator. Never, um, underestimate the power of momentum to spark you and move you on forwards. And it also will give you an indication as to whether what you're doing is working or not. So if you had an anticipated goal of. Of a certain amount of return.
Um, but you're not seeing that, then you might have to look back at what you're investing in and go, okay, well, this one's not doing so great. Maybe I should try this. And there are lots of different, um, sort of places out there that will go through what sort of investments you can do, um, and what ETF's, if you're interested in those.
I had some because I did a bit of research myself. Um, and then I also pulled in information from Scott Pape, who's the barefoot investor. Um, so I pulled in some of his stuff and I'd had a financial advisor who he just, he put me in some things and to be honest, some of them were okay.
So I pulled some of that in as well. So you use what information that you have, um, to be able to do that. The other thing I wanted to mention in that, um, the investing basics checklist, I also go through how you can find out what trading platform to use, because that's the other thing, too.
There's the mechanics of how do you actually physically place a trade, and some of the terminologies in there as well. But there's a website link that I've put in there that will take you to the names of a few of them. Um, and that's. So, for instance, the micro investing one.
These are some of the platforms for micro investing, um, for, uh, share trading, um, or ETF's, all of that. There's so many out there. Um, I started with bell direct, but I didn't like their trading fees or brokerage fees. Every time I placed a trade, I was paying like $25.
Um, that's since changed. Um, so I invest quite a lot in vanguard funds, so I use their trading platform because it's free. I don't have to pay anything when I buy, I pay if I want to sell, but I have no intention of selling. Um, and that's another important distinction between trading and investing.
Trading is where you're buying and selling constantly, and if that's what you want to do, then you're going to have to find a platform that would be more beneficial to that because you don't want to be paying brokerage fees constantly. And if you do, then they have to be as small as possible.
Um, but I'm a buy and hold investor, and that's over time. So, so like that chart that showed all of the different options, the different types of investments. If you're just buying and holding, you get to write out the ups. You can write out the downs, but as long as you hold it, you're not going to experience the downs.
You can write it out until it goes back up again. So that's the power of investing. And there's, um, a phrase you may or may not heard called rather than timing the market, it's time in the market, and that's what that's referring to. So ultimately, this is about steps.
So having a clear idea of what you want to achieve and recognizing that it's one step at a time, being more informed, hopefully, after today, you're one step ahead in terms of how much information you have and hopefully how much understanding you have as well. Um, and then it's one step after the other rather than at the moment.
What I found used to hold me back is that I would see this thing I wanted in the distance, in this case, the goal, and go, oh, my gosh, that seems so far away. Um, rather than just breaking it down and going, okay, I just need to know what I need to do next.
And then once I get there, I might get enough information to help me figure out either the next step or the next three steps. But as long. As I know, uh, one step ahead. That's all I need to focus on and to just keep going little by little, because it is important.
So this is. I say this one out a lot. I went through a period. I love listening to podcasts, and I heard this. Within a week, three different people said it, and I was like, oh, I need to take notice of this. And you only fail if you quit.
So, if you want to invest, get as educated as you can, ask as many questions as you can, figure it out little by little, but keep going because it's important, uh, to do this for you, your future, if you've got kids, for your kids future as well, it will give you a lot more financial independence.
And the thing I love the most about money is it gives you choices. If you need to go visit a sick family member overseas really quick smart, it doesn't have to cripple you financially to do that. Um, if you want to decide suddenly to celebrate your milestone birthday overseas somewhere, you can do that.
So it's for fun as well as necessity, but it also gives you the choice of where you live and what you do and the things that you enjoy. Um, so this. So I can. I can. I get very passionate about it. But, um, that's what. That's the thing I love about money and investing, is that it allows you to do that for yourself and your kids.
So what we've spoken about, I'll take breath. Um, the impact of money mindsets on why we do or don't invest. Um, what is investing and how do you actually invest and the impact of investing, and how do you make sure you're doing the right thing? And like I said, that's very personal.
And there's a little bit of testing and measuring that goes with that. So I just wanted to mention a couple of things, and then I'll open up for questions, and I can turn off the recording for questions, in case you don't feel comfortable putting that in the recording as well.
So I do offer a money management assessment. It's a one off session. Um, I started doing these earlier this year, and I found it quite often. It's just a matter of. I just need to understand where everything is. You're not quite ready for a financial advisor, but you don't, and you don't want to spend the money on that either.
But you just want to see if what you're doing is okay. Get things organized. I have tools and templates that I provide to help with that as well. I do this for business and personal. So, um, if you're a business owner and you want to link the two, that's what I specialize in, but I can do each of them individually as well.
Um, for m business owners, I do offer a more comprehensive live program. That one, um, opens up three times a year. At the moment, we're actually going through a cohort, so. So it won't open up again now until next year. But if you'd like to know more about it, you can have a look at that link, money essentialsbusiness.com, and, um, you can join the waitlist to find out when it's open again.
Okay, I am going to open
