Property Hub - Investment Insights & Inspiration - Get Invested: How to be a better investor with Ramin Nakisa

Episode Date: June 23, 2023

Ramin Nakisa is a top investment coach and author with a rare ability to make finance and investment education easy. This week’s episode is a re-post of a classic Get Invested interview from 2021, where Ramin reveals his insights. The founder of PensionCraft set his foundations with a Physics degree and doctorate at Imperial College in London then postdoctoral research in neural network models of language acquisition in the Experimental Psychology Department at Oxford University, so he has a really diverse and interesting background. Before becoming a strategist Ramin worked in investment banking for 15 years, and spent two years teaching finance in an investment bank, which was a big passion and also helped him to learn how to explain finance in a non-mathematical way … which you’ll benefit from in our discussion today. In this interview, Ramin says the best investors keep it simple, and the best way to keep it simple is to ‘play dead’. In this fascinating discussion, you’ll be fast tracked and equipped to be a better investor. Enjoy. NEW - Join the Property Hub community on Substack! Sign up to get Australian property news, opinion and episodes in your inbox: https://propertyhubau.substack.com/  Three easy ways to Get Invested right now: 1. Subscribe to this podcast now, if you haven’t already, and get the inspiration delivered to your podcast feed each week 2. Get a copy of my book, Get Invested, for FREE, and find out what it takes for you to invest in living more, working less. Go to: https://knowhowproperty.com.au/get-invested-free-ebook  3. Join the Get Invested community. Each month Bushy sends a free and exclusive monthly email full of practical ‘Self, Health and Wealth’ wisdom that our current Freedom Fighter subscribers can’t wait to get each month. Just visit bushymartin.com.au, scroll to the bottom of the page and sign up. About Get Invested, a Property Hub show Get Invested is the leading weekly podcast for Australians who want to learn how to unlock their full ‘self, health and wealth’ potential. Hosted by Bushy Martin, an award winning property investor, founder, author and media commentator who is recognised as one of Australia’s most trusted experts in property, investment and lifestyle, Get Invested reveals the secrets of the high performers who invest for success in every aspect of their lives and the world around them. Get Invested is part of the Property Hub podcast channel, your home for property investment insights, inspiration and stories from Australia’s top property experts, investors, leaders and analysts. Subscribe now on Apple Podcasts, Spotify and Google Podcasts to get every Get Invested episode each week for free, and also get full access to RealtyTalk, Australia’s top online property show for red hot property investing news and insights direct from property industry leaders and influencers. Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, show producer Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media.  For business and partnership enquiries, send an email to: [e-mail] omnystudio.com/listener for privacy information.

Welcome to Get Invested on the Property Hub podcast channel, the leading weekly show to help you unlock your full self-health and wealth potential. I'm your host, Bushy Martin, and each week I go deep with the best investors, experts, leaders and founders to find out what it takes to break free from the grind, discover freedom and live by design. Subscribe now and join me and get invested in the life you really want. Let's get started. Welcome to Get Invested on the Property Hub podcast. I'm Andrew Montessi, the producer of the show. Now, this week, we're bringing back a classic. It's an interview with UK investor Raman Nikesa, which was one of Get Invested's most popular

episodes. Raman is a UK-based investment coach, author, and founder of PensionCraft. Raman did a physics degree and a doctorate at Imperial College in London, then post-doctoral research in neural network models of language acquisition in the experimental psychology department at Oxford University. So he's got a really diverse and interesting background. He worked in investment banking for 15 years. Then before becoming a strategist, he spent two years teaching finance in an investment bank, which was a massive passion and also helped him to learn how to explain finance in a non-mathematical way.

And you're really going to benefit from that in this discussion. In this interview, Rahman says the best investors keep it simple, and the best way to keep it simple is to play dead. In this fascinating discussion, you'll be fast-tracked and equipped to be a better investor. Enjoy. Hi, Freedom Fighters. Now, in my continual search for quality investment information from quality investment people to inform you here on Get Invested, I rarely come across someone who's not only really

good at what they do but also communicates objective independent insights in a easily digestible understandable and quite humble way but this is exactly the case with today's special guest raman akisa now i've been quietly listening to his very informative and timely youtube segments for some time now and um both excited and quite humbled to be able to share his wealth of wisdom with you here today on get invested so welcome and let's get invested raman thank you bushy that's really kind of you so do you want me to just explain what i do yeah so yeah let's start off for those who haven't had the pleasure of enjoying you on your youtube channel uh just give us a rundown on who you are what you do but most importantly why you

do what you do well i think the reason why i do what i do is because i used to work in the investment banking industry. And if you work within that culture, there's a lot of assumed knowledge. So there's a lot of jargon that we use, there's a lot of knowledge that we have. And of course, in any kind of discipline, you have this kind of shorthand, which you use, and people just assume a certain amount of knowledge. So what really struck me is when I left that world, is how little other people understood about investing, and how to succeed in investing. So really, my goal was to allow people who haven't had that investment banking background to understand how they can succeed in that space, in the investment space, because

I think the knowledge just isn't there. We aren't taught at school how to invest, which is really awful, I think. They teach you all kinds of things which are really not very useful at all. I left school with lots of knowledge of things like Latin and physics, But when it came to investing, I knew absolutely nothing. So I had to literally teach myself. I had to bootstrap myself into the industry. And so I thought if I provided a resource for people to be able to do that themselves, that would be quite valuable. And certainly that's the way it's turned out, I think.

I think you've touched on a very good point. It's exactly the same here in Australia, really, as it is in the UK. And I actually think it's actually worse than what we think because not only are you not equipped financially or investment-wise to really look after yourself, but unfortunately the education system, if you're not good at maths, then they carry this chip on their shoulder for the rest of their life about this fear of money and this fear of finances.

Has that been your experience in the UK? that yeah and what really struck me was that you didn't need to be good at maths or even intelligent to do well at investing I think it's more to do with discipline than it is about being smart and really self-control and having that kind of long-range approach to investing and really keeping at it for a long period of time and that takes huge discipline whereas you know you can be really clever and come up with smart ways to trade but ultimately those won't succeed unless you've got the kind of mental fortitude to stick at it year after year.

Yeah, the mental fortitude is an absolute key one. There's no doubt about that. Okay, so what I'd love to do, if you wouldn't mind, is share your journey with the listeners, going back as far as you are comfortable and as far as you can remember, and talk us through what you've invested your time, energy money in uh what you've learned from that what was some of the the wins and losses along that

journey and uh how that's brought you back to what you're now doing yeah sure i guess what some people might find surprising was that my first love was physics you know i absolutely loved physics and i kind of lived for physics i lived and breathed it i did a degree in it and in physics and a doctorate as well so that was my my kind of goal for life i thought but then you know I got to the point where I got married and I decided that I wanted to be able to afford a house and academia just wasn't able to pay for some of those things so I left academia and I started working on the business side and initially I started modeling human behavior so me and my team we were working on Bayesian models that would predict customer behavior so a lot of companies

wanted to use this use this kind of thing for for marketing so obviously nowadays they call it big data but you know we were just using some fairly fairly simple uh models to try and see whether people would leave a bank or whether they'd buy a certain product when it was worth marketing something and whether you could kind of nudge people into buying certain things or not and the cost required in order to do that in order to make it worthwhile so that was the kind of thing we were working on which was really interesting and then I worked for a while just kind of freelancing so I helped companies do some of these mathematical problems and then eventually I had my first child so I got married we had our first child and at that point I needed something more more solid so

I went to see this recruitment agent and he said well you're good at maths why don't you work in investment banking so so you know off I go to this investment bank day two I see the twin towers uh you know an aircraft plows into one of the twin towers and I think what the hell have I done you know it was a bit of a baptism of fire but I did meet some really interesting people and initially I was pushed into the kind of tech space so I was working on risk systems at an investment bank and they said right you can do maths so you work on this system modeling risk for us so that's what I did and you know I made some interesting friends there there was a guy who created one of these risk systems and we made we made friends and he's really interesting actually

he kind of learnt Farsi which is I'm half Iranian so he could speak Farsi even though he's English and he always used to make fun of the management at this this bank and it was a French bank where they take take things very seriously so it was great fun and we used to talk about maths and we used to go out for persian food it was great so i did meet some really interesting people and i realized that that actually being part of a tech team was not what i wanted to do if you're the only phd in the group you start to think well why is that so after that i moved into a kind of more more kind of banky type of job rather than the tech job so this was more of a quant role where I used my math skills better and I was better paid so there was an entire team of

people all of whom had PhDs and we just had an absolute blast this was another risk system but I was kind of moving up into the more core part of the investment business and then I was there for about two or three years. And I was learning a hell of a lot about all of the assets that we were pricing. And I was right in the middle of the credit bubble. So I was working on the risk systems, which were involved in pricing some of these things like CDOs, and another asset class called ABS, which also imploded during the global financial crisis. So I was really kind of in the middle of it and it was just a wonderful environment in terms of ideas in terms of fun you know we used to have a lot of laughs in the role but um you know that that eventually I kind

of got pissed off with that role because um it wasn't a client facing role and if you are in the kind of middle office in in an investment bank you just don't get the big bucks so for me it was important to try and move to the front office and and also I think to to use some of the more kind of skills that I learned in teaching so what I did is I moved to a role where I was actually teaching within the investment bank so they actually have a group which teaches how to price all of the assets that we have or they actually teach clients and they teach staff so it was like a business university they called it and that was brilliant I absolutely love that so that was a big big move for me because it meant that I could learn about every single asset that we traded I talked to

traders I talked to sales people and I trained them so it got to the point where I could walk along the trading floor and I taught a lot of the grads and they'd all say hi Roman hi hi hi and it was quite a quite a kind of collegiate atmosphere which i which i absolutely loved and uh but it forced me to learn absolutely everything and exactly how to price everything in incredible detail and that was important because you couldn't if you stand in front of a group of traders teaching them about derivatives for two weeks for seven hours a day if you get something wrong they are absolutely ruthless and so that was a great way to learn but the way we did it was i'd sit in on two classes and then the next class i'd be teaching it so that was a real baptism of fire

but what was interesting about it was that the way we taught was not mathematical so if you if you if you for example if you price a derivative you might think it's all about maths that's not true with any product that an investment bank prices it's as if you know they hand you a folder and they say, look, a client's just bought this product. How do we hedge the risk? So literally you go through this folder page by page. So first of all, we lay off the equity risk by taking opposite position. Secondly, we lay off the interest rate risk by taking this interest rate derivative. So then the ultimate cost to the client is the cost of hedging their position. So that's how you price things. It's not to do with maths, really. It's

the cost to the bank of of hedging plus you add a bit of uh extra money which is your which pays your lambo or whatever it is you know that's how that's how the that's how the banks make their money so that non-mathematical approach to teaching was something i learned there and it was an incredible team that used to teach there at the investment bank so that was very useful as it turned out later on of course you never know what's going to be useful at the time i didn't know physics would be late useful later on but it was and i didn't know that the um the kind of teaching skills would be useful either but it but it was very useful later on yeah as it is now of course of course yeah of course so and that's something i'm interested in because i what i'm

picking up from uh what you're talking about already is that you have a a natural leaning towards teaching that's that's something that you're clearly very comfortable in and very good at given you know what you're doing on youtube uh the the physics attraction early on where did that come from can you remember i can actually because uh as a kid i grew up in um when i was very young i grew up in iran and um they used to have really clear nights if you go out to the desert and i was just completely captivated by the stars and i just thought that was the most incredible thing what the hell are they so I wanted to learn about astronomy and astronomy was what I thought I'd end up doing so I thought astrophysics would be the way to do that

as it turned out my PhD was in biophysics because I got kind of interested in how physics can be applied to understanding how living things work so that was that was kind of like a the original goal was astrophysics and I still love astronomy so you know if I go out into the night sky i can name the stars and you know i used to do a bit of astrophotography that was great fun so that was how it led to physics it was via astronomy right yeah love it love it you clearly i um you've got a quite a a uh a structure of mine i always saw physics as something that's reasonably structured and fairly logical if it you know this goes with that if you if you follow it through and break it down it's small enough then then you can sort of start to put the bigger

picture together and was that sort of thinking approach and it's quite lateral but also quite logical at the same time was that something that was quite transferable and quite useful to you and what you were then doing in the investment space very much so and that's why i think there are so many maths and physics phds in finance so a lot of the products that you come up with have been thought up by physicists i mean that's good and bad right because some of the products clearly haven't survived the test of time but many of them have and if clients want something then your job is to produce a product which suits their requirements and often that blows up because they don't understand the risk or you don't understand

the risk eventually but I think that innovation and that mindset was useful later on and certainly the way you kind of break down a problem and and do something in a pragmatic way which seems insuperable at first so something like pricing cdo or something complex seems almost impossible but breaking it down it becomes almost beautiful and although these things did blow up i'm sure that the maths is so lovely that they'll probably come back in some form i do see them coming back now i do see some cdos are starting to be sold again but that kind of idea of tiering risk and layering risk and parceling up risk and buying and selling it certainly that i think comes straight out of the canon from physics and and mathematics clearly

yes clearly yeah okay so that i mean the good thing is that uh given that you sort of transition through that space you you pretty much had exposure to all and every aspect and and because you've had to teach it i mean there's no no better way to learn something than to have to teach it i've always found and then i often say to people if you want to learn something when you're learning it think to yourself i'm going to have to teach someone else this and as soon as you do that you'll be much more focused about not only taking on board what you're hearing but then thinking about how am i going to then translate this and communicate this effectively to someone else that that hasn't had the benefit of learning?

Has that been useful to you in terms of building that skill base that's now so affected with what you're doing? Absolutely. I mean, I think another good way to do it is to write down what your understanding is. If anything, you know, you can write a book about it. And, in fact, the first book I wrote was written on the tube. So, you know, every morning I'd be on the 5.30 train amongst

all the builders working in, you know, travelling into the city and it would be like the milk train. it would be so early that you know everyone would be asleep as I left and everyone would be asleep as I came home but I'd write two hours a day because I was commuting on that train so I'd be in there squeezed amongst the builders writing all these equations into this book but ultimately it meant that I could understand the products that we traded and I wrote this book called The Financial Bestiary where I kind of treated it like animals at the zoo. A bestiary is like a medieval book where they talk about the different types of animals. And the idea was

you'd learn a moral from each of the different animals. So this is the salamander, and it teaches you about moral courage. This is a dragon and so on. So I did the same thing. So my beasts were the people who worked at the bank. So I got pictures of the people I worked with. And I say, this is a trader. This is what they do. This is a salesperson. This is what they do. And this is a restructurer a risk guy you know all the different roles at the bank and then also the products that we traded treated them like animals and um and i think that's a good way to understand how investment works because you can almost think of the different asset types as creatures as animals and i think the job of an investor is to understand the nature of each animal

and this is why I was asking you about naturalists in Australia because David Attenborough I see myself as a kind of David Attenborough but for investment so I can say you know here are the asset types these are the environments in which they live some assets do well in this kind of environment this kind of macro backdrop some assets do well in another type of environment and each of the different asset types evolves into its own niche and there's a continual process of evolution so as i say you know the job of the structure is the investment banks is to come up with the new organisms the new the new products and then ultimately these go out into the world and they're kind of tested in markets some of them survive some of them don't sometimes you get a

merger of different types of product into one and then over time you come up with a process of evolution and and products which are robust and who've which have lived through multiple cycles of extinction so after 2008 you know we saw many of the products that were created stop existing and uh but many of them have gone on and kind of shown they were incredibly robust things like etfs which people thought were about to kind of collapse the financial system or some people have said they're akin to communism but in fact they've been incredibly robust and they've survived multiple crises and not cause systemic problems as people thought they would.

So I think that's the way I see investment, kind of almost like a naturalist. Yeah, I love it because what it's recognising, it's a dynamic system of changing and evolving parts. And I'd love for you, we'll get to it shortly, but I'd love you to put some animation around some of that when we start talking about, you know, where you're seeing things now, where it's heading

and put into those bestiary terms. When you mentioned bestiary, I'd go straight to Monty Python because I'm an old same age now, but the way they used to carve up the show, they almost had that bestiary type of illustrations and the medieval type of approach of actually communicating it. So it's a very good way of actually, one, understanding the exercise, but more importantly, for those that are listening, starting to see investment markets not as the numbers exercise, but as a living, breathing organism effectively or a system of organisms like the Earth. So we have the great meteor crash that wipes out the dinosaurs and then humans start to take ascendancy over time.

It's exactly the same as what you were saying in that regard as far as the financial markets are concerned. Yeah. And I think, you know, if we're going to touch on asset allocation, which is what I was doing. So when I became a strategist at the investment bank, the role of the strategist is to advise the people who actually invest your money. So these would be your pension manager, would read research, which is produced by investment banks, and they get ideas from us. So that was the idea that we would publish research that would be given to clients. And if they liked our research, they'd trade with the bank. So that was the kind of understood quid pro quo. and if they if they did like the research and the ideas then obviously they'd come back for more

so the role was to come up with the idea generation and you know some of the some of the some of the stuff i did was to do with asset allocation so it's how how the animals live together so when you construct a portfolio think of that almost like a living thing where you have to kind of create an ecosystem where the assets live together in harmony now obviously just as with a kind of ecosystem if you have too much of one organism so for example i believe in australia there was a plague of of rabbits um those were introduced and then they kind of there were too many of them so they brought in another species in order to kill them and then there was an unstable population spurt in the predators. And so I think a portfolio is similar, you've got to achieve that

balance. So I think that's why it's really important to understand things like correlation, because that tells you whether two assets sit nicely together. And if one of them counteracts the risk from the other. So if you want, I mean, you could think of lots of predators inside a room that's like having a portfolio which is 100 equity or if you have lots of um things which are in a room which essentially eat the same thing then that's risky because they could run out of run out of food so so that's why i think it's important to have a diversification across different asset types in your portfolio because under different types of conditions you'll find some of them do well and then as conditions change you want to make sure that your portfolio

will do fairly well in all of those conditions this is the kind of thinking behind portfolios like Ray Dalio's all-weather portfolio for example where you've got some gold you've got some fixed income some of it is short duration fixed income some of it's long duration you've got some equity and in each kind of environment some of those asset types will do better so if you've got deflation the bonds will do well the equity is not well um and the gold probably would be okay if you've got a very strong growth environment then you the equity will do well so in every kind of environment something will do well so this is why i think that kind of analogy is a good one for building a portfolio and asset allocation

as husbandry almost. Yeah, I love it. It's a great analogy and a great way to put some perspective around it and to take some of the fear out of it as well. The biggest hurdle I see with a lot of would-be investors is this fear factor over, I don't understand you, this is all too complicated for me, but if you break it down into as simple terms the way you've just done

and create things out of it and think about it as an ecosystem and all of a sudden it's like, okay, this is making sense. We don't want all of one thing because they'll end up eating each other. If we've got a spread that thrives or survives in different environments at different times, then that's all we need to be doing with what we're doing in the investment space.

So that's brilliant. Okay, so you got into asset allocation. Now I want to circle back to asset allocation later and sort of break that down a little bit because I think it's a really important takeaway for the listeners, given your expertise in that area. where did where did things go from there well there was a kind of change of management at the bank and um i didn't get on so well with the new management at the bank um so eventually they let

me go so i've been at the bank for a long time so i got a fairly good payoff and i was you know i every investment bank person has an exit plan because it's kind of like being in the second world war you know you don't want to get too matey with your friends because they often just disappear so so uh i was one of the ones that disappeared and um suddenly i was blinking in the sunshine and fortunately i had a plan and so that's how pension craft was born i wanted to teach people how to invest you know i learned the skills about how to teach at the bank i had huge product knowledge so it was a matter of actually simplifying it and making it comprehensible to people who we call retail investors who are normal people so you've got institutional investors who

are the people yeah normal people um but but it was people who didn't have that shared culture who were outside the culture and uh so it was very difficult at first because i'd lost all of my resources i didn't have my bloomberg terminal and that was a terrible loss you know i mean i I miss my colleagues, but I miss my Bloomberg Terminal more. It was like information was suddenly snatched away from me. And so I was left with... How long ago was this, by the way? This was 2017, I think I started.

Yeah. So, you know, I had to kind of basically start from scratch. So I did that. And one of my colleagues from the bank came with me, who was actually one of the people I worked with in Hyderabad in India and we started it together I mean since then he's gone his own way but um that's another part of the story but but I mean it was all amicable and it was fine but uh for a long time it just got nowhere so I had to fall back on tutoring to pay to pay for things like food uh so obviously I'd saved a lot of money

and i had a payoff from the bank and so that could pay for the everyday stuff but i had to make an income so literally i'd spend the mornings and during the day preparing um content for youtube and pension craft and then in the evenings i'd be teaching physics and maths to students which i absolutely loved i really enjoyed that but it was very draining and you know i was literally working weekends because that's when the kids wanted to learn and then during the week I'd be doing the content and stuff for pension craft so it was pretty tough in terms of time and you know I found it quite difficult to kind of schedule everything at the same time and you have to kind of switch between two jobs which is very difficult it's very difficult you know I mean if you're

teaching someone who's 18 maths to get them through their exam is very different to talking to someone about how to invest their inheritance from their grandmother it's kind of a different mental state I'd say very draining I would have thought both mentally emotionally and physically over time yeah it was a very difficult time and very exhausting I think and it obviously took a toll on on me and my family life and ultimately you know my wife decided that she didn't want to be part of that and that was a very difficult time and it led to divorce between me and my wife all very amicable you know I think she did the right thing which was to decide that you know she'd had enough and she she didn't really see pension craft as a as a useful thing I think it

was very difficult for her and her parents to understand a business model where you give away 95% of what you do for free I mean that sounds crazy right I mean how could you possibly make money out of that and of course at the time I wasn't but I knew that if I stuck with it that ultimately I'd gain a following and people would find the knowledge valuable because I knew I was putting everything into it I was literally pouring myself into these videos so I knew that it was valuable because I knew at the bank people found it valuable who were professional investors so it was just a matter of time ultimately i was hoping that until people discovered that that it was useful let's drill in there because it's you know it's during our most challenging times

that that uh we get our greatest insights and because if we stack them up i mean you left probably a well-paying job with with the bank and yes you've got the parachute of the of the payout but that's a bit of a panacea at times uh because it's still as you say it's not putting bread and butter on the table week to week you're you've been spreading yourself between tutoring and and building pension craft uh you it sounds like you had a lot of doubters around you who were who were you know i'm not being uh deflamatory to your wife or or family but it's quite normal for you know people who are used to a regular income check to suddenly um see a position where there's nothing and they can't see anything coming so you're giving all this stuff

away but but the payday is it doesn't appear to ever be coming how did you uh maintain the fortitude and the self-belief and then then there's a divorce thrown into that so there's all of that that sort of comes back to you questioning yourself how did you manage to uh manage yourself through that process and and stay focused on uh the vision of um what you're now doing uh despite that that quite deep opposition from a whole series of corners rama well i had um i was i was a member of something called the content marketing academy content marketing academy run by a guy called chris marr who is a scottish man and he was really a good teacher ultimately his business didn't survive but um he provided teaching on

how to do content marketing because i've you know my background was physics and and banking so i didn't know about marketing so for me this was a complete eye-opener to know that yeah you can give away stuff and still um ultimately make a profit but you've got to keep doing it that was the that was the gist of it so I had an accountability group which formed as part of that and there are four of us and we still meet every two weeks and we discuss our businesses but we discuss life you know so they saw me through the divorce um you know they they they were the ones that said keep going and if I hadn't done that then I wouldn't be where I am today which is a business which which works and feeds me and feeds Laura and feeds my dog Teddy you know and

ultimately it'll feed several people I suspect that's the goal so I think what really is important is to have that kind of accountability group who understand your business you understand each other and you support each other because if you don't keep going then obviously you're not going to succeed now there obviously does come a time when you realize that um it's not going to work out and it's difficult to draw the line it's difficult to know when that point is and for me I came very very close there was a point at which I just said look if it doesn't work in the next couple of months I'm just going to give up um and I think at that point I said well what I'm going to do is i'm going to create a patreon account and and then one of the accountability groups said don't forget

to say at the end of the video sign up on patreon and i thought oh yeah why don't i do that and guess what when i said sign up for patreon people did and um and so that grew very rapidly so that was that was effectively how i kept going and then once you start to see the patreon numbers build up then you realize yeah this is something that could be a viable business and now we've got you know over 700 members almost 800 on patreon and 80 000 subscribers on youtube almost 90 000 and it's growing very rapidly and a mailing list with over 10 000 people so it certainly it certainly succeeded in the end but it was really touch and go for a long time yeah i'm gonna there's a living example there to me of the the uh patience persistence

endurance and resilience you need to succeed in anything and it's it's it's often you know when you're about to give up that the that the uh the turning corner or the uh opportunity that's going to carry you long term is is sitting there so it's uh admirable that you've been able to stick with it and maintain yourself with that accountability support group that sits in around you to see it through. So congratulations on that. Because I often say to people, you know, contemplating being self-employed,

if you can't survive for two years on nothing, then probably don't start because that's about the minimum you need to even get to a point where you're going to start to put some money on the table. Yeah, it was almost exactly two years before it did take off. So I think that's about right. I'd heard one-and-a-half years, and then the one-and-a-half-year point was my kind of crunch moment.

And so that was important to keep going after that. Yeah, brilliant. So excellent. So what I'd love to do now, though, is to jump a little bit – well, no, before I do that, I'm going to go in a different direction. While you were building your career and the family and everything else, And I'd love for you to share with us what, if anything, you were personally investing in along that journey and why. So when I was at the investment bank, I was very time poor.

So for me, I had very little time to think about investments. So I just put it into some fairly random investments. It was a high yield bond fund because I was working in credit. So I had a fairly good knowledge of how that worked. and a european equity fund and um i think there was an investment grade an investment grade corporate bond fund so those are the kind of things i put into my into my eyes and i just left it you know i never even looked at it and that actually did very well because i ignored it i didn't do anything with it and i kind of learned my lesson previously because i tried trading

single stocks when i was just getting into investing in the first in the first instance before i went to the bank um so i used to try and invest in single stocks i read a couple of books and it just imploded and i did all the wrong things and i made some terrible investments but then i kind of learned from that and and just kept it simple and that worked fairly well because i didn't do anything with the portfolio so that was that was a good way to invest well i didn't really realize at that point i still didn't realize that was the kind of secret which was the fact I'd ignored it. Let's spell that secret out because this is something

that I don't see many investors in many areas all get because there's always this perception that we've got to be very active to produce results. It's almost written into our culture, I think. Australians are predominantly much more cosmopolitan now, but there's a lot of British heritage in the way we operate, think and behave here in Australia. I'm a proud convict myself, actually.

We tracked the heritage back far enough. But what goes with that is you've got to be doing it, you've got to be active, you've got to be making it happen. Whereas if we tease out what you just shared with us, your best performing investment was the one you didn't do anything with. You just set and forget. Can you sort of sum it up for us a little bit? Because I think there's some real gold in what you've just mentioned there.

Yeah, the first time I really realised how important that message was, was a story that I'd heard from Jim O'Shaughnessy, who's written a brilliant book called What Works on Wall Street. So he's a kind of quant investor, an incredibly funny guy. He has the best memes on Twitter. He's really great on FinTwit. But he's really generous with his time. You know, he spends a lot of time mentoring people and sharing his knowledge.

a lot of stuff about philosophy but also about about um if you listen to his podcast it's very good it's called infinite loops uh where he talks about things like um philosophy and things which you wouldn't have thought would be related to investment so one of the things that he actually shared with me was i'd heard this story that fidelity had done a study to see which of their clients perform the best and it turned out it was the dead clients these people who'd who created a trust and who basically didn't fiddle with the portfolio and their portfolios just blew all the others out of the water so i i'd heard that it was jim that came up with this anecdote and he confirmed that he'd heard it from someone at fidelity they never found the original reference

but but i think the idea is a good one which is don't fiddle the ideal investor is a dead investor So if you can pretend to be dead, then that's a good way to do it. So, in fact, that's why I say I call it the kind of Teddy investment approach. So you can see how Teddy spends most of his time. For the listeners who aren't watching this, Raman's beautiful dog is spread-eagled on the couch directly behind him. But Teddy would make a great investor because, you know, he has short bouts of intense activity interspersed with long periods of sleeping on the sofa.

So I think that's probably the best approach to investing, because there are certain times when you get these incredible opportunities, when equity markets sell off, and there's a big crash, and everyone's saying don't invest, or there's just indifference about the equity market. And then you get these periods like now when, you know, your plumber's telling you to buy a Tesla. and that tells you that something's not quite right and things are probably overpriced so i think having a sensitivity to that and you having these periods of intense activity when you capitalize on the opportunities is important and then having long periods of doing nothing is absolutely okay and keeping FOMO at bay you know this fear of missing out which makes people

desperate to invest. So I speak to quite a lot of high net worth investors now. And many of them are in a position where they've sold a business, they've got millions to invest, and it's in cash. And they feel bad about it because they think, well, I should be fully invested. All these investment banks are coming up to me very kindly offering to invest my money for me. And I just tell them look you don't need the money and there's no rush to invest take your time because you can afford to invest when things are much more much much better in terms of an entry point when prices are low yes so I think I think that fear of missing out forces us to kind of try and fiddle yeah it does I agree that 100% and I know you're ascribed to some of Warren Buffett's

philosophies as well but one of his best i think is to is to spend a lot of time with the bat ready to hit the ball but until the perfect perfect ball comes along you you don't swing so uh it's a pretty good analogy i think tell me uh you sort of touched on a little bit but i'd love for you to share with us what you believe has been your worst investment ever so far i had some awful ones i've got to say And I think probably the worst. And this one has all of the cognitive biases built into it. So these are the kind of things you should avoid. So this was when I bought Wyvail Garden Centres. I love gardening. Right. So I love gardening. I think I understand it. And in the UK, it's really big. You know, people every spring they go out and they buy lots of stuff for the garden.

And it's, you know, millions of gardeners in the UK. So it's really a kind of little bit of paradise in your back garden that everyone tries to construct. So I thought, well, you know, we've got all these gardeners. A great investment would be something like this company called Wyvale Garden Centers. So, you know, I go and I buy large quantities of this stock. So I was too concentrated. That's my first mistake. The second thing is it comes springtime. It rained on Bank Holiday Monday. the sales of these companies depend hugely on that bank holiday and the share price tanks and so what

do I do do I hold on no I sold just after it crashed so I bought at the peak I sold at the bottom and obviously you know I've kind of locked myself out of it and guess what happened it rallied straight away so I was locked out of the investment and I'd done all the things which I shouldn't do i'd gone for a sector where i'm familiar with it so that was kind of like a familiarity bias yeah i'd hugely concentrated my portfolio i mean single stock stuff generally doesn't work and uh and then i sold when it fell which is exactly what you shouldn't do and i bought at the top so i mean literally it was a disaster but that taught me that actually funds might be a better way to go where it comes off the shelf as a portfolio which is diversified

it's fairly cheap you know the management costs are low and you don't have to think about things like rebalancing or any of that stuff it's all done for you so that's I think how I first came to realize that was maybe not going to work for me but I had read a few books and I thought look I've got all this data I can look at the earnings growth historically I can look at the price to earnings growth ratio and all these ratios I looked at, the dividend. But in fact, it was just a foolish game. And it was a game I was going to lose. And I think that's the important thing. Not everyone has the best. There isn't a single approach to investing. There are multiple paths to a good portfolio. So one of the things at PensionCraft is that I never tell people what

to do i just present the data and i always try and present both sides of an argument for and against an investment and ultimately people have to find their own way and everyone has their own style of investing so some of the pension crafters usually the younger ones are heavily invested in crypto which is fine if you understand the risks of that and you're you're kind of happy with with the investment itself whereas some of the older people invest more in things like venture capital trusts where you're funding startup companies or they invest in Russia or emerging markets or some of them just have a single fund you know that's it and they keep it really simple so there is no one size fits all and I think it's important to have that diversity in the community

but we're all nice to each other but you can see the friction sometimes on the on the slack group where we talk to each other where there's a kind of clash of cultures but we're always polite well we're usually polite to each other we try and keep it polite but but I think that's important there isn't just one way to do it and I think that's why copying Warren Buffett or copying me is a mistake and people always ask me how do you invest and tell me what to do but I never do because that's not my goal my goal is to teach you how to do it for yourself in your style and you touched on a really important point there because all the the fundamental whether you're technical or you're a quant or whether you're a value investor or whether you're looking at

fundamentals uh the missing missing piece or the bit that's unique about uh all of that is how you think because how you think and then how you act are going to have a big impact on uh the sorts of results you're going to get from your investing and i think i'm interested in your thoughts around this but the missing piece i see in a lot of investors is that they spend all the time externally looking at what's going to happen and spend very little time thinking about how they think and what's between the ears and what impact that's going to have on their own behaviours. What's your thoughts around that? Yeah, I mean, it was an interesting thread on Pension Craft recently where one of the old timers in our community said, what do you think is the biggest

risk for your portfolio? And I said, the biggest risk is you, because your behaviour ultimately determines how much money you'll make and if you have the wrong kinds of behavior then it'll be a disaster so I think that's the single biggest risk and I think people talk about understanding things like volatility and correlation I talk about it but much more important is to understand your own psychology so I think it's really important to understand it and to master your own behavior and to overcome your own cognitive biases whatever those are and we all have them we're very ill-suited to being investors. If we sense a sell-off, our natural reaction is to run away from it and to take risk off the table when you should actually be running towards the fire.

And of course, evolution has told us that you don't run towards fire. So you've almost got to be like a Marine. I mean, they drill Marines to run into enemy fire. And it takes a special kind of mindset to do that. And that's what it feels like. If you've got a big sell-off, like in 2008 and you have to buy in that carnage you feel sick i mean literally you feel sick because you can see what's happening in markets every new story you read is saying that the world is ending and you know the system's about to collapse and it seems quite plausible that it will but i think that's why it's important to know that that is not the case that a lot of what people say is not true and usually everything's okay i think that's the important thing be an

optimist because ultimately these things do recover if you invest in single stock sometimes those don't recover but if you index if you if you go for indices you know like a whole market or funds then ultimately they do recover if you have a diversified portfolio again it has to have certain caveats but that's the important message i think now i think the one that sort of goes parallel with that is that a lot of investors believe they need to create a job themselves effectively they don't they're not recognizing the time but they they need to put that amount of energy in it coming back to your dead investor analogy which i think is a really good one which which I'm going to use, thank you, Ron.

If you get active early and do your homework and do your due diligence and get into something that's diversified and that's going to follow the general direction of the market providing, you know, we all still believe that it's generally going to go up, then the best thing you can do from there is get the hell out of the way. And for me, I often say things not,

if an investment is creating a job for me, it's not an investment. That's not an investment. That's a job. What I actually want to do is my investments to fund my lifestyle so I can put my energy into the things I actually enjoy doing outside of that and just monitor it, sure, but not have to be so active in it that it's actually replacing my employment income with the time I need to spend managing, monitoring the investments. What's your view on that side of things? Yeah, absolutely. I think that really you shouldn't be spending too much time on investment.

There are certain periods of time when you should be focusing on what's going on. And those are the big sell-offs. That's when nobody else wants to be involved. Those are the real opportunities. But most of the time, you should just be fairly hands-off and just get on with your life. You know, enjoy the stuff that you do, spend time with your family, do whatever it is that makes you happy. And as you say, I don't think investment is a job.

And I think you should have realistic expectations about investment. investment doesn't make you rich investment keeps you rich and ultimately it takes a long time and it should be boring right so if people say well i'm really excited about this trade then immediately that's a red flag for me it should you know should be really boring like taking out the rubbish or washing up the dishes you know it should be there should be just something that you do as part of your routine yeah yeah absolutely great yeah awesome boss um what i'd love to do now is jump briefly into the future for a minute and then i want to drill into some mutual topics of interest so i'd love you to paint out a picture of what your ideal lifestyle

is and make that as vivid as you possibly can for us and then talk to us about what you have invested in and what you will invest in to either make that happen or continue to allow that to happen yeah so for me an ideal lifestyle is a fairly simple one i mean i don't particularly want to live in monaco or have a fancy car so for me having a fairly simple life but you know comfortable you know i like gardening i love my dog um my partner laura you know we we obviously we want to go on things like holidays and not spend all of our time working so I mean when I first started Pension Craft it was literally 24 hours a day seven days a week doing this and the tutoring but now what actually Laura's helped me do is to map out time at the weekends so you know

we go and see friends and we relax we do some cooking together personally I really like to go for walks with ted you know my dog and have time to do that which i'd never had time to do before so i think having that time when you can kind of recover and live your life as well as do the interesting stuff which i really enjoy which is the the pension craft teaching and the business side of things i think having that balance is very important as you say i think that's one of your threefold approaches to to life the three things which are important yeah yeah it's fun that's a Really good analogy. And in terms of your investment approach now that's going to continue to create and then fund that ongoing lifestyle, what are you, again, we're not asking you to give it any big gritties, but your investing approach, how has that evolved? And what are you doing personally in that regard? Yeah. Well, this is why I always say don't copy me, because, you know, not everyone else is got a startup business who's my age with my medical conditions or whatever it is that, you know, worries you.

So so I'd say up to the point where I left the investment bank, there was just that portfolio which I'd left for a long time. And then once I started PensionCraft, I opened up a Vanguard account and I've been generally very cautious in that account since it's opened. So the reason for that is that I've got a fixed amount of capital. And if I lost it, that was it. There was no second bite of the cherry. And I didn't know I was going to have enough money to live until quite recently. So for me, it was very important to be cautious. so I've had a very cautious portfolio a lot of fixed income in it and Vanguard has closed my only equity fund so when valuations got to very high levels last year in February I sold half of my equity and then Vanguard shut down my remaining equity they closed my fund in February and so I've literally got no equity at all now so everything I've got is in bonds and cash so what I'm going to gradually do over the next two years or so is average back into the equity market because

ultimately that's where you get the highest returns and I'm still fairly young and now I've got the ability to pay for my lifestyle I don't depend on my investments that's the important thing you're having investments that you depend on is a very different game from having investments which ultimately could let you retire so now I'm being more risk on so I'm putting more risk on the table and i'm going to gradually build that up over time and if there is a big equity market sell-off then i'll accelerate my equity purchases and go all in but if there isn't then i'll just gradually build up to a mostly equity portfolio yeah yeah something i'd love you to touch on because where australia is perhaps a little bit different from the uk europe and the us

is that we are very tax-advantaged in property here in Australia and Australians have an absolute love for property. In fact, on average, the real estate represents about 54% of household wealth here in this country and property has certainly been very generous to myself and my wife over the long term. I know things are a bit different in the UK what what if any part does properly play in your thinking around investment both now and in the future well in terms of of wealth the UK is

exactly the same about half of UK wealth is tied up in property and many of the clients I speak to not only have a portfolio of standard market investments they also have large buy to let portfolios. So we often have this discussion about which is most advantageous. And look, if you have property, then it can provide a good income. The other benefit is that it gives you leverage returns. So if you put a small amount in, obviously you can amplify your returns, but also your losses. That's obviously a risk. And it's very closely tied to GDP. That's the other that's the first problem i'd say so if you do have an economic downturn generally that's a negative for house prices and because of the fact it's very liquid it's very difficult to sell and

it's costly to sell your property then it can take a while to get out of that market so if you need the money then putting it in property is a bad idea so only money that you can really leave um on the table and untouched for decades i'd say would be suitable for the for for the real estate market but it does provide you with that kind of income and you know the leverage can be attractive to some people but obviously the house you live in is not an investment it's a liability yeah beautiful yeah i'm glad you said that because that's a conversation i have with people here when they come say well i've got money in my house well no you haven't that's actually that's costing you money and it's not worth anything until you sell it and then you've got

to live somewhere so don't don't kid me that your home is an investment because that's that's a place where you live so one of the problems you can't diversify it so you can always buy real estate investment trust so that's commercial property wrapped up as a kind of equity which allows you to diversify globally and that's got sectors as well so you can invest in things like data centers or the area of land, which is used for mobile phones, mobile phone masts, you know, they have to sit on land somewhere. So the way they actually fund that

is via real estate investment trusts, or you can buy shopping centres, obviously not so good at the moment, or office space, again, not great at the moment. But these are the kinds of things where obviously you'd buy it when it's stuffed, you know, because that's when you get the reasonable valuation. So if you're somebody who wants to make the best possible profits, you'd buy those when they're depressed.

But what's good about the REIT market is that it's very liquid. So literally you can sell these things in seconds and it does provide an income as well. so that might be another way to get exposure to property uh which isn't necessarily the case which isn't necessarily as illiquid as physical property that you buy as a as an individual investor and also you don't have to fix somebody's boiler at two in the morning which is another aspect of real estate which i'm sure you may have had to deal with no we don't have people to do that man i i'd say yeah the properties are going to finance and it's also an elite team sport and you're not a player you you just manage the managers mate so you make sure you've got better

people to do that so you're not getting up at two o'clock on saturday night with a screwdriver to go out and fix the yeah that's dispersed hey yeah i'd love to now dive into a subject that i know you've got some passion for and and it's something that i haven't really spoken too much about on the podcast today and i'd like to really elaborate on this area if you don't mind and that's the importance of asset asset allocation and so i'd love you to take us through the key aspects of of that if you like because i know you've got a really good course that that revolves exactly around that can you sort of take us on on the key things that need to be thought about so that the listeners can start to then understand how important asset allocation really is

now we started off with this metaphor of of animals and understanding that a portfolio is kind of like a menagerie or a kind of petting zoo that you have to put together yourself and all of the animals have to sit nicely together and i think that's the way to understand asset allocation what is the attribute of this asset type so let's say it's equity what are the drivers of equity what makes the price go up and down and then secondly what kind of macroeconomic environment would be good for that asset and the answers are often quite difficult to understand and sometimes it's not clear-cut some assets do well in a certain environment in one era but they're not in the same environment in another era so it's not as simple as just saying well interest rates

are going down so it's good for this or that so but broadly it's understanding the attributes of the different asset types what are they so in the in the asset allocation course we go through each of the different asset types, how to work out the risk of the portfolio, how to work out the correlation of the portfolio, and whether things diversify each other. So for example, equity generally does well during periods of economic growth, because earnings go up for companies, and if earnings go up, then the prices track them upwards. Sometimes earnings go up without prices tracking them if people are too glum and sometimes prices go up even if earnings don't so in 2019 earnings in the US were basically flat for three quarters but equity markets kept on going up

and that's the point at which I sold it was the third quarter of earnings growth and then obviously we had the pandemic and everything sold off and I was quite pleased that I'd sold half of my equity at that point. So it's important to understand what drives each market. In equity, it's earnings growth. Prices ultimately track earnings growth. And in the fixed income space, there are a whole bunch of drivers. So for bonds, generally bonds feed on misery. So whereas equity does well during periods of happiness in the economy, the bonds feed on misery. So if there's bad economic news, if there's a disaster in the equity market, that's when bonds really thrive. And that's why they sit so nicely together, because when equities are selling off, you

want something that's not going to sell off with it. And basically within equity, there's almost nothing which is a safe haven during one of these massive sell-offs. You've got to move to another asset class, which is fixed income. and the safest of safe asset classes is US treasuries. And the other thing to understand about bonds is how long are you tying up your money? So if you're tying up your money for a long period of time,

you're baking in a fixed rate of interest. If everyone else is earning more than you, if interest rates rise, well, that's terrible because you've locked in a low rate. So if interest rates rise, the price of bonds go down. And if interest rates fall, the price of bonds go up. So that's another important thing to understand. Central banks, the role of central banks is very important too.

So they are the guys who determine the level of interest rates based on the economy. So a lot of the stuff I talk about on YouTube is what the Fed's going to do because that really matters. And understanding what the Fed is saying is also really important because you'll understand what's going on in markets much better if you understand that monetary policy. and i think a lot of people don't understand that so that's another big part of of what we teach

and then we've got things like slightly more esoteric asset classes like commodities i know people in australia will be clued up to that particular asset type because that's essentially the lifeblood of of growth you have to if you're building beijing you have to have concrete, you have to have rebar, you've got to have glass, steel. So understanding the drivers of commodities is much harder, I think, because it depends on things like mines being shut or demand being modified by economic slumps, whatever it is. So I think these are the kind of broad ways of understanding what's the driver of the asset class? How is it correlated to the other assets that you've got and do they diversify each other and if they do then they might sit well together

in a portfolio and then finally what are the macroeconomic environments where those particular assets will do well just to give you a kind of broad overview of what you'd learn in the asset allocation class yeah brilliant brilliant if you're to sort of sum up the most successful asset allocation strategies that you've seen and then again this is not financial advice and we're not suggesting that you the listeners rush out and do this but what can you share in that regard well i think i think having a having a mix of of equity and bonds which is suitable to your risk appetite is the most important thing and to explain why let me just tell you about what happened in march last year in 2020 now i'd gone blue in the face telling people that when equity

markets sell off, you don't sell, you buy. And people will say, oh, yes, Roman, I agree. I'd never do that. I'd never sell. You can bet one month after it happened, I started getting the call saying, Roman, I sold. And now I'm locked out of the market and prices have gone up. And what am I going to do? So for many of those people, many of whom I'm still talking to you now about that, we're talking about how to get back into the market. So, you know, I think having an asset allocation, which is suitable to your risk appetite, which means that you won't sell when equity markets fall, is really important. So let's say every 10 years or so, let's say equity markets fall 50% from their previous peak. If that's the case, then if your portfolio is 50%

bonds 50 equity then you'll only take half of the hit and that might make you less likely to sell so it's really about controlling your own ability to sleep at night if you're somebody who doesn't like risk or doesn't want risk or doesn't need risk then you know having less equity in your portfolio might make sense yeah so i think that's important you know i think that's important the asset allocation, really the biggest choice is how much equity, how much bonds, and that level of risk. Because if you don't understand the risk, effectively, you're just kind of shooting in the dark.

You've got no idea what's going to happen to your portfolio. Yeah, totally. Something, and I'll bet you this is a question you're getting quite a bit of as well, is for those that haven't invested yet and are sitting in cash, given there's a lot of talk about the emerging asset bubble and the correction straight crash exercise. What do you say to them in terms of do I sit back in cash and wait for the correction and jump in or do I just jump in anyway?

A lot of the people I speak to don't have a lump sum. So these are people who are regularly investing their salary and for them this is irrelevant, right? They can basically put their fingers in their ears and just carry on investing as much as they can, as much in equity as they can for a long period of time. For the people who do have a large lump sum, it's a very different story. They're very nervous now because they see all the stories, they see the valuations sky high. Now, the justification for that until recently was that interest rates were low. So people could say, well, it's kind of understandable that valuations are the highest they've ever been in many cases.

because interest rates are low. Well, they're not so low now, because we've seen US treasuries go from 0.8% to 1.7% over a handful of months. So that justification can't be used anymore. So now they have to say, well, it's fiscal stimulus, which is creating this increase in equity prices, or this is a new paradigm, which is always a red flag. Or they say valuation doesn't matter anymore because in this new world it doesn't matter whether a company is earning enough profits to justify its price now when people say valuation doesn't matter that's when you know valuation matters most of all that's a sure sign that something's badly wrong yeah so for these clients i usually say well i understand what you're saying and but you don't

know how long the bubble is going to last and in japan in the late 80s and early 90s valuations went to double what they are now so literally a price to earnings multiple of 60 or 50 50 to 60 i think it was so you can't just stay out of the markets waiting for a crash so you do have to allocate some capital maybe not all of it but some of it and i think your portfolio really has to express your beliefs about probability. And you always have to allocate based on the most likely outcome. And if you always allocate in terms of tail risks, you'd never get out of bed. If you worried about risks in the same way that people do in their daily lives, then you literally never get out of bed. You'd never drive your car. You'd never drink any alcohol. You'd take no pleasure

in life. So similarly for a portfolio, you've just got to say, well, I've got to take some risk. I'm not completely sure there's going to be a crash. So I have some equity, but maybe I won't allocate my whole 100% of my money into equity. So that's what I generally say. And you can always dollar cost average into markets because then if there is a crash, this is what I'm doing, then you can really fill your boots and go fully into equity.

Yeah. And again, that debt investor strategy, if you're just drip feeding a little bits in regardless of what's happening in the market and therefore timing and market swings is relevant because you're, you're focusing on the next 20 or 30 years, not, not the next two or three months, which is always the, always a challenge. Tell me, you touched on crypto before and I'd love your thoughts on it.

And I'm talking here from a investor perspective, not a speculator, because there's a number of people that have been calling me saying, look, I'm going to sell my investment properties and put it all into crypto. I just shake my head when I hear this sort of stuff. But I'd love your thoughts around crypto generally as a long-term investable vehicle, not a short-term speculation. What's your thoughts?

Well, like anything, the value of crypto depends on what people are willing to pay for it. Ultimately, that's true of any market. But the difference between crypto and other asset types is that it doesn't generate an income. And the reason why I personally, I don't invest in it is because of the difficulty of accessing the market. So if there was an ETF for crypto,

I'd probably invest some of my portfolio in it, you know, just a small percentage because it does provide some diversification because, you know, it's not really tied to any other asset classes. And obviously the returns have been good recently, but it is a very crashy asset class. And what worries me is just as many people approach me after equity markets crash because they bought at the top and they sold, it's so much worse for crypto because the crashes

are so much bigger. And we haven't had a crash in it recently, but you just look back to 2018 and the crash was huge. So I think for many people, the cognitive biases are made that much worse by the volatility, which is around 80%. And the volatility still hasn't come down for things like Bitcoin. People said it would by now,

but it hasn't, you know, it still remains very high. So I think as long as you understand the risk and you understand the behavior, I don't have any issues with crypto as an investment. Would I have it as a large percentage of my portfolio? Probably not.

Because I think you also got to think about what is the impact of the thing I own? So if I buy some equity tracker, effectively I'm providing capital for companies that provide goods and services. Or if I buy a corporate bond fund, I'm funding these companies which provide the goods and services that we use every day. Whereas with crypto, all I'm really doing is paying for a number. I'm paying for a key and it also has a certain energy cost, which I don't like. So what's the net effect on the world? It doesn't have any practical use as a transaction system.

They're not great for Bitcoin in particular. Other cryptos are better. But, you know, I don't really see why the world is a better place because of it, because I'm not paranoid about fiat currencies. I don't share that rather extreme worldview that, you know, fiat currencies are doomed. I just don't think that's true. And I think a lot of the narrative you hear on YouTube, which is that fiat currencies will become worthless because they're being printed to oblivion. I think that's just nonsense. And I think that's very misleading. So what I don't like about it is that kind of religious aspect where you stop thinking.

And if you speak to Bitcoin people, you realize it is like a religion. You know, they'll tell you about it day and night and they just tweet about it. And they're really quite boring, unfortunately. So that's why I don't like it, because I don't like the religious aspect. Well, it's become a... I love your thoughts on this. And maybe I'm just more aware of it now, but the perceived story that's sold around crypto and we're seeing the same with the whole GameStop Reddit herd mentality. It's all about the story and this disconnect

between what the thing's doing and what people believe it's worth. What's your views on that? Is that a trend that you're seeing? I mean, you've been more active and involved a lot longer in the markets globally than I have. Yeah, I mean, for example, GameStop, Everyone is kind of selling that as sticking it to the big guy, the guys in suits, yeah? But if you look at trading volume, what makes the guy at the investment bank able to have

a Lamborghini? It's because there's trade flow. And the more trades there are, the more money they make. Now, trading flow had actually been going down for a long time until GameStop, until we got this massive pandemania, this incredible rally that we got in equity markets. after March in 2020. And because of that huge increase in flow, there's been a huge increase in profits at investment banks.

So really what GameStop and the so-called democratization of investment has done is it's made bankers richer. If you trade a lot, you're just giving your money away to an investment bank. You're paying for their Lambo. So that's probably not the intended consequence. it's not really having the effect that people think it is and really making a company like GameStop which is a broken business model increasing the price of the equity is not an

efficient use of capital ultimately you know it's a company that shouldn't be allowed to thrive because what they're doing is is no longer kind of relevant why would you buy games from a game store in a shopping mall when you can stream stuff now or you can buy online i think that's that's a mistake so i think that's a good example of an unintended consequence yeah yeah it's it's like the old zombie companies back in the japanese exercise where things have been kept alive you know we if we use the medical analogy we we're using the the uh electric shocks to keep the body alive but the brain's dead it's actually actually gone and uh when we start to see that level of perception driving and same in crypto it's it's it's the old greater fool approach you

know as long as the greater fool is going to pay more than i'll i'll keep jumping in but there's no other justification for it other than that pretty much and japan's an interesting example actually if you look at the amount of retail investors this is normal investors involved in generating the flow of business in the equity market, a lot of the trades were done by retail investors during the bubble. But then after the bubble popped and nobody was interested in equity anymore, except for some big institutional players, the amount of retail investment dropped dramatically. And I suspect what we'll see is maybe not falling back to levels that they were at before, but a lot of the people who are new to the market will see after the next correction,

which is ultimately going to happen there'll be less interest and i think a lot of that flow will will kind of go away because people also realize that the best way to invest is not to trade a lot and they're going to have less time on their hands because they won't be stuck at home once the lockdowns end exactly right exactly right and let's just touch on that because that's something that i know you you've spoken about quite a bit in the past and it's again it's a thing that not a lot of investors really get their head around and that that's the effect phase on investment returns can you just uh expand on that subject for us yeah there was really great um talk which i heard by a canadian guy called larry bates who he creates something called the

t-rex calculator so t-rex and if you just look for larry bates t-rex on google you'll find his calculator but effectively what you do is you you tell this calculator how much am i investing What will my return be? Say 6%. How long am I investing for? 10 years. And what's the fee I'm paying? So let's say returns are 6% and you're paying 2% in fees. Well, you'll get a pretty good return over that 10-year period because of compounding. But if you're paying 2% of it away every year, then you're giving away a third of your gains. So what the T-Rex calculator works out is what percentage of the gains you keep the analogy i always think of when i'm thinking about this is imagine you're feeding pigs right you're one of the snouts in the trough but it's like

your broker is one of the other pigs and he's got a really big snout and he's eating some of your returns and then you've got your platform eating some of your returns and then your fund manager so the idea is to have less snouts in the trough because that way you get to keep more of the returns and that's what the t-rex calculator does it works out the percentage you keep so reasonably now you can you can trade with a fund that costs you 0.2 you can buy global equity for 0.2 your platform depending on how much you invest will be roughly 0.2 again so your all-in fee every year should be about 0.4 so that's a very small snout and you get to eat more of the return so i think that's the key thing having the least

number of people between you and the assets which generate your your returns and then it's been and then the least amount of churn so you're not sort of buying and selling all the time or moving in and out uh unnecessarily and you put those two together and then get out get the hell out of the way and let time do its work uh yeah i think that sums it up and i love that pig analogy yeah i love the way you keep bringing it back to uh to that uh um now something else i just want to sort of close on before we get into the ambush series you've written a great book called investing in fear and it's one thing that that permeates every aspect of every level of media these days roman because the and i'm going to sort of

display my hand here i think a lot of media needs fear to engage our eyeballs in our earbuds to keep us watching i'd love for you to talk about your book investing in fear and what are some of the the key take-homes that might be relevant to the listeners on that one well i i knew that lots of people were investing in volatility so you know it's something we used to talk about at the investment bank and we obviously had to understand volatility but it sounds like it's just like a If you're at school and you're working out how much something changes over time, that's called the standard deviation. So it's literally as if you're trading the amount of wiggliness in a stock. So that's what volatility is.

And you can actually buy and sell it. But what I'd heard was from clients that there were grannies buying volatility products and betting on whether the level of VIX, which is called the fear index, whether it would go up or down. So I thought, well, surely they don't understand the product because it is quite complex because you can't actually buy the VIX directly. You have to buy futures on the VIX and that in turn has a carry cost. So all the time that you hold the product, it's losing money unless fear spikes. So the whole book is teaching you about when it kind of makes sense and how to get exposure to that volatility. So how do you minimize your carry cost? There are certain products which do that.

So the rent you pay while you wait for a crisis to happen is smaller. And then secondly, once one of these crises do happen, can you buy a product that will make money as the price of VIX falls? And what's the best way to do that? You know, what's the best level of VIX to get in and out? And it turns out you can't really predict the spike upwards, but the spike or the kind of falling down of the volatility afterwards is more predictable so i think that's probably the better way to play it and if you are going to go for a long-term

volatility exposure as part of your portfolio it's best to go for one of these these products which minimize the the the kind of roll cost which is the price you pay to hold it but that's the role that's the goal of the book to try and explain how these these costs and strategies might work in a portfolio practically. Yeah. Yeah, and I love it. Again, I think fear increasingly is going to play a big part in every aspect of our lives,

given the focus of all forms of media on that very thing. So, and as a hedge, sort of embracing that as an opportunity rather than as a threat is something that I haven't seen anyone else put in the engine to. So I'm going to jump into the ambush round, if I can, Raman, which are just five quick questions that the listeners always love to glean your words of wisdom on. And the first of those is, what's your favourite quote and why?

I think it's probably one by Warren Buffett, which is, when the tide goes out, you can see who's swimming naked. Because at the moment, that's what's happening, right? We're seeing lots of scandals unearthed, and the tide's gone out. Yeah, no doubt about that. The top, other than your own books, what's the top book that you'd recommend listeners read and why? It's probably Morgan Housel's book,

which is The Psychology of Investing, or The Psychology of Money by Morgan Housel, because I think that touches on this theme of how to control your own behaviour when it comes to investing, which i think is probably the most important thing yeah absolutely great yeah this one's a little bit left field most aussies feel like they pay way too much tax uh what's the top and legal thing that you've done to minimize the tax that you pay um earning less i used to pay a fortune in tax and then i left investment banking and now i pay very little

that's an easy solution and running your own business is also a very good way to do it as well um yeah back on the investment advice i want to cover off on both ends of the spectrum here what's both the the worst investment advice you've ever received and the best investment advice you've ever received i think the worst was to buy gold and it was actually from one of my strategist friends at the bank who is the gold strategist the precious metal strategist strategist and my mistake was to believe them and that they knew what the hell they were talking about so that was an awkward moment uh sorry adele um and then the best advice i think probably was um was the fact that it was probably that jim o'shaughnessy thing which is

the best investor is a dead investor that really caught my attention and made me realize the best behaviour. Yeah. That's such a good analogy. I actually haven't heard that before and I'm going to use that, Raman, because it says it all.

It's if you just allow time and the markets to do their work then that's providing you've done the right thing, diversified yourself early on and I think correct me if I'm wrong, but I think Buffett

that said that once he passes, he's suggesting his wife just put money into a good Vanguard index and set and forget, get out of the road. Yeah, that's right. An S&P 500 fund, a little bit into treasuries, and that's it. So if the best stock selector in the planet thinks that's the best thing to do, that's good enough for me. Yeah, likewise.

Last one, what's a personal habit or a rewarding ritual that you believe contributes most to your investment success tonight? I think learning about investment is probably the best thing because even though it initially leads people to make complex portfolios, ultimately it makes them create simple portfolios.

And usually I just have two funds in my portfolio. So I think understanding how to invest is probably the most important thing. is that continual learning and i'm still learning when i make courses when i make videos that process should never end because things are always changing yeah yes hold on that final question and it's a it's a big one but it gives you an opportunity to wrap all this up neatly if i gave you a microphone that spoke to every single one of the 7.7 doing a lot of people that are currently alive in the world and i gave you one minute to talk what would you suggest

i invest in so firstly i'd say have a plan don't just buy stuff willy-nilly what i see a lot of the time is people end up with a portfolio like an accretion disc around a black hole where it just basically sucks in all these different trades and products keep it simple you literally just need a couple of funds and you're done the second thing is know what your goals are some people want to have a champagne lifestyle some people want a simple lifestyle but if you know what your goal is you can build your portfolio to fit that goal. Learn about yourself. That's as important as learning about markets.

And keep less snouts in the trough. So don't pay too much in order to have those investments. Pay as little in fees as possible. And basically have fun with it. But I'd say keep it as simple as possible. And if you do want to have a little speculative bet for fun, make it a small proportion of the portfolio, not a big allocation. yeah yeah beautifully said uh now and for those that uh have enjoyed our conversation as as much

as i have and want to reach out to you and do some more with you how can they do that well just watch our youtube channel just go to youtube and look for pension craft and you'll see links to the stuff that we provide the membership you can support us on youtube or um you can also sign up for our newsletter which is free so that that's what we offer So YouTube's a good place to start. Yeah, awesome. Look, you've been very generous with your time. I know it's very early in the morning there in the UK

and you've got the hot cuppa to keep you company, but really enjoyed the opportunity. I've been getting a lot of value out of your YouTube segments for quite some time now. And that was what really sparked my interest to get you on because I want many more Australians to be tuning in to the sort of ancient wisdom almost that you're sharing there that's giving them impartial advice that they often can't get

from anywhere else. Everyone else has got a vested interest in trying to push them in a certain direction. What I love about what you're doing is you're giving them the information that then allows them to make more informed decisions based on what suits them. So very appreciative and looking forward to staying in touch as you continue to grow and prosper.

Thanks, Ryan. Thanks for a great interview. I really enjoyed that. Thank you, Bushy. Thank you, Raymond. Talk soon. Thanks for tuning in to Get Invested on the Property Hub podcast channel, your home for property investment insights and inspiration.

And don't leave yet until you've taken the next step towards living by design by getting my award-winning book, Get Invested, absolutely free when you sign up at knowhowproperty.com.au or bushimartin.com.au. And finally, make sure you subscribe to Property Hub to get your weekly dose of Get Invested inspiration, along with every episode of Realty Talk, Australia's leading property show for red hot property investing news and insights, direct from industry leaders and influencers. Remember to always get invested in your knowledge, and I look forward to seeing you next time.