Property Hub - Investment Insights & Inspiration - Get Invested: Shares without the circus — build wealth, not a second job

Starting point is 00:00:00 Hi friend fighters. Now there's a red button sitting beside millions of investors right now. It doesn't flash, doesn't sound an alarm and it doesn't ask whether you've slept, panicked, argued with your partner or swallowed three hours of financial fear-mongering before pressing it. It simply says buy or sell and that may be the most dangerous convenience in modern investing because the share market gives you the power to change your mind in seconds. But it doesn't give you the wisdom to know whether you should. In comparison, when your investment property falls in value, you generally can't panic sell it before lunch.

Starting point is 00:00:43 There's paperwork, agents, conveyances and enough friction to let your nervous system put its pants back on. But shares? Well, one ugly headline, one red screen, one confident bloke on social media filming inside a rented sports car and your 15-year freedom plan can be sold before your coffee cools. Perhaps that's why share investing can feel a bit like the Melbourne Cup conducted inside a circus tent with a betting window in your pocket.

Starting point is 00:01:12 There are form guides, hot favourites, dark horses and last-minute whispers. And at least one bloke who knows a bloke whose cousin once cleaned a trainer's pool. Then the gate opens, the noise explodes, your carefully selected champion gets boxed in behind three mining stocks and the horse you nearly backed romps home at 40 to 1. The only guarantee, when it appears to be, the person that's charging for the tips. Now, some investors possess the knowledge, the time,

Starting point is 00:01:42 discipline and the temperament to analyse individual business as well. But many of us aren't Warren Buffett with a better hat. where time poor Aussies trying to build enough wealth to fund a better life without accidentally enrolling in a second full-time job called watching the ticker and I learned that lesson the very expensive way years ago I paid five and a half grand to learn technical trading using CFDs or contracts for difference it came with charts systems and leverage of up to 100 to 1 which all sounds very sophisticated right up until you realise that 100 to 1 leverage is the financial equivalent of juggling borrowed chainsaws while bouncing on a trampoline. Then the market opened

Starting point is 00:02:30 well below my so-called guaranteed stop-loss safety net and I lost 33 grand overnight on a single trade. Yeah, you heard that right, $33,000. Now that wasn't an investment return, that was a very expensive tuition fee from the university of know enough to be dangerous and it eventually changed my question. I started asking what will the market do next and I started asking which investment approach will stop me doing something stupid next because I wasn't investing in businesses. I was auditioning for the high wire act in the share market circus. Now I'm clearly not a shares expert. Yes, I've dabbled in CFDs, direct shares, managed funds, ETFs and index funds and I know enough to know exactly how dangerous knowing a little can be. So today isn't about hot

Starting point is 00:03:22 tips, heroic forecasts or crowning one universal share market winner. It's about deciding which horse for which course with which jockey might suit which investor when. So there's technical trading for the rare person who understands the very different risks, including leaving the course without their financial trousers. There's direct shares for those with the skill, time and stomach for concentration. Then there's broad index funds and ETFs or exchange traded funds for diversified ownership with less labour. There's also evidence-based factor approaches for those who accept different rules and uncomfortable periods of trailing a market cap index. And let's not forget active professional managers for those prepared to pay for judgment while accepting

Starting point is 00:04:11 that the expensive jockey may still trail the field. So today you'll discover why an ETF label can be a costume and why five different fund names may still own the same handful of favourite horses. Why the large share portfolio you own may already be hiding inside your investment stable but you haven't realised it yet. We'll run into how fees, tax, currency, concentration and behaviour can all nibble at your compounding and why a cheap fund becomes painfully expensive when fear sells it at the worst time.

Starting point is 00:04:48 Then we'll put equities through the same life-first inspection that we're using on all the other assets that we're progressively wheeling into the workshop over this approach series of episodes and sticking them up on the hoist to run full diagnostics. without making it sound like an acronym recital and an accountant's Christmas party. So we'll test growth, income, liquidity, time, control, risk, tax and simplicity and most importantly, whether the whole thing fits your goals, your capacity,

Starting point is 00:05:17 your family, your stage of life and your nervous system. You'll find out who shares may suit, who should approach them with care and who should watch them from a very safe distance. And before we finish, you'll have a simple way to give equities a green, amber or red traffic light inside your personal strategy. Plus the behavioural guard lines and the guard rails that you'll need to write before fear arrives with its finger hovering over that big red button. Because a brilliant horse on the wrong course with the wrong jockey is still a bad bet. And the goal isn't to beat the market this afternoon. The goal is to own productive businesses for long enough to help fund your ideal lifestyle

Starting point is 00:06:03 without the ticker owning your attention, the circus owning your emotions or your investment quietly becoming your second job. So let's get invested together and find out whether equities belongs in your freedom stable or whether the share market ringmaster has already measured you up for a clown suit. So stick with me, grab your popcorn, and let's explore if and where shares and equities investment fits your strategy inside the tent. Welcome to Get Invested on the Property Hub podcast channel, the leading weekly show for Australians who want to learn how to unlock their 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

Starting point is 00:06:50 to break free from the grind, discover freedom and to live by design. Subscribe now and join me and get invested in the life that you really want. Let's get started. But first, I'm interrupting today's episode to invest in something far more important than property. Our long-term listener, Property Hub Collective host, fellow property investor and great mate Eddie, the Frenchman on the run, is currently attempting the almost impossible. He's running non-stop more than 3,900 kilometres across the country, from Cottesloe to Bondi, chasing a world record and trying to raise a million dollars for Red Kite

Starting point is 00:07:32 to support children with cancer and their families. Day after punishing day, it is covering anywhere between 70 to 110 kilometres, despite mounting injuries, crushing exhaustion and a mental battle that most of us can't even imagine. this is his horizontal mount everest but this is what matters eddie's deliberately choosing pain to help families living through crushing pain that they never chose so please don't just be inspired get involved follow at frenchman on the run on instagram share his journey and donate now at frenchmanontherun.com just click the link in the show notes

Starting point is 00:08:18 if 10 000 aussies like you and me donate just ten dollars a day for 10 days together that's a million dollars and every follow fuels him every share spreads his mission and every dollar helps the family through the fight of their lives so come on australia let's all help carry eddie while he carries hope across our great continent one more step helps one more family as he keeps quietly made in history. Righto, let's get back to the episode. Well, I'm afraid of fighters. Here's a slightly uncomfortable thought. You may be trusting a large part of your future ideal lifestyle to a share portfolio that you've never inspected. And stranger still, you may not even know that you own one. Now, before you decide whether shares are your thing, which shares to buy,

Starting point is 00:09:11 which fund to follow, which jockey to trust with your money, there's one awkward question that you need to answer first. How many shares do you already own? Because for many Aussies, the answer isn't zero. It could be hundreds or even thousands of companies sitting quietly inside your superannuation while you're standing at the share market betting window wondering which horse to back first. Now, it's a bit like arriving at the Melbourne Cup, studying the form guide for your first bet, then discovering your retirement stable may already own part of the field, several trainers and a slice of the grandstand. So your first action today isn't buy, it's inventory. Before you add anything new, you need to know what you already own, where you own it

Starting point is 00:09:59 and whether your shiny new idea is genuinely diversifying you or simply buying the same favourite horses in different coloured silks. Now to do that we need to strip away the flashing prices, the three-letter ticker codes and the share market theatre and get back to what a share actually is. A direct share isn't just a green or red number on your phone, it's a tiny ownership interest in a real company with customers, employees, assets, debts, risks and if things go well profits and future value. The price is the scoreboard. The business is the game. And if you spend all day staring at the scoreboard, you can easily forget what you actually own, why you bought it, and how long the game needs to run. But there are different ways to enter

Starting point is 00:10:49 this ownership race. It can be the operator, owning and running the whole stable, feeding the horses, fixing the fences, and occasionally wondering why every bucket's got your name on it. That's the business investment that we inspected in our last episode. Or it can be a direct shareholder, choosing particular companies and accepting more control, more concentration and more responsibility for getting the selection right. Or it can be a fund investor, where you generally own units in a collective investment vehicle and what's held underneath is selected by an index methodology, a rules-based process or a professional manager.

Starting point is 00:11:29 The ownership connection is still there, but your workload, control, cost, concentration and decision burden can be completely different. And then there's trading, where the main focus shifts from owning businesses for their long-term value to profiting from short-term price movement. So with a derivative like a CFD, for example,

Starting point is 00:11:50 you generally don't own the underlying share at all. You're entering a contract whose value moves with the underlying price. So same circus tent, but very different act. And as my $33,000 tuition fee made painfully clear, you better know which act you've joined before the lights go down. Now, this is exactly why we're in the A for Approach stage of your property wealth journey,

Starting point is 00:12:15 where your W for Y chooses the life that you're building towards. Your E for Examination reveals what your money, time, health and headspace can generally support. and your A for approach chooses which investment vehicles get a job when in helping to bridge the gap for you. So not the loudest vehicle, not the vehicle your mates just bought and definitely not the glitter covered horse that your algorithm keeps shoving under your nose because you paused on a breathless reel. You need the vehicle that fits your destination, your capacity, your time frame and your temperament. And can I challenge you here? Because this is exactly where the AFA

Starting point is 00:12:58 approach work actually separates investors to eventually build their version of sustainable success from the great Australian gunner stable. Gunner check the super, gunner write the plan, gunner diversify, gunner do something different one day. So if your eyes are glazing over or your attention is already wandering back to the next shiny property, don't take that as proof that this doesn't matter. Take it as a warning light because successful investing is often decided in the very unsexy work that most gunner investors avoid. So I challenge you to stay with me and I want you to challenge yourself and turn at least one insight today into an action. Because if you keep doing what you've already done, you'll keep getting what you've already got. While you keep

Starting point is 00:13:48 blaming the market, the government, the advisor, or bad luck for a destination you never properly mapped out or drove towards. Now one very important distinction here, super isn't another horse in this race. It's more like the tax advantage stable that can hold different investment horses. So depending on your fund and chosen investment option, that stable may contain Australian shares, international shares, property, fixed interest, cash, or a mixture of all of the above. So after this episode, don't just check your super balance. Check the investment option that's sitting behind it. What does that actually hold? How much is it really exposed to Australian and international shares? And if you're investing outside super as well, are you filling a genuine

Starting point is 00:14:36 gap or simply buy more of what you already own. So let's make this real by referring back to Michael and Jessica, our fictional property crash test dummies from the sniff test episode of the stoonish days that we introduced a couple of weeks ago. And if you remember, they had around $235,000 in combined super and another 10 grand in shares outside of it. Now suppose, purely for illustration, that 60% of their actual super investment options or exposed to shares. That would be about $141,000 of share ownership inside super plus the $10,000 outside or roughly $151,000 of equity exposure before they buy one shining new ETF. So the statement, we don't invest in shares, may really mean we haven't looked under the bonnet

Starting point is 00:15:24 yet. And the 60% that I mentioned isn't a recommendation or an assumption about their option. It simply shows you why the look-through comes before the shopping list. Now, that's an exposure order, not a recommendation to change anything. And just to keep our financial trousers firmly attached, what I'm sharing today is general education and personal experience, not personal financial tax or investment advice. Because your personal circumstances matter, so get license advice where you need it. So our job today is to help you ask much better questions before you or anyone advising you start supplying answers and we're going to organize those questions around five investment lanes but instead of asking which lane wins we'll ask three far more

Starting point is 00:16:14 useful questions. Who's making the investment decisions? How concentrated or diversified is the ownership and how much time skill cost and emotional energy does the approach demand from you those three questions help separate technical trading direct fundamental investing broad market indexing evidence-based factor rules and active professional management not into a podium of first second and last but into a map for different investors at different stages with different capabilities and different definitions of a good life. Because the best approach isn't necessarily the cleverest looking one. It's the one that you can understand, afford, implement and stick with without turning your freedom plan into another job or turning yourself into the most

Starting point is 00:17:02 dangerous animal in the investment stable. And that brings us to equities investment specialist Raman Nikesa. Raman's a physicist with a doctorate, a former investment bank strategist who spent 15 years inside the industry, and the founder of PensionCraft, where he turns complicated investment concepts into clear, independent education. Now, I explored Raman's full story here on Get Invested way back in a great episode in May 2021, which we'll link to on the show notes. And when I spoke with Raman, he shared a lesson that sounds almost too simple for an industry that gets paid to look very complicated. His more successful investments weren't necessarily the ones that he worked hardest on.

Starting point is 00:17:45 They were the ones that he largely left alone. Now, that doesn't mean do nothing, learn nothing, and buy anything. Bad investments don't improve because you neglect them. But once you've got a sound plan, a suitable approach, and sensible ownership, activity can become the enemy of outcomes. So as you listen to Rahman, notice two things. What happened when he tried to get clever and what improved when he became boring? Because in the share market circus, the quietest investor may be doing more for the future

Starting point is 00:18:20 than the busiest performer under the big top. So here's Rahman. 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 I think there was an investment grade, an investment grade corporate bond fund.

Starting point is 00:18:51 So those are the kind of things I put into my into my ISA and I just left it. You know, I never even looked at it. And I actually did very well because I ignored it. 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 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

Starting point is 00:19:28 invest right and there's a 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 and let's spell that secret out because this is something that i i don't see many investors in 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 and i'm in australians that are predominantly we're much more cosmopolitan now but we there's a lot of british heritage in the way we operate thinking and behave here in australia and i'm i'm a proud convict myself actually raman if we take the heritage back far enough but what what goes with that is this got to be doing it got to be active got to be making

Starting point is 00:20:16 it happen whereas you know if we tease out what you just shared with us uh your your best performing uh investment was the one you didn't do anything with you just it's set set and forget can we can you sort of uh 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 um realized how important that message was was a story that i'd heard from jim o'shaughnessy who's written a brilliant book called what's 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 fin twit 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

Starting point is 00:21:02 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 performed the best. And it turned out it was the dead clients, these people who'd 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'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

Starting point is 00:21:48 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 uh 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 mostly for the listeners who who aren't watching this uh raman's beautiful dog is spread-eagled on the couch uh directly behind him so 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

Starting point is 00:22:41 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 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

Starting point is 00:23:27 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'll go i know you had ascribed to some of warren buffett's philosophies as well but one of his best i think is to use to spend a lot of time with the bat ready to hit the ball but until the perfect perfect ball comes along you don't swing so it's a pretty good analogy i think so for him fathers rama's teddy

Starting point is 00:24:18 approach is wonderfully memorable here. A short burst of activity followed by a very long nap on the investment sofa. And for most of us, that already sounds more attractive than becoming a full-time financial ferret frantically digging through every market headline looking for the next hot tip. But before we turn keep it simple into a bumper sticker, there's a very important catch. Simple can mean deliberately designed or it can mean completely unexamined and they're clearly not the same thing. A single fund can give you exposure to hundreds or thousands of companies or it can concentrate you into one narrow market, sector, theme or investment idea. Meanwhile five different ETFs can look beautifully diversified on your screen while leaning heavily on many of

Starting point is 00:25:12 the same big companies underneath. So that's clearly not diversification. That's the same horses wearing five sets of racing silks. And a direct share portfolio can hold 20 company names yet still be highly concentrated in one country, one industry, one economic driver or one optimistic story. So the aim isn't to own the fewest things. The aim is to own the fewest moving parts needed to do the required jobs without hiding risk inside something that merely looks simple. Because good simplicity is what's left after you've done the important thinking. Bad simplicity is what happens when you skip it. So before you buy a share, a fund or an ETF, you need to ask four basic questions. What do I actually own? What jobs are meant to perform?

Starting point is 00:26:04 What else do I own that behaves the same way? And what would cause me to abandon the plan at exactly the wrong time. Now, that last question matters because Raman's next story isn't really about a garden centre. It's about what happens when familiarity dresses itself up as expertise, confidence becomes concentration, a falling price becomes a panic button and an intelligent investor meets the least intelligent version of himself. So as you watch this next extract, don't just listen for what Raman bought. Listen for the chain of decisions that turn one ordinary investment into a behavioral train wreck because if you can recognize that chain early you've got a much better chance of breaking it before it breaks your investment plan

Starting point is 00:26:50 so here's Rahman's garden center confession but 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 Y Vale garden centers 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

Starting point is 00:27:36 I go and 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?

Starting point is 00:27:58 No, I sold just after it crashed. So I bought at the peak. I sold at the bottom. and obviously you know i 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

Starting point is 00:28:31 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.

Starting point is 00:29:17 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 PensionCrafters, usually the younger ones, are heavily invested in crypto, which is fine if you understand the risks of that, and you're kind of happy with the investment itself. Whereas some of the older people invest more in things like venture capital trusts, where you're funding startup companies,

Starting point is 00:30:06 or they invest in Russia, or emerging markets, or some of them just have a single fund. 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

Starting point is 00:30:51 yourself in your style and i mean you touched on a really important point there because all the the fundamental whether you're the technical or you're a quant or whether you're a value investor or you 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 uh because how you think and then how you act are going to have a big impact on 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 that I see in a lot of investors is that they spend all the time externally looking at what's going to happen. They spend very little time thinking about how they think and what's between the ears

Starting point is 00:31:34 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 PensionCraft 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 behavior 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 you know we're very ill-suited to being investors if we sense the 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

Starting point is 00:32:42 fire so you've almost got to be like a marine i mean they truly 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

Starting point is 00:33:33 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. Yeah, I think one that sort of goes parallel with that is that a lot of investors believe they need to create a job themselves effectively. They're not recognising the time, but they need to put that amount of energy in.

Starting point is 00:34:05 Coming back to your debt investor analogy, which I think is a really good one, which I'm going to use, thank you, Bronwyn. uh the uh if you get active early and do your homework and do your due diligence and and get into something that's diversified that's going to follow the general direction of the market providing you know we 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 and for me uh i often say a thing's 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

Starting point is 00:34:44 the things i actually enjoy doing the outside of that and just yet monitor it sure but not not have to be so active in it but it's actually uh replacing my uh employment income with with the time i need to spend managing monitoring the investments but what 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 times when 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 that 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

Starting point is 00:35:26 it is that makes you happy and and as you say i don't think investment is a job and i think you 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 be really boring, like taking out the rubbish or washing up the dishes. It should be just something that you do as part of your routine. Now, that's very interesting because Rahman's garden centre story isn't just an admission. It's a mirror. Because four warning lights flash in sequence. First, familiarity felt like competence. He understood gardening,

Starting point is 00:36:13 so his brain quietly decided that he understood the garden centre business. But using the products isn't the same as understanding the company. Now, I've eaten plenty of chocolate, but that doesn't qualify me to value a cocoa supply chain or run Willy Wonka's factory. Second, confidence became concentration. The more certain he felt, the more he bought, which meant that the cost of being wrong grew faster than the evidence behind him. Third, liquidity became temptation.

Starting point is 00:36:45 The share price fell, the red button appeared, and discomfort demanded action. So a market fall became a permanent personal loss when he sold. then you had to watch the investment recover without it. And here's the arithmetic that your frightened brain won't volunteer while the screen's flashing red. If a $100,000 falls 20%, you've got $80,000 left. To get back to $100,000, you don't need 20%, you need 25%. After a 30% fall, the remaining $70,000 needs nearly 43% to recover.

Starting point is 00:37:23 And after a 50% fall, the remaining money needs 100%. Now, that's not a forecast. It's just the brutal mass of digging a percentage hole, which is why panic selling after the fall can convert temporary volatility into a permanent freedom plan wound. And fourth, the approach didn't fit the investor. He had the books, the data, and the analytical ability, but not the desire to turn individual share research into his second job.

Starting point is 00:37:56 And that's the key distinction. A direct share approach can be entirely valid for the right investor but it becomes dangerous when borrowed confidence, limited time and emotional concentration are wearing the jockey's silks. And a fund isn't a magical antidote. A fund can be broad or narrow, cheap or expensive, transparent or confusing well-built or badly matched an atf is a rapper not a quality stamp for the investment gods so next we're going to meet the five jockeys in this share market race

Starting point is 00:38:33 we'll look at what each approach does well what it demands in time skill fees and emotional control and which investors should climb into the saddle or quietly hand the reins to someone or something more suited to the course, because there isn't one winning approach for everyone. But there is a very expensive way to discover that you've chosen the wrong one, and we're going to help you to avoid paying that tuition fee next. So let's open the starting gates, because if you've been waiting for me to name the one winning jockey, I'm about to disappoint you. In the most useful way possible, There isn't one universally best way to invest in shares.

Starting point is 00:39:15 There's only an approach that's better or worse suited to you, the job you needed to do and the course your life's asking you to run. So here's our race day map. The horse is the investment approach, how the business is selected, combined, held and eventually sold. The course is your real life, your goal, timeframe, cash needs, capacity and tolerance for rough ground. and the jockey is whoever or whatever makes and maintains the decisions.

Starting point is 00:39:46 Now that might be you, an index rule book, a systematic process or a professional manager and this matters because a good horse on the wrong course with the wrong jockey can still end up in the mounting yard manure. So let's meet the five jockeys. In barrier one or the first lane is the screen watcher. This is technical trading or short-term speculation. Decisions are driven mainly by price movement, patterns, momentum and timing rules, rather than by owning a productive business for its long-term economics.

Starting point is 00:40:21 And with products like CFTs, you're not buying the underlying asset at all. You're speculating on the price movement, often with leverage turning a market sneeze into a financial cyclone. now disciplined training can be a genuine craft for a very small minority who've got a tested system as well as the required time skill risk capital and exceptional emotional control but if your priority is to build wealth without creating a second job this is generally the wrong saddle now as i've mentioned i've ridden this horse and my 33 000 cfd bruise still remembers the course. So the fit question is simple. If the screens disappeared for six months,

Starting point is 00:41:04 would your strategy survive? If it wouldn't, you may not own an investment plan at all. You may own a demanding job with no sick leave. Then in barrier two, in the second lane, is the business detective. This is direct fundamental or value investing. You choose individual companies by examining the business, its earnings, cash flow, balance sheet, competitive position, management, governance and price. The upside, direct choice, control over what you own and the chance to benefit from dividends and business growth. But the entry tickets, real research, valuation discipline,

Starting point is 00:41:44 the humility to ask what if I'm wrong and the stomach to hold fewer businesses without hugging them emotionally. because familiarity isn't research wearing on a Cobra. Buying a company because you use its products is like backing a horse because you like its name. This lane may suit you if you generally enjoy business analysis, have the time to keep learning, can document why you bought

Starting point is 00:42:08 and recognise when the facts, not the price noise, have broken your thesis. It's unlikely to suit you if research feels like homework, your following tips, or one company failure could permanently derail your freedom plan. Next, in barrier three, or the third lane, is the whole field owner. This is broad market indexing. Instead of trying to pick the Melbourne Cup winner, you buy a rules-based slice of a broad field and accept the market's result, lest the investment costs another friction. now it's appeals obvious broad business ownership low administration clear rules and often lower

Starting point is 00:42:49 fees that can make it a strong candidate for time poor investors who want the businesses to do more of the work than they do but don't confuse index with everything or etf with broad and diversified an index can be concentrated by country country sector company size or the rules used to build it and an ETF can track almost anything including a narrow theme that's basically one show pony wearing a diversified looking rug. Now this lane may suit you

Starting point is 00:43:21 if you value simplicity, automation and low time demand and you can accept market returns and market falls without chasing last year's winning jockey. It won't suit money you'll need in the near term or an investor whose panic button activates every time the scoreboard turns red.

Starting point is 00:43:39 This is evidence-based, factor-based, systematic investing. It sits somewhere between a traditional capital market index and a manager picking companies by personal judgment. A systematic process uses research-led rules to tilt a diversified portfolio towards characteristics associated with higher expected returns, such as company size, relative price or value, and profitability. now dimensional investing is one example of this philosophy but that's an illustration not a recommendation and no factor premium comes with a winning post guarantee the approach can remain

Starting point is 00:44:19 systematic without being chained to every rigid index change but it can cost more be harder to explain and behave very differently from the broad market for a painfully long time and that creates tracking regret when your sensible looking plan falls behind the popular scoreboard and the crowd starts booing your jockey. Now next in barrier four and the fourth lane is the evidence engineer. Now this lane may suit you if you value evidence and repeatable rules, understand the extra friction and can stay committed through extended underperformance. It won't suit you if you'll abandon the factors just before they potentially matter or if complexity weakens your confidence rather than strengthening it.

Starting point is 00:45:04 Then in the final fifth barrier in lane five is the professional selector. Now this is active professional management. You pay a manager to select, wait, monitor and change the portfolio for you. That can provide professional research, deliberate risk management and access to a strategy or market

Starting point is 00:45:24 that you don't want to run yourself. For a time poor investor, delegation can be valuable but delegation isn't application. You still need to understand the manager's job, method, benchmark, fees, turnover and failure conditions because the risks include higher friction, manager selection, style drift, key person dependence

Starting point is 00:45:47 and paying more without receiving more after-coups. So this lane may suit you if you value school delegation, can assess the process rather than chase performance and can stay with a credible manager through an uncomfortable patch. It won't suit you if your selection method's who won last year because that's not due diligence. That's reading yesterday's form guide after the race is actually finished. So that sums up your five barrier lanes.

Starting point is 00:46:18 The screen watcher, the business detective, the whole field owner, the evidence engineer and the professional selector. now here's your 30 second scratching test if you can't or won't watch screens and follow a tested trading system then scratch lane one if you won't read company reports understand valuation and monitor the business thesis scratch lane two if accepting the market result feels far too ordinary be very careful with lane three if trailing a broad index for years would make you abandon the evidence then scratch lane four and if you choose managers from last year's leaderboard don't pretend you've researched lane five. Now this little test doesn't pick your winner but

Starting point is 00:47:03 it quickly removes horses that you're just not equipped or willing to ride. So none of them are automatically a green, amber or red traffic light. The verdict depends on the horse, the course and the jockey after time, fees, tax friction, concentration and behaviour have all crossed the line. And yes, some investors may eventually combine approaches using a broad core with carefully controlled satellites. But we'll come to that later because combining five poorly understood approaches doesn't create sophistication. It creates a firing circus with a bigger fee bill so before you choose any lane we need to take every horse every course and every jockey through the same pre-race asset inspection where your baromian rings tests your

Starting point is 00:47:52 destination your gear set tests your fit your sniff inspects what you actually own and your prosciutto code exposes whether your behavior can actually survive the ride because the next question isn't which barrier lane sounds smartest it's which one still works when life markets and your emotions stop behaving nicely and that's where we're going to go next because now that we've met the five jockeys no sensible steward lets a horse onto the course just because its owner says trust me mate she's a beauty before any approach turns a place in your freedom plan it needs to pass four inspection stations, where the first checks the course map, the second weighs the investor, the third inspects the investment, and the fourth tests whether your

Starting point is 00:48:40 behaviour can actually survive the ride. So the same assessment that we're applying to all investment asset classes, but today we're applying it to shares, funds, ETFs, and the five lanes that we've just met. So starting with inspection station one, the baromian rings. Now this is where your lifestyle, finance and investment need to agree on the same destination. So starting with the lifestyle ring, what future freedom is this money meant to fund? When do you need it? And what job must the equities perform? Is it long-term growth, income or distributions, diversification away from your business, property or Australian exposure or accessible capital for a later lifestyle phase.

Starting point is 00:49:24 Because money with a known near-term appointment like your emergency buffer, a home deposit or planned spending shouldn't be sent into a volatile long-distance race just because a starting gate was easy to open. Then comes the finance ring. Is this genuinely surplus capital? Are your buffers protected? Can your cash flow keep supporting the plan

Starting point is 00:49:46 without forcing you to sell when markets or life turn unfriendly? And are you quietly adding borrowed money or margin that turns an ordinary fall into a forced sale? Because shares may be liquid, but a fragile financial structure can still lock you into the wrong decision. Then comes the investment ring. Which of the five lanes is doing the job? What structure or wrapper holds it?

Starting point is 00:50:12 What exposure do you already own through your super? And does this equities investment fill a genuine gap or merely add another racing silk to the same horse? Now, if those three rings aren't connected, stop admiring the product and repair the plan. Then we move to inspection station two, the gear set weigh-in. Now, this tests whether the approach fits your actual life, not the imaginary investor you became after watching three YouTube videos where G in gear set is for your growth and the goal job. Can you state the job in one sentence? If you can't, the investment hasn't got a clear finishing line. Then your gear set E is for expertise and ease. Can you explain what you own, how it works and why it belongs

Starting point is 00:51:01 without hiding behind a ticker code or a glossy product name? And can you maintain it without creating your unwanted second job. Then comes A for affordability and that's not just can I afford the first purchase, it's whether you can fund the intended strategy while protecting buffers, cash flow and other priorities after brokerage, fees, advice, platform and tax friction are all considered. Then assess your R for risk and risk. Could you sleep through a frightening share market fall? Could you cope if a dividend or distribution was reduced? And could you hold without needing the market to reassure you every afternoon? Now, your risk tolerance isn't what you tick on a calm day questionnaire. It's what you do when the horse bolts. Then inspect S for simplicity.

Starting point is 00:51:58 But remember, simple doesn't mean few account lines. It means clear purpose, understandable holdings, limited overlap, and the fewest moving parts needed to do the required jobs. Then the second year's EVE is for your equity and leverage efficiency. Now shares commonly use less routine leverage than property because of margin call risk, which removes one powerful accelerator and one major source of fragility. Now that trade-off needs to be very clearly understood, not fixed in air quotes by juggling borrowed chainsaws for a margin loan but before we leave leverage there's one trapdoor property investors need to understand clearly now you might be thinking well i gear into property so why wouldn't i gear into shares well simply because a margin

Starting point is 00:52:48 loan can demand cash at exactly the moment that you're least able or willing to actually provide it. A margin loan uses your shares or funds as security and the lender sets a maximum loan to valuation ratio or LVR. Now imagine you've got a hundred grand share portfolio including a 50 grand margin loan so your starting LVR is 50% but if the market falls by 25% your shares are now worth only 75 grand, while the loan's still 50 grand. And suddenly your LVR has jumped to 66.7%. So if you assume that the lender's limit is 60% and ignore any buffer for this simple example, you may need to quickly pay five grand off the loan, provide more acceptable security, or sell around 12 and a half grand of your shares and use every dollar to reduce the debt.

Starting point is 00:53:42 That's a margin call. And without a genuine war chest, you can be forced to sell into the fall, crystallising a loss when your long-term plan wanted you to hold. Now, an ordinary residential property lender isn't revaluing your home every afternoon and demanding cash tomorrow morning just because its value fell. Property gearing still carries serious cash flow interest rate and forced sale risk, but margin lending can turn market volatility into an immediate liquidity crisis. So if you're considering it, your war chest isn't spare cash, it's structural survival gear. And remember, margin limits, buffers, eligible securities and response timeframes vary between lenders. So understand exactly what can trigger the call before you answer it. Then explore the gear set T for time efficiency.

Starting point is 00:54:35 How many hours will this approach consume in researching, monitoring, rebalancing, record-keeping and worrying? Because the cheapest fund can still be expensive if it costs you the life it was meant to fund. And finally, your mandatory co-driver check. Does your partner understand the destination, the likely market falls and the rules? If the first time your partner sees a portfolio is during a crash, that's not diversification, that is domestic volatility. Now we shift to inspection station three, the sniff test, because your gear set weighs the investor, but sniff puts us nose right inside the investment. Where your sniff test starts with your S for strategy and self-fit. So what exact job does this equities holding perform?

Starting point is 00:55:27 what would make you buy more hold rebalance or sell if the only sell rule is when i feel terrified well the circus already owns you then your sniff test n is for numbers and net return don't be hypnotized by a dividend theater or a historical growth number in its sunday best your real result combines the change in value plus dividends or distributions less every layer of fees, costs, tax friction, and lost purchasing power. So here's a simple example. Suppose a $100,000 investment pays a $4,000 distribution over the year, but its market value falls by $10,000. So you haven't made 4% just because $4,000 landed on the bank. You've got $90,000 of investment value plus $4,000 of cash, or $94,000 in total, before tax, fees, and any other costs.

Starting point is 00:56:26 Now that's a negative 6% economic result in this simplified example. So income is useful, but the income isn't the whole return. And more than rent alone tells you whether a property investment worked. So a high yield isn't free money, and dividends or distributions can be reduced or suspended. So for Australian shares, franking credits may affect the after-tax result depending on eligibility and your circumstances. For international exposure, currency movements can help or hurt your Australian dollar result, foreign withholding may apply,

Starting point is 00:57:04 and an eligible foreign income tax offset may provide relief from double taxation. Those are inputs for current tax and licensed financial advice, not a reason to choose the horse by the shiner on its tax tail then sniff the eye for investment integrity look through the wrapper what are the underlying holdings how are they selected and weighted what index benchmark or manager process governs the portfolio where's the concentration how much overlaps with your other funds in your super what are the fees turnover conflicts and provider risks? And have you read the official disclosures, including the PDS and target market determination, where they apply? Because a familiar logo isn't due diligence. It's just

Starting point is 00:57:55 a familiar logo. Then comes the first F in SNF for flexibility and freedom. Now, equities can often be sold quickly and cheaply, which can be a wonderful emergency exit, but a terrible emotional revolving door. So ask whether liquidity frees your plan or gives your frightened self too many chances to sabotage it. And then the final sniff-eff is force multipliers and failure planning. Can regular contributions, automation, deliberate rebalancing, broad diversification, low friction and the TLC of time, leverage where appropriate and compounding do more of the work than you do. And what's your written response to a severe fall? A job loss, a partner anxiety, a dividend cut, a manager change, or the sudden urge to chase the newest winner?

Starting point is 00:58:50 Because a failure plan isn't pessimism, it's optimism wearing a seatbelt. Now that your sniff test is complete, we move on to inspection station four, the Bushido writer's code. So begin with the end, understand before you own, survive before you strive, put head before heart, stay invested long enough for TLC to do its work, diversify by design not by default and take 100% responsibility for the process. Now in practice that means writing the rules before fear, greed and breaking news enter the mounting yard. When will you contribute? you? When will you review? What evidence would justify a sale? What conditions would trigger rebalancing? And who must you speak with before hitting the big red button? Because a rule that

Starting point is 00:59:42 says stay the course, unless the course looks scary, isn't a rule. That's a permission slip for panic. So after all four inspections and applying your go or no-go traffic lights, green means the job's clear the time frame and capital fit the holdings and friction are understood your partner's aligned and the fail plan is actually written amber means something important is still fuzzy like overlap concentration index rules manager process cost time demand or your ability to hold and red means stop before you mount up because you're using near-term or emergency money, relying on tips, adding dangerous leverage, buying something you can't explain or hiding the ride from your co-driver. Now red doesn't always mean never, it means the unresolved

Starting point is 01:00:33 risk needs attention and potentially appropriately licensed advice before you proceed. Now one leak deserves its own barnyard inspection here and I'm talking about fees because cheap doesn't automatically mean good and the cheapest wrong investment can be spectacularly expensive but every avoidable layer that feeds on your return leaves less for you to compound and that's exactly where Raman and I went next exactly right exactly right and let's just touch on that because that's something that I know you've spoken about quite a bit in the past and it's a game so I think not a lot of investors really get their head around and that that's the effective phase of investment returns can you just uh expand on that subject for us yeah there was really great um talk

Starting point is 01:01:24 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 six percent how long am i investing for 10 years and what's the fee i'm paying so let's say returns are six percent and you're paying two percent in fees well you'll get a pretty good return over that 10-year period because of compounding but if you're paying two percent 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

Starting point is 01:02:18 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 you're 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

Starting point is 01:03:12 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 now ramen's pigs have left the trough but before we hose down the barnyard let's count all the snouts because the fee printed in the headline may be only one hungry mouth and a very crowded pen. There may be advice fees, implementation fees, platform and administration fees, investment management fees, performance fees, buy-sell spreads and brokerage. International investing may also involve foreign exchange costs, while a necessary turnover can create more trading friction, record-keeping and potential tax consequences. Then there's the cost that don't arrive wearing a name badge.

Starting point is 01:04:05 Cash sitting idle while you wait for the perfect entry. Chasing yesterday's winner, selling after a frightening fall, or rebuilding the portfolio every time a new ringmaster cracks the headline whip. Now, that's behaviour friction. It won't appear in the product disclosure statement, but it can still take a very real bite out of your result.

Starting point is 01:04:28 So calculate the full friction stack. What do you pay to get in? What do you pay while you own it? What might you pay when money moves, is converted or comes out? What tax friction may arise in your circumstances? And what bad behaviour does this approach make dangerously easy? Now, this doesn't mean cheapest always wins. A low-cost mystery box is still a mystery box.

Starting point is 01:04:58 And expertise, advice, research, risk management and convenience can justify a higher cost if they perform a valuable job, you understand, and if the benefit is worth the full price for you. So the watchdog question is, what am I paying? Who receives it? What do I get? And would I knowingly buy that service again? Because low friction isn't the destination, freedom is. and equities can bring some powerful freedom features to the right plan.

Starting point is 01:05:32 The entry point can be relatively accessible. Board funds can connect you to hundreds or thousands of productive businesses across industries and countries that you couldn't sensibly research one company at a time. You can have management teams, workers, ideas and enterprise quietly working while you're living your life. Regular investing can often be automated. Administration can be modest. And compared with direct property or operating a business,

Starting point is 01:06:00 there may be no tenant call, no leaking roof, no payroll, and no staff member ringing in sick. Many listed shares and mainstream funds can be highly saleable, which can improve flexibility and access to capital. And because routine leverage is often lower, you may remove one source of forced sale fragility while also giving up one potential growth accelerator. But none of those features is stamped on every product.

Starting point is 01:06:28 A narrow ETF can still be concentrated. A traded product can still have liquidity, pricing, currency or tracking risks. A broad fund can still overlap heavily with your super. And the easy sell button that improves flexibility can also become a trapdoor under your long-term plan. so the freedom multiplies only multiply freedom when the structure exposure cost and behavior all fit the job so let's now translate that for a property investor just imagine a household has 150 grand available towards a purchase setting purchase costs and buffers aside for a moment so if it becomes the 20 deposit on a 750 grand property they may control a 750 000 asset

Starting point is 01:07:16 with a $600,000 loan, subject of course to serviceability, valuation and cash flow capacity and having extra capital for the purchase costs and adequate buffers. Now, that leverage can magnify capital growth, but it can also magnify losses, holding pressure and forced sale risk. Now, if the same $150,000 goes into unleveraged shares or broad equity funds, it generally buys around $150,000 of market exposure. Potentially spread across hundreds or thousands of businesses with no tenant, no leaking roof, no $600,000 loan

Starting point is 01:07:53 and the ability to add or sell in much smaller pieces. But you also give up property's leverage accelerator and give a live scoreboard that can actually tempt you to fiddle every day. So neither road automatically wins. Property can offer leverage, control and scarce land exposure. Equities can offer accessibility, liquidity, global diversification and low personal workload. So different force multipliers and different value points

Starting point is 01:08:24 and potentially different jobs inside the same freedom plan. And all of this changes the next question absolutely completely. So it's no longer merely which share, ETF or fund looks best. It becomes, what job should equities perform at this stage of my freedom journey? Because your portfolio isn't a tattoo. It shouldn't be frozen to the same shape for the rest of your life. And it needs to take into account the fact that your capital, work, family, health and time horizon all change, so the job can change too.

Starting point is 01:09:01 And as I've detailed in my book, The Freedom Formula, I think of that journey through four key phases, and they are activate, accumulate, diversify and liberate. Not four compulsive products, not four model portfolios and definitely not four tips from a bloke in a shiny race day suit. They're four different jobs. So let's break them down, starting with phase one, activate. This is where intention becomes a system.

Starting point is 01:09:31 You protect your emergency buffer, review expensive debt and year-term commitments, then decide whether genuinely long-term surplus money can begin buying productive ownership regularly. For some investors, a simple, broadly diversified low-maintenance fund approach may be an easier starting saddle than selecting individual companies, especially when the starting balance is modest,

Starting point is 01:09:54 time is scarce, or tinkering is your favourite indoor sport. Automation can help turn good intentions into regular ownership without requiring a monthly wrestling match with your willpower. and here's what that boring habit can look like in numbers. $20 a week for 15 years is $156,000 of your own contributions. At a purely illustrative 7% annual return, regularly invested, that could grow to roughly $276,000 before fees and tax. So around $120,000 of the result comes from growth and compounding, not from finding the next miracle horse. Now, real returns won't arrive smoothly,

Starting point is 01:10:34 and 7% isn't promised or predicted here. The lesson's simply this. Small, repeated ownership plus time can become meaningful without waiting for one giant starting check. But activate also means checking what's already active. Your super may already hold Australian shares, international shares, property and defensive assets. depending, of course, on your investment option.

Starting point is 01:11:00 So don't build a shiny new share portfolio outside super without first looking through the super wrapper. Otherwise, you may own the same circuit elephant twice and call it diversification because it's entered through two different tents. And money needed soon from emergencies, a home deposit or known lifestyle spending doesn't belong in the share market's short-term bucking chute.

Starting point is 01:11:23 then comes phase two accumulate now the main job here is generally long-term growth powered by regular contributions reinvestment where appropriate low avoidable friction and enough time for competing to stop whispering and start speaking up and this is where boring becomes beautiful your core does most of the work that core might use a simple diversified fund or several broad funds that give you more control over geography, asset mix and rebalancing. A systematic research-led or factor approach or active professional management may also earn a place for the right investor if you understand the method, the extra cost, the periods of underperformance and while you'll stay with it when it looks wrong against the latest winner. Then there's the

Starting point is 01:12:18 satellite. That may hold a narrower strategy, a specialist manager, a factor tilt or selected direct shares. But a satellite should have a written job, a clear boundary and a size that can't destroy your freedom mission if it crashes back to earth. That's position sizing in plain English, not how much can I make, but how much permanent damage could I survive if I'm completely wrong. For example, if a speculative satellite is 5% of your portfolio and it falls to zero, the portfolio wound is limited to 5%. Yes, painful, but potentially survivable. But if the satellite's 20% and it falls to zero, the whole portfolio loses 20% and the remaining 80% needs a 25% gain just to restore the starting balance. So position size isn't a confidence

Starting point is 01:13:14 score. It's a pre-agreed damage limit. And as your portfolio grows, extra control may become more useful, but only if your skill, discipline, time and tax awareness grow with it. So complexity must be earned. It's not a loyalty reward for having more money. Then comes phase three, diversify. Now be careful here because this doesn't mean collecting investments like fridge magnets. Specify before you diversify. Build the core jobs first, then reduce risks that you're already carrying. So if your income, business, property, super and direct shares all depend heavily on Australia, then another Australian label fund may add a new account line without adding much new economic exposure. Real diversification looks through the labels

Starting point is 01:14:06 across businesses, sectors, geographies, currencies, investment methods, asset classes, ownership structures and access timeframes. It asks what could hurt several parts of my wealth at the same time and what generally different driver could make the whole household more resilient. Now that may mean global equity exposure, a different rules-based method, professionally managed exposure or another asset class entirely. But adding more funds isn't automatically safer. More holdings can mean more overlap, more fees, more paperwork and more opportunities to fiddle. So diversify by design, not by product pile up. Then comes the last phase four of liberate. This is where wealth starts doing more of the working so that you can choose

Starting point is 01:14:59 to do less of it. But liberate isn't a magic dividend switch that you flick on the Friday before retirement. Dividends and contributions can change, share prices can fall and selling assets during an unfriendly period can create a very different result from selling during a friendly one. So the transition from growth to lifestyle funding needs to be planned well before the paycheck leaves the building. The job may shift from maximum accumulation towards a deliberate mix of growth, income, liquidity and resilience. Now equities may still keep an important job here while accessible cash, defensive assets, super, property income or other sources perform different lifestyle funding jobs.

Starting point is 01:15:44 So the right mix, structures, tax treatment and drawdown sequence are personal. They're time sensitive and appropriately licensed advice questions need to be involved here. Not something that I'm going to prescribe from a microphone, but every Liberate plan needs a written failure plan. what funds funds known spending if share prices fall sharply what happens if distributions reduce which assets can be left alone and which capital must remain accessible what triggers a review and what doesn't trigger a panic sale who does your partner call if you can't steer the plan and what advice and tax checks need to occur before money starts moving because a freedom

Starting point is 01:16:32 plan that only works when every market behaves isn't a plan. It's a sunny day picnic with no wet weather tent. But the principle is simple. Don't wait until you need the income to discover you've built only for growth. And don't abandon growth so completely that a long retirement outlives the plan. So across all four phases, the share market isn't the destination it's one possible vehicle performing a changing job inside your total freedom plan so activate the habit accumulate productive ownership diversify the risks that you genuinely have and liberate the lifestyle that you actually want that's my telescope view purpose phase portfolio and person not the microscope view of today's price tomorrow's prediction

Starting point is 01:17:26 and whichever trapeze artist is currently trending. And this is where Raman's final principle brings the whole journey back to earth. 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.

Starting point is 01:17:51 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 i said it's a big one but gives you an opportunity to wrap all this up i have neatly if i gave you a microphone that spoke to every single one of the 7.7 billion odd 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

Starting point is 01:18:32 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.

Starting point is 01:19:04 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. and there it is a plan a purpose self-knowledge low friction and if you want a little speculation

Starting point is 01:19:31 on the side keep it small enough that can't kick down the freedom stable and that final point is doing more work than it may first appear because a portfolio doesn't become sensible just because it's simple and it doesn't become superior just because it's sophisticated it becomes useful when the purpose, the approach and the person all agreed. So before we leave the share market circus, I want you to pass three traffic lights outside the big top. The first traffic light is gear set. Does this ownership lane fit your goals, financial capacity, knowledge, time frame, your nervous system and the people sharing your life? Here, green means you understand a commitment, can afford the exposure and the work fits the life that you want. Amber means there's

Starting point is 01:20:23 a knowledge, capacity, time or household gap that you need to resolve and red means the approach needs a version of you that doesn't exist. So more time than you have, more karma than you've shown or more money than you can afford to leave riding through a rough market. The second light in the sniff test goes to does the actual exposure pass the watchdog inspection does it have a strategic job can you see what you really own including the overlap with your other funds in your super is the full friction understandable and acceptable is the diversification genuine and is there a written failure plan for when the ride gets ugly under sniff green means the structure supports the job. Amber means you've still got a mystery to investigate. And red means

Starting point is 01:21:16 the label looks reassuring, but the holdings, costs, concentration or exit conditions don't survive a proper sniff. The third lot is Bushido. Can you follow your rules when ownership feels boring? When everybody else seems to be getting rich from the latest shiny thing? And when the market falls far enough and fast enough to make your written plan feel like it was drafted by an optimistic stranger. With Bushido, green means your behaviour has rules, automation, boundaries and support. Amber means you're relying too heavily on memory and mood. And red means your strategy is effectively, well, I'll make a calm decision while emotionally on fire. And that's not a strategy. That's a circus act without a safety net. Now the three green lights don't mean rush

Starting point is 01:22:13 out and buy. They mean that you've earned the right to move into proper due diligence and personal advice where that's appropriate. An amber light means slow down, find the missing information and retest. And one red light means stop. Don't paint a green because the marl's excited, resolve the mismatch, change the approach or walk away. Because there's no medal for owning every asset class and no shame in choosing the lane that you actually stay in. So what do you do with all of this when this episode finishes? Well, here's six quick actions, not a 47-tap spreadsheet, just one page, one honest conversation and six decisions. Action one, name the job. Finish the sentence, at this stage in my freedom journey, I need equities to help me dot, dot, dot.

Starting point is 01:23:10 It could be activate a habit, accumulate long-term ownership, diversify risks that I already carry, or help fund a liberate lifestyle. But if you can't name the job, you're not ready to hire the investment. Action two, run your gear set. Do it with your partner, the outcome affects them. Write down your capacity, knowledge, time, time frame and stress tolerance. Don't answer as your heroic future self. Answer as the human who will have to live with it on any ordinary Wednesday. Action three, choose your ownership lane. Between direct shares, a simple diversified fund, a more tailored multi-fund approach,

Starting point is 01:23:53 a systematic or factor-based approach or active professional management. then write one sentence explaining why that lane fits you not why it won why it won last year not why someone shouted it on social media why its work cost control and behavior demands fit the life that you're trying to fund action four calculate the full friction entry ongoing moving and exiting costs advice platform management brokerage spreads currency and potential tax consequences in your circumstances then add the most expensive possibility the behavior this approach may tempt from you action five pre-write the rules when will you contribute how often will you review what will trigger a rebalance or a sale what will you do and what won't you do during

Starting point is 01:24:47 ace of the year four how large can a speculative satellite become and what market noise will you deliberately ignore. So schedule the review, remove the unnecessary alerts and stop carrying the whole share market around in your pocket. Action six, look through the wrapper. Read the current official disclosure documents. Check the holdings, the concentration, the overlap, the fees, the risks and who the product is actually designed for. Look through your suba as well as investments held outside it. And before acting, get appropriately licensed financial advice and qualified tax advice where your circumstances require it. And that's it. Six actions that turn market interest into a life-first ownership decision. And that brings me to my original quote of the week.

Starting point is 01:25:37 The market can change its mind every second. Your purpose shouldn't. Because the goal isn't to become a professional watcher, it's to become a purposeful owner. To own productive businesses through an approach that you understand, at a cost you accept, with rules that you can follow so that your wealth can grow without consuming the life that it's meant to fund. Now before we finish, an important reminder. I'm not a shares expert and I'm not sharing personal financial advice here. What I've shared is based on my own experience, my own approach to shares, ETFs and index funds and general educational insights for you to consider. It's not a recommendation to buy, sell or hold any share, ETF, fund manager or strategy. Your goals, financial

Starting point is 01:26:23 position, risk capacity, tax, super, time frame and family circumstances are all very personal to you. So check current official information, read the relevant disclosures and seek appropriately licensed financial and tax advice before you act. And if today has helped you see shares as one vehicle inside a much bigger freedom plan, then keep following the property wealth journey because your best approach doesn't begin with an asset. It begins with your why, your examination and the life that you're actually building. You'll find the next step and the supporting resources in the show notes. And next time we take this same life first interrogation into my favourite of property, where leverage, control, scale and growth potential enter the ring against liquidity,

Starting point is 01:27:11 illiquidity concentration holding costs and some very chunky transaction friction now property may earn an important place in your strategy but it doesn't get a free pass so until next time go out there live more give more grow more and become more because wealth isn't just what you own it's the freedom to live how you choose with the people you love while you're still here to enjoy it. So own the businesses, leave the circus to the ringmasters and always, always get invested. Thanks for tuning in to Get Invested on the Property Hub podcast channel, your home for property investment insights and inspiration. Make sure you subscribe to Property Hub for free. Get your weekly dose of Get Invested inspiration along with every episode

Starting point is 01:28:01 of Realty Talk, Australia's top online property show for red hot property investing news and insights direct from industry leaders and influencers. And finally, I'll see you next time.

Property Hub - Investment Insights & Inspiration - Get Invested: Shares without the circus — build wealth, not a second job

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