She's On The Money - Back to Basics Of Investing

Episode Date: February 28, 2023

Know nothing about investing? Well this is the episode for you! Victoria takes us back to the basics explaining what a share is, the different types of shares, how you earn money from shares how compound interest works and more. Plus we unpack some common concerns around investing, and some questions we should be asking ourselves at the start of our journey to determine our next steps! Acknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements. The advice shared on She's On The Money is general in nature and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.  Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708,  AFSL - 451289.See omnystudio.com/listener for privacy information.

Hello, my name is Natasha Nabanunga-Bamblett. I'm a proud Yorta Yorta, Kernai, Wolperi and Awadjeri woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on Awadjeri country, acknowledging the elders, the ancestors and the next generation coming through. As this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow. Let's get into it. She's on the money.

She's on the money. Hello and welcome to She's On The Money, the podcast for millennials who want financial freedom. My name is Bec Syed and with me is Victoria Devine. Hello. We are going back to investing basics today. Sexy, very excited about this topic. I'm so excited. I'm worried that you'll be really annoyed by all my questions.

No, I'm so excited. I'm so excited because I feel like there have been so many community questions being like, hey, you know, I want to understand this, this, this, and this. And while we have done a mini investing series and a whole host of episodes on it, I feel like a back to basics episode is kind of like the reset all of us need. But hello, Bec. Sorry that I'm very excited about this. This episode is for you. If you've had investing as a goal that just keeps getting pushed to the back of your to-do list because you don't really know where to begin, or if you're worried that you'll make the wrong decisions, or maybe you get overwhelmed with all the research and information and jargon that is out there. We honestly have all been there. The worst place to

be is at the start of a journey and feeling really overwhelmed by all of it and you just don't know what to do. But please don't think that you're the only one there and don't let that stop you. That's why we're here and taking you back to the basics of investing today, Bec. Yes, yes, yes. I'm so here for this. So as you know, my knowledge is entry level for sure. Love it. So I do have lots of questions for you, V. So in the first half of the show, we're going to get you to explain some of the absolute basics, like what is a share, types of shares,

how you earn money from shares, risk profiles. And then in the second half, you'll tell us about compound interest, and we'll talk about some common concerns about investing and some questions we should be asking ourselves at the start of our journey to determine next steps. Sexy. Am I the only one that's like really excited about this and to dive straight back in? I know so many of you might be following along and go, oh, this is stuff I know. But I would actually encourage you to still listen because there's no such thing as too much information. And there's also no such thing as knowing absolutely everything. So there could be a tidbit that you learn or something else or a different point of view or a way of seeing things that you hadn't

seen it before that can actually be really helpful on your investing journey. So while you might go, well, I know what a share is, full stop, end of story, like this conversation can actually be a really empowering one to either remind you of how well you're doing or to make you feel really empowered about taking the next step. Absolutely. Wouldn't hurt. So I'm going to ask first, what is a share? What is share and what are stocks? So a share and a stock, same thing. A share is more of an Australian term and a stock is more of an American term, but in Australia, they are used interchangeably. So a share is essentially a very small part of a business, Bec.

So what happens is a company goes to market and say, I want to be on the share market. I want to be able to sell parts of my business to the general public. And you go, all right, no worries. And they might break it up and they might say, all right, let's issue 40% of our company to the public. So we'll keep 60% of it. We're going to issue 40% of it to the public, but we're going to break it up. So you can't just go buy one share and get 40%, right? They might break it up into 100,000 pieces. And therefore,

there might be 100,000 shares in the market that could be bought. They might break it up into a million pieces. And therefore, you get a millionth of 40%, which is obviously not even 1%, but you have a very small fraction of that company. And when you buy a share, you become an owner of that company. It might be very, very small, but with that ownership comes voting rights. So you could vote if you really wanted to when their board makes decisions, but it also entitles you to a portion of the profits if there are some in some shares. So if you go and you say, all right, I'm going to give you $10 for this share that I purchased, and it might be in a bank, it might be in something else, but we're going to use a bank share as an example because they're kind of

like tried and true blue chip boring stocks that basically everyone's heard of right you hear about them on the news all the time you hear about them when people are talking about oh nz is down or up or i bought nab shares or i bought combat like everyone talks about it right but if you went and bought a comm bank share how much do you think a share is worth oh it depends it does depend okay it does depend and you one share one share in comm bank in comm bank yeah i'm gonna say $20? Oh, if they were 20 bucks, I would be going and buying so many of them because back today, they're $110 a share, right? A lot more than a lot of people think they are, which is why fractionized investing has become popular where you buy like a fraction of share so you can still

have exposure, but you might not be able to afford the full share at $110 each, right? But essentially if you went and bought that share, it entitles you to some of the profit, but then also some of the gain over time. So $110 is what CommBank is worth today as of recording. However, maybe in a couple of years that CommBank share might increase in value because they've, you know, grown their business model and they're a far more profitable bank and they're a lot sexier than they currently are. They're a standard share today and banking shares in Australia don't have a lot of flexibility, like they don't go up and down in the same way a lot of other shares do that we talk about because they are a blue chip stock, which means they are tried and true and have existed for a

long time. So their fluctuation in price usually stays similar. If their business increases in price, well, your share price increases, which means if you go to sell that share, you can then see a piece of that profit because the share that you sold is now today worth more than it was when you bought it yesterday, right? But then along the way, as the company says, okay, well, we've had a really good year back or we've had a really good six months, we've done all of our banking, we've done all of our bookkeeping, we have, you know, a million dollars profit. They will then divide that among their shareholders. So you'll get a payment, which is called a dividend, just for owning the stock because you're a part owner of the business. And therefore, the money that you've

put into the share market is making you money in a number of ways. So one is that capital growth. So the business increasing in value over time, but also two, you're getting paid a percentage of the profit that that business makes each and every single year because you're a part owner get paid. So what is the benefit to the companies? Like why do they do this? So often you would go public so that you can raise more capital so that you have more working capital because that company right then goes, oh, we own 100% of our company and we want millions of dollars to expand this part of our business or grow this part of our business or we need more cash coming in so we can lend it out. And that is often why they end up on a stock exchange because they go, well,

we need Bex money because we don't have any of our own right now. And that's basically why you would go on the stock exchange just to make money as a business so that you can continue to trade and continue to grow and build. Okay. That makes a lot of sense. Honestly, you know, I'm at entry level. So tell me, are there any terms to do with investing? I should know. Yes. So first things first, I feel like in our community, I have a laundry list of five terms that we talk about most often and we're going to go through them. So the first one is ETF and that is an exchange traded fund. And an exchange traded fund sounds really complicated, but strip it back. It is a pooled investment. That's probably too complicated still. So think of it as a basket. So essentially

an ETF isn't an individual share that you've gone and bought one share of ComBank because it was $110. You might go, V, I have $110, but I don't want to only own one asset because then I only own CommBank. I want to own a lot of different things. So I get good diversification in my portfolio because if, you know, CommBank crashed tomorrow, well, that's my whole portfolio. That's 100% of what I own. But if I owned a lot of different banks and I owned, you know, a few different other industries, if one crashes, it's not going to be felt as harshly because I own 100 different companies. So instead of buying a stock, an individual stock, you might go and buy what's called an ETF. So that's an exchange traded fund. And it's essentially a fund that exists

that has bought maybe 100 or 200 companies, or it could be an ASX top 200. So it could be the top 200 companies in the share market. And it just holds that. And you go and buy one share in that basket as opposed to buying the share directly. So you go, I want to own an exchange traded fund, an ETF, and that's a type of pooled investment where instead of you giving your money to ComBank and saying, thank you, I would like one of your shares, you give your money to the fund. So the exchange traded fund and the manager there say, can you put my money in the basket with everybody else's money? And then collectively we all own a lot of different stocks. So essentially it's a investment security that holds lots of different underlying assets rather than just one individual

stock. Does that make sense? That does make sense. So if I was to use it in a sentence, I would say I own a share in an ETF. Yeah, you could. You absolutely could do that. And you buy and sell ETFs in exactly the same way you buy and sell shares. They are on the ASX as well. So you go and it might have different code and you go and purchase it. In Australia, one of the biggest issuers of, or two of the biggest issuers of ETFs are Vanguard, which you might've heard about, and BetaShares, which both do ETFs. And the cool thing about ETFs these days is there's basically an ETF for everything. So if you're like, well, I'm an ethical investor, I only want to own ethical shares. Well, you can go get an ethical ETF. Or if you go, I'm really into tech, Victoria,

like I just want to invest in different tech companies, go buy a tech ETF. Or you could go, you know what? I only want to own American tech companies. There's an ETF for that. There's literally ETFs for everything that a couple of years ago, I was online, obviously looking up ETFs because I was bored and it was fun. I found an ETF that only invests or only holds businesses that have 100% women on their board. That is really cool. I think it is very cool. I'm very biased because I love this space, but I think it's an interesting concept to wrap your head around as well, because I feel like a lot of people will say things like, oh, an ETF is a bit too complex, when in reality, they can be really good for beginners who are like, well, I don't know where

to invest, but they might know their values or they might know where they want to start. And it's a good place to get instant diversification because diversification is really important. It's making sure that you don't have all your eggs in one basket instead of just having exposure to CBA. You have exposure to heaps of things. So if one thing crashes, I guarantee something else is doing well and then maybe other things are just coasting along. So your returns are an average of that bucket of shares as opposed to just that direct one share. Does that make sense? That does make sense. Okay. So what's the next one? All right. So we've just talked about ETFs and I feel like in our community, we've been talking a lot about the difference

between an ETF and a managed fund. And sometimes they're compared like apples for apples because people think it's one or the other, but they're actually completely different products. And that's comparing apples with oranges, which is a bit silly. So a managed fund is an alternative to individual shares or an ETF. And a managed fund is basically just what it sounds like. It's an investment fund that is managed by a fund manager, whereas an ETF often is not. If you put your money into a managed fund, you're essentially giving your money to them to invest on your behalf. So you often have very little say over what they do with your money, which is fine because you're not going to pick a fund manager that you don't believe in, right? You're not going to go give it

to BEC if you think that BEC is not going to use it wisely. So you do have to hope that they will invest it wisely. And one of the key differences between the managed fund and an ETF is that a managed fund is unlisted. So it is not going to be on the ASX like an ETF that you go and buy in the same way that you purchase a share. So unlike an ETF, managed funds don't usually trade on the share market. In fact, they only trade once a day. So right now, if you Googled any share, you could get today's right now current market price because in australia the market opens at 10 a.m and it closes at 4 p.m surprise bet you didn't know that no but we trade between 10 and 4 every single day which means you can get a live price whereas a managed fund only trades once a

day and often it is 10 a.m or 11 a.m depending on what the company is thus you do have to wait until the end of a trading day if you want to buy or sell your units so you can't do it throughout the day. It's not something that people would become, you know, how we talk about the concept of share traders where they're online all day and they're like buying and selling shares for really small amounts. You can't do that with managed funds. So one of the benefits of a managed fund, and this is very similar to an ETF, is that it allows investors to pool their money together with other investors. And the more money you have, the more power you have when it comes to purchasing. And by doing so, opportunities that might not actually be available to a retail

investor because we just don't have enough money can then be opened up. So many managed funds will invest in assets like property or the government or corporate bonds or private equity that is usually completely out of reach. But you can do so by buying a portion of a managed fund, get access to an alternative asset class, which can for a lot of people be really exciting. but as I'm explaining this I think I can see your brain working going this is a little bit more complex than an ETF like you don't just go and buy it and then you can sell it whenever you want you absolutely can buy it you can absolutely sell it that makes sense but there is a bit more complexity behind it which is why some people in the she's on the money community don't lean on it

immediately as one of their first investing decisions right so obviously there are a whole heap of other benefits. Another one of them is that the fund manager's expertise plays into it. So I'm someone who does own a managed fund. But the reason I own the managed fund is because I'm a little creep, Bec. And I know exactly who that fund manager is. And I've actually followed them from a couple of different asset places. I like that guy. I like his decisions. I'm very interested to see what he does at this new company. And that's why I'm following him. And that's why I've invested. So if you like a track record of a particular fund manager, you can go with them, but that's obviously not that common to know that information and it's quite in-depth. But the

benefit of having a fund manager is that you don't have to do any of the hard work of researching, of identifying and tracking potentially high-performing companies that might provide outsized returns because you'll be paying a manager and a team to do that. Managed funds are more expensive than ETFs. ETFs are usually automatically created, whereas managed funds have a whole team of researchers behind them. Does that make sense? It does. And I assume that if you're putting, say, $100 into a managed fund, only a portion of that is actually going to shares? Most of it will go to shares, but the fees on that are going to be higher. So managed funds normally charge management fees that are more expensive than an ETF. So you need to make sure

that your fund is justifying their fees by delivering consistent market crushing performances. otherwise that fee does really eat into your long-term returns and I think it's really important to know the difference between the two because sometimes it can be easy to be taken away with oh well that managed fund has the same performance and it sounds cooler but you haven't actually looked at fees because apples are not apples in this circumstance does that make sense does make sense what else you got on that little list of yours all right so the next list I have number three I feel like this is taking me ages to get through them but it's because I'm passionate I am so sorry. The next is an index fund. And this is really sexy because it tracks an index.

So an index fund is basically a portfolio of shares or bonds that exists to mimic or copy the composition and performance of a financial market or index. So that sounds confusing, but essentially it exists to copy something that already exists. So you might create an ASX top 200 ETF and that will take the top 200 companies on the ASX list and pop them into a fund and it will just track the average of that. So the idea of an index fund is not to outperform the market, it's actually to meet the market returns and the market benchmarks. So index funds usually have way lower expenses and fees than actively managed funds because there's no one managing it in the same way that a managed fund exists. So in a managed fund, you've got somebody going out there

doing the work, maybe surveying the company, seeing if it's worth putting into the portfolio. An index fund actually follows what we call a passive investment strategy, where you just go, all right, I'll take the top 200 and get the average of that. Wham, bam, thank you, ma'am. That absolutely makes sense. So an index fund is an investment type that just wants to track the market average. And usually, if you're talking about an index fund, we're just looking for the average of the average that's all I want that's it but I just want a consistent return and index funds typically invest in all the components that are included in the index that they track and they have fund managers whose job it is to make sure that the index fund performs the same

as the index so the index is the measure and the index fund has basically cut and paste everything from the index to own it in that asset does that make sense I think no it's not making sense is it I guess my question is, what's really different between an ETF and an index if the index is kind of trying to mimic like an ASX 200, for example? Essentially, the biggest difference between ETFs and index funds is that ETFs can be traded throughout the day like shares can be, whereas index funds can be bought and sold only for the price that is set at the end of the trading day. So, obviously, for long-term investors, this isn't an issue. But essentially, something like the ASX top 200 ETF could be bought and sold throughout the day, whereas the ASX top 200

index fund couldn't be. And both of them employ different strategies, but essentially that from my perspective is the main difference. Okay. That is one of the main differences. The other thing is I would say is fees and expenses. So the primary difference between ETFs and index funds is as I said before how they're bought and sold but this actually translates to fees. So ETFs as we were saying before trade on an exchange just like shares do and you buy and sell them through a broker which means that you could potentially be paying broking costs whereas index funds are usually bought directly with the fund manager so there isn't that intermediate body. So there's just different fees and charges that need to be taken into consideration and I don't think it's

like for like, but I also think that they can be quite similar, especially to a beginner and do not fear if you're in a position where you're like, this is a lot of information and I feel really overwhelmed. We all do. I have a book that goes into this even more comprehensively so you can digest it. And you know what? There's absolutely no shame in listening to this portion of the episode a few times so you can really wrap your head around it because Lord knows it takes me like three or four goes to understand something for the first time. And then it finally clicks and I go, oh, okay, now I get it. I think I'm going to be listening to this first portion of the episode about 20 times just to understand it. What's the next one on your list, V? What's an

asset class? Okay. So in Australia, there are four main types of asset classes. There's cash, fixed interest, property, and shares, which I'm sure you've heard of all of them. So the first is actually an investment. Cash, it would be whatever's in your bank account right now, whether it is $1 or $1 million. It is an investment that might not be returning all of that much money, but it is an investment nonetheless. The next is fixed interest. So, these are things like bonds or you would have heard of a term deposit where you can kind of lock your money away. At the moment, it's not that popular because obviously interest rates are going wild and the bank is not going to pay you that much so that they can hold on to your money.

The next is the great Australian dream. So, that's property. We've all heard of property investing and we have an entire podcast called The Property Playbook on property if you want to deep dive more into that asset class. And the last, which is unsurprisingly my favorite, is shares. And shares essentially, as we explained, make sense. But each asset class is expected to have different risk and return characteristics. And the right asset mix for you at any given point in time is actually going to really depend on how much time you have to be investing. So obviously, cash might be better for a short-term goal, like you might be saving for a holiday or a car. But if you're working towards financial freedom, Bec, and you're like, oh my

gosh, I really want to be investing for the next 30, 40 years. Well, cash is probably not the best place to put your money because you've got a larger time horizon. And if you're investing for the next 20, 30, 40 years, maybe shares is a better option for you. And the same goes for fixed interest and property. It all depends on who you are and how much risk you want to take on. And that leads me actually back into the last thing I wanted to talk about and that is actually the word portfolio. I feel like it gets thrown around a lot and the second you maybe sign up for shares or you might have signed up for six park or you might have gone through self-wealth or you might be with raise or you might be with spaceship it really doesn't matter what one but you might

assume that that's your only portfolio because you go oh they've used the term portfolio but essentially a portfolio is a collection of financial investments. Like it could be shares, it could be bonds, it could be commodities, it could be cash, it could be your jewelry, but essentially it's everything that Beck individually owns. So my personal portfolio, it's made up of some shares. I own property. I have, you know, some assets at home that I insure through my home and contents. I have a car and all of that collectively becomes my portfolio. And I think a lot of the time, and it was the reason I wanted to include portfolio in this list is we just assume it's only referring to a share, or we just assume it's only referring to one

asset class, whereas that's not the case. So for example, if you bought an investment property, that would become part of your portfolio. And when we talk about that, I think it's important to take into consideration because a lot of people will say, I have nothing. It's like, well, let's actually step back. Do you own a car? Do you have jewelry? Do you have this? Do you have that, go, yeah, okay, well, that's actually made up of what your net worth is. And I think we really need to see it from a more holistic point of view. Okay, V, I think we need to go to a quick break. We do. I feel like there's a lot of information to digest. I literally just word vomited all over you guys. I need to go clean up. Sorry, sorry, sorry. See you on the flip side.

See you soon. We are back in going back to basics on investing. At the end of the day, V, isn't it safer to have money in a savings account? No, sit down. Absolutely. Look, it's true. Savings accounts and term deposits are a less risky type of investment. And it's generally recommended that you keep some of your money in these assets. So when it comes to, and you and I have talked about this a lot, emergency savings, emergency fund, that is always in cash. We never invest that because we never want to lose or have no access to that. I want you to have access to your emergency fund day or night, any time of the day. You shouldn't have to sell something down to access that. But investing in shares can give your money the chance to earn better returns than it would

have if you left it in your bank account over the long term. So over 10 years, the ASX 200 index, which we discussed in the first half of this episode, had an average total return of 9.3% each year. And the total return combines the price return, so the capital growth, so how much that asset has increased in price over time, and the income yield, so how much you got paid for owning that. Almost half the total return came from yield, so how much you got paid for owning that share, not how much it increased in value. in fact you could own a share back today that is worth ten dollars and you could own that same share in 20 years and it could still be worth ten dollars but it might have paid you a hundred

dollars over that period of time just for owning it because you get a portion of that profit but the company was just consistent it didn't increase in value because maybe they're a potato chip company yeah and they just make these great potato chips and they have the same customer base over that you know 10 20 years they buy their potato chips regularly they make a profit they distribute it to their company. But is that company worth more in 10 years than it was today if they haven't increased their customer base? No, it's still worth 10 bucks a share, but you got paid every year for owning that share. So we need to take that into consideration because a lot of people might look at their portfolio and go, oh, I bought that share for 10 bucks and it's still only worth

$10. And they completely forget the dividend that was paid out during that time, which is the money that you get paid to own that share. Right. Okay. Okay. So let's talk about money in a savings account. Yeah. Sexy. Have we spoken about compound interest before, Bec? Not I. Not you. But I've talked about how sexy it is before, right? Like you've heard me say, yeah, because it is, right? So compound interest is the money that you made making money and then that money making money, which is obviously very, very attractive. So compound interest is when you earn interest on both the money that you've saved and the interest that you earned. So it is literally your money working for you, which we love. We want all of our dollars to be working as hard

as we did for it. If not harder, let's be honest. I want it to continue making money while I'm not working. And I will make sure that we link to the Money Smart compound interest calculator in the show notes because I talk about it all the time and it's basically my favorite resource on the internet. I have it bookmarked. If I start typing in my search bar compound, it will literally come up compound interest calculator, money smart. And like it knows what I'm looking for because I go on there so often. But I did a little example for you. So let's say, Bec, you invest $500 and then every single month you go and invest $50 into this account for the next 10 years. And we're going to use the example before of the ASX 200 index of 9.3% return over the last 10

years because that makes sense that's where we're pulling our stats from following following so at an annual interest rate or an annual rate of return of 9.3 percent over that period of time beck if you just saved it and put that money that five hundred dollars and then fifty dollars each and every single month into your savings account you would have saved six thousand dollars wow that's pretty good yeah but if you had invested it at a rate of return of 9.3 percent you would have $11,104, which is $4,604 more money than if you had saved it instead. Okay. That is $4,600 of, from my perspective, free money that you didn't have to work for. Feels like free money. Exactly. Because the money that your money makes, makes money. And then that compounds

and the power of compounding actually doesn't exist just over 10 years. 10 years is about the timeframe, from my perspective, it's the minimum timeframe when compounding actually starts to take an effect. So if we look at it, maybe let's zoom out a little bit further and look at 20 years. So let's just double the timeframe. Your initial deposit was $500. You know, over 10 years, we said that you'd earn $6,000 in your savings account. If we doubled it, that's $12,000. That makes sense. But if you had invested it at that rate of return of 9.3% each year, Bec, you'd have $37,885 over that period of time, which compares to that $12,000 you would have saved otherwise, which is $25,585 more free money that you have. Whoa. Isn't that cool?

And if you extrapolate it out even further, because you're young, you're in a position where, you know, I wouldn't say that you're retiring in the next 10, 20 or 30 years. I'd say there's a minimum of 40 years before you consider that because you're a young dog, right? You're a baby. But if we did that over the long term and said, all right, well, it's going to be 40 years in the share market. That first year of you earning $6,000, if you'd saved it, then we $12,000 over 40 years, you would have saved $24,000 if you just kept doing that, right? Like that's basic maths. Compounding is actually really hard for the human brain to understand because it kind of goes along level and then it projects upwards. And we don't think that way.

We actually think in a really linear way, which is one plus one equals two, and then two plus two equals four and four plus four equals eight. And like we think in a linear way, we don't actually have the mental, and I'm not saying we're silly. It's not the case. It's just the way our brains work. We don't compound in our brains, right? So I think this is really going to shock you. And it makes me so excited because over 40 years, just starting with 500 bucks, we're just talking about $50 per month, which if you're in that position, that is fantastic. The sooner you can start, the better. If you're not in the position to start yet, that is totally okay too, because we can always come back to this at a time that suits you. But had you saved over that period of

time, it would have been $24,000, Bec. Had you invested it instead, it would be $276,318. That is $251,818 free money for waiting. That is so outrageous. That is so much money. And see that, like I'm just showing Bec the graph. If you look at the graph, this down here, so the bottom blue part on your Money Smart calculator is going to show you how much you saved. And that's that linear line that we expect. One plus one equals two, two plus two equals four, right? But you can see that above that, it has what compounds. Because the money that your money makes starts making money. And then that money starts making money. And at some point, the money that your money makes actually becomes more money than what you're contributing.

So what you're contributing does compound a little bit. But what your compound interest does is actually compound massively over time. So the light blue bar that you can see above, and if you guys go and have a look at it, it'll make sense. You can see in the very last year that your initial deposit is still $50, but you're literally making $24,000 on that in a year. So it's one of those things that over time, we think it doesn't matter, but from little things, big things really do grow. Because if we strip that back to that 10-year example again, I go, it's $11,104, Bec. You go, that's pretty good, but like not life-changing. But if we go back to that 40 years, that's life-changing, Bec. So the power in investing isn't necessarily in getting the

highest interest rate. It's actually having time in the market, which a lot of us, especially if you're listening to She's On The Money have the grace of. That is mind-blowing. It's fun, right? When you start extrapolating it out and go, wow, this is what I could do. This is what I could create. And that example is $50 a month. And for some people, that might not be enough. For some people, that's actually inconceivable. They just don't have that available right now. And it's not about shame. It's not about whether you can or can't do it. It's not about what is, quote, enough because from my perspective even if you have a dollar a month to invest from my perspective that's enough because I want you to be investing because you understand compound interest because

you understand what that can create and while today you might only have a dollar well next month you might be able to find two in a couple of months you might be able to find five in a couple of years you might be in a different situation where fifty dollars a month is conceivable. So Beck, that's why I'm so passionate about it because from little things, big things really do grow. And if we even just take it back to what women earn in general, we already know we're at a disadvantage. We already know that women are retiring with less superannuation than men and less to actually retire in general. And given that number I just gave you, do you know that women who are 75 years and older on average retire with only $314,000 in superannuation.

And if you strip that back to what, quote, retirement age is, and retirement age is usually 65, the average female who is 65 years old has a superannuation balance of $381,000 by investing $500 and then potentially investing $50 each and every single month. You double that. Is that not wild to think that with education, we could change our lives. That is wild. I can't believe it's not more commonly known. Exactly. So for me, this is why I'm so passionate about it, but also why I don't think that there is a minimum amount that's quote, not worth it. I don't think it's ever not worth investing because it's actually about mindset and creating that mindset of abundance and going, well, actually I might not have a lot, but what I do have is working for future me.

and what I do have is putting me in a position where in the future I can invest more and instead of going, all right, well, I'll invest when I have money. You're already doing it today. So if ever you do come into money or if ever your situation does change, you go, all I have to do is change my contribution amount because I know who I am. I know what I'm investing and I know where I'm investing as opposed to having to start from scratch quote when you have money. That's the same thing as going, yeah, I'll start dating when I get married. like that makes no sense why would you start investing once you're rich you're not going to get rich unless you start investing right right this is really motivating me i hope so i hope so

because i really love investing and i also have just started redating my husband and i can recommend it yeah take your husband on dates so v a lot of my friends have said that shares are a little bit risky because the prices go up and down everything carries risk but yeah prices do go up and down over time. That's how the market performs. And it's actually not something that you should worry about in the short term. So when I first started investing, I checked my share portfolio literally every day. And I was so stressed if I saw it go down by even like 0.1% because it's on the way down. Like, what have I done? I've made the wrong decision. And that's just not the case. The advice I have here is zoom out. Investments should be for a long time. And don't worry if

your stock does go down, the one thing that you need to remember is if you went and bought 10 shares in a company and you spent $1 on each share, so you had $10 worth of stock back. And then in a couple of months, because we have a predicted recession coming up, that stock has dropped down to being worth $5. You're going to absolutely worry, right? You'll go, oh my God, I bought $10 worth of stock. I got 10 shares and now it's worth five bucks. It's worth half of what I paid for it. What you're not remembering is that's just what the market's valuing it at today. They're not saying, Bec, you only have $5. They're saying, Bec, you will have $5 if you sell this asset today. What you own right now is 10 shares in this company and the

market might be off. It might only now be worth $5 instead of $10 today. But if you wait and the market recovers, it might get back to that $10. It might even go to $15 or $20, but you still own those 10 shares. It's really important to understand that during the global financial crisis in 2008, 2009, obviously a lot of people lost a lot of money for a lot of different reasons. But one of the main reasons was people being really scared of the market. And if they had shares, they sold it because they're like, I just want to save whatever I have. And one of the best investment opportunities was actually when the market was completely down because shares were on sale back. So essentially the market crashed, everything was cheaper and those who were in the

market for the long term saw it as an opportunity to stock up on stocks that they liked for a little bit cheaper. So I think before you sell a stock, I would really do a little bit of a check and go, why am I selling this stock? Is it out of fear? Am I selling this because I'm anxious or am I selling this because I need the cash? Those two are different conversations. If it's because you're anxious, please, before you do that sell, do a bit of research to make sure that you aren't just triggering something that means in six or 12 months when you go, oh, I want to invest again, you don't then have to buy back in at a dollar per share again and have lost $5 in the process. Does that make sense? Yeah, that does make sense. I was also watching on Netflix at the moment,

you know, that Bernie Madoff documentary that you've probably got absolutely no interest in, but I was so excited. Right. Okay. So there's this documentary about essentially the biggest Ponzi scheme on Wall Street. And it's, from my perspective, very interesting. I don't think I could pay you to sit through it. But essentially, one of the red flags that investigators found when looking into this Madoff case was actually that he had never reported a bad year. It was impossible over the period of time. I think it was 17 years that he said he was investing. They were like, he just never had a bad year. And even the best of the best investors over a 17-year period have bad years. Did you watch those? Yeah, he made them up. It was a Ponzi scheme. He never actually

invested any of his investors' money. It's actually wild. Anyway, it's actually cooked. I'll tell you all about it after. That's something I would want to watch, actually. Yeah, I think you would find it interesting. If I can get past all the finance stuff. No, no, no. There's no financial now that needs to exist there. He's running a Ponzi scheme. He's doing the wrong thing. There's lots of money. It's very interesting. But essentially, the best investors actually expect to lose money over time, but they know that it will come back because over our lifetime, Beck, over the average human being's lifetime, they will see seven very large market dips. They'll see things like the GFC. They'll see things like the recession that our

market is currently talking about. And the best investors try to keep up and try learning and get up when they fail, not run away when they're anxious. So I think it's really important to talk about the fact that if in doubt, zoom out. Instead of looking at what's going on for this year or what the performance on your portfolio was for the last six months, let's look at five, 10, 20, even 30 years into the future. And I promise it looks a lot more bright. Okay, V, I am so ready. So what do I do first? Do I pay off debt or just start saving? All right. So first things first, I would make sure you have your financial house in order before you start investing because there's no point investing money that you then have to pull

out for something else. So the first thing I would get in order is making sure you have an emergency fund. And I genuinely believe that whether you are in debt or not, in personal debt, in a mortgage, I don't care what you are, I still think you need an emergency fund as a priority because to me, that is the first ticket to financial freedom is making sure that you don't have to go further into debt for unexpected expenses, that you don't have to rely on anybody else for money, that you don't have to ask for things and that you feel completely empowered in your financial journey. So having an emergency fund. The next thing I would do is prioritize paying off consumer debt first. So paying off debt from my perspective is an investment in itself because you're not

paying interest on that. And most consumer debts actually carry really high interest rates. So we're not talking about, you know, the 4% interest rate you have on your mortgage, because as we said before, the ASX index has averaged a total return of 9.3%. So obviously, one of these things is not like the other. But if you have a credit card that's 14% to 22%, I would absolutely prioritize paying that off because the sooner you pay that off, the less interest you're paying and that's a money win. So I would get rid of that first. And then once you've got that rid of and you have your emergency fund, from my perspective, if you want to invest, my friend, you are ready to invest. the thing I would do though is making sure that you have enough education but you're listening

to this podcast so you're on the right path aren't you amazing I feel like I've got a long road ahead of me but I am pretty bloody motivated after all of this I'm really excited because I feel like you've just clicked on what compound interest is and the power it has to change your life over the long term so I'm very excited to continue this conversation absolutely let's do it I think that's plenty for today what do you reckon I am definitely all investing basics out So as always, we would love it if you joined the conversation on our Facebook group where our community shares money tips and investing tricks every single day, free of judgment. So it's She's On The Money on Facebook and join us.

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