She's On The Money - Green Flags a Company Is a Good Investment

Episode Date: December 5, 2023

We know how daunting it can be to start your investment journey, and aside from your personal values, what are some of the green flags we should be looking out for that tell us a company is a good investment? From P/B and P/E ratios to IPOs and more, Victoria Devine shares her top tips for figuring out if a company might be the right place for you to invest your hard earned dosh! 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 Bunny, the podcast for people who love green flags. Oh, that sounds like a good podcast. I'm kind of excited for this one, V. Oh, well, me too. Let's get into it. My name is Bec Syed and as usual, I'm joined by Victoria Devine. Hello. I'm excited about this because I love a green flag. I mean, a lot of my girlfriends seem to love red flags.

I mean, that's the issue. Do you know what one of my friends said the other day? I was like, that is such a red flag. I was like, I feel like we're talking about relationships. They're like, all he's doing is showing you red flags. And she's like, yeah, I love the carnival. And I was like, uh-huh. Oh, you're doing this to yourself. So today we're going to talk about green flags and I hope she's listening because it's about investment, not relationship advice, which apparently she wasn't going to take from me anyway. It's transferable, but we will talk about why green flags are the ones to look out for.

They're the best kind. They're the best kind of flags. Vivi, you are well aware that I am trying to fix up my finances. Yes. Probably not doing a great job right now, but that's okay. Because we still have to sit down. I'm going to like sit you down and I'm going to take you through the money masterclass and be like, and then do this and then do that. Honestly, if it comes to it, I'm taking your money off you. I think that's probably where we're going to end

up. Like it's just going to end up with me being like, that's not yours. Sit over there in the corner. I need that. But no, today we're talking about investing. I've never invested in a company or bought shares and I don't really know what companies should I invest in. I know you can't give like personal advice right now. Are you sure? I mean, maybe you can't. No, I can't. I was kind of excited. I was like, no one can legally. Like you won't find a podcast that is Australian that will come out and say, oh, this share, this share and this share are perfect for beginners

because that is personal advice and it's actually illegal to do that. So if that's what you're looking for, I'm just going to burst the bubble now and be like, oh, nobody can legally provide that. And if they are and they have said something like that, you kind of go, that's a red flag. Red flag. Because you should know you shouldn't be doing that and I can almost guarantee that they have absolutely no license

to be having that conversation anyway. So you shouldn't be taking their advice to begin with. This episode today, I'm going to talk a little bit more technically. So we're going to talk about P ratios. We can talk about PB ratios. We're going to talk about the PS ratio, what they mean, what is an IPO? How does all of that work? And what does it mean when it comes to green flags? We're not so much talking about your ethics and your values and what is a green flag in that perspective. Because if we want to talk about my ethics and values, obviously, if you know me well enough, you'd know that I'm looking for sustainable, ethical businesses that are relatively environmentally friendly, that care about their staff and all of that stuff.

We'll do a whole episode on that. That is fine. But that's more ethics than it is going, hey, Bec, how do we value a company? What I can do is help you get the right information so that you can choose the right investments for you. And it's not as hard as people think it is. Like, I think that we all get analysis paralysis when it comes to picking shares. You're like, well, I don't know what one I pick. And I'm like, well, why are we talking about what share you're picking back when you don't even have a share trading platform? Like there's so much we need to set up first. Like, why are we talking about investing back when I know your budget's not on track? No.

And like, that's not a bad thing. There's nothing shameful or awful about it. It's more, Beck, let's get your financial house sorted so that then we know how much we can invest comfortably so that you're not shooting yourself in the foot later and going, oh my God, I actually needed that money and you don't have to pull it out because you go, well, actually, V, I reckon I can afford 30 bucks a month. And then I go, oh, great. Well, let's work with that. Whereas other people might go, I'm so excited to start my investment journey. I'm just going to really prioritize this. And then they're like picking a thousand dollars or something and then realizing that they can't afford their car insurance or like

groceries aren't happening in the same way that they were before. And they're like transferring money out of their savings to make this other thing. Like it becomes a absolute mess, a carnival, you could say. Oh, we like a carnival. But it could become like that. And then you become overwhelmed and you're like, investing is not for me. It's all too complicated. It's too hard. It's not like that. Okay. Well, before we go too far into this episode, can you just remind all of us why we should consider investing in companies? Because we like money. Ah, I see. You know what I love? Compound interest. Compound interest is the money that your money made because it was invested. And then that money that your money

made, it starts making more money. And then when your money that the money made starts making money, that's free money back. And I love free money. Whoa. Okay. So there's a few steps to get there, but once you're there. Do you like free money back? I don't hate free money. Oh, you don't hate it? Like just be partial though. Not sure. Oh, you know, I could take it. I only like it if there's no catches. Exactly. That's the thing. Yeah. Yeah. Like why are you trying to offer me 50 bucks, sir? What's going on here? Yeah, exactly. So today I want to touch on, I guess the importance of investing. You can start investing today. You actually don't need a lot of money to do it. We've spoken about this on the podcast before. There still seems to be

this, I guess, myth that you need a lot of money to become an investor. And nowadays we have platforms and I'll plug Sharesies because obviously we work with them. We adore them. A lot of our community adore them. If you want to sign up, use the code SOTM and you'll get 10 in your account to start, which is very sexy. Guess what that is? Free money. But with shares you can invest with as little as one cent. That's pretty good. Like I can't think of something more accessible. I like that actually. Because they do what's called fractional investing. So Beck, if you went to a normal share trading platform, you're like, I really want to purchase a share. I've decided it's

going to be an individual company. Let's say it's BHP. I don't know why that one came into my head, but that was the first one that came into my head. Maybe because it's like a spicy, see. It's got green flags. It's got red flags. Like, I don't know. This would divide people, right? But if you went to your normal share trading platform, for you to buy one share in BHP, it's going to be about 46 bucks. And you might go, well, V, I just said that I had $30 a month to invest. I can't even buy one BHP share. What shares these offers, and this is not me trying to sell their product. It's me trying to explain fractional investing. They go, oh, well, how much money have you got there? And you might go, I've got 30 bucks. So you might go,

actually I've got 10 bucks. And they go, yeah, no worries. How about we give you $10 worth of BHP shares? And they do what's called fractional investing. So instead of you having to buy a whole share, you still get exposure to that asset. You can purchase that asset, but for what your budget is, not what the share price is, which is really nice because a lot of people want exposure to particular companies and you might go, oh, but that one's too expensive for me to buy like one off. So it's kind of nice to be able to build your portfolio in a way that suits you. And that's one of the reasons why I really love this concept of fractional investing. Is it safe? Yes, absolutely. Everything's still held in the same way an ETF would be held. So like you are absolutely fine.

I know a lot of people are like, oh, but is it risky? I'm like, it's not more risky than any other type of investment. So don't stress too much. Right. So it's very unlike property where, you know, I can't be like, hey, Bec, do you want to buy property? And you'd be like, yeah, but I've only got enough money for the bathroom. So can we just buy the bathroom now and buy the rest of the house later? No, it doesn't work like that. That would be nice though. You also don't have to be like a night trader to make money in the share market. I feel like there's this massive misconception that like to be a good investor, you need to sit in a dark room with like three computer screens in front of you trading shares. That's not what happens.

That's what I pictured. Yeah. Like, you know, I invest. There's no way I would be doing that. I want to sleep at night, not trade at night. And the risk of trading is actually incredibly high because you're making inconsistent, calculated decisions. You've got to be educated on that. And like most people are not. Do I sometimes have a little bit of a play in the trade market? Of course I do. I'm an ex-financial advisor. That was my bread and butter. Like I love it. But like you don't do that to make lots of money. You do that from my perspective because it's fun, because research tells us that you're going to get worse returns if you do that than if you put your money into a stable investment over

the long period of time. Because what we know to be true, Bec, is that time is what matters most in your investment journey, not how smart you are or how impressive the investments that you've purchased are, but more how long you're exposed to an asset class. Also, the sexiest part of the money that your money makes making money, so compounding interest, Bec, is that it becomes passive. So you're no longer having to trade your time, so the hours that you work each week for money, but money is still coming in the door. Like you want to get paid for staying in bed, Bec? Yeah, that's how with investing. So what happens in the future is, let's use my favorite example, which I've used a lot on the podcast before, and it's that $1.2 million investment

portfolio. So we know that if you started at the age of 21, investing $500 each and every single month up until your retirement age of 65, you at an average rate of return of 7.5% will very likely have an investment portfolio worth $1.2 million. Wow. Right? So you go, well, V, that makes sense because I was exposed to the market for that long. Well, no, because if you just saved it instead, Bec, you'd have $240,000. Right. So you're making by giving yourself exposure to the share market over a long period of time. $1 million in free dollaroos. That's free money, baby. That's free, right? But Bec, what does that mean once you retire? Do you just start spending that $1.2 million? The answer's no. No. No. Because the money that your money has made is still invested

and it's still making money. And if we be a little bit cautious, so let's pretend that once you retire, your portfolio is only returning 5% because we're being a bit more conservative. Is that what the Australian share market returns, Bec? No, it's not. The share market in Australia on average over a 30-year period of time returns close to 10%. We're going to be super conservative and pretend it only returns 5%. Okay. A $1.2 million investment portfolio each year at a rate of return of 5%, conservative, is going to give you an income of $60,000. Wow. Without diminishing that $1.2 million. So that $1.2 million will consistently sit there and it will just work, it will be invested, but the money that your money is making will be $60,000 a year.

And in retirement, that becomes your income. So you're just taking the cream off the top. So you're just taking the cream off the top. And then you know what happens, like, and I don't want to be too dramatic about it, but I just think it's so exciting to be in a position where you then have that $1.2 million, right? Because we can't live forever. So we can make plans and leave legacies and go, oh, well, with that $1.2 million, when I have kids, like I would love it to go to my kids. And you can like make as many rules as you want. You could be like, but they can't spend the $1.2 million. They can just have an income for the rest of their lives that they share between themselves of $60,000. Isn't that sexy? Yeah, that's a really nice idea. Or they could add to

it and do the same thing. And that's how obviously there's a lot of other ways that family wealth starts and intergenerational wealth starts. But this is one of the ways that intergenerational wealth can start. And you can set your entire family lineup for success in the future. And I just think that's so exciting because I'm definitely one of those people that is passionate about leaving a legacy. Yeah. Like I want to do good, be good, have a good time, but I also want everybody to be in a better off position. You're telling me I could do that? Yeah. Isn't that attractive? And we can start today right here, right now. Exactly. With as little as one cent. That is very impressive. Okay. So tell us what green flags should we be looking out for that

tell us a company is actually a good investment? All the green flags. All right. So first we're to start with the profitability green flag. So that's basically the first thing you should look at. Are you investing in a business that actually makes money? Because I can almost guarantee that you're not going to make any money personally if they don't make any money. Sure. Where's it coming from to be given to you? So then we're going to delve a little bit deeper later. The first green flag is that it's profitable and the profits are stable. So this is where I go back and I go, hey, remember that time that everybody in the media was talking about after pay shares? and every man and his dog in the office was like,

I bought after pay shares and I've made so much. This happened like just pre-COVID. And I remember just looking at people being like, cool, Bec, you're not being paid to own that share. You bought that share and that share increased in price. And the only way for you to get your little mittens on that extra money is to sell that share you have while the market is high.

If the market dips and your share becomes worth less, you haven't actually made any money. Yeah. Whereas if we went and bought like a NAB share, and I often use that as an example just because it comes to mind, I used to be a financial advisor. So I had like literally things that were wired into my brain, BHP and NAB were two of them, right? Right. So if you went and purchased a NAB share in comparison, your friends aren't going to jump up and down in the same way they did about Afterpay, right? They're going to be like, cool, Bec, you bought a bank share. And you'll be like, yep, but for every single share I have, I get paid 84 cents. Oh. I get paid to own that share. And

that's what's called a dividend. So that's pretty sexy because that's a share that pays you to own it because it's a dividend share. And we know that NAB over the last 50 plus years, they've made money. They're a bank. They're really good at making money. I mean, we're pretty salty at the moment because they're making money off our mortgages that are sky high and we could have these really big conversations. But at the end of the day, if you are making an investment, it pays to make one that is going to put you in the best possible position even if it is a little boring right so beck do you want to be paid to own something that you own over the long term or do you want to buy something that increases in value but never pays you it's just valued higher because

of market demand and then it could go down later when it maybe isn't as shiny of a product or as new of a product it's like bitcoin yeah i see what you mean like dogecoin i was on that train you were on the Dogecoin trade. I was. So you're telling me you've never bought shares on the share market. The little Bex Syed has gone out and bought Dogecoin. I was not very well informed. Do you know, I don't even know how I would buy Dogecoin. I know. I don't know how I got there. Where is your Dogecoin now? It is gone and I have lost some money. Oh, interesting. I don't recommend. So which side of the table should we be taking, I guess? Ideally, get paid. All right, get paid. So we like that. But you don't have to delve into a company's financials to do this. Like,

you don't have to go read an annual report I will I have but like the banks they like post them on their websites and they're beautiful like they must have a really good graphic designer because like their annual reports are so sexy like they have like lots of very bright colorful graphs and charts a letter from their CEO explaining what they did that year I just get so excited reading annual reports I'm like oh bushy I understand that I want to be like you one day you could Like it's a waste of time because you don't actually need to do that, right? I used to do that a lot more when I was a financial advisor because I could sit down with you and you might go, oh, V, well, why is that off this year? Like last year it performed really well. And I could

go, well, I've read the report. Here's what the CEO says. Here's what the market says. Here's what, you know, is going on. And this is what the future looks like. And you would go, I feel so much more confident. So that was like part of my job. You don't need to do that because all you have to do is look on your trading or investment platform because it will usually provide you with a really easy report of like where they are, where they're at, where they've been historically. You can also Google it really easily. Sure. Like it's very easy to Google. Let's use NAB again as an example. If you're buying a direct share, what has NAB's performance been like over the last two years, five years, 10 years, 50 years? Gotcha. Gotcha. Okay. So what

like you don't need to be too specific. Yeah. Okay. But to be a little bit specific, what exactly are we looking for in these reports? All right, strap up. This one's big. So there are a few ratios that we're going to talk about. And these are free financial indicators that are used by financial advisors, but they're also used by people who invest. And I have an investing course coming out early next year, which is really exciting. So I'll be able to delve into it a little bit deeper and really explain, okay, well, this is how you'd get it. Sure. You can Google it as well. Like, I hate the fact that I could basically make myself redundant and be like, you can Google it back. I'll tell you what you need, but you can always Google

free PE ratio calculator and you just put the numbers in and it will spit it out so you don't have to do the calculations, right? Okay. Like, I don't want you to feel overwhelmed because you're like, there, you signed up to She's On The Money because it was approachable and now you're making me do basically complex algebra. I'll be like, sit down, sorry, I've been waiting for this moment. But the first thing is a PE ratio. So that is a price to earnings ratio. So we're comparing the price of the share to how much that company makes. Makes sense, right? So this is the company's share price divided by its earnings per share. So some won't have earnings per share. If a company has a high PE ratio, they might be overvalued. So if you come

out with a number that is deemed to be high, one of two things, one, it was a really good buy, or it could be overvalued. So you might look at something again, let's pretend it's Afterpay. We know that that company was overvalued because of market hype. We know that people were really excited about it because they were getting on the train. It's like Dogecoin. Why was it so expensive when you bought it? Because everybody was talking about it. Was it actually because their annual report came out and they're providing a lot of value when they've invested a whole heap of time, energy and resources and, you know, they're going places? Or was it because people in the market were excited about the opportunity? When people in the market are excited about the

opportunity, often things will be overvalued, which means you're paying more than you should for that asset. So this ratio tells you, are you paying what you should for this or is it a bit spino right now? How do we know if it's high? Does it tell you on the thing? So on average, when you're talking about PE ratios, to make sure it's kind of on track, it's not overvalued and it's not undervalued, you're looking at a number between 20 and 25. Usually. Obviously I can delve into this a lot deeper later, but about 20 to 25. But when you see a low PE ratio, like it comes out like five, that could actually indicate that the stock is undervalued. So this is where traders start to go, my ears are pricked up. So I've done all my calculations in this share. It's actually

got a low PE ratio. So either there's something wrong with it, Bec, or the market doesn't see its value. Okay. Often you might see a share with a low PE ratio if they are involved in any kind of drama at the time. So, you know, if something happens in the share market or if something happens in social media and, you know, the CEO has gotten in trouble for something and then market sentiment has gone down. So that just basically means that people trust them less. When people trust assets less, they might sell them off. And as you're selling off, obviously the share price is decreasing because there's less demand for it. And that could result in an undervalued share. And do you know what we like? We love drama. We love drama. It was up to me, Bec. I would have

an entire drama podcast in addition to this podcast. Like I don't want to talk about like popular drama or like other people like that's a bit ick just like stuff you'd hear on the train yeah like you know I mean like a podcast where people are like calling in being like this is anonymous but like I heard on the train that such and such did such and such and we'll just like anonymize it I'm here for the drama like I just want the story let's do it anyway back to investing that's what we're trying to get good at right now we love a bit of drama because it doesn't mean it's true but it also doesn't mean that the business is impacted at all right so you could seize the opportunity yeah you could be like they're undervalued right now

but are they a stable business yeah they look pretty good that could be an opportunity to seize and i love when a company is undervalued doesn't happen often and when it does other investors especially professional investors are on top of it so can you as a lay person go and you know pick an undervalued share not that easily sure but it's nice to talk about why it's important because how many times at school were you told, do this maths problem, here's this ratio you need to learn? You're like, well, I don't do that. Yeah, why? We would do it because it could benefit us. Okay. The next is a PB ratio and it's nothing like a PB and J, right? So it is a price to book value ratio. Sounds complex. Let me break it down. So this is essentially a company's share price

divided by its book value. Share price, very straightforward. I'm assuming you could tell me what that is right now. It's basically how much a share costs for you to purchase individually. But a book value, you're like, what the heck, do they sell books? No, they don't sell books. It's when you look at their balance sheet. So you might look at their profit and loss, and it's basically the cost of carrying an asset on a company's balance sheet. So how much is the actual business worth? So a business might be in significant debt, so they might be really good at making profit, but they might also be in significant debt. And we need to take all of these things into consideration when making an investment

decision, right? So you don't want to go, oh, this is the best business ever. Like, look how much turnover they've got. Cough, what Afterpay did. But then they're also running in the red because they are trying so hard to invest so much into their business in the hope that it will be successful. But if it's not, they actually have so much debt and that's really bad for shareholders. Okay. Like we don't want to date people who are in millions of dollars of debt, Beck. It's red flag. It could be perceived as a red flag. You're right about that. Could be a little bit of a red flag. Especially if they're trying to be shiny in the media, but you're like, I looked under the covers and I saw what you've got.

I see what's going on. I see what's going on. And it's not that hot. Yeah, I see. Red flag. And that's where people can be all talk. And that will tell you if they're all talk or not, right? Sure. Number three, we're going to talk about price to sales ratio. That's a good ratio. It's called the PS ratio. And this is the company's share price divided by its sale price per share. So you determine a PS ratio by dividing the company's total market capitalization or value. So how much is that business worth by its trailing 12 month revenue? So essentially this shows how much investors are willing to pay for a share in the current market. So what does that actually look

like, you need to have a look at it because it's not just what the share price is. It's a bit deeper than that. But those are the three that I want you to kind of consider. For me, the first one that I would learn if I was a brand new investor would definitely be that PE ratio, that first one we talked about. It's the easiest to calculate. It makes the most sense mentally and it'll give you a bit of confidence. I don't want you jumping in and being like, I need to do all three at once. Like just start with one because that's essentially the company's share price by how much you make from it. So, Bec, earlier we were talking about NAB. So, let's use them as an example. So, the NAB share price is $28.42. So, that's how much it would cost to buy one share in National Australia

Bank. We know as well that for each share that you own in NAB, they pay about 82 to 84 cents a year in dividends. So, they do pay you to own their asset. If we then plug that in and look at their price to earnings ratio, NAB right now at the end of November had a PE ratio of 11.73%. Okay. In Australia, the average is 15. So if we compare that to the 15, obviously like we gave different numbers because we're looking at an international market, but the average in Australia is 15. A low number can indicate that the stock might be undervalued. If we have a little bit of think about the market right now, Bec. Do people like banks right now? Like maybe they're disenchanted. They're not that happy with them, are they? Because they're increasing their mortgage

rates. People are like, banks are absolutely screwing us over. So you're right, people are disenchanted. Is it still a good business? Unfortunately, it's like... Yeah, like banks make the world go round, right? So people might be a little bit disenchanted. And I'm not saying that this is completely accurate. It's just an example. But what I'm now seeing is that the average PE ratio in Australia is 15, NABs is about 12. So right now they're a bit undervalued and it would make sense because people aren't that excited about banks. Does it make it a bad investment? No. Does it make it a good investment? No. Can't say. Can't say. But what we can say is that we would not want to buy a bank that had a PE ratio of 30 if the average Australian

PE ratios 15. Got you. Does that make sense? You kind of look at it and go, oh, well, maybe now might be a not too bad time to buy. However, the important thing to remember about when the right time to buy is you can do your PE ratio, you can do PB ratio, you can do PS ratio, you can do all these ratios, but the best time back for you to invest is not when the market is ready. It's when you are personally ready. And I would personally love for you to overpay slightly for a share that you then hold for a really long time that pays off for you because I can almost promise that everybody listening to this podcast can't time the market. I can't time the market. Warren Buffett can't time the market. I'd be so flipping rich if I could time the market. It's just good to make us

feel confident in the decisions that we are making to understand these things. It's not the be all end all. You don't even have to do it. Okay. So if I was listening to this, I would go back and or listened to maybe like the last 10 minutes. So, baby, let's take a quick break. Yeah, and you can like rewind and listen to it again. I feel like I've overwhelmed you. This is why we need to get the course out sooner so I can do it in video and like have my little whiteboard and be like this and this

and this is what this looks like. Totally. No, you are great at explaining. I'm trying, Mum. You're doing a great job. Thanks, honey. Let's go for a little break. On the flip side, we'll take a deeper dive into green flags

that a company is actually a good investment. Don't go anywhere, guys. Okay, V, we are back. How are you feeling? I'm so excited. Nobody else is. They're all like, P, B, P, E, P, S, what? Hey, I'm excited. Let's be excited together. But let's talk about green flags again. I love talking about green flags. Do you want to know another one? I would love to know another one. I thought you might. It's why you're here today. So another green flag, no debt, low debt or well-managed debt. Because you know how in like our lives, when we talk about debt we're like there's good bad and okay debt like we talk about it that way kind of same

for business okay like good debt would mean that they'd invested in the business and it was going to grow because of the debt that they've taken on bad debt would be they are having creditors chase them because they have you know bitten off more than they can chew and they're probably not a good business to invest in right that's traumatizing in a perfect world a business would have no debt yeah it's very sexy she's on the money has no debt oh that's pretty hot we're Also not on the ASX so you can't buy us as a share and nor will we ever be because I'm the boss now. Ah, she's the captain now.

I'm the captain now. But ideally a company has no debt, but that's not a deal breaker if there's like low debt or you can see that it's being well managed. Like they might have taken on an investment loan to, you know, purchase some assets that are going to further the income of the business. If a company does bring in a lot of money, but it has a lot of debt to pay off, that actually decreases your dividends because they've got to pay their debt back before they pay the shareholders. That makes sense, but you don't really think about that when you're looking at

share prices. So we always want a company that has like low debt or debt that's going to get lower over time that makes sense for the business spec. Okay. I'm hearing you. All right. Do you want my final green flag? Yes. Okay. So final green flag when it comes to profit is that the company is consistently raising dividends for a few reasons. One, we always want to make more money, but like, is this business keeping up with inflation, Bec? Ah, yeah, true. Because if they're not, we're actually going backwards by owning them over the long term. Right. And that's not very sexy, but you can check past dividend payouts on the ASX website or my favorite, Google it. What have NAB's dividends been like over the last 30 years? Have a look at it. I promise there's

charts everywhere on the internet about every share. It's not just NAB, I've just clung to that example today. We like transparency. I don't even own NAB shares at the moment. What is wrong with me? Anyway, I think that is probably where I will leave it when it comes to green flags. I hope you're feeling a little bit more confident and comfortable. Yeah. Okay. So I think right now we can't see a single red flag, no red flag in sight. No profitability red flags. No profitability red flags. Because that's what we're talking about, remember? But what else should we be looking for before we invest in a company? All right. So no more green flags, but we're just talking about things that you should be looking for. Just in general. You can

only have so many green flags. True. Have you seen the TikTok trend of beige flags? Yeah. So we're talking beige flags now. No, no, no. We're not talking beige flags. I just wanted to talk about TikTok again. She loves talking about TikTok. I love TikTok. That's why I don't do any work anymore. Anyway, I guess the next few tips, they require a bit more research. So they're not just like immediate green flags where you go, yep, tick P ratio. That's easy. Does the company have debt? Yes, no. Easy answer. Does that make sense? Yeah. So it requires a bit more research, but they're worth it and will take you from a novice to a pro investor in no time. I could sell a ShamWow with this energy. Seriously. So one of the things we want to look at is whether

there is a future in the product or the service that that company is selling. Okay. So will this actually be a profitable and competitive business in the next 10 years is a question you need to be asking. So for example, am I going to run out and buy shares in a company that makes DVDs or CDs? Maybe they're coming back. Maybe they're coming back. You're like, they're vintage. It's like records. I don't want to hear your justification, but that's my example that I have come up with on the fly. And you're going to be like, maybe. No, no, no. You were meant to say know, Bec. That's impressive. That's impressive. But probably not because that's not where technology is at right now. And in another 10 years, that's probably not going to be the

dominant technology that the market is using, in which case your share price is probably going to decrease. Gotcha. Their profit is probably going to decrease. You're right. There could be a vintage market. But like, are we buying vintage market things on the ASX? No. No. Exactly. Are they recession resistant is the next thing we want to talk about. Oh, that's a good one. Especially after the pandemic, really good question to ask. So like, for example, during the pandemic, supermarkets did so well, right? Like I don't think people expected that, but it kind of makes sense. But because regardless of what's going on in the economy, Bec, we all need to buy food. In fact, when the economy is kaput, we're actually spending more money at the supermarket than we are

on takeaway and stuff like that. So like that's a pretty good business when it comes to recession. Preferably, the customers for a particular business are from more than one source. So like imagine if the business was propped up because, you know, it's probably not going to be on the ASX, but you get my example, all right? Yeah. Instagram. So it's a really big Instagram account and they have an Instagram shop. That's risky. Sure. So if all of your customers are coming from one platform. What happens if that single source is wiped out or that single source is changed? It's not actually in your hands. That entire customer source has been wiped out. Whereas a company that might be on all social media platforms might be different. That is just an

example. But for bigger businesses, it's obviously very, very different. But that's one I think we can all wrap our heads around. Yeah. Very risky to just be on Instagram. It's why so many businesses, especially small businesses. Now we're just talking about something completely different. No, but it's why they want to diversify their customers. So that's why, you know, once TikTok happened, they were trying to promote TikTok from Instagram to push you over to another platform because if something happens to their main platform, at least they can communicate with you on there. It's why if you go on any website, they are always trying to collect your email address because in the marketing world, Instagram's good, TikTok's good, any social

media is good but what is golden is your email address because they have direct contact to you they might not have the Instagram platform that could connect with your profile but they could send you an email being like hey sorry our Instagram got completely wiped here's a new link to our new Instagram so they've got direct communication with you which is why so many companies really promote they go oh 10% off your first order if you sign up to our newsletter like they put so much value on essentially owning the customer because there's no rules around it in the same way there would be around having a follower on Instagram or having a follower on Facebook so anyway you want diversification of customer sources that makes sense everything's

really checking out I'm like thinking back to my life I'm like oh that's why you asked me this this is why you email me all the time blah blah blah but okay let's move on what else are we looking for? So we're looking for a company that has IPO'd and has done so for a while. You look confused. IPO. So an IPO is an initial public offering and it basically refers to the process of offering shares of a private company or corporation to the public in a new stock insurance for the first time. So the first time they're put on the market, right? Okay. So a lot of people get hung up on like, oh, this company is about to IPO and I'm going to invest in them. That's risky. How do you know how they're going to stabilize and what their actual share price

will settle to? You're right. You might have an IPO that happens and that company is completely undervalued and it skyrockets and you make lots and lots of money. But here at She's On The Money, we're about making money over the long term. I'd prefer you to be stable and secure over the long term as opposed to get rich quick. We can't time the market. I've said it a million times. If I could, I already would have and I wouldn't even have this podcast because I'd be too rich because I'd be on an island. That's fair. Do you want to come on my island? Yeah, actually. If I ever get a successful IPO, I'll let you know. Thank you. So essentially, that means that they're a publicly listed company on the stock market and anyone can now buy shares in them. So once a company has

entered into an IPO, it's actually a much safer investment because there's much lower risk now because we actually can see what the market is willing to pay for them. So before we're guessing what the market is going to pay for them, like everyone's kind of been like, oh, they're IPOing back for 50 bucks a share. That's so undervalued. The business is worth more than that because I love it. You don't know what that dude who's saying that actually knows. Or they could be saying it's overvalued, can't believe they'd expect $50 a share. How do you know what that dude actually means, right? So essentially, once they've put themselves on the market, you can measure or you can see what the market's actually willing to pay for them.

And it's a much safer investment and usually leads to larger dividends. We like large dividends in this house. We do. We like big Ds. Yeah, we like the big dividend. The big dividend. Stop it. Sorry. but the longer it has been IPO'd for, so the longer it's been on the market, usually the less risky the investment because it's been through a number of different phases and cycles. So that's why we talk about blue chip stocks. So you can't just become a blue chip stock overnight. You've got to earn that with time. So blue chip stock is kind of those

tried true investments that have performed well over time. They're a bit boring. If you had grandparents who are into investing they definitely care about chip stocks okay so you might be talking about coals and woolies and bhp and the big four banks and stuff like that nothing exciting like trans-urban yeah so like transport and like toll roads and stuff you kind of go there's nothing sexy about them yeah but we need them but we need them and have you seen how much tolls are recently oh my lord don't even get me started the back way to get to the studio every time we record because tolls now to get from where I live, which is probably giving away too much personal information,

to where the studio is, it's like $22. I know. What the heck in? The Monash. So I would much prefer to buy everybody coffee when I get to work and it took me 15 minutes longer. Okay, V, so I feel like I've learned a lot today and there's a few things I have to go and Google,

price to earnings ratio. Are you proud of me? I had that off my head. I did. Honestly, I'm really proud of you because at the end of the day, I feel like you've been on the show for like a year now, which is wild to me. like January is going to be our anniversary what should we do I don't know yeah stunning I'll think

of something really cute okay but I feel like you've gone from being like oh no investing's not for me I bought Dogecoin one time to being like oh I kind of understand it like I'm not that intimidated by it like you haven't done it yet which is so fine sure like we invest in our own time not when the market tells us to invest yes but like I feel like you might be a little bit more confident than you used to be around going oh no like investment something I want to do but I just haven't done it yet. Yes, I absolutely feel that. You know, baby steps. So thank you so much. I've learned so much today and over this year. I don't know about you, but I think it's a really good place to leave it for now. I think it's a brilliant place to leave it. So we will

see you guys on Friday for a little bit of a recap. But we love you. We hope you have a good day. And sorry that I overwhelmed you. I didn't mean it. Listen to the episode again. Bye, guys. 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 321 649 27708 AFSL 451 289.