She's On The Money - Ownership Structures of Investments Part B

Episode Date: October 3, 2023

As promised, part B is here! A few weeks ago we covered off Part A, which looked at setting up your own structures to personally own shares, now we're digging deeper into the different ownership structures of shares, ETF's, and managed funds. After this two-part series, you should be informed and confident enough to dive into investing, if you haven't already. 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. Devine Victoria. I am very excited for this episode, but I'm not sure that that feeling at the moment is mutual. At the moment, you can see right through me.

Yeah, like you always can. Like you're one of those people that definitely shouldn't be given state secrets. Yeah, that's true. Like if a ransom man came and kidnapped you and said, Bec, you need to tell us the code, you'd be like, oh, the code's 1234. No worries. Why did you need to know again?

Yeah, yeah, exactly, exactly. What? Oh, it was a secret. Oh. So unfortunately my face and my body and my words can't keep a secret. But that's okay. And my secret today is that I am not super excited. Don't care about ownership structures.

But I have a feeling you'll be able to explain it in a way that gets me excited. You reckon? I think so. I know a couple of weeks ago we were talking about this and we decided to do a part B because there's a lot of information that goes into this. We were talking about a few things that sparked my interest and seemed super important to chat about. It did. And it's one of those things where I was like, okay, well, I don't want to overwhelm people too much, but also we'll get into it, but there's like two different ownership structures that we wanted to talk about.

So there was like personal ownership structures. So the way that you can set up your own personal ownership and then the ownership structures that exist inside the assets that you purchase. And those aren't really changeable. It's not like you can go, oh, well, with an ETF, I want the ownership structure to be different. No, no, no. That's just how an ETF functions.

Whereas with your trusts or your sole trader or your individual share holdings, like that's all your choice and you can hold it however you want. whereas this is more what you need to consider when buying shares and what that actually looks like and I feel like our community has said a number of times things like oh well if it's not chess sponsored you shouldn't be buying it and I don't necessarily agree with that so we want to I guess break down all of those things that I feel can be really overwhelming at the start of an investment journey where you're like hold on I was just going to buy an ETF what do you mean I have to think about chess ownership structure or what's this or what's that that's what this

episode is about to hopefully give you a bit more independence, but also, I guess, confidence to go, no, no, no, like I am where I am and I'm starting here and that's okay. Sure. Okay. And all of those terms and everything we will discuss a little bit later in the episode. But yes, we were speaking about this a couple of weeks ago, basically the different structures we could set up personally to own shares. And you promised that you'd give us a part B and explain the different ownership structures that shares, ETFs and managed funds use so we can understand them better. So I'm ready. Let's go. All right. Let's recap though and strip it right back to the start, V. What exactly is a share and why should I buy one? That is really, really the

start. Hey, I like it. So shares, also known as stocks or equities, same stuff. People just call it different things. Shares is a more of an Australian term. Stocks is a more American term. Equities is more of a finance bro term. If people are like, oh yeah, I've been buying equities. sit down sir you just bought a share but essentially all of those things represent ownership in a company so when you own a share you're essentially becoming a teeny tiny part owner of that company my favorite way of looking at it is kind of like a pie chart and you took a really tiny sliver of the pie and now it's your sliver of the pie and what that does it is it actually entitles you to any of the growth and profit of that company because you're a little

baby shareholder, like you're the owner of the company. So why should you care about that? Well, owning shares can potentially give you a chance to grow your money as the company's value increases over time. And hopefully that company is doing so well that they're paying dividends. A dividend is a profit that is distributed to the shareholders of a company. And you just reinvest that money, compounding interest is what that is called. And over time, your money that your money has made starts making more money and that becomes really attractive, Bec. Wow. And it's just a snowball effect. Yeah. That's investing to a T.

Got it. Okay. Okay. Okay. So now let's talk about ownership. You mentioned off-air that it's simple and there are two ways to own shares, directly and indirectly. I did. I also mentioned it on-air, but like off-air, absolutely. I've been ranting about this off-air though, because I'm like, there is definitely a difference. And from my perspective, you're on the money, babe. But simply put, direct ownership is when you buy shares in individual companies, while indirect ownership often involves investing in funds that own the shares for you. So it's kind of like the difference between a direct share, like going, and I always use NAB, I don't know why, let's change it. You're going to buy a CommBank share individually and

Beck Syed is the owner, whereas you might go and buy an ETF or a managed fund that holds CommBank. CommBank doesn't know that Beck is the owner. What CommBank knows is that ETF or that fund you've put your money into, they own a significant portion of that share. And that's how it's broken down. It's just an ownership structure. And as we'll get into it, we'll talk about, I guess, the pros and cons, but they're kind of much of a muchness in this day and age. Like in theory, I do get that. I do want to know more about the pros and cons, but why should I choose direct ownership? Okay. So I guess to summarize it, pros and cons are good. Direct ownership means that you actually get to choose the companies that you get to invest in, while indirect ownership offers

more diversification, being able to spread your investment across multiple companies so you can diversify your risk. Direct ownership, as I said, it kind of puts you more in the control seat. You get to choose which companies align with your personal values and goals. Plus, if those companies perform well, your returns can actually be quite rewarding. And sorry if this is a really silly question, but why? It's probably not. This is She's On The Money, No Such Thing As Dumb Questions, sit down on.

Thank you very much, Victoria. But I want to know why doesn't everyone just do that? Why don't you just do that? Why don't you just do that? Sounds good, right? Because you're like, especially the way I just explained it. I'm like, you've got so much control, Bec. You could make money, Bec.

Totally. Cool. Why doesn't everyone just do that? Because there's actually a number of downsides we need to consider as well. So with great power comes great responsibility, Bec. So they say. Direct ownership. it does come with higher risks because your returns are directly tied to the performance

of individual companies. It also requires a whole heap more research and monitoring to make sure that you are, as an investor, making informed and smart financial decisions. The kind of like onus and the responsibility is far more on you. Ah, okay. I got you. I got you. So does that mean indirect shares have less responsibility. I mean, we could absolutely say it that way. That's how I personally feel about it. Indirect ownership. So things like managed funds or ETF, they offer you far more diversification. So essentially what you're doing is when you invest in a managed fund or an ETF, similar concepts, they're not identical. We'll get into that. But essentially what you're doing is investing in a basket of companies instead of

just one direct company, which reduces the impact of, you know, if one company isn't doing so well and you just went invested in that one, like you're going to feel all the losses. Whereas if that one was one of 200, Bec, it's a lot more consistent. It's a lot more level. You're getting more consistent returns. And to me, as somebody who likes a more indirect approach to investing, because I think I've mentioned it before on the podcast, I do own ETFs. And I would argue that I am, I don't want to say like one of the best investors, that's not what I mean at all, but like I'm very educated in this space. I used to do wholesale direct investing for ultra high net wealth clients. I know how to do that. I don't want to do it. It's so much responsibility,

Bec. I love an ETF. Like it works for me and my personal situation because as much as I adore investing, and please don't get me wrong, don't tell anyone, but I do like to have a little bit of a punt on the side. I do like finding a share that makes sense to me and reading annual reports and investing, but that's such a small part of my investment portfolio because to me, that's fun. And if we look at the statistics, we know that index funds and ETFs outperform investors who are trying to chase return. So like me chasing return and picking my individual stocks, it's not going to put me in a better position long-term. So essentially it reduces the impact if one of the companies that you pick doesn't perform well and professional fund managers, they essentially

handle all of that for you. So say a company isn't performing that well in your ETF and it's one of 200, they might go, we're going to bullet it because they go and do all the research and they look into it and go, you know what, we're going to bullet that bank and replace it with this other one. It means that there's a more hands-off approach and you kind of have some professionals in the background. Okay. Also, I just realized how different we are as people. When you said punt, I was immediately like a slap at the pokies. You know what, that's kind of what I meant. That's kind of what I meant, but I do it on the ASX because Sportsbet are not getting my money. In fact, every time one of their ads comes up, which I don't know why it does on my

TikTok, I'm like, get off my feed. Okay. Interesting. Get off my feed. I respect it. Now let's do a quick recap. What is an ETF and a managed fund and are they harder to buy than shares? Yeah. Okay. That's a good question because I keep talking about ETFs and managed funds. We definitely should dive into it. So, a managed fund is also known as like mutual funds or like a unit trust. These are investment vehicles in which a fund manager, they essentially take all your money, pool it together from multiple different investors and allocate those funds to a diverse range of assets. These could include shares, bonds, other securities that they want to hold. Managed funds are typically overseen by what they call a professional funds manager. So,

like one usually white dude like there are female fund managers there aren't many of them this is obviously something that the average investor might not do you might just go oh this one performs really well like you might go to a particular managed fund and go I want to know more about it but you just look at the investments I go and look at the investments and then I go look at the fund manager and go who is he where has he worked before what are his values what are his morals what's his tenure look like has he been working with this particular company for a year Is he new? Has he been there for 10 years? Well, I'm a psycho. Honestly, I can't be trusted. So, I like to do that. But essentially, this usual dude actively manages investment decisions on

behalf of the investor. So, Bec, you don't have to make that decision because they're going to do it for you. And the aim is to achieve that fund's objectives. So, that fund might have different objectives. So, a fund might have the objective to meet the industry benchmark. So they might go, look, this fund is just investing in the top 200 different shares on the ASX and our plan is actually just to stay on track with what the market does. Great, no worries. There are funds out there that have the aim of beating the benchmark. There are funds out there that have the aim of doing lots of different things. Make sure you know that aim before you get into a fund because it might not align with your values. If you're someone who's like, you

know what, I want a really low touch ETF or managed fund. I'm just going to pick one that has the top 200. Make sure that the 200 that they're picking are trying to meet the benchmark, not exceed it, because that would be a different risk profile again. Because obviously if they're trying to be way more aggressive, like that's going to be a different situation than just like, I just want to track the average of the average. So ETFs on the other hand, they're a type of fund that tracks the performance of a specific market index or sector. So I'll give you an example. An ETF might track the S&P 500, which is essentially the top 500 companies in America. I've heard about this one, yeah. It's really standard. Often when you're like watching the news, so like,

you know, like the little scrolling bar at the bottom of the news, the S&P will usually be reported there. And a lot of people will be like, I don't know what that means. And it might be like a little green arrow going up or a little red arrow going down or the yellow bar. That's telling you if the S&P 500 went up that time or down or if it just stayed on track. So they might track the S&P 500 or they might track like a technology sector and only invest in tech companies. Just like managed funds, ETFs, they pull all of your investors' money together into one big bucket and they invest in a diversified basket of assets. However, instead of being managed actively, so there's no one like Graham Poobah who's like making decisions every day, making sure everything's

tracking, ETFs are usually passively managed and their aim is to replicate the performance of their underlying index or sector. So like if it's the technology sector that I mentioned just before, they just go, oh, well, Beck, we've put together this list of 20 tech companies. The plan is to just get an average return of what the tech industry returns. You go, okay, no worries. Sure. That makes sense. No, they're not harder to buy. That was your question before. Yes. They're not harder. They're not more complex. In fact, they are identical to buying a share back. They are listed in exactly the same way on the ASX. You buy them on a share trading platform, exactly the same way you would buy an individual share. There's nothing more complex about the purchase

of them. Okay. That's good to know. What you will find though, while I'm on this topic, is that a managed funds fees are usually higher than an ETF because managed funds are actively managed. Therefore, you need to pay for that active management. And an ETF is usually lower fees because there's more of a passive approach. Okay. Does that make sense? That totally makes sense. So managed funds, usually a bit more expensive, usually a bit more aggressive, usually trying to like beat a benchmark. ETFs, usually a basket of the top performing shares in Australia, passively managed, cheaper to purchase. Both are purchased on the share trading platform of your choice, listed in exactly the same way as a share would be.

Cool. Does that make sense? Yeah, I'm really shocked, actually, that I comprehended all of that. Oh my god, I did my job! So, thank you very much. That was fantastic. Now, as we've been talking, I've been writing down little bits and pieces. So, I'm hearing terms like hin, s-r-n, chess. Sexy. It's not the game. It's not the game. Do you know how to play chess? Yeah. Oh, I love chess. I'm not smart enough for chess. I only know how to do chess through the share market. Uh-huh. Well, you know, I think that's just as important, I would say. Maybe more important it's probably more important unless you're like competitive chess and you make lots of money true unfortunately i'm not at that level yet but i never will be don't worry but no i do

think i need a little bit of time to break it down let's go on a really quick break and when we come back we'll discuss it all i'm excited let's go cool we are back v i'm excited about this we just knocked out a quick game of chess definitely did not you definitely did not is there such thing as a quick game of chess Actually, probably not. That's probably never existed ever. I reckon it does exist if it was like a really smart chess person playing against me because they'd just go bam, bam, bam, Victoria, you're out.

Yes. Okay. I always thought that chess was a reflection of intelligence as well. Yeah, me too. I'd always be like, oh, if you can play chess, you must be real smart. Yeah. And I never could. So, yeah, I've always felt really self-conscious about that.

Oh, no, it's not the case at all. Do you teach me chess? Yeah, absolutely. Oh, really? Yeah, I'd love to. I'll buy your drinks at the bar. You bring the chess set. Perfect.

Now, I know exactly what I said before the break was that we're going to go into a few different terms, but I'm curious. I know that you were talking about how like when you're watching the news, you see that little bar at the bottom and it has like S&P and stuff. I always wanted to know what the all odds are. Yeah, okay. That is a good one. It's very similar to the S&P.

So the all odds, if you want to look it up on the ASX, which is the Australian Stock Exchange, its code is XAO. And so essentially, the XAO, it tracks the top or the largest 500 companies in Australia that are listed on the ASX according to their market capitalization. So basically how big they are. And that will change over time. Like if a company decreases in value, they might drop off the All Lords and another company that's worth more comes on. So essentially the top 500 largest companies in Australia. It's commonly referred to as the All Ords because it's actually considered the benchmark index for gauging the performance of the broader Australian market. So the All Ords was originally calculated in, I think it was 1980,

with a starting level of 500 and represents close to 90% of the ASX. So it's not like a little bit of the ASX. It's a lot of the ASX. And it's essentially a good way of quickly checking in and seeing how's the Australian market doing. If the all odds are down, it means that 90% of the ASX is on its way down. There must be something going on in the economy that is, you know, pushing it down. If the all odds is up, it means the economy is doing really well. So it's kind of like that one number that's like a really good sense check or a pulse check to see what's our market doing? Is it okay? And it's a good idea to track this if you're an investor, not because you're going to invest in it, but because you want to have your finger on

the pulse. And it can be really jarring, right? As a baby investor, you've just started, you're like, oh my gosh, my whole portfolio is completely off. Do you know what makes you feel a lot better? Looking at the all odds and saying, oh, the broader economy is a little bit off. This makes sense. So this is one of those things. I'm in the middle of writing my investing masterclass and this is something that, you know, I asked the community a little while ago, just in the Facebook group, because I haven't announced it publicly that I'm doing that. So if you're listening to this on the pod, you're welcome. But we're writing an investing masterclass and I said, what do you want to know? Like, obviously I can write everything that I know

about the stock market and what that actually looks like, how to do it, what to start. And someone's question, can't remember who it was, so do apologize, was my favorite question yet. she's like what does it actually mean to do your research so if I go back you know before investing do your research what the heck is investing research how do I do that great question so I've made a whole unit on how to quote do your research and what to look at and what can make you feel a bit more comfortable yeah because investing is one thing yes I can show you how to do your research to check if a share or a ETF is a good investment for you personally and whether you would choose it or not with the right you know technology behind it sure but also like what

about a bit of a sense check beck like what if you're a bit stressed yeah how do i do a bit of research to make sure that i can just still feel a little bit comfy in the market the all odds is something that i would look at first to go what's the broader economy doing if that's off well make sense that your shares are off beck yeah because the whole economy is a bit messed up right now gotcha that might make you feel a bit more comfortable but yeah the all odds is actually really important and I'm glad you brought it up. Oh great I'm shocked that I finally figured out what that was because I feel like it's something that we joke about in like high school the all odds are up or whatever. Exactly but you don't know what it means but essentially TLDR it's the

top 500 biggest companies in Australia and it's a benchmark to see are they doing well are they not doing well it's why you'll see the all odds the numbers aren't massive when they move right it's always like the all odds are up 0.1 percent right like you never hear 12 percent yeah because that's 500 companies and the average is going to have to be pretty significant to have a bigger than a you know one or two percent jump gotcha but it'll always be small amounts and it's just like slow fluctuations and then if you look at it over the broader like you know scale of time because as we say on the pod lame but it's my favorite saying when in doubt zoom out like look at the bigger picture back you might see that the all odds over time are just slowly tracking

upwards that's reflective of a really healthy market or you might see it tracking downwards like going into COVID we saw the all odds track downwards going into any type of recession we see it track downwards and you can see how fast or slow that is and go oh that's happening pretty quickly or that's actually really slow it's interesting once you know what it is yeah okay I won't go on and on about it because I totally could and I could totally listen all day but we I do have an episode to get to. All right. What on earth is HIN, SRN, and chess?

Are these online games? No, they're not online games. Let's do one at a time. Can I break it up? Because I'm not going to answer all three at one time because I think that would be irresponsible. And while my job often is to completely overwhelm you, it's funny. Someone slid into my DMs and like, Victoria, this is so embarrassing, but sometimes I have

to listen to your episodes three times to get them. It's not embarrassing. That's not embarrassing. That's smart. Yeah, it is. Like, do you know how much research I often do on these episodes to jam-pack them full of information that hopefully you get? Yes.

I can't expect you to walk away. It's like going to a lecture. Did you listen? Probably not. No. Watch it three, four, five, six, seven times. Yeah, and on, like, double speed. Yeah, yeah.

So I'm not going to spend that whole time doing it. But it is not embarrassing to have to go back and listen to it again. In fact, I had to watch a Barbie movie three times before I got everything in it. yeah exactly so like the same should be true for my podcast because like they're basically on par with the barbie movie right oh yeah oh absolutely all right so let's start with chess okay because it sounds the most like a game and i feel like it's most spoken about in our community as well so put simply chess is clearing house electronic sub-registered system told you it was sexy so essentially beck that means that the asx is just keeping a list of who owns what shares

That's what CHESS means. Okay. So it's the Clearinghouse Electronic Subregister System. It's just registering everybody who owns shares in the ASX. So if you go and purchase a share on the ASX, they want to keep track of everybody. That's what CHESS does. So if your shares are quote CHESS sponsored, it means that when you buy or sell shares on the ASX, it has a record of you owning the shares directly or not. And this is the main way in Australia that people buy and sell shares because they go to a broker, they might go to an online platform, purchase a share and then they will get a whole heap of paperwork, usually from computer share that says, you now own this, here's your chest number, here's this, here's that and it's just tracking that you're the

actual underlying owner of that asset. Just be aware when it comes to choosing a broker for buying and selling these because some brokers are and some brokers aren't chest sponsored. doesn't mean they're worse or different. It's just something that you need to understand and we'll obviously get into those different arrangements soon. Okay. So I'm not going to go on and on about it now because I know I've got a rant coming soon. She can feel it bubbling up. Okay. So this is if you're, I'm assuming, the owner of the share, but what if you're in an ETF or a managed fund, will you still be chest sponsored? Does that make sense? So that's where, remember at the start of the episode, I said there's two ways

to hold shares. There's indirect and direct. So a CHESS sponsor, if it is in your name, that would be direct. ETFs and managed funds are essentially indirect. And that means you are absolutely correct, Bec. If your shares are CHESS ASX sponsored, it means that you personally own them directly. So like the name on the certificate would say Bec Syed rather than someone else holding them on your behalf, like an ETF or a managed fund in the pool that we were talking about before. So you would receive dividends directly if you're the underlying owner of them. So that's essentially the profit the company pays to its owners, i.e. you. And you actually, if you're the underlying direct owner, you have voting rights. Not many people

care about their voting rights. And let's be honest, if you only own one share, your voting rights, they're not going to have the biggest influence, but that's okay. Some people really, really want to have them. Is it bad that you don't own them directly is the next question. I think people are probably thinking, no, not necessarily. Some people are honestly wildly passionate about this. You might see it all over the internet. If you are someone like me, is this embarrassing? Might be. Trolls Reddit forums about like what shares are being bought and sold and people's opinions on different ETFs. Like I'm going to need to know all of that information, right? But a lot of people will be like, it's terrible because it's not just sponsored and you're not

the direct owner of it. Anyway, I could not care less. But some people, as I said, are wildly passionate about it. But as someone who does arguably know the industry very well and invests in ETFs and managed funds directly, it doesn't worry me because all my investments are still safe and are still secure. And essentially what my shares in my ETF and managed funds are operating under is what's called a custodian model. So that all sounds very complex, you could say, but a custodian model essentially means that someone else is currently holding that share certificate on my behalf. It's all above board. If either of those companies, like let's say the share trading platform that I have picked operates under a custodian model,

which means that the ETF I bought, or even sometimes the share that I buy, isn't going to be in my direct name. It's under this custodian model. You might go, But what if they go bankrupt, Victoria? What if they lose all their money? True. Are you going to lose your shares, Bec? It's a good question. You're not because it's held under a custodian model, which means that the owners of that

company that you're investing with, they don't actually have access to that. They can't just transfer it to their name. Custodian means they're the custodians of it, not the underlying owner. The share owners are, and essentially the owner of the share, it isn't as clear as if it was chest sponsored, but there still is a direct line of working that out. And that company can't just yeet off with your shares. Like you're not going to lose out in that circumstance. The only way you would lose out and, you know, there might be an issue with your share is if your share actually loses value, but it wouldn't have anything to do with your broker. However, in that custodian

model, your shares are actually held within a trust. So remember in the first episode, we were talking about trusts and direct ownership, companies can set up trusts to hold their clients' assets. So my shares are currently being held in a trust by my custodian, which is my broker. And they're not going to go missing if that company goes bankrupt or they shut down. So you're okay. And I think a lot of people get really worried about that because they're like, oh, but someone's going to, you know, take off with my shares because they've got my share certificate. I'm like, not so quick. Like that's not how it works. That's not how it works. So you're safer than you might think you are. That's good to know. It's always good to be

safer than you think. Exactly. What about HIN and SRN? Are they equally? I feel like I'm overloading this episode, but like, I feel like this all needs to go in the same episode. So I do apologize, but no, thankfully. So historically shareholders, you actually would have received like a share certificate, like a legit one in the mail to prove that you are the underlying owner of that asset. You can still receive those if you really want to. I get mine by email. shares are now automatically held digitally on what's called a HIN if you go with a stockbroker so a HIN it's actually very simple it means hold up identification number again it's just a number that tracks who owns what and when and where okay which is essentially like an ID card or an ID

number for your shares it's not super complex you don't need to be super across it just know that each time you would buy, you would be given a HIN. It's essentially just to track your shares. So the ASX knows who owns what and when and where. Bec, you also asked about an SRN. So you're going to have an SRN if you buy shares with the registry. So you know how I said before, you get a HIN if you go with a stockbroker. If you go directly with the registry, you're actually going to get an SRN, which stands for security reference number. Again, just another ID number, which is unique to each company's shares that you own. So both of which are honestly just acronyms for numbers you're going to get when you register your investments. So no matter which way your

shares are held, you remain ultimately the beneficial owner, even if the stockbroker or the registry goes bankrupt. So you're okay, you're safe. Safe. These are tracking numbers. So if you get them in the mail or you get them in your emails, save them somewhere important in a folder in your emails or like my favorite, I don't keep paper in my house. I'm a lose it. But you know what? If I don't lose pieces of paper in my house, I have been on the phone and I flip them over and I draw all over the place and then I rip them up.

Like it is not a good idea. So I actually take photos of all of mine and just save them in an album in my phone or I email them to myself. But definitely keep track of these numbers because ultimately they are important, but you're not going to use them every day when you're doing share trading. Great idea, Vicky D. I don't know if you do the same thing as I. I take photos, I send it to myself, and I put like a trillion different keywords. You're the same. In the email, I'm like, H-I-N, identification number for X, Y, Z, share,

share trading, stockbroking, investment account. Like I have to have everything because what if I forget what to Google in my own emails? Totally. What's future me going to think about looking for this? And I can't trust future me because I have proven to myself I can't be trusted. I agree. Okay. So I just want to quickly wrap my head around this all because it is a lot. It is a lot. I'm sorry. But I feel like you've gotten across it really quickly. Thank you so much. I mean, there might be gaps in my knowledge, but the episode was so nice that we listened to it twice. Exactly. If I buy shares directly in my own name, my own name will be listed down on the share register. I'll be able to buy and sell individual

shares whenever I want. My dividends will be paid directly to me and I have voting rights. Whoa. Yes, exactly. You're on the money there. Thank you so much. You're on the money. That is so sick. Okay. So while I'm at it, when you indirectly invest, the name on the share register is the ETF or the managed funds company. Yes. Not my name. No, not your name. But they hold the assets on my behalf and manage what the ETF or managed fund is made up of. So I don't have to worry about buying and selling. Yes. But do I still get my dividends though? What happens if the share makes a profit? Oh, that's a good question. I like that you're thinking about this stuff now. It makes me so proud. I'm like, oh, so you're just worried about

where our dividends are going to go? Thank you so much. I've taught her something. The profit still goes to you. Do not worry. Okay. So it will just be filtered directly through your ETF or managed fund. It does get distributed in a bit of a different way, but it's still there for you. are not missing out. Often when it comes back in, the fees that you've agreed to pay for your ETF or managed fund get taken out of that amount and then it gets distributed to you. Or through your ETF or managed fund, you might've picked what's called a dividend reinvestment plan, which means they never give you the cash. They actually just reinvest it back into the same ETF for you. So it's all automated, which can be really helpful because if you're planning to invest over the

long-term and you own a share, and let's pretend it paid you $10 this year, you don't want that $10 this year. You want it reinvested into the share market so that it can grow over time. And then when you reach retirement, you can make use of it. But that's what I mean when I say the money that your money makes makes money is because the money that your money made gets reinvested and then that money makes money. So that $10 that gets reinvested then might make a dollar next year. And then that dollar makes money and it just compounds from there. Okay. So it doesn't necessarily mean that you're missing out, but it might get filtered through

a different way. But those profits are still yours. And like, for example, if ComBank says that they're paying a dividend to investors, that is still going to come to you. You don't miss out. Good to know. Very good to know. Don't miss out. Don't miss out. And arguably, the most important thing about investing is making money. So like, I'm not going to let you miss out. No.

Are you joking? I'd be like, don't do that. That's terrible. You won't get paid. That would be silly. That would be so dumb. I trust that you're not done with teaching, but I probably am done with learning. You're done? Okay. Don't worry. But before we wrap up, how do we pick which option works best for us? Okay. So this is a good question, but also a really personal question because like, I can't tell you what's going to work best for you. From my perspective, it's really important to consider your goals and your risk tolerance and your lifestyle. Like some people might want

to be individual share traders and consistently, you know, rebalance their own portfolios and manage it that way. If you're hands-on and you want to pick your own companies, like direct ownership might actually be your own style, Bec. But if you're looking for diversification, maybe a little less involvement, maybe a little less risk because when you diversify more, Bec, you're lowering your risk. So the more diversification you have, the more risk you have. Maybe indirect ownership is a better fit because you go, well, I can get instant diversification, less involvement if I go and buy a top 200 ASX ETF. And that might make you really comfortable. But again, you might be wildly passionate about picking your own shares or maybe

you don't want the top 200 or maybe you just want a bit more control. So it's really going to depend on who you are and what you do. And as I've said, you know, this is what I do, but I do both. I'm not saying that both is right for you. I do both because let's be honest, direct share investment for me is me having a good time in the share market. I love it, Bec. It's so lame. I love doing my research. I love looking at new companies and what they are made up of and what their board looks like and what their CEO has done historically and how they've performed. That is not everybody's cup of tea. Everybody else in our community or a lot of people in our community might turn around and be like, V, we hear you. We see you. We understand the importance of investing. We know

that to create financial freedom, we want to invest. But I just want to send some money into an investment every month and not think about it again. You're a psychopath. I'm not going to be looking at the annual reports of each and every single company because one, I don't comprehend them, but I also just don't care. That's fair. And that's so fair. So I think that understanding the difference between indirect and direct investing is going to be a really personal decision. But I think the crux of this episode is helping you to understand that when we talk about HIN or SRN or CHESS, those things are to me not as important as a lot of people, you know, jump up and down about and say, oh, it's so important that CHESS sponsors so you have direct

control. I personally don't need direct control. What I want is to know that if everything goes South. My investment is going to be safe, irrespective of who was the custodian of that. And I know I'm safe, so I'm fine. And I think that a lot of people in our community wanted to hear that because you go, well, if it's not chair sponsored, maybe it's less secure. And that's not the case at all. So that's where I'm at, but it's going to be a personal decision, not a decision that I can make for you because I don't know you well enough. I wish I did. So let's hang out more. I guess like lastly, are there any regulations we need to be aware of? Ah, look at you with your questions. All right. So owning shares obviously comes with lots of

different rules and regulations, but don't worry, we won't dive right now because I really want to go home now into the technicalities of them. But just know that direct ownership, as we've been talking about it, means that you have to stay informed and you have to actively manage your investments. So like you've got to be across it. You've got to do all the reporting yourself. off. Managed options like a managed fund or an ETF, they actually handle most of the regulation for you. So that's kind of an attractive thing. We won't, maybe I'll do a whole episode one day on regulation, but it won't be that sexy. Maybe we'll like do it as a bonus for people who are just like me, because I know you will not give two flying fruit bats. I've already checked me out.

Yeah, you're like, no, I don't even know why I asked you this. I actually am done now. But to make sure everyone's on the same page, just give us a really quick overview. Oh, you want to another overview. One more quick overview. You're like, really drill it in, V. All right. So obviously today we have covered the basics of direct and indirect ownership of shares. We have talked about direct ownership when it comes to investing directly in shares on the ASX or any stock exchange, to be honest. And we've talked about indirect ownership through managed funds and ETFs. Obviously, these are not the only asset classes that exist in the world. These are just two really good examples of how these work. I think we need to also remember there's no such

thing as a one-size-fits-all approach. And as I said before, choose the method that aligns to your goals and your values, not just what someone on a Reddit thread said was the most important thing. Honestly. Great advice. Don't take Reddit as gospel. I'll have to remember that actually. You done done. I'm done done. Oh, I think we deserve some cheeky Mickey days. Let's do it. Let's go. Have a good week, guys. We love you. Bye. 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

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