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Speaker 1: financial future today. Welcome back to another episode of Sugar
Speaker 1: Mama's Fireplay. Today, we're tackling a topic that I know
Speaker 1: so many of you are curious about, shares versus property.
Speaker 1: For so long, Australians have been told that property is
Speaker 1: the ultimate investment. You can't go wrong with bricks and
Speaker 1: watar How many times have I heard that? But is
Speaker 1: that really the case?
Speaker 2: To help us.
Speaker 1: Unpack this, I'm thrilled to be joined by Michael McCarthy,
Speaker 1: a renowned market strategist from Moomoom and Mumu is the
Speaker 1: innovative online trading platform that is empowering every day investors
Speaker 1: to take control of their financial future. So in today's episode,
Speaker 1: we're going to explore why shares might just offer a
Speaker 1: few advantages over property. Weren't going to be talking about
Speaker 1: historical returns, lower costs, franking, credits, diversification, liquidity, and so
Speaker 1: much more. I might get a little bit passionate about
Speaker 1: this because I think so many people really do underestimate
Speaker 1: the value of Australian shares. Now, of course, this isn't
Speaker 1: saying property is bad, far fromward, but it's about challenging
Speaker 1: those traditional beliefs and opening your mind to so many
Speaker 1: other options, but also other options to help you build
Speaker 1: wealth and understand that property isn't the bill and end all.
Speaker 1: And we're going to dive into the mindset of course
Speaker 1: that holds so many people back from investing in shares
Speaker 1: and explore how you can actually overcome these barriers to
Speaker 1: help grow your own wealth in a smart, sustainable way.
Speaker 2: So I'm a little bit excited.
Speaker 1: Can we jump in right now together, Michael, I like
Speaker 1: to start the episode. Never have a guest on the
Speaker 1: show to ask you how you are? And it's not
Speaker 1: just a service level how are you? It's a genuine
Speaker 1: how are you going? Right now?
Speaker 3: I'm going really well? Thank you can. I'm in a
Speaker 3: sweet spot. I'm not old enough to be relaxed about things,
Speaker 3: but young enough still to be able to do all
Speaker 3: the things that I want to do. So it's a
Speaker 3: perfect time of life for me.
Speaker 2: Oh, I like the sound of your sweet spot. I
Speaker 2: need to be there more. Well, I don't, I need
Speaker 2: to be there sooner.
Speaker 1: All right, now, I'm really keen to talk about property
Speaker 1: versus shares, and I have a feeling that we probably
Speaker 1: share a common belief, but it really irritates me. And
Speaker 1: I'm tell me, if you have the same problem when
Speaker 1: people tell you that, you know, property is the only
Speaker 1: way you can make money, it's there's no risk, you know,
Speaker 1: this very sort of one dimensional opinion of property. So
Speaker 1: I'm really keen to give our listeners, most importantly, some
Speaker 1: facts so that they can sort of set the story straight.
Speaker 1: I should say about really Australian shares versus property, because
Speaker 1: I feel like there's just so much misinformation, there's so
Speaker 1: much misunderstanding, and it's everyone just looks at it as
Speaker 1: a tangible asset. So I am very excited about this conversation.
Speaker 2: I'm just a little bit excited.
Speaker 1: If you can't tell can we obviously before we begin,
Speaker 1: it's general advice only here. This is, you know, educational
Speaker 1: purposes only. If you hear something you think, ohy.
Speaker 2: Should I be doing that?
Speaker 1: Of course, go see a financial planner. But I want
Speaker 1: to start with the historical returns because I said we're
Speaker 1: going to focus on facts and figures here, because I
Speaker 1: really want to arm our listeners with some valuable important information,
Speaker 1: not just opinions. What are some of the historical returns
Speaker 1: that you can tell us about shares versus property over
Speaker 1: the long run.
Speaker 3: Well, there's a lot to unpack here, and I love
Speaker 3: the way you bring the controversy can because this is
Speaker 3: a controversial question and the reason for that is people
Speaker 3: have vested interest on both sides of the question. Right.
Speaker 3: People who sell property want to tell you property is
Speaker 3: a better investment. People who sell shares want to tell
Speaker 3: you that shares are a better investment. So to be
Speaker 3: fair about this, we have to start by comparing like
Speaker 3: forul life like. So we look at them as investments.
Speaker 3: That is, you buy a house, you're not living in it,
Speaker 3: you're renting it out, and you're getting a return on it.
Speaker 3: That's an investment style. And comparing that to buying shares
Speaker 3: and getting dividends on your shares. Now, there are a
Speaker 3: lot of different studies over the years, so I went
Speaker 3: for the longest study I could find.
Speaker 1: I like that from I'm a long term investor. I
Speaker 1: think that's more important than these little bite sized pockets
Speaker 1: of fragments and type of time.
Speaker 3: And so this study ran from nineteen twenty six to
Speaker 3: twenty twenty three, ninety seven years worth of data.
Speaker 2: I like the son of this same reliable and it.
Speaker 3: Was quoted by somebody I respect, doctor Shane Oliver, very
Speaker 3: well known in Australia. I loved sharing, and his conclusion
Speaker 3: over that very long period was that shares are the
Speaker 3: superior return. Now, the difference wasn't huge. It was eleven
Speaker 3: point three percent versus ten point nine percent. Now, that
Speaker 3: doesn't sound very big, but when you allow for the
Speaker 3: compounding of interest year on year, that point four percent
Speaker 3: difference turns out to be a big difference in terms
Speaker 3: of the money you would have earned if you'd put
Speaker 3: one thousand dollars into property or one thousand dollars into
Speaker 3: shares in nineteen twenty six. So that's the best study
Speaker 3: I could find. I have seen plenty of others in
Speaker 3: my searches. One of the more recent ones covered the
Speaker 3: period nineteen ninety three to twenty nineteen, so it stripped
Speaker 3: out the GFC effects. Sorry it had the gfcnup, but
Speaker 3: it stripped out the COVID effects. Anyway, the net result
Speaker 3: there was eight and a half percent versus seven percent,
Speaker 3: so a bigger advantage for shares over that period, which
Speaker 3: surprised me because that's a strong period of property growth.
Speaker 1: Wow, And does those figures look at the net returns
Speaker 1: because obviously it's very expensive to get into the property market,
Speaker 1: like stamp duty is a bitch, you know, it's a
Speaker 1: big setback.
Speaker 3: It doesn't take into account those transaction costs costs. It's
Speaker 3: hard to compare light for like you buy property once
Speaker 3: and you sell it once, whereas with shares, people are
Speaker 3: regularly turning over their portfolios or trimming them or reshaping them,
Speaker 3: so the transaction costs aren't taken into account there, but
Speaker 3: things like tax deductibility are, so we'd have to factor
Speaker 3: those in. And of course they're very different kinds of investments.
Speaker 1: Now, I spoke about the cost of investing in stamp duty,
Speaker 1: and obviously one of the biggest advantages of shares is
Speaker 1: the lower ongoing costs compared to property. Can explain why
Speaker 1: this matters so much for investors.
Speaker 3: It's crucial. Containing your costs is one of the aspects
Speaker 3: of investment that is very often neglected. The reality is,
Speaker 3: the cheaper your cost, the lower the friction of your transactions,
Speaker 3: the better off you'll be in the long run because
Speaker 3: that's money that you otherwise would have invested that you've
Speaker 3: had to spend on the cost of the transaction. So
Speaker 3: stamp duty and realistate agents commissions are a very significant
Speaker 3: impediment to investment success. It doesn't mean but you can't
Speaker 3: overcome them, but it's a hurdle that has to be jumped.
Speaker 3: Whereas when you're talking about shares and it's three dollars
Speaker 3: a trade, the transaction friction here is very very low,
Speaker 3: so that gives you a lot more flexibility about how
Speaker 3: you invest.
Speaker 1: I'm just the wear and tear, you know, having to
Speaker 1: get a you know, an apartment for example, of a
Speaker 1: fresh coat of paint or the carpets now worn out,
Speaker 1: and you can't no one's fault. It's just natural wear
Speaker 1: and tear like that. They're expensive costs and you know,
Speaker 1: I will admit I own property and I own shares,
Speaker 1: and I never get a phone call about having to
Speaker 1: chip money into my share portfolio ever, if anything that
Speaker 1: pays me constantly, whereas I'm constantly having to I guess
Speaker 1: fill the holes on the leaking bucket literally for you know,
Speaker 1: investment properties. It's just so like just frustrating, you know,
Speaker 1: and it just it really does impact your cash flow.
Speaker 1: Interesting to a friend and she bought an investment property
Speaker 1: because somebody told her to, and she's like, I just
Speaker 1: I'm constantly being hit with bills, and then my tenant
Speaker 1: moves out.
Speaker 2: Then I'm stuck for three weeks.
Speaker 1: Then I have to pay you know, the the property
Speaker 1: manager and other you know, couple of weeks rental because
Speaker 1: they found me a new tenant even though I've just
Speaker 1: had three weeks without it and I've had to drop
Speaker 1: the rent. It's it's just the constant dramas and headaches.
Speaker 1: As I look at that and compare to my comparison
Speaker 1: to my property and what I've also your personal experience,
Speaker 1: it's just it's just so much easier and I lighter,
Speaker 1: more efficient, U super time.
Speaker 3: You'll never get a bad tenant in the share port Polio.
Speaker 2: That's so true. I love that.
Speaker 1: All right. Can we talk about franking credits because you
Speaker 1: know I am you know, I'm a huge fan of
Speaker 1: Peter Thornhill. I've had him on the show a couple
Speaker 1: of times. I know a lot of my listeners also
Speaker 1: love Peter Thornhill. Franking credits are obviously very unique to
Speaker 1: the strands share market, particularly with those industrial shares, and
Speaker 1: you know the fact that they grow on average sort
Speaker 1: of forty five percent per annum over the long run.
Speaker 1: Can you just break down for our listeners, well, why
Speaker 1: they're so important, how they can really boost your income.
Speaker 1: That is obviously the dividend income, particularly right now with
Speaker 1: inflation worries for retirement, it's.
Speaker 3: Crucial, and franking credits is one of the key drivers
Speaker 3: of share ownership. It's one of the reasons so many people,
Speaker 3: particularly in retirement, own shares. It's that ability not just
Speaker 3: to get the cash flow that comes with the dividends,
Speaker 3: but those tax credits can be crucial. And the principle
Speaker 3: underlying franking credits is very straightforward. The companies have already
Speaker 3: paid tax on these profits, and because the tax has
Speaker 3: been paid, the investor, the shareholder doesn't have to pay
Speaker 3: tax on the money that's distributed to them as a dividend,
Speaker 3: and that has the effect of increasing the value by
Speaker 3: forty two percent. So if you get a ten dollar
Speaker 3: dividend and it's fully franked and you're paying the top
Speaker 3: tax rate, that real value is not ten dollars, it's
Speaker 3: fourteen dollars twenty. And that big grossing up of franking
Speaker 3: credits is one of the key reasons so many people
Speaker 3: value dividends so highly. And one area where the income
Speaker 3: that comes from shares is clearly superior to the rent
Speaker 3: that's paid on properties.
Speaker 1: Yeah, I think people always need to sit to realize
Speaker 1: this for themselves, like have those two asset classes and
Speaker 1: go hang on this one is just it's so much
Speaker 1: more superior on so many different levels.
Speaker 3: Well about it is I think that shares have disadvantages
Speaker 3: that you can't negatively gear shares. You can. You can
Speaker 3: borrow to buy shares and negatively gear them if you want.
Speaker 3: So that tax aspect is the same. Both property and
Speaker 3: shares are subject to capital gains tax, so in that
Speaker 3: respect they're the same. But the big difference between shares
Speaker 3: and property when it comes to tax is those franking credits.
Speaker 1: And they're so valuable, particularly you know for self under retirees,
Speaker 1: you know in pension phase where they don't pay any tax.
Speaker 1: You know, I've had clients receive like seventy thousand dollars
Speaker 1: in tax refunds because of purely because of franking credits.
Speaker 1: Like that is a massive boost to your retirement income
Speaker 1: and it gives you so much more longevity and sustainability
Speaker 1: and financial independence. And part of my own financial investment
Speaker 1: strategy myself is to build up my franking dividends.
Speaker 2: Can we talk about the property miss.
Speaker 1: And give them a bit of a challenge In Australia
Speaker 1: there is such a cultural bias towards property and property investment.
Speaker 1: Why do you think it is that so many people
Speaker 1: just automatically assume that property is the best, the number
Speaker 1: one most important asset to build wealth?
Speaker 2: Is it because it's a tangible asset?
Speaker 1: Is that?
Speaker 2: Is it as simple and is it embarrassingly basic as that?
Speaker 3: Well? I think there are a lot of threads to that,
Speaker 3: but that is definitely one of them. People favor we're
Speaker 3: human beings. People favor things that they can put their
Speaker 3: hands on, you know, that they can touch and that's
Speaker 3: a natural human thing. It's completely illogical. It's completely illogical. Right.
Speaker 3: The house only has value because people believe it has value.
Speaker 3: That's the same as money, that's the same as shares.
Speaker 3: They only have value because people believe it. But people
Speaker 3: think because they can touch a house, it's different. It's not.
Speaker 3: But that is a normal human reaction. There are a
Speaker 3: couple of other reasons why people seem to think that.
Speaker 3: One of them is the experience. A lot of people's families,
Speaker 3: their friends have had very good experiences investing in property,
Speaker 3: and that's a good thing, but they would have been
Speaker 3: better off in shares, and that's not visible. They see
Speaker 3: the house, they see how well they've done, They see
Speaker 3: them retirement, going on holidays every half year. They see
Speaker 3: all that, and they think that it's come from property.
Speaker 3: In so many cases it has, But they don't see
Speaker 3: the share portfolios that actually underpinned you know, those those
Speaker 3: fabulous holiday homes that people have on a coach somewhere,
Speaker 3: or all those things. Because you see the house and
Speaker 3: because people tell stories. I mean Sydney in particular is
Speaker 3: a property obsessed city.
Speaker 1: I mean, I've got to a dinner party, that's all
Speaker 1: I can't stand it. I'm boring.
Speaker 3: So I think it's that shared success that that has
Speaker 3: given them the reputation. Nothing wrong with being in property,
Speaker 3: but if you want the better investment, in my view,
Speaker 3: you must look at shares Queen.
Speaker 1: Move on and talk about liquidity, because this is a
Speaker 1: big one, you know, with property, and I think a
Speaker 1: lot of people, particularly.
Speaker 2: Young investors, don't realize this.
Speaker 1: And I mean it's not and I don't mean that
Speaker 1: in a meaning or patronizing manner, but you know, with
Speaker 1: property it's expensive, asterhol You've got strata, you know all
Speaker 1: the lovely expenses that come with it. And then of
Speaker 1: course you might get special strata. If you need to
Speaker 1: come up with some money and you don't have sufficient
Speaker 1: emergency money, you can get stuck. Because it's not a
Speaker 1: liquid asset. You can't. So you get a ten thousand
Speaker 1: dollars special strata leven, you don't have to spare ten
Speaker 1: thousand dollars lying around. You can't just sell the front
Speaker 1: door or sell one bedroom, even though it is probably worth.
Speaker 2: More than ten thousand dollars. You can't actually do that.
Speaker 2: You're stuck.
Speaker 1: You Whereas with shares, if you know you had to
Speaker 1: you could really sell ten thousand dollars with the shares
Speaker 1: and that money would be in your account in two
Speaker 1: working days. Yeah, So a lot of people really, I guess,
Speaker 1: ignore until it's maybe sometimes too late or they caught
Speaker 1: out in that scenario where they have to suddenly come
Speaker 1: up with money. Commit to the how the liquidity of
Speaker 1: shares can actually add even more simplicity and efficiency and
Speaker 1: flexibility into someone's investment strategy.
Speaker 3: Absolutely, and the returns argument and the tax argument, and
Speaker 3: you know that can all be had, but this is
Speaker 3: where shares clearly come out on top. That ability to
Speaker 3: liquidate your portfolio in a single day is very powerful.
Speaker 3: If things start going wrong, either for you personally or
Speaker 3: in the market, you can act, and if you act,
Speaker 3: you can get results very very quickly. Whereas in a
Speaker 3: property market slow down, you might be waiting years for
Speaker 3: a good buyer to come along, and if you have
Speaker 3: to sell, you might have to sell at a price
Speaker 3: that is very painful for you. And that lack of
Speaker 3: liquidity and property is a huge disadvantage. And you touched
Speaker 3: on another aspect of it. You can slice off a
Speaker 3: bit of your portfolio. You've got a sudden tax bill
Speaker 3: out of nowhere you weren't expecting. You can sell a
Speaker 3: little bit of your portfolio to cover that cash flow,
Speaker 3: and then as you recoup the cash over time, you
Speaker 3: can reinvest it back in the market. So, as you
Speaker 3: point out, you can't do that with a property. So
Speaker 3: it's not just the liquidity, it's the ability to reshape
Speaker 3: your portfolio to suit your life at that given point
Speaker 3: in time. That really makes shares a much more flexible
Speaker 3: and powerful investment.
Speaker 1: Particularly as well diversification. You know, if you've had one
Speaker 1: stock in your portfolio to do incredibly well, and you think, okay,
Speaker 1: I've got a huge exposure to this particular company, all
Speaker 1: this particular industry. I want to take some money off
Speaker 1: the table and move on to maybe the next best thing,
Speaker 1: or you know, just spread my eggs.
Speaker 2: You can do that with shares.
Speaker 1: With property, you say you bought a property and did
Speaker 1: very well from it, you've got to sell that whole
Speaker 1: entire asset, whereas you could with the share portfolio, you
Speaker 1: could maybe sell half of that holding and then spread
Speaker 1: it across say five other companies.
Speaker 2: You're really stuck.
Speaker 1: And then of course you're triggering with property a massive,
Speaker 1: big hit with the ato assuming you've made a capital growth,
Speaker 1: you know you've got to pay that to the ATO,
Speaker 1: so you take a massive step backwards when it comes
Speaker 1: to releasing that particular asset in comparison to as you said,
Speaker 1: you can kind of quarantine the losses if it's going down,
Speaker 1: but you can also help strategically manage your tax by going, okay,
Speaker 1: well if I sell this asset, I can you know,
Speaker 1: offset the tax here. You can be a lot more
Speaker 1: strategic actually mindfully and proactively plan those transactions with that.
Speaker 1: You know the fact that shares are so incredibly.
Speaker 3: Liquid, Oh absolutely, I mean it comes to things like
Speaker 3: the capital gains tax discount. For example, being able to
Speaker 3: sell on day three hundred and sixty six rather the
Speaker 3: day three hundred and sixty four is crucial. And of
Speaker 3: course you simply can't time a property sale like that
Speaker 3: when it sells itselves. You can move it around if
Speaker 3: you can, but you're committed to it, so it's not
Speaker 3: just having all your money tied up and then getting
Speaker 3: slugged when you finally do release the value that you've made.
Speaker 3: But there's another aspect to it as well. When we
Speaker 3: talk about property, is if every property is the same
Speaker 3: but because every property is unique. So the property market
Speaker 3: might be going up and you might be sitting in
Speaker 3: a house.
Speaker 2: It's not right, I know, it's sometimes I find it.
Speaker 1: So it's little pockets, you know, you know, houses of
Speaker 1: that particular you know, that particular side of the suburb
Speaker 1: or that particular area, or even like particular price points.
Speaker 1: People think that the property market all grows at say
Speaker 1: seven percent or five percent, whatever the number you want
Speaker 1: to use. Actually it doesn't work like that. There are
Speaker 1: certain markets you know that you know, see five hundred
Speaker 1: to seven hundred thousand other property market it might be booming,
Speaker 1: but whereas something over a say two or three million
Speaker 1: dollars may have softened. Like it, it doesn't all work
Speaker 1: with this this return that just is unanimously across the
Speaker 1: whole property market. There's so many complicated sectors and pockets,
Speaker 1: and you know, depending on obviously what the market's doing
Speaker 1: and what the economy is, and what people are looking
Speaker 1: for and the type of people also in the market
Speaker 1: that are shopping for like that drives those numbers, and
Speaker 1: it doesn't. It's not like a sweeping blanket return.
Speaker 3: No, exactly. And if you buy a house or an apartment,
Speaker 3: you're committed to that one house or apartment. It might outperform,
Speaker 3: it might underperform, but your risk is tied to that
Speaker 3: one investment. Whereas if you buy a share portfolio, you
Speaker 3: can diversify across sectors, you can diversify across industries, you
Speaker 3: can diversify across national borders and across currencies to give
Speaker 3: you a better risk profile for the returns you're seeking.
Speaker 3: You don't have that opportunity in property. You're committed to
Speaker 3: the one property, and if it doesn't do well, there's
Speaker 3: not a lot you can do about it. So you
Speaker 3: could be in that terrible situation where everybody's talking about
Speaker 3: how the property market's rising and you're quietly sitting there thinking, well,
Speaker 3: my property is not. That's not the same in shares.
Speaker 3: In shares, you can quickly adapt and roll towards those
Speaker 3: shares that are performing well, and you can get out
Speaker 3: of the shares that are not performing well, so that
Speaker 3: you've got much more flexibility and much more power to
Speaker 3: control your risk when it comes to a share portfolio
Speaker 3: as opposed to a property.
Speaker 1: Look, we're going to talk about diversification because I think
Speaker 1: it's really important because a lot of people don't really
Speaker 1: know how to actually diversify your portfolio and why it
Speaker 1: is so incredibly important. We're just going to take a
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Speaker 2: Now.
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Speaker 1: your financial growth and your financial dreams. Michael, thank you
Speaker 1: so much for talking to me about this it shares
Speaker 1: versus property debate.
Speaker 2: We just touched on diversification before.
Speaker 1: The AD break, and I feel like so many people
Speaker 1: don't really understand what diversification.
Speaker 2: Really is and what it really looks like.
Speaker 1: People think, oh, well, I've invested into a listed investment
Speaker 1: COMMUNITYTF that's diversified. Yes, that technically is. But there's more
Speaker 1: to be done than just that. You can't just necessarily
Speaker 1: stop there. Can you explain what diversification is, how it
Speaker 1: fits in, and how you use, for example, Mumu to
Speaker 1: help diversify your own investment portfolio.
Speaker 3: Diversification is a concept that frankly, most of us are
Speaker 3: already familiar with. We've all heard the saying, don't put
Speaker 3: all your eggs in one basket, and that's exactly what
Speaker 3: diversification is. Not putting all your eggs in one basket.
Speaker 3: It's spreading your investments across sectors, across industries, across markets,
Speaker 3: across different kinds of assets. It's across national borders. International
Speaker 3: investing in shares is one of the fastest growing areas
Speaker 3: of our business at the moment, and many investors have
Speaker 3: a particular focus on the US, but we're also finding
Speaker 3: good interest in other countries, including lately Hong Kong because
Speaker 3: of the China exposures. And it's that ability to get
Speaker 3: exposures to different nations, to different investment themes. If you
Speaker 3: wanted tech exposures here in Australia, once you got beyond
Speaker 3: the top three or four names, you're really struggling for investments.
Speaker 3: But if you've got access to the US markets or
Speaker 3: the Hong Kong markets, you can find all the tech
Speaker 3: exposes you want, so you can get investments that help
Speaker 3: spread your risk. The whole point of investing that the
Speaker 3: main aim is to maximize returns while minimizing risk, and
Speaker 3: diversification speaks directly to that ability to minimize risk.
Speaker 1: So how many different investments would you recommend to help
Speaker 1: a person build a diversified portfolio? I know, you know,
Speaker 1: if I look at back in my financial planning days
Speaker 1: running a practice, you know you'd sort of say thirty
Speaker 1: stocks across you know, a variety of different industries. What
Speaker 1: are you seeing now as the trend when it comes
Speaker 1: to diversification.
Speaker 3: Well, look correctly answer to how much should I diversify
Speaker 3: depends very much on a person's situation. Somebody who's in
Speaker 3: retirement and is looking to get income and remain pretty
Speaker 3: capital stable that not to gain or lose too much
Speaker 3: when the markets move might be very well spread out.
Speaker 3: They might have more than thirty stocks in their portfolio,
Speaker 3: including some higher dividend paying stocks. Whereas somebody who's starting
Speaker 3: out on their investment career and has plenty of working
Speaker 3: life to build their wealth and build their portfolio might
Speaker 3: decide it's a good time to take some more risk,
Speaker 3: and they've got plenty of time to earn back money
Speaker 3: if they lose, and they might decide that three or
Speaker 3: four high growth stocks that are higher risk but potentially
Speaker 3: higher reward might be suitable for them. So I'd certainly
Speaker 3: agree that for most people, twenty to thirty stocks for
Speaker 3: individual investment, even in a self managed super fund that's
Speaker 3: under three million dollars, twenty to thirty stocks is often
Speaker 3: seen as a sweet spot. But if you want more
Speaker 3: concentrated returns that is higher risk for potentially higher returns,
Speaker 3: diversify less. If you want to be assured and have
Speaker 3: much lower risk, you'd spread beyond thirty stocks. Once again,
Speaker 3: it comes down to what your investment goals are, where
Speaker 3: you are in your investment journey, and what it is
Speaker 3: that allows you to sleep peacefully at night. Get drives
Speaker 3: the answer to how many stocks should I own?
Speaker 2: And doing a risk profile as well.
Speaker 3: There's a great way to do it.
Speaker 1: Some people say that the share market is very volatile
Speaker 1: and it's risky. You know, it's akin to gambling. What
Speaker 1: are your thoughts on this perception and how do you
Speaker 1: answer that when you come across someone that might say
Speaker 1: that to you.
Speaker 3: People do say that to me Kenna. In fact, I've
Speaker 3: been involved in a number of late night, robust discussions
Speaker 3: with fellow traders over all sorts of issues in the market,
Speaker 3: but the question being, you know, is it gambling? Well?
Speaker 3: Is the Reserve Bank of Australia gambling when it buys
Speaker 3: Australian dollars because they're low? Is Warren Buffett gambling when
Speaker 3: he invests, you know, billions of dollars in coca? If
Speaker 3: your answer to that is yes, then yes, investing the
Speaker 3: stock market is gambling. I come to this with a
Speaker 3: unique perspective. Can Although I've been in share markets and
Speaker 3: financial markets for forty years, I actually started my career
Speaker 3: in numbers on the racetrack. My father was a bookmaker.
Speaker 2: Oh wow, in horse resting and missuming.
Speaker 3: All of them. Because my father was a mathematician. He
Speaker 3: wasn't an animal lover. He was a mathematician, and so
Speaker 3: we worked at all of the tracks. We worked at
Speaker 3: the gallops as we called them, the trots and the dogs,
Speaker 3: or the dish liquors as theirs. So risk assessment has
Speaker 3: been part of my life since the age of fifteen
Speaker 3: your blood, yes, yes, So I see them all as
Speaker 3: risk assessment opportunities. Whether it's in a casino or on
Speaker 3: the board, on the stock exchange, or on the currency markets,
Speaker 3: I see them all as risk assessment. People make judgments.
Speaker 3: They're happy with risk assessment, but they don't like gambling.
Speaker 3: I'd argue they're exactly the same thing, and that without risk,
Speaker 3: there's no reward. Yeah, people want to eliminate risk, but
Speaker 3: they don't understand if you do that. And one of
Speaker 3: the worst things I see in the investment space on
Speaker 3: the personal level is people who invest only in cash.
Speaker 3: Oh I know, and it destroys them over time because
Speaker 3: the share market goes up, other markets go up, and
Speaker 3: cash stays the same. And easily five percent does not
Speaker 3: save them from the ravages of inflation.
Speaker 1: You know what really worries me about that is that
Speaker 1: people don't realize until it's too late. Yes, and the
Speaker 1: penny's dropped and you're really stuck and you've lost time
Speaker 1: and you're not necessarily in position to be able to
Speaker 1: recover back to what you should be at. And this
Speaker 1: is why financially see is so important. One of the
Speaker 1: main drivers of the Sugar Mama platform is just to
Speaker 1: actually give people the right information that can make great
Speaker 1: decisions for the long term. And that's not to say
Speaker 1: obviously cash is the worst investment ever, It's extremely important appropriate,
Speaker 1: particularly for emergency money those short term goals. But if
Speaker 1: you want to build wealth, stop playing in the savings
Speaker 1: pool and learn how to invest in an intelligent way
Speaker 1: for long term wealth. You spoke about obviously risk, I'm
Speaker 1: interested to know how do you personally use mumou to
Speaker 1: help mitigate your risk and to also diversify it, Like,
Speaker 1: what are the key features you use within mumu to
Speaker 1: build your wealth and stay in that sweet spot that
Speaker 1: we spoke.
Speaker 3: About it at the beginning. Well, so I use a
Speaker 3: strategy that's very common. So, like a lot of Australians,
Speaker 3: I have a surf managed super fund and so I
Speaker 3: manage my own and I use what a lot of
Speaker 3: Australians use, and that is a core plus satellite approach.
Speaker 3: In other words, I've got a stable core of investments
Speaker 3: that I'm in for the long haul. Now. They tend
Speaker 3: to pay reasonable dividends, not necessarily the highest paying dividends.
Speaker 3: There are a number of ETFs involved, and there's some
Speaker 3: international exposures in that core, and that core doesn't really
Speaker 3: change much of me. Well. Over the years, I've tried
Speaker 3: to pick good businesses to invest in and stick with
Speaker 3: those businesses through the thick and the thin, and then
Speaker 3: around that core investment portfolio I put satellites. Now, one
Speaker 3: of the ways I use the the Move platform to
Speaker 3: help me with the identification of investment opportunities. I go
Speaker 3: to the low end of the market and I search
Speaker 3: the Australian share market by reverse engineering the prices. So
Speaker 3: I start with the lowest price stocks first of all.
Speaker 3: And you know, I think it's fair to say there's
Speaker 3: some dross amongst them. There's some really potentially toxic investments,
Speaker 3: but there are a few gems and the movie platform
Speaker 3: helps me find them because it has the financial information
Speaker 3: that allows me to gauge whether or not I should
Speaker 3: be investigating further.
Speaker 1: So you're like, one man's trash is another man's treasure
Speaker 1: you're looking for, you know, the diamond in the rough,
Speaker 1: the one that's been discarded, maybe innocently, is actually an
Speaker 1: absolute gem.
Speaker 3: Yes, or even undiscovered. I'd love undiscovered. My background as
Speaker 3: a derivatives trader really serves me here because I was
Speaker 3: trained in a very unconventional style of trading derivatives. And
Speaker 3: I won't boy you with the details of it, but
Speaker 3: I used to say that my life is a search
Speaker 3: for despair and denial because they were the two indicators
Speaker 3: that often led me to an investment that, for whatever reason,
Speaker 3: was being shunned that wasn't economic and meant that I
Speaker 3: could invest in it. So I use the Movemove platform
Speaker 3: to find those treasures amongst the trash, as you put it,
Speaker 3: and the other thing I use it for. And this
Speaker 3: is definitely not for everybody. I've been trading derivatives since
Speaker 3: nineteen ninety three. I've studied in this area, this is
Speaker 3: where my master's degree is. This is not for everybody.
Speaker 3: But I used the options finder on the Moomoo platform
Speaker 3: because the opportunity to trade us options is very powerful
Speaker 3: for me as an experienced trader. It generates alpha for me,
Speaker 3: which is what portfolio I managed to say when they
Speaker 3: get an excess return. So it's an opportunity to make
Speaker 3: an excess And once again I won't board our listeners
Speaker 3: with the technical details, but essentially I look to make
Speaker 3: very small investments that might grow very large, but in
Speaker 3: most cases will erode to zero.
Speaker 2: So this is part of your satellite strategy.
Speaker 3: That's right, And so I only commit a very small
Speaker 3: part of the portfolio to it. I expect to write
Speaker 3: it off and that it'll be made up for by
Speaker 3: returns on other investments. And if it comes good as
Speaker 3: about one in fourteen at the moment, do I get
Speaker 3: a nice kicker to the returns on my portfolio that year?
Speaker 2: Can I see you?
Speaker 1: A personal question and obviously feel free to decline this
Speaker 1: because your IP. But what percentage of your portfolio is
Speaker 1: core and what percentages satellite?
Speaker 3: That's a fair question and I can answer that it varies.
Speaker 3: It varies depending on where we are in the cycle.
Speaker 3: So the moment I'm over ninety percent core.
Speaker 2: That sounds quite safe.
Speaker 3: Yeah, I'm concerned about the short term outlook for the market.
Speaker 3: So I've really battened down the hatches and most of
Speaker 3: the rest of it is cash.
Speaker 2: To be frank, why did Why are you worried? What
Speaker 2: are your alarm bells right now?
Speaker 3: Sir John Templeton was possibly the first global fund manager
Speaker 3: in the nineteen sixties, he invested heavily in Japan from
Speaker 3: the US. He was also a philanthropist and a leading
Speaker 3: investor in almost every way, and he famously said that
Speaker 3: bull markets are born in despair. They rise on skepticism,
Speaker 3: they mature on optimism, and they die on euphoria. And
Speaker 3: the mood that I'm seeing in the US in particular
Speaker 3: at the moment, but in share markets generally is euphoric. Really, Well,
Speaker 3: look what happened after November five, after the US election.
Speaker 3: The markets went crazy. They're already at record levels and
Speaker 3: they've let in some cases twenty or thirty percent above
Speaker 3: their record highs on the back of the election of
Speaker 3: the new president and the new Congress.
Speaker 1: And so when do you see this potential pullback and
Speaker 1: buying opportunity? Well, what do you what's that magical moment
Speaker 1: where you're like, all right, I'm going from ninety ten
Speaker 1: to like seventy thirty.
Speaker 3: Well, here's here's the tough part about it being a
Speaker 3: qualitative measure like euphoria. It's very hard to time. Yeah, right,
Speaker 3: And I reminded to time and define well exactly. So
Speaker 3: the defining I'm okay with. I've been around for four
Speaker 3: decades now, and so I've sort of seen a lot
Speaker 3: of market cycles and I'm pretty confident my reading on euphoria.
Speaker 3: And I do note that Berkshire Hathaway has sold a
Speaker 3: lot of holdings and accumulated a very large pile of cash.
Speaker 3: And it reminded me of nineteen eighty seven, now a
Speaker 3: bit of history. For the younger listeners, that'd be just
Speaker 3: about everybody but me in nineteen eighty seven. In March
Speaker 3: of nineteen eighty seven, the markets had been in a
Speaker 3: three year bull run and things were looking very very rosy.
Speaker 3: Everyone was positive. Taxi drivers were asking about what shares
Speaker 3: they should be buying, and at that time Australia's richest man,
Speaker 3: mister Kerry Packer, sold out every share he owned in
Speaker 3: March of nineteen eighty seven. Now in October of nineteen
Speaker 3: eighty seven, we had the Black Monday crash and the
Speaker 3: share market in Australia. And remember it's above the eight
Speaker 3: thousand mark. The share market at that time was at
Speaker 3: twenty three hundred and fifty two. That was the high,
Speaker 3: and it fell to below eight hundred. It was horrific. Now,
Speaker 3: mister Packard missed out on fifteen percent of the gains
Speaker 3: between March of eighty seven and October of eighty seven,
Speaker 3: the market had gone up another fifteen percent. But when
Speaker 3: he avoided the sixty five percent plus fall in the
Speaker 3: market and had cash to buy bargains, he did the
Speaker 3: deal of a lifetime when he brought back Channel nine
Speaker 3: from alman Born.
Speaker 1: One thing I always think as an investor, I'd never
Speaker 1: get greedy. I don't want to pick the per top
Speaker 1: and I don't want to pick the bottom. I'm in
Speaker 1: it for the long run. It's such a danger in
Speaker 1: trying to get the absolute like squeeze every single scent
Speaker 1: out of your portfolio, like you're never going to get
Speaker 1: it right, or if you do, you're going to get
Speaker 1: it wrong the next seven times ahead of that, and
Speaker 1: just don't be greedy, be.
Speaker 3: Intelligent, You're so right. Don't pick tops and bottoms. That's
Speaker 3: the way it's often put. Professional traders say, finess and die.
Speaker 3: Oh I like it when you try and finess that
Speaker 3: last little bit and get that last little bit extra
Speaker 3: the market against you, And yes, you lose a lot
Speaker 3: of what you would have had.
Speaker 1: Yeah, and I know that sounds harsh, but you know,
Speaker 1: when you're trying to build wealth, you know you want
Speaker 1: it to obviously pull every single dollar out of your
Speaker 1: portfolio and be as smart and strategic as possible, but
Speaker 1: it can come with so much regret and you know
Speaker 1: things are out of your control to a certain degree.
Speaker 1: How do you use moomur yourself, like when it comes
Speaker 1: to just your building that core portfolio? Like what you know,
Speaker 1: for a new listener that's not ready to start building
Speaker 1: a satellite portfolio and use that type of strategy, which
Speaker 1: is I think a brilliant one. How would they use
Speaker 1: the Movio app and to build that portfolio like you
Speaker 1: have the core that.
Speaker 3: Is well, the think about it is it very much
Speaker 3: depends on where a person is in their investment journey.
Speaker 3: So for me, I start with the macro, I look
Speaker 3: at the globe, and I look at the big trends
Speaker 3: of driving markets, and then I work my way down
Speaker 3: to some themes and then I and often I'll then
Speaker 3: take part in the community forums on the movie platform.
Speaker 3: And then once I've sort of got a sense of
Speaker 3: what the market's thinking, I start thinking about individual stocks
Speaker 3: and I use the screeners on the Momoo platform to
Speaker 3: identify the stocks that I want. Now, the screens are
Speaker 3: very powerful. They can screen on all sorts of different criteria.
Speaker 3: Whether you measure companies fundamentally, you want to know things
Speaker 3: about the cash flow, their profitability, their return on equity.
Speaker 3: That's one way and our screens will do that. But
Speaker 3: you can also put in technical analysis signals. So if
Speaker 3: you like, for example, head and shoulders formations and think
Speaker 3: that they tell you something, you can use that as
Speaker 3: a criteria on a screen and identify charts that have
Speaker 3: that pattern that you're looking for. So, whatever way you
Speaker 3: use to choose the stocks, the screeners are very powerful.
Speaker 3: And one of the things we have noticed on the
Speaker 3: platform is a huge growth in ETF investment, and it
Speaker 3: just makes sense economically. In one transaction, you can get
Speaker 3: a tailed exposure, whether that's a favored tech stock falling
Speaker 3: or whether that's to a portfolio of stocks that represents
Speaker 3: the ASEX two hundred. You can get that in one
Speaker 3: transaction and hold that and so identifying which ETFs are
Speaker 3: best for you is a key and once again the
Speaker 3: screens will help. You can go into the ETF section
Speaker 3: of the moon Move platform and it'll give you thematics investment,
Speaker 3: thematics and if that's if thematic you're looking at. You
Speaker 3: click on that, it brings up a list of applicable
Speaker 3: atfs ETF sorry ETFs, and you then click on the ETF.
Speaker 3: You can drill through to find out more detail about
Speaker 3: how it performs and you can see chart of it
Speaker 3: at the same time.
Speaker 1: And I love this on app So you can literally
Speaker 1: do this like sitting on the bus or the train
Speaker 1: on your way to work, or lying in bed at night,
Speaker 1: you know, or when you wake up in the morning.
Speaker 1: It can literally be done in the moment, and you
Speaker 1: don't need to be sitting there spending hours looking at
Speaker 1: screens on a desktop, you know, cross referencing, running excels Bridge.
Speaker 1: Everything's there for.
Speaker 3: You absolutely, and in fact, Moumou was the first AI
Speaker 3: enabled platform. Now that artificial intelligence worry some people, they
Speaker 3: worry about where it's going. Perhaps one day the machines
Speaker 3: will take over. I'm here to say no, they will not.
Speaker 3: AI is just a bunch of algorithms that do jobs
Speaker 3: that you ask them to do, and so we use
Speaker 3: AI on the moomou platform to put the relevant information
Speaker 3: in front of the investor as they're looking for it.
Speaker 3: So if you put Meta, for example, the US stock
Speaker 3: that's so popular, the owner of Facebook and another app
Speaker 3: apps that are very popular. If you put Meta into
Speaker 3: our platform, not only will you see it's stock code,
Speaker 3: but you'll see related information and related tradeable instruments, so
Speaker 3: that if you just want to invest straight into MATA,
Speaker 3: you can go straight into that. But if you wanted
Speaker 3: to tailor your investment or perhaps look at a portfolio
Speaker 3: of stocks that are similar to MATA that are wrapped
Speaker 3: in an ETF, you can find that on the Meumu platform.
Speaker 3: So we use the AI to put the relevant information
Speaker 3: in front of you, whether that's a chart for you,
Speaker 3: whether that's the financial information about the company, or whether
Speaker 3: that's something else about the company and it's related stocks.
Speaker 3: That information is brought to the front when you select
Speaker 3: a stock. So we'll be using the power of AI
Speaker 3: to put the most important information in front of investors.
Speaker 1: All right, as we wrap up today's episode, for our
Speaker 1: listeners who really want to get into shares and understand
Speaker 1: that property isn't for them or it's just something that's
Speaker 1: just doesn't float their boat. If they want to start
Speaker 1: investing in shares but don't necessarily have much money to
Speaker 1: get started, what are your tips, Like, you know, what
Speaker 1: would you say to your son or your daughter or
Speaker 1: you know, my eleven year old son, Like, what would
Speaker 1: your advice be to them about getting started in shares
Speaker 1: with a small amount of money.
Speaker 3: Well, first of all, you've raised a good point which
Speaker 3: we haven't touched on yet. You do need a lot
Speaker 3: of money to get into the property market, but you
Speaker 3: can get into the share market with as little as
Speaker 3: five hundred dollars, so you can start at a much
Speaker 3: earlier point in your investment career, if you want to
Speaker 3: put it that way. But what I would say is
Speaker 3: do some paper trading.
Speaker 2: Yes, so you can do that through the movie.
Speaker 3: Absolutely, it's a very popular module. In fact, we run
Speaker 3: paper trading competitions regularly in conjunction with our global partner Nasdak,
Speaker 3: so that you can test your ideas, not just in
Speaker 3: the market, but against fellow traders and investors, and a
Speaker 3: lot of people get a real kick out of that.
Speaker 2: We just conclude to putition even going, I think at
Speaker 2: the moment.
Speaker 3: Absolutely so we've just completed one and there's another one
Speaker 3: starting very soon, and we run them regularly because they
Speaker 3: are a powerful learning experience. You can read all the
Speaker 3: books you like, or read all the web pages you like,
Speaker 3: but until you actually start picking stocks and purchasing them
Speaker 3: and seeing how they go, you haven't really come up
Speaker 3: with you know, you haven't got to a point where
Speaker 3: you can say you've got a good formula. So being
Speaker 3: able to paper trade is ideal because in paper trading,
Speaker 3: you're playing with paper money. There's no real money at risk.
Speaker 2: It's a dress rehearsal.
Speaker 3: There we go the perfect analogy. That's exactly what it is.
Speaker 3: So you can do all the things that you would
Speaker 3: do in making an investment. Identify it, execute it, monitor it,
Speaker 3: see how it goes and nobody ever gets hurt because
Speaker 3: it's all on paper. Now, that means you don't get
Speaker 3: the rewards either, So if you're picked well and it
Speaker 3: goes up, you don't get paid either. But It's a
Speaker 3: great way to test your ideas before you actually put
Speaker 3: your money at.
Speaker 2: Risk, and then you are ready and prepped for opening night.
Speaker 3: I love the analogy.
Speaker 1: Well, look, Michael, thank you so much for coming on
Speaker 1: today's episode. I really appreciate it, and I mean your opinions,
Speaker 1: your insights, your facts and figures are incredibly important, and
Speaker 1: particularly right now when so many people feel overwhelmed, you know,
Speaker 1: with all the different opinions and you know, statements, and
Speaker 1: you know, I guess seeing the herd mentality as well,
Speaker 1: particularly obviously around property. So I think for people hearing
Speaker 1: today's episode, they'll realize that, okay, property isn't the bill
Speaker 1: in it all, there is actually something quite possibly far
Speaker 1: moot more superior, efficient, effective, and just so much easier
Speaker 1: both financially, mentally and energetically, I will say, and I'm
Speaker 1: saying that from someone who has, you know, fingers in
Speaker 1: both pies. So thank you for this, and today again
Speaker 1: a huge thank you to Mumoo for sponsoring this episode
Speaker 1: of Sugar Mama's Fireplay. As I have said, if you
Speaker 1: are looking for a smarter, easier way to invest, Moomu
Speaker 1: has you covered and they have low fees incredibly intruitive tools,
Speaker 1: many of different ones as well which I've used personally,
Speaker 1: and of course expert driven insights. So even if you're
Speaker 1: just a tiny bit interested, join the Mumu community today.
Speaker 1: Just simply download the app and start your journey towards
Speaker 1: financial freedom with Mumu. I promise you. Investing has never
Speaker 1: been simpler and more inspiring.
Speaker 2: Thank you everyone for listening.
Speaker 1: To today's episode. This is Sugar Mamma's fireplay. I will
Speaker 1: see you next Monday, and of course please take a
Speaker 1: moment to leave a rating and review and let us
Speaker 1: know what you would like to hear more of. I
Speaker 1: am here to help you, I'm here to guide you.
Speaker 1: I'm here to motivate you. This is Sugar Mama's fireplay
Speaker 1: Chow for now.