Speaker 1: Welcome to How Do They Afford That, the podcast that
Speaker 1: peaks into the financial lives of everyday Australians. I'm Michael Thompson.
Speaker 1: I'm a writer and the co host of the podcast
Speaker 1: Fear and Greed Business News and as always, I'm a Canner,
Speaker 1: Campbell Financial Planner and founder of Sugar Muma TV, the
Speaker 1: financial literacy platform that you will find pretty much everywhere
Speaker 1: YouTube podcasts like this one, obviously, books, Instagram, threads, TikTok
Speaker 1: and more.
Speaker 2: Hollo Canna, Good morning, How are you.
Speaker 1: I'm going well, and I'm looking forward to today's episode
Speaker 1: because it is going to be big and it is
Speaker 1: going to I reckon this will answer more listener questions
Speaker 1: in one episode than anything we've ever done before.
Speaker 2: We've got a lot to cover and there's some things
Speaker 2: that have really been burning at the back of my
Speaker 2: mind that we're going to sort of unpack today.
Speaker 1: I'm looking forward to it. Investing. We're talking about investing. Obviously,
Speaker 1: investing isn't a one size fits all thing, which I
Speaker 1: think is something that we've established over the course of
Speaker 1: this podcast so far. Someone who's in their twenties, for instance,
Speaker 1: might have a very different approach to an investing that
Speaker 1: compared to someone who is approaching retirement or who has
Speaker 1: already retired. So today we are going to look at
Speaker 1: investing at different life stages and generations. What to consider
Speaker 1: if you're a baby boomer or gen X, or a millennial,
Speaker 1: gen y, gen Z all those things and to do
Speaker 1: that we are getting some help. Roger Montgomery is the
Speaker 1: founder of Montgomery Investment Management. He has more than three
Speaker 1: decades of experience in funds management and related activities, including
Speaker 1: equities analysis and stockbroking. He is also the author of
Speaker 1: best selling investment book value Able, and is a supporter
Speaker 1: of this podcast. Roger Montgomery, welcome back to how Do
Speaker 1: They Ford That?
Speaker 3: Thank you both for having me, really really great to
Speaker 3: see you again.
Speaker 2: Oh we are absolutely honored and I cannot wait to
Speaker 2: pick your brain and ask your whole follow questions that
Speaker 2: are burning on the tip of my tongue.
Speaker 1: Before we get into any of that. As you're listening,
Speaker 1: please know that anything we talk about is always general
Speaker 1: in nature. It is never personal, investment, strategic or product advice.
Speaker 1: It is purely for financial education purpose only.
Speaker 2: Absolutely Remember we do not know what your risk profile is.
Speaker 2: We do know what your goals are what your situation
Speaker 2: looks like, what's important to you. So please always bear
Speaker 2: that in mind and know that this is general in nature.
Speaker 1: Roger can I start with a fairly broad statement, and
Speaker 1: I suspect there could be an error or two in it,
Speaker 1: but I'm just going to put it out there. Starting
Speaker 1: with the youngest investors, a couple of key principles here,
Speaker 1: get started early and aim for growth. Does that sum
Speaker 1: it up reasonably? Well?
Speaker 3: Look, I think there's merit in the philosophy, no doubt
Speaker 3: about that. When I think about this particular generation, which
Speaker 3: is Generation Z, I think about my kids. My eldest
Speaker 3: is twenty three, the oldest Gen Z is twenty nine
Speaker 3: or thereabouts, and the youngest to be fourteen. My youngest
Speaker 3: is fifteen. I wrote my book to give them a
Speaker 3: recipe if I came to an untimely demise. I wanted
Speaker 3: to give them a recipe for how to invest in shares.
Speaker 3: They don't care about shares, they don't care about investing.
Speaker 3: They're not even thinking about it, except for my eldest,
Speaker 3: who at the moment is working in the cryptocurrency space
Speaker 3: in Tokyo. He does some fascinating stuff there. So he's
Speaker 3: interested in profiting and making money and growing his wealth,
Speaker 3: but not the traditional way. He's not thinking about shares,
Speaker 3: he's not thinking certainly not thinking about bonds. Wouldn't even
Speaker 3: know what a bond is, and he's not thinking about
Speaker 3: private credit or other asset classes. Really, for him, it's
Speaker 3: about a high growth asset where he can make a
Speaker 3: lot of money very quickly. That happens to be cryptocurrencies
Speaker 3: for him, and property, and he wants to take his
Speaker 3: profits from digital currencies and plow that back into property
Speaker 3: as quickly as he can. I think there's merit investing
Speaker 3: in property, but I also think that there's merit in
Speaker 3: sticking to what you know and what you're good at.
Speaker 3: He really does know that space very very well, So
Speaker 3: why would he venture outside into something that he doesn't
Speaker 3: know anything about unless he's guided into that by somebody else.
Speaker 1: You've talked to us before we've and definitely go back
Speaker 1: and have a listen to the previous episode that we've
Speaker 1: done with Roger, because it is a fantastic guide as
Speaker 1: to what to look for in quality companies to invest in.
Speaker 1: Do you find it perhaps frustrating then that there is
Speaker 1: a generation here who is perhaps not looking at those
Speaker 1: same principles of investing that you've gone through, when you've
Speaker 1: laid this out in terms of what people can look for,
Speaker 1: and looking at the history of a company and then
Speaker 1: using that to make some kind of educated projections about
Speaker 1: what is going to happen for that company in the
Speaker 1: future that shares seem like a fairly obvious logical place
Speaker 1: for a young person to be investing in. Is that
Speaker 1: at all frustrating that suddenly that there isn't this attention
Speaker 1: that you go if you got onto this right now,
Speaker 1: you could be setting yourself up for life.
Speaker 3: Yeah, it look because I don't know the people who
Speaker 3: aren't taking it up.
Speaker 1: Yeah, I'm not frustrated by Yeah, it's a very kind
Speaker 1: of zen approaches. Actually, it's not trying to control things control.
Speaker 3: What does frustrate me though, is I had a little
Speaker 3: experiment where I was allowed by my wife to have
Speaker 3: access to Instagram and Instagram reels, and it was properly
Speaker 3: turned off because I quickly became quite addicted to it
Speaker 3: and I was saving all of these bizarre things and anyway,
Speaker 3: but that during that short exposure, I saw lots of
Speaker 3: financial advice. I saw I was privy to financial advice
Speaker 3: on reels. Some of it was reasonable and conventional. Some
Speaker 3: of it was just plain bizarre. And I worry for
Speaker 3: a generation of people such as this generation jen Z,
Speaker 3: who are digital natives, you know, they've been brought up
Speaker 3: on this technology. They're not getting their advice from financial advisors.
Speaker 3: They're not getting their advice from people who know what
Speaker 3: they're doing. They're getting their advice from peers, and there
Speaker 3: is don't have that experience, and they don't know what
Speaker 3: they don't know, and because of that, there is some
Speaker 3: dangerous stuff that's being offered to them as advice. And
Speaker 3: I worry and I'm frustrated by that because there's been
Speaker 3: a lot of work done by the generations that have
Speaker 3: gone before them, and it's frustrating that that generation is
Speaker 3: going to make the same mistakes that the generation before
Speaker 3: them made by not listening to the advice of the
Speaker 3: generation before them.
Speaker 1: So it's like, stick with what you know for one thing,
Speaker 1: is kind of the first part of it, but also
Speaker 1: make the most of all of the work that has
Speaker 1: already been done in terms of explaining these principles. And
Speaker 1: that episode that you spoke to us about is a
Speaker 1: great example of that. It is a how to guide
Speaker 1: as to what to look for a starting point for
Speaker 1: your research.
Speaker 3: There are millions and millions of people gen X and
Speaker 3: baby boomers who have lost billions of dollars trading shares
Speaker 3: and futures and derivatives using charts. And when I turned
Speaker 3: on Instagram reels, there were these young kids promoting charts
Speaker 3: and I thought, oh my gosh, you know I tested well.
Speaker 3: I used to work for BT Australia. We had an algorithm.
Speaker 3: We worked on algorithm that I worked with another guy,
Speaker 3: a business partner of mine, and we were at one
Speaker 3: point we were the biggest traders of the Nikeye Futures
Speaker 3: index on the Tokyo Exchange Tokyo Futures Exchange, and we
Speaker 3: learned what works and what doesn't work. And I can
Speaker 3: assure you that when you take all of these charting
Speaker 3: techniques and digitize them and test them, which is what
Speaker 3: we did. We back tested all of this stuff over many,
Speaker 3: many years and across markets to see if they were
Speaker 3: robust or not. They don't hold water, they don't work.
Speaker 3: It's the most bizarre thing. If you don't mind, can
Speaker 3: you indulge me a very quick little story. Please. There's
Speaker 3: a thing in charting called support and resistance, right, and
Speaker 3: support is supposedly the level at which the share won't
Speaker 3: go below, and resistance is the level above which it
Speaker 3: won't go. But if the price breaks through resistance, then
Speaker 3: according to this reel that I watched, the price will
Speaker 3: go keep going up. Well, let's suppose the price in
Speaker 3: the middle is two dollars. Support is at a dollar fifty,
Speaker 3: and resistance is at three dollars, for example. So the
Speaker 3: theory goes that you don't buy the shares at two
Speaker 3: dollars today. You wait for it to go above three dollars,
Speaker 3: then you buy it. Think about doing that in real estate.
Speaker 3: Imagine going to an action and you're there with your
Speaker 3: dad or your mum, and you say, Mum, I really
Speaker 3: want to buy this apartment. It's going to go for
Speaker 3: two hundred and fifty thousand dollars. Oh no, no, no,
Speaker 3: we'll come back next year and see if it's gone
Speaker 3: through three hundred thousand, then we'll buy it, because then
Speaker 3: it might go up further. That's absurd. And if it
Speaker 3: doesn't work for one asset class, it's not going to
Speaker 3: work for another asset class. It's nonsense. And I see
Speaker 3: a generation of young people making the same mistakes that
Speaker 3: all the generations before them have made. It's just a
Speaker 3: waste of time and it's so sad that they're going
Speaker 3: to lose a lot of money.
Speaker 2: The one thing that I completely agree with absolutely everything
Speaker 2: you're saying, and I have to say, people, you know,
Speaker 2: viewers watch these people on these reels selling these programs
Speaker 2: and software trading systems and charts and graphs, and they
Speaker 2: don't realize the person in front of them is actually
Speaker 2: not actually a successful investor. They're a successful salesperson indeed.
Speaker 2: And that's where I think the smoker mirrors is just
Speaker 2: causing a lot of problems and people investing is it takes.
Speaker 2: As you know, you've got three decades of experience. When
Speaker 2: it comes to investing, it's experience, it's education. There's a
Speaker 2: huge amount of analysis, not having the right connections, Like
Speaker 2: I mean, I won't even go through the long list
Speaker 2: of skills and intuition and education you need. And these
Speaker 2: every day people thinking they could just pick it up
Speaker 2: by doing a two hundred and ninety nine dollars course,
Speaker 2: I like, it's just insane.
Speaker 3: I used to meet a lot of This is fifteen
Speaker 3: twenty years ago. Met a lot of dentists and doctors
Speaker 3: who took up trading. They and I pointed out to them,
Speaker 3: you know, you've done a dozen years of study to
Speaker 3: become qualified at what you're doing, and you think that
Speaker 3: this is something that you can just you know, read
Speaker 3: a book and that's going to be enough. You know,
Speaker 3: charting behind the charts are businesses. We talked about this
Speaker 3: the last time I was on the program. You know,
Speaker 3: behind those charts. Turn the charts off. You don't need those.
Speaker 3: You just need to look at the operating performance of
Speaker 3: the business and you'll be able to pick the right
Speaker 3: things from that. The charts is kind of an attempt
Speaker 3: at a shortcut, and it's a really clumsy attempt.
Speaker 2: The second thing that really worries me and infuriates me
Speaker 2: to a certain degree is the lack of understanding of risk.
Speaker 2: You have this young generation who has motivated and driven,
Speaker 2: you know, they want to get ahead financially, which I
Speaker 2: think is admirable, but they don't understand risk, and they
Speaker 2: are self educated, and they are making these massive decisions
Speaker 2: with their hard earned money not under standing the risk
Speaker 2: that they're taking. And this is where I find most
Speaker 2: self educated, and I does not necessarily mean when I
Speaker 2: say self educated that they actually really do know what
Speaker 2: they're doing. No one knows what a risk profile is.
Speaker 2: And if that anyone goes and see a financial planner,
Speaker 2: one of the first documents they're going to sit you
Speaker 2: down and go through with you is a risk profile.
Speaker 2: Now people will come to me and say, you know,
Speaker 2: I invested in this and that, and they're high risk investments.
Speaker 2: So as far as I'm concerned, they should be just
Speaker 2: going to the casino with the level of risk that
Speaker 2: they're taking. But when I do a risk profile with them,
Speaker 2: which has you know, mean, there are hundreds of different
Speaker 2: risk profiles out there, but the quality ones, suddenly people realize, oh,
Speaker 2: hang on, no, I would never take that type of risks.
Speaker 2: And I'm like, well, look what you're doing over here
Speaker 2: doesn't make sense. But they, just as you just said,
Speaker 2: they don't know what they don't know, and I'm interested
Speaker 2: to know that.
Speaker 3: What are your thoughts of.
Speaker 2: Risk profiling is something you would recommend someone does as
Speaker 2: part of getting into building up a share portfolio and
Speaker 2: investing in share How valuable do you see it in
Speaker 2: someone understanding the importance of understanding timing with shares, and
Speaker 2: I'm I say timing and trying to pick the market,
Speaker 2: but time and going okay, well I need this money
Speaker 2: to pay for a deposit in five years, Maybe shares
Speaker 2: aren't the smartest thing necessarily to use all my money
Speaker 2: for right now.
Speaker 3: Yeah, I would look. We talked a little bit the
Speaker 3: last miles on the program about private credit and private credit.
Speaker 3: I think if you're going to need the money in two, three,
Speaker 3: four years, then the stock market, unfortunately, it could be
Speaker 3: on its knees when you need the money. Yeah, because
Speaker 3: the stock market is volatile, and so private credit probably
Speaker 3: offers a more attractive alternative. If your time horizon is
Speaker 3: longer than that five years plus, then I would say, well,
Speaker 3: that's enough time for the stock market to recover and
Speaker 3: you'll probably do okay, particularly if you're investing regularly, so
Speaker 3: you're not just making a lump some investment today and
Speaker 3: then putting in the bottom drawn forgetting about it, but
Speaker 3: you're regular. Adding that way, if the market is volatile
Speaker 3: in the intervening five years, you can buy more at
Speaker 3: a lower price and that will help with the recovery.
Speaker 3: That will accelerate the recovery but a couple of points
Speaker 3: that you made that I think is interesting. I'm going
Speaker 3: to be really unconventional here. I think nothing teaches you
Speaker 3: risk like losing money. Yes, right, do that when you're young.
Speaker 3: Do that good. And I've contradicted what I said earlier.
Speaker 3: But if you're going to lose I remember a friend
Speaker 3: of mine and I was in Melbourne. We're at university,
Speaker 3: and this is back in nineteen eighty nine, and I
Speaker 3: remember both of us saying we were coming up with
Speaker 3: an idea for making money in the markets, and we
Speaker 3: thought ten thousand dollars is a lot of money. My
Speaker 3: mum went garranteur on a loan for me to get
Speaker 3: the ten thousand dollars. My friend was very, very wealthy,
Speaker 3: and it was nothing for him to get ten thousand dollars.
Speaker 3: So we put our ten thousand dollars in. We turned
Speaker 3: that twenty thousand dollars very quick into forty thousand dollars.
Speaker 3: And this is back in the late nineteen eighties. I
Speaker 3: thought I didn't need to go to university. I thought,
Speaker 3: why am i UNI? I'm just going to keep doing
Speaker 3: this this is I can quit UNI and I'll be fine.
Speaker 3: But then over the ensuing couple of weeks, we lost
Speaker 3: all of our money and I ended up working at
Speaker 3: a fish and chip shop for a year and worked
Speaker 3: at a nightclub to pay my mum back because she
Speaker 3: was guaranteur on the loan, the ten thousand dollar loan.
Speaker 3: Nothing taught me risk like losing money. But I'm glad
Speaker 3: that I did it then because both of us said
Speaker 3: at the time, look, when we're in our forties and fifties,
Speaker 3: ten thousand dollars won't matter that much to us, So
Speaker 3: now's the time to do it. It seemed like all
Speaker 3: the money in the world, But inflation and salary increases
Speaker 3: and property price increases over time diminishes that initial risk
Speaker 3: that you thought was a lot.
Speaker 2: Yeah.
Speaker 3: I noticed that I was in an auction on the
Speaker 3: weekend and there was a person bidding at the auction
Speaker 3: and they were bidding in you know, twos and three
Speaker 3: thousand dollars increments, and the other bidder was bidding an
Speaker 3: eighty thousand dollars increments. Well, you know, every time it
Speaker 3: went up two thousand dollars, they'd bid another eighty and
Speaker 3: an event, you know, after three bids they were knocked out.
Speaker 3: And I think that's a function of the fact that
Speaker 3: they were thinking about what the property is worth today,
Speaker 3: not realizing that, you know, at an average increase of
Speaker 3: about seven percent, which is what Australian property prices, particularly houses,
Speaker 3: have gone up by over the last fifteen years or so,
Speaker 3: that property is going to be worth twice as much
Speaker 3: in ten years time. So the extra eighty grand is
Speaker 3: not that much when you realize that, you know it's
Speaker 3: going to be worth a whole lot more So when
Speaker 3: you're young, you can you can afford to have that perspective.
Speaker 3: You can afford to think about ten years time, fifteen
Speaker 3: years time, twenty years time, and you can afford to
Speaker 3: take a few risks. They have to be measured. You
Speaker 3: don't want to bet the whole farm, although that's what
Speaker 3: I did. You know, I didn't to work to pay
Speaker 3: it off, but it taught me risk, which came in very,
Speaker 3: very handy for the rest of my investing career.
Speaker 2: And that's exactly what we want to do here, is
Speaker 2: make sure that whatever you decide to do, you understand
Speaker 2: the risk involved. And and you know, I'm a very
Speaker 2: aggressive investor like yourself. You know, I'd say ninety five
Speaker 2: percent of my investment portfolio, including my super is predominantly shares.
Speaker 2: I'm in it for the long gain's aggressive risk.
Speaker 3: Ye say, that's aggressive, but if you understand your risk,
Speaker 3: it's rational risk taking.
Speaker 2: Exactly, which is an aggressive And this is the frustration
Speaker 2: as a financial planner. I actually think I invest very conservatively,
Speaker 2: and I think my investment portfolio is extremely boring, but
Speaker 2: from an acid point of view, and with my financial.
Speaker 3: Planning license, all your money and that's.
Speaker 2: It's technically deemed as high growth, which is you know,
Speaker 2: then considered highly volatile and high aggressive, even though I
Speaker 2: think it's incredibly boring. But you know, that's the difference
Speaker 2: and understanding my risk and understanding obviously the financial education
Speaker 2: piece and how valuable it is.
Speaker 3: So then the younger generation, you know, generation Z my
Speaker 3: son who's invested inverted commas, invested in crypto, you know,
Speaker 3: he understands that risk. He knows, he's been through a
Speaker 3: couple of cycles, he's seen how far it can fall.
Speaker 3: He gets it. But he's still committed to it and
Speaker 3: he's that's what he's doing, so he knows the exposures
Speaker 3: that he's taking. It's when you don't understand the risk,
Speaker 3: that's when that's when bad things are going to happen
Speaker 3: that are unanticipated. Bad things can still happen, you know,
Speaker 3: to you, but you anticipate it and you ride through
Speaker 3: it because you know what the long term outcome is
Speaker 3: going to be. So for that younger generation gen Z,
Speaker 3: you know, they can take a few risks early. That's okay, all.
Speaker 1: Right, all right, So that's I mean, and we may
Speaker 1: have to leave gen Z behind now because we have
Speaker 1: a number of other generations still to get through. But
Speaker 1: really we are talking essentially an acceptable level of risk,
Speaker 1: and the risk kind of varies depending on the age
Speaker 1: and the individual.
Speaker 3: You know, it's not fair. I mean, it's really hard
Speaker 3: to talk about a generational investing because, as I said earlier,
Speaker 3: I've got three children, two adult children who are gen
Speaker 3: Z and one teen, and they're all completely different people,
Speaker 3: and they have different different appetites for risk and different
Speaker 3: attitudes to money. One as a saver, one is a spendthrift,
Speaker 3: and they're going to have different lives as a consequence
Speaker 3: of that, but that's who they are, all right.
Speaker 1: What we're going to do is, in a little bit,
Speaker 1: we're going to take a break. And after the break,
Speaker 1: I want to talk to you about the kind of
Speaker 1: the middle generations, because to me that kind of feels
Speaker 1: like where there's a fair bit of gray as to
Speaker 1: indeed as to the perhaps the right mix for those generations.
Speaker 1: But before we do that, we've talked about the young.
Speaker 1: Let's talk about the other end of the age spectrum,
Speaker 1: but also the other end of the risk spectrum. So
Speaker 1: we're talking about kind of older Australians, people who are
Speaker 1: either quite close to retirement or have already retired. And
Speaker 1: assuming then that if we when we're talking about young people,
Speaker 1: we're talking about the ability to take a few more risks,
Speaker 1: presumably that's not the case for this generation.
Speaker 3: Yeah, and Canna, you and I were talking about this
Speaker 3: before we began recording the podcast. The conventional wisdom is
Speaker 3: that as you get older, you invest more conservatively, you
Speaker 3: invest more for income. But what that does is if
Speaker 3: you follow that recipe, you miss out on growth. And
Speaker 3: as you pointed out, you know, if you're retiring at
Speaker 3: sixty five today, you've got twenty and potentially thirty years
Speaker 3: of spending that you have to finance. It could be.
Speaker 2: Really dangerous and detrimental to your financial will being to
Speaker 2: follow that Bonds fixed interest cash generic recommendation.
Speaker 3: So I'll give you an example. Thirty years ago, my
Speaker 3: friends introduced me to red wine, and I have since.
Speaker 3: I've had a love of red wine for a very
Speaker 3: long time. And back thirty years ago when I was introduced,
Speaker 3: I bought a bottle of Penfoldst. Henri La. It was
Speaker 3: called a claret. Then the French preventedors from using We're
Speaker 3: not allowed to call it claret anymore. But it was
Speaker 3: fourteen dollars ninety nine a bottle, which in your mid
Speaker 3: twenties you're kind of going, oh, come, well, you know
Speaker 3: it's more than a six dollar pad tie, but you
Speaker 3: know it's it's fourteen dollars. That wine today is one
Speaker 3: hundred and fifty dollars, and in fifteen years time it
Speaker 3: will be three hundred and forty dollars for the same wine. Now,
Speaker 3: the point I'm making is, if you're retiring today and
Speaker 3: you're enjoying St. Honri A one hundred and fifty dollars
Speaker 3: a bottle, you've got to grow your money at the
Speaker 3: same rate that wine is increasing so that you can
Speaker 3: still afford to drink it in twenty years time or
Speaker 3: thirty years time or fifteen years time. So it's really
Speaker 3: important that you have growth in your portfolio. You have
Speaker 3: to have some growth. And if you deny yourself that growth,
Speaker 3: and what's going to happen is the income that you
Speaker 3: are generating, it's not going to grow. And consequently, the
Speaker 3: purchasing power of that income is actually going to start declining.
Speaker 3: So what you can afford to buy today, you won't
Speaker 3: be able to afford when you're in the lane eight
Speaker 3: years of your retirement.
Speaker 2: And that's when we see people start to eat into
Speaker 2: their capital. You know, the superanneration portfolio starts to reduce
Speaker 2: because they having to sell off investments to help plug
Speaker 2: the holes in the budget and the living expenses. And
Speaker 2: once you start that speed at which the funds or
Speaker 2: investment portfolio significantly reduce.
Speaker 3: Yeah, there's a balancing that goes on. You know, if
Speaker 3: you're in your nineties now and you've got twenty million
Speaker 3: dollars sitting aside and you're eating bread and water because
Speaker 3: you're just living off the income, you know, well, that
Speaker 3: doesn't that's crazy. You know, you can probably go on
Speaker 3: a holiday and you can spend some of that money
Speaker 3: that you've got there. You could spend some of your
Speaker 3: capital and you're going to be okay, depending on how
Speaker 3: committed you are to leaving something behind for others. But
Speaker 3: you're right. The biggest problem I see amongst people is
Speaker 3: not planning for being healthy and well for long enough.
Speaker 3: And that's something that needs to be funded, and it
Speaker 3: really can only be funded through growth. I mentioned earlier.
Speaker 3: Private credit. I think that and I'm plugging it because
Speaker 3: I think it's an emerging asset class of vital importance
Speaker 3: because it has lower volatility, less risk, but it also
Speaker 3: delivers a reasonably attractive return. So I think that's going
Speaker 3: to solve some problems for a lot of retirees.
Speaker 1: Can I talk to you both about something that we
Speaker 1: have talked about in the past, and I think you
Speaker 1: both have a strategy along these lines, and you call
Speaker 1: it different things, but kind of you've got what you
Speaker 1: call your sleep well strategy sleep well yeah.
Speaker 2: And nurse thy rhyme to send everyone off to sleep
Speaker 2: with for low.
Speaker 1: It and the whole idea is about allowing for volatility
Speaker 1: during retirement. Can you just give us a quick kind
Speaker 1: of summary as to how this works on why it's important.
Speaker 2: Well, my financial wisdom to people is as they approach
Speaker 2: retirement to try and have at least two years worth
Speaker 2: of living expenses set aside in cash. Now, the reason
Speaker 2: why I recommend that is is if you have a
Speaker 2: high growth portfolio that's predominantly you know, equity based or
Speaker 2: private equity, you have bought yourself up to two years
Speaker 2: for the market to recover. So if the share market,
Speaker 2: which naturally does experience, is a pullback, a correction of
Speaker 2: high levels of volatility, you're never backed into a corner
Speaker 2: where you have to start selling things down at.
Speaker 3: A low price exactly, means less assets left over to.
Speaker 2: Recover exactly, crystallizing those losses I do know, whatever, So
Speaker 2: you don't want to be forced to sell it lows exactly.
Speaker 2: And by having two years worth of living expenses in cash,
Speaker 2: you can actually just switch off the dividends, turn off
Speaker 2: the TV, unplug the computer screen, go on holiday if
Speaker 2: you want it, because you've got two years with the
Speaker 2: living expenses there. And history shows that on average takes
Speaker 2: about eight months for the market to recover. When we
Speaker 2: look at all you know historically, all the sort of
Speaker 2: call them crashes have happened previously, so that means you've
Speaker 2: got a six month buffer on top of that, it
Speaker 2: takes away that stress and that anxiety, and it means
Speaker 2: that you can even if you want to potentially reinvest
Speaker 2: those div ends whilst share prices are potentially discounted. So
Speaker 2: it just keeps you. It's safeguards your financial well being
Speaker 2: and still allows you to invest for the long run
Speaker 2: and not having to you know, follow that Herd mentality
Speaker 2: of when you get old and retirement, you've got to
Speaker 2: look at bonds of interest in cash and those those
Speaker 2: investment asset classes which I fear won't go the distance
Speaker 2: and won't provide those longevity benefits that we definitely need
Speaker 2: when you look at the life expectancy and retirement. So
Speaker 2: if your average retirement sixty five, life expectancies eighty eighty
Speaker 2: five male or female, that's call it fifteen twenty five years.
Speaker 2: Where the living expenses, that's a long period of time
Speaker 2: you've got to live off your investment portfolio or superannuation
Speaker 2: or asset base those fundsy to outlive us. So this
Speaker 2: allows you to be able to access those that investment
Speaker 2: classes but also have a controlled element of risk from
Speaker 2: a proactive level.
Speaker 3: Yeah, look, I think actually what you're describing is really sensible,
Speaker 3: and I'm confident that having.
Speaker 2: I feel really proud, thank you well.
Speaker 3: Having liquidity short term liquidity is vital because what it
Speaker 3: does is it gives you something called optionality over cheap prices.
Speaker 3: So if you've got let's say you've got a couple
Speaker 3: of years of needs set aside in something that's attracting
Speaker 3: a reasonable yield but at the same times not exposed
Speaker 3: to volatility, then you can draw on that to add
Speaker 3: to your other buckets, to add to your other investments
Speaker 3: if the market does fall, and you can recover the
Speaker 3: loss much quicker if you're adding at the lows, So
Speaker 3: that makes really good sense. Another metaphor that I think
Speaker 3: is useful is the construction of a boat. So if
Speaker 3: you imagine that the hull of the boat, you need
Speaker 3: that hull to stay afloat, so you have a large
Speaker 3: proportion of your assets in this is for retirees and
Speaker 3: pre retirees. You have a large proportion of your assets
Speaker 3: in secure, safer, more stable assets, and the liquidity pool
Speaker 3: is in that building the hull of the boat to
Speaker 3: keep you afloat. Then you have an outboard engine that
Speaker 3: gets you moving, so you have some growth assets. They
Speaker 3: represent the outboard engine. And then if you really and
Speaker 3: not everyone has this appetite. We were talking about this earlier,
Speaker 3: that not everyone invests the same way and has the
Speaker 3: same risk appetite in the same generation. You know, there
Speaker 3: are some people who want a higher risk exposure, you know,
Speaker 3: they want something a little bit spicy and whatever that is.
Speaker 3: That's the turbo on the outboard engine, and it's in proportion.
Speaker 3: So the bulk of your assets are in these conservatives
Speaker 3: safe Admittedly, they can be high yielding, you know, they.
Speaker 2: Can be safe boundaries.
Speaker 3: Yeah, indeed, and again I bring up private credit. You know,
Speaker 3: that can be the bulk of that. That's your core.
Speaker 3: And then you've got a lesser exposure to growth that's
Speaker 3: your outboard engine, and an even smaller exposure to high
Speaker 3: growth and more speculative things that might just you know,
Speaker 3: might pay for a night out or might pay for
Speaker 3: a holiday or whatever if it comes off, and you
Speaker 3: don't mind if that money is lost, And that's the
Speaker 3: turbo on the outboard engine. The engine isn't dependent on
Speaker 3: that to keep you moving forward. Whether that's there or not,
Speaker 3: it doesn't matter. So that metaphor, I think is also
Speaker 3: a good one for frameworking how to prepare for retirement
Speaker 3: and how to invest during retirement. I love it all. Right.
Speaker 1: Self interest is telling me that we need to move on.
Speaker 1: And it's self interest because I want to get to
Speaker 1: those middle generations. I want to get to the millennials
Speaker 1: and the gen X because I kind of fit into
Speaker 1: the slightly older end of the millennial generation and it
Speaker 1: is an area where there is well for me at least,
Speaker 1: a great deal of uncertainty as to what is the
Speaker 1: right approach. We're going to take a quick break and
Speaker 1: we will come back in a moment and get into millennials,
Speaker 1: gen X and what on earth we should be looking at. CANA.
Speaker 1: We are talking today about investing across generations, and we
Speaker 1: are joined in the studio by Roger Montgomery, who has
Speaker 1: done a fantastic job so far of taking us through
Speaker 1: the youngest generation and the older generations and what we
Speaker 1: should be looking at. Let's jump into the middle generation.
Speaker 1: So this is kind of millennials in the age range
Speaker 1: of say, kind of late twenties through to kind of
Speaker 1: early mid forties, so kind of twenty eight to forty three.
Speaker 1: That in that kind of range at gen X, which
Speaker 1: is mid forties, up until kind of late fifties.
Speaker 3: Yeah, also fifty nine.
Speaker 1: Yeah, And so it's a very large kind of range
Speaker 1: in there. There's a couple of days. But we are
Speaker 1: not talking about people in their first years of work anymore,
Speaker 1: and we are not necessarily talking people that are on
Speaker 1: the very cusp of retirement. We are talking about a
Speaker 1: big mass right in the middle. I'm in that mass.
Speaker 1: What is the right approach and this might be a
Speaker 1: question that's too broad, what is the right approach to
Speaker 1: make sure that your portfolio is set up the right
Speaker 1: way to actually achieve what you need those what you
Speaker 1: need to achieve for those age demographics.
Speaker 3: Well, I'd like to invite myself back on the program
Speaker 3: to talk about something called the bucket strategy, which is
Speaker 3: a strategy that I wrote about a little while back.
Speaker 3: So we'll come back and talk about that one that
Speaker 3: answers that that question about how to approach investing and
Speaker 3: how to allocate to different asset classes, and I'll detail
Speaker 3: that a little bit more. But maybe if we could
Speaker 3: just take a step back and can I give you
Speaker 3: some shocking statistics about these age groups?
Speaker 1: Oh dear, please do Yeah.
Speaker 3: So seven percent of Generation X seven percent not seventy
Speaker 3: seven takes financial advice.
Speaker 2: Funny you say that, Michael, do you ever follow my
Speaker 2: financial advice that you have free, unlimited access to.
Speaker 1: On occasion I have been known to consider it.
Speaker 2: I think the only advice you took was to invest
Speaker 2: in an air fryer.
Speaker 1: It was very good advice.
Speaker 3: I don't think that's an appreciating asset. I think if
Speaker 3: you pop that out on the nature strip, Council will
Speaker 3: come and take it away for zero. Well.
Speaker 1: I certainly appreciated he did buy the Rolls Royce. It
Speaker 1: has changed our lives in terms of improving the efficiency
Speaker 1: of cooking and everything as it has made a difference.
Speaker 1: But the broader point, like seven seven.
Speaker 3: Percent, classic example, seven percent formally take financial advice. I'm
Speaker 3: sure there's many more that you know will take advice
Speaker 3: over a beer and a glass of wine at a barbecue.
Speaker 3: In terms of those taking formally taking financial advice, seven percent,
Speaker 3: you know the biggest block, how do you find a
Speaker 3: good one? You listen to this program. Obviously there's a
Speaker 3: very good one right here. The way people have asked
Speaker 3: me this question before, how do I find a financial
Speaker 3: advisor that's reputable? How do you know if you're not
Speaker 3: in the industry. You know, I've been in this industry
Speaker 3: my entire life since the day I left university. So
Speaker 3: for me, it's easy, it's you know, it's my narrative.
Speaker 3: But how does somebody who's not in the industry he
Speaker 3: can choose And the simplest way is, you know, there
Speaker 3: are governing bodies for financial advisors that hand out awards
Speaker 3: every year. They are awarded financial advisors. And my hope
Speaker 3: is that people will look to awarded financial advisors to
Speaker 3: find the really good ones. Now that's a simple way.
Speaker 3: I don't know. I'm not going to name anyone. I
Speaker 3: don't you know, I'm not going to do that. But
Speaker 3: you know, you can Google and you can find awarded
Speaker 3: financial advisors or advisors like you that are willing to
Speaker 3: put their neck on the block, their head on the block,
Speaker 3: and publish what they're doing and what they think because
Speaker 3: you know, like me, I get called up about my
Speaker 3: previous calls. Hey, Roger, you said property was going to
Speaker 3: do X, and it's done. Why he said this, stock
Speaker 3: was going to say this and it did X. You know,
Speaker 3: we're taking risk all the time, and over thirty years
Speaker 3: for you to be able to do that consistently. You know,
Speaker 3: you have to have built up some kind of track record,
Speaker 3: so you want to find those advisors that have that
Speaker 3: track record.
Speaker 2: I have to say I hate those awards. I've nominated
Speaker 2: quite a few times ago and actually said, please take
Speaker 2: me off right, I don't like it. I just I
Speaker 2: just don't. I feel really uncomfortable.
Speaker 3: Sorry, But they're peer reviewed. Some of the better ones
Speaker 3: are peer reviewed. So your peers are saying, can I
Speaker 3: you're really good at what you do.
Speaker 1: You know.
Speaker 3: But if your peers are saying you're really good at
Speaker 3: what you do, then other people should know about that,
Speaker 3: and they should hear about that. You're doing them a
Speaker 3: disservice by not making your name known.
Speaker 1: Yeah, it's also a good starting point, it feels as though,
Speaker 1: at least because there are a lot of names out there,
Speaker 1: and at least this is a point at which to
Speaker 1: start your research because you're not necessarily going to look
Speaker 1: at that list and go, yep, I'm going with that person. Kenny,
Speaker 1: you've talked about the point that when you are investigating
Speaker 1: potential financial planners, that you should actually interview them, that
Speaker 1: they should be Yeah, you have to do that. This
Speaker 1: is the starting point that this gives you some names
Speaker 1: to work with. I asked for a recommend that I
Speaker 1: talked to my accountant because I really trust my accountant.
Speaker 1: It gives us great kind of tax advice. And I said,
Speaker 1: do you know anyone that you have worked with over
Speaker 1: a long period of time that that you would recommend.
Speaker 3: So, Michael, I like to think about frameworks. So you know,
Speaker 3: when we're talking about the younger generation, the framework is,
Speaker 3: you know, it's okay to take a few risks. They
Speaker 3: feel like big risks, but that's okay at your age
Speaker 3: as long as it doesn't destroy you emotionally. When we
Speaker 3: talked about older generations, you know, the framework was. You
Speaker 3: talked about one framework, which was making sure you've got
Speaker 3: two years a sign. Mine was the boat construction idea.
Speaker 3: You know, the framework for finding a financial planner start
Speaker 3: with an awarded list and then go and interview some
Speaker 3: of them.
Speaker 2: And I have to say, from my point of view,
Speaker 2: when I talk to other financial planners, I love hearing
Speaker 2: what other financial planners do in their personal lives.
Speaker 3: Indeed, because I am.
Speaker 2: Never going to take financial advice from a financial plan
Speaker 2: that doesn't much the beat of their own drum and
Speaker 2: follow us own wisdom.
Speaker 3: Well, they do say plumber's pipes are always leaking.
Speaker 2: Well, I didn't don't know about that because I feel
Speaker 2: like I've got my financial ducks lined up and I've
Speaker 2: always been passionate about you know about that. But you know,
Speaker 2: ask a ask a financial planet, like how do you invest?
Speaker 3: What do you do?
Speaker 2: Because they need to be the one that inspires you,
Speaker 2: motivates you, empowers you for a long period of time
Speaker 2: and for three times which are tough and challenging and
Speaker 2: you're exhausted and you just want to throw the budget
Speaker 2: out the window. You need that financial plan goes. Yeah,
Speaker 2: I get it. It's tough, it's hard, it's frustrating. There
Speaker 2: are setbacks, but hanging that keep going because I'm doing
Speaker 2: this too, and I'm going to hold your hand and
Speaker 2: you know, use the analogy of a swimming coach can't
Speaker 2: do the lapse for you, but they will walk up
Speaker 2: and down.
Speaker 3: Yeah, there are long in the morning and train.
Speaker 2: Yeah.
Speaker 3: The other thing that you know, and this has just
Speaker 3: come to me is, as you've spoken, Warren Buffett and
Speaker 3: the late Charlie Munger had a very pithy quote about
Speaker 3: seeking advice and it's worth remembering. I think they said
Speaker 3: Wall Street is and they were obviously relating to the
Speaker 3: US markets. They said, Wall Street is the only place
Speaker 3: in the world where people who drive rolls Royce's take
Speaker 3: their advice from people who catch the subway. Yeah, you know,
Speaker 3: you talked about people eating their own cooking, and it's
Speaker 3: really important that they've become successful from investing the way
Speaker 3: they're advising you to invest. You know that that's a
Speaker 3: sensible framework as well. I think that's really smart.
Speaker 2: You need someone to tell you it's going to be worth.
Speaker 3: It, because it is.
Speaker 1: Yeah, back to me, I'm sorry the listeners. Back to
Speaker 1: the older millennials, and I'm speaking on behalf of them.
Speaker 1: Where on earth do we start?
Speaker 3: Yeah? Okay, so here's here's more interesting stats. Very quickly,
Speaker 3: eighteen percent of gen X have at least one residential
Speaker 3: investment property. Only eighteen percent really yep, eighteen percent. Forty
Speaker 3: eight percent of gen X worried about running out of
Speaker 3: money during retirement, thirty percent are worried they'll never have
Speaker 3: enough savings to retire, and three quarters seventy five percent
Speaker 3: think that the high level of government debt means that
Speaker 3: the government won't be able to fund our retirement. Now
Speaker 3: I think gen X, and I'm a gen X, you're
Speaker 3: a late gen Why. I think we've swallowed a message
Speaker 3: hook line and sinker. We have been told that we
Speaker 3: have to fund our own retirement. It's a relatively new concept, right,
Speaker 3: and it all started in nineteen ninety two, right with
Speaker 3: the advent of superannuation, which was only three or four
Speaker 3: percent at the time. But we have now swallowed hook
Speaker 3: line and sinker that we're responsible for our own retirement,
Speaker 3: and the government is going yay, we're no longer responsible.
Speaker 3: We've convinced everyone they're responsible. And the problem that we're
Speaker 3: going to face, I think, and this is a big
Speaker 3: concern for me, is that for my generation and the
Speaker 3: generations that come behind me. I'm fifty three years old,
Speaker 3: so I'm in the middle, the upper end of the
Speaker 3: middle of gen X. I actually think that government debt
Speaker 3: and really mismanaging the fiscal budget. The level of debt
Speaker 3: is going to get to a point where it is
Speaker 3: so large because the population of working Australians is so
Speaker 3: much lower than the population of retired Australians, the responsibility
Speaker 3: of the government is going to be too onerous and
Speaker 3: consequently they'll dip into retirement savings, they will use superannuation
Speaker 3: as a source of long term funding, and they will
Speaker 3: prescribe that part of my SUPER has to be invested
Speaker 3: in this project that the government's going to do. And
Speaker 3: that's not legislation that exists today. But if you look
Speaker 3: at the chronology of legislative changes over time, superannuation was
Speaker 3: invented by baby boomers for baby boomers and the generations
Speaker 3: that come after them. Well, bad luck for you. This
Speaker 3: is controversial, highly controversial, highly unconventional. But I do believe
Speaker 3: that I will have to work longer before I can
Speaker 3: access my SUPER. I will not be able to access
Speaker 3: as much of it as generations before me as quickly
Speaker 3: as they have been able to. And there will be
Speaker 3: all sorts of rule changes and legislative changes that make
Speaker 3: sure that that pull of money is accessible by government
Speaker 3: and less accessible by me.
Speaker 1: And what used to fund kind of major infrastructure things
Speaker 1: that I don't know building.
Speaker 3: And you know what, you can't prove that I'm wrong
Speaker 3: right now, and I can't prove that I'm right. It
Speaker 3: will take fifteen or twenty years and will come back
Speaker 3: and review it.
Speaker 2: Then I actually agree with a lot of what you
Speaker 2: just said, and I have thought I've had the same
Speaker 2: suspicion and concern to a certain about eighty percent of
Speaker 2: what you've just said.
Speaker 3: So the consequence of that is that I don't think
Speaker 3: it's such a bad thing to have some money accumulating
Speaker 3: outside of SUPER. I know the advice for Generation X
Speaker 3: and Generation wise to maximize your contribution to SUPER, and
Speaker 3: that's fair. There's merit with the way legislation is constructed today,
Speaker 3: you should be maximizing your contribution to SUPER. But what
Speaker 3: that advice doesn't take into account is what the legislation
Speaker 3: is going to look like in fifteen or twenty years time,
Speaker 3: and how it might change. And knowing that it might change,
Speaker 3: and I believe that it could change, I think there's
Speaker 3: also merit. And this is all I'm saying. There's merit
Speaker 3: in building some assets outside of SUPER as well.
Speaker 1: It's insurance policy, indeed, because otherwise it does feel very unfair,
Speaker 1: doesn't it that you would be making long term decisions
Speaker 1: for your financial future based on what is the situation now?
Speaker 1: But I suppose there is.
Speaker 3: There is If you're the youngest gen Y today, you're
Speaker 3: not retiring for thirty five years based on current legislation.
Speaker 3: Do you think the legislation in thirty five years is
Speaker 3: going to be the same as it is today. I
Speaker 3: suspect not.
Speaker 1: Yeah, a lot cospect.
Speaker 3: Successive governments will have made some changes.
Speaker 1: So okay, So we're talking then about taking a fairly
Speaker 1: cautious of you in a way.
Speaker 3: It's a fied approach. So I want you to you know,
Speaker 3: if your gen X and gen Y, you should be
Speaker 3: definitely putting a large you know, I talk about paying yourself.
Speaker 3: I tell my kids make sure you pay yourself first.
Speaker 3: So when you buy something, you're paying Apple. You know,
Speaker 3: when you're paying Netflix, you're paying the pub owner for
Speaker 3: the beer, you're paying them. Don't pay them first, pay
Speaker 3: yourself first. And you know every age group should be
Speaker 3: doing this. You put some money aside that secures your
Speaker 3: future first, and then spend the rest. But put money
Speaker 3: aside and build your assets. And all I'm saying, Michael,
Speaker 3: is I think there's merit in maximizing super but also
Speaker 3: maximizing what's outside of super.
Speaker 1: Okay, And so to deal with one of those stats,
Speaker 1: the very very low number of people that are actually
Speaker 1: getting financial advice, it's the easiest way to kind of
Speaker 1: clear up what is what still feels to me like
Speaker 1: a bit of a gray area for these middle generations
Speaker 1: where you just there this question mark over how aggressive
Speaker 1: should I be investing, how much risk should I be
Speaker 1: taking on at the moment when I'm kind of in
Speaker 1: this in the middle. But I'm not your guys, it's
Speaker 1: likely you've.
Speaker 3: Got a mortgage. You know, a third of households in
Speaker 3: Australia have a mortgage, a third don't, a third own
Speaker 3: their property, and a third don't own a property and
Speaker 3: don't have a mortgage. The majority of that third that
Speaker 3: have a mortgage are in the two generations you're talking about. Sorry,
Speaker 3: I interrupted, You.
Speaker 1: Know, you're absolutely right, And there was there was some
Speaker 1: data to back that up in the last couple of
Speaker 1: weeks that just showed just how big the mortgages are,
Speaker 1: particularly in that in the older millennial age range, that
Speaker 1: this is the this is the generation that is most
Speaker 1: weighed down by kind of mortgage debt as a percentage
Speaker 1: of income, et cetera.
Speaker 3: And part of the reason is because we had children
Speaker 3: later than our parents. You know, if you've got a
Speaker 3: baby boom a parent they had they had you in
Speaker 3: their twenties. You know, they were in their early twenties
Speaker 3: to mid twenties. I was born to a twenty two
Speaker 3: year old mum, and you know that's that's just not
Speaker 3: considered generally.
Speaker 2: Now.
Speaker 3: You know, people are having kids in their thirties now,
Speaker 3: and because they've had kids later, they're setting up their
Speaker 3: families later, they're getting mortgage starting their mortgages later. So
Speaker 3: they're going to be carrying those mortgages potentially into their retirement.
Speaker 3: And that's a very different prospect to the generations that
Speaker 3: came before them. So managing managing your assets, and managing
Speaker 3: your wealth has to be finally tuned, much more finely
Speaker 3: chuned than generations that came before us. Can I just
Speaker 3: say this about mortgages. One thing about mortgages. If your
Speaker 3: interest rate is say seven percent, and you're on the
Speaker 3: highest tax bracket, then your pre tax dollars that you
Speaker 3: have to your pre tax return, the pretax equivalent return
Speaker 3: that you need is circle twelve to thirteen percent. So
Speaker 3: unless you know of an investment there's going to get
Speaker 3: you a better than thirteen percent return, you should pay
Speaker 3: the mortgage off. Oh wow, right, because your pre tax
Speaker 3: return is so high that is a guaranteed return. By
Speaker 3: the way, no other returns are guaranteed. Paying off your
Speaker 3: mortgage guarantees you, if you're on the highest tax break
Speaker 3: a twelve to thirteen percent return on your money by
Speaker 3: paying off that mortgage. If it's a seven percent interest rate,
Speaker 3: so you should be paying off the mortgage. Get that done.
Speaker 3: That's a guaranteed return.
Speaker 2: Non deductible debt. That's what I say. And then you
Speaker 2: can if you wanted to factor in a recycling strategy.
Speaker 3: Okay, well you can talk about that. I don't even
Speaker 3: heard of that.
Speaker 2: Oh well, we need to chat. But so in essence,
Speaker 2: what you're saying is because of the longevity issue, because
Speaker 2: of the potential risk of legislative changes to superannuation, because
Speaker 2: of medical technology and the way we're running our lives
Speaker 2: later and that having children takeing out a mortgage later
Speaker 2: in life, we really need to invest, as you say,
Speaker 2: with a focus on the long run, regardless of what
Speaker 2: generation we technically belong to. And obviously we need to
Speaker 2: take into consideration our individual needs. You know what our
Speaker 2: value system is and what where we sit with risk
Speaker 2: and how comfortable do you feel. But but the end
Speaker 2: of the big picture is is we need to be
Speaker 2: investing for the long m when it comes to picking
Speaker 2: our underlying.
Speaker 3: Yes, there's some you know this episode that we're recording today,
Speaker 3: you know, we're not going to get into the steps
Speaker 3: for building a property portfolio or the steps to building
Speaker 3: a share portfolio. You know, building up your equity is
Speaker 3: the property prices rise and reducing your debt. But you
Speaker 3: know that's we haven't got time for doing all of that.
Speaker 3: But what I will say is, you know, the one
Speaker 3: bit of advice that I saw on reels on Instagram
Speaker 3: reels that did make sense was early in a mortgage,
Speaker 3: if you can make big lump some payments. You know,
Speaker 3: if you come into extra money, you can knock off
Speaker 3: more than the minimum that is going to shorten that
Speaker 3: is going to shorten that mortgage. That's going to bring
Speaker 3: down your debt much faster. And as property prices increase,
Speaker 3: that allows you and unpresum that's what you meant by
Speaker 3: debt recycling, that allows you to reborrow and then buy
Speaker 3: other growth assets.
Speaker 2: Absolutely.
Speaker 1: Okay, So really we're talking some of the key principles
Speaker 1: here for these generations are diversification. It is about being
Speaker 1: mindful of your superannuation and acknowledging that that is still
Speaker 1: an enormous kind of asset and the important of making
Speaker 1: the most of that and getting some advice if you
Speaker 1: need to in terms of kind of how to make
Speaker 1: the most of that, but also consider building your wealth
Speaker 1: outside of superannuations.
Speaker 3: And if we can take one step before that, or
Speaker 3: take into consideration a step before that, and that is
Speaker 3: sit down and work out what you know, what are
Speaker 3: you good at, stick to what you're good at, and
Speaker 3: if you need to invest in asset classes that you
Speaker 3: don't know much about or you don't aren't good at,
Speaker 3: then you are one of the ninety three percent of
Speaker 3: gen X that isn't getting advice, and you should go
Speaker 3: and get some advice. So, for example, you might sit
Speaker 3: down and you say, you know what, I really like
Speaker 3: the idea of building a property portfolio. You know, I'm
Speaker 3: going to be indifferent to the asset class today, or
Speaker 3: I really really like the idea of building a shit portfolio. Okay,
Speaker 3: we'll start your journey there. Get to know more about that,
Speaker 3: or find out find an advisor who's going to be
Speaker 3: able to help you with that that specific asset class
Speaker 3: that you're passionate about, but don't go into it boots
Speaker 3: and all into an asset class that you don't know
Speaker 3: anything about.
Speaker 1: Can we bring it full circle because we have run
Speaker 1: out of time here and just go are there any
Speaker 1: a couple of key lessons that younger investors can learn
Speaker 1: from the older generations? What are some of the mistakes
Speaker 1: that you have seen made by investors in the past
Speaker 1: that then you touched on this earlier, But I think
Speaker 1: it's just such a great way to kind of look
Speaker 1: at it and go that when you made the point
Speaker 1: about how people have lost billions and billions of dollars,
Speaker 1: we need to learn from some of these mistakes that
Speaker 1: have been made.
Speaker 3: Sure, I think I think your best opportunity for creating
Speaker 3: wealth is to start a business. That number one. So
Speaker 3: if you've got any not everyone has the predilection for entrepreneurialism,
Speaker 3: and if you don't, that's OK. But just be mindful
Speaker 3: your greatest opportunity comes from starting a business. If you
Speaker 3: don't want to start a business, then you need to
Speaker 3: learn about investing and you need to start early. In
Speaker 3: both cases, the best advice I can give is start soon.
Speaker 3: Think of a snowball and think of a really long
Speaker 3: ski hill, you know, and just think about how that
Speaker 3: snowball hypothetically builds up as it rolls down. There was
Speaker 3: a book written about Warren Buffett, one of the most
Speaker 3: famous books about Warren Buffett, and it's called Snowball, and
Speaker 3: the idea, you know, the metaphor is the snowball rolling
Speaker 3: down the hill and accumulating wealth the longer it runs.
Speaker 3: So start your snowball early, and because you've got a
Speaker 3: really long runway, it's going to be a very big
Speaker 3: snowball at the end. The other piece of advice that
Speaker 3: I would give, and I think this is really important.
Speaker 3: When you're young, you don't think long term. You can't
Speaker 3: think long term because you haven't been around long term.
Speaker 3: One of the things that helped me was having children.
Speaker 3: Was really interesting. When I had my first son, I
Speaker 3: was twenty twenty eight or twenty nine, and he gave
Speaker 3: me perspective because I realized, my gosh, one day, this little, tiny,
Speaker 3: gorgeous ball of flesh and blood and skin, he is
Speaker 3: going to be twenty one. He's now twenty three, you know,
Speaker 3: And that time went in a flash and it gave
Speaker 3: me perspective. And I think when you're young, you don't
Speaker 3: have that perspective. You don't think you're ever going to
Speaker 3: be old. Trust me, you will, and so start early.
Speaker 3: You know, invest for the future. You might not think
Speaker 3: it's relevant today, but get started because it'll come whether
Speaker 3: you like it or not.
Speaker 1: Roger, there are so many individual kind of nuggets that
Speaker 1: you have shared with us today. It's probably one of
Speaker 1: those podcasts that will have to go back and listen
Speaker 1: to kind of two or three times in order to
Speaker 1: fully absorb it. Thank you so much for coming in today.
Speaker 3: Always a pleasure. I wish we could talk for longer.
Speaker 2: There's so much more I know, there's a lot, even
Speaker 2: more to unpack. The deeper we'd keep digging, the more
Speaker 2: we find.
Speaker 1: That was Roger Montgomery, founder and chief investment officer at
Speaker 1: Montgomery Investment Management, a supporter of this podcast. Visit mont
Speaker 1: invest dot com for more information, or you can sign
Speaker 1: up for Roger's insights at Roger Montgomery dot com and
Speaker 1: don't forget to pick up a copy of his book
Speaker 1: as well. Value Able canor I know that that has
Speaker 1: become very popular in your house.
Speaker 2: My three year old takes and well I am not
Speaker 2: allowed to take it back from her. She screams Blue murder.
Speaker 3: She sounds like she's a savant. If she's reading that
Speaker 3: book at three it.
Speaker 2: Is upside down.
Speaker 3: That's she loves it.
Speaker 1: That is quite incredible. All right, Kenna, How do we
Speaker 1: find you if we want more information?
Speaker 2: Best place to get in contact with me is on
Speaker 2: Instagram at Trugu Mama.
Speaker 1: Tv and you can hear me every day with Sean
Speaker 1: Aylmer on Fear and Greed, Australia's best business podcast. Thank
Speaker 1: you very much for listening to How Today. Afford that
Speaker 1: remember to hit follow on the podcast and the very
Speaker 1: best thing that you can do is tell somebody else
Speaker 1: or Betty yet send them this episode and they can
Speaker 1: also benefit from all of the wisdom that we've had today.
Speaker 1: Thank you very much for your company. Join us again
Speaker 1: next week.
Speaker 3: I