1 00:00:10,039 --> 00:00:13,119 Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. 2 00:00:13,160 --> 00:00:15,400 Speaker 2: I'm James Kirby. Welcome aboard everybody. 3 00:00:15,920 --> 00:00:19,080 Speaker 1: I want to take you on a slightly different path today, 4 00:00:19,160 --> 00:00:21,320 Speaker 1: and that is I actually want to have a discussion, 5 00:00:21,360 --> 00:00:25,440 Speaker 1: free wheeling discussion, you might say, with someone who's thinking 6 00:00:25,560 --> 00:00:27,480 Speaker 1: on investment issues. 7 00:00:27,680 --> 00:00:28,600 Speaker 2: Is very important. 8 00:00:28,880 --> 00:00:31,920 Speaker 1: Firstly because she is important, right she's the chief investment 9 00:00:31,920 --> 00:00:35,040 Speaker 1: officer a DMP with one hundred and eighteen billion dollars 10 00:00:35,320 --> 00:00:40,120 Speaker 1: under management there. But more importantly she has a message 11 00:00:40,159 --> 00:00:44,360 Speaker 1: I think which is crucial to everybody, absolutely every single 12 00:00:44,479 --> 00:00:48,360 Speaker 1: listener on the show. Just to put this into perspective, 13 00:00:48,479 --> 00:00:52,760 Speaker 1: it's going to talk about the changing nature of investment 14 00:00:53,479 --> 00:00:56,600 Speaker 1: principles and the sort of lines have inquired that we've 15 00:00:56,600 --> 00:00:59,120 Speaker 1: been believing if you like for a long time, I'll 16 00:00:59,120 --> 00:01:01,400 Speaker 1: give you an exam, but that I probably know this 17 00:01:01,600 --> 00:01:04,839 Speaker 1: rule of one hundred, which is basically where you say 18 00:01:05,040 --> 00:01:07,520 Speaker 1: how do I invest in? You subtract your age from 19 00:01:07,560 --> 00:01:10,160 Speaker 1: one hundred. Right, So for instance, if you're fifty, you 20 00:01:10,200 --> 00:01:13,160 Speaker 1: have fifty percent in fixed in investments and you have 21 00:01:13,200 --> 00:01:16,800 Speaker 1: fifty percent in growth investments, and as you get older 22 00:01:16,840 --> 00:01:19,319 Speaker 1: you have more and more fixed investments. Makes a lot 23 00:01:19,319 --> 00:01:22,800 Speaker 1: of sense. The thing is, those rules were invented when 24 00:01:22,800 --> 00:01:25,640 Speaker 1: people used to retire at sixty five and live for 25 00:01:25,680 --> 00:01:29,920 Speaker 1: about three years. That's really changed more commonly, perhaps if 26 00:01:29,959 --> 00:01:33,360 Speaker 1: you're in a big fund, you sit there one day 27 00:01:33,360 --> 00:01:35,080 Speaker 1: and you tick off the boxes. What are you a 28 00:01:35,160 --> 00:01:39,399 Speaker 1: conservative or balanced or growth? And then something happens and 29 00:01:39,440 --> 00:01:41,479 Speaker 1: you change your mind. I'm thinking of last year when 30 00:01:41,480 --> 00:01:44,000 Speaker 1: there was that big sell off last year in April, 31 00:01:44,240 --> 00:01:48,640 Speaker 1: and I couldn't believe the people, the nature of the 32 00:01:48,680 --> 00:01:50,120 Speaker 1: people who came up to me and said, should I 33 00:01:50,200 --> 00:01:52,240 Speaker 1: go to cash? I couldn't believe that people would even 34 00:01:52,320 --> 00:01:55,680 Speaker 1: think of that of doing that. More commonly people would say, look, 35 00:01:55,760 --> 00:01:59,880 Speaker 1: I'm whatever, I'm fifty five or I'm fifty seven. I 36 00:02:00,120 --> 00:02:05,280 Speaker 1: mean a balance fund, should I go conservative? So ann 37 00:02:05,640 --> 00:02:08,600 Speaker 1: Anna Shelley is the chief investment officer at AMP, and 38 00:02:08,639 --> 00:02:10,080 Speaker 1: she has some things to say about that. 39 00:02:10,120 --> 00:02:11,800 Speaker 2: How are you, Anna, And thank you very much for 40 00:02:11,840 --> 00:02:12,520 Speaker 2: coming on the show. 41 00:02:13,320 --> 00:02:15,600 Speaker 3: Oh I'm very well, Thank you, James, and glad to 42 00:02:15,639 --> 00:02:16,840 Speaker 3: be here. Thank you for having me. 43 00:02:17,880 --> 00:02:20,160 Speaker 1: Look, why don't we just actually talk about how this 44 00:02:20,320 --> 00:02:22,960 Speaker 1: came to pass Once upon a time, and I mean, 45 00:02:23,000 --> 00:02:26,679 Speaker 1: I think the famous the US financial advisor sort of 46 00:02:26,800 --> 00:02:28,960 Speaker 1: guru of advisors who invented this rule. 47 00:02:28,760 --> 00:02:30,720 Speaker 2: Of one hundred. It's common all around the world. 48 00:02:30,760 --> 00:02:34,000 Speaker 1: I remember it's common all around the world, and that 49 00:02:34,040 --> 00:02:37,000 Speaker 1: I've worked around the world and it has It was 50 00:02:37,080 --> 00:02:41,360 Speaker 1: common in everywhere I worked. This broad notion that you 51 00:02:41,400 --> 00:02:45,359 Speaker 1: should you know, your age should reflect how you invest. 52 00:02:45,960 --> 00:02:50,520 Speaker 1: And basically you have your age in income. So if 53 00:02:50,639 --> 00:02:54,240 Speaker 1: you're if you're forty four, you have forty four percent income, 54 00:02:54,360 --> 00:02:55,959 Speaker 1: you know you have sixty six percent growth. 55 00:02:55,960 --> 00:02:57,080 Speaker 2: It made a lot of sense. 56 00:02:58,720 --> 00:03:02,520 Speaker 1: How did that come about and what made you start 57 00:03:02,600 --> 00:03:03,680 Speaker 1: to question it? 58 00:03:05,080 --> 00:03:07,880 Speaker 3: Yeah, well, I think you know, firstly, the markets love 59 00:03:08,040 --> 00:03:10,639 Speaker 3: a rule of thumb. Everybody loves the way of making 60 00:03:10,680 --> 00:03:14,720 Speaker 3: things easier for investment, and it was a pretty good meature. 61 00:03:14,720 --> 00:03:17,519 Speaker 3: I mean, as you say, people did used to retire younger, 62 00:03:17,600 --> 00:03:20,320 Speaker 3: you know, maybe around sixty, sometimes even younger than that 63 00:03:20,480 --> 00:03:25,120 Speaker 3: in hard labor industries, and then they tended not to 64 00:03:25,160 --> 00:03:28,600 Speaker 3: have a very big life expectancy after that. So I 65 00:03:28,639 --> 00:03:32,520 Speaker 3: think when you know, when Australian super annuation verse came 66 00:03:32,560 --> 00:03:36,880 Speaker 3: into being and then grew so substantially with the increase 67 00:03:36,920 --> 00:03:42,119 Speaker 3: in contributions into superannuation in Australia, we started seeing funds, 68 00:03:42,400 --> 00:03:45,840 Speaker 3: you know, investing in that sixty percent growth asset sixty 69 00:03:45,920 --> 00:03:49,840 Speaker 3: forty style. Gradually moved though up to seventy thirty, which 70 00:03:50,280 --> 00:03:53,360 Speaker 3: became more common, and then in recent years you've seen 71 00:03:53,640 --> 00:03:58,240 Speaker 3: quite a shift actually, as many funds have either adopted 72 00:03:58,320 --> 00:04:02,120 Speaker 3: a life cycle or a life stage strategy, which is 73 00:04:02,160 --> 00:04:05,440 Speaker 3: where for members who don't make a choice, or don't 74 00:04:05,520 --> 00:04:08,480 Speaker 3: want to make a choice, or don't feel like they 75 00:04:08,760 --> 00:04:11,920 Speaker 3: have the information or knowledge themselves to make a choice, 76 00:04:12,120 --> 00:04:15,040 Speaker 3: they end up in a default strategy that uses their 77 00:04:15,120 --> 00:04:18,880 Speaker 3: age to start with really high growth assets almost one 78 00:04:18,960 --> 00:04:22,839 Speaker 3: hundred percent when they're young, and then gradually decline them 79 00:04:22,920 --> 00:04:26,719 Speaker 3: down to lower growth assets. And it used to be 80 00:04:27,200 --> 00:04:30,560 Speaker 3: that the lower growth assets at around retirement age was 81 00:04:30,600 --> 00:04:33,600 Speaker 3: about the fifty percent mark. But what we've seen in 82 00:04:33,680 --> 00:04:38,120 Speaker 3: recent years is that most superannuation funds that have this 83 00:04:38,320 --> 00:04:41,839 Speaker 3: style of investing, and AMP is one of them, have 84 00:04:42,120 --> 00:04:46,280 Speaker 3: lifted that glide path. They've lifted the growth asset waiting 85 00:04:46,920 --> 00:04:50,479 Speaker 3: across the spectrum across all ages, but also that they've 86 00:04:50,640 --> 00:04:54,240 Speaker 3: let that decline happen at a later stage in life. 87 00:04:54,360 --> 00:04:57,800 Speaker 3: So instead of having people decline potentially whilst they were 88 00:04:57,800 --> 00:05:01,719 Speaker 3: still in their forties. That pushed that so that young people, 89 00:05:01,960 --> 00:05:05,039 Speaker 3: really young people were all the way up to fifty 90 00:05:05,120 --> 00:05:07,920 Speaker 3: years of age, sometimes all the way through to sixty 91 00:05:08,000 --> 00:05:11,039 Speaker 3: sixty five years of age. And that's what. 92 00:05:11,200 --> 00:05:14,520 Speaker 1: Would you explain to the listeners to be careful always, 93 00:05:14,600 --> 00:05:19,720 Speaker 1: you know, just that everyone captures the concepts we're putting forward. 94 00:05:20,120 --> 00:05:22,159 Speaker 2: Give me, say you have a glide paths. What's it 95 00:05:22,200 --> 00:05:22,640 Speaker 2: all about? 96 00:05:23,839 --> 00:05:26,960 Speaker 3: Yeah, So basically that's sort of taking your age as 97 00:05:27,000 --> 00:05:31,000 Speaker 3: a barometer for when you might retire. So that might 98 00:05:31,040 --> 00:05:34,520 Speaker 3: be mean that you're retiring around say sixty five. And 99 00:05:34,560 --> 00:05:37,960 Speaker 3: then what it does is it uses that as a 100 00:05:38,080 --> 00:05:41,080 Speaker 3: projection then of not only the age at which you're 101 00:05:41,080 --> 00:05:43,279 Speaker 3: going to retire, but then also how long you're going 102 00:05:43,320 --> 00:05:46,440 Speaker 3: to live for past retirement, and so how long your 103 00:05:46,480 --> 00:05:50,520 Speaker 3: balance needs to work and needs to grow to sustain 104 00:05:50,560 --> 00:05:52,400 Speaker 3: itself over your full lifetime. 105 00:05:52,640 --> 00:05:56,080 Speaker 1: Yes, my dad retired at sixty and he thought this 106 00:05:56,279 --> 00:05:59,200 Speaker 1: was wonderfully, you know, to him, this was an achievement 107 00:06:00,040 --> 00:06:02,520 Speaker 1: that he could do. So he didn't know that he 108 00:06:02,560 --> 00:06:09,000 Speaker 1: was going to live to ninety right, thirty years solid, 109 00:06:09,880 --> 00:06:11,960 Speaker 1: and he didn't really think about it very deeply. He 110 00:06:11,960 --> 00:06:17,560 Speaker 1: didn't think about inflation, so I'm aware of the risks 111 00:06:18,240 --> 00:06:21,160 Speaker 1: when you have a kind of a conventional retirement plan. 112 00:06:21,640 --> 00:06:24,560 Speaker 1: So more recently, I'm looking at a quote from you here, 113 00:06:24,560 --> 00:06:27,320 Speaker 1: and basically you're saying that sixty five year olds should 114 00:06:27,320 --> 00:06:31,040 Speaker 1: have growth assets closer to seventy percent these days. Now, 115 00:06:31,080 --> 00:06:33,599 Speaker 1: that to me is a knockout, right, because, for instance, 116 00:06:33,640 --> 00:06:36,000 Speaker 1: if you were a self managed super fund, I wouldn't 117 00:06:36,040 --> 00:06:38,960 Speaker 1: think many people at sixty five have seventy percent growth asset. 118 00:06:39,040 --> 00:06:42,279 Speaker 1: Do you think a large portion of the investing population 119 00:06:42,800 --> 00:06:45,760 Speaker 1: have yet to catch up with the thinking that people 120 00:06:45,839 --> 00:06:48,120 Speaker 1: like you in your position have. 121 00:06:49,240 --> 00:06:52,080 Speaker 3: Yes, I think so. So. I think because we do 122 00:06:52,120 --> 00:06:55,440 Speaker 3: all the actuarial modeling and all that, there's a whole 123 00:06:55,520 --> 00:06:59,880 Speaker 3: hYP of mathematical modeling behind the structure of our option, 124 00:07:00,200 --> 00:07:04,280 Speaker 3: and particularly behind that glide path or you know how 125 00:07:04,440 --> 00:07:07,719 Speaker 3: much the waiting to your growth assets reduces and at 126 00:07:07,760 --> 00:07:10,640 Speaker 3: what age, So the whole heap of modeling behind that. 127 00:07:11,520 --> 00:07:14,840 Speaker 3: Nearly all the super funds similar sorts of modeling, and 128 00:07:15,280 --> 00:07:17,920 Speaker 3: many of them have come to the same sorts of conclusions. 129 00:07:18,000 --> 00:07:22,520 Speaker 3: So there's a fair alignment across the industry that because 130 00:07:22,600 --> 00:07:27,160 Speaker 3: of things like longer life expectancies, but also the higher 131 00:07:27,160 --> 00:07:33,040 Speaker 3: cost of living probably higher ongoing inflation at least for 132 00:07:33,080 --> 00:07:35,800 Speaker 3: the next few years, but potentially even longer than that. 133 00:07:36,760 --> 00:07:40,440 Speaker 3: These factors mean that you're going to need more growth 134 00:07:40,520 --> 00:07:44,040 Speaker 3: assets in what is now a twenty thirty year in 135 00:07:44,080 --> 00:07:47,040 Speaker 3: the case of your father, you know, period of retirement 136 00:07:47,120 --> 00:07:50,200 Speaker 3: that itself is a really long time, like for many 137 00:07:50,240 --> 00:07:54,560 Speaker 3: people that's as long as they're working lifetime. So it's 138 00:07:54,760 --> 00:07:59,080 Speaker 3: really important then that that we're not too conservative at 139 00:07:59,080 --> 00:08:01,880 Speaker 3: that age of a time, because we still need our 140 00:08:02,040 --> 00:08:06,240 Speaker 3: balances to grow through our retirement. We don't want them 141 00:08:06,280 --> 00:08:09,880 Speaker 3: static or they will start to be eroded away by 142 00:08:09,920 --> 00:08:14,280 Speaker 3: inflation the cost of living and will start to see 143 00:08:14,400 --> 00:08:17,640 Speaker 3: I will have in fact a higher risk of running 144 00:08:17,640 --> 00:08:21,720 Speaker 3: out of money because ironically we've got a lower risk too, 145 00:08:21,760 --> 00:08:25,440 Speaker 3: lower risk in our investment assets at retirement age. 146 00:08:26,320 --> 00:08:30,440 Speaker 1: So do you think then a lot of people in Australia, 147 00:08:30,520 --> 00:08:36,360 Speaker 1: regardless again of their choice of retirement format SMSF, big 148 00:08:36,400 --> 00:08:41,280 Speaker 1: super fund, reach A super fund, may have ticked the 149 00:08:41,280 --> 00:08:46,120 Speaker 1: wrong box when they were choosing between conservative and balanced 150 00:08:46,480 --> 00:08:47,400 Speaker 1: and other options. 151 00:08:48,160 --> 00:08:52,000 Speaker 3: Yeah, potentially, I mean we do in speaking to financial advisors, 152 00:08:52,000 --> 00:08:54,720 Speaker 3: we do find there's still a lot of advisors who 153 00:08:54,880 --> 00:08:59,280 Speaker 3: downweigh their client's growth assets to say fifty percent, you know, 154 00:08:59,320 --> 00:09:04,120 Speaker 3: as early as the early fifties in age, and we 155 00:09:04,200 --> 00:09:07,280 Speaker 3: think that's very young if someone's life expectancy is into 156 00:09:07,320 --> 00:09:10,640 Speaker 3: the late eighties. So we do see that. I think 157 00:09:10,679 --> 00:09:14,320 Speaker 3: the other one is that there is some statistics from 158 00:09:14,679 --> 00:09:18,040 Speaker 3: OPRA that showed that for those investors who are over 159 00:09:18,320 --> 00:09:22,120 Speaker 3: seventy years of age, that they had a growth allocation 160 00:09:22,280 --> 00:09:25,480 Speaker 3: back in about twenty fourteen of about twenty eight percent 161 00:09:25,840 --> 00:09:30,440 Speaker 3: only so really very conservatively invested. That has gone up 162 00:09:30,440 --> 00:09:34,760 Speaker 3: to about forty two percent today. But that's still quite 163 00:09:34,880 --> 00:09:38,840 Speaker 3: conservative now. Obviously depends, you know, it depends how healthy 164 00:09:38,880 --> 00:09:40,000 Speaker 3: you are as well as. 165 00:09:39,880 --> 00:09:45,320 Speaker 1: Of course, and we are talking averages thoughts. Okay, talking averages. Yeah, 166 00:09:45,360 --> 00:09:48,440 Speaker 1: And to be fair to Anna and all in her area, 167 00:09:48,600 --> 00:09:51,160 Speaker 1: we must keep that in mind, right this is these 168 00:09:51,160 --> 00:09:55,000 Speaker 1: are broad observations. Yeah, okay, I want to stress test this. 169 00:09:55,120 --> 00:09:55,400 Speaker 2: Anna. 170 00:09:55,440 --> 00:09:56,960 Speaker 1: We'll take a short break and we'll be back in 171 00:09:57,000 --> 00:10:08,160 Speaker 1: a moment. Hello, and welcome back to The Australian's Money 172 00:10:08,160 --> 00:10:11,319 Speaker 1: Puzzle podcast. I'm with Anna Shelley, the Chief Investment Officer 173 00:10:11,360 --> 00:10:15,720 Speaker 1: of AMP, who is putting forward, folks to my mind, 174 00:10:16,120 --> 00:10:22,080 Speaker 1: I will certainly not say radical, but fresh and important 175 00:10:22,200 --> 00:10:26,480 Speaker 1: observations about how you should do you should invest And 176 00:10:26,520 --> 00:10:29,240 Speaker 1: this is the kernel of investing because we know that 177 00:10:29,360 --> 00:10:33,079 Speaker 1: asset allocation is the primary determinant of you, of your 178 00:10:33,120 --> 00:10:36,080 Speaker 1: investment outcomes or your retirement outcomes. So the choices you 179 00:10:36,160 --> 00:10:39,440 Speaker 1: make be the formal choices inside the big fund of 180 00:10:39,920 --> 00:10:42,640 Speaker 1: balance to a conservative for growth, or the choices you 181 00:10:42,640 --> 00:10:46,200 Speaker 1: make and running in a salesman super fund. Are they are? 182 00:10:46,000 --> 00:10:48,280 Speaker 1: They are the key determinant and how well you're going 183 00:10:48,320 --> 00:10:50,880 Speaker 1: to do. And the thing I want to put to 184 00:10:50,960 --> 00:10:54,920 Speaker 1: you is that you're in a position where you have 185 00:10:55,120 --> 00:10:58,200 Speaker 1: a strong academic background, you have a strong experience in this, 186 00:10:58,280 --> 00:11:03,160 Speaker 1: and so of many other people. And it's one thing 187 00:11:03,280 --> 00:11:06,200 Speaker 1: to say this, it's another thing to do it, isn't it. 188 00:11:06,240 --> 00:11:09,000 Speaker 1: I mean, how do you deal with the issue that 189 00:11:09,120 --> 00:11:13,400 Speaker 1: as people get older, they become more conservative and it 190 00:11:13,520 --> 00:11:18,440 Speaker 1: is scarier if you are thirty five and someone says, hey, listen, 191 00:11:18,480 --> 00:11:21,240 Speaker 1: you haven't enough in growth at all. You need to 192 00:11:21,320 --> 00:11:24,120 Speaker 1: restructure things, and you need to expose yourself more to 193 00:11:24,160 --> 00:11:26,480 Speaker 1: the share market to get those strong returns, and you 194 00:11:26,559 --> 00:11:29,080 Speaker 1: need to cool off on the stuff that's given you 195 00:11:29,520 --> 00:11:34,800 Speaker 1: a fixed return. That's one thing. But if you're you know, 196 00:11:34,920 --> 00:11:38,320 Speaker 1: let's say someone's still struggling, maybe they still have a 197 00:11:38,360 --> 00:11:41,920 Speaker 1: mortgage or one more kid in school. Retirement isn't that 198 00:11:42,000 --> 00:11:44,000 Speaker 1: far away, and they may not be able to control 199 00:11:44,080 --> 00:11:46,280 Speaker 1: the day they retire. I mean, something might happen and 200 00:11:46,360 --> 00:11:48,520 Speaker 1: the company might just say, hey, listen, you know sorry, 201 00:11:48,640 --> 00:11:51,319 Speaker 1: you know, they might never get such a good job again. 202 00:11:51,800 --> 00:11:55,640 Speaker 1: In that context, it can be very emotionally difficult to imagine 203 00:11:55,640 --> 00:11:58,560 Speaker 1: to put yourself at risk because that is what is 204 00:11:59,160 --> 00:12:01,440 Speaker 1: that is what you are asking people to do. 205 00:12:02,520 --> 00:12:07,640 Speaker 3: Yes, So look, behavioral risk is it's very real, right, 206 00:12:07,720 --> 00:12:09,280 Speaker 3: and we did talk about the fact that there are 207 00:12:09,400 --> 00:12:13,120 Speaker 3: individual circumstances where people just may not be able to 208 00:12:13,120 --> 00:12:16,080 Speaker 3: tolerate that risk. It might be stressful to them. So 209 00:12:16,280 --> 00:12:19,120 Speaker 3: you do have to manage your own self. But there 210 00:12:19,120 --> 00:12:22,439 Speaker 3: are some techniques that can help. So a common thing 211 00:12:22,559 --> 00:12:27,440 Speaker 3: that many advisors do is that they segment away some 212 00:12:27,559 --> 00:12:30,240 Speaker 3: of the savings and it could be say two years 213 00:12:30,240 --> 00:12:32,199 Speaker 3: of spending for examt. 214 00:12:32,120 --> 00:12:34,400 Speaker 2: The book is that the book of strategy sort of. 215 00:12:34,880 --> 00:12:38,760 Speaker 3: The bucket strategy exactly exactly. So if you've got twos 216 00:12:38,760 --> 00:12:42,680 Speaker 3: of spending, sometimes that can help you not to folk 217 00:12:42,800 --> 00:12:45,040 Speaker 3: not to focus as much on the rest of your 218 00:12:45,080 --> 00:12:48,400 Speaker 3: long term savings. And when the market has a crash 219 00:12:48,480 --> 00:12:50,480 Speaker 3: or a wobble, as it always does, and we're in 220 00:12:50,520 --> 00:12:54,439 Speaker 3: the media and commentators, we're always worried and scared and pesitistic, 221 00:12:54,559 --> 00:12:55,680 Speaker 3: and you know there's a lot of it. 222 00:12:55,760 --> 00:12:56,480 Speaker 2: We are the noise. 223 00:12:57,360 --> 00:13:01,480 Speaker 3: Yes, yes, there's you know, the headlines. They can be 224 00:13:01,600 --> 00:13:05,040 Speaker 3: very scary. But if you have this bucket, we know, okay, 225 00:13:05,320 --> 00:13:08,520 Speaker 3: I have for sure two years of spending in this bucket, 226 00:13:09,080 --> 00:13:11,720 Speaker 3: and then you it might help you then to not 227 00:13:11,880 --> 00:13:14,679 Speaker 3: focus as much on the day to day movements in 228 00:13:14,720 --> 00:13:17,080 Speaker 3: the rest of your long term bucket. So there are 229 00:13:17,080 --> 00:13:20,600 Speaker 3: some strategies like that I think too. You should always 230 00:13:20,600 --> 00:13:23,240 Speaker 3: remember that in Australia, because of the way the age 231 00:13:23,320 --> 00:13:27,400 Speaker 3: pension works, it really acts like insurance for you. It's 232 00:13:27,440 --> 00:13:31,200 Speaker 3: an income for so that's another factor sort of to 233 00:13:31,240 --> 00:13:33,240 Speaker 3: have in the back of the mind. You know, even 234 00:13:33,280 --> 00:13:35,679 Speaker 3: if my investments are going up and down and I'm 235 00:13:35,720 --> 00:13:39,360 Speaker 3: feeling nervous, I've got this, I've got this backup plan, 236 00:13:39,400 --> 00:13:42,160 Speaker 3: which is the age pension. I've got my two years 237 00:13:42,160 --> 00:13:44,679 Speaker 3: of spending and try not to focus on the ups 238 00:13:44,720 --> 00:13:47,680 Speaker 3: and down. So those things can help, but that you 239 00:13:47,679 --> 00:13:50,880 Speaker 3: know there will always be circumstances perhaps where multiple things 240 00:13:50,960 --> 00:13:54,680 Speaker 3: happen at once, whether it's ill, health, job loss, other 241 00:13:54,760 --> 00:13:58,760 Speaker 3: pressures may be too much and the investor may just 242 00:13:58,920 --> 00:14:01,840 Speaker 3: need to deread and have something that they can be 243 00:14:01,920 --> 00:14:02,720 Speaker 3: comfortable with. 244 00:14:03,760 --> 00:14:08,080 Speaker 1: Can I ask you specifically about with big funds, institutional funds? 245 00:14:09,280 --> 00:14:10,280 Speaker 2: How would you do that? 246 00:14:10,360 --> 00:14:13,000 Speaker 1: If you're asked to make a choice the day you 247 00:14:13,080 --> 00:14:17,160 Speaker 1: sign up with AMP or Stanian super or whoever. If 248 00:14:17,200 --> 00:14:23,240 Speaker 1: you're asked to make these choices between conservative, balanced and growth, then, 249 00:14:23,960 --> 00:14:26,680 Speaker 1: by the way, we should say we are broadly saying 250 00:14:26,760 --> 00:14:28,920 Speaker 1: keep away from conservative for longer? 251 00:14:29,080 --> 00:14:32,400 Speaker 2: Are really as a choice? Okay? Making those choices? 252 00:14:32,480 --> 00:14:35,880 Speaker 1: How do you incorporate the boocket strategy into making that choice? 253 00:14:35,920 --> 00:14:39,240 Speaker 1: Because if you hit because you don't mean because you 254 00:14:39,280 --> 00:14:41,960 Speaker 1: need cash for that strategy, how do you do that 255 00:14:42,000 --> 00:14:44,560 Speaker 1: in a big super fund between the limited menu that 256 00:14:44,600 --> 00:14:45,120 Speaker 1: it offers. 257 00:14:45,880 --> 00:14:48,960 Speaker 3: Yeah, So what I would say is, firstly, when you're young, 258 00:14:49,160 --> 00:14:51,960 Speaker 3: you don't need to have anything complex, right, you just 259 00:14:52,000 --> 00:14:53,800 Speaker 3: try as much as possible to be in as high 260 00:14:53,840 --> 00:14:56,840 Speaker 3: growth as possible, and potentially when you get within five 261 00:14:56,920 --> 00:14:58,920 Speaker 3: years of retirement, you have a look at it, look 262 00:14:58,920 --> 00:15:02,840 Speaker 3: at your own circumstance, perhaps sick advice. What you can 263 00:15:02,880 --> 00:15:05,920 Speaker 3: do then is you can have because you can choose 264 00:15:06,000 --> 00:15:09,000 Speaker 3: how to allocate your super, and even on a limited menu, 265 00:15:09,720 --> 00:15:12,520 Speaker 3: you can have two years, estimate your two years of 266 00:15:12,560 --> 00:15:16,000 Speaker 3: spending and put it in the cash option, and then 267 00:15:16,040 --> 00:15:20,520 Speaker 3: you can have the remainder in a balanced or seventy 268 00:15:20,520 --> 00:15:23,400 Speaker 3: five twenty five tight and you can you can do that. 269 00:15:24,040 --> 00:15:27,520 Speaker 3: There's a lot more available today in terms of digital 270 00:15:27,560 --> 00:15:30,800 Speaker 3: advice and modeling. We have at A and P surpers 271 00:15:30,840 --> 00:15:35,360 Speaker 3: and really quite sophisticated digital advice that takes into account 272 00:15:35,440 --> 00:15:38,080 Speaker 3: things like whether you have a spouse, whether your home 273 00:15:38,280 --> 00:15:41,360 Speaker 3: is paid off. One of the things that we are 274 00:15:41,480 --> 00:15:45,760 Speaker 3: seeing more frequently, sadly, is that many people are entering 275 00:15:45,800 --> 00:15:51,640 Speaker 3: retirement still with mortgages. And that's a real factor again 276 00:15:51,920 --> 00:15:54,640 Speaker 3: in this need for your super to work harder, because 277 00:15:54,640 --> 00:15:57,240 Speaker 3: it not only has to pay off the remainder of 278 00:15:57,240 --> 00:15:59,920 Speaker 3: your mortgage when you retire, but then it also has 279 00:15:59,920 --> 00:16:02,920 Speaker 3: to sustain you for the rest of your life. 280 00:16:03,080 --> 00:16:07,320 Speaker 1: So the presence of a mortgage would actually fortify your arguments. 281 00:16:07,320 --> 00:16:11,720 Speaker 3: Really it does, I think so, yes, yeah, definitely, because I. 282 00:16:11,680 --> 00:16:15,400 Speaker 1: Think but increasing the number of people are in that position, 283 00:16:15,480 --> 00:16:16,200 Speaker 1: especially neu. 284 00:16:16,040 --> 00:16:20,320 Speaker 3: Retorties exactly, and housing itself when it's fully paid off 285 00:16:21,040 --> 00:16:25,680 Speaker 3: provides another level of flexibility, And perhaps flexibility is the 286 00:16:25,920 --> 00:16:30,080 Speaker 3: other lever that if you have it and can have it, 287 00:16:30,640 --> 00:16:34,800 Speaker 3: particularly around income draw down. Right, So you might say, 288 00:16:34,920 --> 00:16:37,840 Speaker 3: I need, you know, forty thousand dollars a year to 289 00:16:37,960 --> 00:16:40,720 Speaker 3: have a comfortable retirement. That's my aim, that's what I'm 290 00:16:40,720 --> 00:16:43,880 Speaker 3: going to try and generate. But say the market has 291 00:16:43,920 --> 00:16:46,200 Speaker 3: a big crash, if you are able to say, do 292 00:16:46,280 --> 00:16:48,200 Speaker 3: you know what, this year, I'll just try and get 293 00:16:48,200 --> 00:16:50,200 Speaker 3: by with a bit less, try and not take out 294 00:16:50,280 --> 00:16:52,840 Speaker 3: quite as much, or maybe that extra holiday that I 295 00:16:52,880 --> 00:16:54,560 Speaker 3: was going to take, I might just push that back 296 00:16:54,560 --> 00:16:57,400 Speaker 3: to next year. That type of flexibility can have a 297 00:16:57,440 --> 00:17:01,320 Speaker 3: real positive impact on your assets because it means then 298 00:17:01,840 --> 00:17:04,240 Speaker 3: if you draw down a little less in those negative 299 00:17:04,280 --> 00:17:08,919 Speaker 3: market years, that then it allows time for the market 300 00:17:08,960 --> 00:17:12,480 Speaker 3: to recover and your assets then to recover as well. Now, 301 00:17:12,560 --> 00:17:16,560 Speaker 3: not everyone has that flexibility. Certainly, it's probably more common 302 00:17:16,560 --> 00:17:19,840 Speaker 3: in the wealthier retirees that they do have that flexibility. 303 00:17:20,359 --> 00:17:23,880 Speaker 3: But the flexibility certainly is helpful, and if you think 304 00:17:23,920 --> 00:17:26,679 Speaker 3: about the interaction of the age pension or the part 305 00:17:26,720 --> 00:17:30,120 Speaker 3: age pension with your income, then that can be really 306 00:17:30,160 --> 00:17:33,880 Speaker 3: beneficial as well. Another thing that might be useful for 307 00:17:34,119 --> 00:17:37,640 Speaker 3: members and investors to think about is whether they might 308 00:17:37,680 --> 00:17:40,760 Speaker 3: want to layer in, as well as their cash spending 309 00:17:40,840 --> 00:17:44,600 Speaker 3: bucket and then their balanced fund exposure, whether they might 310 00:17:44,640 --> 00:17:49,320 Speaker 3: want to layer in a lifetime annuity or income stream, 311 00:17:50,119 --> 00:17:54,440 Speaker 3: because that can provide another layer of diversification but also 312 00:17:54,440 --> 00:17:57,920 Speaker 3: have stability of income. So again that would give them 313 00:17:57,920 --> 00:17:59,200 Speaker 3: that extra security. 314 00:17:59,240 --> 00:18:03,159 Speaker 1: And you might just as a component as opposed to 315 00:18:03,200 --> 00:18:04,399 Speaker 1: an answer. 316 00:18:04,440 --> 00:18:06,800 Speaker 3: As a component. I think as a component, we have 317 00:18:06,840 --> 00:18:10,840 Speaker 3: a lifetime income stream at AMP delivers very high income, 318 00:18:10,920 --> 00:18:15,240 Speaker 3: much higher than normal annuities, and it's a very helpful tool. 319 00:18:15,440 --> 00:18:18,639 Speaker 1: We're very skeptical of promoting any one product over another, 320 00:18:18,680 --> 00:18:19,359 Speaker 1: but I just want. 321 00:18:19,200 --> 00:18:22,600 Speaker 2: To say, I'm sure you could get the regular Liam short. 322 00:18:23,359 --> 00:18:25,840 Speaker 1: On the last show, Financial Advisor did make the very 323 00:18:25,840 --> 00:18:28,520 Speaker 1: same point that an annuity can be an option and 324 00:18:28,720 --> 00:18:30,840 Speaker 1: a component option. I want to ask you just one thing. 325 00:18:31,320 --> 00:18:32,800 Speaker 1: I had always thought you had to spend a lot 326 00:18:32,840 --> 00:18:35,480 Speaker 1: to get in an innuity. What's the minimum amount you 327 00:18:35,520 --> 00:18:37,640 Speaker 1: can I get a bite size inusity? Can I put 328 00:18:37,640 --> 00:18:40,119 Speaker 1: fifty grand out in an annuity or is there a minimum. 329 00:18:40,520 --> 00:18:42,480 Speaker 3: No, there's no minimum, so you can well, and it's 330 00:18:42,480 --> 00:18:44,280 Speaker 3: going to depend on where you go, of course and 331 00:18:44,280 --> 00:18:45,280 Speaker 3: what your providers are. 332 00:18:45,520 --> 00:18:50,480 Speaker 1: But I presume there's a minimum in practice in effectiveness. 333 00:18:49,960 --> 00:18:52,800 Speaker 3: Well within our super fund we normally talk about in 334 00:18:52,880 --> 00:18:56,560 Speaker 3: terms of proportions of the total. Okay, Yeah, So I 335 00:18:56,600 --> 00:19:00,080 Speaker 3: would say you'd have two years of spending income of 336 00:19:00,280 --> 00:19:02,240 Speaker 3: seventy five percent in the balance fund. You might put 337 00:19:02,280 --> 00:19:06,199 Speaker 3: half of that in an annuity, a lifetime income stream, 338 00:19:06,320 --> 00:19:09,080 Speaker 3: and then that will add an extra lay of income 339 00:19:09,400 --> 00:19:12,440 Speaker 3: and security with in your confidence. 340 00:19:12,920 --> 00:19:16,240 Speaker 1: The innuity folks. As you know, we discussed ugly and 341 00:19:16,280 --> 00:19:18,520 Speaker 1: we will discuss again. They have pros and cons. We'll 342 00:19:18,520 --> 00:19:19,359 Speaker 1: come back to that one. 343 00:19:19,520 --> 00:19:19,840 Speaker 2: Okay. 344 00:19:19,880 --> 00:19:22,240 Speaker 1: I want to take a break, and in the next part, 345 00:19:22,440 --> 00:19:24,840 Speaker 1: which I will be a fun part, certainly for me, 346 00:19:24,960 --> 00:19:27,199 Speaker 1: I want to stress test some of the ideas that 347 00:19:27,200 --> 00:19:31,320 Speaker 1: were put forward by Anna, and I'm thinking about whether, 348 00:19:31,480 --> 00:19:36,000 Speaker 1: like inflation really is that much of a concern, for instance, 349 00:19:36,640 --> 00:19:40,200 Speaker 1: in the immediate future. I'm also thinking, if you would 350 00:19:40,280 --> 00:19:45,000 Speaker 1: consider this, Anna, that the whole notion of fixed and 351 00:19:45,119 --> 00:19:47,960 Speaker 1: growth is under pressure in many ways at the moment. 352 00:19:48,000 --> 00:19:50,399 Speaker 1: The whole concept that people lived with for so long 353 00:19:50,840 --> 00:19:54,480 Speaker 1: that you know, very simply, you know, growth with shares 354 00:19:55,119 --> 00:19:59,600 Speaker 1: and income was fixed income reflected largely by bonds, and 355 00:19:59,640 --> 00:20:00,840 Speaker 1: that is here's the other question. 356 00:20:00,840 --> 00:20:02,280 Speaker 2: We'll come back to that after the break. 357 00:20:08,200 --> 00:20:11,480 Speaker 1: Hello, Welcome back to the Australians Money Puzzle podcast. I'm 358 00:20:11,480 --> 00:20:16,359 Speaker 1: with Anna Shelley, chief investment officer at AMP, and we 359 00:20:16,480 --> 00:20:19,919 Speaker 1: have been talking about it the changing nature, if you like, 360 00:20:20,160 --> 00:20:23,240 Speaker 1: of investment, and it's very core, the very very core 361 00:20:23,280 --> 00:20:27,040 Speaker 1: principles of investments, which is so important that you get 362 00:20:27,040 --> 00:20:28,880 Speaker 1: this right because you can make all these. 363 00:20:28,800 --> 00:20:29,760 Speaker 2: Tiny decisions right. 364 00:20:29,760 --> 00:20:32,120 Speaker 1: You can buy this share and that share, and that's 365 00:20:32,160 --> 00:20:34,640 Speaker 1: all fine, but really if you get your strategy wrong, 366 00:20:35,920 --> 00:20:38,400 Speaker 1: then it's not going to make up for any small decisions. 367 00:20:38,400 --> 00:20:40,200 Speaker 1: This is so important and I wanted to have a 368 00:20:40,240 --> 00:20:43,639 Speaker 1: show and as the ideal guest on this, so I 369 00:20:43,640 --> 00:20:46,000 Speaker 1: wanted to sort of just let's just kind of stress 370 00:20:46,040 --> 00:20:49,800 Speaker 1: test for us some of the concepts Anna, that you've 371 00:20:49,840 --> 00:20:53,439 Speaker 1: put forward. I mean, the first one is that you 372 00:20:53,560 --> 00:20:55,520 Speaker 1: should do this because you live longer. I don't think 373 00:20:55,560 --> 00:20:58,520 Speaker 1: anybody has any problem with that. The actuarian numbers are there. 374 00:20:58,640 --> 00:21:03,280 Speaker 1: But about inflation, that more like a no one knows right, 375 00:21:03,320 --> 00:21:04,119 Speaker 1: you're forecasting. 376 00:21:05,400 --> 00:21:08,760 Speaker 3: Yeah, yeah, I think to inflation. When we say higher 377 00:21:08,880 --> 00:21:13,160 Speaker 3: inflation over the next at least several years, but possibly 378 00:21:13,200 --> 00:21:16,680 Speaker 3: even next decade. We're not talking about anything too scary, right, 379 00:21:16,720 --> 00:21:19,280 Speaker 3: We're talking about three to four percent inflation instead of 380 00:21:19,280 --> 00:21:22,480 Speaker 3: two to three percent inflation. Now, why does that matter? 381 00:21:22,600 --> 00:21:25,040 Speaker 3: And as you said before, we've had high inflation in 382 00:21:25,160 --> 00:21:27,800 Speaker 3: past periods and you know, people have got through and 383 00:21:27,800 --> 00:21:30,520 Speaker 3: they've managed to retire and it's all been okay. The 384 00:21:30,560 --> 00:21:33,720 Speaker 3: real key here is the length of time of that 385 00:21:33,920 --> 00:21:38,120 Speaker 3: three to four percent, Right, So even a small one 386 00:21:38,160 --> 00:21:43,440 Speaker 3: percent increase in inflation over thirty years makes a big 387 00:21:43,600 --> 00:21:47,479 Speaker 3: that's a significantly higher challenge then for your assets. 388 00:21:47,560 --> 00:21:49,520 Speaker 2: It erolled your spending power. 389 00:21:49,560 --> 00:21:52,679 Speaker 3: Yeah, it absolutely does. Yeah yeah, And it's because of 390 00:21:52,720 --> 00:21:56,879 Speaker 3: that longer period of life expectancy. That's why it's a 391 00:21:56,920 --> 00:21:59,080 Speaker 3: big deal. And in fact, even if it was a 392 00:21:59,160 --> 00:22:01,520 Speaker 3: half a percent higher than the you know, the RBI 393 00:22:01,600 --> 00:22:04,199 Speaker 3: is two and a half percent target, you still you 394 00:22:04,440 --> 00:22:07,200 Speaker 3: have to take account of it in your in designing 395 00:22:07,200 --> 00:22:09,040 Speaker 3: your investment portfolios. 396 00:22:10,600 --> 00:22:14,040 Speaker 1: When you were saying about seventy percent growth at sixty five, 397 00:22:14,080 --> 00:22:20,560 Speaker 1: which is ane, I'm just yeah, what's the word bestarted 398 00:22:20,600 --> 00:22:26,520 Speaker 1: by when you say growth, very broadly, can you tell 399 00:22:26,520 --> 00:22:29,760 Speaker 1: me what is in growth? And because you know, we 400 00:22:29,840 --> 00:22:35,800 Speaker 1: have this debate inside Australian superinnuation circles where unfortunately terms 401 00:22:35,880 --> 00:22:38,120 Speaker 1: like balanced and growth are relatively robbery. 402 00:22:38,600 --> 00:22:39,479 Speaker 2: And what's growth? 403 00:22:39,560 --> 00:22:41,359 Speaker 1: What's in your growth fund compared to what's in the 404 00:22:41,359 --> 00:22:43,720 Speaker 1: host plus growth fund compared to what's in the rest 405 00:22:43,760 --> 00:22:44,359 Speaker 1: growth fund. 406 00:22:44,680 --> 00:22:45,639 Speaker 2: They're not all the same. 407 00:22:46,280 --> 00:22:49,120 Speaker 1: So just very broadly to the investor, when we say 408 00:22:49,160 --> 00:22:53,679 Speaker 1: seventy percent growth, what's what what's in that? 409 00:22:55,119 --> 00:23:00,080 Speaker 3: So added simplest growth assets are equities, the mess the 410 00:23:00,240 --> 00:23:08,080 Speaker 3: global emerging markets, property, infrastructure, private equity, and then sometimes 411 00:23:08,080 --> 00:23:11,320 Speaker 3: some alternative assets depending on what they are, so maybe 412 00:23:11,320 --> 00:23:13,640 Speaker 3: hedge funds, but there are also low risk hedge funds. 413 00:23:13,680 --> 00:23:15,800 Speaker 3: So that's where it gets a bit gray. But at 414 00:23:15,840 --> 00:23:18,120 Speaker 3: it's very simplest. If you were an investor, you would 415 00:23:18,119 --> 00:23:22,600 Speaker 3: say that the only really defensive assets are fixed income 416 00:23:22,880 --> 00:23:23,840 Speaker 3: and cash. 417 00:23:24,600 --> 00:23:29,120 Speaker 2: Okay, and fixed income is strictly bonds. 418 00:23:30,359 --> 00:23:34,560 Speaker 3: Yes, but of course you can get things like infrastructure 419 00:23:34,800 --> 00:23:38,800 Speaker 3: debt and different types of debt, some of them, say 420 00:23:38,920 --> 00:23:42,280 Speaker 3: emerging market debt, you might regard. You know, they're going 421 00:23:42,359 --> 00:23:47,760 Speaker 3: up the risk spectrum, so they're definitely heading into growth territory. 422 00:23:48,160 --> 00:23:52,080 Speaker 2: Yeah, and in fact, say sorry, yes. 423 00:23:51,880 --> 00:23:54,400 Speaker 3: I was going to say that APRA would say that, 424 00:23:54,600 --> 00:24:00,440 Speaker 3: for example, higher yielding credit, higher yielding bonds have an 425 00:24:00,440 --> 00:24:01,920 Speaker 3: element of growth to. 426 00:24:02,040 --> 00:24:07,720 Speaker 1: Them, so the income bucket is pretty smaller in a. 427 00:24:07,720 --> 00:24:10,800 Speaker 3: True safety term. Yes. And so one of the issues 428 00:24:10,840 --> 00:24:13,000 Speaker 3: has been over the last period that the bonds have 429 00:24:13,080 --> 00:24:16,720 Speaker 3: had that you know, they had a positive correlation with equities, 430 00:24:16,760 --> 00:24:20,560 Speaker 3: and we saw in the Liberation they sell off in particular, 431 00:24:20,920 --> 00:24:23,919 Speaker 3: that equities went down, bonds fell, and that's you know, 432 00:24:24,040 --> 00:24:28,040 Speaker 3: that whole construct of having a gross and defensive part 433 00:24:28,119 --> 00:24:31,120 Speaker 3: to your portfolio kind of fell apart a bit. But 434 00:24:31,160 --> 00:24:34,760 Speaker 3: the good news is that actually the bond equity correlation 435 00:24:35,640 --> 00:24:38,800 Speaker 3: has recently turned negative again. What that means is that 436 00:24:39,400 --> 00:24:43,800 Speaker 3: going forward, if equities fall, bonds should rise, So they 437 00:24:43,840 --> 00:24:47,679 Speaker 3: should rebalance your keep your portfolio a little bit in balance, 438 00:24:47,760 --> 00:24:50,440 Speaker 3: provide a bit of protection as they used to in 439 00:24:50,760 --> 00:24:54,440 Speaker 3: time's gone by. And you might say, well, why's that happened? 440 00:24:54,440 --> 00:24:57,439 Speaker 3: And the thing about correlations is they do move around 441 00:24:57,440 --> 00:24:59,439 Speaker 3: a lot over the short term, and so you've got 442 00:24:59,480 --> 00:25:01,040 Speaker 3: to keep your eyes on them. You know, are my 443 00:25:01,160 --> 00:25:05,480 Speaker 3: bombs still defensive, are they actually protecting the portfolio? And 444 00:25:05,840 --> 00:25:08,679 Speaker 3: going forward, what we think is that we are entering 445 00:25:08,720 --> 00:25:13,520 Speaker 3: a new market regime, a new bull market. Dare I say, 446 00:25:14,000 --> 00:25:18,160 Speaker 3: a period of growth, definitely economic growth and possibly a 447 00:25:18,200 --> 00:25:22,360 Speaker 3: return to disinflationary forces in the US, maybe not yet 448 00:25:22,400 --> 00:25:26,720 Speaker 3: in Australia, but in the US. And therefore we've seen 449 00:25:26,800 --> 00:25:29,479 Speaker 3: that correlation go back to how it was, so that 450 00:25:29,560 --> 00:25:34,119 Speaker 3: bombs should now provide more protection against equity market falls, 451 00:25:34,920 --> 00:25:38,040 Speaker 3: and we should see things like the defensive assets that 452 00:25:38,080 --> 00:25:41,480 Speaker 3: have really run recently with concerns in the market, things 453 00:25:41,520 --> 00:25:45,879 Speaker 3: like gold, they should probably revert back again to to 454 00:25:46,119 --> 00:25:51,159 Speaker 3: history if that global economic growth acceleration does continue. 455 00:25:51,680 --> 00:25:53,800 Speaker 2: So which leads me to the question. 456 00:25:54,240 --> 00:25:56,159 Speaker 1: There is a strong debate, a fresh debed for some 457 00:25:56,240 --> 00:25:59,200 Speaker 1: time now about not just sixty forty and the whole idea, 458 00:25:59,280 --> 00:26:03,360 Speaker 1: the whole rule, but what defensive is and what growth 459 00:26:03,600 --> 00:26:07,880 Speaker 1: is and the bond's correlation. As you say, the traditional 460 00:26:08,000 --> 00:26:11,440 Speaker 1: let's just to make it easy for listeners, the traditional 461 00:26:12,400 --> 00:26:16,120 Speaker 1: concept that you had bonds for defense and you had 462 00:26:16,160 --> 00:26:21,440 Speaker 1: equities for growth was seriously tested for quite some time, 463 00:26:21,520 --> 00:26:26,560 Speaker 1: almost since the GFC. But you're, first of all, it 464 00:26:26,640 --> 00:26:29,600 Speaker 1: sounds to me like you are comfortable in the on 465 00:26:29,640 --> 00:26:33,240 Speaker 1: the very long term and in your modeling, or you're 466 00:26:33,280 --> 00:26:35,320 Speaker 1: thinking now that you are comfortable. 467 00:26:34,880 --> 00:26:37,040 Speaker 2: That still holds. Is that right? 468 00:26:37,760 --> 00:26:37,879 Speaker 3: Oh? 469 00:26:37,960 --> 00:26:40,160 Speaker 2: Yes, and so yeah. 470 00:26:40,600 --> 00:26:48,320 Speaker 1: So does that mean that for defensive holdings for investors 471 00:26:49,320 --> 00:26:52,359 Speaker 1: you think something like gold doesn't stand up. I'm thinking 472 00:26:52,400 --> 00:26:56,080 Speaker 1: of Morgan Stanley's and some of the top end of 473 00:26:56,119 --> 00:27:01,000 Speaker 1: wealth managers basically reversing away from bonds, especially in the 474 00:27:01,160 --> 00:27:03,960 Speaker 1: US where they were so central and so we was 475 00:27:04,040 --> 00:27:06,480 Speaker 1: so liquid and so the deepest market in the world 476 00:27:07,040 --> 00:27:10,399 Speaker 1: towards other assets or turnasives, specifically gold. 477 00:27:10,720 --> 00:27:12,480 Speaker 2: Do you think that's actually. 478 00:27:14,119 --> 00:27:18,119 Speaker 1: Fees a period of time as opposed to an enduring theme, 479 00:27:18,440 --> 00:27:20,240 Speaker 1: do you So? 480 00:27:20,840 --> 00:27:24,119 Speaker 3: Firstly, we do think that you could there's a place 481 00:27:24,200 --> 00:27:26,960 Speaker 3: for gold in portfolios. So I think you could have 482 00:27:27,119 --> 00:27:30,439 Speaker 3: up to maybe five percent in gold. And the reason 483 00:27:30,480 --> 00:27:32,840 Speaker 3: you might do that is, you know, as a hedge 484 00:27:32,880 --> 00:27:38,840 Speaker 3: against major currency weakness, financial turmoil, equity market dislocation, that 485 00:27:38,960 --> 00:27:41,840 Speaker 3: sort of thing. The point I would make for Australian 486 00:27:42,040 --> 00:27:44,560 Speaker 3: investors is to keep in mind that actually a lot 487 00:27:44,600 --> 00:27:49,879 Speaker 3: of Australian investors already have exposure through gold mining shares 488 00:27:50,400 --> 00:27:54,919 Speaker 3: and typically a quite overweight position in the Australian share market, 489 00:27:54,920 --> 00:27:56,679 Speaker 3: and so bear that in mind because you might not 490 00:27:56,760 --> 00:28:00,439 Speaker 3: then need a separate exposure to gold, but if you 491 00:28:00,680 --> 00:28:03,320 Speaker 3: wanted to, you could have it. I think modeling shows 492 00:28:03,359 --> 00:28:06,639 Speaker 3: that it is justified. But over the long term, what 493 00:28:06,680 --> 00:28:08,560 Speaker 3: we've seen with gold as it goes through these long 494 00:28:08,680 --> 00:28:11,879 Speaker 3: phases of long term upswings and then down swings, and 495 00:28:11,920 --> 00:28:14,720 Speaker 3: then it does nothing for you know, years at a time, 496 00:28:14,920 --> 00:28:18,600 Speaker 3: so it doesn't always play, you know, exactly the role 497 00:28:18,640 --> 00:28:21,879 Speaker 3: you might want it to, and it is you have 498 00:28:21,960 --> 00:28:25,640 Speaker 3: to think about it as a long term holding. At 499 00:28:25,680 --> 00:28:27,879 Speaker 3: the moment, I would say we have had a bit 500 00:28:27,880 --> 00:28:31,360 Speaker 3: of a phase because what we've seen is large central 501 00:28:31,400 --> 00:28:34,359 Speaker 3: bank buying of gold, and that's come about because of 502 00:28:34,400 --> 00:28:38,160 Speaker 3: this concern the geopolitical concern about the US, and so 503 00:28:38,320 --> 00:28:41,600 Speaker 3: lots of central banks that had offloaded a lot of 504 00:28:41,640 --> 00:28:43,960 Speaker 3: their gold reserves over the last sort of twenty years 505 00:28:44,920 --> 00:28:48,320 Speaker 3: have been definitely piling back into gold. And some of 506 00:28:48,400 --> 00:28:51,120 Speaker 3: that's their concern about US debt, they're concerned about the 507 00:28:51,200 --> 00:28:55,440 Speaker 3: US government, the concern about US dollar weakness, and so 508 00:28:56,320 --> 00:28:59,800 Speaker 3: there's definitely been some strong buying there that has supported 509 00:28:59,840 --> 00:29:00,200 Speaker 3: the goal. 510 00:29:01,680 --> 00:29:04,680 Speaker 1: Okay, very good. Thank you very much. I think we're 511 00:29:04,720 --> 00:29:06,720 Speaker 1: running out of time. I really appreciate that. 512 00:29:06,800 --> 00:29:08,280 Speaker 2: Anna. It's lovely to have you on the show. 513 00:29:09,680 --> 00:29:12,120 Speaker 3: Thank you very much, James. That was lovely, very interesting 514 00:29:12,200 --> 00:29:14,400 Speaker 3: chat and hope play listeners found that hopeful. 515 00:29:14,760 --> 00:29:16,200 Speaker 2: I expect many of them would. 516 00:29:16,280 --> 00:29:18,560 Speaker 1: Regardless folks, as I say, of what way you have 517 00:29:18,680 --> 00:29:23,040 Speaker 1: you were investing, whether you have your money in big, super, small, super, 518 00:29:23,120 --> 00:29:26,600 Speaker 1: your own super, I think the points are bound to everybody. 519 00:29:26,920 --> 00:29:27,400 Speaker 2: Very good. 520 00:29:27,760 --> 00:29:30,640 Speaker 1: Let's have some more correspondence. I didn't deal with correspondence today. 521 00:29:30,640 --> 00:29:32,360 Speaker 1: It has been building up. I know I will get 522 00:29:32,360 --> 00:29:34,600 Speaker 1: to it very quickly. Had some very interesting on the 523 00:29:34,680 --> 00:29:38,120 Speaker 1: last show. Some correspondents and let's have some more the 524 00:29:38,160 --> 00:29:41,440 Speaker 1: money puzzle at the Australian dot com dot Au. Today's 525 00:29:41,440 --> 00:29:45,120 Speaker 1: show was produced by Leah Samma Glue. Talk to you soon.