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Speaker 1: Start here. Is it time to now sell our share

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Speaker 1: portfolios and switch to cash because of the war. Let's

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Speaker 1: talk about risk, the timing, the costs, and what history

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Speaker 1: always shows us. Good morning, everyone, and welcome back to

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Speaker 1: start Here, the very special mini series within Sugar Mama's Fireplay,

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Speaker 1: where you can just ask me questions about money and

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Speaker 1: your financial direction. I'm going to launch straight into this

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Speaker 1: listener's question because it's very relevant as to what is

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Speaker 1: happening in the world right now. She writes, I canna,

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Speaker 1: I'm so worried about what to do with my share

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Speaker 1: portfolio and my superinnuation with everything happening in Iran and

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Speaker 1: the Middle East. I have worked so hard to turn

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Speaker 1: my personal finances around, and it's now terrifying to watch

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Speaker 1: what's going on and watching my money go down at

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Speaker 1: the toilet. Considering seriously selling everything and moving to cash.

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Speaker 1: But the plan would be if I do this, to

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Speaker 1: then buy everything back when things settle down and feel

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Speaker 1: more stable. Do you think this is a wise move? Okay,

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Speaker 1: First of all, thank you for being so brave to

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Speaker 1: ask this question, Isabelle. I know a lot of people

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Speaker 1: are wondering the exact same thing right now, but Before

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Speaker 1: I can go any further, I just need to remind

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Speaker 1: everyone that this podcast, as in all of my content,

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Speaker 1: as always, is general in nature and it's educational purposes only.

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Speaker 1: I can't give you product advice. I can't give you

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Speaker 1: strategic advice whether to sell or not. It's really important

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Speaker 1: that you go and see a financial plan if you

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Speaker 1: need personal advice, because there are so many different nuances

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Speaker 1: in your situation that need to be considered right now.

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Speaker 1: But I'm still going to calmly unpack this and help

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Speaker 1: you navigate this very uncertain time with the waters so murky,

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Speaker 1: and I'm hoping by the end of this episode you'll

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Speaker 1: feel a greater sense of calm, tranquility, but also understand

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Speaker 1: the opportunities, the blessings, and the actual practical things that

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Speaker 1: you can do right now instead of potentially selling everything.

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Speaker 1: So let's go through this together right now. So the

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Speaker 1: first thing, I want to just take a step back,

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Speaker 1: as I always do, and that's actually just talk about

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Speaker 1: what's actually driving markets right now. So markets around the

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Speaker 1: world are reacting, obviously to the heightened geopolitical tension in

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Speaker 1: the Middle East and the possibility of a serious escalation.

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Speaker 1: Investors are concerned about obviously the disruption of oil supply,

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Speaker 1: rising energy prices, and of course that feeding into inflation,

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Speaker 1: the bank's having to keep interest rates high or even

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Speaker 1: higher for longer, and then of course the slow global

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Speaker 1: economic growth. It's uncertainty that makes markets really unhappy. And

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Speaker 1: when we have this uncertainty, particularly uncertainty arising, that's when

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Speaker 1: prices start to adjust and it feels like they take

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Speaker 1: the elevator down and the staircase up. When it comes

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Speaker 1: to the adjustment of prices, we need to remember markets

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Speaker 1: are pricing possible outcomes, not confirmed permanent damage, and that

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Speaker 1: distinction is critical. Volatility simply means prices move around. They

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Speaker 1: can move up and down, and historically they move around

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Speaker 1: a lot. This is not abnormal. But if you take

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Speaker 1: a step back and look at the big picture here,

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Speaker 1: Australian shares have delivered strong long term returns depending on

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Speaker 1: where you look, but roughly between nine to eleven percent

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Speaker 1: per annum over long periods of time, and that is

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Speaker 1: despite wars, recessions, oil shocks and of course pandemics. Then

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Speaker 1: if you look at the US S and P five hundred,

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Speaker 1: that is average around roughly around ten percent per antum

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Speaker 1: over many decades, again despite multiple major crisises. Now that

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Speaker 1: long term return includes wars, the Great Depression, the GFC, COVID,

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Speaker 1: political instability, inflation spikes, and markets falling, markets recovering markets compounding.

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Speaker 1: This is all very, very normal. It's part of the

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Speaker 1: beast of investing. But it's also part of the adventure

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Speaker 1: of the excitement and the opportunity. So I want to

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Speaker 1: move on and now talk about the risk in a

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Speaker 1: very honest way, because I feel like you haven't looked

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Speaker 1: at the risk in what you're considering doing. Shares are

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Speaker 1: long term growth assets. They carry a huge amount of

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Speaker 1: short to even medium term risk. They can fall ten,

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Speaker 1: twenty to thirty percent even during severe downturn. Yes, I

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Speaker 1: will agree with you that is uncomfortable, but that short

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Speaker 1: to medium term risk is precisely why they have historically

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Speaker 1: delivered higher returns than assets conservative assets such as cash

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Speaker 1: and fixed interest. Doctor Shane Oliver, who's the chief economist

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Speaker 1: at AMP, an absolutely brilliant man and just so insightful.

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Speaker 1: And I've never met him personally, but he seems like

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Speaker 1: a really lovely, gentle wise guy. Neeps. There's thing very

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Speaker 1: very clearly sharp falls are not nice, but they are

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Speaker 1: the price we pay for higher long term returns. There

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Speaker 1: is no free lunch in investing, and I couldn't agree more.

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Speaker 1: The pendulum swings both ways. It's not enjoyable, but it's

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Speaker 1: part and parcel of investing. And because of that risk

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Speaker 1: that we are agreeing and accepting to take on board,

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Speaker 1: we have the right to expect greater long term returns

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Speaker 1: when we're looking at periods of say twenty, thirty, forty

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Speaker 1: even fifty years, and if that means that our money

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Speaker 1: is working for us and will ultimately give us that

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Speaker 1: financial freedom. For me, this is the type of asset

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Speaker 1: class that I want to be investing and working on

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Speaker 1: my financial independence journey. Now, why is timing the market

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Speaker 1: so hard? This is something you really need to take

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Speaker 1: into consideration, because Isabelle, you've said that you're thinking of

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Speaker 1: selling everything, parking it into cash, and then buying back

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Speaker 1: in when the market is stable, like, there are so

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Speaker 1: many risks involved. So if you go and sell your portfolio,

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Speaker 1: both your super and your investment portfolio, you are making

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Speaker 1: a very specific bet. You are betting that you will

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Speaker 1: be able to buy back at a better time, the

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Speaker 1: perfect time to succeed. You must get two things right.

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Speaker 1: Number one is when is the best time to sell?

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Speaker 1: And you know the market's already priced in on a

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Speaker 1: huge drop already. And then the second risk and decision

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Speaker 1: that you've got to make, and this is not one

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Speaker 1: that I would want to be making myself, even with

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Speaker 1: all my experience, and that is when is the right

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Speaker 1: time to re enter. Markets don't send you like a

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Speaker 1: text message when they've bottomed out. In fact, some of

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Speaker 1: the strongest market recovery days historically can occur very close

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Speaker 1: to the worst declines. And by the time the news

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Speaker 1: is okay, everything's much better, much more stable, you know,

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Speaker 1: we're looking at sailing forward in the right direction. Again,

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Speaker 1: the markets have already moved, and quite often they're already

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Speaker 1: moved to a new high. And this is exactly why

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Speaker 1: Warren Buffett used to always say the stock market is

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Speaker 1: a device for try answering money from the impatient to

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Speaker 1: the patient. Patience has historically always been rewarded. Impatience has

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Speaker 1: historically been costly. And I'm worried that this decision to

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Speaker 1: sell potentially could leave you not only with an expensive cost,

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Speaker 1: but a huge amount of regret and remorse. So you

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Speaker 1: really need to think carefully before making any decisions. Then

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Speaker 1: there are the hidden costs of selling, which again you

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Speaker 1: may not have actually considered quite yet because obviously emotions

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Speaker 1: are running high. So selling everything creates expenses. You've got

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Speaker 1: the brokerage costs. When you sell, you've got the brokerage costs. Again,

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Speaker 1: when you buy those stocks back, you've got potential capital

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Speaker 1: gains tax or you may be crystallizing some capital losses.

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Speaker 1: And once you sell, you're no longer entitled to dividends,

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Speaker 1: those wonderful, juicy dividends that you may have been receiving

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Speaker 1: and also may have been reinvesting. So if the market

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Speaker 1: recovers and recovers quite quickly whilst you're still sitting in cash,

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Speaker 1: you're going to miss that upside, that opunity, that wave

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Speaker 1: to this keep going back on track again. Now, when

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Speaker 1: markets downturn, they also create opportunity, amazing opportunity. This is

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Speaker 1: where the part of me that gets a little bit excited.

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Speaker 1: Obviously there's horrific things going on in the world, but

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Speaker 1: there are opportunities for people who have been waiting for

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Speaker 1: the right time to get started, and this may be

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Speaker 1: that time. No, it really does get overlooked. So when

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Speaker 1: share price is full, there are some key things to

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Speaker 1: think about. Valuations improve and dividend yields rise, and then

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Speaker 1: future expected returns often increase. Think about it for a second.

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Speaker 1: If a quality company was attractive at say one hundred dollars,

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Speaker 1: and it has obviously been impacted with what's going on,

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Speaker 1: and now the share prices dropped to say eighty dollars,

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Speaker 1: that stock is even more attractive, better value for money

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Speaker 1: at eighty dollars. Of course we're assuming that as the

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Speaker 1: long term fundamentals remain in tact. But historically some of

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Speaker 1: the best long term buying opportunities have actually been achieved

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Speaker 1: by investing during period of pessimism. You know, volatility really

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Speaker 1: does create opportunity, long term opportunity. But the only people

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Speaker 1: who are going to benefit from this and even maximize

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Speaker 1: from this are the people who stay invested or the

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Speaker 1: people who keep buying through turbulent times, which I will

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Speaker 1: admit and share with you that's exactly what I plan

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Speaker 1: on doing. So you might be thinking, Okay, this all

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Speaker 1: makes sense, but what about cash and fix interest in

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Speaker 1: term deposits. Well, right now, this is particularly relevant for

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Speaker 1: Australian investors. Many Australian shares, particularly those large cap blue

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Speaker 1: chip established companies, they're offering dividend yields that are competitive

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Speaker 1: with and in some cases higher than bank deposit rates.

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Speaker 1: And I'm going to include you know, like the listed

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Speaker 1: investment companies like Whitefield. You can just jump on their

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Speaker 1: website and see what their current yield is, and when

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Speaker 1: you factor in franking credits, the effective grossed up yield

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Speaker 1: can be even more attractive, particularly for investors on a

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Speaker 1: low marginal tax rate or self fondited retirees who are

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Speaker 1: drawing a tax free allocation pension, so cash in the bank. Yes,

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Speaker 1: it may feel safer in the short term, but this

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Speaker 1: is the thing we need to remember. Investing in these

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Speaker 1: type of assets is long term, and over the long

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Speaker 1: term period of time, shares are historically outpaced cash significantly. No.

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Speaker 1: I always like to think cash protects capital, but shares

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Speaker 1: grow capital and they grow income. They serve two very

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Speaker 1: different purposes. Now, Isabelle, I completely understand that you're feeling

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Speaker 1: nervous right now, and if you're only new to investing,

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Speaker 1: this is very normal and very natural this reaction. But

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Speaker 1: can I just say for a second, the answer the

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Speaker 1: potential right answer or better answer may not necessarily lie

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Speaker 1: in selling everything. There are a few different things that

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Speaker 1: you could think about and consider under the guidance of

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Speaker 1: a financial planner that actually might work better for you

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Speaker 1: right now, as well as for those long term financial

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Speaker 1: goals and dreams of yours. For example, looking at a

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Speaker 1: more balanced approach might be wiser. For example, you could

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Speaker 1: look at keeping everything as is. You know where your

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Speaker 1: super is, where your share portfolio is, but perhaps from

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Speaker 1: this moment going on, whilst you're feeling nervous, you direct

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Speaker 1: any new savings into maybe more conservative assets temporarily like

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Speaker 1: term deposits like bonds, looking at maybe even something like property,

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Speaker 1: something that will add further diversification to your portfolio and

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Speaker 1: look more balanced. Another idea is to also look the

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Speaker 1: diversification and act location within your superannuation and your investment portfolio.

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Speaker 1: Perhaps you set this up not fully understanding what your

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Speaker 1: risk profile really is, and perhaps you may have invested

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Speaker 1: a little bit more aggressively than what you may have

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Speaker 1: been ready for. There's nothing necessarily wrong with that, we're

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Speaker 1: all learning, but perhaps again just being aware of this

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Speaker 1: may help calm the nerves and having that insight as

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Speaker 1: to where the potential imbalance is will then allow you

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Speaker 1: to strategically and intentionally rebalance your entire portfolio over time

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Speaker 1: rather than just exiting entirely. Now, this benefits you, and

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Speaker 1: that will avoid locking in any losses or triggering any

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Speaker 1: capital gains tax plus all those costs that we spoke to.

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Speaker 1: But it also will help give you a psychological breathing space.

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Speaker 1: You're doing something proactive, something intentional, something intelligent to help

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Speaker 1: take the risk off the plate. And sometimes this just

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Speaker 1: simple adjustment is actually far wiser than abandoning your whole

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Speaker 1: entire share portfolio and superannuation investment plan. So can I

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Speaker 1: recommend that you ask yourself a couple of questions? Number One,

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Speaker 1: is am I properly diversified across different sectors and different

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Speaker 1: asset allocations, particularly in alignment to what your risk profile

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Speaker 1: says you are? Number two, am I concentrated in one

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Speaker 1: or two particular shares? It might be a fact that

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Speaker 1: your portfolio only has, say a few different companies or

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Speaker 1: a few different ETFs you may not be exposed to

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Speaker 1: other areas. Will help smooth out the natural volatility as

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Speaker 1: part of your portfolio By asking yourself this question, you'll

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Speaker 1: be able to see where the problems are and how

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Speaker 1: to fix them. And then the third question is is

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Speaker 1: my portfolio aligned with my time horizon? Investing in shares

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Speaker 1: is a long term investment ten years, if not indefinitely.

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Speaker 1: When I buy shares, I have zero intention to ever

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Speaker 1: sell them. But if I was saving up for a

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Speaker 1: deposit for a property, or say something like a holiday

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Speaker 1: or to help pay for school fees, that money does

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Speaker 1: not go into shares. That money goes into a cash

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Speaker 1: savings account because I want to make sure that I

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Speaker 1: have that money is not subject to market volatility and

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Speaker 1: I can access it anytime without any risk. This is

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Speaker 1: really important that you understand how the different asset classes

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Speaker 1: serve different timeframes. Remember, diversification doesn't actually completely eliminate volatility,

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Speaker 1: it certainly reduces the concentration risks. So really review your

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Speaker 1: risk profile, your timeframe, the assets, the sectors, and of

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Speaker 1: course how many shares are in your portfolio, and the

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Speaker 1: deadline timeframe for yourself. As we get close to wrapping

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Speaker 1: up today's episode, I just want to take a moment

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Speaker 1: to take a step back and look at the big

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Speaker 1: piece here. There has always been something to worry about,

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Speaker 1: yet markets have continued to deliver long term growth over

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Speaker 1: more than a century. Volatility feels dramatic in the moment,

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Speaker 1: but when you can zoom out and look at us

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Speaker 1: a ten, twenty thirty year timeframe, it actually becomes a normal,

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Speaker 1: natural part of the journey. So my final words for

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Speaker 1: you Isabelle, and for anyone else who's worried about what

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Speaker 1: to do with their share portfolio and whether they should

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Speaker 1: be selling, can I just say your fear is so

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Speaker 1: understandable right now, but history shows volatility is very normal

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Speaker 1: and natural. Timing is extremely difficult in both selling and

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Speaker 1: buying back in, and when you do sell, you're locking

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Speaker 1: in your losses. And when you sell there are costs

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Speaker 1: and tax implications, and of course, downturns create opportunity, sometimes

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Speaker 1: amazing once in a lifetime opportunity and attractive income. That is,

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Speaker 1: your precious dividends can still be earned from the quality

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Speaker 1: shares that you already have in your investment portfolio and

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Speaker 1: within super so you're not actually missing out. And patience

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Speaker 1: has historically been rewarded, So if you are losing sleep

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Speaker 1: right now, seek personal advice. Remember to turn down the

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Speaker 1: noise and to focus on your bottom line, that is

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Speaker 1: how much your investment portfolio is paying you, and if

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Speaker 1: that hasn't changed, that is a good sign that you

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Speaker 1: are heading in the right direction. And perhaps it might

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Speaker 1: just be that opportunity that once in a life opportunity

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Speaker 1: to buy even better income streams at a discounted price.

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Speaker 1: But as always, make decisions based on your long term

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Speaker 1: game plan, not on the short term headlines. Volatility is temporary,

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Speaker 1: compounding is powerful, very powerful, and discipline always builds wealth.

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Speaker 1: I hope this episode really helps you as well and

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Speaker 1: everyone else who's worried right now, And for the record,

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Speaker 1: I will continue on investing through this market. I am

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Speaker 1: not worried at all, and I am seeing this as

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Speaker 1: an opportunity to purchase the same high quality stocks that

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Speaker 1: pay fully franked dividends or helping achieve financial freedom and independence,

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Speaker 1: perhaps even a little bit sooner or even overachieve our goals.

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Speaker 1: As always, if you could leave me a rating and review,

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Speaker 1: I would greatly appreciate it, and I look forward to

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Speaker 1: touching base with you next Monday morning on Sugar Mama's

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Speaker 1: Fireplan