WEBVTT - The art of strategic mediocrity 0:00:00.200 --> 0:00:02.920 What I found is that the companies that perform the 0:00:02.960 --> 0:00:06.360 best in over a ten year period never with the 0:00:06.440 --> 0:00:07.480 top than any one year. 0:00:07.840 --> 0:00:13.200 The immediate volatility after the Liberation Day announcements, when is 0:00:13.200 --> 0:00:14.040 it its first day? 0:00:14.680 --> 0:00:15.600 It ended up the day up. 0:00:15.640 --> 0:00:18.079 If I look at websites of FU managers often of 0:00:18.160 --> 0:00:20.720 about a one year, three year, maybe a five year record. 0:00:21.040 --> 0:00:23.520 If I'm investing for a longer term than that, then 0:00:23.600 --> 0:00:25.119 actually that's not really relevant for me. 0:00:28.480 --> 0:00:32.520 Kyoto Koto, Welcome to shared Lunch. I'm Garth Bray. Congratulations 0:00:32.560 --> 0:00:34.360 if you've made it through the past few weeks with 0:00:34.520 --> 0:00:38.159 your nerves holding investors haven't seen this volatility for more 0:00:38.200 --> 0:00:41.000 than a decade. How are you coping and how are 0:00:41.080 --> 0:00:44.000 you looking for the positives and opportunities. Well, we're in 0:00:44.000 --> 0:00:46.360 Wellington today and helping me look for those things. We 0:00:46.440 --> 0:00:49.040 have some sparkling talent in the form of Paul of Beth, 0:00:49.400 --> 0:00:52.040 editor of the bottom Line, and Susan and Batley company 0:00:52.080 --> 0:00:55.600 director and also head of Cheesey's business arm. Before we 0:00:55.640 --> 0:00:59.080 get started, here's some important information you should always consider 0:00:59.120 --> 0:00:59.720 an investing. 0:01:00.400 --> 0:01:03.000 Investing involves the risk you might lose the money you 0:01:03.040 --> 0:01:06.320 start with. We recommend talking to a licensed financial advisor. 0:01:07.040 --> 0:01:10.880 We also recommend reading product disclosure documents before deciding to invest. 0:01:11.120 --> 0:01:13.520 Everything you're about to see and here is current at 0:01:13.520 --> 0:01:14.400 the time of recording. 0:01:14.720 --> 0:01:18.480 Welcome to both of you. Paul, you took the boldest 0:01:18.480 --> 0:01:20.480 bet I can think of in the first quarter of 0:01:20.480 --> 0:01:23.280 twenty twenty five and launched a business, so congratulations on 0:01:23.319 --> 0:01:27.200 the bottom line. Susanna, you're a director at deliver Easy 0:01:27.319 --> 0:01:29.560 as well as helping out with the business side of 0:01:29.600 --> 0:01:31.880 business here at Cheers EA's so, I mean a lot 0:01:31.920 --> 0:01:37.280 on your plate obviously. Congratulations and welcome to twenty twenty five. 0:01:38.720 --> 0:01:40.399 What are you doing for stress at the moment? How's 0:01:40.400 --> 0:01:44.160 your stress levels? I find it pretty calm. 0:01:44.240 --> 0:01:45.560 I mean we're at the bottom of the world with 0:01:45.920 --> 0:01:50.480 one hundred thousand mile mote surrounding us. It's quite easy 0:01:50.520 --> 0:01:55.000 to be in New Zealand and watch on while Rome burns. 0:01:55.800 --> 0:01:58.920 I mean, it's the last couple of weeks in this 0:01:59.120 --> 0:02:02.880 year in general have certainly thrown up a lot of 0:02:02.880 --> 0:02:06.640 things to think about. But it's the same thing. You know, 0:02:06.640 --> 0:02:09.959 New Zealand has that relativity thing right. Things are bad 0:02:10.000 --> 0:02:13.960 here at times, but when you look overseas, Yeah, you're 0:02:13.960 --> 0:02:14.960 definitely shaken. 0:02:14.720 --> 0:02:16.919 Your head about you are you waking up every morning 0:02:16.960 --> 0:02:18.880 checking the numbers and checking again. 0:02:19.080 --> 0:02:21.480 I mean, I am still checking the numbers. But what 0:02:21.520 --> 0:02:25.040 I've actually found really helpful for me is actually looking 0:02:25.080 --> 0:02:28.160 back in history and continue to look at other times 0:02:28.200 --> 0:02:31.480 where there have been a lot of volatility. The reasons 0:02:31.480 --> 0:02:34.760 have been different. But I do think that if you 0:02:34.760 --> 0:02:38.720 don't engage with history, then everything feels unprecedented. So I've 0:02:38.760 --> 0:02:41.240 found that to be quite a calming thing to think 0:02:41.280 --> 0:02:43.720 about and look at each time that's happened. That life 0:02:43.800 --> 0:02:46.799 does go on and markets do continue, So. 0:02:46.760 --> 0:02:48.400 You're looking at the cycle and trying to work out 0:02:48.400 --> 0:02:50.520 where we are there and work out what happens next, 0:02:50.600 --> 0:02:52.840 or at least take some stock from the fact that 0:02:52.960 --> 0:02:54.360 this is not unprecedented. 0:02:55.080 --> 0:02:59.040 That's right. I mean, I don't try and analyze the future. 0:02:59.200 --> 0:03:02.680 In fact, even that is a really odd phrase, because 0:03:02.760 --> 0:03:05.120 the future hasn't happened, so there really is nothing to analyze, 0:03:05.200 --> 0:03:08.520 and I have really no idea what's going to happen. 0:03:09.000 --> 0:03:11.600 And if I look back in history, history is really 0:03:11.639 --> 0:03:14.720 a series of surprises, and so it's very hard to 0:03:14.720 --> 0:03:17.280 then think about what that next surprise has got to be. 0:03:18.000 --> 0:03:20.200 But I do think it is good to focus on 0:03:20.280 --> 0:03:22.160 some of the things that we do know are likely 0:03:22.960 --> 0:03:25.720 and sort of thinking about what a good response to 0:03:25.760 --> 0:03:28.600 that might be. It is hard to continue to invest 0:03:28.639 --> 0:03:31.400 when you're seeing your portfolio go down and value and 0:03:31.480 --> 0:03:34.120 knowing that that might persist for some time and things 0:03:34.200 --> 0:03:37.960 might look worse even the next week. In fact, Howard Marx, 0:03:38.360 --> 0:03:41.360 who is someone that I really enjoy his books, and 0:03:41.400 --> 0:03:43.240 he's got a very famous memo that I think he's 0:03:43.280 --> 0:03:46.880 written since about nineteen ninety and I came across oak 0:03:46.880 --> 0:03:50.400 Tree Capital during the GFC. We're at about the last 0:03:50.480 --> 0:03:53.240 four months of the GFC. Oak Tree Capital. We're deploying 0:03:53.280 --> 0:03:56.920 about six hundred million dollars US into the market every week, 0:03:57.280 --> 0:03:59.960 and that was as a market was continuing to deteriorate, 0:04:00.120 --> 0:04:02.080 and so every week what they had purchased the week 0:04:02.120 --> 0:04:04.080 before was worth less, and then they kept doing it 0:04:04.200 --> 0:04:07.720 again and again and again. And that having that high 0:04:07.800 --> 0:04:11.440 conviction and be willing to put up with quite an 0:04:11.480 --> 0:04:16.599 extended pair of volatility is really hard psychologically, and that's 0:04:16.640 --> 0:04:19.039 why often in the past few have been able to 0:04:19.040 --> 0:04:21.279 do that. But for the people that can do that well, 0:04:21.920 --> 0:04:25.479 it's been incredibly fruitful over the long term, I guess. 0:04:25.520 --> 0:04:27.920 I mean, you know, if you compet it to house prices, 0:04:27.920 --> 0:04:31.120 Obviously there's been pandemonium if they dropped like fifteen percent 0:04:31.600 --> 0:04:33.680 since February, like was sort of seen with e SMP. 0:04:33.880 --> 0:04:36.160 But admittedly there would be people out there licking their 0:04:36.200 --> 0:04:38.360 lips and going great, finally, this is my chance to 0:04:38.400 --> 0:04:40.240 get into that market will double down or so on. 0:04:40.360 --> 0:04:42.440 And it's the same effectively with equities, right. 0:04:42.760 --> 0:04:44.920 That's right. I mean house prices, I think is an 0:04:44.920 --> 0:04:48.479 interesting one, and I think gets overlooked a bit around 0:04:48.760 --> 0:04:51.760 the impact of leverage that that has as well. So 0:04:52.520 --> 0:04:54.279 you know, when people might buy a house if they 0:04:54.560 --> 0:04:57.360 have funding it with eighty percent of a mortgage, then 0:04:57.520 --> 0:05:01.279 that leverage really amplifies the outcome. And that's great when 0:05:01.320 --> 0:05:04.320 things are going up, but that can get pretty catastrophic 0:05:04.760 --> 0:05:06.719 when things are going down. And so when we've seen 0:05:06.720 --> 0:05:10.720 house prices move down, that return on equity gets a 0:05:10.720 --> 0:05:15.080 lot more negative. It's amplified because of the effect of leverage, 0:05:15.600 --> 0:05:18.520 whereas in the equity markets, you know a lot of 0:05:18.520 --> 0:05:21.560 people investing and not using leverage to that degree. So 0:05:21.640 --> 0:05:23.760 it's interesting that house price. 0:05:23.600 --> 0:05:27.480 Analogy not since the eighties anyway, Yeah, Yeah, I want 0:05:27.480 --> 0:05:28.880 to get to did a little bit later on because 0:05:28.880 --> 0:05:30.800 obviously it's a big part of what's behind what's been 0:05:30.839 --> 0:05:32.480 going on coming out of the state, so I spots. 0:05:32.520 --> 0:05:36.960 But the reasons about sort of stress was this is 0:05:37.120 --> 0:05:39.520 probably a little bit like kind of a health check 0:05:39.560 --> 0:05:41.279 time for a lot of people with their portfolio. As 0:05:41.320 --> 0:05:43.600 would you say, Paul, Like, it's like, am I comfortable 0:05:43.600 --> 0:05:44.960 with this amount of risk? 0:05:45.160 --> 0:05:48.159 Definitely? And they should have been doing that already. Anyway, 0:05:48.200 --> 0:05:50.960 if you're looking at equities, you know you're going in 0:05:51.000 --> 0:05:53.440 with something that's volatile. There are a lot of other 0:05:53.480 --> 0:05:56.920 products out there to mitigate that. In the handy little 0:05:56.960 --> 0:05:59.800 risk profiles that we get in various disclosure statements to 0:05:59.839 --> 0:06:02.160 one to seven seven bang, you're going to have to 0:06:02.160 --> 0:06:05.080 tolerate some downs with the ups and think about it 0:06:05.120 --> 0:06:06.760 over a long period of time. I mean, I still 0:06:06.760 --> 0:06:09.120 struggle when I see these statements looking at a long 0:06:09.200 --> 0:06:11.960 term investment being five years, that's not a long term investment. 0:06:13.240 --> 0:06:17.160 You're day trading if you're thinking that's your sort of profile. 0:06:17.200 --> 0:06:20.960 If we think about Kiwi Saber forty years, this is 0:06:21.000 --> 0:06:24.640 a generational product, So you can go through these sorts 0:06:24.640 --> 0:06:28.920 of things and looking at you know, the immediate volatility 0:06:28.920 --> 0:06:34.560 after the Liberation Day announcements and ends it x first day, 0:06:35.160 --> 0:06:36.680 it ended up the day up. We were the first 0:06:36.720 --> 0:06:39.799 market to open. We eaked out in the final fifteen 0:06:39.800 --> 0:06:41.880 minutes of the match where all of the big money 0:06:41.920 --> 0:06:44.240 sort of trying to set their final prices for the day, 0:06:44.760 --> 0:06:46.680 ends up in the green, having been sort of you know, 0:06:46.720 --> 0:06:48.960 in the red for a lot of it. Then you 0:06:49.000 --> 0:06:52.360 get to a Wall Street reaction the following day slaps everyone. 0:06:53.480 --> 0:06:55.200 We finally get it on the Monday, where it comes 0:06:55.240 --> 0:06:59.200 down a bit domestically. But you'd look at those numbers 0:06:59.440 --> 0:07:01.720 and I remember I was looking back at say sort 0:07:01.720 --> 0:07:04.479 of heighter GFC, hider COVID, he to COVID. Was I 0:07:04.520 --> 0:07:07.720 mean some of that that some of those movements were nonsensical. 0:07:07.720 --> 0:07:10.440 You couldn't quite wrap your head around it, even thinking 0:07:10.440 --> 0:07:13.040 about the likes of West Texas and the media oil 0:07:13.080 --> 0:07:18.760 prices going negative for a stage mad GFC going back 0:07:18.800 --> 0:07:20.920 to you know it was it was a smaller, sort 0:07:21.120 --> 0:07:23.239 slightly bigger than the dot com bubble in the early 0:07:23.240 --> 0:07:26.600 two thousands. But over the course of it, you're sort 0:07:26.640 --> 0:07:29.520 of going, Okay, we're feeling this now because it's happening 0:07:29.600 --> 0:07:31.800 right now, but we felt like this in the past. 0:07:32.240 --> 0:07:35.360 And that's how you try and sort of think back 0:07:35.360 --> 0:07:37.840 into your mind. Okay, if you're thinking about equities, it's 0:07:37.840 --> 0:07:40.520 a long term thing. It's it's so easy to get 0:07:40.560 --> 0:07:42.520 caught up in the ups and downs. You do want 0:07:42.520 --> 0:07:45.240 to have an idea of going into things, you know, 0:07:45.360 --> 0:07:47.840 what am I What am I comfortable with and revisit 0:07:47.880 --> 0:07:50.000 that every now and then, like, you know, let's have 0:07:50.000 --> 0:07:52.600 a look at it, maybe quarterly, maybe yearly. What do 0:07:52.640 --> 0:07:55.040 I think about my portfolio now? What do I need 0:07:55.120 --> 0:07:58.040 sort of over the next six, twelve, twenty, fourth, thirty 0:07:58.040 --> 0:08:01.000 months type thing? And it just accordingly or not. 0:08:02.160 --> 0:08:04.000 It's like a health check, as you kind of check 0:08:04.040 --> 0:08:05.960 and maybe once a year with your doctor if you 0:08:06.280 --> 0:08:08.920 can get in to see them and go, you know, 0:08:08.920 --> 0:08:11.320 how things looking. It's a chance to say, is my 0:08:11.480 --> 0:08:14.600 strategy for the long term working right now? And do 0:08:14.680 --> 0:08:16.040 I need to adjust it? Would they be right? 0:08:16.520 --> 0:08:20.400 Yeah? And I do think sometimes living through these moments 0:08:20.480 --> 0:08:22.840 are the reality check to actually go back and look 0:08:22.880 --> 0:08:25.400 and go, am I dipssified enough? Do I have enough 0:08:25.400 --> 0:08:29.520 cash on hand? Are those settings right for me? At 0:08:29.520 --> 0:08:32.880 the stage of life and for my risk appetite, I 0:08:32.880 --> 0:08:35.880 think when it comes to investing, it's really important to 0:08:36.679 --> 0:08:40.000 understand whether we are trying to maximize for the short 0:08:40.120 --> 0:08:42.960 term or optimize for the long term. And those are 0:08:42.960 --> 0:08:46.280 two very different things, and they're actually adulds with each other. 0:08:46.679 --> 0:08:50.400 So if you're optimizing for the long term most of 0:08:50.400 --> 0:08:52.600 the time, I would say by definition, that means not 0:08:52.640 --> 0:08:55.480 maximizing for the short term, and it means actually not 0:08:56.080 --> 0:08:59.760 maximizing for returns when times are good. And again psychologically 0:08:59.800 --> 0:09:03.839 that's quite hard. You know. For the last couple of years, 0:09:03.960 --> 0:09:06.360 I'm very well in Nvidio, and every time that I 0:09:06.440 --> 0:09:08.079 go and look at that stock, I go, oh, I 0:09:08.440 --> 0:09:10.920 think it's overpriced, and I will invest, and then sure 0:09:11.000 --> 0:09:12.760 enough I was wrong and the price will keep going up. 0:09:13.400 --> 0:09:15.520 And I do think there are times when things are 0:09:15.559 --> 0:09:19.079 going up where people could maximize short term returns by 0:09:19.200 --> 0:09:22.760 taking on more debt, having lower cash levels, going more 0:09:22.760 --> 0:09:26.320 into individual equities, and maybe having less di versification. But 0:09:26.480 --> 0:09:29.319 what that also does is it does make your portfolio 0:09:29.960 --> 0:09:35.560 more or less resilient to large volatility and large periers 0:09:35.559 --> 0:09:39.440 of uncertainty, and less resilient over the long term and 0:09:39.480 --> 0:09:41.600 for people that really are looking to optimize for the 0:09:41.640 --> 0:09:44.440 long term. And if we look at the formula of 0:09:44.679 --> 0:09:47.280 long term wealth, is your sort of return to the 0:09:47.280 --> 0:09:50.160 power of time. That keyword is time, like it's to 0:09:50.240 --> 0:09:53.120 the power of time. And so if you're thinking about 0:09:53.240 --> 0:09:56.600 endurance and thinking about maximizing for the long term, then 0:09:56.640 --> 0:10:00.440 sometimes that does mean holding back a bit in terms 0:10:00.480 --> 0:10:03.680 of trying to maximize over short periods of time, because 0:10:03.720 --> 0:10:07.040 actually you really want to make sure that you can 0:10:07.080 --> 0:10:09.240 survive the one and twenty year event or the one 0:10:09.280 --> 0:10:13.200 in forty year event, and that's quite different the what. 0:10:13.280 --> 0:10:14.880 If moment that we're all kind of going through. 0:10:14.920 --> 0:10:18.680 Now, that's right, and I think when we you know, 0:10:19.080 --> 0:10:21.839 what we do know so far is that over long 0:10:21.840 --> 0:10:24.920 periods of time, there's been lots of periods of volatility, 0:10:25.040 --> 0:10:28.360 but that markets overall have done well. And so that 0:10:28.480 --> 0:10:31.000 does go back to going, am I diverse wide enough? 0:10:31.120 --> 0:10:34.640 What does diversifacation look like? And is my time horizon 0:10:34.720 --> 0:10:38.079 to fuce point long enough? And I agree with five 0:10:38.160 --> 0:10:40.200 years is just not long enough in my view to 0:10:40.480 --> 0:10:42.120 be really thinking about the equity markets. 0:10:42.320 --> 0:10:44.760 You're looking more like ten or longer, yeah. 0:10:45.160 --> 0:10:49.320 Or longer? I mean, I think Warren Buffett made something like, 0:10:50.840 --> 0:10:53.160 I think something like ninety nine percent of returns are 0:10:53.240 --> 0:10:56.959 to returned sixty I think, and that's just because of 0:10:56.960 --> 0:10:59.640 that exponential, that power of time that it's all been 0:10:59.679 --> 0:11:00.839 in the the latter years. 0:11:01.040 --> 0:11:03.120 But he made some pretty smart decisions before that, I'm 0:11:03.120 --> 0:11:07.520 sure did. Coming back to the INSIDEX and you were 0:11:07.559 --> 0:11:10.160 talking about how we actually managed to perform a little 0:11:10.160 --> 0:11:13.240 bit out of step with those market moves. You know, 0:11:13.520 --> 0:11:16.880 there's obviously a lack there. I mean, has there been 0:11:17.200 --> 0:11:19.960 has it been a good guide for the volatility that's 0:11:19.960 --> 0:11:22.160 out there, the performance of that market, and are we 0:11:22.200 --> 0:11:24.199 sort of seeing it reflected or are there some local 0:11:24.240 --> 0:11:26.440 things that we need to think about there would. 0:11:26.200 --> 0:11:31.400 Definitely follow those trends. You're looking at it, and you 0:11:31.440 --> 0:11:35.800 don't tend to see the same peaks and troughs that 0:11:36.160 --> 0:11:39.960 you get on that daily basis over sort of the 0:11:40.000 --> 0:11:41.960 short period of time. I mean, that's where you saw 0:11:43.240 --> 0:11:45.960 five percent going on the NASDAK, you might get a 0:11:46.000 --> 0:11:47.160 three on the fifty. 0:11:47.440 --> 0:11:49.120 Might that make it a bit more of a defensive 0:11:49.440 --> 0:11:50.280 A definitely. 0:11:51.040 --> 0:11:54.400 I mean, when you're looking at the top ten, top twenty, 0:11:54.480 --> 0:11:58.400 you're looking at utilities you've got the three government controlled 0:11:58.559 --> 0:12:03.560 power companies, an airline which is government controlled, broadband provided 0:12:03.600 --> 0:12:06.080 that got out of got into businesses that it probably 0:12:06.080 --> 0:12:08.320 shouldn't have. Fisher and Pyble Healthcare is probably the most 0:12:08.320 --> 0:12:11.720 interesting one out of there and has been an astonishing success. 0:12:12.200 --> 0:12:15.079 There are always a lot of what if moments, and 0:12:15.800 --> 0:12:17.480 it does often make you wonder whether or not we've 0:12:17.520 --> 0:12:19.959 got the risk settings right. It's one thing for the 0:12:20.000 --> 0:12:23.520 market to be defensive, but the trading volumes on the 0:12:23.559 --> 0:12:26.960 nz X fifty were pretty low throughout this entire period, 0:12:27.000 --> 0:12:29.920 even though activity sort of perked up throughout it all. 0:12:30.120 --> 0:12:32.280 When you're looking back at sort of just the actual 0:12:32.679 --> 0:12:35.520 volume of shares trading, and you're looking at maybe one 0:12:35.600 --> 0:12:38.320 twenty one to thirty mili in turnover value of trading 0:12:38.360 --> 0:12:41.360 going through it on a daily basis, The rewatings of 0:12:41.520 --> 0:12:45.400 major indices a couple of weeks prior had massive volumes 0:12:45.480 --> 0:12:48.000 over that you're looking at sort of equivalent volumes going 0:12:48.040 --> 0:12:50.600 through the Breck search back in twenty sixteen around mid 0:12:50.679 --> 0:12:54.480 year like that, that seems out of step when you've 0:12:54.520 --> 0:12:56.920 got some of the biggest trading volumes going on in 0:12:56.920 --> 0:13:02.600 Wall Street over in Australia, and yes, people are sort 0:13:02.600 --> 0:13:05.720 of sitting and waiting to see what goes on. But 0:13:05.800 --> 0:13:10.560 you're just wondering, why is New Zealand not actually engaging 0:13:10.600 --> 0:13:13.880 in this? Is this just a function of the fact 0:13:13.880 --> 0:13:15.839 that a lot of our ownership is being done through 0:13:15.840 --> 0:13:18.440 passive ETFs now and these are the vehicles that people 0:13:18.440 --> 0:13:21.240 are flocking to. Has really been quite curious is to 0:13:21.280 --> 0:13:24.160 wonder have we got our risk settings right for what 0:13:24.280 --> 0:13:27.280 should be something that is there to support not only 0:13:27.840 --> 0:13:31.679 deeper capital markets for new businesses to be coming out there, 0:13:31.679 --> 0:13:34.199 but for investors to get involved in. You struggle to 0:13:34.200 --> 0:13:36.560 see the imagination getting captured by the New Zealand public 0:13:36.600 --> 0:13:38.880 at a time when more of the New Zealand public 0:13:38.960 --> 0:13:42.200 is finally getting over the finance company debacle, the eighty 0:13:42.240 --> 0:13:46.880 seven crash, You're left sort of scratching your head, going 0:13:47.559 --> 0:13:48.400 what gives. 0:13:48.360 --> 0:13:50.280 The data would suggest though, that we are getting over 0:13:50.320 --> 0:13:52.679 those things that if you look at even at the 0:13:52.760 --> 0:13:57.920 Cheeses index that Cheesy's produces quarterly, people are diving into 0:13:57.920 --> 0:14:01.240 those marks, not necessarily the nsiet x point, but they're 0:14:01.240 --> 0:14:02.440 getting amongst it, don't they. 0:14:02.600 --> 0:14:06.079 Yeah, I've been really hardened to see the response to 0:14:06.120 --> 0:14:08.920 this period of volatility, where the latest figures from the 0:14:08.960 --> 0:14:12.640 Cheesy's Index over the quarter January to March showed again 0:14:12.720 --> 0:14:16.720 continuing strong netbuying through this period, and then also a 0:14:16.800 --> 0:14:21.240 shift away from sort of more individual companies into more 0:14:21.280 --> 0:14:26.280 ETFs and diversified funds as well as into defensive individual 0:14:26.280 --> 0:14:29.320 companies as well. And I do think that reflects the 0:14:29.320 --> 0:14:31.560 fact that we are probably in for a period of 0:14:31.640 --> 0:14:37.760 continued volatility and divesification is a really important thing to 0:14:37.920 --> 0:14:41.600 make your portfolio more resilient to sort of withstand withstand 0:14:41.640 --> 0:14:47.560 that period. I also think actually even before this tariff 0:14:47.560 --> 0:14:50.200 war and these geopolitical events that we're seeing play out. 0:14:50.600 --> 0:14:53.640 You know, if I look at twenty twenty four, in 0:14:53.680 --> 0:14:55.640 the year, the S and P five hundred was up, 0:14:55.680 --> 0:14:58.440 I think about twenty five percent, but about half of 0:14:58.440 --> 0:15:02.680 those companies had losses so had a negative return for 0:15:02.760 --> 0:15:05.880 that period. And actually it's a very few number of 0:15:05.960 --> 0:15:09.520 companies that accounted for the majority of that return. And 0:15:09.680 --> 0:15:11.120 I think that is a trend that we're seeing more 0:15:11.160 --> 0:15:13.960 and more, particularly as you have large tech players with 0:15:14.200 --> 0:15:19.240 high operating leverage and you're seeing some more global companies, 0:15:20.160 --> 0:15:23.080 you are seeing that the drive to the tails and 0:15:23.120 --> 0:15:25.960 the tails that are driving for the big outcomes, and 0:15:26.080 --> 0:15:29.000 unless you can you know, really pick who those winners 0:15:29.000 --> 0:15:32.720 will be. And I mean I certainly can't. Definitely, we're 0:15:32.760 --> 0:15:35.080 not near my day job if I could do that. 0:15:35.400 --> 0:15:39.080 But you know, unless you can do that, well, then 0:15:40.120 --> 0:15:41.840 you know you're it's going to be hard to even 0:15:41.880 --> 0:15:45.120 beat the market return if you haven't got decent exposure 0:15:45.160 --> 0:15:47.320 to those very few sort of fewer and fewer stocks 0:15:47.320 --> 0:15:50.920 that are driving the big outcomes. And so I do 0:15:51.000 --> 0:15:55.560 think that moving more to that diversified approach is really 0:15:55.600 --> 0:15:58.520 helpful as we're seeing that trend even beyond you know, 0:15:58.600 --> 0:16:02.240 the volatility with off the back of the Trump saga. 0:16:02.280 --> 0:16:04.120 That's just also one of those issues that you get 0:16:04.120 --> 0:16:07.360 around the shifting around the ETFs and the such. It's 0:16:07.360 --> 0:16:10.880 hard to look at say like a QQQ, the Nasdaq 0:16:10.920 --> 0:16:13.080 ETF or the S and P five hundred and really 0:16:13.080 --> 0:16:16.160 consider either of those to be diversified given the concentration 0:16:16.240 --> 0:16:19.720 of Magnificent seven and you know, just thinking about, like 0:16:19.840 --> 0:16:23.000 you know, people on Shares's platform, this is we investors 0:16:24.040 --> 0:16:27.680 being drawn more to US stocks and they're going down 0:16:27.760 --> 0:16:31.080 this you get told to diversify your portfolio. This American 0:16:31.080 --> 0:16:33.240 market should be one that you should go into. But 0:16:33.280 --> 0:16:35.800 if you're only going into seven companies that are making 0:16:35.880 --> 0:16:37.520 up the dominance of it, you know, it's hard to 0:16:37.520 --> 0:16:40.960 wrap your head around how you're actually diversifying your investment there, 0:16:41.080 --> 0:16:42.680 or if you're just trying to ride the wave that 0:16:42.720 --> 0:16:45.000 we've all been don for what last seven eight nine 0:16:45.080 --> 0:16:45.520 years now? 0:16:45.640 --> 0:16:47.880 I mean to fourth point though. Yeah, when you look 0:16:47.920 --> 0:16:50.120 at for example one E S and P five hundred ETF, 0:16:50.880 --> 0:16:54.080 it is dominated by a very few number of stocks. 0:16:54.240 --> 0:16:56.440 And I mean I remember a time on the ins 0:16:56.480 --> 0:16:59.400 oft X fifty where I think it was fishing, Packal, Healthcare, 0:16:59.400 --> 0:17:02.200 and A two milk collectively where something like thirty percent 0:17:02.240 --> 0:17:05.600 of the index. And so unless you had for fund 0:17:05.600 --> 0:17:07.760 managers that didn't have a massive exposure to those two, 0:17:07.800 --> 0:17:11.600 they almost always underperformed index at that time. What we 0:17:11.640 --> 0:17:14.440 are also seeing because we call a lot of our 0:17:14.920 --> 0:17:17.600 keep we saving members, and we are talking to investors 0:17:17.640 --> 0:17:20.919 all the time. And another thing we're seeing is we're 0:17:20.920 --> 0:17:24.560 actually fine larging investors not disengage. They're not going I 0:17:24.640 --> 0:17:26.360 just put my head in the set end and try 0:17:26.359 --> 0:17:29.280 and just forget about this period we are seeing investors 0:17:29.400 --> 0:17:33.000 actually continue to check in with their balances, but also 0:17:33.040 --> 0:17:35.280 they're saying, actually, this is just part and parcel of 0:17:35.400 --> 0:17:37.919 being an investor. And I think that really is a 0:17:37.960 --> 0:17:41.280 shift in mentality of what we've seen in previous periods, 0:17:41.320 --> 0:17:44.520 particularly amongst retail where I'm talking to investors, I've seen 0:17:44.520 --> 0:17:48.920 a really big shift in psychology where it is much 0:17:48.960 --> 0:17:51.760 more volatility is the price of investing, and it's not 0:17:51.800 --> 0:17:54.199 a penalty, it's not for doing something wrong. It's literally 0:17:54.200 --> 0:17:57.639 the price of being in the market. And actually, when 0:17:57.640 --> 0:18:00.440 I do talk to investors, the things that they're about 0:18:00.640 --> 0:18:03.400 is not volatility in the short term, and they shouldn't 0:18:03.440 --> 0:18:05.560 be like for investors taking a long enough time horizon 0:18:05.600 --> 0:18:09.840 and advertate, volatility in itself shouldn't be the issue. The 0:18:09.880 --> 0:18:12.800 issue is, you know, can I lose some all of 0:18:12.800 --> 0:18:15.600 my money? Or am I going to get inadequate returns 0:18:15.600 --> 0:18:17.720 for the risk I'm taking on? Those are the issues 0:18:17.720 --> 0:18:20.640 that investors need to be concerned with, not that short 0:18:20.720 --> 0:18:21.600 term volatility. 0:18:21.960 --> 0:18:23.920 Yeah, I guess key. We saver is probably a huge 0:18:23.960 --> 0:18:27.000 part of that equation. Right, people are now directly invested 0:18:27.040 --> 0:18:28.520 that can sort of see a little bit about their 0:18:28.560 --> 0:18:32.199 peace of the world. And that's probably leading a lot 0:18:32.240 --> 0:18:34.399 of financial literacy as well. I guess the fact that 0:18:34.400 --> 0:18:37.160 it's locked in right that people are in there until 0:18:37.560 --> 0:18:39.800 sixty five or whatever, or until they buy their first house, 0:18:39.840 --> 0:18:41.399 if that's where they're trying to push it to. So 0:18:41.440 --> 0:18:42.680 that's got to be a big part of this. 0:18:42.680 --> 0:18:45.159 Yeah, totally. And dolo cost averaging in that is the 0:18:45.200 --> 0:18:48.880 key saver strategy. Like every month money gets deployed, whether 0:18:49.000 --> 0:18:51.080 or not people are feeling good about it and looking 0:18:51.119 --> 0:18:55.800 at the balance and obviously only investing at the top 0:18:55.800 --> 0:18:57.480 of the market is not a good strategy. So dolo 0:18:57.520 --> 0:19:01.000 cost averaging does rely on investing when markets go down 0:19:01.080 --> 0:19:04.080 and continue to deploy money during those moments, which, as 0:19:04.119 --> 0:19:06.440 we've talked about psychologically, is challenging. 0:19:06.960 --> 0:19:08.600 I mean, we do have some slightly unusual KEI we 0:19:08.680 --> 0:19:10.840 server settings here where we sort of tax it going in, 0:19:10.880 --> 0:19:13.840 whereas a lot of other countries will just say you 0:19:13.880 --> 0:19:15.840 make the money, you grow, your pie, will have it 0:19:15.880 --> 0:19:17.920 when you cash it out when you're retired. Things like 0:19:18.320 --> 0:19:20.000 is it time for us to look at that and 0:19:20.040 --> 0:19:21.520 say we need a health check on We. 0:19:21.480 --> 0:19:24.199 Should be looking at that all the time, you know. 0:19:24.480 --> 0:19:29.600 The esteemed commentator Brian Fellow, who is very smart columnist 0:19:29.600 --> 0:19:33.199 at The Herald for many, many many years, would regularly 0:19:33.240 --> 0:19:36.040 point out a bit the horrendous change that was made 0:19:36.040 --> 0:19:38.760 when Roger Douglass was Finance Minister to change that setting 0:19:38.760 --> 0:19:41.160 around the tax you're clipping the ticket on the way 0:19:41.160 --> 0:19:43.399 through and what government wants to give up that money, 0:19:44.200 --> 0:19:49.120 which the ultimate taxpayer doesn't see. You're not aware of 0:19:49.960 --> 0:19:53.280 how much you're actually paying. Until we had the sort 0:19:53.280 --> 0:19:56.880 of it might have been the COVID crash. When you're 0:19:56.880 --> 0:19:59.040 looking at the annual key we save balances, it was 0:19:59.400 --> 0:20:01.400 almost about that time where the tax take was going 0:20:01.400 --> 0:20:04.520 to be bigger than the fees generated. Now, you know, 0:20:05.359 --> 0:20:07.320