1 00:00:07,133 --> 00:00:10,453 Speaker 1: You're listening to the Saturday Morning with Jack Team podcast 2 00:00:10,573 --> 00:00:13,453 Speaker 1: from newstalk z'b quarter. 3 00:00:13,173 --> 00:00:16,613 Speaker 2: To eleven on News talkszb Ed mcnight from Obi's Partners 4 00:00:16,693 --> 00:00:18,973 Speaker 2: is here with us this morning. We're talking money ed 5 00:00:19,133 --> 00:00:23,053 Speaker 2: and an alternative to trying to time the market, because 6 00:00:23,053 --> 00:00:24,933 Speaker 2: buying at the bottom of the market is all well 7 00:00:24,973 --> 00:00:27,453 Speaker 2: and good in principle, but of course timing the market 8 00:00:27,493 --> 00:00:30,613 Speaker 2: is nigh impossible. Then you've got a better option dollar 9 00:00:30,693 --> 00:00:33,893 Speaker 2: cost averaging. So yeah, why is this better than trying 10 00:00:33,893 --> 00:00:35,093 Speaker 2: to time the market? Do you reckon? 11 00:00:35,693 --> 00:00:39,293 Speaker 3: Well, I suppose us keyws have this obsession about trying 12 00:00:39,293 --> 00:00:42,173 Speaker 3: to invest at the absolute lowest point in the market. 13 00:00:42,613 --> 00:00:45,293 Speaker 3: And I think implicit in that is this idea that 14 00:00:45,453 --> 00:00:47,773 Speaker 3: buying at the bottom of the market gives you the 15 00:00:47,853 --> 00:00:51,973 Speaker 3: lowest price. But that's not always true. And I remember 16 00:00:52,013 --> 00:00:54,933 Speaker 3: reading an example from a great book, Girls That invest 17 00:00:54,933 --> 00:00:57,493 Speaker 3: Who was written by a friend of mine's some Curve, 18 00:00:57,893 --> 00:01:01,053 Speaker 3: and she gave us awesome example about, well, what if 19 00:01:01,053 --> 00:01:04,333 Speaker 3: you started forty years ago and you put two hundred 20 00:01:04,413 --> 00:01:08,253 Speaker 3: dollars a month into investments, But you Jack in this case, 21 00:01:08,333 --> 00:01:11,293 Speaker 3: you're a market timing genius and you're able to perfectly 22 00:01:11,333 --> 00:01:14,333 Speaker 3: predict the bottom of the market. So you start forty 23 00:01:14,413 --> 00:01:16,933 Speaker 3: years ago, you put your two hundred dollars a week away, 24 00:01:16,973 --> 00:01:19,093 Speaker 3: and you save it. You save it the next month 25 00:01:19,133 --> 00:01:21,173 Speaker 3: as well, you save it the next month as well, 26 00:01:21,253 --> 00:01:23,773 Speaker 3: and as soon as the market crashes, your piling your money, 27 00:01:23,773 --> 00:01:26,533 Speaker 3: and you keep doing this for forty years. Well, after 28 00:01:26,613 --> 00:01:28,853 Speaker 3: forty years you would have made about nine hundred and 29 00:01:28,853 --> 00:01:31,853 Speaker 3: fifty grand, which is a great, great nest egg. You'd 30 00:01:31,893 --> 00:01:34,173 Speaker 3: be very happy with that over forty years. Shows you 31 00:01:34,213 --> 00:01:37,373 Speaker 3: the power of compounding interest. But Leeds say, in said 32 00:01:37,413 --> 00:01:39,013 Speaker 3: forty years ago, you said, okay, I've got my two 33 00:01:39,053 --> 00:01:41,013 Speaker 3: hundred dollars a month, but I'm just going to put 34 00:01:41,013 --> 00:01:44,453 Speaker 3: it into investments and shares, and I'm not going to 35 00:01:44,493 --> 00:01:46,733 Speaker 3: care whether the markets aren't, the markets down, I'm just 36 00:01:46,773 --> 00:01:49,613 Speaker 3: going to do it. Well blow me down. You forty 37 00:01:49,693 --> 00:01:52,733 Speaker 3: years later would have just under one point four million 38 00:01:52,773 --> 00:01:56,253 Speaker 3: dollars in the bank. And I thought, this is fascinating. 39 00:01:56,293 --> 00:02:00,253 Speaker 3: So why does this happen? Well, it's because share markets 40 00:02:00,293 --> 00:02:04,173 Speaker 3: and all asset markets tend to increase in value over time. 41 00:02:04,493 --> 00:02:06,333 Speaker 3: And so I'll give you an example that I'm not 42 00:02:06,533 --> 00:02:09,213 Speaker 3: that a little bit clearer. The bottom of the market 43 00:02:09,413 --> 00:02:12,013 Speaker 3: for the S and P five hundred, they had a 44 00:02:12,013 --> 00:02:14,093 Speaker 3: bit of a dip September twenty twenty two, there was 45 00:02:14,133 --> 00:02:17,133 Speaker 3: a bottom of the market. But if you invested into 46 00:02:17,173 --> 00:02:21,093 Speaker 3: an index tracking fund at any time before March twenty 47 00:02:21,133 --> 00:02:24,013 Speaker 3: twenty one, you would have had a cheaper price. Right, 48 00:02:24,213 --> 00:02:27,613 Speaker 3: I'll give you another example market bottom down S and 49 00:02:27,613 --> 00:02:30,893 Speaker 3: P five hundred again, March twenty twenty COVID lockdowns. But 50 00:02:30,933 --> 00:02:33,653 Speaker 3: if you'd invested in an index tracking fund any time 51 00:02:33,733 --> 00:02:37,653 Speaker 3: before September twenty seventeen, you would have got in at 52 00:02:37,693 --> 00:02:42,413 Speaker 3: a cheaper price. And so what sometimes people think markets 53 00:02:42,453 --> 00:02:44,693 Speaker 3: do is they start at ten dollars, they go to 54 00:02:44,733 --> 00:02:46,613 Speaker 3: twenty dollars, they go to ten dollars, they go to 55 00:02:46,653 --> 00:02:49,653 Speaker 3: twenty dollars. But that's not how it works. All types 56 00:02:49,653 --> 00:02:52,413 Speaker 3: of assets tend to increase in value over time, and 57 00:02:52,453 --> 00:02:55,973 Speaker 3: so often the earlier you get in, the cheaper price 58 00:02:56,013 --> 00:02:59,093 Speaker 3: you'll get, and often lower than the bottom of the market. 59 00:02:59,733 --> 00:03:02,493 Speaker 3: I've got one more example for you, just in terms 60 00:03:02,533 --> 00:03:06,213 Speaker 3: of property prices as well. So again I work with them, 61 00:03:06,613 --> 00:03:07,973 Speaker 3: is a lot they all want to buy at the 62 00:03:07,973 --> 00:03:10,373 Speaker 3: bottom of the market. Well, the bottom of the market 63 00:03:10,373 --> 00:03:13,213 Speaker 3: in Auckland was twenty twenty four. But again, if you 64 00:03:13,253 --> 00:03:16,053 Speaker 3: had purchased an investment property or any sort of property 65 00:03:16,133 --> 00:03:19,093 Speaker 3: at any time before September twenty twenty, you would have 66 00:03:19,093 --> 00:03:22,533 Speaker 3: bought at the lower price. December two thousand and eight, 67 00:03:22,933 --> 00:03:26,373 Speaker 3: there was a crash again because of the GFC, but 68 00:03:26,413 --> 00:03:28,413 Speaker 3: if you had bought it any time before January two 69 00:03:28,453 --> 00:03:31,413 Speaker 3: thousand and six, you would have got in again at 70 00:03:31,453 --> 00:03:33,973 Speaker 3: a lower price. And so I just want to challenge 71 00:03:34,053 --> 00:03:37,613 Speaker 3: Kiwis to think, Hey, it's not always about trying to 72 00:03:37,653 --> 00:03:41,413 Speaker 3: time the market perfectly, because you probably can't do that anyway, 73 00:03:41,693 --> 00:03:45,693 Speaker 3: But it's about continuously investing through the ups and through 74 00:03:45,693 --> 00:03:48,773 Speaker 3: the downs, and often you'll come out better than just 75 00:03:48,973 --> 00:03:51,773 Speaker 3: even if you were able to time that market perfectly. 76 00:03:52,493 --> 00:03:55,413 Speaker 4: Think it's sort of you have to sort of almost 77 00:03:55,653 --> 00:03:58,613 Speaker 4: break with a kind of intuition, you know what I mean, Like, Yeah, 78 00:03:58,653 --> 00:04:01,413 Speaker 4: you have to, like it's a classic like using logic 79 00:04:01,733 --> 00:04:07,093 Speaker 4: and rational thinking to kind of, yeah, to override what 80 00:04:07,133 --> 00:04:08,613 Speaker 4: your natural impulses might be. 81 00:04:09,613 --> 00:04:13,813 Speaker 3: I think it's just about resetting our expectations around. Well, yes, 82 00:04:13,893 --> 00:04:15,893 Speaker 3: we do want to get the lowest price possible so 83 00:04:15,933 --> 00:04:18,493 Speaker 3: we can make them both the best gains possible. But 84 00:04:18,533 --> 00:04:20,733 Speaker 3: it's just well, what's going to do that for us? 85 00:04:20,853 --> 00:04:23,093 Speaker 3: Is it going to be trying to time the market 86 00:04:23,173 --> 00:04:25,733 Speaker 3: perfectly or is it realizing we can't do that and 87 00:04:25,813 --> 00:04:28,453 Speaker 3: actually the better returns come in by getting into the 88 00:04:28,493 --> 00:04:30,933 Speaker 3: market sooner. And I think we all do this anyway 89 00:04:30,973 --> 00:04:34,093 Speaker 3: with our Kiwi savers. Yeah, even if there's a market crash, 90 00:04:34,133 --> 00:04:35,733 Speaker 3: it's not like we all go and say, right, let 91 00:04:35,773 --> 00:04:38,013 Speaker 3: me raise my contributions now I want to put more 92 00:04:38,053 --> 00:04:41,173 Speaker 3: into Kiwi Saver. We just keep doing our three percent 93 00:04:41,213 --> 00:04:44,453 Speaker 3: to our four percent every single week, month, fortnite. However, 94 00:04:44,493 --> 00:04:47,893 Speaker 3: often we get paid and one day you open up 95 00:04:47,933 --> 00:04:50,893 Speaker 3: your bank cap and you're really surprised at actually whether 96 00:04:50,933 --> 00:04:52,733 Speaker 3: the market was up or whether the market was down. 97 00:04:52,813 --> 00:04:54,013 Speaker 3: I actually did okay out of this. 98 00:04:54,293 --> 00:04:54,533 Speaker 4: Yeah. 99 00:04:54,573 --> 00:04:56,573 Speaker 2: It also means you can kind of save yourself the 100 00:04:56,613 --> 00:04:59,973 Speaker 2: anxiety that comes with the volatility, especially with the stock 101 00:05:00,013 --> 00:05:01,813 Speaker 2: market like it is right now, right up and down 102 00:05:01,813 --> 00:05:03,853 Speaker 2: and up and down, and the president who can tweet 103 00:05:03,853 --> 00:05:06,613 Speaker 2: out something and things change in a moment. You know, 104 00:05:06,653 --> 00:05:09,093 Speaker 2: you can save yourself all of that anxiety by just 105 00:05:09,133 --> 00:05:11,693 Speaker 2: trying to form a habit. We're by you dollar cost 106 00:05:11,773 --> 00:05:16,013 Speaker 2: average over time, thank you so much. Those are fascinating examples, 107 00:05:16,013 --> 00:05:18,293 Speaker 2: and we really appreciate it. That's evening night from Obi's 108 00:05:18,293 --> 00:05:19,493 Speaker 2: Partners with Us This Morning. 109 00:05:20,253 --> 00:05:23,373 Speaker 1: For more from Saturday Morning with Jack Tame, listen live 110 00:05:23,453 --> 00:05:26,293 Speaker 1: to News Talks d B from nine am Saturday, or 111 00:05:26,333 --> 00:05:28,253 Speaker 1: follow the podcast on iHeartRadio