Speaker 1: Hello.
Speaker 2: My name's Santasha Nabananga Bamblet. I'm a proud yr the
Speaker 2: Order Kerney Whoalbury and a waddery woman. And before we
Speaker 2: get started on She's on the Money podcast, I would
Speaker 2: like to acknowledge the traditional custodians of the land of
Speaker 2: which this podcast is recorded on a wondery country, acknowledging
Speaker 2: the elders, the ancestors and the next generation coming through
Speaker 2: as this podcast is about connecting, empowering, knowledge sharing and
Speaker 2: the storytelling of you to make a difference for today
Speaker 2: and lasting impact for tomorrow.
Speaker 1: Let's get into it. She's on the Money.
Speaker 3: She's on the Money.
Speaker 4: Hello, and welcome to She's on the Money, the pod
Speaker 4: cast for people who love Green Flags.
Speaker 1: Oh that sounds like a good podcast.
Speaker 4: I'm kind of excited for this one being well me too.
Speaker 1: Let's get into it.
Speaker 4: My name is Beck Side and as usual, I'm joined
Speaker 4: by Victoria de Vine.
Speaker 5: Hello.
Speaker 1: I'm excited about this because I love a green flag.
Speaker 1: I mean a lot of my girlfriends seem to love
Speaker 1: red flags.
Speaker 4: I mean, that's the issue.
Speaker 1: What my friends said the other day, I was like,
Speaker 1: that is such a red flag. I was like, I
Speaker 1: feel like we're talking about relationships, Like all he's doing
Speaker 1: is showing you red flags, and she's like, yeah, I
Speaker 1: love the carnival. I was like, Aha, you're doing this
Speaker 1: to yourself. Today we're going to talk about green flags.
Speaker 1: And I hope she's listening because it's about investment, not
Speaker 1: relationship advice, which apparently she wasn't going to take from
Speaker 1: me anyway.
Speaker 4: It's transferable, but we will talk about why green flags
Speaker 4: are the ones to walk out.
Speaker 1: They're the best kind.
Speaker 4: They're the best kind of flags. You are well aware
Speaker 4: that I am trying to fix up my finances. Yes,
Speaker 4: probably not doing a great job right now, but that's.
Speaker 1: Because we still have to sit down. I'm going to like,
Speaker 1: sit you down and I'm going to take you through
Speaker 1: the money masterclass and be like and then do this,
Speaker 1: and then do that. Honestly, if it comes to it,
Speaker 1: I'm taking your money off you.
Speaker 4: I think that's probably where we're gonna get it.
Speaker 1: Like, it's just going to end up with me being like,
Speaker 1: that's not yours. Sit over there in the corner.
Speaker 4: I need that. But no, today we're talking about investing.
Speaker 4: I've never invested in a company or bought shares, and
Speaker 4: I don't really know what companies should I invest in.
Speaker 4: I know you can't give like personal advice right now
Speaker 4: for sure. I mean maybe you can't.
Speaker 1: No, I can't. Damn.
Speaker 4: I was kind of excited.
Speaker 1: I was like, no one can legally like you won't
Speaker 1: shine a podcast that is Australian that will come out
Speaker 1: and say, oh this share this share in this share
Speaker 1: perfect for beginners because that is personal advice and it's
Speaker 1: actually illegal to do that. So if that's what you're
Speaker 1: looking for, I'm just going to burst the bubble now
Speaker 1: and be like, h nobody can legally provide that. And
Speaker 1: if they are and they have said something like that,
Speaker 1: you kind of go, that's a red flag, red flas
Speaker 1: you should know you shouldn't be doing that. And I
Speaker 1: can almost guarantee that they have absolutely no license to
Speaker 1: be having that conversation anyway, so you shouldn't be taking
Speaker 1: their advice. To begin with this episode today, I'm going
Speaker 1: to talk a little bit more technically, so we're going
Speaker 1: to talk about per ratios. We can shook about PB ratio.
Speaker 1: We're going to talk about the PS ratio, what they mean,
Speaker 1: what is an ipo, how does all of that work,
Speaker 1: and what does it mean, when it comes to green flags,
Speaker 1: we're not so much talking about your ethics and your
Speaker 1: values and what is a green flag in that perspective,
Speaker 1: Because if we want to talk about my ethics and values, obviously,
Speaker 1: if you know me well enough, you've know that I'm
Speaker 1: looking for sustainable, ethical businesses that are relatively environmentally friendly,
Speaker 1: that care about their staff and all of that stuff.
Speaker 1: Will do a whole episode on that. That is fine,
Speaker 1: But that's more ethics than it is going, Hey, Beck,
Speaker 1: how do we value a company? What I can do
Speaker 1: is help you get the right information so that you
Speaker 1: can choose the right investments for you. And it's not
Speaker 1: as hard as people think it is. Like, and I
Speaker 1: think that we all get analysis paralysis when it comes
Speaker 1: to picking shares. You're like, well, I don't know what
Speaker 1: one I pick. And I'm like, well, why are we
Speaker 1: talking about what share you're picking, Beck, when you don't
Speaker 1: even have a shared trading form? Like there's so much
Speaker 1: we need to set up first, Like why are we
Speaker 1: talking about investing Beck when I know your budget's not
Speaker 1: on track? No, And like that's not a bad thing.
Speaker 1: There's nothing shameful or awful about it. It's more beck,
Speaker 1: let's get your financial house sorted so that then we
Speaker 1: know how much we can invest comfortably, so that you're
Speaker 1: not shooting yourself in the foot later and going, oh
Speaker 1: my god, Via, I actually needed that money, and you
Speaker 1: don't have to pull it out because you go, well, actually,
Speaker 1: v I reckon, I can afford thirty bucks a month,
Speaker 1: and then I go, oh, great, well let's work with that.
Speaker 1: Whereas other people might go, I'm so excited to start
Speaker 1: my investment journey. I'm just going to really prioritize this.
Speaker 1: And then they're like picking one thousand dollars or something
Speaker 1: and then realizing that they can't afford their current insurance
Speaker 1: or like groceries aren't happening in the same way that
Speaker 1: they were before, and they're like transferring money out of
Speaker 1: their savings to make this other thing. Like it becomes
Speaker 1: an absolute mess, a carnival. You could say, oh, we
Speaker 1: like it okay, but it could become like that, and
Speaker 1: then you become overwhelmed and you're like, investing's not for me.
Speaker 1: It's all too complicated, it's too hard. It's not like that.
Speaker 2: Hmm.
Speaker 4: Okay, Well, before we go too far into this episode,
Speaker 4: can you just remind all of us why we should
Speaker 4: consider investing in.
Speaker 1: Companies because we lack money. I see, you know what
Speaker 1: I love? Compound interest.
Speaker 2: Yeah.
Speaker 1: Compound interest is the money that your money made because
Speaker 1: it was invested, and then that money that your money
Speaker 1: made it starts making more money. And then when your
Speaker 1: money that the money made starts making money, that's free money, Beck,
Speaker 1: and I love free money.
Speaker 4: WHOA, Okay, there's a few steps to get there. But
Speaker 4: once you're there, do you like free money?
Speaker 1: Beck?
Speaker 4: I don't hate free money?
Speaker 1: Oh, you don't hate it? Like just the partial though
Speaker 1: I'm not sure you know, I could take or only
Speaker 1: like it if there's no catches exactly.
Speaker 4: That's yeah.
Speaker 1: Yeah, Like why are you trying to offer me fifty bucks?
Speaker 2: Ye? Sir?
Speaker 4: What's going on here?
Speaker 2: Yeah?
Speaker 1: Exactly. So today I want to touch on I guess
Speaker 1: the importance of investing. You can start investing today. You
Speaker 1: actually don't need a lot of money to do it.
Speaker 1: We've spoken about this on the podcast before. There still
Speaker 1: seems to be this I guess myth that you need
Speaker 1: a lot of money to become an in And nowadays
Speaker 1: we have platforms and I'll plug share Z's because obviously
Speaker 1: we work with them. We adore them. A lot of
Speaker 1: our community adore them. If you want to sign up,
Speaker 1: use the code SotM and you'll get ten bucks in
Speaker 1: your account to start, which is very sexy. Guess what
Speaker 1: that is free for any But with Sharez's you can
Speaker 1: invest with as little as one cent.
Speaker 4: That's pretty good.
Speaker 1: Like, I can't think of something more accessible.
Speaker 4: Mm.
Speaker 1: I like that actually because they do what's called fractional investing.
Speaker 1: So beck if you went to a normal share trading platform,
Speaker 1: you're like, I really want to purchase a share. I've
Speaker 1: decided it's going to be an individual company. Let's say
Speaker 1: it's beach p. I don't know why that one came
Speaker 1: into my head, but that was the first one that
Speaker 1: came into my head. Maybe because it's like a spicy
Speaker 1: it's got green flags, it's got red flags. Like I
Speaker 1: don't know this would divide people, right, But if you
Speaker 1: went to your normal share trading platform, for you to
Speaker 1: buy one share in VHP, it's going to be about
Speaker 1: forty six bucks and you might go will be I
Speaker 1: just said that I had thirty dollars a month to invest.
Speaker 1: I can't even buy one VHP share. What Shares's offers,
Speaker 1: and this is not me trying to sell their product,
Speaker 1: it's me trying to explain fractional investing. They go, ah, well,
Speaker 1: how much money have you got back? And you might
Speaker 1: go I've got thirty bucks. So you might go, actually,
Speaker 1: I've got ten bucks, and they go, yeah, no worries,
Speaker 1: how but we give you ten dollars worth of BHP
Speaker 1: shares and they do what's called fractional investing, So instead
Speaker 1: of you having to buy a whole share, you still
Speaker 1: get exposure to that asset. You can purchase that asset,
Speaker 1: but for what your budget is, not what the share
Speaker 1: price is, which is really nice because a lot of
Speaker 1: people want exposure to particular companies and you might go, oh,
Speaker 1: but that one's too expensive for me to buy, like
Speaker 1: one off. So it's kind of nice to be able
Speaker 1: to build your portfolio in a way that suits you.
Speaker 1: And that's one of the reasons why I really love
Speaker 1: this concept of fractional investing. Is it safe, Yes, absolutely,
Speaker 1: Everything's still held in the same way an ETF would
Speaker 1: be held, So like, you are absolutely fine. I know
Speaker 1: a lot of people like, oh, but is it risky.
Speaker 1: I'm like, it's not more risky than any other type
Speaker 1: of investment, so don't stress too much. Right, So it's
Speaker 1: very unlike property, where you know, I can't be like, hey, Beck,
Speaker 1: do you want to buy property and you'd be like, yeah,
Speaker 1: but I've only got enough money for the bathroom, So
Speaker 1: can we just buy the bathroom now and by the
Speaker 1: rest of the house later. Now it doesn't work like that.
Speaker 4: That would be nice though.
Speaker 1: You also don't have to be like a night trader
Speaker 1: to make money in the share market. I feel like
Speaker 1: there's this massive misconception that, like, to be a good
Speaker 1: investor you need to sit in a dark room with
Speaker 1: like three computer screens in front of you trading shares.
Speaker 1: That's not what HAPs I pictured. Yeah, like you know,
Speaker 1: I invest, There's no way I would be doing that.
Speaker 1: I want to sleep at night, not trade at night.
Speaker 1: And the risk of trading is actually incredibly high because
Speaker 1: you're making consistent, calculated decisions. You've got to be educated
Speaker 1: on that, and like most people are not. Do I
Speaker 1: sometimes have a little bit of a play in the
Speaker 1: trade market, of course they do. I'm an ex financial advisor.
Speaker 1: That was my bread and butter, Like I love it,
Speaker 1: but like, you don't do that to make lots of money.
Speaker 1: You do that from my perspective because it's fun, because
Speaker 1: research tells us that you're going to get worse returns
Speaker 1: if you do that than if you put your money
Speaker 1: into a stable investment over the long period of time.
Speaker 1: Because what we know to be true, Beat is that
Speaker 1: time is what matters most in your investment journey, not
Speaker 1: how smart you are or how impressive the investments that
Speaker 1: you've purchased are, but more how long you're exposed to
Speaker 1: an asset class. Also, the sexiest part of the money
Speaker 1: that your money makes making money, so compounding interest back
Speaker 1: is that it becomes passive, so you're no longer having
Speaker 1: to trade your time, so the hours that you work
Speaker 1: each week for money, but money is still coming in
Speaker 1: the door. You want to get paid for staying in
Speaker 1: bed Beck. Yeah, that's how with investing. Yeah, So what
Speaker 1: happens in the future is let's use my favorite example,
Speaker 1: which I've used a lot on the podcast before, and
Speaker 1: it's that one point two million dollar investment portfolio. So
Speaker 1: we know that if you started at the age of
Speaker 1: twenty one investing five hundred dollars each and every single
Speaker 1: month up until your retirement age of sixty five, you
Speaker 1: at an average rate of return of seven and a
Speaker 1: half percent, will very likely have an investment portfolio worth
Speaker 1: one point two million dollars. Right, so you go, We'll
Speaker 1: be that makes sense because I was exposed to the
Speaker 1: market for that long. Well, no, because if you've just
Speaker 1: saved it instead, Beck, you'd have two hundred and forty
Speaker 1: thousand dollars.
Speaker 4: Right.
Speaker 1: So you're making by giving yourself exposure to the share
Speaker 1: market over a long period of time. When million dollars
Speaker 1: in free dollar.
Speaker 4: Ruse, that's free money back to me free right?
Speaker 1: But Beck, what does that mean once you retire, do
Speaker 1: you just start spending that one point two million dollars?
Speaker 1: The answer is no, No, no, because the money that
Speaker 1: your money has made is still invested and it's still
Speaker 1: making money. And if we be a little bit cautious,
Speaker 1: so let's pretend that once you retire, your portfolio is
Speaker 1: only returning five percent because we're being a bit more conservative.
Speaker 1: Is that what the Australian share market returns back?
Speaker 4: No, it's not.
Speaker 1: The share market in Australia or average over a thirty
Speaker 1: year period of time returns close to ten percent. We're
Speaker 1: going to be super conservative and pretend it only returns
Speaker 1: five percent. Okay, a one point two million dollar investment
Speaker 1: portfolio each year at a rate of return of five
Speaker 1: percent conservative is going to give you an income of
Speaker 1: sixty thousand dollars. Wow, without diminishing that one point two
Speaker 1: million dollars. So that one point two million dollars will
Speaker 1: consistently sit there and it will just work. It will
Speaker 1: be invested, but the money that your money is making
Speaker 1: will be sixty thousand dollars a year, and in retirement
Speaker 1: that becomes your income.
Speaker 4: So you've taken the cream off the top.
Speaker 1: So you just taking the cream off the top, and
Speaker 1: then you know what happens like And I don't want
Speaker 1: to be too dramatic about it, but I just think
Speaker 1: it's so exciting to be in a position where you
Speaker 1: then have that one point two million dollars, right because
Speaker 1: we can't live forever, so we can make plans and
Speaker 1: leave legacies and go, oh, well with that one point
Speaker 1: two million dollars when I have kids, like, I would
Speaker 1: love it to go to my kids. And you can
Speaker 1: make as many rules as you want. You could be
Speaker 1: like they can't spend the one point two million dollars,
Speaker 1: they can just have an income for the rest of
Speaker 1: their lives that they share between themselves of sixty thousand dollars.
Speaker 1: Isn't that sexy? Yeah, that's they can add to it
Speaker 1: and do the same thing. And that's how Obviously there's
Speaker 1: a lot of other ways that family wealth starts and
Speaker 1: need to generational wealth starts, but this is one of
Speaker 1: the ways that intergenerational wealth can start and you can
Speaker 1: set your entire family lineup for success in the future.
Speaker 1: And I just think that's so exciting because I'm definitely
Speaker 1: one of those people that is passionate about leaving a legacy. Yeah,
Speaker 1: like I want to do good, be good, have a
Speaker 1: good time, but I also want everybody to be in
Speaker 1: a better off position. You're telling me I could do that? Yeah?
Speaker 1: Is that attractive?
Speaker 4: And we can start today, right here, right now, exactly
Speaker 4: with as little as one said. That is very impressive. Okay,
Speaker 4: So tell us what green flags should we be looking
Speaker 4: out for that tell us a company is actually a
Speaker 4: good investment all the.
Speaker 1: Green flags, right, So first we're going to start with
Speaker 1: the profitability green flags. So that's basically the first thing
Speaker 1: you should look at. Are you investing in a business
Speaker 1: that actually makes money? Because I can almost guarantee that
Speaker 1: you're not going to make any money personally. If they
Speaker 1: don't make any money, sure, where's it coming from to
Speaker 1: be given to you? So then we're going to delve
Speaker 1: a little bit deeper later. The first green flag is
Speaker 1: that it's profitable and the profits are stable. So this
Speaker 1: is where I go back and I go, hey, remember
Speaker 1: that time that everybody in the media was talking about
Speaker 1: after pay shares. Every man at his dog in the
Speaker 1: office was like, I bought after pay shares and I've
Speaker 1: made so much. This happened like just pre COVID, and
Speaker 1: I remember just looking at people being like cool, Beck,
Speaker 1: You're not being paid to own that share. You bought
Speaker 1: that share, and that share increased in price, and the
Speaker 1: only way for you to get your little mittens on
Speaker 1: that extra money is to sell that share you have
Speaker 1: while the market is high. If the market dips and
Speaker 1: your share becomes worthless, you haven't actually made any money.
Speaker 4: Yeah.
Speaker 1: Whereas if we went and bought like a NAB share.
Speaker 1: And I often use that as an example just because
Speaker 1: it comes to mind. I used to be a financial advisor,
Speaker 1: so I had like literally things that were wired into
Speaker 1: my brain. Bitch P and NAB or two of them. Right,
Speaker 1: So if you went and purchased a NAB sharing comparison,
Speaker 1: your friends aren't going to jump up and down in
Speaker 1: the same way they did about after Pay. Right, They're
Speaker 1: gonna be like, cool, Beck, you bought a bank share
Speaker 1: and you'll be like, yep. For every single share I have,
Speaker 1: I get paid eighty four cents. Oh, I get paid
Speaker 1: to own that share. And that's what's called a dividend.
Speaker 1: So that's pretty sexy, yeah, because that's a share that
Speaker 1: pays you to own it, because it's a dividends share.
Speaker 1: And we know that NAB over the last you know,
Speaker 1: fifty plus years, they've made money. They're a bank. You're
Speaker 1: really good at making money. I mean, we're pretty salty
Speaker 1: at the moment because they're making money off our mortgages
Speaker 1: that are sky high. And we could have these really
Speaker 1: big conversations. But at the end of the day, if
Speaker 1: you are making an investment, it pays to make one
Speaker 1: that is going to put you in the best possible position,
Speaker 1: even if it is a little boring.
Speaker 6: Right.
Speaker 1: So, Beck, do you want to be paid to own
Speaker 1: something that you own over the long term or do
Speaker 1: you want to buy something that increases in value, but
Speaker 1: never pays you. It's just valued higher because of market demand,
Speaker 1: and then it could go down later when it maybe
Speaker 1: isn't as shiny as a product or as new of
Speaker 1: a product. It's like bitcoin.
Speaker 4: Yeah, I see what you mean, like doge coin train.
Speaker 1: You were on the dose coin train.
Speaker 5: So you're telling me you've never gought shared on the
Speaker 5: share market. A little BECKSI ed has gone out and
Speaker 5: bought doge coin.
Speaker 4: I was not very willing.
Speaker 1: You know, I don't even know how I would buy
Speaker 1: doge coin.
Speaker 4: I know, I don't know how I got there. Where
Speaker 4: is your doge coin? Now it is gone and I
Speaker 4: have lost some money? So interesting, I recommend.
Speaker 1: So which side of the table should we be taking?
Speaker 4: I guess ideally get paid?
Speaker 1: All right, get paid? So we like that. But you
Speaker 1: don't have to delve into a company's financials to do this,
Speaker 1: Like you don't have to go read an annual report.
Speaker 1: I will I have like the banks they like post
Speaker 1: them on their websites, and they're beautiful, like they must
Speaker 1: have a really good graphic designer, because like their annual
Speaker 1: reports are so sexy, like they have like lots of
Speaker 1: very bright, colorful graphs and charts, a letter from their
Speaker 1: CEO explaining what they did that. I just get so
Speaker 1: excited reading reports. I'm like, oh, boushie, I understand that
Speaker 1: I want to be like you one day. You could
Speaker 1: like it's a waste of time because you don't actually
Speaker 1: need to do that, right. I used to do that
Speaker 1: a lot more when I was a financial advisor because
Speaker 1: I could sit down with you and you might go, oh, well,
Speaker 1: why is that off this year? Like last year it
Speaker 1: performed really well, and I could go, well, I've read
Speaker 1: the report, here's what the CEO says, here's what the
Speaker 1: market says, here's what you know is going on, and
Speaker 1: this is what the future looks like. And you would
Speaker 1: go I feel so much more confident. So that was
Speaker 1: a part of my job. You don't need to do
Speaker 1: that because all you have to do is look on
Speaker 1: your trading or investment platform because it will usually provide
Speaker 1: you with a really easy report of like where they are,
Speaker 1: where they're at, where they've been historically. You can also
Speaker 1: google it really easily, like it's very easy to google.
Speaker 1: Let's use NAB again as an example. If you're buying
Speaker 1: a direct share, what has NAB's performance been like over
Speaker 1: the last two years, five years, ten years, fifty years.
Speaker 4: Ago, come up back, gotcha?
Speaker 1: Okay, so you don't need to be too specific.
Speaker 4: Yeah, okay, but to be a little bit specific what
Speaker 4: exactly what you're looking for in these reports?
Speaker 2: All right?
Speaker 4: Strap up?
Speaker 1: This one's big. So there are a few ratios that
Speaker 1: we're going to talk about, and these are free financial
Speaker 1: indo caters that are used by financial advisors, but they're
Speaker 1: also used by people who invest. And I have an
Speaker 1: investing course coming out early next year which is really exciting,
Speaker 1: so I'll be able to delve into it a little
Speaker 1: bit deeper and really explain. Okay, well this is how
Speaker 1: you'd get it. Sure, you can google it as well.
Speaker 1: Like I hate the fact that I could basically make
Speaker 1: myself redundant and be like, you can google it back.
Speaker 1: I'll tell you what you need, but you can always
Speaker 1: google free pe ratio calculator and you just put the
Speaker 1: numbers in and it will spit it out so you
Speaker 1: don't have to do the calculations, right, Okay, Like, I
Speaker 1: don't want you to feel overwhelmed because you're like they
Speaker 1: assigned up to cheese on the money because it was
Speaker 1: approachable and now you're making me do basically complex algebra.
Speaker 1: I'm like, you can sit down. Sorry, I've been waiting
Speaker 1: for this moment. But the first thing is a pee ratio.
Speaker 1: So that is a price to earnings ratio. Okay, so
Speaker 1: we're comparing the price of the share to how much
Speaker 1: that company makes makes sense, right, So this is the
Speaker 1: company's share price divided by its earnings per share. So
Speaker 1: someone have earnings per share. If a company has a
Speaker 1: high peer ratio, they might be overvalued. So if you
Speaker 1: come out with a number that is deemed to be high,
Speaker 1: one of two things. One it was a really goodbye,
Speaker 1: or it could be overvalued. Sure, so you might look
Speaker 1: at something again. Let's pretenders I have to pay. We
Speaker 1: know that that company was overvalued because of market hype.
Speaker 1: We know that people were really excited about it because
Speaker 1: they were getting on the train. It's like dogecoin. Why
Speaker 1: was it so expensive when you bought it because everybody
Speaker 1: was talking about it? Was it actually because their annual
Speaker 1: report came out and they're providing a lot of value
Speaker 1: when you know they've invested a whole heap of time, energy,
Speaker 1: and resources and you know they're going places. Or was
Speaker 1: it because people in the market were excited about the opportunity.
Speaker 1: When people in the market are excited about the opportunity,
Speaker 1: often things will be overvalued, which means you're paying more
Speaker 1: than you should for that asset. So this ratio tells
Speaker 1: you are you paying what you should for this or
Speaker 1: is it a bit speno right now?
Speaker 4: How do we know if it's high? Does it tell
Speaker 4: you on the thing?
Speaker 1: So on average, when you're talking about PE ratios, to
Speaker 1: make sure it's kind of on track, it's not overvalued
Speaker 1: and it's not undervalued. You're looking at a number between
Speaker 1: twenty and twenty five. Usually obviously I can delve into
Speaker 1: this a lot deeper later, but about twenty to twenty five.
Speaker 1: But when you see a low PE ratio like it
Speaker 1: comes out like five, that could actually indicate that the
Speaker 1: stock is undervalued. So this is where traders start to go, Hmmm,
Speaker 1: my ears are pricked up. I've done all my calculations
Speaker 1: in this share. It's actually got a low pee ratio.
Speaker 1: So either there's something wrong with it beck or the
Speaker 1: market doesn't see its value.
Speaker 4: Okay.
Speaker 1: Often you might see a share with a low PEE
Speaker 1: ratio if they are involved in any kind of drama
Speaker 1: at the time. So you know, if something happens in
Speaker 1: the share market, or if something happens in social media
Speaker 1: and you know, the CEO has gotten in trouble for something,
Speaker 1: and then market sentiment has gone down. So that just
Speaker 1: basically means that people trust them less. When people trust
Speaker 1: assets less, they might sell them off. And as you're
Speaker 1: selling off, obviously the share price is decreasing because there's
Speaker 1: less demand for it, and that could result in an
Speaker 1: undervalued share. And do you know what we like? Hmmm,
Speaker 1: we love drama.
Speaker 4: We love we loved your drama.
Speaker 1: It was up to me, Beck, I would have an
Speaker 1: entire drama podcast in addition to this podcast, Like I
Speaker 1: don't want to talk about like popular drama or like
Speaker 1: other people like that's just like stuff you'd hear on
Speaker 1: the train, Like you know what I mean, Like a
Speaker 1: podcast where people are like calling in being like this
Speaker 1: is anonymous, but like I heard on the train that
Speaker 1: such and such did such and such and we'll just
Speaker 1: like anonymize it. I'm here for the drama, Like I
Speaker 1: just want the story.
Speaker 4: Let's do it.
Speaker 1: Anyway, back to investing, that's what we're trying to get
Speaker 1: good at right now. We love a bit of drama
Speaker 1: because it doesn't mean it's true, but it also doesn't
Speaker 1: mean that the business is impacted at all. Right, so
Speaker 1: you could seize the opportunity. Can be like, they're undervalued
Speaker 1: right now, but are they a stable business? Yeah, they
Speaker 1: look pretty good. That could be an opportunity to seize.
Speaker 1: And I love when a company is undervalued. Doesn't happen often,
Speaker 1: and when it does, other investors, especially professional investors, are
Speaker 1: on top of it. So can you, as a lay
Speaker 1: person go and you know, pick an undervalued share?
Speaker 5: Not that easily, sure, but it's nice to talk about.
Speaker 1: Why it's important because how many times at school were
Speaker 1: you told do this maths problem? Here's this ratio you
Speaker 1: need to learn. You're like, well, I would I ende
Speaker 1: with that?
Speaker 4: Yeah?
Speaker 1: Why we would do it because it could benefit us.
Speaker 4: I can.
Speaker 1: Next, is a pb ratio and it's nothing like a
Speaker 1: PBNJ right, so it is a price to book value ratio.
Speaker 1: Sounds complex? Let me break it down. So this is
Speaker 1: essentially a company's share price divided by its book value
Speaker 1: share price, very straightforward. I'm assuming you could tell me
Speaker 1: what that is right now. It's basically how much a
Speaker 1: share costs for you to purchase individually book value. You
Speaker 1: don't want the heck can do they sell books? No,
Speaker 1: they don't sell books. It's when you look at their
Speaker 1: balance sheets. So you might look at their profit and loss,
Speaker 1: and it's basically the cost of carrying an asset on
Speaker 1: a company's balance sheet. So how much is the actual
Speaker 1: business worth. So a business might be in significant debt,
Speaker 1: so they might be really good at making profit, but
Speaker 1: they might also be in significant debt. And we need
Speaker 1: to take all of these things into consideration when making
Speaker 1: an investment decision. Right, So you don't want to go, oh,
Speaker 1: this is the best business ever, like, look how much
Speaker 1: turnover they've got cough what after pay did? But then
Speaker 1: they're also running in the red because they are trying
Speaker 1: so hard to invest so much into their business in
Speaker 1: the hope that it will be successful. But if it's not,
Speaker 1: they actually have so much debt and that's really bad
Speaker 1: for shareholders.
Speaker 4: Okay, Like, we.
Speaker 1: Don't want to date people who are millions of dollars
Speaker 1: of debt back spread flat.
Speaker 4: It could be perceived as a red flag. You're right
Speaker 4: about it.
Speaker 1: About especially if they're trying to be in the media.
Speaker 1: But you're like, I looked under the covers and.
Speaker 5: I saw what you've got.
Speaker 4: I see what's going on.
Speaker 5: I see what's going on, and it's not that hot
Speaker 5: red black.
Speaker 1: And that's where people can be all talk, and that
Speaker 1: will tell you if they're all talk or all right.
Speaker 4: Sure.
Speaker 1: Number three, we're going to talk about price to sales ratio.
Speaker 1: That's a good ratio. It's got the PS ratio, and
Speaker 1: this is the company's share price divided by its sale
Speaker 1: price per share. So you determine a PS ratio by
Speaker 1: dividing the company's total market capitalizational value. So how much
Speaker 1: is that business worth by it's trailing twelve month revenue.
Speaker 1: So essentially, this shows how much investors are willing to
Speaker 1: pay for a share in the current market. So what
Speaker 1: does that actually look like. You need to have a
Speaker 1: look at it, because it's not just what the share
Speaker 1: price is. It's a bit deeper than that. But those
Speaker 1: are the three that I want you to kind of consider.
Speaker 1: For me, the first one that I would learn if
Speaker 1: I was a brand new investor would definitely be that
Speaker 1: peer ratio. That first one we talked about. It's the
Speaker 1: easiest to calculate, it makes the most sense mentally and
Speaker 1: it'll give you a bit of confidence. I don't want
Speaker 1: you jumping in and being like I need to do
Speaker 1: all three at once, Like, just start with one, because
Speaker 1: that's essentially the company's share price by how much you
Speaker 1: make from it. So Beck earlier, we were talking about NABS,
Speaker 1: so let's use them as an example. So the NAB
Speaker 1: share price is twenty eight dollars and forty two cents,
Speaker 1: So that's how much it would cost to buy one
Speaker 1: share in National Australia Bank SLAG. We know as well
Speaker 1: that for each share that you own in NAB, they
Speaker 1: pay about eighty two to eighty four cents a year
Speaker 1: in dividends, so they do pay you to own their asset.
Speaker 1: If we then plug that in and look at their
Speaker 1: price to earnings ratio, NAB right now, at the end
Speaker 1: of November had a PE ratio of eleven point seven
Speaker 1: three percent. Okay, in Australia the average is fifteen. So
Speaker 1: if we compare that to the fifteen Obviously, like we
Speaker 1: gave different numbers because we're looking at an international mone,
Speaker 1: but the average in Australia is fifteen. A low number
Speaker 1: can indicate that the stock might be undervalued. If we
Speaker 1: have a little bit of a think about the market
Speaker 1: right now? Back, do people like banks right now?
Speaker 4: Like, maybe they're disenchanted.
Speaker 1: They're not that happy with them, are they? Because they're
Speaker 1: increasing their mortgage rates. People are like banks absolutely screwing
Speaker 1: us over. So you're right, people are disenchanted. Is it
Speaker 1: still a good business unfortunately? Yeah, Like banks make the
Speaker 1: world go round to run, so people might be a
Speaker 1: little bit disenchanted. And I'm not saying that this is
Speaker 1: completely accurate, It's just an example. But what I'm now
Speaker 1: seeing is that the average PE ratio in Australia fifteen
Speaker 1: NABS is about twelve, So right now they're a bit undervalued,
Speaker 1: and it would make sense because people aren't that excited
Speaker 1: about banks. Does it make it about investment?
Speaker 2: No?
Speaker 1: Does it make it a good investment No, can't say.
Speaker 1: Can't say. But what we can say is that we
Speaker 1: would not want to buy a bank that had a
Speaker 1: PE ratio of thirty If the average Australian PE ratio
Speaker 1: is fifteen?
Speaker 5: Gotcha?
Speaker 1: Does that make sense? And go, oh well, maybe now
Speaker 1: it might be a not too bad time to buy. However,
Speaker 1: the important thing to remember about when the right time
Speaker 1: to buy is you can do your PE ratio. You
Speaker 1: can do p B ratio, you can do PS ratio,
Speaker 1: you can do all these ratios. But the best time
Speaker 1: bag for you to invest is not when the market
Speaker 1: is ready. It's when you are personally ready. And I
Speaker 1: would personally love for you to overpay slightly for a
Speaker 1: share that you'd then hold for a really long time
Speaker 1: that pays off for you. Because I can almost promise
Speaker 1: that everybody listening to this podcast can't time the market. Yeah,
Speaker 1: I can't time the market. Warren Buffett can't time the market.
Speaker 1: I'd be so flipping rich if I could time the market.
Speaker 1: It's just good to make us feel confident in the
Speaker 1: decisions that we are making to understand these things. It's
Speaker 1: not the be all, end all. You don't even have
Speaker 1: to do it.
Speaker 4: Okay, So if I was listening to this, yes, I
Speaker 4: would go back and listen to maybe like the last
Speaker 4: ten minutes. So baby, let's take a quick break.
Speaker 1: Yeah, and you can like rewind and listen to it again.
Speaker 1: I feel like I've overwhelmed you. This is why we
Speaker 1: need to get course out sooner so I can do
Speaker 1: it in video and like have my little whiteboard and
Speaker 1: be like this and this and this is what this
Speaker 1: looks like.
Speaker 4: Hotally, No, you are great at explaining. I'm trying. Mom,
Speaker 4: You're doing great job.
Speaker 1: Thanks, honey.
Speaker 4: Let's go for a little break on the flip side.
Speaker 4: We'll take a deeper dive into green flags that a
Speaker 4: company is actually a good investment.
Speaker 1: Don't go anywhere, guys.
Speaker 4: Okay, v we are back. Hey feeling I'm so excited.
Speaker 1: Nobody else is. They're like pe bp e ps.
Speaker 4: What Hey, I'm excited. Let's be excited together. But let's
Speaker 4: talk about green flags again.
Speaker 1: I love talking about green flags. Do you want to
Speaker 1: know another one?
Speaker 4: I would love to know another one.
Speaker 1: I thought you might. That's why you're here today. So
Speaker 1: another green flag. No debt, load debt or well managed
Speaker 1: debt because you know how, in like our lives, when
Speaker 1: we talk about debt, we're like there's good, bad, and
Speaker 1: okay debt, Like if we talk about it that way,
Speaker 1: kind of same for business, Okay, Like good debt mean
Speaker 1: that they're invested in the business and it was going
Speaker 1: to grow because of the debt that they're taken on.
Speaker 1: Bad debt would be they are having creditors chase them
Speaker 1: because they have, you know, a bit off more than
Speaker 1: they can chew, and then probably not a good business
Speaker 1: to invest in.
Speaker 4: Right, that's traumatizing.
Speaker 1: In a perfect world, a business would have no debt. Yeah,
Speaker 1: it's very sexy. She's on the money, has no debt.
Speaker 1: Oh yeah, we're also not on the ax, so you
Speaker 1: can't buy us as a share and norm will we
Speaker 1: ever be because I'm the boss now.
Speaker 5: Ah, I'm the captain now.
Speaker 1: But ideally a company has no debt. But that's not
Speaker 1: a deal breaker if there's like low debt, or you
Speaker 1: can see that it's being well managed, like they might
Speaker 1: have taken on an investment loan to you know, purchase
Speaker 1: some assets that are going to further the income of
Speaker 1: the business. If a company does bring in a lot
Speaker 1: of money but it has a lot of debt to
Speaker 1: pay off, that actually decreases your dividends because they've got
Speaker 1: to pay their debt back before they pay the shareholders.
Speaker 1: And that makes sense, but you don't really think about
Speaker 1: that when you're looking at share price. So we always
Speaker 1: want a company that has like low debt or debt
Speaker 1: that's going to get lower over time. That makes sense
Speaker 1: for the business.
Speaker 4: Beck, Okay, I'm hearing you all right, do.
Speaker 1: You want my final green flag. Yes, okay, So final
Speaker 1: green flag when it comes to profit is that the
Speaker 1: company is consistently raising dividends for a few reasons. One,
Speaker 1: we always want to make more money, but like, is
Speaker 1: this business keeping up with inflation? Beck ah, Yeah, because
Speaker 1: if they're not, we're actually going backwards by owning them
Speaker 1: over the long term. Right, that's not very sexy. But
Speaker 1: you can check past dividend payouts on the ASEX website
Speaker 1: or my favorite google it. What have NABS dividends been
Speaker 1: like over the last thirty years? Have a look at it.
Speaker 1: I promised, there's charts everywhere on the internet about every share.
Speaker 1: It's not just NAB of just clung to that example.
Speaker 4: Today we like transparents.
Speaker 1: I don't even own nabshares at the moment.
Speaker 4: What is wrong with me?
Speaker 1: Anyway? I think that is probably where I will leave
Speaker 1: it when it comes to green flags. I hope you're
Speaker 1: feeling a little bit more confident and comfortable.
Speaker 4: Yeah, okay, so I think right now we can't see
Speaker 4: a single red flag, no red flag in sight, no profitability,
Speaker 4: red flag.
Speaker 1: No profitability, that's what we're talking about, remember.
Speaker 4: But what else should we be looking for before we
Speaker 4: invest in a company.
Speaker 1: All right, So no more green flags, but we're just
Speaker 1: talking about things that you should be looking for in general.
Speaker 1: Can only have so many green flags. Have you seen
Speaker 1: the TikTok trend of beige flags?
Speaker 4: Yes, so we're talking beige flags now.
Speaker 1: No, no, no, we're not talking beige flags. I just
Speaker 1: wanted to talk about TikTok again.
Speaker 4: She loves talking about TikTok.
Speaker 5: I love TikTok.
Speaker 1: That's why I don't do any work anymore. Anyway, I
Speaker 1: guess the next few tips they require a bit more research,
Speaker 1: so they're like not just like immediate green flags where
Speaker 1: you go go yep, tick P ratio, that's easy. Does
Speaker 1: the company have debt?
Speaker 2: Yes?
Speaker 1: No easy answer. Does that make sense? Yeah, So it
Speaker 1: requires a bit more research, but they're worth it, and
Speaker 1: we'll take you from a novice to a pro investor
Speaker 1: in no time. I could sell a sham well with
Speaker 1: this energy.
Speaker 4: Seriously.
Speaker 1: So, one of the things we want to look at
Speaker 1: is whether there is a future in the product or
Speaker 1: the service that that company is selling. So will this
Speaker 1: actually be a profitable and competitive business in the next
Speaker 1: ten years is a question you need to be asking. So,
Speaker 1: for example, am I going to run out and buy
Speaker 1: shares in a company that makes DVDs or CDs M.
Speaker 4: Maybe they're coming back.
Speaker 1: Maybe they're coming back. You're like, their vintage is like records.
Speaker 1: Like I don't want to hear your justification, but like
Speaker 1: that's my example I have come up with on the fly,
Speaker 1: and you're gonna be like maybe no, no, no, You're.
Speaker 5: Meant to say no, Beck, that's impressive.
Speaker 1: That's impressive, but probably not because that's not where technology
Speaker 1: is at right now, and in another ten years, that's
Speaker 1: probably not going to be the dominant technology that the
Speaker 1: market is using, in which case your share price is
Speaker 1: probably going to decrease. Gotcha, their profit is probably going
Speaker 1: to decrease. You're right, there could be a vintage market,
Speaker 1: but like, are we buying vintage market things on the ax?
Speaker 4: No?
Speaker 1: No, exactly? Are they recession resistant? Is the next thing
Speaker 1: we want to talk about.
Speaker 4: That's a good one, especially.
Speaker 1: Of the pandemic, Really good question to ask. So like,
Speaker 1: for example, during the pandemic, supermarkets did so well, right, Like,
Speaker 1: I don't think people expected that, but it kind of
Speaker 1: makes sense. But because regardless of what's going on in
Speaker 1: the economy, VEC we all need to buy food. In fact,
Speaker 1: when the economy is put we're actually spending more money
Speaker 1: at the supermarket than we are on takeaway and stuff
Speaker 1: like that. So that's a pretty good business when it
Speaker 1: comes to recession. Preferably, the customers for a particular business
Speaker 1: are from more than one source. So like imagine if
Speaker 1: the business was propped up because you know, it's probably
Speaker 1: not going to be on the ASEX. But you get
Speaker 1: my example all right, Instagram. So it's a really big
Speaker 1: Instagram account and they have an Instagram shop. That's risky. Sure,
Speaker 1: So if all of your customers are coming from one platform,
Speaker 1: what happens if that single source is wiped out or
Speaker 1: that single source is changed. It's not actually in your
Speaker 1: hands that entire customer source has been wiped out, whereas
Speaker 1: a company that might be on all social media platforms
Speaker 1: might be different. That is just an example, but for
Speaker 1: bigger businesses it's obviously very very different. But that's one
Speaker 1: I think we can all wrap our heads around.
Speaker 4: Yep, very risky to just be on Instagram.
Speaker 1: It's why so many businesses, especially small business it is
Speaker 1: now we're just talking about something completely different, no, but
Speaker 1: it's why they want to diversify their customers. So it's
Speaker 1: why you know, once TikTok happened, they were trying to
Speaker 1: promote TikTok from Instagram to push you over to another platform,
Speaker 1: because if something happens to their main platform, at least
Speaker 1: they can communicate with you on there. It's why if
Speaker 1: you go on any website, they are always trying to
Speaker 1: collect your email address because in the marketing world, Instagram's good,
Speaker 1: TikTok's good, any social media is good, but what is
Speaker 1: golden is your email address because they have direct contact
Speaker 1: to you. They might not have the Instagram platform that
Speaker 1: could connect with your profile, but they could send you
Speaker 1: an email being like, hey, sorry, our Instagram got completely wiped.
Speaker 1: Here's a new link to our new Instagram. So they've
Speaker 1: got direct communication with you, which is why so many
Speaker 1: companies really promote they go, oh, ten percent of your
Speaker 1: first order if you sign up to our newsletter, like
Speaker 1: they put so much value on essentially owning the customer
Speaker 1: because there's no rules around it in the same way
Speaker 1: there would be around having a follower on Instagram or
Speaker 1: having a follower on Facebook. So okay, you want diversification
Speaker 1: of customer sources.
Speaker 4: That makes sense everything's really checking out. I'm like thinking
Speaker 4: back to my life and I'm like, oh, that's why
Speaker 4: you ask me, this is why you email me all
Speaker 4: the time. Blah blah blah blah blah. But okay, let's
Speaker 4: move on. What else are we looking for?
Speaker 1: So we're looking for a company that has ipo'ed and
Speaker 1: has done so for a while. You look confused.
Speaker 4: IPO.
Speaker 1: So an IPO is an initial public offering, and it
Speaker 1: basically refers to the process of offering shares of a
Speaker 1: private company or corporation to the public in a new
Speaker 1: stock insurance for the first time. So the first time
Speaker 1: they're put on the market. Right, So a lot of
Speaker 1: people get hung up on like, oh, this company's about
Speaker 1: to IPO and I'm going to invest in them. That's risky.
Speaker 1: How do you know how they're going to stabilize and
Speaker 1: what their actual share price will settle to.
Speaker 5: You're right.
Speaker 1: You might have an IPO that happens and that company
Speaker 1: is completely undervalued and it's skyrockets and you make lots
Speaker 1: and lots of money. But here it she's on the money.
Speaker 1: We're about making money over the long term. I'd prefer
Speaker 1: you to be stable and secure over the long term
Speaker 1: as opposed to get rich quick. Yep, we can't time
Speaker 1: the market. I've said it a million times. If I could,
Speaker 1: I already would have and I wouldn't even have this
Speaker 1: podcast because I'd be too rich because I'd be on
Speaker 1: an island.
Speaker 4: That's fair.
Speaker 1: Do you have a companies to island?
Speaker 6: Yeah?
Speaker 1: Actually, if I ever I ever get a successful IPO,
Speaker 1: I'll let you know. So essentially that means that they
Speaker 1: are a publicly listed company on the stock market and
Speaker 1: anyone can now buy shares in them. So once a
Speaker 1: company has entered into an IPO, it's actually a much
Speaker 1: safer investment because there's much lower risk now because we
Speaker 1: actually can see what the market is willing to pay
Speaker 1: for them, so before we're guessing what the market is
Speaker 1: going to pay for them, Like everyone's kind of been like, Oh,
Speaker 1: they're ipoing Beck for fifty bucks a share. That's so undervalued.
Speaker 1: The business is worth more than that because I love it.
Speaker 1: You don't know what that dude who's saying that actually knows,
Speaker 1: or they could be saying it's overvalued. Can't believe they'd
Speaker 1: expect fifty dollars a share. How do you know what
Speaker 1: that dude actually means right. So essentially, once they've put
Speaker 1: themselves on the market, you can measure or you can
Speaker 1: see what the market's actually willing to pay for them,
Speaker 1: and it's a much safer investment and usually leads to
Speaker 1: larger dividends. We like large dividends in this we do.
Speaker 4: We like big d's.
Speaker 1: Yeah, we like the big dividend.
Speaker 3: Stop it.
Speaker 4: Sorry, But the longer.
Speaker 1: It has been iPod for, so the longer it's been
Speaker 1: on the market, ye, usually the less risky the investment
Speaker 1: because it's been through a number of different phases and cycles.
Speaker 1: So that's why we talk about blue chip stocks. So
Speaker 1: you can't just become a blue chip stock overnight. You've
Speaker 1: got to earn that with time. So new chip stock
Speaker 1: is kind of those tried true investments that have performed
Speaker 1: well over time. They're a bit boring. If you had
Speaker 1: grandparents who were into investing, they definitely.
Speaker 4: Care about the chip stocks.
Speaker 1: Okay, so you might be talking about coals and woolies
Speaker 1: and HP and the big four banks and stuff like that.
Speaker 1: Nothing exciting like transurban so like transport and like toll
Speaker 1: roads and stuff. You kind of go, there's nothing sexy
Speaker 1: about them.
Speaker 4: Yeah, but we need them, but we need them.
Speaker 1: And have you seen how much tolls are recently? Oh
Speaker 1: my lord, now the back way to get to the
Speaker 1: studio every time we record because tolls now to get
Speaker 1: from where I live, which is probably giving away too
Speaker 1: much personal information to where the studio is. It's like
Speaker 1: twenty two.
Speaker 4: Dollars, I know what the heck in them Onnash So.
Speaker 1: I would much prefer to buy everybody coffee when I
Speaker 1: get to work, And it took me fifteen minutes longer,
Speaker 1: OKAYV So I feel like I've learned a lot today
Speaker 1: and there's a few things I have to go and
Speaker 1: google price to earnings ratio of me.
Speaker 4: I had that off my head.
Speaker 1: I did, Honestly. I'm really proud of you because at
Speaker 1: the end of the day, I feel like you've been
Speaker 1: on the show for like a year now, which is
Speaker 1: wild to me. Like January is going to be our anniversary,
Speaker 1: whichuld we do. I don't know, yes, dounning, I'll think
Speaker 1: of something really cute, okay, But I feel like you've
Speaker 1: gone from being like, oh, no, investing's not for me.
Speaker 1: I bought doge coin one time, to being like, oh,
Speaker 1: I kind of understand it like I'm not that intimidated
Speaker 1: by it, Like you haven't done it yet, which is
Speaker 1: so fine. Like we invest in our own time, not
Speaker 1: when the market tells us to invest. Yes, but like
Speaker 1: I feel like you might be a little bit more
Speaker 1: confident than you used to be around going oh no,
Speaker 1: like investments something I want to do, but I just
Speaker 1: haven't done it yet.
Speaker 4: Yes, I absolutely feel like you know, baby step So
Speaker 4: thank you so much. I have learned so much today
Speaker 4: and over this year. I don't know about you, but
Speaker 4: I think it's a really good place to leave it.
Speaker 1: For that, I think it's a brilliant place to leave it.
Speaker 1: So we will see you guys on Friday for a
Speaker 1: little bit of a recap. But we love you and
Speaker 1: we hope you have a good day. And sorry that
Speaker 1: I overwhelmed you. I didn't mean it. Listen to the.
Speaker 4: Episode again, my guys.
Speaker 6: Yes, the advice shared on She's on the Money is
Speaker 6: general in nature and does not consider your individual circumstances.
Speaker 6: She's on the Money exists purely for educational purposes and
Speaker 6: should not be relied upon to make an investment or
Speaker 6: financial decision.
Speaker 1: If you do choose to buy a financial product.
Speaker 6: Read the PDS TMD and obtain appropriate financial advice tailored
Speaker 6: towards your needs. Victoria Divine and She's on the Money
Speaker 6: are authorized representatives of Money Sherper Pty Ltd ABN three
Speaker 6: two one six four nine two seven seven zero eight
Speaker 6: AFSL four five one two eight nine