Encore: Sharemarket investing for beginners parts 1, 2 & 3

All three parts of our sharemarket investing for beginners series combined.

Jess and Dom look at the basics of shares as investments, a checklist of things to consider before buying shares, and then go through the process of buying shares.

It All Adds Up is the podcast where we make money easy to understand so that listeners can begin building their financial wealth. You can submit questions via email or voice memo to [e-mail] for Jess and Dom to answer each week.

See omnystudio.com/listener for privacy information.

Episode Transcript

S1 (00:00):
Hello and welcome to It All Adds Up the podcast
where we chat about money, how to get it, how
to spend it, and how to invest it. I'm senior
economics writer Jess Irvine, and you're listening to our summer series,
where we're replaying some of our hottest hits to help
you get in shipshape financial form for 2023. It all
adds Up will resume normal programming in February with a

(00:21):
brand new season full of money saving tips and insights.
So until then, sit back, relax and enjoy. Hello and
welcome to It All Adds Up the podcast where we
chat about money, how to get it, how to spend it,

(00:43):
and how to invest it. I'm senior economics writer Jess Irvine.

S2 (00:47):
And I'm money editor, Dumb Pal. And so far in
the pod, we've covered a few things like how to
get your pay rise and giving you some savings tips.
But Jess, I think it's about time we moved on
to the fun stuff.

S1 (00:58):
Investing so fun. I'm so excited to talk about investing
because I think it's a topic that interests but scares
a lot of people. But there has been a real
revolution in the world of investing, and people talk about
a democratization of sort of access to being able to
directly invest in the share market. And it's really something

(01:19):
that everyone should get up to speed with, at least. So, Dom,
over the next few episodes, we've decided to tackle the big,
scary world of share investing in three parts. And today
we're going to start with the absolute basics. So what
are shares? Why would you buy them and how can
you buy them at all their various forms?

S2 (01:38):
Yeah. And by the end, we want to turn you
into a bit of an investing whiz. And we're just
going to rip through a lot of information this episode,
just to give you a bit of a taste of
what's out there. But if you'd like us to do
a deeper dive into anything that we do, raise then
as an email add, it all adds up at 9:00
to you and we'll consider it for a future episode.
And you can also still submit listener questions. We'll be

(02:00):
taking those on. We'll be reading one out at the
end of the episode, so please keep sending those through.

S1 (02:04):
Yeah, we love hearing from you. And as always, please
do remember that the information we're about to discuss is
general in nature and does not take into account your
personal goals, objectives or circumstances. And you should always seek
some professional advice before making any major financial decisions. So
Dom Yeah, let's have a quick chat about where we're

(02:26):
at personally in terms of share market investing. I've written
copious amounts of columns about the fact that I became
a direct share market investor just over a year ago. Now,
where are you at? Have you ever bought any shares?

S2 (02:39):
I dabbled very briefly, I would say pre-COVID with some
some ETFs, but in sort of a meaningful way. I've
never really invested in the share market. I've never really,
like thought about it, which is bad for for me
being the money at it. I feel like there's a
really sort of terrible thing to admit, but at the

(03:00):
same time, it's also an opportunity for me to learn
as we go. So I'm going to sort of be
a bit of a learner as well through this whole process.

S1 (03:09):
Exactly. And I'm excited. We've had the idea that we
could actually buy shares during a podcast episode so people
could hear, you know, what that process is actually like.
Because I remember just I actually just started by like
going to the ASX website and going like, how do
you buy shares? And I thought maybe I could buy
them through the ASX website.

S2 (03:27):
I'm stuff that you can't. I mean, I thought exactly
the same thing. I was like, surely we can just
go onto this, this website, you know, and buy them there.
But no, alas, yeah.

S1 (03:35):
No, you have to, you must have a broker and
there's all sorts of different brokers, so we'll get into
that in a later episode. But first, you know, just
to let people know that there has been this massive,
you know, explosion in the number of Aussies. It's something
like the ASX did an investor study and it's something
like more than a million Australians bought shares for the
first time during the sort of COVID pandemic era, which

(03:59):
is just kind of incredible, isn't it?

S2 (04:01):
Yeah, it's really shocking. And it's not just like shares.
People just got into investing in a huge way. Like,
you know, we saw something last week or last month
from ASIC's talking about the number of people who bought
things like crypto during COVID. Like people just went bananas for,
for investing. And there's a lot of like reasons behind that.
Like I suppose like the broad reason why people did

(04:22):
it during COVID is that people had a lot more
time on their hands. It was a lot of stimulus
in the economy. People weren't spending money on many other things.
So all those sort of things combined meant people were
more sort of keen, I guess, to get involved with
shares of, especially if they had never done it before. But,
you know, we do have a lot of new tech
and other things in the market as well. That helps.

S1 (04:42):
Yeah. So you can do sort of micro investing apps
where you can invest for as little as a dollar
or $10. You know, there's sites like just to name
a few shares is Pearler, CommSec Pocket Raiz Invest Spaceship Voyager.
So there's all these sort of micro investing apps where
you can get a foot in the door without sort
of necessarily needing the big lump of cash that you

(05:02):
would take to a broker as you did in the
olden days. And it's so easy. It's it's in your pocket.
I'm going to make a confession, which is to say
that I have bought shares while literally sitting on the toilet.

S3 (05:15):
Which is.

S1 (05:16):
Unhygienic. But, you know, we all do it.

S3 (05:18):
Yeah, exactly. And I decided to do it for the
sake of it to just be like I bought shares.
I'll Citigo Yeah, I mean, that's and.

S2 (05:26):
That's that is, I think, the perfect example of how
far we've come in terms of buying shares. Because if
you look back, you know, 20 years ago. Right. Yeah,
you literally would have had to go into your broker
or like, go walk into the CBD and talk to
your broker and hand the big bag of cash, I assume.
I assume all transactions were done with big bags of cash.
20 years ago. So yeah, things are modernized a lot.

(05:48):
And also during COVID, you know, we didn't have any
like a lot of great investment options and interest rates
were at record lows. Like if you had money in cash,
it was almost you almost losing money. It was such
a bad investment. So people were people were out there
looking for other ways to get a better return on
on their cash. So all these sort of things, a
big confluence of reasons sort of produced this, this massive

(06:12):
investing boom. So people are more interested in it than
they ever have been before.

S1 (06:15):
Yeah, and it has turned out to be a bit
of a rocky ride over the last year if, you know,
the share market has been all over the shop and
mostly down since I've been buying it. And so it
is a bumpy ride and I think we want to
sort of talk people through that and let people know
it's not there's no guaranteed returns. You know, historical performance
is not is no guarantee. And, you know, if you're

(06:37):
someone who's saving up for a home and you're parking
your money in shares and I want to have a
really good talk to you. So I thought we could
just start with some super basics, which is like so
I mean, basically the first thing you need to do
if you want invested shares is you need to have
some cash to invest. So you need to spend less
than you earn. Pretty essential and you got some savings.
And then I want to remind people of the there

(06:59):
are lots of different ways that you can save and
buy assets and invest of which shares is one. But
we thought we would just talk through the sort of
the risk spectrum, starting with like what is the lowest
risk thing to do with your money?

S2 (07:11):
Well, it's cash. You know, as I mentioned before, you know,
we've seen historically over the past few years very, very
low returns for cash because your interest rate is not
only what you pay on your mortgage and affects your
mortgage repayments, but it also affects the money you get
back from the bank if you have cash in your
bank account. So when that was 8.1%, you were getting

(07:32):
virtually nothing back. We've you had money sitting in your
bank account or sitting in a term deposit. So cash
is super safe, but very low returns, though they are
slowly increasing as interest rates are increasing.

S1 (07:45):
Yeah. And the next thing sort of moving slightly up,
but not too far is sort of fixed interest type products.
And we're talking here about bonds. And bonds can be
issued by the governments or corporates. And so government bonds,
you know, you give the government your cash and they say, Alright,
we'll pay you this fixed amount of interest every year

(08:05):
and at the end we'll give you your money back
too and they can be traded in secondary markets etc.
and the price can go up and down. But if
you just want to give your money to the to
the government, you know, you get that fixed return and
the same corporates, you know, companies can also issue bonds
and same sort of arrangement, although you've got a little
bit more risk of course that the company, you know,

(08:26):
things go pear shaped and well is your money is safe,
will it come back in the same way that you
could be guaranteed with the government? So bonds are an option?

S2 (08:34):
Yep, you can again. Bonds. The first time I ever
heard about bonds was in the Alvin and the Chipmunks movie.
For any Alvin and the Chipmunks fans out there, that's
the first time I ever heard the phrase bonds and
wonder what they were. So anyway, moving on.

S3 (08:45):
I just I need.

S1 (08:47):
To know, did they invest.

S3 (08:48):
In both of them?

S2 (08:48):
So there's like a scene, I think in like the
early in the movie where like the dad of the Chipmunks, like,
gives them a gift for Christmas and he buys them
bonds and they really disappoint because obviously they'd like kids
and they want to toys. Anyway, this is we're going
way off the rails here anyway. Next thing up, the
sort of the risk scale would be things like shares.
So these are sort of income producing assets they can

(09:09):
appreciate in value. They can also drop in value. Property
is also included in this. In this bracket, though, we'll
probably leave talking about investing in property for another podcast's
another day.

S1 (09:19):
I mean, the thing with shares is that people always
focus on the share market going up, but actually a
lot of the return that you get from shares is dividends.
So that's another component and that's sort of like, you know,
you have an investment property, you get paid rent, you
have shares, you get paid dividends, and then also, you know,
the asset valuation can fluctuate as well in a way
that gets you return. So we'll get into a bit

(09:41):
more of that. And then so I mean, finally up
the chain of things like assets that you can hold
which don't necessarily pay you the income like dividends or rent,
you know, could be commodities and could be crypto. And
then within that, there's a risk spectrum of, you know,
like maybe gold is perhaps something that's going to be
a bit more stable in value or that to fluctuate too.
But you're sort of taking a punt on supply and demand,

(10:04):
sort of driving demand for that and whether you would
get a capital appreciation. So crypto probably being on the
out there and scale.

S2 (10:12):
Absolutely, especially at the moment. One other thing to note
is that through superannuation, we are all shareholders in, you know, many,
many and broad companies and that has has various tax
benefits in terms of being another way to invest in
shares indirectly. But we'll discuss that in a sort of
another episode when we talk about what you should think

(10:33):
about before you invest in shares. But for now, I mean,
what is it? What do you do when you own
a share? What does that mean? What happens when I
when I buy, buy my share? What does that represent
for me as a person?

S1 (10:46):
You become a capitalist. You become an owner of capital.
And this is something that I tell myself and I've
told myself several times, the share market prices go up
and down, Bring it back to. What does it mean
when you have purchased a share? What does it mean
to own a share? It means that you are the
part owner of the company in which you've bought the share.

(11:07):
So you're in there. Congratulations. And so if that company
makes some money and it decides not to reinvest the
money in the business and it decides instead to distribute
some of the profit to its shareholders, of which you
are now, one, you'll get something called a dividend. And
then if the you know, the value of the shares
go up over time, because the company is performing very well,

(11:29):
you can sort of sell out your shares perhaps for
a capital gain versus what you bought them for. So
there's two elements to returns on shares is the dividends
and then there's any capital appreciation. And what we economists
have observed historically, at least, is that there is this
something called an equity premium puzzle, which is to say

(11:50):
that over the last century or so, it is true
that the value of shares have gone up by more
than what returns would be on those safe, secure assets
like government bonds have. So, you know, does it always
happen that shares go up in value by the 8%
every year? Absolutely not. But over the last century, if

(12:12):
you averaged it out, you know, we're talking about a
return that is higher because of that element of risk
as well. But gosh, there's a lot of volatility.

S2 (12:21):
Yes. And as we're speaking today, I think the market
has fallen 2.5% this morning. So that is an indication
of the sort of volatility that you kind of experience.
And like putting my my former retail reporter hat on
like a bit of an example of this. If we
look at something like Woolies, which is a household name,
if we look over the past year, Woolworths, the price
of its shares have fallen 8%, but it's been very

(12:43):
volatile during that time. And then if you look over
the past five years, it's actually up 68% and then
if you look over the past 20 years it's grown
600 over 600%, so that gives you a bit of
an idea of like the short term. It's been volatile,
it's been down, but then if you stretch it out
over a longer term, it's actually gone up quite a lot.
But then obviously there's companies that like the opposite of that,
which like again, putting my retail hat on Myer. Much

(13:06):
loved department store had some struggles it's seen some short
term gains in its shed share price but if you
look since it's listed, it's actually down very significantly. So
these are the sort of trials and tribulations you've got
to deal with if you do buy a share and
if you do become an owner, a part owner of
of a company.

S1 (13:25):
Yeah. And we could talk to perhaps the importance of
diversification there because, you know, owning one single stock, that's
a risky business. But there are ways that you can
buy into shares where you're sort of purchasing a big
bundle of lots of different shares, which just spreads some
of the risk. So let's run through some of the
ways that you can buy shares, because I think people go, Oh,

(13:47):
buy shares are better, just go buy some, you know,
BHP or some CBA shares. And that's what I'll do.
But I mean, that is legitimately something you can do.
You could get a brokerage account and just buy one
individual share and watch it in a very scared fashion.

S2 (14:03):
You're not going to make much money, but you could
do it. You could just own the single.

S3 (14:07):
Share, if.

S1 (14:08):
You like, want to troll through a lot of company
reports and if you have a lot of inside information.

S3 (14:13):
About.

S1 (14:13):
That particular company, it would be illegal to trade on that.
But I guess the advantage of individual shares is this
You don't pay management fees. You're not paying somebody else
to make decisions about what to buy. So you don't pay,
you know, an annual management fee. But gosh, it's a
lot of risk. So individual shares are one option. Another
way is sort of pooled investment vehicles and there's a

(14:36):
lots of different types of them. But basically you go
in with other people and you put your money altogether
and then instead of just, you know, having a small
amount of money and only buying one share, the fund
can buy a little slice of a lot of different
shares and or other asset classes. So if you're looking
at the Australian share market, the sort of things you're

(14:58):
looking at, things like listed investment companies or even exchange
traded management funds, and those funds will own a little
slice of a lot of different assets and you can
purchase a unit in that fund and you get instant.
Diversification and access to all the underlying assets in that fund. Now,

(15:18):
one of the ones that has become really popular in
recent years are things called exchange traded funds or ETFs,
and not to be confused with EFT.

S3 (15:29):
I see a lot of novice nifty. I've got to
get into the different fees.

S1 (15:33):
Yeah. ETF so exchange traded funds. Dom Do you want
to have a go at explaining what an exchange traded
fund is?

S3 (15:42):
Yeah. So it's very, it's sort of quite similar.

S2 (15:44):
Like basically you are buying rather than an individual share.
They are Woolies or BHP. You're buying effectively a basket
of shares like a shopping basket full of different things.
And these various ETFs exist that will intentionally invest in
different shares and different sort of things on the market.

(16:07):
So very popular. There's ETFs for Australian shares, there's ETFs
for international shares. There's specifically ETFs for like American tech stocks.
They've been very popular. There's a lot of ethical ETFs
which only invest in companies that fit into certain parameters
or environment, social and governance sort of aspects. And these

(16:30):
like shares, like like individual shares, these can be bought
and sold on the share market. So hence why they
are called Exchange-traded. And they're great because you get immediate diversification.
So like and you can also then tailor them to
exactly what you want. Again, if you're super into sustainability
and all that sort of stuff, you can buy some ethical,

(16:51):
ethical ETFs or if you really want exposure to, you know,
water rights in Texas, I'm sure there's an ETF there
for that. So, you know, there's there's hundreds of thousands
of different of ETFs. You can you can buy and
they're very popular and they've got very low fees, I believe.

S1 (17:08):
Yeah. I mean, back in the old days when you
were doing sort of managed funds, you could be paying
2 to 3% a year of your, you know, view
of money to the investment manager. And. Whereas some ETFs,
you can pay as low a management fee of 0.07%,
so you're still paying a management fee to the ETF creator, the,

(17:31):
the company that sort of bundles all the assets together
and manages them and make sure they don't deviate too
much in value from from the underlying assets. So there's
still a fee payable, but it can be super, super small,
which is great.

S2 (17:45):
Yeah, because they're not they're not doing they're not making
any hard decisions about their investments. They're just buying these
exact stocks that they've told you that they're going to
buy and that's it. Yeah. So it's very simple. But
some like there's not the ETFs aren't the sort of
the be all end all for for diversified investment opportunities.
They do have some cons like some aren't located in Australia.

(18:08):
So you have to think about the tax implications of
those and not all of them are indexed. So some
of them have sort of riskier underlying assets that you
also have been directly into investing your money in.

S1 (18:20):
Yeah, the early days ETFs were by and large index ETFs,
so that you were sort of buying, you know, a
bundle of shares that tracked the broad value of like
the ASX 200 or the S&P 500. But it has
been the case in more recent years we've seen this
proliferation of more exotic things. You know, as you say,
you know, investing and lots of weird things. So an ETF,

(18:44):
you know, it had that reputation of, oh, it's a
very solid sort of index strategy, passive investing. They're actually
actively managed, you know, ETFs now where you where the
underlying assets are going up and down depending on how
the active investment manager. So you have to be a
little bit bit careful. And one thing to look out
for is, you know, the big reputable sort of names

(19:06):
in ETFs these days are like Vanguard, iShares Betashares. Not
to endorse any of those companies, but it can. Before
you do invest in something like an ETF, you do
need to have a look at, you know, their funds
under management. Is there a significant amount of other people
with their money in the fund because you don't want,
you know, a small upstart that might, you know, close

(19:26):
in a few years and you have to sell your
assets when they decide to close the fund, you know,
so just checking, checking the qualifications or, you know, who's
the money manager who you're really entrusting to and making
sure that they've got enough size and history to be
able to nail it.

S3 (19:42):
Hmm.

S1 (19:43):
So that's just sort of a broad wrap up of
the world of why you buy, invest in shares and
some various ways to go about it, which I hope
sort of just brings down to earth some of the
language involved, particularly the know the acronyms evolved of ETFs.
There's a lot to wrap your head around and yet
can't end a podcast about investing without quoting Warren Buffett.

S3 (20:06):
Of course you have to so.

S2 (20:07):
It legally be done.

S1 (20:09):
It's interesting to note that he was sort of asked, Oh, well, he's.
Had to instruct the trustee of his own estate. You know,
Warren Buffett is famous for picking stocks and value stocks
and getting that alpha return. But even he has said that,
you know, for when he's leaving his money to his wife,
he just wants to whack it all in an S&P
500 index fund. And and that is, you know, a good,

(20:31):
solid way to protect the value of the money and,
you know, versus any more active strategy. So that's the
advice of Warren Buffett. Of course, everyone needs to do
what's right for them. Dump. But ETFs are definitely something
to keep in mind if you are really new to
share market investing and you want to just be able
to get that instant diversification as you dip your toe in.

S2 (20:55):
Yeah, ETFs are a good way to sort of get
a bit of a sense of how sort of easy
diversification works. And, you know, if you're feeling confused and
you feel like you still don't know everything, don't worry.
This is the first episode. We've got more coming up.
We'll talking about all the things you should ask yourself
before you take the plunge, all the things you should
know before you actually put that money into the share market.

(21:16):
And then the one after that will be how to
actually do it. And we'll. We'll do it. We'll do
it on the podcast with you. Well, not with you,
but you know, I.

S1 (21:23):
Won't be on the toilet, I promise.

S3 (21:25):
Yeah. No.

S2 (21:26):
Absolutely not. And that'll only be about how to find
a broker to execute a trade, all that sort of stuff. So.
So we can really fill you in and make you
that in investing ways. But we've come to the to
the twilight hours of the podcast. So it's time for
our listener question, which has come from Arjun this week.
And he has said that he recently refinanced his home

(21:47):
onto a 30 year variable rate loan. And from that
he makes an additional $500 repayment alongside his monthly mortgage repayments.
And he's been doing that for a couple of years
and he wants to know if it makes more sense
to change the terms of his loan so he can
match what he actually can actually afford to pay each month,
or if he should just keep making his extra repayments.

(22:10):
And at first glance, I think that he's probably fine
just making his actually payments. I think that's that's a
good move. The wisdom imparted to me when I got
my home loan is that you set it at 30
years and you don't fiddle with it too much and
just sort of just let it let it roll out.
But what do you think, Jess?

S1 (22:24):
Yeah, I mean, some people suggest as a savings strategy,
you know, to pay your home off sooner when you refinance,
you should, you know, not just reset to the 30 year,
you should go to the 27 or 26 or whatever
you're up to. But I don't think it makes too
much of a difference. If I just wanted to, you know,
that would involve refinancing to a different loan term, which
could be quite complicated. You can just as is doing,

(22:47):
pay it off quicker and then when you pay it back,
it's done. The the 30 year term just means that
he'll be have a lower minimum repayment that is required.
But he's already making excess repayments, in which case congratulations.
And I would just keep going with that strategy.

S2 (23:04):
Yeah, absolutely. And then you've got a bit of, you know,
money for those sort of rainy days. And, you know,
especially if interest rates increase, that sort of $500 is
a good little buffer for for any sort of things
that may happen. And just to bring us home just once,
the money tip of the week.

S1 (23:19):
Yes. So power bills. Ouch. Bottom line there. Now, both
wanted to just remind everyone of my most favorite websites
in the world. Check my browser history. It's true. W
w w dot energy made easy dot gov dot aew.
Being the government making your life easier for everyone except
for Victoria because it's a separate site. Energy made easy

(23:41):
dot gov today you go in there, whack a few
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a list of the cheapest provider. It changes a bit
and we're seeing a lot of companies coming in and
out of the market. So you have to be on
top of this and you have to be on top
of your energy provider because we've seen some ridiculously high
price hikes and you don't want to be caught on
some of those ridiculously high plans. So check that out today.

(24:02):
For Victorians, there has never been a better time to
be a Victorian go to compare dot energy dot Victoria
because you get all the same benefits. You got a
government website and the Victorian Government is paying you a
$250 energy bonus just for going to the site and
lodging an application for for the bonus. So you just
get 250 bucks, you know, that's been open since one July,

(24:25):
you've got until June 30 next year to do it,
but get onto it today. Dom, have you done it?

S2 (24:30):
Oh, I've done it. I did it as soon as
it opened. And I tell you what, there's I don't
bring up the Sydney-melbourne rivalry too much. I try to
keep things civil on the podcast, but I don't see
New South Wales getting any any free 250 bucks from
the government just for go in and check out our
energy bills. So I'm just going to I'm going to
put that there as a look a little sort of
a marker as to why Melbourne may be the superior city.

S3 (24:51):
I feel like you're coming off a period in.

S1 (24:52):
Which there was never a worst time to be a Victorian.

S3 (24:55):
Given.

S2 (24:55):
You know, we won't talk about that. We want to mention.

S3 (24:58):
The relevant for if you can't remember. Okay, so we're
talking about a veil argument, I think.

S2 (25:04):
But thanks to everyone for tuning in this week. Again,
join us next week. We will be continuing this theme
of share market investing and we'll be talking about everything
you need to know and think about before. You actually
do buy a share. So come back, Gina. Next week.
We'll still be here.

S1 (25:17):
See you next week.

S2 (25:30):
Hello and welcome to It All ends up the podcast
where we chat about money, how to get it, how
to spend it and how to invest it. I'm money
editor Dom Powell.

S1 (25:37):
And I'm senior economics writer Jess Irvine. And today we're
continuing with the second episode of our special three part
series on share market Investing for Beginners. So if you
haven't already, we do suggest going back and listening to
the episode before this, which will be labeled episode four
in your podcast player and get up to speed with
some of the basics of what buying shares really is

(25:59):
and different ways to go about it to get yourself
a diversified portfolio.

S2 (26:03):
Yeah, the Images episode is to give you a checklist
of things to consider before jumping on the share market
bandwagon and investing your hard earned money in shares directly.
It's not an exhaustive list, but there certainly are some
good questions in there to hopefully get you thinking like
a long term investor.

S1 (26:18):
Yeah, and we want to make it really clear that
the information we're about to discuss is general in nature,
and it doesn't take into account your personal financial goals
and objectives. And you should always do your own research
and seek some professional advice before making any major financial decisions.
So in our third episode in this series were actually
both of us going to purchase some shares and you'll

(26:39):
actually be able to hear on that episode what that
process involves. But we really wanted to spend some time
stressing that there are things that you need to ask
yourself and considerations you need to take into account before
you even decide that investing directly is the right thing
for you, because it's definitely not the right thing for everyone.
Is it dumb?

S2 (26:58):
No. And I'm pretty excited because like as I mentioned
in the prior episode, I have actually never properly invested
in shares. I have been a crypto investor for my sins.
It feels dirty to say, but I used to invest
in crypto quite seriously. So you know that I'm familiar
with the markets in that sense, but I've never actually
sort of sat down and thought about building a portfolio.

(27:20):
So I think this is like, this is a great
opportunity because you get to see me and all my
incompetence and just can lead me through it with the
like the grizzled investor she is. So I think the
first thing that I especially thought about when, when I
was sort of contemplating this whole process is the sort
of it's a it seems like a very early, like
basic and sort of almost silly thing to think about,

(27:40):
but why do you want to invest Like don't just
do it because you think that you should do it
with a goal in mind. And we've sort of mentioned
this a bit about having sort of money goals and
sort of not not explicitly long term, but at least,
you know, future of planning or your investments and all
that sort of stuff. So there is a little bit

(28:01):
of a broad sort of question you have to ask
yourself about why the the inherent why of why you
want to actually put money into the share market. So,
you know, having a at least a little rough plan
is is probably a good thing to to get before
you actually take the plunge.

S1 (28:16):
Yeah. My why is that I'm hoping that I can
amass some assets outside of super which I might be
able to grow such to be big enough before the
age of 60 that I could retire a little bit
early and live off not just, you know, the earnings
from that, but actually sell down some of the capital.
So I'm 41, so I've I've actually only got a
sort of 19 years left in the market there in 50.

(28:37):
And if I want to actually do the early retirement,
I'd say so that's my sort of a goal at least.
What's your thoughts with investing in shares?

S2 (28:48):
It seems like fun and I haven't done it before.

S3 (28:50):
But I mean.

S2 (28:53):
I'm 26, so I'm just like, Yeah, cool. That sounds
like something to do. So.

S3 (28:58):
You know, Well, that's good.

S1 (28:59):
I think we've got some more questions.

S2 (29:01):
But looking through different ends of the spectrum here. So,
you know, we could we're really covering all bases.

S3 (29:07):
Well, I'm.

S1 (29:07):
Glad we're doing this episode to maybe force you to
think through some more elements of.

S3 (29:11):
Your strategy.

S2 (29:12):
And then possibly give.

S3 (29:13):
Us that.

S1 (29:14):
Number two question to ask yourself is this is just
sort of a knock out one before you put money
buying directly in shares. Do you have any high interest debts,
like high interest credit cards or personal loans? So do
you have either of those things?

S2 (29:29):
I mean, does a mortgage account.

S1 (29:31):
A mortgage does not count in my mind, but it's
really like a credit card. You're paying an average interest
rate of about 20% or something. You're going to be
hard pressed to find, you know, a share that you
can buy that's going to guarantee you 20% return, which
is what you will get if you park your dollar
instead in paying off that credit card balance. So that's
really the one that I want people to think about

(29:53):
is the credit cards and Hick's I mean is another issue.
People have different opinions on that, but again, that it's
a relatively low interest rate that you're talking about compared
to those really punitive 10% plus interest rates that I
really would want anyone to clear before they thought about
purchasing shares.

S2 (30:10):
All right. Well, that's great because I don't have any headaches.
I've only got a mortgage. So tick. Check this. Second question.
Number three is thinking about the amount of cash that
you've got to spend on things that, like might be unexpected.
So imagine. Sees upcoming bills like all of these things
have to take priority before investing in things like shares because,

(30:32):
you know, obviously you need to be able to pay
rent or pay your water bill or eat or, you know,
pay for an unexpected hospital visit or something like that.
So that another sort of almost obvious sort of thing.
But it really must take precedence over any of this
sort of stuff. Yeah.

S1 (30:47):
And I just caution people to think through the myriad
of things like needing new tires for your car or,
you know, these sort of little, you know, this sort
of unexpected but expected things. So you don't want to
have put your money into your shares and then you
have to pull it out again because you've got to
buy a new tyres like you should not be running
your self that close to the wind. People talk about

(31:07):
having an emergency fund of maybe 3 to 6 months
of living expenses so that if you do have, you know,
one of those larger events like you lose your job,
can you feed yourself for long enough because you don't
want to lose your job At the same time the
share market has crashed and then you're sort of selling
out your shares at a loss. You know that a
really bad situation to be in. So do you have
an emergency fund?

S2 (31:28):
I do.

S1 (31:29):
You do?

S3 (31:30):
There we go.

S1 (31:30):
Excellent. And I guess, you know, it's important, whatever it
is that lets you sleep at night. So I have
about six months of basic living expenses in there, which
is it's about $36,000 in cash that I have sitting there. Yeah.

S2 (31:45):
And I don't have anything new.

S3 (31:47):
Yeah.

S1 (31:47):
So, I mean, I like to run it pretty conservative,
you know? And, you know, there's no back up for me. Really.
I need to have that money in place so I
don't invest anything that eats into that for me.

S2 (32:00):
I have a few thousand dollars. So again, different different
ends of the.

S3 (32:04):
Spectrum, I guess.

S1 (32:05):
I mean, you don't have any dependents. I've got a son.
So maybe there's a few more sort of things that
I have to to consider.

S2 (32:12):
Yeah, I think. I think so. Now, number four is
Jess's favourite topic, which is putting extra money into your super. So, Jess,
why would someone want to do that instead of possibly
buying it?

S1 (32:23):
Because you're going to be old one day. We will
all be over. We will not all be over 60,
but we hope to be. And the government has a
system in place where you pay ultra low tax on
putting your money into super. You're only going to pay
$0.15 on the dollar compared to your marginal income tax rate,
which might be as high as $0.47 in the dollar

(32:44):
if you're on the higher tax thresholds. And you know,
so there is a great way the best one of
the best ways to make money is to avoid paying tax.
And if you are happy to park your money away
for that sort of longer term horizon, you're going to
have a bigger cost base. You know, you're going to
have more money up front because you pay less tax
on it to invest, and that will grow over time.
So people forget that we are all shareholders basically through

(33:07):
our superannuation accounts. And you can, as an alternative to
parking money in a brokerage and buying, you know, shares directly,
you can just be paying money into your super account.
And for people to know that you can contribute up
to $27,500 each year into your super and get all
those great low tax rates that includes your employer's contributions.

(33:31):
But you know that that is some headroom to play in.
It can be a good tax dodge if you don't
want the money back. And also just to flag for
people that you can also use previous year's unused caps
so that you might have some extra headway there for
previous years that can be rolled over. And that's new.
And not everyone knows that. But yes, super. I mean,
it is it is a way of buying shares. You

(33:53):
just can't and you lock the way, the money, you
can't access it until you're old.

S2 (33:56):
I feel like we need a podcast episode where justice
talks about how great it is to just put extra
money into super. And you just you just told the
whole time and I'm just like.

S1 (34:04):
You do it. Do it. But having said that, you know,
it's your money. And people, particularly at the younger end
of the spectrum and if you want to retire early,
you know, you're entitled to hold some money outside of super.
The tax breaks won't be as great. But yeah, you
might just prefer to live your life, you know, having
some of that money before you are 60. So that's,
you know, something to consider if you if you are
going down the path of direct share ownership, which, you know,

(34:26):
we're both doing so. Hmm. Also Poké Nola's DOS, which
is my favorite financial. Why not both? You can do
a bit of both, you know, put half in half
somewhere else. You know, it doesn't have to all go
in the share market. So speaking of getting old, question
number five to ask yourself is what is your investment
time horizon? So, you know, you've got a bit longer

(34:49):
on the clock.

S3 (34:50):
Dom That's more than just a little bit.

S1 (34:55):
But people, you know, you know, how long should you
be thinking? Do you think a minimum that you'd want
to be parking your money away in the share market
before you'd want to get it back to your.

S2 (35:06):
I would say five years? Like that's probably when I'm
thinking about investing shares. I'm thinking, Well, I'm just going
to put it here and like leave it for five
years and see what happens. Right? Like again, for my sins,
I was a crypto investor and that is such a
different mindset. You would buy something one day and then
the next day you probably sell it because over that.
Course of time, it would have doubled in value. So

(35:28):
like me getting into this, into the traditional traditional share
share market is like a complete change in sort of
perspective for me because like it's thinking about, well, I'm
not going to touch this for like five, maybe ten years.
So I think a really longer term sort of investment
time horizon is really needed for this because, you know,
share markets can underperform for quite a long time. And

(35:50):
look at the ASX at the moment. We've had 12 months,
is it nearly 12 months of of decline? So, you know,
that's and that's just a little taste of it really.

S1 (35:58):
Yeah. And there can be periods for as long as
a decade where, you know, you're getting below average returns.
And I, I'm a worrier. So I listen to a
lot of negative naysayers and there's any number of people
who will tell you that we've now come off a
period where shares have been historically highly valued and we're
in a super bubble which could unwind for years to come.

(36:19):
So I like to be conservative and think I'm kissing
goodbye to my money for at least ten years, because
I think that's but in my mind, I'm comfortable with
believing that, you know, over a ten year horizon should
generate a positive return. But I want to know that
I've got a lot of leeway to play with. If
we are sort of in a situation where it's going
to take longer for the share market to recover.

S2 (36:42):
Number six on the list of things to think about
is plans for your home ownership, because securing getting yourself
a place to live in without having to pay rent
is one of the best ways you can sort of
minimize your costs and set yourself up for the future.
So I think if you're sitting on, you know, let's
say a home deposit ish size of amount of money,

(37:05):
it's probably better to think about that rather than putting
that money into the share market. But, you know, that
obviously depends on your circumstances. Maybe you really think you're
not going to buy a home for the next five
years and maybe putting money into shares isn't such a
bad option. But of course it varies on where you
are in your life.

S1 (37:21):
Yeah, there's a bit of a debate about should you
invest your your home deposit in shares if you're maybe
not looking to buy for the 5 to 10 year horizon.
But if you're looking to buy in the next sort
of five years, I really question whether that's where you
should have your money and if you should have your
money in more conservative cash options that you can, you know, act.

(37:42):
If you see something, you can act on the property
market as needs be. And one thing to flag for
people is, again, super.

S3 (37:50):
No, just if you want to leave it alone, if
you want a little.

S1 (37:53):
Bit of both, you want to own a home, you
can look at the government's first home super saver scheme
where you can park, you can make sort of voluntary
contributions into the super account, get the tax breaks and
then put out when it comes time to purchase your property.
And in that way you are getting yourself a little
bit of access to share market returns because the super
is ultimately invested in some proportion in shares. So that's

(38:16):
worth thinking. But yes, I also agree that, you know,
people get really mean. Younger people are understandably so frustrated
with the housing market and so worried or, you know,
just throwing up your hands and saying, I will never
be able to afford a property, I'll just put my
money in shares. I can understand that feeling, but really
have a hard think about saving for for that first

(38:39):
home deposit, making some sacrifices. Go back and listen to
our episode, number one, because as a way of securing
your financial future, it's it's really something. Don't just dismiss it.
See what compromises you could make to to get yourself
that debt shelter that you're going to need when you're old.

S2 (38:56):
Absolutely.

S1 (38:58):
So question number seven is to think whether you have
any other short to medium term savings goals. So maybe
it's not your first home deposit, but you might have
other things you kind of want to do in the
next couple of years, which again, would fall short of
that sort of 5 to 10 year investment horizon. Are
you going to need to replace your car? Are you
going to get married soon? Is there a big overseas

(39:21):
trip you want to do? Is there maybe some home renovations?
So thinking about your sort of short to medium term consumption,
things that you might want to do just thinking through
that so that you don't go, Oh, well, one day
I will sell out the shares a little bit earlier
or at a time. You know, it's about planning ahead
and thinking it's it's okay to spend some money now

(39:41):
and you don't want to be locking away the money
for the short term in having bought your shares again
and selling out if it's a bad time. So just thinking,
you know, what are some other goals aside from home
ownership that you might want to just put the cash,
you know, and savings accounts are coming back up? I
did notice there's like a Bank of Queensland at Cole,

(40:03):
you know, online saving. It's now paying 4% if you
are aged between 15 and 34 years old. So you
know there is now money to be made from putting
your money in the bank, which wasn't the case for
a couple of years. But that is something to consider.

S2 (40:20):
Well, look, I'm not planning on getting married anytime soon.

S1 (40:24):
You never know.

S2 (40:25):
Whenever I'll, I'll look. It'll be it would surprise us both, Jess,
if I got married in the next 12 months. Right.
But don't need a new car. I do have a
couple of overseas trips planned, so I think this is
a tick as well. I think I'm alright. I don't
have anything massive to do to save up for the
the eighth sort of thing is, is another sort of
quite a broad sort of concept that you do not

(40:46):
really need to think about when investing in shares, which
is your appetite for risk, because as we've sort of
said a couple of times now, the share markets do
not always go up, and especially individual shares. If you
go down the path of buying individual shares in individual
companies don't always go up either. You can see 20
to 40% drops in value. And if that happens, you've

(41:09):
got to think about how you're going to react to that,
because if you're going to go, Oh, no, time to sell,
you know, it's dropped 40%, it'll never recover sort of thing.
Maybe investing in shares or maybe investing in specific companies
is not really for you. Maybe you should think about
some other sort of investment options. So and also think
about how compulsively you're going to check the balance of

(41:32):
your portfolio. It's like it can get very addictive to
open up your share trading app and go, you know,
shares are down 3% today. Oh, it's up 5% today. Like,
you know, that's. Almost useless unless you want to day trade,
which you probably shouldn't do.

S1 (41:46):
Yeah, there's. I mean, there's two costs to consider. There's
the cost of actually, you might make a panicky decision
and lose some money because you've sold out at at
inopportune time. But there's also just like a mental cost of,
you know, I think it's only human to sort of
look at those balances, see the red ticks, the red numbers,
you know, with the negative side. I mean, I have

(42:06):
experienced this having started investing over the last year. You know,
prices have come off. I am in the red on
paper and I am a long term investor and I
want to hold that for the long term. But I
still have to admit there's a psychic cost there. You know,
we're humans. We are loss averse. We fear losses more
than we value gains. You know, Can you stomach that?

(42:28):
Is it just going to make your life unpleasant to
see those red numbers? And that will depend, you know,
on who you are, what other stresses you've got in
your life. So number nine is about really what are
you going to actually invest in? Do you have an
investment strategy and particularly one that will give you diversification.
So in the next episode, we are both going to

(42:52):
be purchasing shares that we've decided.

S2 (42:54):
So I'm so excited to.

S1 (42:55):
Look at and we can reveal that they're not going
to be single stock investments. So both of us, you know,
we see the value in diversification and instant diversification. You know,
we've talked a lot in the last episode as well
about exchange traded funds and in particular ETFs, which track
a broader index. So like the ASX 200 or the
S&P 500, you can sort of from day dot be

(43:18):
purchasing something which gives you access to a range of
different companies, not just one. And you know that this
is a classic lesson for investors. Be diversified across asset
classes and also within shares across geographies and across industries
so that something we can't give financial advice. But I'm

(43:41):
more than happy to let people know that diversification is
a good thing and there are ways to buy shares,
you know, through those index ETFs, which which do give
you that instant diversification, which, if you're a beginner investor,
would probably help smooth your way into the market.

S2 (43:56):
Absolutely. I think it's I don't think it's particularly controversial
to say that diversification is good. Like it's just you know,
it is in many aspects of life, you know, not
just shares. And the last question to ask yourself is
how much you'll be investing and how regularly this is
sort of getting down to the real nuts and bolts
of it. But like, you've got to think about, you know,
your total pool of money that you wish, willing to invest.

(44:19):
How you going to split that up or if you're
going to split it up amongst different sort of assets
and think about, you know, if you're going to be
buying and selling over a period of time like dollar
cost averaging, which is quite a common strategy when it
comes to investing in in shares, or if you're just
going to go all in one day, get it done,
leave it sort of thing. So these are all sort
of things you have to sort of ask yourself before

(44:39):
you actually press the button and buy the shares. And
especially when it comes to things like fees, certain assets
and certain investment offerings will have different fees that are
higher or lower. And that is something really important to
think about alongside your brokerage fees, which, you know, can
range from being as low as $3 I think.

S3 (44:58):
We get to these days just.

S1 (44:59):
Yes, as a 3.1. Yep.

S2 (45:01):
Wow. Cheapest chips. So, you know, these are all these
sort of like really practical things you need to think
about before you actually purchase a share or multiple. Yeah.

S1 (45:12):
And we'll get into this more in the next episode. But,
you know, there traditionally is a sort of a $500
minimum investment with a lot of brokers. So if you
haven't got the $500, you're looking at micro investing sites,
which we will talk about, and they've got ongoing fees
rather than, you know, upfront fees. So there's a bit
to think about, which I think we should flesh out
further in episode number three when we actually get around

(45:35):
to to making the decisions about how to actually put
our money in the market.

S2 (45:40):
Yep. And look, this is not an exhaustive list. You know,
there's just sort of some prompts to help you think
about this once once you decide to go down the
path of buying shares. But yeah, as as just as mentioned,
we next week, we will be buying shares on the
podcast live. Not that I think you can really do
a live podcast, but it will be live to us,

(46:01):
which is enough. And we'll do talking about the whole thing.
Like literally what buttons do you press? What is a
market order versus like a limit order? What brokers should
you choose? So many questions and we'll answer most of them, probably.

S3 (46:16):
Some of them, some of them.

S1 (46:18):
Pertinent good ones. Yeah.

S2 (46:20):
And speaking of questions, we'll listen to question.

S1 (46:23):
Excellent. We love listener questions. Please do keep emailing them
to us at it all adds up at Nine.com.au today.
And this week's question is from Belinda. She says that
she and her husband are new to Australia and looking
for some tips on how to build up a good
credit score rating. She wants to know what kind of
purchases would help build a good credit score. And what

(46:46):
do banks look at when someone wants to buy a
home in terms of the credit score? So what what
do you think?

S2 (46:53):
It's interesting because I was worried about this when I
before I bought my home, too. And I thought the
credit scores of these huge deals, you really have to
worry about them, like, oh, God, like I got no
credit score and we've borrowed anything. And the bank did
not ask me once about it. It was never even mentioned.
And for all my friends who have also bought property,
it has never been mentioned for them, ever. Like the

(47:14):
credit score just never comes up. So I think there
is this perception that credit scores are really big and
important things, but I think that might have been a
bit of an American import where it is actually quite
a big deal over there. And it does change how
you what and how you can borrow from a bank
where here it doesn't really matter that much. So. I
think whilst building a credit score is a good thing
to do, it's probably not that much of a big deal,

(47:39):
especially if you're looking to borrow. But Jess, I'm not
sure if you have any other thoughts on this.

S1 (47:42):
Yeah, and I mean people sort of think us in
an American context. Should I go out and get a
credit card just so that I can where, you know,
I've got I can demonstrate that I could pay a
credit card, but actually that can work against you in
an Australian context, because if you've got a credit card
with a $10,000 limit on it, say they assume that
you have that maxed out and you're paying that off.

(48:02):
So it actually reduces how much you can borrow. So
that is another little twist. If you're looking at buying
property in Australia, you know, the credit score, I think
they do do a credit check on you, but it's
it's not sort of as important as it is in
some other jurisdictions.

S2 (48:18):
And just take us home with your budget tip of
the week, which I believe this week involves picking up
trash from the side of the road.

S1 (48:25):
It does. It's it's the wonderful world of street bounty.
And I just want everyone to know that I furnished
most of my house with stuff off the street. And
I want a Nobel Prize that for everyone. When I
first bought my my house I was addicted to. I
would literally look up the website for the local council
areas covering some of Sydney's most salubrious suburbs. I would

(48:49):
figure out which local areas were having their sort of
regular household clean up day. That's when you could put
all your rubbish out on the streets, you know, furniture.
And I would get in my car and I would
go pick up that good stuff and put it in
my car and put it in my home because rich
people throw out some good stuff.

S3 (49:04):
So this is.

S1 (49:05):
True. So that's just it. I just and I mean,
if it if it's not off the street Facebook marketplace,
you can pick up secondhand furniture for free. So that
that's just my top tip. Get get rubbish off the
streets and finish your home with.

S3 (49:18):
Well, look.

S2 (49:18):
To be fair. One of my favourite things in my home,
which I get complimented on every time someone comes over,
is these very two very large giraffe wooden giraffe statues,
which I found outside my apartment block one day during lockdown.
And I bought them because I thought they were funny.
And I just haven't been able to get rid of
them because I can't bring myself to to get rid
of them. So stray batty.

S1 (49:38):
It's also it's recycling. It's saving stuff from landfill. And
I'll also confess, my couch is from a neighbour who
was walking it out to the street on hard rubbish
collection day. And I said, Just put that in my house, please.
And then I sold my other couch on Facebook. Marketplace.

S2 (49:54):
Money, money, money. Alright, well everyone, thanks for listening in
this week and joining us. Tune in this time next
week for our final episode in Share Market Investing, where
we will be buying shares on podcast though.

S1 (50:05):
What fun it is going to be fun. Is it
a first? I think it will probably be a first
for podcasting.

S2 (50:09):
Let's say.

S3 (50:10):
It is. See you next.

S2 (50:11):
Week, then. Next week.

S1 (50:25):
Hello and welcome to It All Adds Up the podcast
where we chat about money, how to get it, how
to spend it and how to invest it. I'm senior
economics writer Jess Irvine.

S2 (50:35):
And I'm money an added on PAL. And this is
the grand finale, not the one that was last weekend.
But of our three part series on investing in shares
for beginners. And if you haven't before already listening to
this episode, I would highly recommend going back and listening
to episodes four and five in your podcast player, where
we cover sort of the basics of share investing and
some really important questions. So ask yourself before you actually

(50:57):
decide to invest in shares.

S1 (50:59):
Yes, because I think this has got to be fun.
We're going to buy shares live on air, although we're
not sure if you can be live on and.

S2 (51:05):
It's live in spirit.

S1 (51:08):
But yes, so which is going to be fun. But
everybody know that we have done our due diligence on
that and made some really important questions and answered them on,
you know, whether we should be investing at all. But
I think there is value for people in just being
able to hear what it's like or what steps you
have to actually go through to execute share trade, you know,

(51:29):
like which I remember when I did it for the
first time, I was, you know, in conniptions because I'm black.
Which button do I press? Do I do a limit
order or a market order? And the amount of time
I spent sort of in analysis paralysis and trying to choose,
you know, which is the best broker, etc.. So I'm
hoping we can talk you through some of that and
just sort of hold your hand if you have decided

(51:50):
that it's right for you that you want to buy
shares directly, you know, you can hear what it's like
when someone does it.

S2 (51:55):
And look, we're not going to tell you which says specifically,
of course, because you should always do your own research
and we don't want to get arrested by ask. I
don't want Joe Longo busting in the door behind me
with a pair of handcuffs. We are not qualified financial advisors.
We are just financial journalists, which are very different things.
But we are sort of happy to share that we're
both buying into exchange traded funds, which sort of investing

(52:18):
in a bundle of shares. So we're not going to
give you any hot stock tips. So don't try and
copycat us, please.

S1 (52:25):
Yeah, definitely don't copycat us. And this is a really
good time to stress that the information we're about to
discuss is general in nature and doesn't take into account
your personal financial goals and objectives. And you should always
do your own research and seek professional advice before making
any major financial decisions.

S2 (52:41):
Yeah, I just we are both very well educated and experienced.
Financial journalist.

S1 (52:45):
Yes, we are. Congratulations to.

S3 (52:47):
Us. I didn't realize we.

S2 (52:48):
Were, but apparently we are. Really.

S1 (52:49):
I wrote it in the script, so it must be.

S2 (52:51):
It must be true. But even so, we've both sort
of found the process of buying shares a bit tricky
to navigate. There is a lot of things to consider.

S1 (53:00):
Yeah, and we're going to walk through the sort of
basic steps. We've got about six steps of how you
actually go move through the process. And I remember when
I did it for the first time, I actually had
a morningstar, an analyst who's like way overqualified to be
doing this, but I was just like texting him or
on the phone guy.

S3 (53:18):
I don't know what a market order is.

S1 (53:20):
And it was very kind to talk me through the step.
Number one is you have to choose a broker. If
you want to buy shares, you have to get in
touch with a broker. And how do you choose one?

S2 (53:33):
Well, there are so many different ones, and I think
like a lot of the ones that people will be
familiar with are things like the ones that provided by
the big banks. So things like CommSec, which is very
popular like these, you know, linked to the big four banks,
they give you a pathway into the share market. Often
you can use the bank balance, all that sort of stuff.
But you know, we're in the OR in the 21st century,
you know, you can do anything on your phone these

(53:54):
days and there are a myriad of various different online
share trading apps which allow you to buy and sell shares.
So they're sort of, I guess, what would you call them, micro.

S3 (54:05):
Investing sort of sites.

S1 (54:07):
Well, I consider the micro investing sites are more the
ones where you're buying in with this sort of $50
or so. And I think we can namedrop a few,
but we're not recommending any of them. So like your
you're micro investing sites of things like Rays, CommSec, Pocket
Spaceship Voyager shares these acorns. And so they're actually the
micro investing in my mind is you sort of paying

(54:30):
that you know the smaller amounts and paying like a
monthly fee too to be participating on that platform rather
than paying the brokerage fee all the time. So if
you've got smaller sums, you may be looking at those
sorts of sites. If you've got sort of over the
traditional $500 that you need to purchase, you know, into

(54:50):
a share for the first time, you're talking about the
sort of bigger brokers. And if we want to namedrop
a few of those, You've mentioned CommSec, there's NAB trade,
you know, the major banks mostly all have a platform
and you're thinking stake superhero Pearler self Well CMC markets
think markets eToro. If I say the first off I'm
not endorsing any of them but definitely you have to

(55:14):
have a bit of research. And one thing to note
about those type of brokers is some of them operate
on a custodial model, which means you're sort of they
will own the shares for you. You're definitely still the
beneficial owner of it, but they're sort of pooled. And
other brokers will be what's called chess sponsored. So you'll
be issued what's also known as a hidden number from

(55:36):
the ASX and those shares will be held sort of
identifiable directly to you. So that's something to have a
little think about when you're choosing a broker.

S2 (55:44):
Yeah, and I think it's good to not get too
bogged down in that sort of stuff. You know, just
have a Google look at some of the lists of
the cheapest ones, because obviously that is a factor when
you're buying shares, you don't want to pay massive amounts
of money in brokerage fees and other sort of fees.
So you can get as low as $3 for brokerage
fees in the market at the moment, which is pretty cheap.

(56:04):
And some places often do like free brokerage to you
buying us shares or free brokerage if it's, you know,
Sunday afternoon or something like that. Like, you know, there's
different sort of times that they'll give you like deals
and all that sort of stuff. So these are things
to keep in mind when you are buying shares. And
then once you've sort of picked your your broker, your
second step is to set up an account, which is

(56:26):
kind of like setting up an account on on any
sort of online platform, really, except involves a little more paperwork.

S3 (56:31):
Yeah.

S1 (56:31):
And in the olden days, you used to have to
like faxing a copy of your driver's licence and all
the rest, and that would take days. Now, there are
some brokers where you can set up pretty much in
an instant. There are some brokers where it takes maybe
a day or so because they do want you to
scan your license and send it in. You know, there
is a bit of email back and forth to set
up the account. So yeah, you have to you have

(56:52):
to set up an account with a broker to be
able to buy.

S3 (56:55):
Shares and.

S2 (56:56):
You'll need a few things on hand, like a tax
file number and all that sort of stuff like that.
You will need a little bit of documentation. But you know,
I think it only took me maybe a day or
two to set up my account. So really, it's not
that hard any more.

S1 (57:10):
Yep. And step number three, once you've got the account
all set up is you have to put money into
your account. So you have to transfer money across from
your savings account to actually be in your share brokerage
account ready to deploy. I mean, and that's just a
matter of doing a BPAY. But it can sort of,
you know, you have to allow time for that money

(57:31):
to get across. So as you can see, it's not
as easy as just sort of pressing by, although that
is the next step.

S2 (57:36):
That is the next step. But just on that, I
actually my platform, which I use, allows me to pay
ID money, which is, you know, sort of very new age.
But it came across almost instantly like, you know. So
there are ways that you can get money in very quickly.
But I don't think I don't think all services offer that.

S1 (57:54):
Yeah, mine is like an Osco transfer, which is pretty,
pretty quick. So but I have used other brokerage accounts
where it did take a little bit longer than that.

S2 (58:03):
And then step number four is opening up the app
and placing a buy order. And just I believe we're
going to do that right now.

S1 (58:11):
So we've just run through a few of the steps
that we're about to do to give people sort of
some lay of the land, do you think?

S2 (58:17):
Yes, I think that's probably that probably makes the most sense.
The number one thing to think about is when the
market opens, the market does not run at all times.
You cannot buy, you know, shares on the toilet at
8 p.m. at night. You have to think about when
the market is actually running.

S1 (58:34):
You have to wait until 10:00 in the morning and
then you can buy on the toilet. Although I do
sort of say to people, sometimes the market pricing can
be a little bit, you know, more erratic just as
the market opens or closes. So the hours a 10 a.m.
to 4 p.m. and I sort of like to leave
a little bit of leeway. So you're sort of more
avoiding those open and closed times. When you first go

(58:58):
in and you check the the app and you press buy,
it's going to show you something called a buy, sell
spread or the bid ask spread and that. Is the
gap between the sort of the highest price that buyers
are wanting to pay and the lowest price that sellers
are willing to accept and is usually a bit of
a gap there. You know, of a couple of cents

(59:19):
or whatever, and that's called the buy sell spread. And
it pays to make sure that that spread isn't too
big like so there isn't something weird. The market isn't
particularly liquid for that particular asset or something because you
know that that's just something to check.

S2 (59:35):
You'll also be presented with a number of different options
when it comes to how you actually want to buy
the shares. And commonly you'll see an option for a
limit order or a market order. And a market order
is where you just tell the platform to buy the
shares at the whatever the best market price they can
get for you at that moment. Then when you press

(59:55):
buy a limit order lets you set a sort of
a maximum that you're willing to pay for the shares. So,
you know, say you, you know, you refuse to buy
these shares unless they're $8. You can put in an
order to say once they hit $8, I will buy
them then.

S1 (01:00:09):
Yeah. And I need to confess at this point that
I did use to put limit orders in and I
became incredibly obsessed with not paying like $0.01 above the
buy sell spread. So I was always putting in offers
which were sort of outside of the spread and sort
of below and sort of just hoping that the market
would move that that such that there would be a
seller that would accept my low offer and sometimes I

(01:00:30):
would put in an order and it wouldn't clear because I,
you know, the market had moved the other way and
I was just torturing myself for a couple of cents.
And I have I now tend to I'll just pop
in and do a market order. As long as I've
checked that the market is nice and liquid and that buy,
sell spread isn't isn't to it, something weird isn't happening.
I just pop in a market order because I was

(01:00:52):
absolutely sending myself crazy over a few cents.

S2 (01:00:54):
Yeah. And you know, it's no no sense crying over
a few cents.

S3 (01:01:01):
A little bit of comedy for you, but.

S2 (01:01:03):
You also need to think about how many shares you're
going to actually buy. So divide the amount of money
you going to spend by the current share price and
also factor in a few things like brokerage cost and
any other fees.

S1 (01:01:14):
Yep. And if you are doing a limit order, it will.
One of the last steps is it usually asks you
to set an expiration date for your order so you're
not waiting around all day for that share to execute.
Or you can say at the end of the day,
just don't worry about it if it if it doesn't clear.

S2 (01:01:28):
So those are the steps. So I'm now opening my
phone and I am putting in my password for my
shared trading app. I'm going to go buy some shares.
And I'm just doing a quick search for the ETF,
which I'm looking to buy, and I've found it, so
I've opened it up having a look at the the
current trading price and its volume and its performance over

(01:01:49):
the past month. Always a good thing to have a
quick look at just to make sure that you know,
you're not buying at a real peak or a real
trough or anything like that. And there's a big green
buy button down the bottom. I'm going to hit that
big green buy button.

S3 (01:02:04):
I know. They make it so easy.

S2 (01:02:06):
So I'm going to put in the amount I'm going
to invest. I'm not going wild today. I'm only going
to invest $100. So put that in it. Asked me
to review it. I'm doing a market order. So it's
just whatever the best price is, it's available. And then
there you go. It's done. And it processes and and easy, easy, done.

S3 (01:02:25):
You are.

S1 (01:02:25):
So quick. Dave. Okay, I'm going to alter my style,
which is to get really nervous. I'm worried about all
the money I'm about to, you know, transform into ownership
of a a share, which is fantastic, but it's also
my cash going in. Okay, so what? Okay, I'm going
to open my share app. Here we go. And it's
presenting me with information about my full balance. I know

(01:02:48):
what I'm going to buy. It's an index ETF that
I've bought before, so I'm just going to click on that.

S3 (01:02:56):
Where we go.

S1 (01:02:58):
Okay. And it's saying again it green button by okay.
So I'm rolling in cash and I've got $1,000 I'm
going to invest. So I now need to just have
a look at what's the bid and the ask price.
And I'll just just I've got my calculator out to
divide 1000 divided by that price to know how many

(01:03:23):
shares I can get. Okay, So it's telling me I
can buy about ten units. I'm so I'm really close.
Other amount to maybe it's 11, but it would depend
what price that goes through. So I'm gonna I'm going
to go for gold to try and buy 11 units
in it. So I punch in shares. Number 11. And

(01:03:46):
then I'm changing it from a limit order to a
market order. And I'm saying so 11 shares at market,
it's giving me an estimate of how much that would cost,
which is above. So I'm gonna have to knock it
down to 1010 at market. Max amount would be that amount. Yes.

(01:04:08):
It expires saying end of the day it doesn't matter.
It's a market order. And then I just take some
deep breaths. Done.

S2 (01:04:13):
You can purchase. I believe in you.

S1 (01:04:18):
And it says review. Okay, review the buy. And that
buy sell spreads nice and tight. I there's my brokerage cost. Okay.
So I go and I've got a submit button. And
I'm going to press that now. Sending done. Order placed.

S2 (01:04:35):
And then you.

S1 (01:04:36):
Go to go.

S2 (01:04:37):
And that's that's it's is easy Is that.

S1 (01:04:39):
Did we make that sound like.

S3 (01:04:40):
Fun. Yeah it is fun.

S1 (01:04:43):
As I still find it, I get a bit nerve wracking,
although I'm down with it. I know what I'm doing,
you know?

S2 (01:04:48):
You cool with it?

S1 (01:04:50):
Yeah. And then, I mean, now what I love to do,
I don't know if you would need to do this for,
but I like to review my contract notes, so I
actually get the PDF report of, of my contract note,
which is my purchase order and I printed out and
I have a binder at home where I have a
whole bunch and I keep every contract. Note that for
everything I've ever bought.

S2 (01:05:08):
Yeah, I mean, I was not going to do any
of that. I'm just going to probably just leave it
and and think about it another time. But, you know,
if you want to be as as diligent as Jess is,
you can do that too.

S1 (01:05:20):
Another thing I do like those. I use a website
called Share Site, which offers a free sort of share
tracking and you can enter your holdings and if you
have under ten different holdings, you can access that for free.
So I do immediately I printed out and then I
go enter it as a trade on my share site account,
and then it sort of gives me a record. So

(01:05:40):
if you do make purchases across multiple brokerage apps, you know,
you can get a complete picture of your holdings.

S2 (01:05:47):
And then the last step is to close your app
and then never think about it again. Well, not never again,
but just trying to try to put it out of
your mind. Ignore the fact that you just you just
spent $1,000 on some shares and just, you know, go
and go and make a cup of tea and think
about anything else because don't need to obsessively check it
because it's not going to be healthy to do that.

S1 (01:06:08):
Yes. Take it for me as someone who has obsessively
checked it for for way too long. But I'm I'm
getting better. And I just know up or down, you know,
what I've done is I've got myself a toehold, a
foothold in an asset that, you know, may increase in
value over time. I hope it does. It will probably
pay me distributions or dividends, you know, and I can
look forward to that. And I you know, just keeping

(01:06:29):
an eye on the bigger picture of what you're doing.
You know, I think with the apps, it can sort
of make it feel like a game or a bit
like not real as real money we've just said goodbye
to and hopefully we'll leave it there for enough time
that it will prove to be a good investment for us. Still,
I wish you well.

S2 (01:06:47):
And I wish you well too. Just and you go
over on that. There it is. There's at the end
of our sort of three part episode on how to
buy shares and how to get involved in the share market.
I hope you found them interesting. You know, it was
interesting for us to talk about it and interesting to
buy shares live again. Live Not really live. We think
it's live. And as always, you know, we're rounding off

(01:07:08):
the end of this episode with a listener question, I believe.

S1 (01:07:11):
Yes. So our listener question is from Lloyd, who knew
we were going to be talking about shares and he
was wondering if we're going to talk about international investments
in the podcast. So maybe we could just talk quickly
about international having an international element to your portfolio.

S2 (01:07:28):
Yeah, I mean, as we mentioned a couple of times,
diversification is really important and if you only invest in
Australian shares, you're going to get a bit of a
limited exposure to different things. Like Australia is really sort
of overweight as an economy to things like mining and
resources and all that sort of stuff, because obviously that's
what we make a lot of our money out of.
So I think international shares can be really good to

(01:07:48):
give you that little bit of extra edge on sort
of thing, especially like tech stocks and stuff like that,
because we don't have a huge number of tech stocks
on the local market. So yeah, things like that. International
shares are really important.

S1 (01:07:59):
Yeah, and it's really easy these days to get yourself
access to that. There's any number of sort of international shares, ETFs.
You know, if you want to pick a particular market,
you can do that or you can get ones that
sort of buy you a slice of everything across lots
of different countries as well.

S2 (01:08:15):
And just your budget tip of the week, I believe,
is style related.

S1 (01:08:19):
It is. You look amazing, Don. Thank you. I'm not
sure about myself. This is one thing I feel like
I'm kind of talking to my lady friends here, which
is that we do spend quite a lot of money
on hair treatments and haircuts and, you know, power to
you if you value that. But one thing that I
have really saved and I've got more money to invest

(01:08:39):
in shares is because I don't pay a hairdresser anymore.
I just well, I did once try to cut my
own hair and I don't actually recommend that. But I
now have a friend who I've equipped with a pair
of $10 scissors and she comes over and she gives
me a hair trim for free every couple of weeks
and it's totally free. And I just like to have
a word. Yes. As I say to my lady friends,

(01:09:02):
you know, don't get caught up in the beauty gap,
which or the beauty penalty where you're paying a lot
of money to sort of shore up your appearances and
try to boost your self-esteem. You're beautiful as you are.
You look amazing. Get a friend to cut your hair.
And if you if you haven't got any friends with
steady hands, you can look out for tough training days.

(01:09:23):
You know, there's always people needing to experiment on you
or even search Facebook for hair model groups in your
local area, which where you can connect with sort of
trainee hairdressers so you can save a lot of cash
that way.

S2 (01:09:35):
Yeah, I I've been told multiple times by barbers, which
I view as an insult, to be quite honest, that
I have a very difficult head of hair to cut.
Something to do with having a double crown makes it
really like hard to style anyway. So as much as
I really like that idea, I think I'm probably going
to stick with my with my local hairdresser.

S1 (01:09:52):
Okay. You might have special needs.

S2 (01:09:54):
I do have a specialty and a customer ahead.

S3 (01:09:55):
Of had a pound.

S2 (01:09:57):
But that does bring us to the end of the
episode for another week. Keep sending in those listener questions.
We love to read and we love to read them out.
We love to answer them via email address. Is it
all adds up At 9:00 today, you and next week
will be returning to normal programming with our regular run
of episodes.

S1 (01:10:13):
Excellent. See you next week, Dom. That was fun.

S2 (01:10:15):
Thanks, Jess. This episode of It All Adds Up was
produced by Chee Wong. The information discussed is general in
nature and does not take into account your personal financial situation,
goals or objectives. You should always do your own research
or get professional advice before making any major financial decisions.
If you like today's episode, hit follow a new podcast app.

(01:10:37):
Leave a review and recommend it to all your friends.
You can also submit your listener questions in text or
audio form at. It all adds up at 9:00 PM today.
Thanks for listening.