May 2, 2023 • 47 mins
There is no doubt that we are in a stressful economic situation right now, but every season brings a different opportunity! So today we are going to give you tips and tricks on how to invest in a high inflation environment. We look at why inflation currently sits where it is, the sorts of investments that are more viable in this landscape and do a bit of an investment mindset check in.
Acknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements.
The advice shared on She's On The Money is general in nature and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708, AFSL - 451289.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hello.
Speaker 2 (00:01):
My name's Santasha Nabananga Bamblet. I'm a proud yr the
Order Kerney Whoalbury and a waddery woman. And before we
get started on She's on the Money podcast, I would
like to acknowledge the traditional custodians of the land of
which this podcast is recorded on a wondery country, acknowledging
the elders, the ancestors and the next generation coming through
(00:23):
as this podcast is about connecting, empowering, knowledge sharing and
the storytelling of you to make a difference for today
and lasting impact for tomorrow.
Speaker 1 (00:33):
Let's get into it. She's on the Money.
Speaker 3 (00:36):
She's on the Money.
Speaker 4 (00:57):
Hello, and welcome to She's on the Money podcast for
millennials who want financial freedom.
Speaker 1 (01:03):
Hello v Hello, are you ready to talk about investment?
Speaker 4 (01:07):
Yeah, I'm very ready. I'm very um Would you say interested?
Speaker 1 (01:10):
Is your interest inflated? Its inflated?
Speaker 3 (01:14):
Believe it or not.
Speaker 1 (01:15):
People didn't come here for good jokes, Beck, No, which
is good because we don't have any that turns out Yeah, no, terrible.
We actually might get onto the finance content. Yes see
if that works out better, let's try it.
Speaker 3 (01:27):
Let's try it.
Speaker 4 (01:27):
Yeah, we're talking about investing am I getting this right?
How to invest in a high inflation environment?
Speaker 1 (01:35):
Strap yourself in Today's Gonna Get Wild. We are back
with another investing episode. As you can tell, I'm trying
my hardest to come up with as many topics related
to investment as possible. Let me ask you a question.
Do you think it is possible to invest in a
high inflation environment? Beck?
Speaker 4 (01:53):
Okay, So I'm going to have to break this one
down real quick because I did not know what high
inflation actually meant? But it is it true that high
inflation is the rising cost.
Speaker 1 (02:04):
Of living in jen Yeah? Amazing, that's right, Okay, amazing. Yeah. So,
I mean if you're not really.
Speaker 4 (02:11):
Affected by it, if you're making enough money to not
really see a change or that much of a shift
in your like how much you have to spend or
how much you have left over at the end of
the pay cycle, then I don't think that there would
be a big problem.
Speaker 1 (02:26):
Yeah. I'm getting on this topic. I hope early enough
so that you guys continue to invest during this period,
because I've seen some stuff online that says it's not
worth it, and I couldn't tell you harder, harder? Can
I tell you harder. I don't know if that's the
right terminology, but you can. You can do it back right, Okay,
stress highly enough that it is fine to invest during
(02:48):
a high inflation environment. So obviously there's a lot of
privilege in that because during the time of peak inflation,
other people are struggling. And if this episode for some
reason is triggering you into feeling like other people have
things that you currently don't, maybe it's not the episode
for you. Honestly, I think that mindset is going to
(03:09):
derail your confidence and make you feel worse off. And
I think that the best thing we can, I guess
see for our community is that quote that I use
all the time, arising hidlifts soulships. Even if you're not
in the best position of your life right now, that
doesn't mean that somebody else needs to downplay their circumstances.
You know, obviously we don't exactly want it rubbed in
our faces, but someone else should thrive because by some
(03:33):
other female or some other human being in our community thriving,
that opens up even more opportunity for you and I
to be successful. Beck, And I think that is so beautiful,
yeahhasutely so for anyone who has been listening to Chese
on the Money. I think you guys knew I was
gonna say it was always a good time to invest.
And today we're going to be giving you some tips
and tricks on how to invest in a high inflation environment.
(03:56):
We're going to start off with a little bit of
a recap of why inflation currently sits where it is.
We'll look at the sorts of investments that are a
little bit more sexy in this landscape, and we're going
to be doing a little bit of an investment mindset
check in too, So strap yourselves in.
Speaker 4 (04:09):
Oh my god, I'm kind of excited. But also if
you do think that you are not in the place
to be listening to episode, just know that I'm on
this journey with you because I also have zero dollars
all the time. So we're getting better at it and
getting better at it.
Speaker 3 (04:23):
I am, I am, I am.
Speaker 1 (04:24):
Can I get to sit down very soon and do
her budget in cashlow? And I cannot wait.
Speaker 3 (04:28):
I'm so excited.
Speaker 1 (04:29):
We're going to bring them budget cashlow masterclass to life
like you're going to get it in real life. I am,
she doesn't even know.
Speaker 3 (04:37):
I don't know what I guess I'm explained.
Speaker 1 (04:39):
Do you want to talk about in place? I want
to do? I want to you do? I do? All right?
So first things first, I want to start off by
saying that we are in a super stressful economic situation
right now, but where possible, I kind of want you
to try and zoom out and remember that the economy
is like an ecosystem, or even like the seasons during
a year, It is never stagnant and things are always
(04:59):
che What we're in right now is the balancing out
period of what was uncharacteristically low interest rates. They were
actually never going to be low forever. And I feel
like we heard that a lot. People would say things like, oh, beck,
that money's never going to be as cheap as it
is today. Maybe I heard that a lot more because
I worked in money, but people would always say, oh,
(05:20):
money is cheap right now, it's great time to invest or.
Money's cheap right now. It's a great time to buy property,
because you know that makes sense. But in the same way,
this season is also going to pass, and we are
going to find a new status and a new update
and a new I guess normal you could say, so
it's compening, it's comforting to know, but it's also just
(05:41):
one of those things where I think, in every circumstance,
and you know, my business partner Kate in Zella Money,
because we run a mortgage broken company together. Kate and
I talk about this all the time, and it's just
this idea that there was this concept of money so cheap,
and we would talk to people who'd be like, oh,
but it's only two percent to borrow, you know, half
of the million dollars, Maybe I should just got up
(06:01):
to seven hundred thousand. And a good mortgage broker would
have talked to you about your personal circumstances and whether
you can go up to that or whether you shouldn't,
or what that looks like, and takes your entire picture
into consideration, Whereas I think a lot of people had
a few cheeky mortgage brokers who were like, oh, yeah, Beck,
if you want to take more, take more, money's cheap.
(06:24):
Whereas you're broker, if they are a good broker, or
even anyone dealing with you in a money situation, really
shouldn't be pushing you to take more when it's unnecessary
or more when it maybe isn't the best financial decision,
because anyone who works in the money space knew we
and equivocally knew that two percent wouldn't last. And I mean,
(06:44):
I'm in that position where I have a mortgage it
has now gone up. I think my mortgage interest rate
made me nearly be sick the other day. Grateful that
I'm in a position where we can still afford. That
things have shifted, that is fine, But we're like five
and a half percent now.
Speaker 3 (07:00):
I don't know.
Speaker 1 (07:01):
When we first got our mortgage back, it was at
two percent. Okay, side mortgage repayments have more than doubled.
Oh I see, I say that is absolutely not a complaint.
I'm not complaining about that at all. It's just that's
the way of the world, right, And I'm grateful to
have been in a position where when my husband Steve
and I took on that mortgage, we went, all right,
(07:21):
how much can we afford? And Kate, who obviously you know,
helped us out loss. Yeah, I'm going to abuse that
relationship to it till the day I died. But Kate said, oh,
you can borrow up to X. No, no, no, no,
I don't want X. How about I've done my budget
and cash flow. I think this is going to be
more obtainable because if things go awry, then I can
(07:45):
afford it. But then on the flip side, I'm just
gonna have more free cash flow, more free cash flow sexy.
I can go on holidays, i can still enjoy my life.
I can still do heaps of things that I want
to do. But I'm not in a situation where I
am kind of like a slave to my mortgage. Yes,
a lot of people got in the position where they're like,
oh my god, two percent. I could afford that two percent,
but hadn't conceptualized what if it doubles, What if it
(08:07):
goes up to four percent, what if it gets up
to nearly six percent? What if we actually are in
a situation where our mortgage interest of payments double. Can
we actually afford that or with that significantly compromise our lives?
And a lot of people are in that circumstance right now.
So it's important to zoom out when we're making any decision,
but especially when we're talking about investment, because when in doubt,
(08:28):
zoom out. That's a good phrase. But also, if you
look at the Australian share market over any thirty year
period of time, no one has ever lost if they
stayed invested right thirty years though it is a long time. Yeah,
I can find you heaps of examples of people that
put their money in four years later they're like, oh,
I've been investing for ages and have made no money
(08:48):
and took it out and made a loss. That would
absolutely happen. Stay in there, if you stay in the market,
that is what the most important thing is, getting exposure
to the peaks and troughs. They might feel really painful
when the market's off and you're like, I'm not getting
as much banged from my buck right now, And when
the market's really on, you're like, oh, making hay while
(09:08):
the sun is shining. It all averages out to be
a good return, okay, But if you're exiting the market
because that trough is really scaring you, that could actually
mean a lot of financial harm to you. So it's
actually all about and we'll talk about it later mindset,
but it's actually all about really conceptualizing and understanding these things.
And there's been a lot of conversation in our Facebook
(09:29):
group on Instagram in my dms of victoria or inflation
is so high, should I still be investing I see
if it works for you, my friend, Yes, if it works.
Speaker 4 (09:38):
For you, if you can afford it, and everyone can.
I suppose if you have like a couple bucks.
Speaker 1 (09:42):
Yes, spare. I could talk about this forever, Beck, but
let's get into the nuts and bolts of it. You
asked me about inflation.
Speaker 3 (09:48):
Yes.
Speaker 1 (09:48):
Inflation is the general rising prices in an economy over
a specified period of time. The RBA, or the Reserve
Bank of Australia, typically targets a low and stable rate
of inflation of between two and three percent each year,
which can signify a growing economy. So slow and steady
wins the race. According to the RBA, inflation, though it
(10:10):
can creep into the double digits and come as an
economic shock. Really, Australians annual interest rate, Beck, you're not
going to be surprised seven point eight percent, okay at
this point in time, right right right, And it's still
fluctuating and it's going up and down. So the RBA
is the bank to the other banks. Sure, so Combank, NAB,
(10:31):
the big four. They don't just automatically have money. The
RBA is like the big dog government.
Speaker 3 (10:37):
Bank, Mama.
Speaker 1 (10:38):
They set the rules. They're the big dogs. The RBA
says our interest rates two percent. But if one of
the big four banks then says, all right, well I'm
still going to be providing mortgages to our clients. Well,
then they're borrowing money from the RBA two percent and
they actually have to pass along that interest rate, and
that's what dictates our interest rates here in Australia. The
(11:00):
big banks, Yeah, they might have heaps and heaps and
heaps of money, but they actually do borrow from the RBA.
So if the RBA's cash rate, when that gets said,
I think sometimes people like, oh, that's a bit confusing.
That's the amount of money it costs our big banks
to borrow from the RBA.
Speaker 3 (11:17):
Right.
Speaker 1 (11:17):
So by the RBA increasing their cash rate and saying, look,
we're going to make borrowing money more expensive, do you
know what they're doing in that circumstance.
Speaker 3 (11:27):
I don't.
Speaker 1 (11:27):
You're like, nah, you've lost me already. So when the
RBA increases their rates, what that means is things are
going to be more expensive for people, like the trickle
down effect means that me, as a customer of one
of the banks, because I have a mortgage, my life's
going to get more expensive. My mortgage rates are going
to increase. I'm going to have less disposable income, which
(11:49):
means there's less disposable income going around in the economy,
which means inflation can't creep up as fast. So the
RBA are increasing their cash rates and saying, look, we're
going to borrow money out at a higher rate because
we don't want inflation to go wild. And after COVID,
I feel like COVID put a little bit of a
hold on inflation for a while there, and then everything
(12:12):
went back to let's call it business as usual or
our new normal or whatever everyone's calling it. Everyone was like, okay, cool,
we are going to have to start pushing some of
these you know, increases in price onto our consumers. And
everything went like this, like travel has gone wild. Travel
can't happen in my family as easily if I'm paying
more on my mortgage. They're trying to keep our economy
(12:34):
a little bit slower. We're trying to slow the growth
of our economy. Does that make sense that I have
or if you had less money to spend on things
that were important to you and you really had to
prioritize maybe just the basics for a little while yep,
the rest of the economy and the businesses around that
they aren't growing as much because you're not funding them. Right,
So if those businesses aren't being funded, the economy growth
(12:55):
starts to slow. And if economy growth starts to slow,
it gets back to that two and three percent that
the RBA is trying to target to mean that we
have slow and steady growth instead of such rapid growth
that we can't afford things. Rental crisises happen, things that
were previously affordable and not affordable anymore, and it gets
out of control. So the RBA, as much as a
(13:16):
lot of people online are like a a'd awful, They've
increased the cash rate. Again, it's the worst. That's them
trying to do their best. Okay, it's them trying to
do their best to make sure that our economy gets
back to a more stable environment.
Speaker 4 (13:30):
Okay, that's good to know. I was going to ask
why does inflation matter? But I guess you did kind
of answer it in that it's inflation matters.
Speaker 1 (13:38):
It's an invocator of a growing environment and a growing economy.
Like it can be a really sexy thing, right, Like
looking at she's on the money. The rate of inflation
in She's on the Money has been really beautiful four
years ago the podcast started and it's kind of gone
up and up and up from there. But what if
absolutely every business in the entire economy did that. Where's
(13:58):
the money coming from to fund that type of growth
in every single business in Australia? Ah okay, I see,
we just don't have the cash to support that. And
when you do, it comes from other places. And when
you have an environment where inflation keeps increasing, people kind
of get greedy in a way, right, I see, And
(14:19):
it's just it's not a nice environment to be in.
So inflation matters because essentially it takes your dollar and
makes it worthless. Let's talk about I recently gave someone
in our team pay rise, right, and the way that
I calculate pay rise is you know, I'm really proud
of it because the way that I calculate it, I
think is the way everyone should calculate it. And I said,
(14:39):
all right, what's the rate of inflation? Seven point eight percent? Great,
we'll start there. You get a seven point eight percent
increase in your pay this year.
Speaker 3 (14:47):
That's very nice.
Speaker 1 (14:48):
It's not nice from my perspective. That for me is
the bare minimum sure, because if inflation has increased by
seven point eight percent, my team member is having her
expenses increased by that. So today, if I had not
given her a pay rise, she wouldn't be able to
afford the same groceries that she was able to afford
(15:09):
last year. Is that fair?
Speaker 3 (15:12):
Doesn't feel like it?
Speaker 1 (15:13):
No, I don't think it's fair either. So above and
beyond that, we can then talk about what pay rice
she deserved. But I thought, as an employer, I needed
to go, Okay, Well, if this individual can not afford
to buy the same groceries and put the same roof
over her head this year as she could last year, Like,
let's pretend bread went up. It absolutely has. But let's
(15:35):
pretend last year a loaf of bread was four dollars.
This year it might be six dollars. That's two dollars
less you have in your account for something else. Right,
life is just more expensive today than it was last year.
And that's essentially what inflation does. Inflation kind of erodes
your purchasing power over time, and as it kind of
(15:56):
takes hold, a dollar is going to buy fewer things
then you could purchase previously I see.
Speaker 4 (16:02):
Okay, well, I have so many questions right now, and
I don't even know where to start. But if I'm
just curious, this is silly. But if the inflation rate
goes back down and the cost of living kind of
like steadies out again, we take that money back from
your employee.
Speaker 1 (16:19):
Yeah, of course, no, I will not, absolutely not, because
it doesn't go backwards.
Speaker 3 (16:26):
That's scary.
Speaker 1 (16:26):
It might go backwards, right, okay, But like if you
look at a graph over time and we started tracking it,
it might go back down. But that's not going back
down as in hey beck, stuff's actually just whole heap cheaper. Now.
The rate of growth of things increasing has just slowed.
So that loaf of bread it's now six dollars, that's
(16:47):
the base rate, but it's not going to creep up
to seven dollars as quickly as it was the year before.
Right does that make sense?
Speaker 3 (16:53):
That doesn't make sense.
Speaker 1 (16:54):
It's not that. Okay, Well now it's back down to
two percent. No, no, no, that's seven point eight percent.
Was a line in the sand. Now we're moving along
and it's just going to take less time, and it's
just going to mean that growth happens a little bit
more slowly, So the RBA going back to them setting
the cash rate they want between two and three percent
every year. Right now, things are growing way more than that.
(17:18):
They're trying to drag us back down so that growth
doesn't happen. I see so hearing this, Yes, I'm thinking
this is awful, terrible, very scary. But are there any God, Yeah,
I'm kind of like Okay. As I said before, inflation
is actually a good thing. There's a reason the RBA
actually has a target of inflation, not keeping things the same,
because that is a good predictor of a strong and
(17:41):
good and stable and reliable economy. We want to grow.
As we said before, slow and steady wins the race,
so we actually want it to be between two and
three percent. Sometimes it goes backwards, sometimes like right now,
it is higher. Low and stable inflation is a good indicator,
or can be a good indicator to be a little
bit more economically correct of a growing economy. It benefits
(18:03):
holders of fixed rate debts like mortgages. So a lot
of people have been messaging me recently, like about to
come off my fixed rate, and I don't know what
to do. Talk to mortgage broken. My friend asap. It
encourages consumption today rather than later, so we're not like
saving up for things as we were before. So like
the holidays and stuff, they kind of come to a
grinding holt because we can't afford them. But then there
(18:26):
are obviously a few cons As you said, it does
feel a little bit negative. Inflation reduces your purchasing power
since essentially every dollar that you have purchases less stuff,
higher prices throughout the economy ends up hurting retail consumers.
It's very tough on retirees that are living on fixed incomes.
If you've predicted that you're going to have X amount
(18:48):
every single year, obviously when things absolutely spike, that's unforeseen
and you just have a fixed income, and then it
does prompt action by the RBA. So the RBA is
the Reserve Bank of Australia that we've been talking about.
Speaker 4 (19:01):
Yes, absolutely, So back to the idea of seasons, every
season has its possibility. Then what are the possibilities of
this high inflation environment.
Speaker 1 (19:09):
Well, inflation is a great season I think to kind
of re examine your portfolio and what your strategy is doing.
I think any economic pressure is good for you as
an individual. To kind of like re prompt how you
feel about things, because when we start our investment journeys
often we're really gung ho and we're so excited about it.
(19:31):
And I get it because I am too. Like I
remember starting investing out, I'm like, I'm going to be rich.
I am setting myself up for a very secure financial future,
and I cannot wait. But then, like the economy starts
to take hold and you kind of see the effects
of did in your portfolio, and you feel a little
bit uncertain, or you feel a little bit unsure, and
things get rocky and you're not sure if you should
exit the market or stay, or do I put some
(19:53):
more in. But we really shouldn't be burying our heads
in the sand at this point. We need to re
examine our portfolio to make sure it's actually a lot
to our values and our goals and what we're trying
to achieve. One of the best strategies in a time
like this is actually to ensure that you're properly diversified
and fully invested. Money invested into shares tends to outpace
(20:13):
inflation in the long run, So you might be looking
at your portfolio today amally the I don't know what
you're talking about. My portfolio has returned five percent and
you just said inflation is seven point eight percent. I
think I'm going backwards. But when we look at the
numbers and we actually look at the data, yes, for
a point in time, that might be absolutely true, and
I will not argue with you on that. But again,
(20:35):
when in doubt, zoom out and look at the bigger picture,
and usually it ends up or most of the time,
it ends up outperforming what inflation was because this rate
of inflation will not exist for as long as the
rate of growth in your investment portfolio. So we know
that over the last twenty years, the average rate of
return of the Australian share markets about eleven percent, right, Okay,
(20:59):
So obviously that's just the Australian shair market. There's lots
of different share markets and that's not a promise that
your portfolio will return that. It's just that's the fact
of the matter when it comes down to the data.
So yeah, I think it's very pretty So now's the
time to maybe have a think about some additional things
that you could add to your portfolio that might make
sense if you only have shares and if you've got
(21:21):
some cash, maybe you would consider things like maybe some
investments in real estate. You can invest in real estate
via shares if you want to do that. You don't
have to go out and buy a family home or
an apartment to do that. Commodities or even Treasury indexed
bonds they often serve as a further diversification support for
your portfolio. Cash on the sidelines is essentially guaranteed to
(21:44):
lose money. Not that sexy. So right now, if you've
got ten thousand dollars in a cash account just sitting there,
absolutely no interest rate on their bank account, it's working
at negative seven point eight percent, like having a desk.
It's costing you seven point eight percent per anm right
now to not have that money working for you. But
(22:06):
people don't see it that way, no, Because right now
I can see ten thousand dollars in that account, and
let's pretend I have absolutely no fees on that account,
and I just let it sit dormant for the next
twelve months. I'll go back in twelve months that account
will have ten thousand dollars exactly in that account. It's
not going to have seven point eight percent less, but
that ten thousand dollars will buy you seven point eight
(22:28):
percent less of stuff than it was able to today
when you had the opportunity to invest it and you didn't.
Speaker 3 (22:34):
That is a.
Speaker 1 (22:35):
Really, really good I'm realated, dramatic Thanks for coming.
Speaker 4 (22:38):
Oh I love this because I was going to say
I should not be doing this, but I started putting
money in a piggybank thinking that that was a.
Speaker 3 (22:46):
Good It's a good start. I'm going to not do that.
Speaker 1 (22:49):
No, but looking at your financial circumstances, that works. Does
it mean that I'm not sitting on some cash. Absolutely not.
I absolutely have a savings account. You're not going to
touch that. I'm not going to invest that. I have
an emergency fund. I will not be investing that because
the entire purpose of an emergency fund is to have
access to quick cash and capital, and that's that money's job.
(23:12):
I don't want you to take from this that every
single dollar you have needs to be invested and you
need to be getting a return otherwise it's not worth it.
That's not what we're saying. But I think we need
to drive home this. If you've been thinking about investing,
then yeah, like it's a good time to have a chat.
But if you have an emergency fund that's doing its job,
it's not meant to be there. Yeah, And I know
(23:34):
you're in the circumstance because we talked about it openly
before where you're like, I just need to start saving.
That's a bloody great start.
Speaker 3 (23:40):
Cool, Okay.
Speaker 1 (23:41):
I don't want you to think that me having this
conversation about it now is a good time to invest. Like, yes,
if you're in the financial position to invest, it's gonna
cost you a lot more long term if you invest
at a time that you can't afford, because what happens
twelve months from now you have to pull that money
out to afford something else, and you lose money because
(24:02):
the sheer market might not have recovered yet. That's a
really bad outcome, right, So I think it's really important
to make sure that you're making decisions that are based
on you, not the way that that example came across.
So that example, I still stand by it. It's a
great example because the purchasing power of ten thousand dollars
today is going to be less if you don't do
anything with it in twelve months. And if that motivated
(24:24):
you to go and invest, that's sexy. Yes, But if
you were like, yeah, but the that ten thousand dollars
is my emergency fund, I'll go get it. Quain, leave
it there. That makes absolute sense. But what we want
is the education to know that every dollar in your
account has been thought about and has been allocated a job.
If that money's job is to make you money, then
(24:46):
go get it. But if that money's job is to
keep you feeling safe, leave it there. Yeah, does that
make sense?
Speaker 3 (24:52):
That makes so much sense.
Speaker 1 (24:52):
I love that.
Speaker 4 (24:53):
Okay, thank you so much for that. I think it's
a really good place to leave it for Now.
Speaker 3 (24:57):
Let's stick have a.
Speaker 4 (24:58):
Little break and come back and.
Speaker 3 (25:00):
Talk more about it. Okay, we're back, and welcome back
to you.
Speaker 1 (25:08):
I always get so fired up on these episodes.
Speaker 4 (25:10):
I'm like, let's talk about investments, and then I know
it's time for you to have a little tea, a
little breather.
Speaker 1 (25:17):
We all know that was a fake break. Again, back,
I've got to pay you. No one on this team
doesn't get paid.
Speaker 3 (25:25):
That's true, that's true. It was a fake break. Okay,
it was a fake break.
Speaker 1 (25:28):
It was a fake break. But you get to talk
about chairs e's and like, I do feel like Chazy's
are a part of our team. Like, yeah, ten out
of ten, very good team, very good people. Do you
know what they love my dog? Oh yeah, well there's.
Speaker 3 (25:41):
A place at our table for them.
Speaker 1 (25:43):
Exactly.
Speaker 3 (25:44):
Let's get back.
Speaker 4 (25:45):
To the investment chat. Exciting, exciting, fun investment chat.
Speaker 1 (25:50):
All right, let's make this conversation a little bit more confusing. Okay,
have you heard of like hedging an investment hedging? Yes? Yeah,
like hear it on like the show's like suits, Yes,
where you.
Speaker 4 (26:03):
Like plot your session in several different areas and some
that are competing, like say, for example, I can't actually
I'm really doing probably a bad job.
Speaker 1 (26:14):
No studies study? Is that?
Speaker 3 (26:17):
Just forget everything I see?
Speaker 1 (26:18):
No, I really liked where you were going with that.
Let's maybe talk about inflation hedges in the case. So,
a hedge in finance means to take an offsetting position.
Who are absolutely correct? You kind of like you know
hedge a bet? You might go, oh, well, what if
it doesn't work out? So in real estate, single family
homes financed with low fixed rate mortgages tend to perform
(26:40):
well during periods of inflation. Do you know why we
know that because TikTok's going wild about how much they
are costing to lease out at the moment. A right like,
I always talk about TikTok because I basically live on TikTok.
Am I creating enough content on there? Hell? No, am
I just consuming the content mindlessly scrolling my life away.
Hell yes, that's what I'm doing. As inflation climbs, your
(27:03):
property is likely to appreciate in value while the monthly
service cost of your mortgage either stays the same or
slightly increases. This is at the core of home equity,
which can rapidly increase your net worth very very sexy.
By purchasing real estate, you'll also they call it insulating.
You're also insulating yourself from rising rents, as they are
likely to rise during inflation surges. We do need to
(27:26):
take into consideration. They're obviously the rising costs of mortgage repayments,
because as I said before, might have more than doubled.
And that makes me feel quite sick because I know
that it's not just me that's happening too. Again, super
grateful to be in a position where that is not
putting significant stress on our lives. We just have to
reshuffle a few things maybe push a few goals off
(27:49):
a little bit, and I feel grateful that we're in
that position. But for some people, mortgages right now are
absolutely destroying them. Let's just be honest about that. The
second thing we want to talk about is what's called
a value share or a value stock if you're a
little bit more American. Some research has shown that value
shares tend to do better than growth stocks during periods
(28:11):
of inflation, which I think is interesting because we have
done a whole series on what a value share is,
what a growth share is, how all of these things work.
So if you haven't listened to that, please go back
and have a listen, because I feel like there was
so much information in that that people said was really
powerful and really helpful. But value shares are companies that
have strong earnings relative to their current share price. They're
(28:33):
also known to have like really good cash flows, which
investors typically value when prices are rising. When prices a
rising and things are getting more expensive, you know what's
really sexy knowing that the company you're investing in has
lots of money coming in the door. That makes me
feel really good. Probably not if you're poor. To Davis
Holmes like, that's not going to work out.
Speaker 3 (28:53):
I heard about that.
Speaker 1 (28:54):
Yeah, not great. But do you know what it is
great about that? And I said to you guys, this
would happen is that all of those Porter Davis contracts
have been bought or transferred over to another company to finish.
So people aren't going to be left in the loach.
What is I treat hold on, hold on, It's going
to be okay. Someone is going to want those contracts
to finish your houses. It is okay. But a company
(29:16):
like Porter Davis as a good example of that, because
I feel like it's been all over the media and
we've all heard about it had terrible cash flow and
could not keep up with the rising cost of prices.
And that's not a reflection on them having terrible work
or being a bad company or any of those things.
But if you don't have money coming in the door,
(29:36):
you can't pay your contractors, you can't pay your stuff.
The business has to end. Like that's just a matter
of fact. I suppose, on the other hand, something like
a growth share it tends to be a little bit
more sensitive to change in interest Over the past decade,
when inflation has been conspicuously absent. Growth stocks have enjoyed
a pretty good period, but lately value shares have been
(30:00):
I guess staged for a comeback. The current environment makes
their continuing success likely, though, So would you say what
is better? I mean, I think that's a question that
might pop up. B Is a value share better than
a growth share? The answer is no, nothing's better. Like
different things perform well in different economies and different periods
(30:21):
of economic change, it does not mean one should be
preferenced over the other. That's why we promote having a
really well diversified portfolio. It's why we talk about, you know,
having some here, having some there, making sure that you
don't have all your eggs in one basket. Because if
you've got some growth stocks that are good companies, maybe
they're not performing as well as they could during this period.
(30:43):
They're just chugging along doing their best. Your value stocks, though,
they're the ones like pulling away. They're the ones putting
in the hard yards during this period of time, so
that you know, if the value stocks or the value
shares are doing really well up here and there, your
growth shares they just trying their best. They're just trying
to get in this economy. Over time, the average of
your overall return is going to be a good average.
(31:07):
You're not going to get the highs of the highs,
You're not going to get the lows of the lows.
Everything will kind of balance out, and that is what
we want from investment. We just want to be safe.
I don't want to just have one thing that does
really well in only one economy. So like playing board games,
you just want a little bit of everything. In your
next role, you don't know what you're going to get,
but you're probably going to have a good.
Speaker 4 (31:27):
Shot exactly, Exactly, like Monopoly, you've got to buy the
light blues and the dark blues exactly.
Speaker 1 (31:34):
I've recently got into a board game called this is
just showing how nerdy I am. It shows how nerdy
I am. Like, take us to the next level. Okay,
I've paid for and download an app on my phone
so that I can play the board game all my
flights Katan.
Speaker 4 (31:49):
Oh my god, same v serious the eight dollars one?
Speaker 3 (31:56):
Can we play?
Speaker 1 (31:56):
Can we play Togain?
Speaker 4 (31:57):
I did not know you were into Katan Okay obsessed, but.
Speaker 1 (32:00):
It's like that, right, like you don't know what's going
to happen next, Like you don't know if you're going
to need to build a road or you're going to
be able to buy a car, Like you don't know
if you're going to be able to build a city,
because like on the next roll, you could be given
a whole heap of different resources. But like it's good
to just have like one in the bank, freach because
like or if you can't really do much, well I
just build a road, you.
Speaker 4 (32:19):
Know, exactly, don't exact all your eggs in the brick bus.
Speaker 1 (32:22):
Exactly, you don't want to. And if you do have
six bricks, do you know what you do? You go
into the trade and you trade four bricks for one straw.
Speaker 3 (32:31):
Anyway, we can definitely talk exactly excited.
Speaker 1 (32:35):
Alright, alright, you can come over. We can have a
wine night where we play Katan.
Speaker 3 (32:40):
Real life, Ktar real life.
Speaker 1 (32:42):
I have the board game. I bought it online. Okay, cool,
let's go to the easter. One of our friends brought it
down and I was like so skeptical, right, No, I
was skeptical. Oh yeah, I don't know about this game.
Was one of Steve's mates. So I just thought it
was like.
Speaker 3 (32:55):
You know, dumb boygo, dumb boygo.
Speaker 1 (32:57):
I am the dumb boy for it.
Speaker 3 (33:01):
Unfortunately we are the dumb boys now, all right.
Speaker 1 (33:02):
Well, you know what dumb boys like to do. They
also like to use complicated words like commodities. Yeah, that
is the next thing I want to talk about, So
to commodities, complicated word for what is essentially things like
gold and other precious metals, Like can you just say
you're invested in gold? Yeah, Like it'd be a lot
(33:24):
easier than gold and other precious metals, as well as
things like raw materials and various natural resources, which are
critical to production. As demand increases, prices rising the economy,
and the cost of production to meet that demand typically
rises accordingly. So I can tell you this is true
because the steel in my house is double what it
(33:45):
was when I got quoted to pay for it last year,
and now I have no other choice but to pay
double for the renovation we're doing. And that's okay, again,
very privileged position to be. But man, I'm feeling it.
I'm a little bit salty about it.
Speaker 3 (34:00):
Yeah, but can you go no steal or you is it?
Speaker 4 (34:05):
You?
Speaker 1 (34:05):
You got to you got to get the steal. You
gotta get the steal, I feel you. Even though commodities
don't pay dividends or represent any underlying business, they are
disconnected to the traditional asset classes like shares and bonds,
and they actually tend to move in an unrelated direction.
So they're a good way of diversifying. Treasury indexed bonds.
Speaker 3 (34:25):
Yes, good, I was going to ask you about this one.
Speaker 1 (34:27):
Bonds are sexy. I think they're really hot. They're really underrated. Actually,
I feel like a bond is like a happy medium
between if you're not willing to take on as much
risk as a share, but you also don't want your
money just sitting in cash. There's something that if that's
your circumstance, you might consider. So Treasury indexed bonds, very specific,
(34:50):
are medium to long term securities where the capital value
of the security is adjusted for movements in the CPI.
So in the Consumer Price Index, just paid quarterly hot
at a fixed rate on the adjusted capital value at maturity.
So maturity just means at the end of the time
that you agreed to invest for mm.
Speaker 3 (35:10):
Hmm, Well, what's it?
Speaker 1 (35:11):
All these confusing more ridiculous? Isn't it? Like I get
it that you get it now? But the fact that
I have to explain something that shouldn't need explaining, Like
why can't we just be like, yeah, okay, at the
end of the term that you agreed to invest, so
at the maturity of the loan or at the maturity
of the investment. In this circumstance, investors receive the adjusted
(35:33):
capital value of the security. So do you know what
that means. Means you get your cash back, oh, initial
investment back, but it will be adjusted based on CPI.
So that's okay, We're all right with that. The value
adjusted for movement in the CPI is done over the
lifetime of the bond, not just like what it is today.
So if you were pulling it out today, like let's
(35:55):
say that your bond matured today, it wouldn't be at
seven point eight percent. It would be you know, if
you were in a ten year bond, it would be
averaged out over those ten years. So it's a little
bit more palatable than that seven point eight So it's
not as scary as you think it is.
Speaker 3 (36:10):
But yeah, gotcha, gotcha, gotcha.
Speaker 1 (36:12):
Okay.
Speaker 4 (36:13):
The podcast before, Yeah, you know what we have spoken
about and you haven't mentioned yet, and I'm kind of
getting concerned. You usually talk about Warren Buffett.
Speaker 1 (36:22):
Yeah, because he's real hot.
Speaker 3 (36:24):
I haven't seen him. Can you show you a picture
after this?
Speaker 1 (36:26):
I'll show you a picture now so I can get
your response.
Speaker 3 (36:28):
Okay, let's do it.
Speaker 4 (36:29):
Oh No, honestly, I thought he's kind of cute.
Speaker 1 (36:35):
I mean, I mean, Beck, he's like the type of
guy that he just looks like he would line up
behind you at the supermarket and you'd let him cut
in line. I wouldn't let a single soul. Yeah, okay
in line. Do you know what that's because you're not
very nice? But I reckon he's pay you bill if
he was behind your supermarket. Well, he know what he's worth.
(36:57):
What do you want to guess what that man? Look
at it.
Speaker 3 (37:00):
He's sound familiar.
Speaker 1 (37:01):
Yeah, yeah, yeah, he's going to say yeah because he's
see it. Oh, he's the most famous investor in the
entire world.
Speaker 3 (37:09):
Eleven billion no oh.
Speaker 1 (37:11):
You read that role That was one hundred and thirteen
point eight billion dollars is what he's currently valued. He's
ninety two years old for those of you playing along
at home, and is basically an American businessman and investor
who has a very, very big following. And he is
very rich because of his investment decisions, not because he
(37:35):
has built super good businesses or came from family wealth.
He's essentially made all of his money by relying on
time tested rules of value investing if you are interested.
And I just think that's really really sexy. Like I mean,
he's one of the most frugal people in the entire world.
He still drives his original car, original car.
Speaker 3 (37:54):
That's cute.
Speaker 1 (37:55):
So he Yeah, he still drives his original car. And
I'm just getting up a picture for Beck which you
guys can google and I might even put it on
my Instagram stories today. But that's his house. It's all
he needs. Cute, little modest I do wonder sometimes, like
he does have a very modest family home in America,
and that's very exciting. But what kind of security do
(38:16):
you reckon he needs on that given who he is
and what's going on?
Speaker 3 (38:20):
Oh true, I just.
Speaker 1 (38:22):
Go hold up, hold up. If you're worth one hundred
and thirteen point eight billion dollars, like you don't just
get to walk home without any type of risk kind
of overarching that circumstance. Well, he's a dude, so yeah,
you're right, And I need two year old guy who
he can defend himself to defend himself. No, he probably
needs some help. But that's a very good question. Actually, yeah,
so google it. We both agree that we'ren Buffett. Oh
(38:44):
sexy smash.
Speaker 3 (38:46):
Yeah, yeah, oh smash for sure.
Speaker 1 (38:49):
You're right. I'm going to do a TikTok of all
the famous investors and it'll be just like one of
those Smash or past serieses.
Speaker 3 (38:55):
Yeah, let's do it.
Speaker 1 (38:56):
Yeah done.
Speaker 3 (38:57):
Okay.
Speaker 4 (38:57):
So, so since we're talking about Warren Buffett, Yeah, it's a
real yeah, real hottie. What does it usually say in
trying times like this?
Speaker 1 (39:04):
So he has so many good quotes and if you've
ever heard me say, oh my gosh, yeah, look, I've
just stolen a lot of things that he said.
Speaker 3 (39:12):
Can't you.
Speaker 1 (39:13):
Yeah, he's inspirational. Yeah, he says, all right, So the
first best thing you can do to protect against inflation
is to invest in yourself and your skills. He says,
if you're the best teacher, if you're the best surgeon,
if you're the best lawyer, you will get your share
of the national economic pie, regardless of the value of
whatever the currency may be. Isn't that interesting hmmm, I
(39:34):
feel like it's just like you've just been like, I
don't get what he means.
Speaker 3 (39:38):
It was too fast for me.
Speaker 1 (39:39):
So essentially, he says, if you're the best in your field,
you're always going to be valued and be able to
generate a good income, regardless of what the economics at
the time are doing. Right. So, like, if you prove
your value and you invest in yourself and you invest
in your skills to become the best of the best,
that is not going to betray you because you're in
(40:00):
trying times. We see, you know, we've got the tech
redundancies going on right now. They're not going to lose
the people that are integral to their companies, are they
very true? They're going to try and cut the people
that they go Okay, cool, we could get another XYZX
at some point in the future.
Speaker 3 (40:16):
Yeah.
Speaker 1 (40:16):
The second best protection is a wonderful business, which means
a company in which the products are in demand even
if the company does have to raise their prices. Companies
that tend to withstand an inflationary environment quote must have
two characteristics. The first is an ability to increase prices
rather easily even when the product demand is flat and
(40:38):
capacity is not fully utilized without fear of significant loss
of either market share or unit volume. And the second
is an ability to accommodate large dollar volume increases in
business often produced more by inflation rather than by real growth,
with only minor additional investment of capital. So those two
(40:58):
things are really good. So rather than trying to pick
individual stocks, whether we're in an inflationary period or not,
you should go with this tried and true method, the
index fund to have and to hold. Ah Warren Buffett
also talks a lot about it's time in the market,
not timing the market. He has been known for identifying
(41:20):
companies that are on his watch list, which is public.
By the way, it becomes a public thing. If he's
looking into a company, he talks about it and shits that.
But he has been known to watch a company for
ten twenty thirty years before investing in them. The patients
are patience, ain't and people being like you're missing out
on these things, like you're not getting in and he's like, yep,
(41:41):
no worries, but I'm going to make sure that I'm
making the right decision for me. And then he does
and it always works out. No, don't know how he
knows what he's doing. Everyone's given to it. He's a billionaire.
Speaker 4 (41:52):
And is this something that you say it? Or does
Warren Buffet say this? From Little Things, Big Things Grow?
Speaker 1 (41:57):
No, I believe that was the very regal Paul Kelly, Ah,
Paul Kelly, Yeah, yep, yep, yeah, yeah. I believe that
was his very very well versed song.
Speaker 3 (42:08):
Yeah, sounds familiar to me.
Speaker 1 (42:11):
So little Things Things gross, it's beautiful, that's gonna be
stuck in my head or study stunning.
Speaker 4 (42:16):
I really recommend people go back to listen to our
recent Investing Small Amounts episode That works.
Speaker 3 (42:23):
Oh, that was.
Speaker 1 (42:23):
Wildly popular, Like I didn't expect it to be as
popular as it was, but the amount of beautiful messages
you guys sent me, and let's be honest, the spike
in download, so that was pretty good. So I feel
like it was a good EP though, where he had
good vibes to throughout the.
Speaker 3 (42:39):
Good vibes is a really really nice day.
Speaker 1 (42:40):
That was on the fifth of April, So April go
and have a listen to that. But there are also
a few things that I want to leave you guys
with today. One is from Little Things being skill growth.
The next year is the average investor will experience. Get this,
beec approximately seven market corrections during their lifetime, and the
last was the GFC. Ah, do you know what a
(43:02):
market correction is? No, it's where it absolutely crashes. You're
going to experience your portfolio look like trash seven times.
I'm so sorry.
Speaker 4 (43:11):
Oh man, that's a really pretty name for something that's
so diffictating.
Speaker 1 (43:15):
Yeah, but it's not devastating if you understand and your
mindset is good, and you're in a position where you're like, Okay, cool,
the market is off, My portfolio doesn't look the best,
but if I hold on to this roller coaster, it
will go back up right. And we know that after
the GFC, which was a global financial crisis which happened
in two thousand and eight two thousand and nine, we
(43:37):
know that some of the best investment returns have come
after that, Like our market and our economy has more
than recovered since the GFC, and people talk about that
as the worst thing in history. And if you go
on my favorite website is the Vanguard website at the moment,
I mean, there's a lot of favorite websites I have.
Isn't there too anyway? TikTok, TikTok's and app that's TikTok
(44:01):
is currently being overtaken by Katan though oh god, yeah, yeah,
Like I'm I'm gonna lose my pop culture references and
I'm just going to be starting to talk about how
many bricks and shape you'll trade me for a piece
of awe.
Speaker 3 (44:13):
Honestly, I won't complain, You'll get.
Speaker 1 (44:15):
It all right. So I think it's really important to
understand that if you go onto the Vanguard website and
have a look at their interactive Investor chart, you can
actually slide around and have a look at the different
asset classes and how they've provided. But that graph is
my favorite graph for showing people how the GFC at
the time, if you cut back, the chart looks like
(44:36):
the scariest drop in the entire world. And then if
you add all the way up to twenty twenty three,
it becomes this little blip ah in the roller coaster
and you go, what's that?
Speaker 4 (44:47):
It's a GFC when in doubt, zoom ow exactly fair.
Speaker 1 (44:52):
You are learning. And the second thing I want to
leave you with today is my favorite thing to harp
on about. Have your emergency fund pump it up. Make
sure financially you are in an okay position right now
is uncertain for so many people, and so many people think, oh,
something won't happen to me. It's fine if you have
some extra cash pumping up your emergency fund is never
(45:14):
going to go astray. Pay your bills on time, hopefully,
stay on top of your mortgage. And if you don't
feel like you're on top of your mortgage, please sign
into the Xela Money Instagram DMS or email them or
shoot me a message or you know, get in contact
because they can review it and make sure that you're
in the best possible position moving forward, and make sure
you're getting paid well for your job. I know that
(45:36):
that can be a very hard one, and we are
going to be creating, in hopefully the near future, a
lot more career episodes because I feel like I can
tell you to invest until the cows come home, but
you know what, you can't do invest if you don't
have a good income. So we're going to be building
up on the career kind of vibe to be like
okay cool. I just feel like there are so many
people in our community who I want to shake and
(45:58):
be like, babe, do you know your worth. You are
worth so much more in his how to achieve that
or here's how you can create a pathway to that
without feeling awful about it. So I just I'm really
excited for that stuff. But we're done here today. I
love that we're going to talk about Katan. Yes, and
we'll see you guys on Friday.
Speaker 3 (46:15):
See you guys then.
Speaker 1 (46:22):
The advice shared on She's on the Money is general
in nature and does not consider your individual circumstances. She's
on the Money exists purely for educational purposes and should
not be relied upon to make an investment or financial decision.
If you do choose to buy a financial product, read
the PDS TMD and obtain appropriate financial advice tailored towards
(46:42):
your needs. Victoria Divine and She's on the Money are
authorized representatives of money SHERPA pty LTD ABN three two
one IS six four nine two seven seven zero eight
AFSL four five one two eight nine.
Speaker 3 (47:01):
The imputed the diffected people.
Speaker 1 (47:04):
They were
Hello.
Speaker 2 (00:01):
My name's Santasha Nabananga Bamblet. I'm a proud yr the
Order Kerney Whoalbury and a waddery woman. And before we
get started on She's on the Money podcast, I would
like to acknowledge the traditional custodians of the land of
which this podcast is recorded on a wondery country, acknowledging
the elders, the ancestors and the next generation coming through
(00:23):
as this podcast is about connecting, empowering, knowledge sharing and
the storytelling of you to make a difference for today
and lasting impact for tomorrow.
Speaker 1 (00:33):
Let's get into it. She's on the Money.
Speaker 3 (00:36):
She's on the Money.
Speaker 4 (00:57):
Hello, and welcome to She's on the Money podcast for
millennials who want financial freedom.
Speaker 1 (01:03):
Hello v Hello, are you ready to talk about investment?
Speaker 4 (01:07):
Yeah, I'm very ready. I'm very um Would you say interested?
Speaker 1 (01:10):
Is your interest inflated? Its inflated?
Speaker 3 (01:14):
Believe it or not.
Speaker 1 (01:15):
People didn't come here for good jokes, Beck, No, which
is good because we don't have any that turns out Yeah, no, terrible.
We actually might get onto the finance content. Yes see
if that works out better, let's try it.
Speaker 3 (01:27):
Let's try it.
Speaker 4 (01:27):
Yeah, we're talking about investing am I getting this right?
How to invest in a high inflation environment?
Speaker 1 (01:35):
Strap yourself in Today's Gonna Get Wild. We are back
with another investing episode. As you can tell, I'm trying
my hardest to come up with as many topics related
to investment as possible. Let me ask you a question.
Do you think it is possible to invest in a
high inflation environment? Beck?
Speaker 4 (01:53):
Okay, So I'm going to have to break this one
down real quick because I did not know what high
inflation actually meant? But it is it true that high
inflation is the rising cost.
Speaker 1 (02:04):
Of living in jen Yeah? Amazing, that's right, Okay, amazing. Yeah. So,
I mean if you're not really.
Speaker 4 (02:11):
Affected by it, if you're making enough money to not
really see a change or that much of a shift
in your like how much you have to spend or
how much you have left over at the end of
the pay cycle, then I don't think that there would
be a big problem.
Speaker 1 (02:26):
Yeah. I'm getting on this topic. I hope early enough
so that you guys continue to invest during this period,
because I've seen some stuff online that says it's not
worth it, and I couldn't tell you harder, harder? Can
I tell you harder. I don't know if that's the
right terminology, but you can. You can do it back right, Okay,
stress highly enough that it is fine to invest during
(02:48):
a high inflation environment. So obviously there's a lot of
privilege in that because during the time of peak inflation,
other people are struggling. And if this episode for some
reason is triggering you into feeling like other people have
things that you currently don't, maybe it's not the episode
for you. Honestly, I think that mindset is going to
(03:09):
derail your confidence and make you feel worse off. And
I think that the best thing we can, I guess
see for our community is that quote that I use
all the time, arising hidlifts soulships. Even if you're not
in the best position of your life right now, that
doesn't mean that somebody else needs to downplay their circumstances.
You know, obviously we don't exactly want it rubbed in
our faces, but someone else should thrive because by some
(03:33):
other female or some other human being in our community thriving,
that opens up even more opportunity for you and I
to be successful. Beck, And I think that is so beautiful,
yeahhasutely so for anyone who has been listening to Chese
on the Money. I think you guys knew I was
gonna say it was always a good time to invest.
And today we're going to be giving you some tips
and tricks on how to invest in a high inflation environment.
(03:56):
We're going to start off with a little bit of
a recap of why inflation currently sits where it is.
We'll look at the sorts of investments that are a
little bit more sexy in this landscape, and we're going
to be doing a little bit of an investment mindset
check in too, So strap yourselves in.
Speaker 4 (04:09):
Oh my god, I'm kind of excited. But also if
you do think that you are not in the place
to be listening to episode, just know that I'm on
this journey with you because I also have zero dollars
all the time. So we're getting better at it and
getting better at it.
Speaker 3 (04:23):
I am, I am, I am.
Speaker 1 (04:24):
Can I get to sit down very soon and do
her budget in cashlow? And I cannot wait.
Speaker 3 (04:28):
I'm so excited.
Speaker 1 (04:29):
We're going to bring them budget cashlow masterclass to life
like you're going to get it in real life. I am,
she doesn't even know.
Speaker 3 (04:37):
I don't know what I guess I'm explained.
Speaker 1 (04:39):
Do you want to talk about in place? I want
to do? I want to you do? I do? All right?
So first things first, I want to start off by
saying that we are in a super stressful economic situation
right now, but where possible, I kind of want you
to try and zoom out and remember that the economy
is like an ecosystem, or even like the seasons during
a year, It is never stagnant and things are always
(04:59):
che What we're in right now is the balancing out
period of what was uncharacteristically low interest rates. They were
actually never going to be low forever. And I feel
like we heard that a lot. People would say things like, oh, beck,
that money's never going to be as cheap as it
is today. Maybe I heard that a lot more because
I worked in money, but people would always say, oh,
(05:20):
money is cheap right now, it's great time to invest or.
Money's cheap right now. It's a great time to buy property,
because you know that makes sense. But in the same way,
this season is also going to pass, and we are
going to find a new status and a new update
and a new I guess normal you could say, so
it's compening, it's comforting to know, but it's also just
(05:41):
one of those things where I think, in every circumstance,
and you know, my business partner Kate in Zella Money,
because we run a mortgage broken company together. Kate and
I talk about this all the time, and it's just
this idea that there was this concept of money so cheap,
and we would talk to people who'd be like, oh,
but it's only two percent to borrow, you know, half
of the million dollars, Maybe I should just got up
(06:01):
to seven hundred thousand. And a good mortgage broker would
have talked to you about your personal circumstances and whether
you can go up to that or whether you shouldn't,
or what that looks like, and takes your entire picture
into consideration, Whereas I think a lot of people had
a few cheeky mortgage brokers who were like, oh, yeah, Beck,
if you want to take more, take more, money's cheap.
(06:24):
Whereas you're broker, if they are a good broker, or
even anyone dealing with you in a money situation, really
shouldn't be pushing you to take more when it's unnecessary
or more when it maybe isn't the best financial decision,
because anyone who works in the money space knew we
and equivocally knew that two percent wouldn't last. And I mean,
(06:44):
I'm in that position where I have a mortgage it
has now gone up. I think my mortgage interest rate
made me nearly be sick the other day. Grateful that
I'm in a position where we can still afford. That
things have shifted, that is fine, But we're like five
and a half percent now.
Speaker 3 (07:00):
I don't know.
Speaker 1 (07:01):
When we first got our mortgage back, it was at
two percent. Okay, side mortgage repayments have more than doubled.
Oh I see, I say that is absolutely not a complaint.
I'm not complaining about that at all. It's just that's
the way of the world, right, And I'm grateful to
have been in a position where when my husband Steve
and I took on that mortgage, we went, all right,
(07:21):
how much can we afford? And Kate, who obviously you know,
helped us out loss. Yeah, I'm going to abuse that
relationship to it till the day I died. But Kate said, oh,
you can borrow up to X. No, no, no, no,
I don't want X. How about I've done my budget
and cash flow. I think this is going to be
more obtainable because if things go awry, then I can
(07:45):
afford it. But then on the flip side, I'm just
gonna have more free cash flow, more free cash flow sexy.
I can go on holidays, i can still enjoy my life.
I can still do heaps of things that I want
to do. But I'm not in a situation where I
am kind of like a slave to my mortgage. Yes,
a lot of people got in the position where they're like,
oh my god, two percent. I could afford that two percent,
but hadn't conceptualized what if it doubles, What if it
(08:07):
goes up to four percent, what if it gets up
to nearly six percent? What if we actually are in
a situation where our mortgage interest of payments double. Can
we actually afford that or with that significantly compromise our lives?
And a lot of people are in that circumstance right now.
So it's important to zoom out when we're making any decision,
but especially when we're talking about investment, because when in doubt,
(08:28):
zoom out. That's a good phrase. But also, if you
look at the Australian share market over any thirty year
period of time, no one has ever lost if they
stayed invested right thirty years though it is a long time. Yeah,
I can find you heaps of examples of people that
put their money in four years later they're like, oh,
I've been investing for ages and have made no money
(08:48):
and took it out and made a loss. That would
absolutely happen. Stay in there, if you stay in the market,
that is what the most important thing is, getting exposure
to the peaks and troughs. They might feel really painful
when the market's off and you're like, I'm not getting
as much banged from my buck right now, And when
the market's really on, you're like, oh, making hay while
(09:08):
the sun is shining. It all averages out to be
a good return, okay, But if you're exiting the market
because that trough is really scaring you, that could actually
mean a lot of financial harm to you. So it's
actually all about and we'll talk about it later mindset,
but it's actually all about really conceptualizing and understanding these things.
And there's been a lot of conversation in our Facebook
(09:29):
group on Instagram in my dms of victoria or inflation
is so high, should I still be investing I see
if it works for you, my friend, Yes, if it works.
Speaker 4 (09:38):
For you, if you can afford it, and everyone can.
I suppose if you have like a couple bucks.
Speaker 1 (09:42):
Yes, spare. I could talk about this forever, Beck, but
let's get into the nuts and bolts of it. You
asked me about inflation.
Speaker 3 (09:48):
Yes.
Speaker 1 (09:48):
Inflation is the general rising prices in an economy over
a specified period of time. The RBA, or the Reserve
Bank of Australia, typically targets a low and stable rate
of inflation of between two and three percent each year,
which can signify a growing economy. So slow and steady
wins the race. According to the RBA, inflation, though it
(10:10):
can creep into the double digits and come as an
economic shock. Really, Australians annual interest rate, Beck, you're not
going to be surprised seven point eight percent, okay at
this point in time, right right right, And it's still
fluctuating and it's going up and down. So the RBA
is the bank to the other banks. Sure, so Combank, NAB,
(10:31):
the big four. They don't just automatically have money. The
RBA is like the big dog government.
Speaker 3 (10:37):
Bank, Mama.
Speaker 1 (10:38):
They set the rules. They're the big dogs. The RBA
says our interest rates two percent. But if one of
the big four banks then says, all right, well I'm
still going to be providing mortgages to our clients. Well,
then they're borrowing money from the RBA two percent and
they actually have to pass along that interest rate, and
that's what dictates our interest rates here in Australia. The
(11:00):
big banks, Yeah, they might have heaps and heaps and
heaps of money, but they actually do borrow from the RBA.
So if the RBA's cash rate, when that gets said,
I think sometimes people like, oh, that's a bit confusing.
That's the amount of money it costs our big banks
to borrow from the RBA.
Speaker 3 (11:17):
Right.
Speaker 1 (11:17):
So by the RBA increasing their cash rate and saying, look,
we're going to make borrowing money more expensive, do you
know what they're doing in that circumstance.
Speaker 3 (11:27):
I don't.
Speaker 1 (11:27):
You're like, nah, you've lost me already. So when the
RBA increases their rates, what that means is things are
going to be more expensive for people, like the trickle
down effect means that me, as a customer of one
of the banks, because I have a mortgage, my life's
going to get more expensive. My mortgage rates are going
to increase. I'm going to have less disposable income, which
(11:49):
means there's less disposable income going around in the economy,
which means inflation can't creep up as fast. So the
RBA are increasing their cash rates and saying, look, we're
going to borrow money out at a higher rate because
we don't want inflation to go wild. And after COVID,
I feel like COVID put a little bit of a
hold on inflation for a while there, and then everything
(12:12):
went back to let's call it business as usual or
our new normal or whatever everyone's calling it. Everyone was like, okay, cool,
we are going to have to start pushing some of
these you know, increases in price onto our consumers. And
everything went like this, like travel has gone wild. Travel
can't happen in my family as easily if I'm paying
more on my mortgage. They're trying to keep our economy
(12:34):
a little bit slower. We're trying to slow the growth
of our economy. Does that make sense that I have
or if you had less money to spend on things
that were important to you and you really had to
prioritize maybe just the basics for a little while yep,
the rest of the economy and the businesses around that
they aren't growing as much because you're not funding them. Right,
So if those businesses aren't being funded, the economy growth
(12:55):
starts to slow. And if economy growth starts to slow,
it gets back to that two and three percent that
the RBA is trying to target to mean that we
have slow and steady growth instead of such rapid growth
that we can't afford things. Rental crisises happen, things that
were previously affordable and not affordable anymore, and it gets
out of control. So the RBA, as much as a
(13:16):
lot of people online are like a a'd awful, They've
increased the cash rate. Again, it's the worst. That's them
trying to do their best. Okay, it's them trying to
do their best to make sure that our economy gets
back to a more stable environment.
Speaker 4 (13:30):
Okay, that's good to know. I was going to ask
why does inflation matter? But I guess you did kind
of answer it in that it's inflation matters.
Speaker 1 (13:38):
It's an invocator of a growing environment and a growing economy.
Like it can be a really sexy thing, right, Like
looking at she's on the money. The rate of inflation
in She's on the Money has been really beautiful four
years ago the podcast started and it's kind of gone
up and up and up from there. But what if
absolutely every business in the entire economy did that. Where's
(13:58):
the money coming from to fund that type of growth
in every single business in Australia? Ah okay, I see,
we just don't have the cash to support that. And
when you do, it comes from other places. And when
you have an environment where inflation keeps increasing, people kind
of get greedy in a way, right, I see, And
(14:19):
it's just it's not a nice environment to be in.
So inflation matters because essentially it takes your dollar and
makes it worthless. Let's talk about I recently gave someone
in our team pay rise, right, and the way that
I calculate pay rise is you know, I'm really proud
of it because the way that I calculate it, I
think is the way everyone should calculate it. And I said,
(14:39):
all right, what's the rate of inflation? Seven point eight percent? Great,
we'll start there. You get a seven point eight percent
increase in your pay this year.
Speaker 3 (14:47):
That's very nice.
Speaker 1 (14:48):
It's not nice from my perspective. That for me is
the bare minimum sure, because if inflation has increased by
seven point eight percent, my team member is having her
expenses increased by that. So today, if I had not
given her a pay rise, she wouldn't be able to
afford the same groceries that she was able to afford
(15:09):
last year. Is that fair?
Speaker 3 (15:12):
Doesn't feel like it?
Speaker 1 (15:13):
No, I don't think it's fair either. So above and
beyond that, we can then talk about what pay rice
she deserved. But I thought, as an employer, I needed
to go, Okay, Well, if this individual can not afford
to buy the same groceries and put the same roof
over her head this year as she could last year, Like,
let's pretend bread went up. It absolutely has. But let's
(15:35):
pretend last year a loaf of bread was four dollars.
This year it might be six dollars. That's two dollars
less you have in your account for something else. Right,
life is just more expensive today than it was last year.
And that's essentially what inflation does. Inflation kind of erodes
your purchasing power over time, and as it kind of
(15:56):
takes hold, a dollar is going to buy fewer things
then you could purchase previously I see.
Speaker 4 (16:02):
Okay, well, I have so many questions right now, and
I don't even know where to start. But if I'm
just curious, this is silly. But if the inflation rate
goes back down and the cost of living kind of
like steadies out again, we take that money back from
your employee.
Speaker 1 (16:19):
Yeah, of course, no, I will not, absolutely not, because
it doesn't go backwards.
Speaker 3 (16:26):
That's scary.
Speaker 1 (16:26):
It might go backwards, right, okay, But like if you
look at a graph over time and we started tracking it,
it might go back down. But that's not going back
down as in hey beck, stuff's actually just whole heap cheaper. Now.
The rate of growth of things increasing has just slowed.
So that loaf of bread it's now six dollars, that's
(16:47):
the base rate, but it's not going to creep up
to seven dollars as quickly as it was the year before.
Right does that make sense?
Speaker 3 (16:53):
That doesn't make sense.
Speaker 1 (16:54):
It's not that. Okay, Well now it's back down to
two percent. No, no, no, that's seven point eight percent.
Was a line in the sand. Now we're moving along
and it's just going to take less time, and it's
just going to mean that growth happens a little bit
more slowly, So the RBA going back to them setting
the cash rate they want between two and three percent
every year. Right now, things are growing way more than that.
(17:18):
They're trying to drag us back down so that growth
doesn't happen. I see so hearing this, Yes, I'm thinking
this is awful, terrible, very scary. But are there any God, Yeah,
I'm kind of like Okay. As I said before, inflation
is actually a good thing. There's a reason the RBA
actually has a target of inflation, not keeping things the same,
because that is a good predictor of a strong and
(17:41):
good and stable and reliable economy. We want to grow.
As we said before, slow and steady wins the race,
so we actually want it to be between two and
three percent. Sometimes it goes backwards, sometimes like right now,
it is higher. Low and stable inflation is a good indicator,
or can be a good indicator to be a little
bit more economically correct of a growing economy. It benefits
(18:03):
holders of fixed rate debts like mortgages. So a lot
of people have been messaging me recently, like about to
come off my fixed rate, and I don't know what
to do. Talk to mortgage broken. My friend asap. It
encourages consumption today rather than later, so we're not like
saving up for things as we were before. So like
the holidays and stuff, they kind of come to a
grinding holt because we can't afford them. But then there
(18:26):
are obviously a few cons As you said, it does
feel a little bit negative. Inflation reduces your purchasing power
since essentially every dollar that you have purchases less stuff,
higher prices throughout the economy ends up hurting retail consumers.
It's very tough on retirees that are living on fixed incomes.
If you've predicted that you're going to have X amount
(18:48):
every single year, obviously when things absolutely spike, that's unforeseen
and you just have a fixed income, and then it
does prompt action by the RBA. So the RBA is
the Reserve Bank of Australia that we've been talking about.
Speaker 4 (19:01):
Yes, absolutely, So back to the idea of seasons, every
season has its possibility. Then what are the possibilities of
this high inflation environment.
Speaker 1 (19:09):
Well, inflation is a great season I think to kind
of re examine your portfolio and what your strategy is doing.
I think any economic pressure is good for you as
an individual. To kind of like re prompt how you
feel about things, because when we start our investment journeys
often we're really gung ho and we're so excited about it.
(19:31):
And I get it because I am too. Like I
remember starting investing out, I'm like, I'm going to be rich.
I am setting myself up for a very secure financial future,
and I cannot wait. But then, like the economy starts
to take hold and you kind of see the effects
of did in your portfolio, and you feel a little
bit uncertain, or you feel a little bit unsure, and
things get rocky and you're not sure if you should
exit the market or stay, or do I put some
(19:53):
more in. But we really shouldn't be burying our heads
in the sand at this point. We need to re
examine our portfolio to make sure it's actually a lot
to our values and our goals and what we're trying
to achieve. One of the best strategies in a time
like this is actually to ensure that you're properly diversified
and fully invested. Money invested into shares tends to outpace
(20:13):
inflation in the long run, So you might be looking
at your portfolio today amally the I don't know what
you're talking about. My portfolio has returned five percent and
you just said inflation is seven point eight percent. I
think I'm going backwards. But when we look at the
numbers and we actually look at the data, yes, for
a point in time, that might be absolutely true, and
I will not argue with you on that. But again,
(20:35):
when in doubt, zoom out and look at the bigger picture,
and usually it ends up or most of the time,
it ends up outperforming what inflation was because this rate
of inflation will not exist for as long as the
rate of growth in your investment portfolio. So we know
that over the last twenty years, the average rate of
return of the Australian share markets about eleven percent, right, Okay,
(20:59):
So obviously that's just the Australian shair market. There's lots
of different share markets and that's not a promise that
your portfolio will return that. It's just that's the fact
of the matter when it comes down to the data.
So yeah, I think it's very pretty So now's the
time to maybe have a think about some additional things
that you could add to your portfolio that might make
sense if you only have shares and if you've got
(21:21):
some cash, maybe you would consider things like maybe some
investments in real estate. You can invest in real estate
via shares if you want to do that. You don't
have to go out and buy a family home or
an apartment to do that. Commodities or even Treasury indexed
bonds they often serve as a further diversification support for
your portfolio. Cash on the sidelines is essentially guaranteed to
(21:44):
lose money. Not that sexy. So right now, if you've
got ten thousand dollars in a cash account just sitting there,
absolutely no interest rate on their bank account, it's working
at negative seven point eight percent, like having a desk.
It's costing you seven point eight percent per anm right
now to not have that money working for you. But
(22:06):
people don't see it that way, no, Because right now
I can see ten thousand dollars in that account, and
let's pretend I have absolutely no fees on that account,
and I just let it sit dormant for the next
twelve months. I'll go back in twelve months that account
will have ten thousand dollars exactly in that account. It's
not going to have seven point eight percent less, but
that ten thousand dollars will buy you seven point eight
(22:28):
percent less of stuff than it was able to today
when you had the opportunity to invest it and you didn't.
Speaker 3 (22:34):
That is a.
Speaker 1 (22:35):
Really, really good I'm realated, dramatic Thanks for coming.
Speaker 4 (22:38):
Oh I love this because I was going to say
I should not be doing this, but I started putting
money in a piggybank thinking that that was a.
Speaker 3 (22:46):
Good It's a good start. I'm going to not do that.
Speaker 1 (22:49):
No, but looking at your financial circumstances, that works. Does
it mean that I'm not sitting on some cash. Absolutely not.
I absolutely have a savings account. You're not going to
touch that. I'm not going to invest that. I have
an emergency fund. I will not be investing that because
the entire purpose of an emergency fund is to have
access to quick cash and capital, and that's that money's job.
(23:12):
I don't want you to take from this that every
single dollar you have needs to be invested and you
need to be getting a return otherwise it's not worth it.
That's not what we're saying. But I think we need
to drive home this. If you've been thinking about investing,
then yeah, like it's a good time to have a chat.
But if you have an emergency fund that's doing its job,
it's not meant to be there. Yeah, And I know
(23:34):
you're in the circumstance because we talked about it openly
before where you're like, I just need to start saving.
That's a bloody great start.
Speaker 3 (23:40):
Cool, Okay.
Speaker 1 (23:41):
I don't want you to think that me having this
conversation about it now is a good time to invest. Like, yes,
if you're in the financial position to invest, it's gonna
cost you a lot more long term if you invest
at a time that you can't afford, because what happens
twelve months from now you have to pull that money
out to afford something else, and you lose money because
(24:02):
the sheer market might not have recovered yet. That's a
really bad outcome, right, So I think it's really important
to make sure that you're making decisions that are based
on you, not the way that that example came across.
So that example, I still stand by it. It's a
great example because the purchasing power of ten thousand dollars
today is going to be less if you don't do
anything with it in twelve months. And if that motivated
(24:24):
you to go and invest, that's sexy. Yes, But if
you were like, yeah, but the that ten thousand dollars
is my emergency fund, I'll go get it. Quain, leave
it there. That makes absolute sense. But what we want
is the education to know that every dollar in your
account has been thought about and has been allocated a job.
If that money's job is to make you money, then
(24:46):
go get it. But if that money's job is to
keep you feeling safe, leave it there. Yeah, does that
make sense?
Speaker 3 (24:52):
That makes so much sense.
Speaker 1 (24:52):
I love that.
Speaker 4 (24:53):
Okay, thank you so much for that. I think it's
a really good place to leave it for Now.
Speaker 3 (24:57):
Let's stick have a.
Speaker 4 (24:58):
Little break and come back and.
Speaker 3 (25:00):
Talk more about it. Okay, we're back, and welcome back
to you.
Speaker 1 (25:08):
I always get so fired up on these episodes.
Speaker 4 (25:10):
I'm like, let's talk about investments, and then I know
it's time for you to have a little tea, a
little breather.
Speaker 1 (25:17):
We all know that was a fake break. Again, back,
I've got to pay you. No one on this team
doesn't get paid.
Speaker 3 (25:25):
That's true, that's true. It was a fake break. Okay,
it was a fake break.
Speaker 1 (25:28):
It was a fake break. But you get to talk
about chairs e's and like, I do feel like Chazy's
are a part of our team. Like, yeah, ten out
of ten, very good team, very good people. Do you
know what they love my dog? Oh yeah, well there's.
Speaker 3 (25:41):
A place at our table for them.
Speaker 1 (25:43):
Exactly.
Speaker 3 (25:44):
Let's get back.
Speaker 4 (25:45):
To the investment chat. Exciting, exciting, fun investment chat.
Speaker 1 (25:50):
All right, let's make this conversation a little bit more confusing. Okay,
have you heard of like hedging an investment hedging? Yes? Yeah,
like hear it on like the show's like suits, Yes,
where you.
Speaker 4 (26:03):
Like plot your session in several different areas and some
that are competing, like say, for example, I can't actually
I'm really doing probably a bad job.
Speaker 1 (26:14):
No studies study? Is that?
Speaker 3 (26:17):
Just forget everything I see?
Speaker 1 (26:18):
No, I really liked where you were going with that.
Let's maybe talk about inflation hedges in the case. So,
a hedge in finance means to take an offsetting position.
Who are absolutely correct? You kind of like you know
hedge a bet? You might go, oh, well, what if
it doesn't work out? So in real estate, single family
homes financed with low fixed rate mortgages tend to perform
(26:40):
well during periods of inflation. Do you know why we
know that because TikTok's going wild about how much they
are costing to lease out at the moment. A right like,
I always talk about TikTok because I basically live on TikTok.
Am I creating enough content on there? Hell? No, am
I just consuming the content mindlessly scrolling my life away.
Hell yes, that's what I'm doing. As inflation climbs, your
(27:03):
property is likely to appreciate in value while the monthly
service cost of your mortgage either stays the same or
slightly increases. This is at the core of home equity,
which can rapidly increase your net worth very very sexy.
By purchasing real estate, you'll also they call it insulating.
You're also insulating yourself from rising rents, as they are
likely to rise during inflation surges. We do need to
(27:26):
take into consideration. They're obviously the rising costs of mortgage repayments,
because as I said before, might have more than doubled.
And that makes me feel quite sick because I know
that it's not just me that's happening too. Again, super
grateful to be in a position where that is not
putting significant stress on our lives. We just have to
reshuffle a few things maybe push a few goals off
(27:49):
a little bit, and I feel grateful that we're in
that position. But for some people, mortgages right now are
absolutely destroying them. Let's just be honest about that. The
second thing we want to talk about is what's called
a value share or a value stock if you're a
little bit more American. Some research has shown that value
shares tend to do better than growth stocks during periods
(28:11):
of inflation, which I think is interesting because we have
done a whole series on what a value share is,
what a growth share is, how all of these things work.
So if you haven't listened to that, please go back
and have a listen, because I feel like there was
so much information in that that people said was really
powerful and really helpful. But value shares are companies that
have strong earnings relative to their current share price. They're
(28:33):
also known to have like really good cash flows, which
investors typically value when prices are rising. When prices a
rising and things are getting more expensive, you know what's
really sexy knowing that the company you're investing in has
lots of money coming in the door. That makes me
feel really good. Probably not if you're poor. To Davis
Holmes like, that's not going to work out.
Speaker 3 (28:53):
I heard about that.
Speaker 1 (28:54):
Yeah, not great. But do you know what it is
great about that? And I said to you guys, this
would happen is that all of those Porter Davis contracts
have been bought or transferred over to another company to finish.
So people aren't going to be left in the loach.
What is I treat hold on, hold on, It's going
to be okay. Someone is going to want those contracts
to finish your houses. It is okay. But a company
(29:16):
like Porter Davis as a good example of that, because
I feel like it's been all over the media and
we've all heard about it had terrible cash flow and
could not keep up with the rising cost of prices.
And that's not a reflection on them having terrible work
or being a bad company or any of those things.
But if you don't have money coming in the door,
(29:36):
you can't pay your contractors, you can't pay your stuff.
The business has to end. Like that's just a matter
of fact. I suppose, on the other hand, something like
a growth share it tends to be a little bit
more sensitive to change in interest Over the past decade,
when inflation has been conspicuously absent. Growth stocks have enjoyed
a pretty good period, but lately value shares have been
(30:00):
I guess staged for a comeback. The current environment makes
their continuing success likely, though, So would you say what
is better? I mean, I think that's a question that
might pop up. B Is a value share better than
a growth share? The answer is no, nothing's better. Like
different things perform well in different economies and different periods
(30:21):
of economic change, it does not mean one should be
preferenced over the other. That's why we promote having a
really well diversified portfolio. It's why we talk about, you know,
having some here, having some there, making sure that you
don't have all your eggs in one basket. Because if
you've got some growth stocks that are good companies, maybe
they're not performing as well as they could during this period.
(30:43):
They're just chugging along doing their best. Your value stocks, though,
they're the ones like pulling away. They're the ones putting
in the hard yards during this period of time, so
that you know, if the value stocks or the value
shares are doing really well up here and there, your
growth shares they just trying their best. They're just trying
to get in this economy. Over time, the average of
your overall return is going to be a good average.
(31:07):
You're not going to get the highs of the highs,
You're not going to get the lows of the lows.
Everything will kind of balance out, and that is what
we want from investment. We just want to be safe.
I don't want to just have one thing that does
really well in only one economy. So like playing board games,
you just want a little bit of everything. In your
next role, you don't know what you're going to get,
but you're probably going to have a good.
Speaker 4 (31:27):
Shot exactly, Exactly, like Monopoly, you've got to buy the
light blues and the dark blues exactly.
Speaker 1 (31:34):
I've recently got into a board game called this is
just showing how nerdy I am. It shows how nerdy
I am. Like, take us to the next level. Okay,
I've paid for and download an app on my phone
so that I can play the board game all my
flights Katan.
Speaker 4 (31:49):
Oh my god, same v serious the eight dollars one?
Speaker 3 (31:56):
Can we play?
Speaker 1 (31:56):
Can we play Togain?
Speaker 4 (31:57):
I did not know you were into Katan Okay obsessed, but.
Speaker 1 (32:00):
It's like that, right, like you don't know what's going
to happen next, Like you don't know if you're going
to need to build a road or you're going to
be able to buy a car, Like you don't know
if you're going to be able to build a city,
because like on the next roll, you could be given
a whole heap of different resources. But like it's good
to just have like one in the bank, freach because
like or if you can't really do much, well I
just build a road, you.
Speaker 4 (32:19):
Know, exactly, don't exact all your eggs in the brick bus.
Speaker 1 (32:22):
Exactly, you don't want to. And if you do have
six bricks, do you know what you do? You go
into the trade and you trade four bricks for one straw.
Speaker 3 (32:31):
Anyway, we can definitely talk exactly excited.
Speaker 1 (32:35):
Alright, alright, you can come over. We can have a
wine night where we play Katan.
Speaker 3 (32:40):
Real life, Ktar real life.
Speaker 1 (32:42):
I have the board game. I bought it online. Okay, cool,
let's go to the easter. One of our friends brought it
down and I was like so skeptical, right, No, I
was skeptical. Oh yeah, I don't know about this game.
Was one of Steve's mates. So I just thought it
was like.
Speaker 3 (32:55):
You know, dumb boygo, dumb boygo.
Speaker 1 (32:57):
I am the dumb boy for it.
Speaker 3 (33:01):
Unfortunately we are the dumb boys now, all right.
Speaker 1 (33:02):
Well, you know what dumb boys like to do. They
also like to use complicated words like commodities. Yeah, that
is the next thing I want to talk about, So
to commodities, complicated word for what is essentially things like
gold and other precious metals, Like can you just say
you're invested in gold? Yeah, Like it'd be a lot
(33:24):
easier than gold and other precious metals, as well as
things like raw materials and various natural resources, which are
critical to production. As demand increases, prices rising the economy,
and the cost of production to meet that demand typically
rises accordingly. So I can tell you this is true
because the steel in my house is double what it
(33:45):
was when I got quoted to pay for it last year,
and now I have no other choice but to pay
double for the renovation we're doing. And that's okay, again,
very privileged position to be. But man, I'm feeling it.
I'm a little bit salty about it.
Speaker 3 (34:00):
Yeah, but can you go no steal or you is it?
Speaker 4 (34:05):
You?
Speaker 1 (34:05):
You got to you got to get the steal. You
gotta get the steal, I feel you. Even though commodities
don't pay dividends or represent any underlying business, they are
disconnected to the traditional asset classes like shares and bonds,
and they actually tend to move in an unrelated direction.
So they're a good way of diversifying. Treasury indexed bonds.
Speaker 3 (34:25):
Yes, good, I was going to ask you about this one.
Speaker 1 (34:27):
Bonds are sexy. I think they're really hot. They're really underrated. Actually,
I feel like a bond is like a happy medium
between if you're not willing to take on as much
risk as a share, but you also don't want your
money just sitting in cash. There's something that if that's
your circumstance, you might consider. So Treasury indexed bonds, very specific,
(34:50):
are medium to long term securities where the capital value
of the security is adjusted for movements in the CPI.
So in the Consumer Price Index, just paid quarterly hot
at a fixed rate on the adjusted capital value at maturity.
So maturity just means at the end of the time
that you agreed to invest for mm.
Speaker 3 (35:10):
Hmm, Well, what's it?
Speaker 1 (35:11):
All these confusing more ridiculous? Isn't it? Like I get
it that you get it now? But the fact that
I have to explain something that shouldn't need explaining, Like
why can't we just be like, yeah, okay, at the
end of the term that you agreed to invest, so
at the maturity of the loan or at the maturity
of the investment. In this circumstance, investors receive the adjusted
(35:33):
capital value of the security. So do you know what
that means. Means you get your cash back, oh, initial
investment back, but it will be adjusted based on CPI.
So that's okay, We're all right with that. The value
adjusted for movement in the CPI is done over the
lifetime of the bond, not just like what it is today.
So if you were pulling it out today, like let's
(35:55):
say that your bond matured today, it wouldn't be at
seven point eight percent. It would be you know, if
you were in a ten year bond, it would be
averaged out over those ten years. So it's a little
bit more palatable than that seven point eight So it's
not as scary as you think it is.
Speaker 3 (36:10):
But yeah, gotcha, gotcha, gotcha.
Speaker 1 (36:12):
Okay.
Speaker 4 (36:13):
The podcast before, Yeah, you know what we have spoken
about and you haven't mentioned yet, and I'm kind of
getting concerned. You usually talk about Warren Buffett.
Speaker 1 (36:22):
Yeah, because he's real hot.
Speaker 3 (36:24):
I haven't seen him. Can you show you a picture
after this?
Speaker 1 (36:26):
I'll show you a picture now so I can get
your response.
Speaker 3 (36:28):
Okay, let's do it.
Speaker 4 (36:29):
Oh No, honestly, I thought he's kind of cute.
Speaker 1 (36:35):
I mean, I mean, Beck, he's like the type of
guy that he just looks like he would line up
behind you at the supermarket and you'd let him cut
in line. I wouldn't let a single soul. Yeah, okay
in line. Do you know what that's because you're not
very nice? But I reckon he's pay you bill if
he was behind your supermarket. Well, he know what he's worth.
(36:57):
What do you want to guess what that man? Look
at it.
Speaker 3 (37:00):
He's sound familiar.
Speaker 1 (37:01):
Yeah, yeah, yeah, he's going to say yeah because he's
see it. Oh, he's the most famous investor in the
entire world.
Speaker 3 (37:09):
Eleven billion no oh.
Speaker 1 (37:11):
You read that role That was one hundred and thirteen
point eight billion dollars is what he's currently valued. He's
ninety two years old for those of you playing along
at home, and is basically an American businessman and investor
who has a very, very big following. And he is
very rich because of his investment decisions, not because he
(37:35):
has built super good businesses or came from family wealth.
He's essentially made all of his money by relying on
time tested rules of value investing if you are interested.
And I just think that's really really sexy. Like I mean,
he's one of the most frugal people in the entire world.
He still drives his original car, original car.
Speaker 3 (37:54):
That's cute.
Speaker 1 (37:55):
So he Yeah, he still drives his original car. And
I'm just getting up a picture for Beck which you
guys can google and I might even put it on
my Instagram stories today. But that's his house. It's all
he needs. Cute, little modest I do wonder sometimes, like
he does have a very modest family home in America,
and that's very exciting. But what kind of security do
(38:16):
you reckon he needs on that given who he is
and what's going on?
Speaker 3 (38:20):
Oh true, I just.
Speaker 1 (38:22):
Go hold up, hold up. If you're worth one hundred
and thirteen point eight billion dollars, like you don't just
get to walk home without any type of risk kind
of overarching that circumstance. Well, he's a dude, so yeah,
you're right, And I need two year old guy who
he can defend himself to defend himself. No, he probably
needs some help. But that's a very good question. Actually, yeah,
so google it. We both agree that we'ren Buffett. Oh
(38:44):
sexy smash.
Speaker 3 (38:46):
Yeah, yeah, oh smash for sure.
Speaker 1 (38:49):
You're right. I'm going to do a TikTok of all
the famous investors and it'll be just like one of
those Smash or past serieses.
Speaker 3 (38:55):
Yeah, let's do it.
Speaker 1 (38:56):
Yeah done.
Speaker 3 (38:57):
Okay.
Speaker 4 (38:57):
So, so since we're talking about Warren Buffett, Yeah, it's a
real yeah, real hottie. What does it usually say in
trying times like this?
Speaker 1 (39:04):
So he has so many good quotes and if you've
ever heard me say, oh my gosh, yeah, look, I've
just stolen a lot of things that he said.
Speaker 3 (39:12):
Can't you.
Speaker 1 (39:13):
Yeah, he's inspirational. Yeah, he says, all right, So the
first best thing you can do to protect against inflation
is to invest in yourself and your skills. He says,
if you're the best teacher, if you're the best surgeon,
if you're the best lawyer, you will get your share
of the national economic pie, regardless of the value of
whatever the currency may be. Isn't that interesting hmmm, I
(39:34):
feel like it's just like you've just been like, I
don't get what he means.
Speaker 3 (39:38):
It was too fast for me.
Speaker 1 (39:39):
So essentially, he says, if you're the best in your field,
you're always going to be valued and be able to
generate a good income, regardless of what the economics at
the time are doing. Right. So, like, if you prove
your value and you invest in yourself and you invest
in your skills to become the best of the best,
that is not going to betray you because you're in
(40:00):
trying times. We see, you know, we've got the tech
redundancies going on right now. They're not going to lose
the people that are integral to their companies, are they
very true? They're going to try and cut the people
that they go Okay, cool, we could get another XYZX
at some point in the future.
Speaker 3 (40:16):
Yeah.
Speaker 1 (40:16):
The second best protection is a wonderful business, which means
a company in which the products are in demand even
if the company does have to raise their prices. Companies
that tend to withstand an inflationary environment quote must have
two characteristics. The first is an ability to increase prices
rather easily even when the product demand is flat and
(40:38):
capacity is not fully utilized without fear of significant loss
of either market share or unit volume. And the second
is an ability to accommodate large dollar volume increases in
business often produced more by inflation rather than by real growth,
with only minor additional investment of capital. So those two
(40:58):
things are really good. So rather than trying to pick
individual stocks, whether we're in an inflationary period or not,
you should go with this tried and true method, the
index fund to have and to hold. Ah Warren Buffett
also talks a lot about it's time in the market,
not timing the market. He has been known for identifying
(41:20):
companies that are on his watch list, which is public.
By the way, it becomes a public thing. If he's
looking into a company, he talks about it and shits that.
But he has been known to watch a company for
ten twenty thirty years before investing in them. The patients
are patience, ain't and people being like you're missing out
on these things, like you're not getting in and he's like, yep,
(41:41):
no worries, but I'm going to make sure that I'm
making the right decision for me. And then he does
and it always works out. No, don't know how he
knows what he's doing. Everyone's given to it. He's a billionaire.
Speaker 4 (41:52):
And is this something that you say it? Or does
Warren Buffet say this? From Little Things, Big Things Grow?
Speaker 1 (41:57):
No, I believe that was the very regal Paul Kelly, Ah,
Paul Kelly, Yeah, yep, yep, yeah, yeah. I believe that
was his very very well versed song.
Speaker 3 (42:08):
Yeah, sounds familiar to me.
Speaker 1 (42:11):
So little Things Things gross, it's beautiful, that's gonna be
stuck in my head or study stunning.
Speaker 4 (42:16):
I really recommend people go back to listen to our
recent Investing Small Amounts episode That works.
Speaker 3 (42:23):
Oh, that was.
Speaker 1 (42:23):
Wildly popular, Like I didn't expect it to be as
popular as it was, but the amount of beautiful messages
you guys sent me, and let's be honest, the spike
in download, so that was pretty good. So I feel
like it was a good EP though, where he had
good vibes to throughout the.
Speaker 3 (42:39):
Good vibes is a really really nice day.
Speaker 1 (42:40):
That was on the fifth of April, So April go
and have a listen to that. But there are also
a few things that I want to leave you guys
with today. One is from Little Things being skill growth.
The next year is the average investor will experience. Get this,
beec approximately seven market corrections during their lifetime, and the
last was the GFC. Ah, do you know what a
(43:02):
market correction is? No, it's where it absolutely crashes. You're
going to experience your portfolio look like trash seven times.
I'm so sorry.
Speaker 4 (43:11):
Oh man, that's a really pretty name for something that's
so diffictating.
Speaker 1 (43:15):
Yeah, but it's not devastating if you understand and your
mindset is good, and you're in a position where you're like, Okay, cool,
the market is off, My portfolio doesn't look the best,
but if I hold on to this roller coaster, it
will go back up right. And we know that after
the GFC, which was a global financial crisis which happened
in two thousand and eight two thousand and nine, we
(43:37):
know that some of the best investment returns have come
after that, Like our market and our economy has more
than recovered since the GFC, and people talk about that
as the worst thing in history. And if you go
on my favorite website is the Vanguard website at the moment,
I mean, there's a lot of favorite websites I have.
Isn't there too anyway? TikTok, TikTok's and app that's TikTok
(44:01):
is currently being overtaken by Katan though oh god, yeah, yeah,
Like I'm I'm gonna lose my pop culture references and
I'm just going to be starting to talk about how
many bricks and shape you'll trade me for a piece
of awe.
Speaker 3 (44:13):
Honestly, I won't complain, You'll get.
Speaker 1 (44:15):
It all right. So I think it's really important to
understand that if you go onto the Vanguard website and
have a look at their interactive Investor chart, you can
actually slide around and have a look at the different
asset classes and how they've provided. But that graph is
my favorite graph for showing people how the GFC at
the time, if you cut back, the chart looks like
(44:36):
the scariest drop in the entire world. And then if
you add all the way up to twenty twenty three,
it becomes this little blip ah in the roller coaster
and you go, what's that?
Speaker 4 (44:47):
It's a GFC when in doubt, zoom ow exactly fair.
Speaker 1 (44:52):
You are learning. And the second thing I want to
leave you with today is my favorite thing to harp
on about. Have your emergency fund pump it up. Make
sure financially you are in an okay position right now
is uncertain for so many people, and so many people think, oh,
something won't happen to me. It's fine if you have
some extra cash pumping up your emergency fund is never
(45:14):
going to go astray. Pay your bills on time, hopefully,
stay on top of your mortgage. And if you don't
feel like you're on top of your mortgage, please sign
into the Xela Money Instagram DMS or email them or
shoot me a message or you know, get in contact
because they can review it and make sure that you're
in the best possible position moving forward, and make sure
you're getting paid well for your job. I know that
(45:36):
that can be a very hard one, and we are
going to be creating, in hopefully the near future, a
lot more career episodes because I feel like I can
tell you to invest until the cows come home, but
you know what, you can't do invest if you don't
have a good income. So we're going to be building
up on the career kind of vibe to be like
okay cool. I just feel like there are so many
people in our community who I want to shake and
(45:58):
be like, babe, do you know your worth. You are
worth so much more in his how to achieve that
or here's how you can create a pathway to that
without feeling awful about it. So I just I'm really
excited for that stuff. But we're done here today. I
love that we're going to talk about Katan. Yes, and
we'll see you guys on Friday.
Speaker 3 (46:15):
See you guys then.
Speaker 1 (46:22):
The advice shared on She's on the Money is general
in nature and does not consider your individual circumstances. She's
on the Money exists purely for educational purposes and should
not be relied upon to make an investment or financial decision.
If you do choose to buy a financial product, read
the PDS TMD and obtain appropriate financial advice tailored towards
(46:42):
your needs. Victoria Divine and She's on the Money are
authorized representatives of money SHERPA pty LTD ABN three two
one IS six four nine two seven seven zero eight
AFSL four five one two eight nine.
Speaker 3 (47:01):
The imputed the diffected people.
Speaker 1 (47:04):
They were
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!