#6 Patience is a virtue | Investing convos every millennial should have

Maddy: [00:00:20] Hello and welcome to You're in Good Company Summer series. Over the six weeks of summer, where delving into the investing conversations every millennial should have. We still hear our close friends and family say that they don't know how to start honest conversations about money, and it makes them feel like they're not in control of their financial future.

Sophie: [00:00:38] So this is our answer. Six Conversations on the topics you wanted to hear.

Maddy: [00:00:43] this summer series is brought to you by Superhero.

Sophie: [00:01:05] So where in the market we're investing? We've got our portfolios, we've got our goals, we've got everything that we're working towards. Happy days. What are we looking out for now? Is it just set and forget forever?

Maddy: [00:01:17] look, we both like to think of ourselves as long term investors, you know, looking for great companies to buy and hold for many years. And I think generally in the case of passive investing, like if you're investing in an ETF that just sort of tracks like the Australian market, for example, it is okay to take a set and forget approach. But if you are choosing to invest in sort of individual stocks or anything that's a little bit more high risk, I think it's really important you are staying informed and coming across what you're actually invested in.

Sophie: [00:01:48] Yeah, and you know what? I think investing connects you to the broader world anyway. So keeping up to date with it doesn't have to be a hard task. It can just be keeping up with the news.

Maddy: [00:01:56] And I think in this situation, you know, knowledge really is power because we know that in the short term, the stock market can be a little bit volatile. But if you know why your shares are going up and down and if you understand what's driving it, it can make it a lot less scary. Rather than if you're blind and you don't know what's driving it, then you know you can't really make appropriate decisions based on that volatility.

Sophie: [00:02:16] And if you see a stock price go down like 20 percent, you're just like, Oh, then if it's like, oh, just one bad profit, it's like, Oh, it's OK, that happens. Sometimes I think you have a quite a good story. Off the back of that is that you invested just before the Covid crash. And even though it was obvious what was happening in that time with Covid, you still kind of had that experience where you had to watch it all go down. But as long as you were keeping up to date with the news, it meant that you were reassured that at some point it still will go up. It's just a funny life event that was happening at the time.

Maddy: [00:02:46] So sorry, how do you keep track of your investments?

Sophie: [00:02:49] So I do all the stuff that we were just talking about, but I do like to look at some internal factors as well. So the first is kind of the financial factors looking at things like profitability. So for example, people make expectations about how a company is going to go, you know, their profits might be sitting at a certain level. And then if they don't meet that, then you'll often say the share price drops or at time of recording, it's happening to CommBank, where they've missed a certain profit. Expectations of their share price has dropped. But it happens all the time, so I'm sure there's many examples that people could bring into that one.

Maddy: [00:03:21] Yeah. Nice. Okay. So financial factors impact the share price.

Sophie: [00:03:24] What else? A second one that I love. This is my favourite one that I like to look at is management factors. So like, who's the CEO, who's running the company where their previous experience has been, you know, often when CEOs change within companies, you might see the share price drop if the expectation is that person is not as good as what it has been previously, or sometimes it might even rise because people are really excited by the new change in management. A really good example that we've spoken about with you is Macquarie Group. And then off the back of that as well, talking about the employees or even just key management watching whether or not they're selling off any of their shares, you can find this information on things like simply Wall Street, which is a tool. And pretty much it just means that if you have, you know, your key management figures selling off some of their shares, it means that the share price right now is sitting at a nice price, and they think that it's not going to grow necessarily in the future because otherwise you'd hold onto them, right?

Maddy: [00:04:18] Yeah, that's a skin in the game thing. It fills you with confidence if management are buying the shares of the company because it means that they see future profitability in it. Whereas if they start selling it, it's kind of like, Oh, what are they? What are they seeing in the future that we can't see? 

Sophie: [00:04:31] unless you're Elon Musk and you're just selling off your shares for tax purposes orchestrated told you to?

Maddy: [00:04:37] I mean, let's not go

Sophie: [00:04:38] that one tip I would give you about keeping track of your internal factors is a great place to look for them. Great. A great place for information is company announcements.

Maddy: [00:04:48] Yeah, I think you can often find that on your brokerage app. Otherwise, something that I have found super helpful is I downloaded the ASX app and turned on notifications for company announcements for the stocks that. I own so now and a lot of the announcements are, you know, nothing but I now, do you get a notification every time a company announcement is made on the stock that I own, which just makes it easier to keep across?

Sophie: [00:05:11] And a great thing about company announcements is they want the investor to understand what's going on. So if you take the example of them reporting their earnings, it's often like a really nice presentation. They have some graphs, so it's definitely a fun photo. Yeah, I'm a visual person, so and that's where I'm like, Yes, this is for me, but they are some internal factors. What are some of the external factors that really help you in monitoring the market when you're invested?

Maddy: [00:05:37] I listen to a couple of daily finance news podcasts, so one is the FT news briefing, which is the Financial Times, and the other is what the flux and I find. It really helps me just to stay across some of the external things going on in the market at the moment that might impact my portfolio. It's kind of like that general knowledge.

Sophie: [00:05:55] Also, the Equity Mates network has a bunch of amazing resources with that as well. I mean, the boys at Equity Mates are constantly talking about, you know, trends and the savvy boys do a wrap up of economic news. And sometimes it's just easy to digest when someone else is just telling you what's going on instead of having to read through the lines of a newspaper.

Maddy: [00:06:13] So true. The other thing that I like to do is check in with my stocks when it gets true reporting season. So in Australia, for ASX listed companies, they have to report their financial results to shareholders at least twice a year. And in Australia, that is in February and in August. So this period really allows investors to kind of look into financial performance, and it also provides an opportunity to kind of better understand what the company actually does, how it's making money. Some of the social like environmental impacts and I guess how the company is being managed. So I quite like to take this opportunity when all this new information comes into the market, just to check in on my individual investments, say what they're reporting, say how the market's reacting and kind of use that time to just take stock of everything that's going on.

Sophie: [00:07:01] Yeah. And I think those reports, all those times of years also give a is a great opportunity to see some of the trends that are arising because all of a sudden, if you say these, you know, the whole bunch of companies doing really well, that kind of just identifies a trend, even though it's just because of companies or even company profits. So I guess that period's kind of like getting your report card at school.

Maddy: [00:07:21] Yeah, I do the best students, I'll say, have a say how they're performing class a hundred percent.

Sophie: [00:07:27] And I think through that time, you can just really identify some broader economic trends that are happening in that period.

Maddy: [00:07:33] So what happens if that report card is really bad or if it has a fail on it? We're going to talk next about some of the reasons that might lead you to actually sell your stocks. But before we get to that, we'll hear from our sponsors.

Sophie: [00:07:48] A really common question people ask when they start out investing is, you know, once you have started investing, can you sell? And the short answer is definitely yes. And although we advocate to be a long term investor, I think we should go through some of the reasons for why people actually might sell their investments. So let's go to some of the reasons why people might sell.

Maddy: [00:08:06] Yeah. So I think the first reason you might sell is if you've reached your investing goals. Remember, in the first episode, we talked about what some of our short, medium and long term goals are. You know, so you mentioned about, you know, saving eventually for a house. So maybe you've gotten to a point where your portfolio is big enough, you're ready to buy a house and you might want to sell off a little bit. Another one is you're finally ready to retire and actually retire early. Hopefully, that would be made in not too long.

Sophie: [00:08:33] No, definitely. I think with that house thing, it's like you're selling to go into another investment. So I think that's also an exciting opportunity to do so. The second is, if you're investing, thesis has changed. So the story you built up around why you've bought that stock no longer kind of exists or an element of it has changed. Mads run us through an example of this.

Maddy: [00:08:54] Yes, sir. I did a lot of research last year into a company called Nuix that IPO'd in December of 2020. It's basically forensic software company, and it was the largest IPO of 2020. So I wrote down what my investing thesis was, so I'll read it too quickly now. It was pretty simple. It's a data analytics engine and it's used around the world. The business manages cybersecurity risk and compliance threats, and these are areas that are becoming increasingly important in our world. The third point was Macquarie, a company that I hold in really high regard had a really significant 30 per cent stake in the business. So that was a big tick for me. I hadn't invested yet because I was waiting to some of the price volatility around the IPO just to settle down a bit, and so then what happened was around four to five months after the IPO, the business announced a series of revenue downgrades, which basically just meant that they weren't hitting the sales targets that they had sort of communicated to the market. So the share price started to really drop off. Now, this probably wouldn't have broken my thesis because I guess I still saw the value or the long term value in the company. But what did break my face this was the launch of an investigation into poor governance because it started to become apparent that the co-founder and the former chair of the company actually had money laundering and tax evasion charges. Yeah, well,

Sophie: [00:10:19] that's a real breaker of a thesis, ain't it?

Maddy: [00:10:21] I mean, you talked about how important management was. So when that became apparent, then the investment thesis was broken and I no longer wanted to invest in the company.

Sophie: [00:10:29] So if you had invested, would you have sold off your shares? Yes. Yeah, there we go. Lovely. So I guess that's why it's really important to monitor your investments, because just being in check with what's happening allows you to understand whether or not the company's still going in the direction you thought it was when you first brought up that thesis. Another really common one is that it no longer aligns with your values, and a good example here would be like sustainability. So you might have been researching that. You want to invest in more sustainable companies, and you've learnt a lot more about the field as of recent and then looked back at some of the companies you've previously invested in and realised that they're kind of not really meeting your values or your standards anymore. And in that case, you can turn around and say, I don't really I only want my investments to align with these sustainable practises and therefore I might sell.

Maddy: [00:11:15] I think a good example of that is Woolworths emerging from its alcohol and pokies business Endeavour group because they were actually finding that people weren't investing in the business because it wasn't meeting their sustainability criteria. By spinning off that part of the business, it makes them a more attractive investment. People who are really valuing sustainability

Sophie: [00:11:33] in the final one is if there's a better opportunity. People do have limited funds to invest, and sometimes you might want to allocate more of your portfolio to a different sector or different company that you found opportunity in. One example I can give, if that was my first investment was Afterpay and that one grew, but I didn't have a lot of savings on the side that I could invest with. So instead, I sold off some of my Afterpay at a time that I genuinely thought was a good time to sell. But I allocated that money into other stocks, so I diversified.

Maddy: [00:12:00] Yeah, I also did this recently. I bought a health care ETF during COVID, when everyone was talking about the vaccine and health care, and it was one of the most sort of popular and talked about industries at the time. And whilst I still think it's a great investment, I guess I'd have just become a lot more interested in other areas and want to invest more time into research and learning about other ideas.

Sophie: [00:12:22] So I think the point we're really trying to make is that long term investing is a great strategy that we both employ. But there are reasons that you can sell your shares and reasons that people do sell their shares. But most of it is really just about, you know, going back to our episode number one, what are your goals? What are your values? What are you here? Why are you investing?

Maddy: [00:12:43] Well, that brings us to the end of today's episode. But of course, before we leave you, it would be remiss of us not to give a few recommendations for further reading, listening or watching. So, so what are you bringing today?

Sophie: [00:12:55] I'm actually bring a resource today. and that is a simply Wall Street. So simply, Wall Street is a website, and it's used for, I guess, a bunch of different things. But really, it's where you can look up companies and it'll talk about the key metrics the business background, valuation management team. And for me, it's really been a bit of a one stop shop to kind of monitor your portfolio because you can always continuously update your understanding about what's happening. And it's in a very simple format.

Maddy: [00:13:24] Yeah, I think this one is what when I am interested in a stock and I'm starting my sort of like research process, first spot I go to is simply Wall Street because it just out like it's a really broad outline overview of everything that you just sort of need to know.

Sophie: [00:13:39] Yeah, and that's good that you say the first up because it's also can be your last stop as well. So as I said, you can kind of monitor where stocks are going. Like one of the features is you can save like the management team has been selling a lot of stock recently. So yeah, it's it's an all round from beginning to end. It's very clean and nice little and want to know what the animal is. It's like a mouse.

Maddy: [00:13:58] Not sure?

Sophie: [00:13:59] Actually, what are you adding to the recommendation list today?

Maddy: [00:14:03] So I hope you don't think mine's a cop out because it's actually probably the biggest resource that I do is what I'm recommending today is your friends.

Sophie: [00:14:15] So you're recommending me? Yes.

Maddy: [00:14:19] No, I'm recommending like your friends and like a community. So like, you know, it might be the your own good company community. Maybe I hope it is, but it could really be anything. And for me, when I started out investing one of the biggest racehorses, the most helpful racehorses that I used was the Equity Mates Investing Discussion Group. And it's just so good for like getting inspiration and bouncing ideas off other people. But I think that can sort of extend to just like chatting with your friends and family. So if we have so many great conversations about what we're noticing, themes, what we're investing in at the moment, why we're investing in it. I also love like chatting to my brothers about this, and I find that they often have quite different perspectives to me. So it's really good to sort of discuss those ideas that we have.

Sophie: [00:15:02] Yeah, I feel like it's at uni, and I think it was like. Marketing where you do like, if you're going to have a product, you've got to test your target market, yeah. So if you're really sold on a company, for some reason, it's really good to see if someone else will critique that and go, Oh, we've got different perspectives. And I think that really helps build your conviction around a stock or potentially work out that it might not be the best investment for you.

Maddy: [00:15:23] Are you a part of any like investing group chats?

Sophie: [00:15:25] I don't have any specific like WhatsApp groups or anything, but I can tell you that probably like 60 percent of my conversations are about investing with friends now.

Maddy: [00:15:32] I really want to have an investing group chat. Yeah, we should create one.

Sophie: [00:15:36] Just add anyone that wants to be there.

Maddy: [00:15:38] But speaking of friends, I thought, You know, I love hearing from friends, bouncing ideas our friends, or I thought it would be only fair that I do that in this recommendations. We've got producer Sascha in the studio with us. So you're throwing over to Sascha now. What is your recommendation for the last episode of our summer series?

Sascha: [00:15:57] I love that you just sprung that on me to just let's get let's get producer Sascha's mic up by the end of the episode. OK, well, I would say that I'm going to go with a podcast because, you know, it's my job, but I do listen to a lot of podcasts that I really enjoy, and mine would be my. The one that I've been recommending non-stop for the last year is We Crashed. It's another one from the Wondery network that Sophie recommended business wars from a couple of weeks ago, and it's basically about the rise and, well, unsuccessful IPO of we work the company. And then what they did afterwards to, you know, survive because if you're in a capital city, you probably have seen a weight walk around. They haven't stopped existing

Maddy: [00:16:51] Wu Equity Mates work out of WeWork.

Sascha: [00:16:53] Don't I know it's like it's a weird silo. But also what I think because we are talking about investing and we're talking about things to look out for. I think what was so interesting is there were lots of people on the journey who were kind of raising red flags, you know, a bit like when your girlfriend starts dating someone that you like, I'm just going to this on me and see if you're making the wrong decision. I think there were quite a few people along the way who are saying things, and I just thought it was a really interesting kind of podcast documentary about your intuition and kind of learning because we're always talking about learning things that you can be picking up for when you're reading the news and when you're thinking about investing in specific companies going forward, there's always something to learn. It's just a really juicy story, too, and they're about to do a miniseries starring, oh, Anne Hathaway and Jared Leto. Wow. Yeah. So if you want to let you know how they say, read the book before you're going to watch the show, listen to the podcast. Where are you going to watch the show?

Maddy: [00:17:56] I'll definitely tune in. That sounds great. I love

Sophie: [00:17:58] this recommendation. We've got someone else adding to the list. Let's make it

Maddy: [00:18:01] longer, and we would love it to hear your recommendations as well. So please jump into our Facebook group. Why J.K. Investing Podcast Discussion Group We would love to hear from you and that marks the end of our summer series. The life cycle of an investor is complete from your

Sophie: [00:18:17] goals to sitting in the market. Well done. We will be back in your years without. Season three. Can you believe that we've made three seasons?

Maddy: [00:18:27] Absolutely not.

Sophie: [00:18:30] But this is the perfect time to be sharing our podcast with a friend that has some money New Year's resolutions that they want to make, and they need to get on top of their financial future because we are here to

Maddy: [00:18:39] help with that. We would love you to jump into our Facebook group. YIGC investing Podcast, Discussion Group and share your New Year money resolutions with us.

Sophie: [00:18:48] Also, hop on to our Instagram at YIGC podcast and share where you're listening to because I want to see where everyone is for this summer or winter or wherever vacay.

Sophie: [00:19:18] Thank you so much for tuning into our summer series. Investing conversations every millennial should have. We hope you've enjoyed it and taken something away from

Maddy: [00:19:28] it, and we will catch you in season three.

Sascha: [00:19:30] Bye.