Ask an Advisor: Ellie Fordham – Dividend investing, salary sacrifice and life insurance

Bryce: [00:00:17] Welcome back to another episode of Equity Mates, or should I say hark warriors and financial conquerors. Welcome to another episode of Equity Mates, where we ride into the battlefield of investing like a mongol horde sweeping across the plains. As always, I'm joined by my equity buddy, Ren. And who am I? 

Alec: [00:00:35] Bryce, you've asked ChatGPT to translate your introduction, as you always do. I was a bit of two minds here with the whole hark. I thought it might go down. Hark, the Herald Angels. And then when it was. When it was Warriors, I was like, Well, basically, all of medieval history is now. Actually all of history. Full stop. But the Mongol Horde made it pretty obvious. You don't have a great grasp on Mongol history. So there's really only one emperor that you would have chosen. Genghis Khan. 

Bryce: [00:01:11] Correct. Nice. Well done. You don't know how many we've done now, but ChatGPT hasn't been able to stomp you yet.

Alec: [00:01:19] So it's ChatGPT. Who hasn't been able to stump? 

Bryce: [00:01:22] Yeah. 

Alec: [00:01:25] Well, look, that's the only question that I'm going to have to answer today because we have an expert coming into the studio soon to actually give more insightful answers than me guessing random people from history. This is our latest ask and Advisor episode where we sit down with one of Australia's best financial advisors. We've taken questions from the Equity Mates community, from ask at equity mates dot com and from the Equity Mates Facebook discussion group. We've got those questions ready and we're going to put them to our advisor in the hot seat today. It's Ellie Fordham. 

Bryce: [00:02:01] Yes. Ellie is from Verse Wealth. She's a senior financial advisor and we have plenty of questions coming from the community. So we're going to cover life insurance, investing questions, superannuation, and then a laundry list of general stuff around family trusts, paying down hex, how to think about salary, sacrificing schemes, plus a lot more. We're going to cover a lot of ground.

Alec: [00:02:25] Yeah. Now, just before we get into it, an important reminder that whilst we are licensed and whilst Ellie is licensed, none of us are aware of your personal financial circumstances. Everything we speak about, any advice you hear is general advice only, not personal advice. The content we're creating is for education purposes only before making a financial decision, make sure you do your own research and if you feel like you need it, seek professional financial advice. But Bryce, with that said, let's let's get into it.

Bryce: [00:02:56] Let's do it. Ellie, welcome to Equity Mates.

Ellie: [00:02:59] Thanks for having me, guys. 

Bryce: [00:03:00] So today we've bucketed our questions into four groups that it's a bit of a trend each episode. But we've got we'll start with a whole bunch of general questions that have come through from the community. Then some specifics around life insurance, which is great because I'm in the midst of that myself and then investing in superannuation. So let's start with the general. The first question that's come to Ellie, is around family trusts and it's from a community member who's in their thirties and they just like to know or understand what are the pros and cons with a family trust. And for those that are unaware, I guess, what is it?

Ellie: [00:03:32] Yeah, that's a really good question. So I think the first thing to think about with a family trust is you might have heard Gina Rinehart have a family trust, but that's not generally how it works for most people that end up having a court case 80 years after the Family Trust got set up. It's a really good entity structure for people that really are an asset. So rather than owning it, say in your own name, you can set up this entity structure called a family trust. And then what the trust allows you to do is at the end of every financial year, distribute income to different sort of individuals and usually their family members. Now the benefit of doing that is that some years you might make a lot of money, all the years you might not make as much money. So it just gives you a level of discretion as to where you're sort of distributing that income to ultimately save you on tax. So it can be really effective. But some of the downside to that is it is expensive to set it up. So it's a cost associated with setting up the structure to put the trust in place. And then typically there's costs associated with running the trust every year. So you do have to lodge a tax return for the trust and typically do some financial statements as well. So some people do choose to get an accountant to help them with that. So I've got a lot of clients that have family trusts and sometimes in the first five years or so, the tax benefit that they get from distributing the income to different family members, sometimes it actually doesn't outweigh the cost associated with setting up and running the trust. But a lot of people set up family trusts for the longer term because as their asset base continues to grow with what they've got invested in the trust, the income that they're generating is hopefully going to be higher. And it also means that if they sell assets in the trust in the longer term, like down the track, it might be like ten years down the track. You've going to have hopefully capital gains in there as well. So it also means that you've got a little bit more discretion as to where you distribute is the technical term, those capital gains. You know, if I was setting up a family trust, maybe I might, you know, distribute some of that income to a sibling who's at uni. He's not making the same sort of income or maybe like a parent or a lot of people use it to distribute income to adult children. So, yeah, it can be a really cool way to decide on tax, but there is definitely quite a few things to sort of think about when working out if that one's going to be the right one for you.

Alec: [00:06:09] So just following on from that, you mentioned that some of your clients or some people that, you know, set it up when they're a little bit younger and with the idea that the benefits will come in the long run. Is there any reason why they wouldn't just wait and set it up when they're, you know, a little bit older in their families, a little bit older as well? Like is there any benefit to setting it up before you need it or before you can benefit from it?

Ellie: [00:06:36] The main benefit of doing that is like if, for example, you bought some assets in your name at the moment and all of the income is sort of tax in your name, but in the future you want to have that discretion to distribute the income to someone else. You need to sell the asset in your name and then buy it again in the name of the family trusts.

Alec: [00:06:54] Right. 

Ellie: [00:06:55] So it's triggering capital gain.

Alec: [00:06:57] Yeah. Okay. Okay. So it's like a taxable event when you put it in the trust. Okay, that makes sense. 

Ellie: [00:07:03] Yeah. Technically called a change of beneficial ownership. Even though, like you, probably some people might buy the same asset that they just sold, it might even be on the same platform or brokerage account, but it's a change of name, so it causes a capital gains event. 

Alec: [00:07:22] Okay.

Bryce: [00:07:22] Can you buy a family home in a you know, in a family trust? 

Ellie: [00:07:25] Yeah. Technically you could buy really anything in there. It's just that the tax discretion available might change depending on the ownership of a family home.

Alec: [00:07:36] But your family home is capital gains free and not making any income.

Bryce: [00:07:42] Yeah. Later down the list. 

Alec: [00:07:43] Unless you charge your kids rent. 

Bryce: [00:07:45] Charge your wife and kids, right?

Ellie: [00:07:49] I've had a couple clients, probably not more recently, but quite a while ago that had their family home in the trusts for the different reasons. Because the other thing about a family trust is that it does give like a bit of a level of asset protection. So for clients who might people who might have like high risk jobs where they're worried about the risk of litigation and things like that, sometimes they get advice to set up their assets in trusts and other entity structures to give that asset protection. So maybe you might be worried about that.

Bryce: [00:08:22] No, no, Nothing wrong with running a very public media company. Anyway.

Alec: [00:08:30] Well, Ellie, while we are sort of talking about, I guess some of the habits and some of the structures of I was going to say, of wealthier clients. But I guess, you know, this trust structure could be any type of client. But if we do pause on some of the wealthier clients that you work with, are there any particular money habits that stand out from the way that they think about money or manage money? 

Ellie: [00:08:51] Yeah, definitely. I think there's one really big thing, and for a lot of clients that I've seen that have grown their wealth over time, the big habit that they always keep in place over time is really having control of their cash flow. So I've met some really wealthy clients that probably still spend like they've got $20,000 to their name. I've met really wealthy clients that spend like they've got $10 million to their name and they only have $20,000 to their name. But the big key, I think, for success for anyone really is having control of the taxpayer. And if you can get the really good habits in place early, they will carry through with you sort of for the rest of your life. When you have more wealth, there's obviously more flexibility to how much you control your cash flow. And I think naturally people's lifestyle and life changes, the better you're doing from a wealth perspective. But generally speaking, I think those clients that I've seen get themselves to really good positions have always got those habits that they continue to use throughout their life.

Bryce: [00:09:57] Crucial. Something that always comes up getting that cash flow sorted. Now, we've had a couple of questions come in that will group together around what to do if you come into a lump sum of money or a windfall, as one of our colleagues here in the office calls it, should you win lotto or even get some money from over time. Tax return is a good one as well. Generally 

Alec: [00:10:16] there's a big range, Bryce is just giving you that every time. Everything from working overtime to winning the lottery.

Bryce: [00:10:24] Like a lump sum outside of your regular cash flow. Yeah. How should we generally think about using that or putting that to work? 

Ellie: [00:10:36] I actually do have a client who takes two of those boxes that had a windfall and got some overtime, so. 

Alec: [00:10:43] Oh, I thought you were going to say won lotto. 

Ellie: [00:10:49] Yeah, I did. 

Bryce: [00:10:50] Oh, wow. How much? 

Ellie: [00:10:52] Yeah, a couple of million dollars. Yeah. Yeah. And it wasn't in the U.S. lotto either.

Bryce: [00:10:58] Oh wow. 

Alec: [00:11:00] Obviously, everyone's circumstances are different, and everyone has different, I guess, financial priorities. How do you approach that generally? 

Ellie: [00:11:07] Yeah, I mean, it is really difficult because everyone does have different financial priorities, different things happening in their life, different levels of income. So I think for us, probably the key is understanding what they want to achieve. First of all, what their priorities and goals are, then working out what's going to be the best plan of attack to get them there. And we're thinking shorter term and longer term as well. So, you know, some of the things that we always sort of look at is shorter term debts, high interest debts. You know, that can often be something that's important to to think about trying to exhaust them, because often, you know, particularly from a cash flow perspective, that can really be holding you back and not helping you to progress to where you want to be. So that's probably one to look at. I think some of someone also raised like HECS debt it as well. I got a lot of questions in May and June about HECS debt and I would I have I was so lucky because it was like 2% indexation. And if you go onto like the ATO website and look at the indexation of HECs, it really has been super low because it's really tied to inflation. And this year it was like so much higher, a little bit higher last year and then this year as well. I used to run the lot all the time. That hex is like the cheapest form of debt that you'll ever have in your life, but I'm totally proven wrong by that now because of the indexation. So that can also be like a sort of a forced repayment in a way as well, because getting taxed on that when you're generating income. And so that's also something to consider. One of the things I think the big strategy thing for a lot of people at the moment, though, is thinking about the cost of insurance, not necessarily on HECS, but like on their home loan or their investment property loan. This is what's the potential rate of return in their investment portfolio at the longer term. Balancing that out with where they're at financially, what they're looking to achieve, like having money in an offset account at the moment. If your home loan interest rate is 6%, your effective risk free rate of return is 6% after tax. This is pretty attractive compared to when it was 2%.

Alec: [00:13:09] Yeah. Yeah. It makes it makes you a hurdle rate for investing a lot higher. 

Ellie: [00:13:12] Definitely. Yeah. But I mean, obviously that's talking short term also. Guaranteed rate of return. 

Bryce: [00:13:17] It does make you think about what we've. I've just bought a house.

Ellie: [00:13:21] Congrats. 

Bryce: [00:13:21] Thank you. Well we'll see but have the offset account. And now it's really, you know, making us think about even our emergency cash like that sitting in a 5%. It seems more financially a better return to actually sit in the offset because the interest is 5.8484 or whatever it is. 

Ellie: [00:13:43] Good. Right.

Alec: [00:13:44] Can you do that? Like, you know, once you put money. 

Bryce: [00:13:47] Know, you can't you can't do it. But I think what we would then I guess what you need to then do is just be very clear in your mind or on a piece of paper somewhere. What of that is like 

Alec: [00:13:55] Can you do multiple offset accounts?

Ellie: [00:13:56] Yes, you can. 

Alec: [00:13:58] Yeah.

Ellie: [00:13:58] So just have a say. Yeah. It depends on the bank, though. 

Alec: [00:14:01] Okay.

Bryce: [00:14:02] So essentially you could just want to use it. You just want to have your Mac and maximise as much in there as possible when rates are like they are, if you, if you can't get a better return elsewhere on that cash. 

Ellie: [00:14:12] I mean if you think about long term interest rates like we've been so lucky over the last few years around where introverts have been. But like I know when I first started exhausting interest rates on hard lines like 8% and longer term, that that's probably not going to be at 2%, I would say. So. Offset and offset can work really, really well. But I think the couple of things to keep in mind is you can have multiple offset accounts that can really help in terms of segmenting like emergency funds or saving money to go on holiday. That can be really helpful. But I've got lots of clients and I think I put myself in this category as well, where if there's money in the bank, I kind of want to spend. It doesn't really work that well for me. 

Alec: [00:14:52] Oh yeah, yeah, yeah. 

Ellie: [00:14:54] My money habits are a little bit different. I like seeing my loan being repaid. I like having the higher repayments going to my loan. It's like a fourth level setting for me. And I think that's also something that you should keep in mind when you thinking about what's going to be the right option for you. Because for a lot of people it's easier said than done to have that money sitting in the offset account. 

Bryce: [00:15:15] Now Ellie, we've got one more to close out the general section before we move on to insurances. And this one's come through from Hayley. She'd like to know the major pros and cons of salary sacrificing schemes to cover things like cars, childcare, you know, whatever your employer might be offering. Help us understand the pros and cons.

Ellie: [00:15:34] I love talking about salary packaging. I've had heeps of clients be able to do this over time and it's actually sort of really popular at the moment with a lot of clients and also to explain why. But I think first of all, with salary sacrificing to super, there's a lot of technical terms in here. So and even like on a sort of different people that I've worked with over time who work in the industry, get this a little bit confused, but I think salary sacrificing, there's the element where you can salary sacrifice to super and put those contributions in and it's sort of a pre tax deduction that comes out of your salary or your wage. I think we're talking more about like salary sacrificing items like a car or childcare or other sorts of things like that. And it depends on your employer as to what you what items you're able to salary sacrifice or salary package. So most people, if their employer allows it, can salary package things like like maybe a professional membership fee or association or maybe like technology, like laptops or something like that software. And the reason why I can do that is typically if you paid for that anyway, from money out of your bank account, you can get a tax deduction on it anyway. So all that, you know, packaging those items allows you to do it through salary and you're reducing your tax as soon as you do it by deducting it through your salary. So, for example, I used to like salary package my membership to my professional association every month that I got paid and I just didn't have to worry about it. But it also helped me too, which is the main benefit, is that you're getting that tax deduction straight away rather than waiting until you get around to lodging your tax return and the paying the money, etc., etc.. But I think probably the more common sort of salary packaging that people talk about is things like cars. Typically how that works, you work with a salary packaging provider that probably the one that your employer wants you to work with. And get a quote for the car. Go and work out what the running costs of the car are going to be based on how many kilometres you're doing. And then they'll work out how much is going to come out of your salary pre-tax. And that's the part that's really beneficial for you because that's where you're going to get a tax deduction. And they'll also work out a component that comes out of your salary parts tax. They don't really get a a tax deduction for that. The benefit of doing that is that if you're running a car and you're driving around and doing stuff that isn't work related is still getting a little bit of a tax deduction for doing it. 

Bryce: [00:18:14] I remember we used to be out of salary sacrifice stock when I used to work at Woollies, which was good and actually 

Ellie: [00:18:21] That's cool. I didn't know you do that

Alec: [00:18:23] Yeah, yeah. Not quite offered here in Equity Mates. [00:18:25][1.9]

Bryce: [00:18:25] Not yet. No, no.

Ellie: [00:18:28] Not yet. 

Alec: [00:18:29] Well, Ellie, let's turn to the second category of topics, which was insurance and in particular life insurance. And I am a little bit cynical of how this made the cut, because Bryce did tell me earlier this week that he was looking at life insurance. So we do have some questions here, but I think he's put it up in the running order just because he has some questions. So I think there's a general question and then we have a specific one that's come through from Emma. But I might ask the general one first, which is what's the difference when you're buying life insurance as part of your super fund in super and then buying life insurance outside of super, just going to an insurer and doing it that way.

Ellie: [00:19:12] Main difference really is so like the terms and conditions of the policies that you put in place. So when you buy insurance through you, so you borrow, you get your super fund to do it. Generally you don't go through a process of confirming your medical conditions and your personal history. The super fund really isn't like understanding your risk associated with having that policy. So the best way I describe it to clients is if you bought a house like Frosted and all of the wall on one side of the house is missing, probably not going to get insurance for the house because it's damaged and it's the same if you get life insurance, you know, if you've had a medical event or medical history, like, for example, if you've had a heart attack, probably going to be with insurers that want to give you cover, whereas when you have it through super, they don't go through that process. So they just give it sort of to everyone. But it just means the conditions around when they pay out a claim are slightly different and it's the discretion of the super fund to change those conditions over time. Whereas if you went and got a policy outside with another provider, you will have to go through that what they call underwriting process of working out what your risk is to the insurance company, and then they'll calculate the premium based on that, on your occupation and how much cover you want to get. The big benefit is that, you know what you covered for, you know specifically what the conditions are of the policy. And once it's set up, it's locked in place. It can't really change over time. 

Bryce: [00:20:47] So we've got a specific one that's coming from Emma, and her and her husband are in their mid thirties and thinking about life insurance. They have a small amount of cover through their superannuation that her husband has no cover and she wants to know where do they even start with the process? How much do they need to consider or how much should they insure themselves for? Are there any red flags to think about when looking at insurers? I think that's a good one. So yeah, just kind of talk us through that process. 

Ellie: [00:21:18] It is really hard to work out where to start. Definitely acknowledge that. I think the number of advisors that are providing life insurance advice is reducing as well, which sucks. 

Alec: [00:21:29] Why is that? 

Ellie: [00:21:30] So, the industry has gone through a lot of regulation over time. Don't need to bore anyone. That was a royal commission that had a pretty big impact on the industry. I think what I started out in advice like if you go get a life insurance plan and pay like $5 for it, I don't think anyone I'm confident that one would be able to give you a life insurance plan these days. And and it cost $500. So I think advisors are just moving their business. The regulations changed. It meant that you could just providing life insurance advice on it only on its own. It's a little bit more difficult to do that, but there are still lots of great resources out there to start identifying what level of cover you need. I think that's the first part. So a lot of super funds will have some calculators on their website. Money Smart also have a couple of calculators then are not perfect. And I think the big one with calculating how much cover you need is everyone makes different assumptions. It's really about making sure those assumptions fit where you're at now, what stage of life you're in. You are probably just thinking through if something you don't really want to happen does happen. What are you prepared to sort of consider at that point in time? That's a big one, working out how much you need. Second part is then working out where to get it. So, of course, you know, the first port of call for a lot of people is a super fund. Definitely good resource. I think going and having a chat to an advisor though, and getting some good insurance cover is really important because those policies are going to be the ones that more than likely you go through that underwriting process that I was talking about. So you're going to have some good quality policies in place and they'll be able to have a look at all the different companies and sort of out of the market and work out what's going to be the right insurer for you, for your occupation, for your medical history, etc.. Because the some insurers that love working with tradies and there's some insurers that probably prefer like white collar professionals to insure. So that's probably an important distinction to consider. I think insurance is a funny one because everyone has this conception that you get an insurance policy and then they're never going to pay your claim. 

Alec: [00:23:52] Yeah

Ellie: [00:23:53] I was actually shocked, like after the royal commission, I was talking to someone at work, an insurance company was like, all you guys have to pay to claim. They're like, That's not true. They actually publish how much they how many claims they payout, the percentage of claims that get made by payouts. So I don't think you need to sort of be concerned about that so much. But when setting up life insurance, you just make sure that heavy working with that actually really explain the policy to you. Because if you do make a claim in the future, you just want to make sure that you're in the right position. You've got the right level of cover based on your assumptions at that point in time, and you're actually going to receive the amount that you need at that point in time. 

Alec: [00:24:38] Well, you mentioned that Money Smart has a life insurance calculator. I have just Googled it and we'll include the link to the Money Smart Life Insurance calculator in the show notes so people can calculate how much they need. I just put my circumstances in there and money smart told me I might not need life insurance so much in my life. Obviously not that valuable to ask at the moment. You know, if I get married and have kids, I'm sure they'll give me a number. Anyway, that's somewhat down to it. Let's take a quick break here, Ellie. And then on the other side, we want to turn to the questions that we've got around investing and also questions around superannuation. But we'll take a quick break here. All right. Welcome back to Equity mates. We are doing one of our favourite types of episodes and ask an advisor episode. We're joined by Ellie Fordham. Ellie, we've covered a lot so far today. We've covered a bunch of general questions. We've spoken about insurance. But as is always the case, when we go out to the Equity Mates community and tell them that we're doing an episode with a financial advisor, we get a flood of questions around investing and we get a flood of questions around starting investing. So we'll start at the very beginning with a very general question. So first, General, how can I start investing? And I think, you know, the context here is even for people who listen to this podcast, who are part of our Facebook discussion group, you know, it's still quite a daunting thing, a lot of jargon. So what's the easiest first step to take to start investing? 

Ellie: [00:26:21] Could I just say, listen to Equity Mates? 

Alec: [00:26:25] Yeah, you should. Although if people are listening to this episode, I think they've already ticked that box. 

Ellie: [00:26:31] Big one, I think is, first of all, do your research. Everyone's level of research is going to be different. What they need to feel confident to make any decision in investing is starting investing is a huge step to take, to take the plunge to do that. So you've got to do the research to know what you're going to do. You don't understand why you're investing, though, to start with. If you're happy to invest because you want to grow your wealth longer term or there's a particular reason why you want to invest, make sure you've really got that front of mind before you take the plunge. I think secondly, then you need to work out what you want to invest into. So it's going to really depend on how much money you've got, your own personal sort of circumstances. Some people chasing shares, some people are choosing property, some people happen to have their money in the bank. It's different for everyone to work out what you want to invest into. That's easier said than done with so much behind that. But obviously using like for example, Equity Mates podcast, you're going to get a good understanding of of something to consider. But I think the last part is once you work out what you going to invest in to really confirm or have clarity on the timeframe that you're investing for, because investing is not a short term gain, it is really long term. And you need to make sure that if you are going to be putting money away, that you're really thinking that you can touch it for a long period of time. Typically we're saying 7 to 10 years. And I think the last thing is to just start, because once you start, if you put aside an amount that you're willing to invest to kick things off, once you sort of sort of have runs on the board, so to speak, it does make your investing experience much easier. I think with a lot of my clients, I often start out with an amount that they're willing to invest initially, and then as their confidence in investing builds at a time they're more than happy to to move more into their investment portfolios and keep that growing.

Alec: [00:28:24] Yeah, yeah, I definitely think that's the case. Once you build confidence, the idea of risk starts to change a little bit. 

Ellie: [00:28:31] Yeah, absolutely. And we're so lucky that there's all these micro investing platforms now. To actually start with smaller amounts. You know, when I started my bus a while ago, there was none of these around. If you wanted to buy shares, you had to say about $500 plus brokerage to put the trade on forever. When I was like 17, saving up for my first trade. And now you can put like ten bucks in an ETF on a micro investing platform. That's a great way to get started. 

Bryce: [00:28:59] It's come a long way In the last even five years since Alec and I really started getting into it. So there is no there is no excuse from an accessibility point of view. At least it's it's good to say. Speaking of macro investing, this one's coming from Eugene. He started investing on a micro investing app but would like to now move towards chess sponsored. He wants to know if he should sell and re-invest into the same ETF or just start afresh. Keep the existing micro investing and start on another broker. 

Ellie: [00:29:29] I think the main consideration to think about here is something we were talking about earlier, where if you move from one platform to another, so move from macro investing to chess sponsorship, you're probably going to have to sell the asset and then rebuy it and you might have capital gains, which we were talking about earlier. So that's probably going to be the biggest consideration to think about whether that's the right move or not. And that's probably one of the downsides about micro investing, is that most of the time you can't transfer the ETF you bought across to the chess sponsorship. So that would probably be for me, one of the biggest factors to consider before doing that, because aside from that, the only other thing to consider is the cost associated with retaining it in the micro investing platform or having it on on the chess sponsorship. Sometimes the cost benefit isn't going to be significantly different by retaining it on the micro platform. 

Alec: [00:30:32] Yeah, I would say when you're thinking about costs, some of the micro investing platforms don't charge monthly fees, so you're just paying whatever the ETF management fee is, Some of them do. And so, you know, if you've got a small amount of money invested on a micro investing app and they're charging you, you know, $4.5 a month fees on top of what you pay for that ETF, that adds up over time. And you know, as a percentage of a small amount invested, it matters.

Ellie: [00:31:04] Yeah it is huge. I agree. I was doing this analysis the other day for my niece and I was looking at it like if she had for 18 years and the micro investing platform, it was going to be huge. So that's absolutely a massive consideration.

Alec: [00:31:17] Um, we got a question around dividend investing. I feel like it's really sort of come into the fall of a lot of people's, I guess, investing universe because growth stocks had a really tough 2022. So people were looking at other alternatives. And then just because, you know, we seem to be in an environment that's focussed on income, bond yields are up. We are, we're getting income from our savings accounts for the first time in a decade almost. And so people are thinking about income. So I guess the question is for people who are younger in that accumulation phase, mid twenties, early thirties like Bryce and I or Bryce, almost mid thirties, come on. I guess the question is, is dividend investing worth it? 

Ellie: [00:32:04] Me too, Bryce, it's all good. Yeah, I feel like everyone's talking about dividend investing. Like I've had a heap of people of friends of mine who are in the industry talking about it lately too. And I really think it comes back to like, what's your investment philosophy? Because when you are investing, you've got a longer term strategy to play what you're thinking about, and that investment strategy really comes back to what are you looking to achieve with those assets and a longer term. So typically for myself, like I'm not really looking to generate income from my investments at the moment. I'm looking for capital growth in the longer term. So if I'm thinking in that regard, I'm thinking about whether a stock that's paying a really good dividend is actually worthwhile having at the moment, or whether I'd be better off focusing my investment strategy and continuing my investment philosophy, which is more having assets and building growth over the longer term. For a lot of older people who've been investing longer term, I'm talking like 60s, 70s, etc. a lot of their assets or really like blue chip stocks that were generating really good dividends over a longer term. But that's because they rely on that income. If you're not reliant on the income, then you're really just looking for asset sitting, get you the best return. 

Alec: [00:33:15] And I think it's important to stress after tax return because even if you're taking that dividend income and reinvesting it straight back into the share market, it still adds to your taxable income, whereas capital gains, you don't you don't pay tax until you sell.

Ellie: [00:33:31] That's right. And a lot of people and again, I'm not trying to pick on them, but like probably older people get really torn up around franking credits and how that's beneficial. And when you're paying lower levels of tax, it can be quite beneficial. Even when you're paying high levels of tax, it can be. But if your after tax return for an Aussie share is 5%, but you could have that same money invested in another stock elsewhere that's getting you above that return. Not paying any tax on it because not generating any income, then it's a bit of a no brainer.

Bryce: [00:34:03] So the next one has come in from Cass and she would like to know is it beneficial or not so beneficial to invest in an individual company as well as investing in an ETF that holds that company? 

Ellie: [00:34:17] Well, good question. I don't see it too often. I guess probably the main reason why you would hold an individual stock as well as holding an ETF with that stock in it is if you're really looking to get more exposure to that particular asset or sector. Some people would use the terms of that sort of being like a satellite investment to an extent to take on more of that risk and get that exposure. So it probably really comes back to whether that's the asset that you want to have in your portfolio to generate that sort of return in the longer term. But if you're looking for a more diverse investment strategy, then usually you probably just look to your ETFs. 

Bryce: [00:34:56] And then finally, to close out investing, this one has come through. Elli, can you explain the six year tax rule when owning an investment property?

Ellie: [00:35:06] That's it's a good one. So, if you do are in your room. So, Bruce, maybe you'll have ten, 12 months time and rent it out. You could go and live somewhere else and rent out your home. That was your former place of residence and then you might rent it out for five years and then sell that property. And the main benefit of this six year rule is that you'll see that property will be exempt from capital gains tax. 

Bryce: [00:35:35] Because it was an owner occupied first. 

Ellie: [00:35:39] Correct, it has to be owner occupied first. You have to live in it and then you basically got six years. It doesn't have to be all in one period. It can be broken up, so you might rent it out for two years and move back in that, rent it out again. But you've got a six year exemption and then it can the property can be exempt from capital gains tax. 

Bryce: [00:35:58] Nice.

Alec: [00:35:59] Fascinating. 

Ellie: [00:35:59] I did have a client do this in the past and it was really beneficial for her situation. 

Bryce: [00:36:05] I bet. 

Alec: [00:36:06] Wow. Well, Ellie, we're almost out of time, but we do just want to touch on super a little bit. We got one question from Ariana that we thought was worth getting in the back end of the episode. Most of us grew up in a world where you had your choice of super was really you choose the fund and then it was aggressive or growth, moderate or conservative. And that's that's about it. But now we're seeing more and more options come to market where you can have more control without going all the way to a self-managed super fund. You know, I think Sabbath's have something Australian super give you something super hero, the broker has a platform where you can make some more choices. How would you approach that decision? Moving from a super fund with pre-mixed options to more of a self-managed self-directed super arrangement? 

Ellie: [00:37:02] A little bit like getting started with investing now and really, first of all, clarifying what purposes of investing is super, you know for us. You know, maybe Bryce and I, we can access our super a little bit before you can't, Alec. You know we've got a really long 

Bryce: [00:37:20] You're not helping my course here.

Ellie: [00:37:25] It's a really long term investment timeframe. So you know in a context like to at the moment the law around super is when you can access it. Typically it's going to be 60 might be change by the time we get there. So we've got plenty of time to invest. So if you're applying those sort of fundamentals to your own personal investment strategy, there's no reason why you can't apply a similar sort of investment strategy with your super. So I think it's great. Again, there's so much more available on the market for you to consider with your super. The benefit of the pre-mixed options are that it's sort of a little bit set and forget you don't have to do the heavy lifting, but once you do the heavy lifting inside your super fund, you work out your strategy, you work out what you're going to be invested into. It is also a sort of could be a set and forget strategy if you wanted it to, and really align your personal investment strategy with your super strategy and have similar thought to investments in this. So I don't think there's any detriment to either. It's just probably a matter of whether you want to take that control yourself. And I know it's important for a lot of people. The other big thing about sort of taking control of your own investments got to be through super is you going to have a lot more transparency and that's also important for a lot of people. So yeah, I think there's a great options that are available. And the other thing that I've noticed, I love companies as well, is that more and more super funds have got more high growth orientated investment options that are coming out, which in the past have tended to be more balanced and a little bit more conservative, probably market a little bit more to pre-retirees. So even lacking that premium space, this is more coming out there too, which is cool. 

Bryce: [00:39:02] Well, Ellie, we have got through all of the questions from our community. So thank you to everyone who sent them in. If you'd like to contribute to next month's, ask an adviser. Send us a question at ask@equitymates.com. And if anyone is interested in reaching out to you or finding more information, what's the best place for them to hit to get in contact? 

Ellie: [00:39:22] Best places to go to our website, versewealth.com.au and booking an introduction, chat with myself or any of our advisors. 

Bryce: [00:39:33] Awesome, we will put that link in the show notes along with the Money Smart Calculator. If you are looking to find out how much you should be covering yourself for life insurance. Interesting to say that Ren has zero in. Actually, he's nine for life and so. Something new we learnt today. But Ellie, thank you so much. We do appreciate you taking the time to answer all of the questions that we had. I learn a lot. I'm sure there were many people in the community that also got a lot out of this episode as well. So thank you very much. 

Ellie: [00:39:59] Pleasure. Thanks for having me again, guys.