ASX Week: The Guide to Building a Balanced Portfolio with Gemma Dale

Bryce: [00:00:32] Welcome to get started investing in this podcast, we cover all the basics that you need to start your investing journey. Are you joining us for the very first time or is this the start of your investing journey? Well, before you dive into this episode, our is designed to go from the very beginning, so we strongly recommend that you scroll up and start from episode one. However, if you are feeling brave and just want to dive in, then of course, don't let us stop you here at Get Started Investing feed, we unpack all the jargon, the confusing bits. We hear your investing stories with the goal of making investing less intimidating. And of course, we want to have a good time along the way. My name is Bryce and as always, I'm joined by Equity Mate Ren. How are you going? 

Alec: [00:01:06] I'm very good. Bryce I'm very excited. There's a few big milestones in the, you know, we've got Christmas. The Americans have Thanksgiving, but here at Equity Mates, there's nothing bigger than ASX week. 

Bryce: [00:01:19] There is nothing bigger than ASX week, and we're lucky to be doing this for the second time this year. We did the ASX week in May. 

Alec: [00:01:26] Christmas only comes once a year. 

Bryce: [00:01:28] I think sometimes that's right. So this week on Equity Mates and Get Started Investing feed is all about ASX week. We've been lucky enough to partner with the ASX to bring you some of the best sessions and experts from their bi annual conference this November, as they've been unable to deliver the event in person. We have been able to move it all online and we're giving you eight episodes on demand as well as on the website. We're bringing your presentations, all the information now delivered at the ASX second on our website. And we're lucky enough to have an expert with us in the studio to help us through all things to do with portfolio construction and balancing portfolios. And that is Gemma Dale from NAB. Welcome, Gemma. 

Gemma Dale: [00:02:10] Thank you. It's lovely to be here. 

Bryce: [00:02:12] So Gemma Dale is the director of self-managed super funds and investor behaviour at NAB. As I said, we're going to be talking all things portfolio construction. How to think about balancing your portfolio. A topic Ren that is pretty important for beginners when they kick off? 

Alec: [00:02:28] Yeah, 100 percent. I think it's often neglected. We spend so long trying to find the perfect stock, the perfect ETF, perfect fund manager, though we don't think about how you know all those different ingredients go together into that recipe to make the cake. I was really struggling with that metaphor. It was because it's beautiful ingredients create gradients together. 

Alec: [00:02:50] And you know, Gemma, you spent a lot of time looking at investor behaviour, and I think so much of portfolio construction relates to how we think about investing, how we react emotionally when things go wrong. So no better person to talk us through it today. So Gemma, 

Bryce: [00:03:05] you did a presentation for the ASX investor week on building a balanced portfolio. If you want to go and check that out, it's going to be on the website now. So go and do so. But we're going to unpack it a bit here. So let's start at the top with some definitions. We're talking about balance in a portfolio. What do you mean by that? 

Gemma Dale: [00:03:22] So it's such an important question, and there's an industry definition which the average person is probably familiar with but has never thought about. And then there's the definition that's relevant to you at the individual level, and they can be dramatically different. But it's worth noting that you will see the term balanced portfolio a lot if you are looking at super funds. So given the average listener base for you guys, almost all of you, I assume, will have, you know, an AustralianSuper, a future fund type, super, whomever else you might be with, and 80 percent of people with their employer super fund will go into the default fund. Default means you just get chucked into it because you can't be bothered to make a decision. And that portfolio will probably be the balanced fund, right? The technical industry definition of a balanced fund, and that is where they spread assets for you across a whole lot of different asset classes from Australian and international shares to fixed income property. And now, because we've evolved a little bit, they'll have alternatives and infrastructure and a few other things as well, and they will show you a beautiful pie chart. So always a pie chart, maybe they'll split it out for you, but it'll be beautiful pie chart. And the idea is you'll see lots of different colours on there that will show you little pieces of pie in different asset classes so that overall you have a diversified portfolio. So we talk about balance. What we really mean is diversification and so boring. I'm never going to call anything diversification because no one will listen. But basically, that's what it's about not putting all your eggs in one basket and ensuring that your portfolio is spread across a variety of different things to give you a return that's not massively skewed. Obviously, we all love to skew to the upside, right? We would love it to be able to get one percent every year, but there's a fair amount of risk in that. And the other option is you go to zero and then you've got no money. So you would say you want to balance out your portfolio to moderate your returns over time so you don't get that massive volatility, that massive up and down because when you hold lots of different things. Talk about what what it means in a minute. You have some that do well. Hopefully, anything that's doing poorly at the same time will be offset by things that do well. Mm hmm. At an individual level that does not have to look like a balanced fund in a super fund at an individual level. You might be trying to achieve something quite different to AustralianSuper or whomever you're with. You might not be going for eight percent per annum until you retire, which is not super exciting. So don't assume that what is the technical definition is right for you personally. It's just more about building a portfolio that's not desperately chasing the one perfect stock or asset. It's more designed to give you a better long term return. Mm hmm. 

Alec: [00:06:12] You mentioned that it relates to our individual goals, and I guess the next question we're going to ask is, does balance mean the same thing for every investor? Or could it mean different things to different people? And I'm going to assume based on your long lost answer, it does mean different things to different people. So I guess the follow up then is how do we figure out what balance means to us? 

Gemma Dale: [00:06:30] Yeah, that's such a good question. Clearly different for everybody. The industry has had to, particularly the super industry has had to make assumptions about what everybody looks like, and they still argue about it internally all the time. So they haven't come up with the perfect solution, but you at the individual level. Broadly speaking, people have one of a handful of goals really in all the time that I've been talking to people and I used to work with financial advisors all the time. They were talking to people. People are trying to create an income stream in retirement and they are retired or they're getting very close to retirement. They're saving up for retirement, intending to create that income stream. You're saving up to buy a house, which is just a massive issue. And I'm sure for your investor base, just the issue. Alternatively, you're trying to build wealth over the long term like they largely the things people are trying to do. So you're trying to create an income stream, you're trying to grow a portfolio. You may have a series of goals within that. We know with equities you need a minimum timeframe of sort of five years. Plus you might pick the window where you make a fortune in the short term, but you might also not. So let's go with five years plus. And if you have a five year plus time frame, it'll be one of those big goals. So if you're trying to build a portfolio over the long term, you're looking for growth, really. If you are looking to build a portfolio to live on from an income perspective, then you're looking for yield, you're not looking for growth so much. And then there's a whole series of different objectives underlying that. But basically, they're the kind of major things that you're looking for. 

Bryce: [00:08:02] So, Gemma, there's a number of different ways that you can achieve balance as an investor in a portfolio asset class, geography industry. Are you able to talk us through those and why they might be important, how you might think about it, depending on where you are in your investing journey?

Gemma Dale: [00:08:18] Yeah, I'll come back to the intellectually where you were talking about trying to find that perfect stock, because that's the question so many people are asking like, how do I get the perfect stock into? I mean, I'm just going to buy that and then I'll be sweet. And usually what we find with our investors is they make a couple of great decisions at the beginning, or they may be poor decisions. They make a couple of decisions. But the next evolution is really like, Oh God, now what do I do? What do I do? So when you're in that situation, so you've bought two stocks or three stocks, so your first ETF or whatever it might be evolving to a portfolio is about thinking, broadly speaking, what are my goals, right? So I know let's say I'm going to go with go with a long term growth portfolio, given where we might be. So long term growth portfolio, I have bought one buy now, pay later stock one international ETF over the Nasdaq and maybe a handful of other things. I've bought that. So you're already halfway there. In terms of diversification, you have realised that buying only domestic companies, you're missing out on some incredible opportunities overseas. And Australia does not have some extraordinary industries and some extraordinary sectors that you would like to get access to if you're trying to build a long term portfolio. Right. So you want to think about geography more in terms of the opportunities it presents rather than I have to have Europe in the U.S. or I have to have China and Japan and whatever it is that you're thinking, it's more about what do they offer that we don't have we don't have a car manufacturing industry in Australia at all. So if you're interested in EVs, you're going to have to go offshore, that sort of thing. So what am I trying to get into my portfolio that I think is a long term growth opportunity? And can I have more than one of those? Because if I've only got one, I might get it badly wrong and then say, we're going to go to pieces. So what am I going to include in that? And how do I get access to them? And preferably you will have some geographic spread just because we don't have everything in Australia, you will have some sector spread, so you will be talking about different sectors and you should be thinking about other asset classes as well. So even though that is hard to do when you're talking to Equity Mates equities, plus all the stuff, fixed income is really hard at the moment and it's. Really hard for young people. It's very difficult to get excited about half a cent like I personally can't go for it. And I'm also talking about professionally balanced portfolios a while ago. They have also been shrinking dramatically in in professional portfolios. So what used to be a 60 percent growth portfolio with 40 per cent defensive assets is now like 85 15, and they're still calling it balanced because you just it's so hard to generate a return out of credit in fixed income. So if you are building a long term growth portfolio, you are allowed to put those asset classes to the side in the current environment, in my view. Obviously, personal advice if you grew up in Detroit. But I think, you know, for a lot of people, the asset classes that matter if you're trying for growth will be domestic and international equities. You may like to think about property and different ways of accessing that if you can't afford a house which many, many of us can't. And also infrastructure and alternatives because they are other options available to you for long term growth. So thinking about the different asset classes, different sectors, different geographies and trying to pick the things in those different areas that are going to get you where you want to go? 

Bryce: [00:11:39] It's we speak about it on the show. The good news is that with the equity market, you can actually get exposure to all of those asset classes without having to spend a million and a half dollars on a shoe box. So and you can get access to the best infrastructure around the world and different commodities and different asset classes all through ASX or the Nasdaq, or whatever it may be. So, yeah, it's very important that you don't just think of the equity market as investing in companies, and that's the only asset class that you can get. Mm-Hmm. 

Alec: [00:12:08] You talk about not wanting to spend $1.5 million on a shoe box, but we both dream of that day. 

Bryce: [00:12:15] I'm not stressed about it, though. Yeah. Yeah, because we know the power of the stock market. I like a lot of people who stress about it. I believe and like no offence, but it's because you might not, you know, understand the power that the stock market has in terms of generating wealth. And you might think that the only way to do so is through property. So, yeah, listen to all of our other podcasts because we talk about that. 

Alec: [00:12:37] I'm still hanging out for a retail property ETF. I think that I know something at some point. Yeah, rental yield and capital growth, a thousand dollar parcels. 

Gemma Dale: [00:12:46] Yeah, I know a few people have had a crack at it. Oh, really? But not delivered anything that would be an exciting investment opportunity for you. Yeah. Yeah, it's hard to crack. 

Alec: [00:12:55] Fair enough. Fair enough. So I think we've we've touched on it and we've sort of, you know, mentioned it, but I really like to drill down on the why here. So, you know, you presented about the importance of a balanced portfolio and how we can achieve a balanced portfolio. Let's really drill down on why balance or diversification is a priority. Why shouldn't we just be optimising for returns? Why should we be focussed on balance?

Gemma Dale: [00:13:22] It's interesting, you say, why wouldn't we be optimising for returns? I mean, we all love the idea of optimising for returns by which you basically mean just picking amazing stuff that does super well. And we would all like to think we're awesome at that. But you get it wrong occasionally, right? And if you are optimising for returns by picking the one thing you think will shoot the lights out. If you're wrong. It hurt a lot. And we've all got it wrong. Speaking personally, so the point of diversification is to go first of all, there's a universe of great ideas out there and there's a universe of great companies. So even if you are super high conviction on one thing like, I believe that X-Y-Z technology company is the future and nothing else will do better. That assumes there is nothing else good out there, which is a bizarre assumption, right? There's plenty of great ideas out there. So you do want to be participating in a number of great ideas. That's one thing I believe very strongly. And then you also want to be assuming that some of your great ideas will suck at some point or another and you want to ensure that your great ideas. Can offset whatever your bad idea was, and sometimes things are blown out of the water for things you would never have anticipated. Or alternatively, I know you're going to ask me about Afterpay, I'm getting ahead of you on this one, but I'm so Afterpay is a really good example, right? Because everyone uses the example of the 100 bagger writes the stock that has just done super well, and many people were on it at NAB Trade, which is where I work. We had so many investors holding Afterpay at point ten dollars, that sort of thing. It went to eight dollars during the crisis last year. But you may not remember it also plummeted the year before, when there were concerns about credit licencing. If Afterpay was licenced like a credit provider and the regulator had to make a call about it. The prospects for that company would be dramatically different, right? If you had no your client. You had to do credit checks and all this kind of stuff. It's no longer buy now, pay later, and it's basically a glorified credit card provider. And that's a totally different story. And it goes from being 100 bagger to still eight bucks. So your great idea can turn out to be a terrible idea if the regulator gives a different opinion and there's nothing you can do to control that outcome. So there's a I mean, that's one example of many, many, many of those. One early in my career was a company called McMillan Shakespeare, which did salary packaging, and they changed the rules in salary. Packaging in the company just collapsed because its business didn't exist anymore the next day. So however great your research and your analysis, sometimes things just don't work out. Yeah. In addition, there's universe of great ideas out there and you want to participate in at least a few of them, not just not all the eggs in one basket. That's the one we always tell everybody don't put all your eggs in one basket, but there's a reason for that. There's other really pretty eggs out there. 

Bryce: [00:16:29] So when Ren and I first started investing, international markets were pretty inaccessible. ETFs were nowhere near as prolific as they are now. So we were limited to the incredibly exciting ASX 200. How did Australian investors right at the moment from what you're seeing on your end when it comes to balanced portfolios, have we spread out wings and investing internationally across all asset classes, as you said? Or are we all in on NAB? And that's it.

Gemma Dale: [00:17:01] Oh, I love your point about accessibility now because the world is so different. When I first started, the choices were so limited you generally had to go with a professional fund manager if you wanted to access. Even really the ASX 200, like even online broking, was in its infancy and you would have to ring up a broker in the Yellow Pages. And it was all very shameful, particularly if you were an 18 year old girl, which I was like, really bad, you know, and you'd pay them $75 to place a trade for you like ridiculous things. So access is extraordinary now, and you also have, like high quality research. You have tools that give you real time trading prices, which didn't exist in five years ago. You've got all this amazing stuff and then you've got products where you can just go and buy it, which is amazing. So I would love to think that everyone's just taken advantage of all of that and done amazing things. Unfortunately, I went and looked at our data, and it's not as good as you would hope if I'm honest with you. So now I've tried. We have like literally hundreds of thousands of investors and we don't necessarily see everything that has. That's probably quite important to note. So they may have other stuff. Yeah, yeah. But the average individual investor. So we have self-managed super funds and companies and trusts and stuff with it slightly different. But the average individual has about five and a half individual assets in their portfolio. Which is maybe not. What a sort of person who's studied diversification would recommend that you have. Yeah, as I said, they may have stuff outside, but that is you're probably not going to have two online brokers, so you're probably not going to have another parcel of shares somewhere else. I think 

Alec: [00:18:39] I have for 

Bryce: [00:18:42] at least three here. 

Gemma Dale: [00:18:44] Okay, so you have in assets with all of them? Yeah, yeah. Do you? you guys are mental. I just 

Bryce: [00:18:51] I am consolidating there 

Gemma Dale: [00:18:52] to be good. I like to keep my paperwork together. Yeah, it's so funny. 

Alec: [00:18:56] There's no cost to open another one and better offers. Keep coming along. And then there's 

Gemma Dale: [00:19:01] you don't transfer your 

Alec: [00:19:02] paper based forms as 

Gemma Dale: [00:19:06] I'm learning something today. OK, so let's assume everyone's got three brokers. We can multiply. Everyone's got 15 assets on average, six in half. That's too funny, we will assume, because our investor base is a little 

Bryce: [00:19:19] older and a little bit less likely to do 

Gemma Dale: [00:19:23] that. This is not too far off. Self-managed super funds are interesting because they have 12, so the individuals have five and a half a joint have like six and like husband of more. I've type situations, I have six assets on average, and even if we include ETFs and likes and diversified products, so that's great. Like you can place one trade and you've got 200 or whatever it is in in terms of individual companies. Then nine percent about total asset. Wow. So nine out of 10 of the other asset are individual stocks. 

Alec: [00:19:56] That's really surprising. 

Gemma Dale: [00:19:57] Yeah, yeah. Admittedly, that's massive compared to two years ago when they were four percent. Wow. So I don't think we should continue to assume that level of growth, but we're only about four percent of turnover. Wow. Couple of years ago, it like, is really small and it's mostly young people driving it. Young people are twice as likely to hold ETFs and twice like their bottom. And the other thing that I do love because last year was all about Robinhood idiots blowing up their cash and making markets crazy or whatever. We were getting all of this. I was talking to journalists every day like, Oh, are you seeing the same stuff is saying this was a terrible GameStop? And we just didn't see it at all. So young people on our platform. And admittedly, we're line to bank. Maybe we just get more conservative people by definition, but they hold twice as long as older people. They're far more likely to buy diversified assets. They're far more conservative in their behaviour than you would ever expect. So we see really sensible trading. 

Alec: [00:20:51] I love to say that because the reputation that Gen Z and millennial traders get is completely 

Bryce: [00:20:57] the cowboys and cowgirls. 

Alec: [00:20:58] Yeah, the more brokers we speak to, the more they say that, oh, good young people are actually investing incredibly sensibly. 

Bryce: [00:21:04] No thanks to Equity Mates. 

Alec: [00:21:10] Gemma, you mentioned there for people that have studied diversification and might not think that five stocks is optimal. I'm going to assume you have studied diversification. What does the research suggest in terms of optimal balance? 

Gemma Dale: [00:21:23] Most important is what I did actually study was fund manager performance, which was quite funny. So quite a long time ago. Whether or not fund managers were likely to outperform the index and the time period I looked at, there was one in Australia who did it. And if I'd moved my time period by two years, they wouldn't have either. So I learnt a lot about that was quite educational, which is good when you're at uni, should probably do educational things. Yeah. So looking at diversification, there's a lot of different pieces of research on this, and it's worth noting they're all historical, right? You can't predict the future. So they always look backwards and go over that time period. This is what you would have needed to hold in order to minimise the volatility in your portfolios and minimise the crazy ups and downs and maximise or optimise your return as best you can, given that sort of volatility. We're getting rid of jargon. Good job done. So by trying to get a better return and less downside risk, less loss, right? So the estimates are between 10 and 25. They say there is diminishing value after 10, so you get to 10. So 10 is great. 15 is better, but not a lot better. And then 20 is better, but not a lot, lot better and so on. So if you can get to 10, I think that's excellent, particularly for a young person. Is building a portfolio. Getting to 10 is pretty impressive. So long as you are looking at different sectors and different types, 

Alec: [00:23:00] I think we should just clarify when we're saying, get to 10, we're talking individual stocks here. That's not 10, eight, 

Gemma Dale: [00:23:06] 10 ETFs is going to give you quite an extraordinary. 

Bryce: [00:23:11] Yes, you just buy the say all well, if you're going to do that. Yeah, I have a question around around building a portfolio and timing Gemma. But before we do, we'll just take a quick break to hear from our sponsors. So, Gemma, one question that often comes through our community online and I feel that causes a bit of angst and stress is the speed at which you need to build diversification in a portfolio. You know, so you just starting out, you have $2000 and people will often ask the question, you know, should I be putting $100 if I can buy fractional across 10 different stocks? So I get there right now? Should I be buying one ATF every five months and building it that way? I know there's no right answer, but like for a beginner investor stressed about getting to that 10 number or whatever it may be. How would you sort of advise on that? 

Gemma Dale: [00:24:03] Probably the first thing is clearly based on our data, very few people get there 

Bryce: [00:24:07] OK, so don't panic you and everybody averages five and they say, 10, you're OK, you're right on time. 

Gemma Dale: [00:24:18] You know, average investor age is not 25. So you do have time. I think that's really important. Like don't panic building in portfolio, particularly when you're young, is it's a long term game. You put your money in when you've got the money to put in, you don't chase it. I think also what's interesting is we get a lot of questions and I'm sure you do about market timing. Yeah, all the time. So I do it now, should I? I had a guy come to me and go, I've done super well because I bought at the absolute low last year, and here's what I bought. Should I sell it all and wait for another dip? I was like, You can, but I can't promise you when it's going to come God, OK? It's fabulous that people have it in mind. I think that's amazing, right? That they understand investing well enough to even have that as a goal is fantastic because it's not true of everybody. Clearly. So that's fantastic. Your timeframe depends on your cash flow, right? And how long it takes you to be able to get there. If it took you a year, go right. If it takes you two years. Right, whatever, it will take time. I think also markets have moved so much in the last two years, you know, to three weeks to full 30 percent, and it's taken a year to grind its way back in and now sitting in Taiz and jumping around all over the place like it's quite extraordinary. What markets do? If you need to take time, take time. Don't put yourself under pressure. 

Bryce: [00:25:41] I think that's nice. Yeah, I think that's a really good answer is just don't stress about it. 

Alec: [00:25:46] Yeah, yeah. And you're doing better than a lot of people that aren't thinking about it at all. 

Gemma Dale: [00:25:50] Yeah. Oh, amazing. The fact that so many young people want to invest now is just amazing to me. And as you say, you talk about the power of the stock market. I just think about the power of compounding in general, like you are investing regularly, vastly better off than the average person, even though all the baby boomers got cheap housing. All right, 

Alec: [00:26:10] let's talk about that. Let's not talk about it. As my parents always say, the interest rates are a lot higher.

Bryce: [00:26:15] Oh yeah. But when you look at them now, look at them.

Alec: [00:26:19] Now, let's keep on the how do we actually build balance train of thought. So Bryce just ask the question about someone who's early in their journey without a lot of money. You know, as we go on our investing journey, as we accumulate more money, as hopefully we earn more from our jobs and we can put more into the market. Balance is important and we've got to keep balance in mind. So what are some of the, I guess, the tips or rules of thumb? Obviously, you can't give specific financial advice, but what are some things we should be thinking about for throughout our investing journey? 

Gemma Dale: [00:26:50] I think one of the hardest challenges with diversification is when you do hit the jackpot with one stock 

Bryce: [00:26:56] and say, OK, 

Gemma Dale: [00:26:59] that's money. So you pick the Afterpay at full box, right? Let's say you do that. So is the best example because everyone knows it. 

Alec: [00:27:05] Bryce would like me to tell you he picked it at two dollars. 

Gemma Dale: [00:27:08] Actually, that's amazing. Well done. I picked the absolute low of the market last year. Absolutely. Unfortunately, it was about one percent of my total investment value, the winner, you know, that day. But I was still like, Look at me. I have friends who are fund managers and they will bring you on. As a trader, I was like, apart from the other many thousands of days I place trades are not enough for us. You always got to have your one win, right? So you pick that one thing and it goes to the Moon and you feel like a champion. But now you have a portfolio that is like $1000 of this and $1000 of this, $1000 of this $1000 and twenty four thousand dollars of that. And that's really hard. This is where I think your research and your conviction matter a lot like the research you did to buy this stock. Have you continued to think about what its prospects look like? Has anything changed? Do you still believe in it passionately or are you just happy you were on the ride? And now you don't really know what the future looks like? It's really hard. I find it really difficult, and portfolios get out of whack all the time, particularly if you've only got a relatively small number of stocks. So one piece of not advice that I mentioned, but one thing that I do think super valuable is. We tend to cut our winners early. That's a habit I have because I panic and so but you record our winners early and we we don't cut our losses early enough. And I think that's quite useful to keep in mind. But then you don't want to keep chasing that one thing. So you can always take a little bit off the top. So let's say you got 25 grand in one thing and 10 grand and everything else. You can always take $5000 off the table and put it into something else worth thinking, though. Do I have any other good ideas? Like, is there anything else I do want to put it into? If you don't know, we get this a lot. It's kind of like, I want to sell that my great what do you want to do with it? I think we'll come up with another idea first, because cash is a really bad idea right now. So your cash sucks. Are you going to answer? 

Alec: [00:29:08] I think that point of letting your winners run is a really important one, because retail investors don't have a lot of advantages over fund managers. Time Horizon is a big one. But another big one is that they can let their portfolios get out of whack. Cathie Wood over in the U.S., one of the most successful fund managers of the last few years, is super bullish on Tesla. But she has to keep selling Tesla shares because only 10 percent of her fund can be allocated to Tesla as retail investors. We don't have those rules, no looking over our shoulder, and we can let winners run and to arbitrarily cut them short, I feel, is letting yourself down. 

Gemma Dale: [00:29:45] Yeah. And I'm like, I'm guilty of that all the time. So it's a challenge to go. Look, we had a heap of people selling Afterpay at 70 and 80 bucks that were like, it just cannot keep going higher. Hmm. But then a lot of people who didn't sell at 160 because it like it's going to the Moon, just keep going to a thousand. So, you know, we're never going to get it perfectly right. All of those people made a lot of money like they all did extremely well. The other thing is, don't kick yourself for not getting it perfectly right like nobody does. No one gets a perfectly right all the time, and we all have a habit of hanging on to one number or another number. Like, Why didn't I buy more of that? Yeah, yeah. 

Bryce: [00:30:22] Yeah, you did that. Well, why didn't I sell you? 

Gemma Dale: [00:30:25] Yeah. So you hang on to these numbers and they're arbitrary, and it's worth noting as well. Like it's often a split second in time. Like a saying that Afterpay went $8 and one cent last year, you probably had twenty two seconds to pick it at that price. It was not a day. It was second. Yeah. You know, so don't take yourself too hard on you. There's a moment in time. 

Bryce: [00:30:44] Yeah. So Jaime, you've mentioned things like geography, asset classes, and then that led us to sort of discuss that you can get access to those sorts of, you know, diversification profiles through the ASX. I over talk us through some of the ASX listed options that, you know, if you're starting out and thinking about balance that you can access 

Alec: [00:31:04] or if you've just made a heap of money on Afterpay and this is the very first time you're thinking about Dollars, 

Gemma Dale: [00:31:12] it is amazing what you can get now for next to nothing that just gives you incredible access. So I'll start with ETFs because they're really well understood and widely known about now, which is great. So people are not going, what is one of those HFT is, again, do they know what they are? So it's an exchange traded fund. Funds managed funds have been around for ever, but exchange traded funds are broadly indexed based. So you're not paying professional management fees. You're paying 15 pips, not charging point one, five per cent, right? Very, very little for this, and you might be paying nine basis point one point nine per cent for someone to track the market for you. The market you choose is up to you. There's an extraordinary range of them out there for you now, so you might want to follow the Nasdaq, the Footsie, the S&P 500, whatever it might be. And that's a matter of going. The S&P 500 is actually a really interesting one in that is the US is the largest and deepest and most liquid market in the world. That's the top 500 companies in the US. It's incredible. You can go, I'm going to get Microsoft and Facebook and Amazon and Google and all the other things and Tesla now. So Tesla was only added to the index. You guys know this, but I will note Tesla was only added to the index sort of around the beginning of this year, and it came in in the top 10 because it wasn't profitable for a long time. And S&P, the guys who run the index were like, not gonna make any profits, you know? Yeah, that's just speculation, right? You might be profitable one day. You have access to all of those companies with one trade, and you will get a fairly consistent return relative to buying any one of those individual companies, which might be quite volatile. So a lot of people start with the S&P 500. I will say, though, for our investors, they start with the ASX. They start with buying the ASX 200. 

Alec: [00:33:10] Yeah, that's not surprising. I mean, it's what we know. Yeah, companies we know very well. Traditionally, it was the companies we know these days. We probably use more products and services from the US companies. 

Gemma Dale: [00:33:19] Yeah, I I think that's super interesting because 15 years ago, if I. Talked about investing in the U.S. and we say Wal-Mart and J.P. Morgan and all this stuff and people will be like, I am loosely familiar with that. I really know what you're talking about. You're like, Isn't it fascinating that this thing happened and it would be a unique inside, whereas now people are like, Oh yes, I'll just look better talking to you. Yeah. There's nothing unique about us products and services anymore. I have them in your pocket and, you know, so you are accessing the products and services you use every day. You can also access the Chinese tech companies, which are a bit more of a complex proposition at the moment, but you can access this incredible range of different things. So ETFs are amazing. You can also go full, professionally managed products, and they are across all the asset classes so you can go for professionally managed fixed income. For example, using a listed ETF that call so actively managed fund or an exchange traded managed fund. You pay more for them because they've got a professional manager running them, but they can give you access to all sorts of stuff, infrastructure and all sorts of things. 

Alec: [00:34:21] So Gemma, as well as all these ETFs that track, you know, a certain market or a, you know, a certain theme, there's also ETFs that track everything. There's an MSCI All World index that is just every stock in the world, basically. Oh, there's also products that are multi asset. So they'll have a little bit of property, a little bit of fixed income, a little bit of stocks if I want to achieve balance in my portfolio. Is it enough just to buy one of those ETFs that track everything or everything in one asset class? 

Gemma Dale: [00:34:53] So I'm going to give you an answer that is probably very unpopular in in parts of my industry, which is you can do that. You're going to get access to literally thousands of underlying assets like thousands because you're going to get 500 companies in the US, just in the S&P 500 bit of your MSCI plus all the other geographies and everything else, you're going to get dozens of underlying assets. It's an easy decision, which is good. Sometimes easy is best because if it's too hard, you don't do anything and that is much worse than doing something not perfect. However, you want to have a good look at what's underneath it like. MSCI is really interesting in that China's got a tiny sleeve for the world's biggest population, a tiny slaving for a while, there was nothing. So you get people buying it, thinking that they're getting access to Tencent and by doing whatever, if the dual listed fine or if they're listed in Hong Kong, fine. But a lot of people were thinking they were getting and they were thinking they're getting access to Tesla, but it wasn't in the S&P 500 at that time. So don't go into these blindly thinking that you're getting everything. You might not be getting the one thing that you actually were a little bit attached to getting. You've got to have a bit of a look at it first. 

Alec: [00:36:02] Correct me if I'm wrong, but isn't the in the MSCI World in the index, the US is like 70 percent of the index, 

Gemma Dale: [00:36:09] so there's two riskier options. I can't remember which should go look it up, but yeah, no, you're absolutely correct, right? So you have to look at how these things are constructed because the US tends to dominate. If you buy the S&P 500 and the numbers may have changed. I haven't looked at it in the last couple of months, but the top five companies comprise 25 percent of the S&P 500. So Microsoft, Amazon, Google, you know, you got five percent each. And then there's really long tail of other stuff, but tiny fractions. So ETFs are amazing, but they are weighted by size, and sometimes you're buying things at their absolute peak or you're buying stuff you're not that interested in. And they are and they dominate so, so long as you understand that fine. But if you haven't looked at it closely, why I was going to buy that thing, it helps to understand. 

Alec: [00:36:59] And I think that's an important point where if you're buying things, ETFs that have us tech in them, basically, so you're going to be exposed to the same same companies in different products. So if you're buying an MSCI World Index and S&P 500 index and the Nasdaq 100 index, yeah, you're basically exposed to five stocks. 

Gemma Dale: [00:37:19] You got to buckle up, Microsoft. Yeah, yeah, absolutely. And so there is a tiny bit of work that needs to go into this. But go into your trading platform, look up the code of what you're looking for. You type in the name. Don't worry about the code. Just dive in the name. It'll come up. There's a PDF, it's two pages. It'll have that pie chart I was talking about and it will show you broadly what's in it, and it'll have the top 10 or 20 stocks so you can pick up this stuff super quickly. You know, it's not difficult to find. It's not difficult information to find. It's very accessible. It only takes two minutes. But if you don't know, you can get very big way to get an unbalanced portfolio unintentionally. And you can also end up with stuff that you're not necessarily keen on. 

Bryce: [00:38:01] So you have to close out today. We thought we'd have a bit of a game. It's called balanced or unbalanced, and we're going to throw a couple of portfolio examples to you. And we just love your non advice on whether or not they balanced or unbalanced and perhaps briefly, why that's the case. So let's start with 50. Percent in Tesla, 50 percent in Apple. 

Gemma Dale: [00:38:28] I'm going unbalanced. Nice. If nothing else, you got a lot of currency exposure, which is another thing that people certainly think about. The dollar can kill you. 

Alec: [00:38:37] Yes, that's probably worth defining what you mean by that currency exposure. 

Gemma Dale: [00:38:42] You have Australian Dollars. You are buying companies that earn revenue and a price in US dollars. So even if the company goes up, if the currency of the Australian dollar is going against you or you bought at a time when the the dollar was low and so on, then the price movement is related to what the dollar does Australian and us, as well as what the company is doing. The company Bryce. So you've got to factor that in. You can hedge, which is basically where you pay someone to take that risk off the table for you. But if you're just buying those two stocks, you haven't hedged. 

Bryce: [00:39:15] Yeah, yeah. 

Alec: [00:39:16] Now this one might be a bit of a softball, but I'll take it balanced or unbalanced. A portfolio evenly spread across a global bond ETF, a global real estate ETF and a global stocks ETF. 

Gemma Dale: [00:39:29] Look, technically that's balanced like it's balanced if it's right for you is a totally different question. Okay, yeah, go ahead. That would not be good for me at all. I'd be like, What am I doing with all these bond funds getting nothing 

Bryce: [00:39:44] balanced or unbalanced? A 100 percent in the MSCI All World Index ETF 

Gemma Dale: [00:39:49] technically balanced, but I'm really glad we had the conversation did a minute ago because you are hugely overweight us taking a couple of other things that might not be 

Alec: [00:39:57] your perfect balance on balance. Again, I feel like I'm just so I feel like Bryce may be. They know 50 percent government bonds, 50 percent gold or half. 

Gemma Dale: [00:40:12] I am assuming that's a super conservative person, right? If you're an incredibly conservative person, that might be the right portfolio for you. But it ain't balanced in 

Bryce: [00:40:23] balanced or unbalanced. 70 per cent crypto 10 per cent cash, 10 percent bonds, 10 percent stocks. 

Gemma Dale: [00:40:30] I know many people out there like that is the perfect place. Yeah, I'm going with on best. I was saying this to you guys before below. Some of the most intelligent people I know don't believe that cryptos. An asset class doesn't mean you shouldn't have any but including it in your portfolio as an asset is a different thing. Yeah. Hmm. 

Alec: [00:40:52] Balanced or unbalanced? Twenty five percent Australian stocks. Twenty five percent international stocks. Fifty percent Your mortgage now. 

Gemma Dale: [00:41:01] So technically your mortgage is not an asset. Yeah, this is really interesting. So I'm assuming that there is a property attached to the mortgage. Yes.

Alec: [00:41:08] Yeah, you know, that is a tough to the mortgage. Let's, let's say 50 percent your your home. 

Gemma Dale: [00:41:17] Do you know what that is? How people live? Right. So for most people, I personally and I, when I bought my first property, was before things went mental. So I'm very lucky, not smart, just lucky. My portfolio went from all equities to zero equities, all property in a mortgage because to me and this is when rates were like seven per percent, maintaining both was not a good financial decision. I wanted that mortgage gone and then I would invest later. So I think that's a realistic portfolio at various stages in your life. And the fact that you have diversified away from just property is amazing. If you have an equities portfolio that's worth as much as your mortgage, you're doing really well. 

Alec: [00:41:56] Yeah, I was going to say probably the more realistic question is balanced or unbalanced. All of your net worth plus 30 years worth of debt in a residential property. 

Gemma Dale: [00:42:05] Yeah. At current rates, you are better off having money in equities and a larger mortgage on a purely tax basis, not necessarily on a financially secure basis, if that makes sense. One thing I was I we have a financial economist who does behavioural stuff at NAB, and they've done a heap of research on financial well-being, like what actually matters emotionally to people and owning your own home is number one. And it doesn't matter how big your mortgage is, that sense of security from owning a home dramatically improves your wellbeing. So having massive mortgages looks really bad and having a house is so expensive and all of those things. But there's a lot to be said for it. Yeah, so it's painful. 

Alec: [00:42:52] It feels like you just rubbing it in one day. Bryce. 

Bryce: [00:42:58] I don't feel insecure about it, 

Alec: [00:43:00] but according to Gemma, will be a lot happier if we. I don't 

Bryce: [00:43:04] think so. But anyway, anyway, 

Gemma Dale: [00:43:06] we should have a look at that data and go, what age group were they asking? Because it might have been married people with kids who don't want to be in rentals?

Alec: [00:43:12] I get it as well. It's done up through house inspections with your landlord. That alone 

Bryce: [00:43:16] with my job, you 

Gemma Dale: [00:43:18] don't have to have flatmates. That made me a little happy. 

Bryce: [00:43:20] It's been an absolute pleasure to have. You on I think there's been a lot of ground Covid and we've ticked a lot of boxes when it comes to building a balanced portfolio, and I know there are a lot of questions that have been answered from our community. So thank you very much. It's been great to have you as part of the ASX investor week here on Equity Mates. A reminder that if you want to check out Gemma's presentation online, head to ASX dot com today you slash investor Dash Day. We'll have that link in the show notes and a reminder that you can check out all of our episodes on Get Started Investing feed and over on the Equity Mates feed with some of the other amazing guests. But Gemma, thank you very much. 

Gemma Dale: [00:43:58] Thanks so much, guys.