2022 in Review: Bryce and Ren’s Insights and Advice for the Future

Bryce: [00:00:31] Welcome to Get Started Investing podcast, where we can help you learn to invest in 15 minutes or less. Each episode we take one real world business story and apply a key investing lesson to help you build your investor toolkit. If you are joining us for the very first time, welcome. We strongly recommend that you scroll up and start at episode one. And just a reminder, we are not experts, we are not financial professionals. And while we are licenced, we are just here learning like you and do not take any advice from a podcast. Any advice is general advice only. 

Alec: [00:01:01] I think technically we are experts now. 

Bryce: [00:01:03] Why? Because we are licenced. 

Alec: [00:01:05] And we are technically financial professionals as. 

Bryce: [00:01:08] Well. My name is Bryce and you've just heard Ren chime in. Right? How are you going?

Alec: [00:01:12] Well, I'm very good, Bryce. I certainly don't feel like an expert and I certainly don't feel like a financial professional. But I do feel like a break. Yes, we're almost at the end of the year. 

Bryce: [00:01:22] Yes, we are. 

Alec: [00:01:23] What a year it's been. 

Bryce: [00:01:24] What a year it's been. It's been a massive year in markets, in equity, at Equity Mates Media. And today's the last episode of Get Started investing for 2022 before we have a break over Christmas. And then we will be back with a six part episode on All with a six part episode on Steps to Take to. 

Alec: [00:01:44] Now Equity Mates. You might have noticed that Bryce slipped a can in the first sentence of the introduction, and he just said a six part episode twice. We'll probably clean that up in the edit prices a little bit under the weather, but it is pushing through for the last episode of the year. But what he was trying to say is we're going to take a week off over Christmas. There'll be one week where we're not releasing anything and then we're coming with a six part summer series to set yourself up for 2023 New Year, new me, new bank account balance. 

Bryce: [00:02:14] It's not just investing. We're speaking personal finance, which I'm really excited about. I really enjoyed doing that series. So in the spirit of taking business stories, which we have been doing over the last few months here on Get Started Investing, we're going to do a bit of a wrap for 2022 to look at some of the news that moved markets. But then, more importantly, some of the lessons that you and I learnt this year and some actions that we can take away from it and then close out with some lessons from the Equity Mates and get started investing community.

Alec: [00:02:43] So let's do it. All right. So news that moved markets in 2022. 

Bryce: [00:02:48] Inflation, inflation, inflation. 

Alec: [00:02:50] Interest rates. 

Bryce: [00:02:51] interest rates. 

Alec: [00:02:53] Russia and Ukraine, Russia's invasion which then led to a lot of inflation, food price inflation, energy inflation. Next one we've got is energy price related. Yes, Putin really screwed up in 2022. So yeah, that's probably the headline of China's COVID zero policy. This slow moving property collapsed 18 months later and still got still going. 

Bryce: [00:03:15] Going but yeah. But hasn't quite collapsed.

Alec: [00:03:18] No. Yeah. It's amazing what I centrally planned and authoritarian government can do to prop up the world's largest asset class when they're motivated to do so.. Anyway, the Australian consumer and actually the American consumer, the Western consumer has held up pretty well. Yeah. Given everything that's going on, yeah. We are seeing record low unemployment in Australia, which is good and in America really low unemployment as well. But consumer spending has held up surprisingly well given how we all feel about the year. 

Bryce: [00:03:50] Yeah, and I mean, this Christmas is going to be a big indicator and on and on that. But I think a recent survey was pushed through the IFR that said something like 65% of people are intending to. This is actually a bad start but are intending to spend more than they have, i.e. going to credit. Yeah, that's spending.

Alec: [00:04:08] Don't do that. 

Bryce: [00:04:09] No, do not do that. It's just the willingness to spend is still there despite everything that's going on. 

Alec: [00:04:14] So yeah. And then the last point you've included here is house prices. Yeah, I. 

Bryce: [00:04:19] Don't think they've moved markets, but I think it's. 

Alec: [00:04:22] Moved housing. 

Bryce: [00:04:23] They moved housing markets. So things are cooling. 

Alec: [00:04:25] So latest data from CoreLogic. Let's see if I can remember it past three months down nationally down 3.5% and the past 12 months down 3.2%, maybe the other way around. But basically we've seen a big drop in the last three months. Sydney down 11% over the past 12 months. Every capital city bar one is down from their 2022 high. Do you know the one? 

Bryce: [00:04:52] I do. Adelaide. 

Alec: [00:04:53] No. Oh it's down for us 2022, but it's 2022 high was in July. [00:04:57][3.7]

Bryce: [00:04:57] Okay. 

Alec: [00:04:58] No Darwin. Every capital city outside of Darwin's all time high was in 2022 and it's come off from there. Darwin was 2014. Wow, hold on. I don't really know what the point of that stuff was to say so. 

Bryce: [00:05:14] Look, plenty of plenty has happened this year. There have been some positives. I mean the Australian market over the past 12 months has remained relatively flat against some of the major markets around the world, kept up by coal prices, iron ore prices and. The resources boom that we're continuing to see here in Australia. But look, you would be forgiven for thinking that it has been a pretty tough year for us as investors. 

Alec: [00:05:39] Can I make two more points on housing? Yeah. First of all, rent nationally is up 10%. Every category of rent is up meaningfully. So it's tough renting. And I actually move rentals this year and I can tell you it's tough renting at the moment. Yeah. The final point is that according to the RBA, 23% of Australian mortgages representing about $500 billion in mortgages are going to roll over from fixed to variable by the end of 2023, which means I'll instantly get like a 3 to 4% interest rate increase.

Bryce: [00:06:10] Yeah, but if you 3 to 4% interest rate increase, I think their numbers say that that actually then translates to like in some instances 80% increase in monthly payments. 

Alec: [00:06:20] Yeah. So that's monthly payments. 

Bryce: [00:06:22] Yeah. Yeah. Yeah. And in some instances for the worst hit, it's actually going to exceed 100%. 

Alec: [00:06:27] Yeah. So I think that's going to be the story to watch in 2023. Yeah. We're not going to be the last to talk about it anyway. That's a bit of doom and gloom. Yes. Christmas. Let's put a pin in that. 

Bryce: [00:06:37] Yes. So, look, there's a lot of jargon in there. If you've just joined us and you're trying to figure out what we're talking about, inflation, energy prices covered, blah, blah, blah. There is a lot of jargon, but the main thing is a lot's happened. Markets have moved generally in a downwards direction, but it shouldn't really change much for us. Ren in my opinion. Well, if this has happened at the end of the year, should we be doing anything different other than learn from this time? Really? 

Alec: [00:07:01] Yeah, I think this is maybe that been the toughest year we've had since doing the podcast. Yeah. So over the past five years, 2020 was rough, but over the full year, yeah, this was bad. 

Bryce: [00:07:14] 2020 had one rough month which was March. 

Alec: [00:07:17] Well for the stock market. But I mean in general it was a pretty tough year. Yeah, yeah, yeah. Covered, remember?

Bryce: [00:07:22] I still got it. 

Alec: [00:07:25] But I think what I've been really reminded of this year is the importance of having a strong core portfolio and just dollar cost averaging into the overall stock market 2020 and 2021. It was very easy to get carried away with trying to pick stocks because everything was going up. You felt like a genius and if you found an unprofitable tech name, chances are you can make a lot of money on it. If you found a cryptocurrency with a stupid name, chances are you can make a lot of money on it. But 2022 has been a reality check. And the reality is that investing consistently into a diversified portfolio is the way to invest, and everything else is just fun on the side. 

Bryce: [00:08:04] And if you have just joined us, we've done a number of episodes over the last couple of months around core and satellite portfolios and automation and how to settle all of that up. And to give a clear example in terms of numbers, if you had a core portfolio that gave you access to the American markets and the Australian markets, those components of your portfolio, well, the Australian market would be pretty even this year. 

Alec: [00:08:27] 12.1%, 2023 year to date, down four so.

Bryce: [00:08:31] So down 4%, the S&P 500 over in the states, the US market is down about 18% year to date. If you had just gone single stocks hard on the big tech stories of 21, 22, you could be down 60, 70%. So that is just a great reminder as to what the value of having a well-diversified core portfolio is. 

Alec: [00:08:52] But Bryce, if you invested in Deere, the agricultural equipment company would be up 20%. 

Bryce: [00:08:57] Yeah, so if you're interested in understanding what Ren is talking about, join us on the Equity Mates Investing podcast. All right. So is that one of your major lessons? Is the value and importance of a core pool, a strong core? 

Alec: [00:09:08] You don't have to these days with one transaction, with one buy, you can buy a little bit of everything and that I'm just reminded how important doing that is. 

Bryce: [00:09:18] A follow on from May would be the dollar cost averaging and it may seem boring when the bull markets are running, when everyone's making money and you just want to be putting money into those stocks that are at the Tesla's and the Afterpay. But now is the time when it does really shine. So I think an action from that is to listen to our episodes on dollar cost and set it up. Yeah, get into the habit of doing it.

Alec: [00:09:40] And for people who are new to the podcast, dollar cost averaging is simply not pulling all your money in cash, then buying it and trying to time the market. It's just consistently putting a little bit of money in every time you pay or every time you save up a little bit every time you can. 

Bryce: [00:09:56] Yeah, yeah.

Alec: [00:09:57] Another learning for me. Bryce only invests what you can afford to lose. The biggest way to lose as an investor is to borrow money, to invest, to invest with leverage, as they call it. I mean, it's probably coming into Christmas. It's probably a good lesson for spending as well. Only spend what you can afford. Yeah. Just don't go into debt in general. Yeah. Unless you're buying a house in Australia. 

Bryce: [00:10:21] In Sydney. Well anyway, yeah. 

Alec: [00:10:23] A lot of people borrowed money to invest in 2020 and 2021 and some would have done. Well, but markets turn. If you only invest what you can afford to lose, you're going to be okay when the market falls because the market inevitably falls and it has always recovered and then some. But you don't want to be caught out when the market falls if you've borrowed. 

Bryce: [00:10:47] Yeah. I mean, it's not even about borrowing money as well. It's just.

Alec: [00:10:51] True that. 

Bryce: [00:10:51] That's not even putting money in that when things do turn around and economies do start to slow. You're not going to call on that money. 

Alec: [00:10:59] It's actually a really good point. The most devastated person right now, Sydney house prices down 11% in the past 12 months. Imagine if you had been putting the money you were saving for a house deposit into the stock market and the stock market falls just as the property market falls and you felt like you were almost there, but because you'd invested a year now behind. 

Bryce: [00:11:21] Imagine how that feeling. Yeah. Not great. Another one from me, Ren, is that trends last longer than you might first think. And what I mean by this, it was easy to get carried away at the start of the year and feel like if you didn't jump into the market when Google fell 30%, when Apple fell, when Amazon fell, you're going to miss out. They're still down 35, 40%, 12 months, almost 12 months later. So it's just not panicking and keeping in mind that markets do play out over a longer period of time than you would generally expect other than what happened in 2020 in COVID, where history record breaking. But yeah. 

Alec: [00:12:01] Everything in the stock market is designed to make you feel like you need to do something. Prices are constantly changing, data points are constantly coming out, and a lot of people have an incentive to get you to do something. The exchanges themselves make money when you do something, the brokers make money when you do something, we make money when you download a podcast saying, say in the Australian Financial Review, make money when you click their articles. Everyone wants you to do something in this game, but things last longer than you think, and often the best strategy is just to do nothing. Yeah, stick with the plan, be consistent, but don't feel like you have to jump because something has happened. Yeah. Yeah. 

Bryce: [00:12:46] All right, then. We've got some lessons that have come from our community, so we're going to take a very quick break. And on the other side, we're going to have a chat about those. 

Alec: [00:12:54] Alright. Bryce, well to close out the year and get started investing, we've gone to our Facebook group and also to our forum community.equitymates.com to ask the Equity Mates and get started investing in the community. What they've learnt in a pretty tough 2022. So do want to kick us off. 

Bryce: [00:13:12] So Heath Malin has come in with a couple, but he's obviously been listing, which is great because he said a stock that's fallen 90% is also a stock that fell 80% then halved. Sounds very familiar, doesn't it? 

Alec: [00:13:22] Right. It does. It's got someone listening. 

Bryce: [00:13:26] Thank you for listening. 

Alec: [00:13:27] You feel like that was on equity? 

Bryce: [00:13:29] Yeah. Yeah, we've spoken about that. So great lesson there. And don't trust the RBA is another one that he said. We did have good. 

Alec: [00:13:36] Faith but you had a bit of bass. I anyway, so Lauren Burnett, hers was looking at your apps daily when you're a long term investor during a market downturn doesn't help your anxiety. I couldn't agree with that more and I would even add to that. Looking at your apps daily in a market upturn isn't good for your FOMO. 

Bryce: [00:14:02] Yeah, exactly. 

Alec: [00:14:03] Like just looking at your brokerage daily isn't good. Full start.

Bryce: [00:14:07] Delete your apps. 

Alec: [00:14:09] Well, no, because then you can't invest. 

Bryce: [00:14:11] Yeah. What do I invest for? I don't need any. 

Alec: [00:14:12] Try to delete your app. Don't delete your account. Important distinction. 

Bryce: [00:14:17] We've got one in from Jun Seok and he said that there are business cycles that will start and end. And to take advantage of those cycles, I think this is a great reminder as well that nothing lasts forever. Expect volatility in markets and particularly at a time like this. I'd be writing down how you're feeling because as Ren said, we haven't experienced something like this at least since doing the podcast. So a really good part of the business cycle is to understand how you feel. 

Alec: [00:14:41] In a prego said know very well why you're investing in the first place to fight the urge to sell at all. I think that's really important. Bryce Why are you investing?

Bryce: [00:14:51] Why am I investing financial freedom in 40 years time? 

Alec: [00:14:56] And I know. 

Bryce: [00:14:58] Chris Isles has put one in and this is his biggest lesson he learnt this year, he said not taking the opportunity to hit up FinFest. Absolutely next year. So thanks for that, Chris. Information released very soon on FinFest 2023. 

Alec: [00:15:15] Bryce, I want to close out with this one from William Foskett. I think that that might be a sock puppet account for you because his biggest lesson, my lesson, is that Bryce looks remarkably like Taylor Lautner and I'll put this on Instagram today, a side by side comparison. 

Bryce: [00:15:36] I was given my understanding of pop culture, I had to Google who this guy was. Okay so now I know. 

Alec: [00:15:46] I'm surprised Harriet hasn't said anything.

Bryce: [00:15:51] She hasn't. Anyway, I'll show you this and see what she says. 

Alec: [00:15:54] Yeah. 

Bryce: [00:15:55] But anyway, look, we appreciate some of our community writing in with their lessons. There were plenty more on the community forums such as Ren said community.equitymates.com to join the discussion. There are plenty of groups in there for all levels of investors, so while they're taking a break over summer, listening to our summer series, jump on and join the conversation. But again, that does bring us to the end of Get Started Investing for 2022. As you said, we have six episodes coming up over summer that tackle all things across personal finance from setting up an emergency account to setting up an automated core portfolio. Love it. It's been great. Thank you for the support from the community as well. We couldn't be doing this without you guys and have a safe and merry Christmas.