Can we convince Leah to start investing?

Bryce: [00:00:31] Welcome to Get Started Investing a podcast where we attempt to answer the most common money and investing questions from you guys, the community. If you've just joined us for the first time, a massive welcome and we strongly recommend that you scroll up and start at episode one. However, if you're feeling brave, of course, let's get going. My name is Bryce and as always, I'm joined by the equity buddy, Ren. How are you? 

Alec: [00:00:52] I'm very good, Bryce. Excited for this episode. Something a little bit different for us. Our producer, Sascha, has dubbed in one of her mates and asked us to convince her mate to start investing. 

Bryce: [00:01:05] Yes. This episode we jump on a call with Leah. She'll give you a bit of intro and background on herself when we get on the call. But yes, the whole purpose of this was to give her a bit more confidence, I think, to get started on her investing journey. And there are a lot of things in this conversation that I think many people in the get started community or perhaps your friends or family would be feeling as well.

Alec: [00:01:27] So yeah, if you've got a mate that needs to be convinced to invest, send him this episode or flick us an email and dob in your mate and maybe we'll get, we'll get them on the line. Um, but I think you know what Leah speaks about here of feelings that I had that I think most people had when they were starting their investing journey. So we all sort of have to figure it out ourselves because it's not taught at school, even though it should be. Yes. And until it is taught at school will all work through it together. 

Bryce: [00:01:57] Outside of school. Now, we must say that while we are licensed, we're not aware of your personal circumstances or layers. So any information on this show is for entertainment or education purposes. Any advice is general advice. And with that said, let's crack in. Alrighty. Will, Leah, thank you for joining us here at Get Started Investing. We love speaking to our community members. So just to set the scene, I guess. Can you just tell us a bit about who you are, your current situation and then we're going to get stuck in and convince you to invest. 

Leah: [00:02:30] In Leah I'm 36. I have two kids. I live in Canberra by day. I work in arts administration. By night. I dabble in performing music and I think we are in a place where time is tight. And so the idea of investing is wonderful, but at the same time the amount of information is a bit overwhelming. So looking forward to maybe being convinced of an easy way to do this. 

Bryce: [00:02:56] Well, first off, I love Canberra. Ren and I busted out uni down there. So yeah, it has a soft spot in my heart. So I guess to start Leah a barrier that I think a lot of people face value investing at all at the moment. 

Leah: [00:03:09] No, we own our household. We have a mortgage at the bank. It's like that in terms of any kind of foreclosures or anything like that. Nothing.

Alec: [00:03:18] And the big barriers are just sort of the time it would take to get started. And having the money to invest is out there. The two big ones. 

Leah: [00:03:28] Yeah. Look, I think it's interesting to think about and I think most people would understand that investing is a good thing to do. But for us, where we're at in our lives, we are both time poor and a little bit financially poor as well. Not things are all fine, but the idea of being too risky with money, for example, is a little bit concerning just because, like I say, we have two children and we want to make sure that their futures are really secure. So we want to do it like making sound financial decisions. 

Alec: [00:04:00] Well, I think I think the first thing to note is that while you may not realise that you already are a stock market investor and that's with your super and I think I think that so many people like we overlook super, we don't think about it because it's just like so far down the line, you know, it's a kind of a, it will sort it out later, but you know, there's no more efficient way to invest than super and then salary sacrificing more into super if you can, just because of the tax benefits. Do you think about your super or is it like most people, like myself included, you just sign up with your employer, suggested one and you just roll from there. 

Leah: [00:04:39] I do have an employer super that is from way back, but it's only like I've only stayed with that one because I've spent a bit of time looking at the various super funds that are offered to me. And this one seems to be, you know, it seems to be best bankable in a lot of a lot of different spaces. So we like both my partner and my husband and I have from time to time contributed more into our super through salary sacrifice. At this point, I'd be interested in your feedback. We feel it is a better use of our investment to pay back our mortgage a little quicker than we otherwise would rather than putting more money into super. 

Bryce: [00:05:22] That's the age old debate that we I think we get that question five times a week from different members of the community. Should I invest or pay off my mortgage? Should I put more in super or pay off my mortgage? We've had some of the best advisers from the country in the studio answering that question. Unfortunately, that doesn't seem to be a right answer to that. It's very much sort of based on your own circumstance. I think the ideal scenario is that you can do both, but obviously resources are finite. 

Alec: [00:05:54] There's like two ways that you approach it. There's like a mathematical approach and a psychological approach. And the mathematical approach is based on expected returns. So if you're putting spare money into an offset account and then you're saving the interest, that might be I don't know what mortgages would be, but, you know, maybe like 6% is what you're saving. And so that's your expected return If you put that money in your offset account and then you compare that to your expected return by investing it. And then, you know, if you're going to put it in a savings account and get four and a half percent interest, you'd be better off putting it in your mortgage offset account over the long term. The stock market has averaged more than 6%. So you would say that the expected return over the long term is better putting it in the share market. But you know, it is at the end of the day, a personal choice. And that gets to the second way when it comes to thinking about debt, which is the psychological one. And for so many people, it's like I just got to pay this debt down, and then once I pay it down, I'll be good. And that's completely fair. I think the middle ground is the right ground. You don't have to swing to either extreme. And it's like you can start investing in the stock market from a dollar and you can sort of like slowly grow that and at the same time put money into the offset account because you know what you don't want you don't want to be is spent 30 years paying off your mortgage. You get to, you know, late in your working life and then you've got a fully paid off house, but no liquid investments. And then it's like, oh, I want to retire early or I need to fund my kids uni or I want to, you know, if there's a health emergency that I've got to deal with and all of a sudden you're asset rich but cash poor. Because if you need to free up cash, you got to sell your house. That's less than ideal. So I think that middle ground is where you're paying off your mortgage, reducing the interest you're paying, but also slowly building some liquid investments in the stock market. So you can call on them if you need them. Is the sort of that right middle ground approach. 

Bryce: [00:07:58] One of the things that we talk about on the show and a lot of the community do is before they even start the investment sort of process, you set up the emergency fund that's sort of like cash buffer. So you do have that level of security, I guess, to your point around not feeling like putting money in, that's risky and you're going to lose it, having that sort of emergency fund there. Is that something you guys do? 

Leah: [00:08:18] Yes. Yeah, that is something we do. There's not a huge amount in it that 's enough to cover a couple of months of salary. So there's space there. For that reason. I think both of us are quite convinced that just having a rainy day fund is quite valuable or quite necessary for the space that we're in. 

Bryce: [00:08:38] Good thing with interest rates the way they are at the moment, the returns on those at five and a half percent or in savings is quite good.

Leah: [00:08:46] I've had many people say the good thing about interest rates at the moment.

Alec: [00:08:51] I know yeah yeah yeah. 

Bryce: [00:08:53] Well yeah I mean compared to where they were on savings accounts not only 12 months ago where you were barely getting a 1% in your interest account, now sitting large chunks of cash in savings accounts that are spitting out five and a half percent. Like that's not that bad in terms of the return. 

Alec: [00:09:12] So let's get to investing, because it is for so many people that there's perceptions around risk and perceptions around how much you need to get started and then the time you need to commit to it. Um, it's fortuitous timing because we just wrote a book on exactly this, so. Well, we'll send you or send you a copy afterwards, but shameless plug play. So don't stress, just invest wherever books are sold. But what we really wanted to do with that was lay out the absolute simplest way to invest, how you can automate it and why it's enough. There's heaps of people out there that want to get the benefits of investing, but don't want to commit a lot of time or money to it. And so that's what we really tried to do with this book. And so I guess before we get into like the how, I think if we just start with why investing. Is an important part of, I guess, building wealth and setting yourself up for retirement. The you know, we mentioned that having liquid investments early, like if you want to retire early or, you know, do anything, if you want to have flexibility in your life, owning a house is great, but it doesn't give you that flexibility to draw down your investments. And I think it's a super preservation age. I always get this wrong. Um, is it 65? Looking at the price, but I think you always get it. 

Bryce: [00:10:33] Last time we said 65, we got crucified for it. 

Alec: [00:10:36] Yeah, well, it's, it's in the sixties and like, it's only going one way. It's only going up. You know, you don't want to have to pay extra tax if you want to draw on your super before you need it. So having just some investments in the share market that you can draw on when you're 59 or whatever, and you want to sort of work part time or, you know, I think is really important just to set yourself up and have choice. So that's number one. But number two is that historically over the long term, the returns on the share market have been a little bit better than property, depending on where you look and who you ask. But there's just like having that diversification away from all of that risk in one asset class. The growth in Canberra's been epic for the last ten years. But like there's this idea that Australian property has just gone up and overall it has. But like different parts of the country have done really well at different times and you just want to diversify the investments that you have because you know, the worse, the worst possible outcome is the kids leave home and you're ready to sell the house and realise some of the investment gain. But Canberra's in a downturn because there's been a couple of the public service and the universities aren't hiring and all of a sudden it's not a great time to own Canberra real estate. So I think like the one is like the flexibility you build into your life. And then too it's like diversification and de-risking your portfolio. 

Leah: [00:12:04] Yeah, look for sure. I absolutely agree. I think for us we're at a place where we've really only started this process in the last couple of years and so in a way the house is our first asset or is our first asset beyond asset super. And so the idea of taking some steps towards other investments, that type of thing is really really appealing. 

Alec: [00:12:30] Leah, we've been talking about you for a while, so let's take a quick break here. Then on the other side, let's get to the nuts and bolts of investing. Let's really crack into the how of it. Welcome back to Get started Investing. Today we are speaking to Leah. And Bryce, we have been given the task from our producer, Sascha of convincing Leah to start investing. 

Bryce: [00:12:59] So I guess to cut to the chase, the question that you had at the start is how to do it and what to do so that the feeling of being overwhelmed and not having enough time is one that doesn't stop you from getting in. And I think to Wren's point, the good news is that there are plenty of options available now to get start in the stock market from literally cents. And I think one of the biggest learnings that I've had from the community is that just by starting with, you know, $10 a week or 50 bucks a fortnight or whatever is enough to get you comfortable with what it would feel like to be putting money into the market. And so not product advice. But one very popular platform to get started is called Raise R A. I said, I'm not sure if you've heard about it, but it's a micro investing app where essentially every time you tap your card at Woollies or whatever it may be, say you or you go to buy a coffee and it's 3.50. Actually, coffee's about $3.50, they call it 550, call it 550. It will then take that additional $0.50 and rounded up to $6 and it'll take that $0.50 and invest it into a pre-made portfolio of assets that will give you exposure to Australian markets, international markets. It'll give you a little bit of cash, it'll give you a little bit of bonds as well. And you can go into the app and choose which portfolio you think is suitable for you. If you want one that's quite aggressive and going to deliver growth if you want one that's conservative. And whilst $0.50 doesn't sound like a lot, every time you tap that card, it's going to put a little bit in over time. And what you'll find is, you know, after two or three months you might only have a few tens or lo hundreds, but at least you'll be in there and understanding what it's like to be investing. And I think it's a really great gateway for a lot of people to get interested and invested in the markets. And then from there you can start building up that portfolio and contributing more than just your regular micro investing or round up. So that's just one sort of platform to look at, that is A-Z. 

Alec: [00:15:13] It's worth mentioning your two kids, if they, you know, raised their kids accounts, a lot of the a lot of the platforms now do kids accounts so they're not the only ones. But getting your kids started early getting them to understand how it all works. Just like the benefits of time are so profound when it comes to investing.

Bryce: [00:15:32] So and just to kind of play out, I think about how Alec and I do a lot of our investing because we I also surprisingly don't have a lot of time to spend researching individual stocks and those sorts of things. And I guess the nature of technology has allowed it. But something to consider is that we have our investments fully automated from the time that we're paid. So we get paid and then from our bank we transfer automatically into our broker platform. So there's a brokerage called Super Hero. You might have CommSec because you've got your banking with CBA. I'm not sure, but Super Hero is the one we use and then we tell super Hero every two weeks, make an investment into various exchange traded fund products. And what that does is you can do it at super low point 50 bucks a fortnight or whatever it may be. Whatever's comfortable. And what it does is main. It means you then don't have to think about it and you can just plug that away every fortnight for eternity and you wake up one day and you're like, I'm so glad I did that. And so we'll send you the book, because in the book it actually spells out how to do that process. And some of the specific products that you can buy that make it very easy to get a good global exposure to the stock market without having to do a whole heap of research. But again, that's just how we do the investment. And it's I think it's a way that a lot of people get over that fear of having to choose and feeling overwhelmed is by automating you get out of your own way. 

Alec: [00:17:06] But I think the last thing just on the time point, there's this idea and like I, I didn't grow up learning about the stock market, but like when I started reading about it, I had this idea that you needed to do all this deep research and choose an individual company and, you know, is Coles or Woollies going to do better, or which bank should I be choosing? And it's pretty overwhelming. But there are products that track the overall stock market, the stock market index and what Bryce was talking about with Rise earlier and then a lot of the investment products that we invest in, you might hear the term ETFs, um, really they just let you buy the overall stock market. With one transaction and there's a heap of research that's buying the overall stock market is a much better strategy than trying to pick stocks. You can be really confident that choosing an index just choosing one and just buying that and that's it. Just and automating it even. But just that's you just have to choose one and just keep buying it. That's enough. That's that's more than enough. And you don't have to make active decisions about when to buy just whatever you can afford when you get paid and just do it consistently. So you do have to make decisions about when you don't have to make decisions about what you just you just buy a little bit of everything. Like the analogy that we use is the fruit salad. Like in our parents day, they had to choose to buy a banana or an apple or a peach or whatever. These ETFs just let you buy the fruit salad and you get a slice of everything. And the beauty about these index ETFs is when companies do well. So you know companies. What's been some great Australian companies recently like Afterpay, emerges out of nowhere, takes the world by storm, it gets added to the index and you start to own it. And then as it grows, you're in more of it and you don't have to do anything. This is all taking care of it for you. But as companies get bigger, you own more of them. As other companies get smaller, you own less of them. And so by doing nothing and just owning a little bit of everything, you end up owning those few great companies. Um, and so the perception that I grew up with, with investing was you needed thousands of dollars, you needed to do all this research and make decisions about what companies to buy. And then you needed to be watching, like when you should sell and all of that stuff. But what I've learnt and what we really tried to share in the book was just like, start from a dollar, buy a little bit of everything and then get on with your life. 

Leah: [00:19:46] Yeah, right. I think that's really valuable advice. Honestly, I think I probably grew up with the same advice that, you know, you needed to know what you were doing and you needed a certain amount of stock investing. And it sounds like that has changed, which is great.

Alec: [00:20:03] Yeah. There's some really good platforms that have driven that change. So yeah, we've thrown a lot at you and you probably take some time to digest it, but any, any questions that immediately sort of pop up. 

Leah: [00:20:16] Yeah. Look, you raised something about it that counts and that's something that we do have in place, but just bank accounts at the moment. We put money into them for the kids when they turn 18, whatever, then it blows up. But I feel like there has to be a better model. Been sticking it in a savings account and waiting 18 years. That seems like there has to be a bit of a better choice than that. So I'd be interested to know if you think that there is. 

Alec: [00:20:42] I mean, I definitely think the there's a strong argument that we should start investing some of that money with the clear caveat that investing over like the share market over the long term has been a really great source of wealth creation. But as your timeline gets shorter and shorter, obviously the risk of the share market crashing gets more. And I think, you know, if you're putting money away for your kids with the idea that when they turn 18, they can get it and buy a car or pay for some uni up front, then it's, you know, then it might not be the right thing to invest it in the share market. It might make sense to put it in a high interest savings account or something a little bit less risky. But if this is the start of the, you know, lifelong investing journey and, you know, this is money that they're going to add to themselves as they start working and, you know, grow for decades to come, I think there is nothing more powerful than getting started in the share market early because your returns compound. But also that knowledge is really important. And, you know, Bryce can speak to that. His upbringing was splitting his pocket money into three different buckets and one of those buckets was investing and made his first investment when he was what, 8? 

Bryce: [00:21:59] Like primary school. 

Alec: [00:22:02] Like primary schools. And then fast, fast forward 20 odd years and now his plays an investing guru on a podcast. 

Leah: [00:22:11] How about that? Financial literacy. That's amazing. Yeah. 

Bryce: [00:22:15] Very fortunate. But the thing is, back even back then, what my parents were teaching me was exactly the same concept here, which was to make it as small as possible into something that is diversified across country and region and do it as much as possible. That's all they said to me to do. And as kids do, they never listen to their parents. And it took me until now to figure out what they were saying was right. 

Alec: [00:22:40] We look in the book and I can't remember the exact numbers, but we did this case study where if you just assume that. So over the long. Term, the stock market returns about 8% a year and that's an average, you know, some years it's 30%, some years it falls 20%. But over the long term, the average is 8% a year. If someone invests a consistent amount between the age 20 and 30 and then never invests again, and then we compare that to someone who starts later and starts investing when they're 30 and they both just earn, they're investing the same amount and they just earn that 8%. The person that invested for ten years between 20 and 30 will always be ahead of the person that starts investing when they're 30. Even if they keep investing for the rest of their lives, like even until they retire at 65 or whatever. There's just and that's just that's compounding like there's such a power in starting early. So like, the best thing you can do for your kids is teach them that because, you know, we're all idiots when we're in our teens and early twenties and we spend money and we get into credit card debt and it takes us to get to our thirties to wake up and be like, Damn it, there was an opportunity that we missed. So teaching them about this early, getting them started young, even if it's small, makes such a difference. 

Leah: [00:23:55] I really do like the idea of micro investing. I can say that that's something that we could apply to what we do quite easily and the rest I will take away and think about and just let you learn a bit more. 

Bryce: [00:24:09] Yeah, yeah, yeah. So we'll send the book through. I know there's a lot to think about and it's really just getting comfortable with your cash flow and then how that can translate to an automated investment strategy. Well, good luck with it all, Leah, send you the book. We do appreciate you taking the time to jump on. I know so many people listening will be or will hear your story and certainly relate to it and have taken something out of this convoy. So we do really appreciate your time. 

Leah: [00:24:35] Thank you. Appreciate it.