Don’t work for the company — instead, own the company

[00:00:31] Welcome to get started investing in this podcast. We cover all the basics. You need to start your investing journey. We unpack all the jargon and confusing bits here, your investing stories with the goal of making it less intimidating. And we want to have a good time along the way. My name is Bryce and as always I'm joined by my Equity Mates Ren. How's it going? [00:01:27][56.1]

Alec: [00:01:28] I'm very good Bryce we always have a good time along the way. [00:01:30][2.9]

Bryce: [00:01:31] That's true. [00:01:31][0.2]

Alec: [00:01:31] We do. That's Equity Mates has a few official policies. Maybe that should be our fourth one. [00:01:37][6.0]

Bryce: [00:01:38] Have fun. [00:01:38][0.2]

Alec: [00:01:38] Have a good time. [00:01:39][0.4]

Bryce: [00:01:39] Always, always. Have fun. So this episode as we are kicking off 2021 is a back to basics episode and we want to address part of the why, why investing is important, why we like to invest. So today we're going to be talking about rather than working for the company, why not just own the company? [00:01:59][20.1]

Alec: [00:02:00] Well, well, I just want to invest because I want more money. [00:02:03][3.7]

Bryce: [00:02:04] I mean, that's fair. There are a lot of reasons why investing is important. But also I think this is more about why investing is a good idea. [00:02:15][10.9]

Alec: [00:02:16] Well, yeah. Why investing in stocks. Yeah. Is is our preferred manner of investment. I mean, there's there's no wrong way to invest. Well, sorry, that's not true. You shouldn't invest in like, I don't know, six year old chocolate bars or something because I hold the value of that. Well, but for us, stocks are the investment choice that make the most sense to us. And a key reason why is because of what you're actually buying. [00:02:47][31.5]

Bryce: [00:02:48] Yeah, absolutely. Before we crack into that, though, just want to make mention that we now are doing a bit of a listener mailbag. Towards the end of the episode, you have the opportunity to go into our website and leave a voice message. We have one from Jemmy who has a great question around platforms and what you can do if they go down or how to change from different types of brokers. So stick around for that. But Ren, let's crack into it. [00:03:15][27.4]

Alec: [00:03:16] Yeah, let's do it. So I think let's set the same most people out there, you and I included, we make our money from a company. We we get a job with a company. You are very nervous. That first day you went for the interview, Woollies sweating your hair gel out of your head [00:03:34][18.2]

Bryce: [00:03:36] about it, [00:03:36][0.5]

Alec: [00:03:37] got the job. Still surprised you got the job. And then for the rest of most people's lives, it's you rely on the company that you work for to grow wealth. You every year you hope you get a performance review and you get a pay bump. If you're lucky enough to get bonuses that you were hoping that your boss puts, it puts in a good word for you when you get a good bonus. And for most people, you work for the company. Yeah, investing is the opportunity to flip that on its head and to actually own the company and have the people that work for the company work for you. I love that. I love that. [00:04:17][40.5]

Bryce: [00:04:17] The CEO of Woolworths Broadband, Duccio, a CEO of Coles Cain, [00:04:23][5.7]

Alec: [00:04:24] Stephen Davis, CEO of Equity Mates Alec. [00:04:26][2.6]

Bryce: [00:04:27] And I say investing gives you the opportunity to directly benefit from, I guess, that the decisions that they are making and the overall performance of the company. [00:04:39][12.1]

Alec: [00:04:40] Yeah. Now, there's probably two things that are important to establish at the outset. The first one is that when you're buying a share, you're not just buying a piece of paper. You're not buying a three letter ticket code. You're buying an ownership stake in that company. As a shareholder, you own whatever fraction of the company you own through the shares you have the right to vote in at annual general meetings and stuff like that. And the company pays you dividends as part of the profit it's making. It pays out to you as an owner of the company. So that's the first thing to establish that you're a part owner. The second thing to establish is that all company executives, CEOs, you know, CFO, those CEOs all the same, all the same, the same source is there in their all of their pay that they're they're incentivised to make money for shareholders, to make money for the owners of the company, you know. A lot of them, the base pay will change based on their shareholder return is often how you hear it, but importantly, all of their bonuses are tied or most of their bonuses are tied to shareholder returns. So the CEO, the executives, the decisions they're making often are driven by their personal financial incentives and their personal financial incentives is to make money by making shareholders money. So if you think about how that flows down in a company, the CEO wants to hit that bonus by, you know, giving their shareholders a return. And then all the decisions that they make in the company are centred around that. The new things that the new businesses they're investing in, the new people that they hire, the new countries that they try and sell their products in, whatever it is, even things like the businesses that they close or sell off. Their personal financial incentive is to do all of that, to make you as the shareholder money, so by just buying a share, you have the opportunity for these CEOs to to be incentivised to make you more money. That's not bad. It's not bad. It really it's actually really exciting. It flips it on the head from begging the CEO or whoever your boss is to to get a pay rise. Absolutely. [00:07:04][144.4]

Bryce: [00:07:05] So, OK, so we've established that. Yes. And of course, this is not to say that you can do this and not work full time like this is something you still [00:07:14][9.4]

Alec: [00:07:15] beg for the IRA to beg for [00:07:17][2.3]

Bryce: [00:07:17] the pay rise. But this is an opportunity to start, you know, developing wealth. But I think one of the most exciting parts Ren is that, OK, so I can invest in Woolley's if I'm working there and have have the boss work for me, so to speak. But if you look at the bigger picture, some of the greatest innovators in history have then commercialised their product or their business through the stock market. That's it. And that then gives you and I the every day investor access to some of the brightest, you know, game changing minds in the world from literally our bedroom. Yeah, yeah. Pretty phenomenal. [00:07:58][40.9]

Alec: [00:07:59] Yeah. I mean, don't just think about your boss working for you. Think of your dream boss, that boss that you have that poster of him or her up on your wall. You know that you have a down light shining on them. I think for Bryce or actually it might have been advantageous for you to make Molnár the Afterpay. So they might be or he might be up on your arse. [00:08:21][22.6]

Bryce: [00:08:22] Let me think about that when I come back to you, [00:08:23][1.7]

Alec: [00:08:24] Elon Musk, or whoever you think the best CEOs in the world are by investing in their companies, they are then incentivised to make you money. They're all everything that they do is in is based on that is getting their bonuses and making shareholders wealthier. And you can be one of those shareholders. And I mean, let's let's take a tour through history. Like, as you said, some of the greatest innovations in history have been commercialised by the stock market. So the telephone pretty big, pretty big. [00:09:02][38.6]

Bryce: [00:09:03] Big has done pretty well [00:09:05][1.9]

Alec: [00:09:05] outside top top 10. Yes. Alexander Graham Bell, the inventor of the telephone, commercialised through AT&T, which was what the company is called now. It was Bell Telephone back in the day, but the same company just with the number of name changes. But that was listed on the stock market. Electricity not back for 80 years old. Thomas Edison was the the inventor, the really commercialised electricity through General Electric. Again, his company publicly traded. You could have bought shares and J as Thomas Edison was doing his work, if we rip through a few more mass produced cars, Henry Ford, one of the pioneers of that, obviously, Ford publicly tradable home appliances, fridges, washing machines, dishwashers, really big. You got it. George Westinghouse came in that kicking around the same time as Thomas Edison. Westinghouse Electric was publicly traded recently. It's been acquired and is now a subsidiary of another company. But while George Westinghouse was doing his thing, you know, you could invest if we go more modern. These are some of the more tried and true ones that we're all going to be familiar with. The personal computer Bill Gates was instrumental in that you could have invested in Microsoft, smartphones, Apple. Steve Jobs obviously publicly traded, currently worth two point three dollars trillion dollars, US electric cars, Tesla, Elon Musk, obviously publicly traded and even things like the switch to online retail. You know, you could have invested in Amazon and had Jeff Bezos working for you for the past, what, twenty seven years? Yeah. Yeah. [00:10:57][111.6]

Bryce: [00:10:58] So through those examples, Ren, I hope it has become clear that again, don't work for the company, own the company. The stock market provides an opportunity to invest in some of the most innovative, game changing companies in the world. But the other part to consider is that these companies are then going out and hiring the smartest people in the world. They are pouring money into research and development. You know, they are trying to absolutely change industries and. It's now so easy as a retail investor and an everyday investor to own parts of these companies. So, look, if we haven't made it clear enough, don't work for the company, own the company. And on the other side of this outbreak, we're going to come back with. Why does this matter and how you can take some action. But before that, we'll hear from our sponsors. Ren, you are all about getting fit. You've bought the garment, you bought the Gulf membership, you bought the gym membership, and you're on the mind MasterChef. And even in lock down last year, you bought those resistance bands of Instagram that from memory didn't even come. [00:12:03][64.9]

Alec: [00:12:04] No, look, they didn't come. But all of that effort really was cancelled out by the numerous menu log orders that were a real staple of my lockdown experience. [00:12:13][9.5]

Bryce: [00:13:01] So Ren, why does all of this matter as a beginner investor? [00:13:05][4.3]

Alec: [00:13:07] I think it matters for two reasons. First of all, it matters in terms of when you're deciding what assets, what like what investments you want to make. Like, do you want to invest in property? Do you want to invest in gold? Do you want to invest in companies or like stocks? And then the second the second part of it is then in terms of what actual companies you want to buy. And I think in the first one and you touched on this before, but the reason that we love stocks is because, you know, they change and they change based on, you know, the people in them. And there's this example of Amazon. You know, when it listed in 1994, it was a online bookseller that from memory had, you know, a few thousand people working for it. If you just held it, it is now an online everything seller and a Web services business that has one point three million employees. And that's that's the first thing. It's it's why we think stocks are great. But then the second the second reason is, I guess, what stocks you want to buy. [00:14:19][71.9]

Bryce: [00:14:19] Yeah. And just one more point on that before we do that. What stocks you want to buy? I also think it's it's worth pointing out that if you want to build wealth and I'm talking about sort of serious wealth, you might be able to do that through becoming sort of a CEO or the likes. But if you look at the richest people in the world, they've all done that through the equity market, through having ownership in a business that appreciates in value over time. So if you do want to start building significant wealth, the stock market and owning these companies is a great way for you to do it. So you're less reliant on scrounging for that pay rise and working your way to the top. [00:15:02][42.1]

Alec: [00:15:02] Put it this way. Are the richest people in the world at the moment last year, Jeff Bezos? Yeah. If they didn't own stock in the companies that they founded and they just got a CEO level salary, call it like, I don't know, ten million dollars a year, which is an unbelievably high salary still. [00:15:22][19.7]

Bryce: [00:15:23] Well, I could actually say that Bezos is actually on eighty one thousand. [00:15:25][2.7]

Alec: [00:15:26] Well, there you go. There you go. If you didn't own any stock, he probably would have got paid more than, let's say they got 10 million bucks a year to become a billionaire. They would have had to take that salary and not do anything with it, like not spend a cent of it for one hundred years to become a billionaire. Unlike the best salary in the world you get, you don't build wealth from your salary. You got to use your wealth and then invest it. [00:15:55][28.6]

Bryce: [00:15:56] Equity is where you go. Equity Mates. All right. So Ren to your point, it's about what stocks can you buy and taking action. So this is probably where the important part of the conversation happens. [00:16:09][13.4]

Alec: [00:16:09] I reckon the last part was pretty important. [00:16:11][1.3]

Bryce: [00:16:11] Yeah. Furcal So so how do we how do we take action on this? What should we be thinking about in terms of, you know, what companies do we want to be buying and owning and who do we want working for us? [00:16:25][13.8]

Alec: [00:16:25] Well, yeah, that's the thing. Like imagine, imagine you're the boss, like you're you're the boss of your investment portfolio. And think about all these CEOs when they're doing interviews, when they're releasing their annual report, think of them as doing a job interview for you. Then they're interviewing to get into your portfolio. [00:16:43][17.9]

Bryce: [00:16:44] They're bringing along [00:16:44][0.5]

Alec: [00:16:46] sweating like Bryce was during his interview with, um. But but really, that's how you have to think about it. You know, companies only want to hire the best people. And, you know, you got your job because the company thought you were the best of all the applicants that they could have possibly hired. Same thing here. Like when you only want to own the best people and the best companies. Yeah. You know, you don't want to own you don't want to own average. You want only the best. Yes. [00:17:15][29.3]

Bryce: [00:17:16] But you also want to own them in industries that are going to be the best to your point before you don't want to be using your analogy, buying the six year old chocolate bar industry. [00:17:28][12.1]

Alec: [00:17:31] You asked me when I was fishing for that. I wouldn't have thought it came back into the conversation, but [00:17:38][6.5]

Bryce: [00:17:38] glad we brought it back. Close that loop. But not only do you want the right bosses, but you want the right industry. So we've got a list here of some industries that we think are ones to, I guess, keep an eye on. And some of the companies within these industries that would be pretty cool to have working for you. [00:17:57][18.3]

Alec: [00:17:57] Yeah, yeah. I don't know. Do we just want to read Dollars? [00:18:00][2.5]

Bryce: [00:18:01] I don't think we want to read the whole list. We can share that in our show notes, but perhaps than a couple of your favourites. [00:18:06][5.2]

Alec: [00:18:06] Well, yeah, I think I think the point is in the same way that we talked about, you know, home appliances, mass produce, cars, electricity, all of those innovations which we now just take for granted, but, you know, created huge amounts of wealth for investors and for the people that founded those companies. It's not like innovation stopped. There's some crazy innovation happening in the world today. And there are going to be founders that become billionaires off the back of that one industry, I think will create the world's first trillionaire. Yeah, I don't have a guess what that is. [00:18:42][35.4]

Bryce: [00:18:42] Space minings, [00:18:43][0.5]

Alec: [00:18:43] but our space. Yes, space in general. And we have the opportunity to invest in them. All right, now, today through the stock market, and that's pretty cool. And that's that's better than buying a block of land. No, I don't want to make this a property, but. Yeah, yeah. You know, I said so. Yes. Some of the industries space, obviously [00:19:07][23.3]

Bryce: [00:19:07] a big one. Yes. Look, I'm a fan of the renewable energy space that's going on at the moment. I don't have sort of many direct investments, but of course, it's just it's hot and it's it's only going to continue growing and innovating. [00:19:21][14.4]

Alec: [00:19:22] Yeah, well, I think all of these I'm just looking down a list. I'm pretty confident all of them, but one which we'll touch on in a sec, has an ETF that tracks it. So the other thing is, if you love if you love the game, you don't have to pick that particular company. If if you don't feel comfortable with it, you can just invest in a in an ETF that just holds holds it all. But yeah, another one for me, like artificial intelligence machine learning that, you know, often spoken about. It's coming in. Robots are coming. [00:19:57][34.8]

Bryce: [00:19:57] The robots are coming. Yes. We've got meat alternatives. Yeah. [00:20:01][4.3]

Alec: [00:20:02] This is the one that I don't think there's an ETF for. [00:20:05][3.0]

Bryce: [00:20:06] Uh, you've got to be on. Yeah. Let's have a look. I'm actually not sure if there's a niche ETF [00:20:11][5.0]

Alec: [00:20:11] in space, if you want if you want to invest in it. There's two big companies that are publicly traded beyond mate and impossible foods. Yeah. Both plant based meat makers. Um, a lot of the big food companies are getting in on it as well. The cool thing in this space, I reckon, is lab grown meat that. Yeah, that's coming. But anyway, let's let's not go too far down the rabbit hole are some other ones, you know, like autonomous vehicles, self-driving cars, you know, like virtual reality, augmented reality, all that stuff that's going on. [00:20:46][35.1]

Bryce: [00:20:47] Pretty interesting. [00:20:48][0.3]

Alec: [00:20:48] Yeah. So many future of farming like well, you know, drone precision farming, robots planting crops, all that stuff and 3D printing. So we just keep going about like cutting edge technologies, personalised medicine, cancer, new cancer treatments. [00:21:06][17.7]

Bryce: [00:21:07] It's all it's all pretty exciting, to be honest. But I think the main message here is that there is plenty of opportunity to have the best, the brightest, the smartest, most innovative people and companies working for you in industries that are, you know, have huge growth potential in front of us. So what we'll endeavour to do is get a list of those ETFs in in the show notes that relate to some of the industries that we've just spoken about. And also sign up to our Get Started Investing feed newsletter that goes out every Tuesday with this episode. And we'll include some of the ETFs in that as well. You can go to Equity Mates dot com email to sign up to that. [00:21:48][40.9]

Alec: [00:21:49] So I think in terms of takeaways, the big takeaway for me is that you don't need to do anything out of this episode other than get really excited. Like if you're like. This this makes a lot of sense. There's an amazing opportunity for me to invest, and it's never been easier for me to start investing. That's enough. Um, and, you know, over the course of the future, episodes will will break down some of the more, I guess, the mechanics of actually doing it. Yeah, but yeah, for us, this is the way I like it is just it's it's unprecedented and unparalleled how easy it is to access these companies and the opportunity that exists in terms of all of these crazy things that are happening, [00:22:34][45.4]

Bryce: [00:22:35] giving me excitement. I know [00:22:36][1.0]

Alec: [00:22:36] I want to go invest [00:22:38][1.3]

Bryce: [00:22:39] now. It is super exciting. And we hope hopefully you took out some of our excitement from that from that discussion. But as we said at the start of episode Ren, we do have a mailbag to close it out. The question has come in from Jemmy. We'll have a quick listen to it. Now, Goodfellows, [00:22:53][14.6]

Speaker 4: [00:22:54] my name name's Jemmy and I'm thirty nine years old and I'm just not managing this thing. And I'm trying to choose a platform. And I like the look of Pearla, but there are only in the States. It's early on. And that raised this question for me. If I choose a platform like Perlow, Robinhood and I go past to lose all of the money that I've invested using that platform, or do I still have access and I can just transfer my shares over to a new platform, [00:23:23][28.6]

Bryce: [00:23:23] which is so Ren. What Jemmy wants to know really is what happens to his shares if the broker goes down and can you transfer them out to. [00:23:31][7.8]

Alec: [00:23:31] Yes. So let's say I'm going to ask the second part of the question first. So when you sign up with a broker, you can change at any time. And every broker offers the ability to transfer shares on an off the platform. So, you know, if you're signed up with Comsec, say and you decide you want to move to superhero, you can you can initiate a transfer. There's normally some kind of a fee to some time sometimes. [00:24:00][28.8]

Bryce: [00:24:01] And it is super easy to do. [00:24:02][1.3]

Alec: [00:24:03] Yeah. Yeah. I can't actually say I've ever done it, but I've [00:24:05][2.5]

Bryce: [00:24:05] done it a couple of times. Yes. Super easy. [00:24:07][1.5]

Alec: [00:24:07] So so the first part of the answer is you can transfer at any time. The second part of the answer is around if a broker collapses. So like Jemmy was talking about Pearla not Paula Pearla part. Yeah. [00:24:24][16.8]

Bryce: [00:24:25] Yeah. [00:24:25][0.0]

Alec: [00:24:26] Um and if they were to collapse, um they the long and the short of it is yes. Your shares are safe and yes you can transfer them to another broker. Now you will hear a discussion around different ways that these shares are kept safe, either on a HPN, a his'n or in a custodial model. You don't need to worry too much about that. Some people prefer having a hidden themselves, but the long and the short of it is either the his'n itself or the custodian will keep it safe. And so if something like Pearla or, you know, any of these other online brokers fall down, your shares are safe and you can transfer them. [00:25:14][48.2]

Bryce: [00:25:15] And you would have if you had listened to the Broker BASIX series with Super Hero, then you would have found out a little bit more information about the hidden and custodial model and those sorts of things. But Jemmy, we hope that answers your question. Sorry, just [00:25:28][13.6]

Alec: [00:25:29] if Jemmy wants to know actually how to do it, contact the brokers support page and tell. [00:25:35][5.9]

Bryce: [00:25:36] Yeah, it's just a form. Yeah, it's very simple. But as I was saying, a call out to our community. We do need your help. This podcast, Get Started Investing feed, is all about breaking down the barriers for beginner investors and making it less intimidating. The best way to work out what these big hurdles are, though, is to hear it directly from you guys. So we're asking for you to share your story with us. It's really simple. Head to Equity Mates dot com forward slash contact. You would have heard we have the ability to leave us a voice message, which Jemmy has done, and you can get in touch and we can bring you on the show and help you work through some of the barriers that you might be facing in your investing journey, which inevitably is going to help everyone else as well. So hit us up Equity Mates dot com forward slash contact and also head over to our main show, Equity Mates Investing podcast. If you're feeling a bit adventurous and like you ready to take that next step. But Ren, as always, it's been fun. Looking forward to chatting about another basic topic and fundamental of investing next week. [00:26:37][61.3]

Alec: [00:26:38] Sounds good. [00:26:38][0.4]

Speaker 3: [00:26:39] This podcast proudly brought to you by Equity Mates Media. Always remember all information contained in this podcast is for education and entertainment purposes only. It is not intended as a substitute for professional, financial, legal or tax advice. Host of Equity Mates and not financial professionals and are not aware of your personal financial circumstances before making. Any financial decisions, you should read the product disclosure statement and if necessary, consult a licenced financial professional more information, head to our discussion page, where you can find resources to search for a registered financial professional company. You. [00:26:39][0.0]

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