How to Invest Wisely During Times of Market Volatility with Evan Lucas

Bryce: [00:00:31] 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? Is this the very start of your investing journey? Well, before you dive into this episode with us, our feed is designed to go from the very beginning, so we strongly recommend that you scroll up and start at episode one here at Get Started Investing feed. We cover and unpack all the jargon and 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 my equity buddy, Ren. How you going? 

Alec: [00:01:05] I'm very good, Bryce. I'm very excited for this episode. There is so much going on in the stock market at the moment. There's so much going on in every market at the moment, and it can be really difficult to understand how to make heads or tails of it, and more importantly, how to position your portfolio and manage your money in a moment like this. So luckily, we can turn to the experts at a time like this. And we've got an expert joining us today to help talk us through what's going on. 

Bryce: [00:01:32] What's going on and how to manage risk. It's our absolute pleasure to welcome Evan Lucas to the studio. Evan, welcome.

Evan Lucas: [00:01:39] That was a massive intro, very, very nice, pleasant intro. 

Alec: [00:01:45] We like to set the bar higher then and now. You got to jump, right?

Evan Lucas: [00:01:48] Well. 

Bryce: [00:01:49] Our talking's all done. It's all of you for here. 

Evan Lucas: [00:01:52] Oh, yeah. So buckle up. 

Bryce: [00:01:54] Evan is the chief market strategist at InvestSMART. After completing a masters in finance, Evan has worked in Amsterdam at ABN Amro and the Royal Bank of Scotland before returning to Australia, working at Morgans and IG before joining Invest Smart. So plenty of experience. And as we said, we're going to be covering how to manage risk. And think about your portfolio in what can be a pretty daunting time at the moment. But before we do. True or false game let's kick it off. 

Alec: [00:02:23] That's it. Evan, we want to get to know you a little bit more. So we like to play this game to hear a bit about your investing journey. And let's start with your very first investment? 

Evan Lucas: [00:02:32] Before I answer that. When these questions come through, just remember I was 20 years old answering these questions. So I was very, very green when this happened. 

Alec: [00:02:41] Okay, that's great. Yeah, yeah, yeah. Warts and all. Everyone start somewhere. I think that's. 

Evan Lucas: [00:02:47] Correct. So that's a massive part of this whole discussion. Yeah, everyone has to start. Yeah. Doesn't matter when or how old or how young you are, you've got to start. And starting somewhere is the the main aim of the whole discussion. All right. 

Alec: [00:02:57] Well, I reckon you've tipped your hand at the answer to this question, but I'm going to ask it anyway. True or false, your very first investment was your most successful. 

Evan Lucas: [00:03:06] So, I mean, is that almost a joke question? I mean, who gets their first investment ever right? It wasn't bad luck. What I did at the time is I literally was just going, okay, what do I think is probably safer is probably the answer to that. And so on the day, I don't know which one got bought first that bought on market and I literally bought BHP and ANZ at the same time. So it wasn't a bad investment, it just wasn't my best. And I don't know, you shouldn't have expected it to be based on those two like that is blue chip is you get the admittedly I didn't buy CBA but in saying that it was pretty blue chip and the idea that all I'd been reading at the time, as I said I was 20 years old, was made sure inverted commas and the Australian market still things like this get a barbell and for those of you that don't know the barbell is in Australia, but the Australian market is resources on one side, banks on the other, and then the bar is everything else in between. So I was thinking, okay, I'll start with the two bars and we started with the bells and was buying the biggest bell I could, BHP and was a bank that was up and coming at the time. ANZ was sort of really pumping. The idea was getting to Asia and it was getting to the growth story and paying a handsome dividend and blah blah blah. So that's why I did nice.

Alec: [00:04:23] Well, I think as a 20 year old, investing in BHP and ANZ is a very sensible choice of everything you could have invested. Right. 

Evan Lucas: [00:04:31] But in answer to true facts, to your answer to your question, no, it was not my best result. 

Bryce: [00:04:37] Clearly true or false. You had a strategy in place before you got started. 

Evan Lucas: [00:04:43] The strategy was to try and replicate the barbell strategy that I've been reading heaps about, which was building our positions, quite frankly, in resources and banking, and then slowly but surely adding stuff to it. And the idea at the time was over time I probably buy Woollies or Wes's, I'd buy a Telstra. So getting back to your first question, the best result that I had, I did in part of the bar, I did buy CSL, so I do put my hand up and the reason I say that is that I, when I got my first degree was it was in health science. So I knew about the health, I knew about all that kind of stuff. And CSL to me, when I read it and did a due diligence on it, I was like, Oh my God, this is one of those exciting things that I read my life. And I jumped into CSL in 2011 and I put my hand up also saying on balance, okay, so I no longer have a. Vested interest I've got out. But that was my strategy was to go down the barbell strategy, which is a really stereotypical strategy. Most Australian people that started investing in the tense, let's be honest.

Alec: [00:05:44] So next question. True or false investing is as hard as you thought it would be. 

Evan Lucas: [00:05:50] Yes and no. When I started, yes. Now not so much. Okay. And the reason I say that to the beauty over particularly the last decade has been the ease and the reduction in cost of investing. So back in the day, it was ridiculous. And we're not talking long ago, like a decade ago is not that long ago it was ridiculous like you would have to you CommSec's this well we're only just starting to really title the bad but it wasn't really there in that trade wasn't really existent. Westpac wasn't even on the planet. And then you look at all the new players that are out there and says that really, really cheap space didn't exist. So you had a broker and therefore you had to call them. And I look and I'm showing my age here, but I'm about I'm 37 and it was weird to have to do that. Like trying to do it online was really expensive. And particularly when I started to get right into it, which started seeing me invest overseas. You then had double brokerage, he had brokerage in Australia who would then tell people in the States or in Europe or in the UK to go and do that? They charge you a brokerage fee at an X clip and then you'd have to do the same on the way out. So you then had that broker charge you in the States, the Australian broker charge you and get it back. So it was really hard. Now the beauty of it, it is so much simpler, so much cleaner and it means therefore the ability to become an investor has started to reach everyone. And that is one of the most important things I think in my world that is happened because what I love behaviour, I love talking about behavioural finance and the freedom that comes with financial freedom, the time that you can get from your money it because in my view anyway all money is, is, is a thing to gain time. It's just about giving you more time. So your money is spread out. It's growing for you, working for you. Your financial freedom just gets much, much bigger. So all of that is my answer to that question is that thankfully investing now has got easier in saying that. Still do your due diligence to do your own work. And I understand, particularly if you starting it, it will it will be an interesting period, but that comes with education. And education is the most important thing. If there's anything we take away from this next 20, 30 minutes, education and your education will be the best thing you can get for your financial freedom. 

Bryce: [00:08:18] So to close out, Evan, true or false, investing is like gambling. 

Evan Lucas: [00:08:22] False, false, false, false. So my way of answering that, as soon as your looking at chance in an investment, inverted commas, that is an investment. That's a bet. Investing is where you actually understand that it is backed by something. If you are investing in an ETF of the ASX 200 or BHP or CSL or ANZ or CBA, that you are actually putting your money into a company's balance sheet. That's the way you've got to remember you're actually being backed by the company or the index with them earning. And my base principle is that although some companies are not great, most companies are there to try and get better. That's the whole mantra. That's why they are a company, that's what they do. So they're trying to actually become bigger, better, stronger, what have you, and therefore you're just being part of that story. You know, a company is asking you for their money to grow their business, whether that's to then go out, invest in a new mining company, whether that's to then lend to you and I, whatever the business underlying is the reason they're coming to you and asking, would you like to invest into our company is because we want you to be part of the story. So in answer to that question, if you're saying investing is gambling, then you need to ask yourself why? Why is that your first thought? Because that, in my view and this is something that I love talking about that is actually what you were is a psychological bias. That means that you're coming from a negative point of view. Most likely that your first initial thought when you think about using money is what we call loss aversion and loss aversion. It is one of the strongest human biases we have. We hate losing money. We are more attuned to losing $10 than we are to making 20 and being net ten backs up. We will concentrate on that $10 loss harder than anything else we do because it's so natural, because we are still human beings. We like to basically control what we can control and loss is something we can't control. So that normally when I hear that question, I know full well that that client or that. That new investor is just about holding your hand and saying, I understand why you think that way, but please be aware that investing and gambling are completely separate things. And as soon as you're taking a chance, that's a bet. That's a gamble. As soon as you're investing, you're looking to be involved with the growth of an economy, a company or whatever it might be. 

Alec: [00:10:52] Love that. Well, Evan, we might clip that answer and spread out across social media, because I think that that really does encapsulate what we try to get across, but in a much more succinct and well-thought out way. But look, Evan, we want to we want to move onto a little bit about your investing philosophy, a little bit about invest smart. And, you know, you mentioned you had a barbell strategy in place when you started. And since starting, you've worked on, you know, multiple companies in financial services across multiple countries. So I guess what have you learnt from that experience and has that changed your investing strategy or your preferred investing style? 

Evan Lucas: [00:11:31] QUESTION Right. So yes, I know that what's happening is that although I started investing when I was 20, I didn't enter financial services in financial markets as I do now as my vocation till I was sort of 27 because it just didn't sit in my thinking. And I think, again, that question when you're asking comes from the point of view of who are you as as a person, who are you as an investor? Because then it also falls into the answer here and why what I'm going to say you is how I've changed. So when I first started, I was green. I did okay. But my own personality and my own identity got in the way because all I saw myself as when I was younger was somebody that travelled. So that's all I did. So my investments were to fund that. So as I've got older, know that I've now have children, I have a wife, I have other things. My personality, my money, identity has changed and that has come also from working. So when I was in Amsterdam, it was all sudden. That was the first time I had a absolute insight into markets and what made me fascinated by them. I got to be an analyst on the trading desk that was sitting behind in Amsterdam. The actual Amsterdam Stock Exchange is inside the building of ABN Amro, and so therefore I got to sit and watch it. It's just fascinating thing to see and being part of that and learning about that and and learning off some of these really big hitters that were from all over the world sitting on that exchange. And that was fantastic. That gave me my bottom out saying. So from there it was, okay. What did I learn from that experience? I understand bottom out research, blah blah blah. I came back to Australia and kept it going but then I realised that it wasn't the only thing. And this is, this is made. So for you guys that are starting out there. So are you guys listening in that are starting your your journey? The thing I learnt straightaway was education is absolutely core to this and I'll keep coming back to this point in that what I also need to learn about is why do markets behave in independent ways to what you would think? And so that therefore led me to actually start going through economics and economics to me. So what we call macro to the big picture versus micro, the bottom up picture was my next change in my strategy was to understand what is going on in the macro. Well, why are interest rates at that time falling? We were at four and a half percent, 4.75% here in Australia. Think about that. And it was falling away. What that meant, how that would therefore impact value and growth stocks, how that would impact again, that's really high level and I understand what I've now learnt also. All of that is complex. I've now learnt and where investment fits into it is that the more and more I went along, the more and more I realised simplicity is key. The simpler you are, the easier things will become. You don't have to think about a barbell strategy. You don't to think about which choices you have to make. You don't have to think about why this company works. Because in the end, I looked at it from the point of view. If you look at the ASX index over the last ten years, even including what's going on right now, it's still averaging 9.7% on a total returns basis and by total returns that includes dividends, reinvested, etc. And therefore I found myself going, am I fighting an uphill battle? Am I working too hard for what I'm doing? And probably was. So I actually went, okay, well why don't I just do that? Why don't I make it simple and just make the barbell the ASX 200. And that's what I did. So I started investing in ETFs and that's where investment came into it. They saw me doing this, we talked about it and that's that's our mantra is simple, easy, cheap, efficient portfolios that diversify you across not just the ASX but international equities. Then also the other thing that never was discussed in my world, which was other asset classes, fixed income, property, cash, and now I've got that core and that core is absolutely key. I just add to that core, I can still play around on the edges, but the simplicity over the last seven years since I started doing that has made my life not only much easier, but the financial freedom that's come with it has grown. Big, long winded answer. Sorry.

Bryce: [00:15:31] No, no, no. That was good. That was good. So let's let's turn to market conditions today because, you know, this is a podcast for for beginners. And a lot of our community are probably, you know, just at the very early stages of their investing journey and experiencing some parts of the markets that we haven't experienced for a while. And and it is all about risk management and understanding, as you've mentioned, to the type of investor that you are and and how to build a profile accordingly. Risk management, though, is a piece of investing jargon that we often. 

Evan Lucas: [00:16:04] Hear, the point we. 

Bryce: [00:16:05] Often hear. So how would you explain risk management to a non investor. 

Evan Lucas: [00:16:10] Yeah, you're buying on Bryce and it is, it's, it's just such a such a dry term, it's so boring. Like what is risk management? How do you explain risk management? So just going back to those you that are starting today, I'll also put my hand up here when I first started investing properly. So I know I did it when I was 20, but when I was actually doing this for a living was around about August 2007. And if you remember what happened in November 2007 and then from there was the GFC. So my cutting of my teeth was the sort of experience that we've started in 2021 to where we are now. Bryce In terms of your question, and that was a fast learning of risk mitigation and talking about risk mitigation, and that is the simple way of looking at it, is the old adage is perfect, don't put all your eggs in one basket, right? So and buy one basket. The ASX 200 technically is one basket, that is one asset. The US equity market, that is one asset class. Again, the UK, France, Germany, take your pick. International equities are another basket. So are bonds, but not again, domestic. International so is cash, right? And by cash sometimes we lose what cash really is. In an asset world, cash is anything that is able to be used today all the way through to 12 months, and it doesn't have a capital gain or loss component. It only has an interest component. So term deposit put money in a bank, let's say ten grand. That ten grand will come back to you. Plus a small amount of interest for the ten grand won't get bigger, it won't get smaller. But because that is basically what we call inverted commas, risk free. And I'm getting to a point Bryce a promise not as they talks about risk reward. So cash sits at the very bottom of risk reward, very, very, very low risk. In fact, 2007, 2008, Kevin Rudd, then prime minister, guaranteed all deposits inside banks and that is he today for up to a quarter of $1,000,000. At one point when he first introduced it, it was a million, but it's been reduced to a half, so it's a quarter of $1,000,000. So it's very, very safe. But because of that, it's also an incredibly low return. So this is what we call risk reward. If you then move up, you then have things like fixed income. Fixed income is similar, but it has a capital component. Your your capital can go up and can go down, but it gives you a yield as well, like your cash. But the return is probably slightly bigger. So it's further up the risk reward curve equities, international equities move about that risk curve. So what the diversification principle is in getting to your idea around risk diversification, Bryce is about having exposure to each one in a certain measure. So if you're a conservative person and you are worried about what we discussed before about loss aversion, you are more likely to have the overall total amounts of your investment in cash and in fixed income because it's less likely to lose a significant amount of money. And let's use that term because it could be fixed. Interest could lose you a little bit of money, then having all of your money or more amounts of your money exposure to property, domestic equities and international equities. And so that's where you move. So if you're more assertive and you believe that, actually, no, I'm looking to invest for the long term. I'm looking for growth. I am looking for a longer term financial freedom. I'm willing to take a bit more risk. You're more likely to. Therefore, the majority of my investment pool is going to be in growth. So that means more equities, more international equities, less fixed income, less cash. So it's again, it's about understanding you. What are you tolerant of? What are you happy with? But again, it's making sure that you've got all of those asset classes, whether you are highly assertive or highly conservative, you still need some of all because it still needs to give you some growth. So you need to get some capital growth from equity markets moving up, not just what we're doing down now, which is down, but also getting the yield you get from fixed income more than the cash you get. But it's also the other way around. If we are going through a downturn like we are now and you are highly assertive, that's fine. But you do need some buffer. You need to have some of your money protected from the downside as well. And that still means cash and still means having fixed income again. When. Sorry. 

Alec: [00:20:30] No, it's all good. Well, Evan, you mentioned a number of different asset classes. They're all up and down the risk curve. And the great news is for investors today, they're more accessible than ever with exchange traded products. But therein also lies another challenge. Analysis, paralysis. There is so much choice. 

Evan Lucas: [00:20:50] So. 

Alec: [00:20:51] So we'd love to get your thoughts on that. But before then, we're going to take a quick break to hear from our sponsors. So, Evan, before the break, we mentioned the amount of choice that's available today. So many asset classes all available at the click of a button in exchange traded products. I think at last count, there's close to 300 exchange traded funds on the ASX and I think between two or 3000 listed in the US. So, so much choice. 

Evan Lucas: [00:21:19] I don't know, expanding further. 

Alec: [00:21:20] How is it investor meant to go about knowing what's out there, filtering down that list and determining what's appropriate for their own investing goal?

Evan Lucas: [00:21:28] Okay. So I'm going to take that from an investment point of view because again, why that is. And again, we will argue that we are not necessarily the right answer, but this is what we're talking about when we talk about simplicity. So let's look at the four things that we look at. Simplicity. How close to the market is it replicating? So is it making sure that that ETF is giving you the ASX 200? Let's use that as the example. The next point is liquidity. And by liquidity, what I mean is, is that you still need to have the ability during ten and four Sydney time to be able to buy and sell that without having any issues about trying to get your money in or your money out at a random price. Most of the ASX listed ones don't have either of those problems. The next one is cost. So in these exchange traded funds it's called the manage is the management exchange ratio. So the more that is our expense ratio, that is where you look, right? So the cheaper it is, the better it is for you and the bigger the player tends to be, the better option. So if you look at a BlackRock or Vanguard, you're going to be a shares these guys tend to be offering you. So let's look at BlackRock's ASX ETF. They're charging a per annum, so per year, 0.4 of 1%. So what we call four basis points. So it is incredibly, incredibly cheap in terms of where it sits, where investment then takes. The next thing is that we try and offer you the ability to do this all for you, because your question is about simplicity, about how do you choose that? Well, what we say is that what we can help you do that by actually taking the choice on for you and finding all these things down. So the next thing that we also do is to also say, okay, we talk about risk. Before in our last question, let's say you're a balanced investor. We know that you need a certain amount of everything and we base it off. There is talking about numbers and about amount of choice. So in a balanced fund, what asset and what Vanguard classify as a balanced fund, there are 3353 balance funds in Australia alone and that's just retail, that's not including super in just 3353 is how do you choose which one is the right? So what we do is that we go, okay, let's collate all that data, find the consensus and then give you the risk of a balanced portfolio at the percentages that the consensus gives us. So the last point is price. So if I was to compare what's going on inside, I raised the price of items. It's about $30. It's actually for about 27 now because of what's been happening in the market. And that gives us the ability to give you a much closer representation of what a balanced portfolio needs of the ASX, which is around about 15% of the ASX, whereas some of them have quite a high price. So Betashares, for example, they have $102 on their ASX, so you can't buy as many for 102 and get close enough to that percentage. And that's just us doing our sitting doesn't mean that Betashares is wrong. It's just it's not it just doesn't fit our model because we need to get you to a risk profile of balance much, much closer than what $100 per unit gets us is $27 per unit is much closer than $100 per unit. So that's just our four points. Again, it's about trying to make it simple, low cost, replicating the market retro brand with lots of liquidity and a price point. That's easy to do with investment. 

Bryce: [00:24:57] And we haven't necessarily touched on all that you offer. It's it is a fantastic business and we recommend that our audience go and have a look because there's there's plenty of things that you do do. But one of which is building a number of ETF portfolios, model ETF portfolios, I should say. We want to understand a little bit about how you designed these portfolios of ETFs. So can you sort of shed some light for us? Evan Yeah. 

Evan Lucas: [00:25:21] So back to my previous answer. So the way we design it again in fact, is all the answers. We've just been talking. We understand that people are different, everyone is different, and that's that's good. So that's where your risk comes into it. Are you a conservative investor? Are you a balance investor? Are you a risk investor? So for growth and are you a really assertive investor? So that's high growth. And again, what we do to make it as simple and as easy as possible is that we get that data out of Morningstar, we get the data out of Vanguard and out of Asik. And again, look at what a growth, what is classified as a growth portfolio in those three metrics get the. This is data and do for work out of percentages that are allocated to international equities, to domestic equities, to fixed income, internationally fixed income, domestically cash property. And that gives you 100%. But they're broken down into things. So let's look at growth. Growth is 66% what we call growth and the rest is obviously defensive, but that means it's actually about 29% Australian equities and about the rest in international equities properties, about 7%, and then the rest is defensive assets, fixed income and cash. But that's just one example and how we choose those, those ETFs to go into it because it's about 5 to 7 of those portfolios is as we described before, which is very, very low cost. So the cheapest we can find, high liquidity is priced to a level to give us the ability to keep those portfolios neat and tightly. And again, the next part of that is making sure that the overall liquidity is very, very strong. 

Alec: [00:26:55] Yeah, I think the the great thing about investment and a lot of the ETF providers as well is how transparent they are. Like the website has so much information and. 

Evan Lucas: [00:27:06] We don't lobby, right? We don't hide behind all of the data about what I've just described. The percentage allocation to each of those portfolios is on our website. So you can you can go and say it's we don't want to hide it. We want you to know exactly what it is because you deserve to know. You need to understand what's going on.

Alec: [00:27:21] Yeah. And you know, we had to look at your growth portfolio and it's 20% fixed interest, 14% cash, and you sort of explain there that it's two thirds growth, a third defensive, and that explanation makes sense. But I think the important thing is that people can make their own judgement, whereas so many of the funds, traditionally they just had a label and the label was balanced or growth and you couldn't actually say what was in there. And I think the big recommendation, the one thing that we've learnt from doing this podcast for a number of years is look under the hood and it's great that you guys open up that hood. Yeah.

Evan Lucas: [00:27:55] And then very much even with us and look at it, understand what it's like, you can then click on them and see which ones we've invested. We do not want to hide any of that. We think it should be absolutely front and centre. When you do our portfolios, they are held in your name. It is held on on a chest in our eighties under your name. So it's again, it's about making sure that all of it is transparent and you are the owner, the absolute and owner of those ETFs. Anyway, we then manage it for you. So as the dividends come in, we reinvest. If that's what you want to do, we allow you to top off if you want it, with an actual contribution plan. So you allow the wonder of the world, according to Einstein, compound interest to take effect. So all of those things are there. We certainly don't want to be pushing that from any perspective because our whole principle is education, easy access with the best and simplest way you can do it to make sure that you are growing your wealth and that in the end is around about financial freedom, which I think is the most important thing you can ever gain.

Bryce: [00:28:54] So having, as I mentioned, plenty of products that investment offer for all different sort of levels of investors and ESG has been an incredibly hot topic for us, not only the get started investing community, but the Equity Mates community as a whole. And one of the products that you guys have is the ethical growth portfolio. One of the challenges those with so many products in this space, navigating it can be difficult. So how should we be navigating the sea of ethical options? Yep. 

Evan Lucas: [00:29:24] So also let's talk about something else that's there as well, which is, well, I think within the last couple of weeks has borne out with this topic about greenwashing. And the reason I want to start there is because at the moment the label ESG is getting confused with environmental investment. And why I say that getting back to how all our portfolios work, ESG is environmental, social and governance. That's what it stands for. And so if you look for our E for our exchange traded portfolio, the ethical investments inside of it are actually stamped and overlooked by the Responsible Investment Association of Australasia. So I look them up. They are the biggest provider in this part of the world around making sure that the investments are done and ticked off on that approval. The wire highlight that is this ESG is not environmental because ESG, like a diversified portfolio, is taking about a third of each of those points. So a third of it makes up environmental, a third of it makes up social, a third of it makes up governments. So let's highlight one that you would probably say greenwashing wise is an interesting one, because by greenwashing we've heard about what's going on with Santos. We've heard about what's now going on with with CBI, about inverted commas, greenwashing and what they are saying. So Fortescue Metals for example, from our eye, so this is from the Responsible Investment Association passes ESG. It passes it and the reason for it, it knows it's got an environmental problem. But it works as hard as it can to repossess the land, repurpose it and give it back as straight as they can where they absolutely kill it is in social and governance. And I mean, they are monstering it so social. They are one of the largest providers of employment for the Indigenous community over Western Australia. They are also one of the largest providers of health and education to the Indigenous community over in Western Australia. So their social component is massive. The governance is also very good. They have one of the highest level of female participation at the board level. They have a female CEO and they are very much on the idea of governance promotion. So again, if you think two thirds of their portfolio of the ESG rating is dominated by social and governance. Offsetting the environmental impact of let's be honest and you know Fortescue is that's why they pass. So greenwashing I think has been lost in the idea that a lot of people go into ESG hearing that term as it's just environmental. It is not and I understand that. And that is why a Fortescue posses mandate. So if you're looking to that idea about you want to invest in ethical investing, understand that's what ethical investing is. If you want to invest in environmental investing, that also exists and therefore there's a huge weighting to the environmental component overriding the synergy. 

Bryce: [00:32:29] So even another product that investment has recently released is a lending product called Fund Later. 

Evan Lucas: [00:32:39] Mm hmm.

Bryce: [00:32:39] Let's start broadly. Who is this product aimed at and what is it? 

Evan Lucas: [00:32:44] So the way we look at it is that we know there are a lot of people out there that want to start but don't necessarily have the initial balance to do it as well as they can. And what what I mean by that is that let's also pointed out that when you invest, you probably need scale. And by scale we mean that to start, you need roughly ten grand. Because again, when you look at this from the point of view that if the market like it is now is moving lower, if you've got a smaller balance, that decline is much more acute. You much, much more acute. So all of a sudden if you were to lose 10% on $1,000, whereas losing 10% on $10,000, the actual overall change, although it's the same percentage wise, the difference is insane, is bad, and it has the ability to also work on the upside. So $10,000 is probably a good start point. However, we understand there's a lot of people out there that don't have that starting balance but want to get into it, know that they have the starting balance ten grand or more over a year or so if they keep investing. So investor came out with the idea of fund later is that we will give our few $6,000 of that ten grand if you've got $4,000 to start with. So your initial investment is four grand. We will put up a non-recourse and by non-recourse it means that therefore it's six grand of ours. We can't pull that off yet in terms of where that sits. And instead of having an interest rate, which I know some people compare it to, there's a monthly fee. And how that works is this to get you to start paying back that six grand, to actually make that whole ten grand cause you're paying $300 a month for 20 months. You can pay that fast. If you want to pay 500, you want to pay 2000, you can do that. And there is a little fee on tax on top of that of 25 bucks. So per month, if you're doing what the minimum is, is $325 per month over 20 months, it's more of a fee than an interest rate, but I know people want to compare it that way. The whole idea is to basically get you started. It also does another thing. It provides a habit if you can get constantly contributing to your portfolio per month. Compound interest comes into it because the hope that we have for you is that once you get past 20 months, you keep going, you keep adding to your portfolio, you keep growing that underlying base and getting the advantage of growing markets, compound interest and returns. 

Alec: [00:35:05] Now, Evan Bryce and I for a long time have spoken about how investment lending needs to be disrupted. We think, you know, the everyone knows the margin lending product that is the traditional product is not great. When the market falls is the time, the opportunity to buy. But that's when a bank will pull the rug out from under you. 

Evan Lucas: [00:35:25] Correct. So we don't have margin calls. The other thing I would say to you is this, is that in the current environment where we know we've just seen the Federal Reserve last night raise rates by 0.75 of 1%. We've already been told by our central bank governor that he's going to raise rates in July. That state is not interest rate dependent, so it's not going to change. It is 25 bucks per month for 20 months. No change, nothing about that. So that's why we try and say it's not an interest rate and it's not a it is definitely not a variable interest rate. We also won't margin call. We will not come in. And what we. Sweet in the market, we're all suddenly go. We need to take you out. Buying you won't have any recourse to us. Stop doing that. We do not. None of that happens with this product. We that we think and this is the term that you need to look at with margin lending is that it provides an interesting service, but you need to be fully aware of how modern lending works. And therefore we were like, we want nothing to do with margin lending. We want to offer you the ability to start with a reasonable sized deposit of ten grand, to start allowing diversification, compound interest, dividend reinvestment to take effect. And then you come up to that ten grand by paying in 300 bucks to pay off the six and that $25 say we understand it's not for everybody. And again, as Ren and Bryce have said through this podcast and I'll say it so please look under the hood, please read into it. It may not. It's not for everyone. We understand that, but we know there are people that are really looking to the future, looking to 7 to 10 years ahead, know they need to start. And this is what we think it is. Yeah. 

Alec: [00:36:55] So I think yeah, as I was saying, compared to a margin lending product, you know what you guys are doing, there's not many others out there. So it's great to see you guys innovating and making new products. The $25 over $300 people can do the maths on that. But as you said, people can pay more back quicker and that doesn't change. That will lower, you know, if you wanted to calculate an interest rate. But I think, yeah, every lending product involves risks. You can less, you can lose more than you've paid off. But I think more access for retail investors, helping retail investors get started. We love to say it in all its way, shapes and forms. So we're excited to see the evolution of this product and what else you do to help retail investors like Brice and I get started. We are coming towards the end of our time, so I guess this week has been tough. The week that we're recording it started with well, it started with a long weekend, which was nice, but then Tuesday was brutal. Three, so $88 billion lost, 4% down in the day, worst day since May 2020, I guess. Do you have any concluding thoughts for people who have maybe just got started investing and are seeing a lot of red in their portfolio or who were thinking about starting and then maybe a little bit less likely after the week that we've just seen. Any concluding thoughts for those people listening? 

Evan Lucas: [00:38:16] So since the ASX as itself became about which is about 1990 on the ASX, the idea there has been 30 down corrections or bear markets, so downward movements like we're currently experiencing, if you started in 1994 of the ASX to where we are today including what's going on this week, you up about 1300 percent. Time heals all. What I would also say is that these movements are part and parcel, unfortunately, of higher risk investing in equities at higher risk. Don't forget you're talking about March 2022, sorry, 2020 start of the pandemic. The market fell 29% in its fastest ever decline in history and rebounds. So if you look at that, the market from the bottom to where it went to the top was up around about 80 and a half percent. We're still up over 60%. Unfortunately, this is the concluding statement. Expect the unexpected in the short term with the idea that longer term capital growth total returns will and has been proven time and time again to come home to roost. Time heals all, and if you're investing in equities, you should be entering at a minimum of five years in your soul process, probably more seven. So that's why it is time heals. Oh, love. 

Bryce: [00:39:34] It. Well, that might be the title of our episode. So nice time. Thanks, Evan. If you're interested in finding out more about the fund laid a product or what investors might have to offer across the board head to invest smartkom w slush fund later. Plenty of not only investment products but plenty of research, insight and analysis through the team there at Invest Investment as well. So, Evan, thank you so much for your time. We very much appreciate it. Love what you guys are doing. And I'm sure this won't be the last time that will. We'll be hearing from you here on Get Started Investing feed and across the Equity Mates media network. So thank you very. 

Evan Lucas: [00:40:11] Much, guys. Thank you so much. Really, that was fantastic. Thanks, Evan.