The Power of Slow Wealth Accumulation

Bryce: [00:00:31] Welcome to get started investing a podcast where we 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're joining us for the first time, welcome. We strongly recommend that you scroll up and start at episode one. And just a reminder before we start as well that we are not experts, we're not financial professionals and we are not licenced. We're here learning just like you, and nothing on this podcast should be taken as advice. With that said, let's crack on. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you going? 

Alec: [00:01:04] I'm very good. Bryce excited for this episode So as with all of these episodes, we like to look to the news and then unpack a key investing lesson to build your investor toolkit. There are two key components to your investing toolkit. One is the technical skills to actually invest. How do I invest? And then the other is the knowledge and the confidence of why I invest and you know, knowing what to do. And this will be more focussed on the second one where I think we're going to title this episode. No one gets rich quick, but everyone can get rich. So because we came across a really heartbreaking story this week and it was in Australia, but we see stories like this across the world. So let's quickly give a brief outline of the story and then then get into the the perils of getting trying to get rich quick. And I guess the reason that Getting Rich Slow works. 

Audio clip: [00:02:03] On the New South Wales Central Coast. A meeting is about to take place at a busy coffee shop between a shareholder and the businessman he invested his money with. 

Alec: [00:02:16] Yeah. 

Audio clip: [00:02:16] So you change that, too? That's a that's. What's that? 125,000. Trying to keep. [00:02:22][5.3]

Audio clip: [00:02:23] The businessman wearing red doesn't know he's being recorded by the shareholder who's been trying and failing to get his money back. [00:02:31][8.0]

Bryce: [00:02:32] Well, when this story takes place, in what way is a town up on the Central Coast? I think. Yeah. And it involves a mining explorer called Grey Wolf. Um, they reportedly had tenements and leases containing precious gems, gold, coal, other sort of minerals. And they went around to small dollar Aussie investors and convinced them to invest hundreds of thousands of dollars into the stock. 

Alec: [00:02:57] Yeah, that's it. Literally, you know, going to the local bowling club, local pubs and convincing people to invest their retirement savings. The stock market promoter said he was selling shares between $0.01 and $0.10, but the stock was about to list on the ASX for a dollar. 

Bryce: [00:03:13] That's what he was claiming. 

Alec: [00:03:14] That's what he was claiming.

Bryce: [00:03:15] So you can see he's trying to say before a cent sell it for a dollar. Yeah. Too good to be true. 

Alec: [00:03:21] Literally. Too good to be true. And a whistleblower, the former CFO came out and said that less than 10% of the funds raised were spent on mining exploration activities and the rest was spent on lavish lunches. First class travel. Their money was wasted. Really heartbreaking. The company never listed on the stock market. These small dollar investors lost all their money. When liquidators came in. They found the company had issued more than 411 million shares and raised more than $7 million. Chase Yeah, so a lot of money taken from small dollar retail investors. The saddest part of the story, Bryce, the stock promoter Edward Lancaster, has now started another mining explorer project, Lithium Gold Mines Australia. And according to reporting from Australian media here, he's on Facebook trying to find new investors. 

Bryce: [00:04:13] Which is unbelievable. Yeah, here we are having Isaac chasing small time influencers and you've got people out there who are literally ripping people off. But anyway, that's another. 

Alec: [00:04:23] That is another story now story. Now, all this reporting comes from the ABC here in Australia. And so, you know, some of these things are just allegations, we should say. But that is the story as it's been reported today. But it made us really think about this, this idea of getting rich quick and, you know, these offers that are too good to be true, whether they be a mining explorer that is going to ten bag or a hundred bag your money in a matter of months when it lists whether it be nfts and crypto and that promise of getting rich overnight. And it's a tale as old as time in the share market. We were looking back as we were preparing for this episode and Isaac Newton. So Isaac Newton, one of the smartest people of all time. Yes. You put him on that list. You would. He lost $20 million in today's money. So inflation adjusted $20 million on the South Sea bubble in 1720, which. 

Bryce: [00:05:17] Is. 

Alec: [00:05:17] So the South Sea Company was a British company in like the 1700s that I think they had a monopoly on, like the African slave trade or something, but it became a stock market bubble. I'm not 100% sure of exactly what the company did, but it's one of the first, you know, Dutch tulips and then the South Sea bubble of some of the first, like modern stock market bubbles.

Bryce: [00:05:38] Even Isaac Newton lost 20 million. 

Alec: [00:05:40] Yeah. Wow. Yeah

Bryce: [00:05:42] Chasing get rich quick. But you mentioned Dutch tulips. Another example of a bubble. Yes. And we were living through one not too long ago with the with the bubble of the NFT. [00:05:51][9.1]

Alec: [00:05:51] Yeah, yeah, yeah. And so I think there's this everyone gets caught up in the I want to get rich quick. [00:05:57][6.0]

Bryce: [00:05:58] I've been, I've come foul of it. Yeah. Taking a stock tip thinking that you know, it's if history were to repeat it's only going to ten back and away we go. [00:06:07][9.5]

Alec: [00:06:07] Yeah. So I think this is an important reminder for us to just you can't get rich quick I think is the first thing, but you can get rich slow. [00:06:16][8.5]

Bryce: [00:06:17] I feel like you can't intentionally get rich quick. [00:06:19][2.5]

Alec: [00:06:20] How would you accidentally get rich quick? [00:06:21][1.2]

Bryce: [00:06:21] Well, by just like through sheer luck, if you were to fall into a stock that ten bags or if you were to buy a bought ape at the perfect time and. [00:06:33][11.1]

Alec: [00:06:33] The bought ape at the perfect time is the. [00:06:35][2.3]

Bryce: [00:06:36] I mean, it's like. [00:06:36][0.4]

Alec: [00:06:37] Well, no, but where I want to get to in this episode is are the stocks that ten bag real or barely ever ten bag overnight. They still take time. Yeah. You like you don't get rich quick in the stock market. You get rich slow. [00:06:51][14.6]

Bryce: [00:06:53] Yes. [00:06:53][0.0]

Alec: [00:06:53] Yeah, yeah. [00:06:54][0.7]

Bryce: [00:06:55] Yeah. [00:06:55][0.0]

Alec: [00:06:56] Unless you you know, you're right. You could be trading like penny stocks and it could go from like a fraction of a cent to $0.02. And yeah, yeah, you put your life savings in it short. Those stories exist, but those stories suck us into believe it's possible. [00:07:09][13.0]

Bryce: [00:07:09] Yeah. Yeah. I mean, there's been plenty of instances where that has happened, but I don't think you can say that. It's you intentionally went in thinking that it was going to turn back over two weeks or whatever, you know what I mean? Just pure luck. [00:07:21][11.7]

Alec: [00:07:21] I don't know. This whole like this whole, like I accidentally got rhetorical is an interesting one from you, which I just don't. [00:07:26][5.1]

Bryce: [00:07:27] If you got rich over a long period of time for credit, I think that you intentionally did it. That if you come to me and say, I got rich, I made a million bucks overnight. Well done. You're a really lucky guy. [00:07:36][9.4]

Alec: [00:07:36] Well, I just call you a liar. [00:07:37][0.8]

Bryce: [00:07:38] Well, yeah, right. Well, having said that. [00:07:40][1.5]

Alec: [00:07:41] So yeah, for me, I think there's if you look at the truth like that, if you look at the Forbes rich list, for example, the two things that they all have in common, they own shares in companies now. Many of them, they founded those companies, but not all of them. But the commonality is they own shares in companies. Companies are just these great wealth creating vehicles. That's number one. But number two, they built wealth slowly over time. And you're like, you look at the top, top five. Elon Musk founded his first company. 1995. Trivia question what was that company? [00:08:16][34.4]

Bryce: [00:08:16] Amazon. Elon Musk was it was just before PayPal. It was a payments company. I can't remember what it was called. [00:08:26][9.5]

Alec: [00:08:26] No, it was like a map company. It was a zip to 1995, first tech boom. What was. [00:08:31][4.5]

Bryce: [00:08:31] The one before PayPal that merged with Paper. [00:08:33][2.0]

Alec: [00:08:33] Economy? [00:08:33][0.0]

Bryce: [00:08:34] Ex-con. [00:08:34][0.0]

Alec: [00:08:34] Yeah. So Elon Musk, 1995, that's you know 27 years Jeff Bezos founded Amazon in 1994 so quiet. AAM Adani number three over in India founder of Adani group 1985 Bernard Arnault co-founder of LVMH. 1987. He started his company and Bill Gates, co-founder of Microsoft in 1975. So obviously these guys are like stupidly rich and they're not useful comparators in many ways. But the point is time owning shares and time. [00:09:08][34.3]

Bryce: [00:09:09] Yeah, I think they are comparative because it is about owning shares and time and that's you know, people might look at that and go, oh, but they've created a co own some of the most successful businesses in today's day and age. But as retail investors we can access these companies so. [00:09:25][15.8]

Alec: [00:09:25] Point love that. [00:09:26][0.7]

Bryce: [00:09:26] We can access them. [00:09:27][0.8]

Alec: [00:09:27] The other the other one. So Buffett I think is number six on the list at the moment. Here's the stat and here's the stat that regardless of how much wealth you build over time, this is an important learning. More than 99% of Buffett's wealth was generated after the time he turned 50. [00:09:43][15.2]

Bryce: [00:09:43] Hmm. I love saying this chart. [00:09:45][1.4]

Alec: [00:09:45] Yeah. He bought his first share in 1942. Yeah. When he was 30, he was worth $1,000,000. Not bad. Yeah, I'm almost 30 and can't claim that. No, but you know, today's worth 100 billion. When he was 50, he was worth 350 million. Not bad. [00:10:02][17.5]

Bryce: [00:10:03] No, it would. [00:10:03][0.5]

Alec: [00:10:04] Take it, definitely. But yeah, more than 99% of that wealth, that hundred billion dollar wealth came after the age of four. [00:10:09][5.9]

Bryce: [00:10:10] I think like do the decades age 53, 50, ten years later, 4 billion, ten years later, 35 billion. Yeah. And then he's 92 and he's over 100 billion. So you can just say, imagine that chart. You've gone from 1000000 to 100 billion in 40 years. [00:10:25][15.3]

Alec: [00:10:25] Yeah. So these are extreme examples. Let's take a quick break and then come back to reality and come back to let's do some work on why getting rich slow works. But let's take a quick break first. [00:10:36][11.0]

Audio clip: [00:10:39] I'm seeing get rich quick everywhere. Let me tell you, the only people getting rich quick on Get Rich quick schemes are the jokers selling you the stuff to do it. The way you build wealth is slow and steady. Time and consistency. That's how you become wealthy. [00:10:54][15.4]

Alec: [00:10:55] So, Bryce, before the break, we delved into the world of billionaires. Not a world we will probably ever play it. [00:11:01][6.2]

Bryce: [00:11:01] Never. [00:11:01][0.0]

Alec: [00:11:02] No one can. [00:11:02][0.6]

Bryce: [00:11:03] In stocks for a long. [00:11:03][0.6]

Alec: [00:11:04] Period. But if you if you look at the Forbes Forbes rich list, not a lot of media barons in there and definitely not a lot of. [00:11:11][7.8]

Bryce: [00:11:11] Money room. [00:11:12][0.2]

Alec: [00:11:12] Made a digital start ups. But let's come back to reality, because the lessons they're with the billionaires is extreme. But the lesson holds that you can get rich slow, but it's the maths just doesn't work on getting rich quick. [00:11:27][14.9]

Bryce: [00:11:27] No. [00:11:27][0.0]

Alec: [00:11:28] So let's do the maths. [00:11:28][0.5]

Bryce: [00:11:29] We jumped online and had a look at the money smart compound interest calculator. If you're in the finance community, probably, although if you're in the fire community, you're probably all over the. [00:11:38][9.1]

Alec: [00:11:38] But I think in the spirit of building your investor toolkit, this is a useful tool. [00:11:42][3.7]

Bryce: [00:11:43] So money smart. Dot gov, dot eu or just here in Australia. [00:11:45][2.7]

Alec: [00:11:46] We're just included in the site. [00:11:46][0.7]

Bryce: [00:11:46] There's probably some similar ones all around the world. It helps you understand what compound interest actually means. So $100 a month invested for 30 years, which we compound at 10%, which may sound ridiculous, but that is the long term market average, including reinvestment of all of your dividends. That gets you to $200,000 over a 30 year period. [00:12:10][23.5]

Alec: [00:12:11] 100 bucks a month for 30 years. [00:12:12][1.8]

Bryce: [00:12:13] Yeah. [00:12:13][0.0]

Alec: [00:12:14] I feel that's doable for me. [00:12:15][1.0]

Bryce: [00:12:15] Yes, achievable. Let's say around that instead of 30 years, we say, hang on, how about you make that 40 years? And what if you want to get to $200,000? All you need to do is invest $40 a month for 40 years. [00:12:32][16.4]

Alec: [00:12:32] Yeah. So over over 30 years, you have to invest $100 a month to get to that 200 grand mark. Yeah, but if you extend your time horizon, you just have to invest $40 month. [00:12:43][10.6]

Bryce: [00:12:43] Yeah. [00:12:43][0.0]

Alec: [00:12:44] So just shows that like you extend your time horizon and the amount you need to invest is less and less. Yeah. Yeah. [00:12:51][7.4]

Bryce: [00:12:52] Or if you continue investing $100 over a longer time horizon, it becomes more and more. [00:12:57][4.8]

Alec: [00:12:57] Yeah, but then I guess the point of this around you just, you just can't get rich quick. Just toss that out of your mind. If you want to be an investor, you want to think long term. Let's shorten our time horizon. Ten years price in ten years. I want to be retired. I want to be on a beach and I want to own four houses. Good luck if I want that 200 grand. 200 grand definitely isn't going to get me those four houses. But if I want 200 grand in ten years and I'm only willing to invest $100 a month, that's all I can take out of my paycheque and invest. I need to find 53% return every year. [00:13:31][33.9]

Bryce: [00:13:32] Which is nuts. It's just we put that into comparison. Some of the best investors in the world, Warren Buffett, they're averaging about 20, 20%. [00:13:41][9.0]

Alec: [00:13:42] Per year and they're the best that history is created. [00:13:44][2.5]

Bryce: [00:13:45] So to say that you're going to be getting a 50 plus percent return every year for ten. [00:13:49][4.4]

Alec: [00:13:50] Years, the maths just doesn't. [00:13:51][1.1]

Bryce: [00:13:51] Doesn't. [00:13:51][0.0]

Alec: [00:13:51] Work. Yeah. Well let's shorten it even further. Five years I want to I'm sick of Equity Mates. I want out. If I have only $100 a month to invest I need 175% a year return. Mm. Yeah. [00:14:03][11.6]

Bryce: [00:14:03] Like just near impossible. [00:14:04][0.8]

Alec: [00:14:05] Yeah. [00:14:05][0.0]

Bryce: [00:14:06] So long story short, the longer the time horizon, the more stocks you own. Yeah. Let it do its thing. [00:14:12][6.5]

Alec: [00:14:12] So, Bryce, let's up the stakes. Let's up the ante. We spoke about billionaires that might be out of my reach, but I want to be a millionaire. [00:14:18][5.3]

Bryce: [00:14:18] Yeah, very achievable. [00:14:19][0.8]

Alec: [00:14:19] Talk to me about the maths. [00:14:20][0.6]

Bryce: [00:14:21] If you put in $200 a month for 40 years at 10%, 10% return, average market return, ASX 200, whatever it is. [00:14:28][7.8]

Alec: [00:14:29] Reinvested dividend. [00:14:30][0.6]

Bryce: [00:14:30] Reinvested dividends. If you put 500 a month, you'll get there in 30 years at a 10% return. [00:14:36][5.4]

Alec: [00:14:36] Okay, that's just out of my range, to be honest. [00:14:39][2.4]

Bryce: [00:14:39] Fickle, getting rich quick. No chance. If you want to be a millionaire in five years, you have to get $13,000 a month. [00:14:46][7.4]

Alec: [00:14:47] With the markets, with the average return that is out of my. I'm not going to take you out for a pay rise. [00:14:52][5.3]

Bryce: [00:14:53] It's unbelievable. So when you do the maths, when you look at it over a long time horizon, it does start to become evident that you can build wealth over a long period of time, significant wealth over a long period of time. There's plenty of stories. And circling right back to this, to the start of this in the news story, taking those opportunities or getting fooled by opportunities of get rich quick. This is a great reminder. The Get Rich Slow model works. [00:15:17][23.8]

Alec: [00:15:17] Yeah. And it's tough because like this these pay the people that were fooled by this person and why why but also you know like the wolf of Wall Street, the people that were duped by him, so many stock market promoters out there a promising get rich quick and for people that you don't learn about investing at school if you don't learn about it from your parents you. I have this perception that that's what the stock market is. You find these gems of opportunities that no one else knows about, and it facilitates getting rich quick. But if people say you can get rich quick, run the other way, because that's not what the stock market is. The stock market is a slow and consistent grind upwards. You know, Buffett just turned 92 and he made 99% of his wealth after the age of 50. That's the mindset that we have to have as investors. And so if someone promises you quick returns, run. [00:16:07][49.9]

Bryce: [00:16:08] Run, run for the hills. All right, Randall, it's great to chat, as always. A reminder to pick up your first tickets. Equity Mates dot com slash fin fest. It is powered by steak, the programme and the line-up of speakers available on the website now. So if you're interested to find out more. Head there, but we'll be back next week. [00:16:26][17.5]

Alec: [00:16:26] Sounds good.