Portfolio Update | Ask Us Anything | ETF Competition

Bryce Leske: [00:00:57] Welcome to another episode of Equity Mates, a podcast where we help you learn to invest in 45 minutes or less. We break down the world of investing from beginning to dividend so that you can hopefully make some returns. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going, Bryce? [00:01:11][14.4]

ALec Renehan: [00:01:11] I'm very good. Bryce very excited for this episode. As always, your intro has made me think we actually got some feedback that we shouldn't be saying 45 minutes or less because we never stick to 45 minutes. [00:01:23][11.6]

Bryce Leske: [00:01:24] This might be enough. So we actually do. [00:01:25][1.2]

ALec Renehan: [00:01:25] Yeah, yeah. Yeah. [00:01:26][0.6]

ALec Renehan: [00:01:26] So I think homework for you. Yes. I'm giving you homework. Come up with a new intro for our next Monday episode. [00:01:32][5.7]

Bryce Leske: [00:01:32] Fair. I think I'll adjust it. I'm not going to come up with a new one. [00:01:35][2.5]

ALec Renehan: [00:01:35] So, you know, a blank slate. [00:01:36][1.5]

Bryce Leske: [00:01:37] This is a very well known introduction and I don't want it to rock the boat too much. [00:01:42][5.3]

ALec Renehan: [00:01:42] So I might throw your whole episode out. Yeah, I'm gonna have to quit. [00:01:47][4.3]

ALec Renehan: [00:01:48] But look, the other reason I'm excited for this episode is there's been a lot going on recently. We've just come off a big week of content. We released five episodes in four days and there's competitions going on. There's a portfolio that we're starting to get off the ground. And I think this episode is going to be a chance for us to take a deep breath, for us to take stock and to cover off on a bunch of things, have a chat about the competition, about the portfolio, and ask us anything episode. We've got a few questions from the audience that we're going to cover off on, but it's exciting times at Equity Mates. There's a lot going on, so I'll stop waffly and we can get into it. [00:02:25][36.5]

Bryce Leske: [00:02:25] The reason we go 45 minutes is because you waffle anyway. You're right, Ren. So let's just start with some housekeeping. You will have noticed that on our get started investing Faid and also on our Equity Mates feed. Last week we released the journey of a millennial investor getting into the markets for the first time with Rohana, one of our mates. Please, if you haven't already go across and listen to that. We've got two more episodes coming up. [00:02:49][23.5]

ALec Renehan: [00:02:49] The second episode out this afternoon. Yes. Depending on when you're listening to this and then third episode next week. So make sure you listen to the one that's out and get ready for two more crackers coming your way. [00:03:00][10.5]

Bryce Leske: [00:03:00] Absolutely. More importantly, you will have seen we have an ETF competition running. The reason we have that going is that we are excited to be launching a Deep Dive mini series into exchange traded funds, ETFs, everything that there is to know. For a beginner investor, you haven't even if you haven't started investing, this is the place to start. It will be released in October. Make sure you are signed up to the Get Started Investing podcast feed. It is not our main one. It is a separate podcast that we have get started investing. Additionally, competition results will only be released on this feed only get started investing feed. So if you are entering in our ETF competition, which Ren will touch on a bit, you must be subscribed to that podcast to find out if you have won the big thousand dollars or not that is coming straight out of Ren shopkeeper payment. [00:03:52][51.7]

ALec Renehan: [00:03:53] Yeah, and look, [00:03:53][0.7]

ALec Renehan: [00:03:54] even if you haven't entered the competition, you should. But there's been some cracking entries that we'll get into and I think the bonus episode is going to be [00:04:01][7.7]

ALec Renehan: [00:04:02] it's going to be good quality. [00:04:03][0.5]

ALec Renehan: [00:04:03] Yes, all ETF providers should be listening because they're going to be wanting to steal some of these ideas. [00:04:08][4.7]

Bryce Leske: [00:04:09] Yes, Ren, I can tell you're excited to do the ATF competition, but two more things to cover off. Firstly, we have three T-shirts, shirts left, the OG Equity Mates t shirt with the bull logo on the back. We will not be printing any more of those for a while until [00:04:22][13.6]

ALec Renehan: [00:04:23] we maybe do a vintage print run in three or four years time. [00:04:26][3.5]

ALec Renehan: [00:04:26] Yes. [00:04:26][0.0]

Bryce Leske: [00:04:27] So if you would like one of those, we only have large left hit us up on Instagram or Facebook and we can arrange that first in best dressed, no pun intended. Additionally, please, if you can leave us a rating on your podcast, primarily iTunes. I think they're the only one you can leave right at this stage if you can leave us a rating and also some commentary in the review section as to why you think this podcast is five stars. That would be awesome. If you don't think it's five stars, please. Messages directly. There's no point putting it out there. [00:04:59][31.5]

ALec Renehan: [00:04:59] You so Bryce doesn't appreciate constructive feedback in a public forum. So pointless. [00:05:06][6.7]

Bryce Leske: [00:05:07] Anyway, I appreciate it. [00:05:09][1.1]

Bryce Leske: [00:05:09] If you could do that, it means a world of difference to us from a sensibility point of view and that sort of stuff. [00:05:13][4.6]

ALec Renehan: [00:05:14] Yeah, we haven't asked in a while so we figured we'd ask again. [00:05:16][2.3]

Bryce Leske: [00:05:16] But enough of the housekeeping Ren. Let's quickly touch on the ETF competition. Yeah, we can jump into a portfolio. [00:05:22][5.4]

ALec Renehan: [00:05:23] So for people who aren't following us on Sociales, they may not be aware of this competition. But basically what we are doing is we've put a thousand dollar prize on the line for a build an ETF competition, come up with the best idea for an ETF. Everyone seems to have one that I think should be made. Now's your chance to share that idea and potentially win the prize. Go to Equity Mates dot com ETF dash competition to submit your entry. As Bryce said at the beginning, we'll do a bonus episode on the get started investing Faid going. Through some of our favorite ATFP ideas and announcing the winner in preparation for our ATF mini series, but we thought we would run through a few that have come in that we really like. Just to give you a taste of what's coming in. One thing that I'm particularly enjoying are the ASX tickers. There's some good ones that have come through, but we've got a few here that might give you some inspiration and give you an idea of the quality, I guess, that's coming through. So should we just throw a few now? Yeah, let's do it. Most of them have names. The first one doesn't. But I liked it, so I've included it anyway. So we'll start with the non named one. It's a five J ATFP, OK, and it captures companies that are building five technology or are most likely to benefit from 5G technology. So I think a lot of people are certainly telco. [00:06:42][79.2]

Bryce Leske: [00:06:42] It's all like Internet of things. [00:06:44][1.7]

ALec Renehan: [00:06:44] Yeah, Internet things. All that stuff. Yeah, yeah. Smart devices, smart cars, all that kind of stuff. So another one that I liked was the waste and circular economy. ATFP submitted by Muhly with the ASX Take a Binbin and that's focused on companies in the, you know, waste and recycling industry that are focused on that circular economy, taking products and turning them into something new. So obviously a massive trend across the world at the moment and a growing trend really driven by a lot of government regulations. So that was a particularly inventive one and a good one for me. [00:07:18][33.6]

Bryce Leske: [00:07:19] This one's come through from Nick. The name is Sustainable Advocates. The ticker would be SAAC, and his suggestion is to buy the least sustainable companies and then advocate for change as a major shareholder. Whilst there are businesses that do this currently, no way for retail investors to participate. [00:07:38][19.1]

ALec Renehan: [00:07:38] Yeah, so you buy what the BHP is and. [00:07:41][2.7]

ALec Renehan: [00:07:42] Right. You're an investor. Not saying that, but yeah, I [00:07:45][3.0]

ALec Renehan: [00:07:45] guess it's you know, rather than Vanguard just passively owning these companies, it's an opportunity for retail investors to be shareholder activist or empower the ATF, provide a shareholder activists on their behalf. This next one I really liked, I thought it was quite creative. So the ETFs name is R&D Intensive and R&D stands for research and development. The ticker was R and they submitted by D'Wayne and the concept was to invest in companies that are spending heavily on research and development across any industry sector or country. And the thesis for that is that these companies that are spending heavily in research and development have a real growth mentality and are investing for the future. [00:08:29][43.6]

Bryce Leske: [00:08:30] It's an interesting one. I'd want to see some science behind whether or not just pouring money into R&D actually leads to good research. [00:08:37][6.7]

ALec Renehan: [00:08:37] Yeah, it's a fair point. It's a very fair point. [00:08:39][2.2]

Bryce Leske: [00:08:40] There's a lot of companies who do spend a lot and don't go anywhere. [00:08:43][3.2]

ALec Renehan: [00:08:43] There are so twines industry, due diligence, in fact, testing on that one. But I thought it was a pretty creative idea. And I think the logic I think. Oh, yeah, yeah. [00:08:52][9.1]

Bryce Leske: [00:08:53] This one's from Simon Genom. Revolution ASX ticker would be DNA. That gene sequencing and gene editing is the future of medicine. So finding companies, I assume that play in this space and getting among the gene mutation. [00:09:08][15.2]

ALec Renehan: [00:09:10] true. Yeah, yeah, yeah. [00:09:11][1.4]

ALec Renehan: [00:09:11] Well, you know, like CRISPR, personalized medicine, all that stuff, you know. But yeah I like it. I like it. Last one defense and the ASX Tica was war. Why are submitted by Pader. And basically it's to invest in the military industrial complex, invest in all of those companies that make defense products and or benefit from an increase in defense spending across the world, which is sadly probably something that we're going to see. You know, a tumultuous twenty were entering. [00:09:40][28.1]

Bryce Leske: [00:09:40] So there are six great entries of perhaps over 200 that have come in so far. So it's been a phenomenal kick off to the competition. It will be running for another couple of weeks if you haven't already entered and would like to put your name in the draw to win this thousand as a Ren said, head to our website. The information is there. Follow us on Instagram. We're calling some of these awesome ones out as we go. [00:09:59][19.0]

ALec Renehan: [00:10:00] And I've got one last thing. There's been a lot of submissions around since stocks around like smoking and gambling stocks. In the commentary, a lot of people are trying to play to the judge and saying Bryce will really like [00:10:11][11.3]

ALec Renehan: [00:10:11] these stocks. [00:10:12][0.3]

Bryce Leske: [00:10:15] Absolutely bamboozled by Ren because I'm not interested in this. [00:10:17][1.4]

ALec Renehan: [00:10:18] I stop trying to play to the judges are, [00:10:20][2.1]

ALec Renehan: [00:10:21] you know, make sure Bryce just doesn't choose the one that has the biggest weighting towards tobacco companies. [00:10:25][4.0]

Bryce Leske: [00:10:26] Don't worry, Ren, that's not going to be an issue. All right. Before we move into the Oscars, anything thought it would be a good idea to update everyone on our portfolio. So where are we at? We have had some issues with the portfolio online. So now the euro is equitymates.com/em/portfolio. [00:10:48][22.0]

ALec Renehan: [00:10:50] and Bryce. As you always tell me, people don't go directly to you URLs. So you can just go to. Our website and then click through the portfolio. [00:10:57][6.8]

Bryce Leske: [00:10:57] Yes, so without going into too much detail, if you haven't already listened to our episodes on construction and the rules behind our portfolios, go back and have a look at those our core portfolio. As it stands, we have spent sixteen thousand dollars, [00:11:12][14.3]

ALec Renehan: [00:11:12] so we've spent all the starting money that we had from our Afterpay winning. [00:11:15][3.1]

Bryce Leske: [00:11:16] Yes. And a reminder, the core portfolio is purely built on ETFs. It is up three percent led by Australian property, which is up nine and a half percent, which was the most controversial pick at the time. And what does that teach Ren. [00:11:27][11.9]

ALec Renehan: [00:11:28] that, you know, the whole set and forget mentality, the whole diversify across a large range of sectors and then hold it for a long period of time? Some of the ones that you think may not perform well, you know, there was a lot of controversy because it covid and all of that. They have actually performed well and because people's expectations were out of line with what actually happened. So it's just a good reminder that we definitely don't know everything that's going to happen. Yes, the point of long term investing is Coverly basis, [00:11:54][25.5]

Bryce Leske: [00:11:55] the satellite portfolio, which is the one where we're having a bit of a play around. We've only deployed 2000 into that. And that was into Citadel and into Magellan, where up 10 percent, led by Citadel, which was a listener pick from Ben and the group at University of Western Australia. That is up 27 per cent after a takeover offer has come through. So pretty phenomenal result for those guys. Thank you so much. We did add it to the portfolio, which is driving those returns. So we'll probably leave it there and have a bit more of a comprehensive discussion on the portfolio when we get some of our listeners to come in and do some stock pitches later this month. So stay tuned for that. One final thing, Ren. We did throw it out to the Facebook community, the Salesforce investing committee, I should say. I came on in, pitched Salesforce, the immediate investing committee. You and myself, we couldn't decide on whether or not we wanted to put it in the portfolio because of the price that it was trading at the time. So we threw it out to all other members of the investing committee. You guys out there, [00:12:53][58.8]

ALec Renehan: [00:12:54] the rule is, if we can't agree or there's a little bit of uncertainty, we put a poll in our Facebook group and I think we did it on Twitter as well. But we let you guys decide the results came back. Unfortunately, the listeners did not. [00:13:06][11.8]

Bryce Leske: [00:13:06] Hey, no, unfortunately, [00:13:06][0.4]

ALec Renehan: [00:13:07] that's just that's why that's how the game that is sorry that [00:13:10][3.2]

ALec Renehan: [00:13:11] it was actually pretty close. I think on Twitter it was basically 50/50 on the Facebook group. It was sixty one percent. No. Thirty nine percent. Yes. Yeah. So it means Salesforce remains on our watch list but did not get added to the portfolio. [00:13:24][12.7]

Bryce Leske: [00:13:24] That's right. It will remain on our watch list. And this is how investing committees go. So be it. It was a resolute decision to go. No, obviously the key concerns were around valuation and interestingly, the complexity of product also came through. We spoke about some of the positive reasons, some of those are around disruptions to key customers, that sort of stuff. So, yeah, that's it. Salesforce is on the watch list. [00:13:45][20.6]

ALec Renehan: [00:13:45] Yeah, we can expand on that more in our next episode. But I think for now it's just important to update people who are listening, but not in the Facebook group. I mean, what are you doing if you're not in the Facebook group? But let's get stuck into this. Ask us anything [00:13:59][14.3]

ALec Renehan: [00:15:13] We just got three questions today, so we'll get stuck into those, and just as a reminder, if you do have questions that you want to ask, again, the Facebook group is where you can ask outside of this forum. [00:15:24][11.4]

Bryce Leske: [00:15:25] So Ren first question is coming in from unknown, that young 16 years old, which is awesome, looking to invest in the stock market, love the attitude. CommBank upstate's that you must be over 18. They want to take advantage of current market conditions and want to know if they can invest while they're 18 or to have to purchase shares in another way. [00:15:46][20.5]

ALec Renehan: [00:15:46] Yes. [00:15:46][0.0]

ALec Renehan: [00:15:47] So there are two key groups of people that this question relates to, both people who are underweight and listening to our podcast and want to invest for the first time, but then also parents or, you know, soon to be parents, kind of like you who want to invest on behalf of their kids. We've had a few questions coming around that. So firstly, for young people who want to invest for themselves, unfortunately for them, they can't sign up to a broker in Australia until they're 18. What that means is that really you're going to need your parent or guardian to set up the brokerage on your behalf. And they can do that. They can set it up so that they're the legal owner, but the child is the beneficiary that your parent is going to have to place your trades, definitely have a chat to your parent or guardian and get them to do it for you, though, because you know the power of compounding, especially if you get in while you're a teenager, you know, that was your story you got in. So be young and look at you now trying to buy a boat and living in Darlinghurst again. So it's a great attitude. But, yeah, you're going to need your parent. I guess the second part is for people who are thinking about investing for their kids or on behalf of their kids, again, it's definitely something you should do because the awesome power of compounding is just so critical. You know, if you can start investing when your kids are young and they can hold an investment for their lifetime or until they retire. So in Australia, you can invest on behalf of your kid. There's a number of ways you can do that so you can open a brokerage account in your child's name. The most important thing, if you're going to do it that way is speak to a financial advisor or a tax professional and make sure you set it up properly. If you are actually investing for your kid and the kid is the beneficial owner and it's set up right, you're all good. But the ATO don't look kindly on people saying that they're investing for their kid when the adult is actually getting the benefit. Yeah. So just that's one that you want to get professional advice and make sure you're setting it up properly. So that's that one. There's also a number of like new apps and, you know, the micro investing apps that are that are playing in this space and creating products that are set up for parents to invest on behalf of their kids, too, that I came across when looking at this question, stock spot offer, the ability for parents to invest for their kids and they often know face up to when the child turns 18 or when the account reaches more than 10 grand. So that's one raise. Also offer raise kids raises that micro investing app that rounds up your transactions. So there two that you can check out or you can just open a brokerage account. But yeah, the main thing is make sure you're doing it in the right way. So I guess the long and the short of it is if you're under 18, you can't invest personally. But investing as a kid or investing for your kids can be done and probably should be done because it will definitely benefit the kids lives. Nice Ren. Next one, choosing managed funds. So this comes in from Evan and he has listened to us talk about our entry into the Magellan Global Fund and using the NAB equity build a product to do so. Yes, and his question was around how we chose the Magellan Global Fund, why we chose it. And I guess more generally, what are the steps that someone should take when deciding what managed fund is right for them? [00:19:02][195.8]

Bryce Leske: [00:19:03] Good question. Why did we choose Magellan? Well, Ren you and I had interviewed Chris Weldon twice on the show. We became pretty star struck. Yes, he is an amazing portfolio manager, has been lucky enough to work underneath Hamish Douglass as his sort of second in charge. And for those who are unaware, Hamish Douglass is perhaps one of the if not, I guess, most well known and respected investors. Fund managers in Australia at the moment has been delivering phenomenal returns for his investors over the last many years. So we took the opportunity through the equity builder to get access to this off market funds. There is a minimum that you need to to buy into these funds. It requires a ridiculous amount of paperwork, which is our third stance in the show. We hate paperwork. But anyway, I think the reason we chose him well, personally, I chose him was we've learned a lot over the last four years. And what we're about to sort of talk about was, you know, a culmination of a lot of those things. So in terms of steps to choosing your managed fund Ren, I think the first step is all about understanding your investing goals there. A lot of fund managers, just like there are ETFs that set up to accommodate to different sorts of goals that might be long term, you might want to fund manager who hedges the market. So it takes both long and short positions. You might want to fund manager who is looking for companies that are tech only whatever that may be. It needs to align with your investing goals, which in our case is to grow wealth over a very long period of time so that we have the ability to pursue, I guess, things in life without having to rely on a paycheck. And certainly the long term view that Magellan have really correlates to that. And that really comes into the next part, which is ensuring that the fund manager has a strategy that aligns to your goals. So I just mentioned there that we want to build wealth over a long period of time. Magellan make it very clear that their time horizon is over a very long period of time. There's no point Ren and I putting money into a fund manager and we're thinking, all right, well, we're going to keep our money in there for 30 years. And they're saying, well, we're going to be delivering your returns over a five year period. [00:21:17][133.8]

ALec Renehan: [00:21:17] Yeah, pointless. [00:21:18][0.4]

ALec Renehan: [00:21:19] There are fund managers that have specifically stated that they want to beat that index every year. Yeah. And, you know, if you want to make money quickly, maybe that's the way to go. [00:21:19][0.0]

Bryce Leske: [00:21:28] But yeah. So in terms of the strategy, it's not only about their time horizon. Do you need to be thinking about what are they actually investing in? Are they even investing in an asset class that will deliver you your investing goals? If I want to be talking about long term time horizons and there's probably not any value in me putting in money into a fund manager who is playing around in the crypto space and having a bit of a cowboy time, I'm not sure that's going to happen. So I make sure that the strategy aligns to your goals. [00:21:56][28.5]

ALec Renehan: [00:21:57] I think the other part of the goals is risk tolerance. Like that's an underappreciated part of setting your goals and that's critical when strategy, you know, your crypto fund manager, your risk tolerance has to be basically I can lose all this money. Yeah. [00:22:09][12.2]

Bryce Leske: [00:22:09] Yeah, absolutely. Three sort of key things to look for in the fund is the management past performance and fees. So in terms of management, you know, we've spoken about having an understanding of the way that Chris and Himesh go about doing their thing. Everyone is different in this world of investing. So it's important to have an understanding of what drives the manager, you know, look up how their thinking does that resonate with you, that sort of stuff. Just get an understanding of who you're actually backing. [00:22:38][28.8]

ALec Renehan: [00:22:39] Say, if they've been interviewed on the Equity Mates podcast,. [00:22:40][1.8]

Bryce Leske: [00:22:41] That's the biggest difference here. One of the big differences between putting your money with an off market managed fund like this or through an ETF is that you are literally backing in the decisions of this manager. You're saying that I think you're going to be able to deliver a better result than if I put it into an ETF. So you want to make sure that the manager that you're backing in, you understand? Yeah. Additionally, how have they been performing over the last number of years? For me, this is not how have they been outperforming? It just has they been outperforming in some regard, like, I'm not trying to be you know, have they outperformed last year, the year before they took a loss? Really, are we looking for if they haven't been outperforming at all? [00:23:20][39.5]

ALec Renehan: [00:23:21] Yeah, yeah, yeah. [00:23:21][0.6]

ALec Renehan: [00:23:22] And it's all relative, like you wouldn't in the last five years. You wouldn't compare a value investor. No. To, you know, someone like Magellan, like a large cap growth investor, because they have different strategies. But if you want to invest in a value investor and they're underperforming every other value investor, yeah. That's potentially a red flag. I mean, potentially it's that strategy, but it's it's worth looking into. So it's all about relative performance. [00:23:46][24.5]

Bryce Leske: [00:23:47] If you were backing in a tech fund manager and they have outperformed over the [00:23:51][4.5]

ALec Renehan: [00:23:51] underperformed the performance for the last [00:23:53][1.8]

Bryce Leske: [00:23:53] ten years, then you've probably got to ask some questions. And thirdly, Ren the other big difference with compared to sort of ETFs and those listed products is the phase fund managers do tend to charge a higher fees and pay different face structures to your traditional or I guess to an ETF product. So make sure you understand more so how your fees are going to be charged and what sort of impact that's going to have on your investments. [00:24:19][25.1]

ALec Renehan: [00:24:19] And most managed funds will report performance net of fees. That's the important metric to compare if you comparing it to like an ETF or something, because performance before fees doesn't really mean that much because you are paying more fees. [00:24:32][13.1]

Bryce Leske: [00:24:33] Yeah. So other things to consider withdrawals. I mean, that's just you withdrawing your cash from the fund. [00:24:39][5.8]

ALec Renehan: [00:24:39] How often are you allowed to do it, when can you do it or how do you do it. [00:24:42][2.9]

Bryce Leske: [00:24:42] Absolutely. A lot of them do have minimums I to enter into the fund and B then to top up the fund as you keep going and then other key times, distribution and reinvestment. But they're pretty straightforward. So yeah, [00:24:55][12.5]

ALec Renehan: [00:24:55] all of that information can be found in the product disclosure statement for all of those managed funds and including things like what their time horizon is and their strategy. So that's the most important document with a lot of those things [00:25:05][10.2]

Bryce Leske: [00:25:06] to find out more head to there are some good resources online. The ASICs Money Smart website. Choosing a managed fund is the. The name of that page that's worth checking out as well as Canstar managed fund writing, I think Morningstar also do a whole bunch of stuff and managed funds. So there's plenty of information out there. Yeah, yeah. So Ren, do you have any final thoughts? [00:25:24][17.6]

ALec Renehan: [00:25:24] Just a few. [00:25:25][0.3]

ALec Renehan: [00:25:25] I always have a few. Sure. [00:25:28][2.5]

ALec Renehan: [00:25:28] Yeah. I think what I've personally learned over the journey with Equity Mates is that active management can play a really important role in certain areas, especially small caps and emerging markets. The index is there are a little bit more fraught to invest in, and that's where that real diligence of understanding the company's understanding what you're investing in, understanding those foreign markets and the dynamics of those foreign markets can really pay dividends pun intended, actually. So I think in some areas, you know, investing in a LogCAP standard fund may not be much better than an ETF because the large cap indexes have just killed it of light. And large cap managers sometimes have difficulty outperforming the index. So if you're going to invest in a large cap manager, you have to be confident that the manager is really smart. Is a Hamish Douglass? I guess so, yeah. I think just have a think about where active management can really add value is probably the first thing. And then the second thing is around. Don't chase performance. There's this phenomenon where especially with large institutional investors, but it applies everywhere is a manager will have a cracking last year and so everyone will then put their money with that manager because they like he or she had a cracking last year. We want to be involved in that because I'll do it again. But the thing with investment returns is it's not linear. It's not the same every year. You have great years, you have bad years. And if you are constantly chasing the person who had a great last year, often you will get that down years, whereas strategies take a long time to play out and investment on a year to year proposition and multi-year propositions. So don't just chase and chop and change. If you think the manager is good, if you think their strategy is good, but they've had a down year, don't just go to the shiny thing that had a good last year because the strategy that you were with will take time to play out. And the strategy that you're moving to may have had its best year and then it may have a few soft years. So institutions get in a lot of trouble chasing performance and then performance reverts to the main. So just be conscious that they might be giving you quarterly updates or that might be giving yearly updates. That doesn't mean you should be changing every quarter or every year. [00:27:36][127.5]

Bryce Leske: [00:27:36] And so last question has come in from another listener. Unfortunately, don't have the name Apologies they I have asked our thoughts on a stock called Smart Pay Holdings. The response to that Ren should be that we would love to hear your thoughts on smart pay holdings. Send us in your thesis and you can come on the show and have a chat about it. They were thinking about adding it to the hypothetical portfolio. Additionally, though, it is dual listed on the New Zealand Stock Exchange. So we'd like our thoughts on other dual listed stocks, both on the ASX and New Zealand Stock Exchange or perhaps elsewhere around the world. So I guess we can start with Ren. What is a dual listed stock and what are some examples? [00:28:16][39.3]

ALec Renehan: [00:28:16] Yeah, now I went a little bit deeper on this, so pull me out. If I if I go too far down a rabbit hole at any time. For people who are unfamiliar with dual listed stocks, it's essentially where a company has a stock listing in two markets. So, for example, A2 Milk is listed in both Australia and New Zealand. There's dual listing and then there's also cross listing the two terms, which in effect mean the same thing for investors. It's just a bit of a different corporate structure, but you'll come across both of those terms, dual listing or cross listing. Both of them are where a stock is listed on more than one exchange. So there's some big examples in Australia. BHP and Rio Tinto are both listed in Australia and the UK. And there's a number of companies that are both listed in New Zealand and Australia, zero A2 Milk, Auckland International Airport, Kathmandu, to name just a few. For people who are wondering why a company would do this, there's a number of reasons. The main one is access to more capital. So if you're a New Zealand company, the capital markets like the size of the market and the number of investors is smaller than Australia. You might choose to be dual listed also in Australia because then you can access a whole bunch more investors. It also means that you can access more fund managers, you know, like there's fund managers with particular mandates so they can only invest in Australian stocks or they can only invest in US stocks. If a company wants access to more fund managers and, you know, a greater pool of investors, basically they might choose to list in a bigger market. So that's why they would do it. There's obviously drawbacks as well. Then they've got to manage two sets of regulatory requirements in reporting. And, you know, they've probably got a lot more travel that they've got to do to speak to investors and all that stuff. But it's just a choice that companies might make. I guess the critical thing is, though, what it means for investors, really, I guess long and short of it is not a lot after exchange rates are. Into consideration, the stock price shouldn't really be that different on exchanges, you know, an A2 milk share in Australian dollars on the ASX and an to milk share in New Zealand Dollars on the New Zealand Stock Exchange really should be in line. There are instances where that doesn't happen. But generally what you say then is traders will come in and trade that difference and they will bring the price back into line through that trading. So there are examples where that hasn't happened. And for people familiar with Long Term Capital Management, a massive hedge fund that collapsed in the 90s, they lost a lot of money on those arbitrage trades. But that is a rabbit hole that I will not go down. I will pull myself out. basically for an investor, for you and I Bryce looking at these companies, if A2 Milk listed in New Zealand and Australia, we have an option to invest via the New Zealand stock market or the Australian stock market. But whichever one we invest in, it's the same ownership stake of the company. It's one share of the company. It gives you the entitlement to the same dividends and stuff like that. Actually, one good thing about dual listing is as an Australian investor, if you invest in Australia, you get franking credits. So, for example, BHP and Rio wouldn't pay franking credits to the UK investors who invest through the UK company because that would be meaningless. So aside from those minor considerations, it's basically the same. You become a shareholder of the company. [00:31:37][200.7]

Bryce Leske: [00:31:38] Why would you choose to do it on the New Zealand Stock Exchange? If you could buy it in Australia? You wouldn't? [00:31:42][4.6]

ALec Renehan: [00:31:43] Well, you wouldn't, I guess, unless you were in New Zealand as an investor. Yeah, um, [00:31:47][4.4]

Bryce Leske: [00:31:48] I think the exchange rate currency, all that sort of stuff. Yeah. [00:31:51][3.0]

ALec Renehan: [00:31:51] Not worth it [00:31:51][0.4]

ALec Renehan: [00:31:51] really. Wherever you based in the world is, you want to invest in your home country, it's just easier from an admin and tax point of view. So it's just something to be aware of that companies can be dual listed, but really it doesn't make the company any better or worse. It's still the same process of analysis to decide if the company is worth investing in to [00:32:11][19.1]

Bryce Leske: [00:32:11] the prices move in the same direction on the stock exchanges. [00:32:13][2.5]

ALec Renehan: [00:32:14] Sometimes you say because, you know, like if ResMed, for example, is listed in Australia and the US, I think it's listed in the U.S. through ideas that are like a US vehicle that you don't really need to worry too much about. But because markets trade at different times, you know, when the Aussie markets open, it will move in Australia and then when the US markets open, will move in the US. But that will respond in the same way. If the price goes up in Australia, it will move up in the US because the investors are looking at the same information. And if it doesn't and there's a price discrepancy, that's when arbitrage traders will come in and try and profit from that differential. Nice. So, yeah, dual listing that really brings us to the end. Unless you want me to go deep on long term capital management, you know. So I think for people, obviously, there are more questions than we can answer on this. And what we've tried to do with the structure of this episode is to list questions and get a little bit more detail, because we think that's probably more valuable. But if you're asking questions and they haven't been answered, go to the Facebook group, because it's not just Bryce and I answering questions. It's a community of Equity Mates who are a lot smarter than us and who can probably give a lot better answers. So join the Facebook group if you haven't already. [00:33:25][70.7]

Bryce Leske: [00:33:25] Absolutely. Well, Ren always good chatting, stocks chatting and away, always good chatting stocks. As we said at the start of the show, if you haven't already, please do leave us a review. We do have some shirts available and make sure you sign up to get started investing because we've got a lot of stuff coming through there. [00:33:41][15.6]

ALec Renehan: [00:33:41] And submit your entries for the Equity Mates build an ETF portfolio and that's probably all the housekeeping and everything that we got. [00:33:50][9.1]

Bryce Leske: [00:33:51] Nice. All right, Ren. We'll chat next week. Sounds good. [00:33:51][0.0]

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