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From Zero to Investor: The Journey Of A Millennial Getting Into The Markets – Part 2

HOSTS Alec Renehan & Bryce Leske|5 October, 2020

Over three episodes, we track the journey of a millennial, who has never invested before, but knows it’s the right thing to do. We cover the basics, what he can invest in, answer all of his questions, and then watch as he finally pulls the trigger on something more meaningful than a 60-inch 4K computer monitor!

Hopefully by the end of these 3 episodes, you too will be inspired to take your first step into the markets, as we show you how easy it can be, particularly thanks to technology and apps such as CommSec Pocket.

In this episode we unpack what Rohan can invest in and how. He’s keen on ETFs and a few individual stocks, so we begin by understanding what is available on CommSec pocket, and how the options fit with Rohan’s investing ambitions. By the end of the episode, Rohan actually makes his first investment!

Start small with CommSec Pocket. Download CommSec Pocket in the App Store or Play Store and get started today.

Bryce Leske: [00:01:29] welcome to get started investing, a podcast that will give you the confidence you need to start your investing journey. This is for anyone who wants to start investing but isn't really sure where to start. Our aim is to cover all of the basics and to make the markets accessible for you. My name is Bryce and as always I am joined by my equity buddy Ren. How's it going, bro? [00:01:47][18.5]

Alec Renehan: [00:01:47] I'm very good. Bryce very excited for this second part of our three-part series. We've plucked a member from the community and also an old friend and we are going to get him into the stock market. [00:01:59][12.0]

Bryce Leske: [00:02:00] That's right. We are tracking the journey of our committee member and friend Rohan, who is back in the studio with us. [00:02:05][5.3]

Rohan: [00:02:06] Rohan great to have you here. Good to be here again. Thank you. [00:02:09][2.3]

Bryce Leske: [00:02:09] I'm glad we didn't scare you away. [00:02:10][0.9]

Rohan: [00:02:10] Lost everything. That's OK. But I would have been great if you didn't make me pay for the bills this time. [00:02:14][3.8]

Alec Renehan: [00:02:16] That's an off night conversation. [00:02:17][1.0]

Bryce Leske: [00:02:19] So the aim of this episode, as Ren alluded to, is to understand, Roee, what to invest in and how last episode we covered everything there was sort of walked through the basics. You had a lot of questions to sort of get you off the ground. Hopefully we Covid those. We gave you a bit of homework to go away and download the app that you were going to be using, which I think we determined was Comsec. And then also have a think about some of the stocks and particular ETFs and perhaps areas of interest that you want to invest in. So we're going to dig into that a little bit more. But for all the listeners out there, hopefully by the end of these three episodes, you, too, will be inspired to take your first step into the markets as we show you how easy it can be, particularly through things like the Comsec pocket app. So let's get stuck in. [00:03:03][44.9]

Alec Renehan: [00:03:04] Yeah, let's do it. I mean, we did a twelve part series on Get Started investing, but that was abstract. So now we're really putting it into practice. And Roee has kindly volunteered to be our guinea pig. And this is where the rubber hits the road. Really? Yes. We've answered all of these questions, Will hopefully we'll see if he's got any more. But by the end of this episode, we will have the world's first. Correct me if I'm wrong, but I'm going to say world-first live on podcast investment [00:03:29][25.7]

Bryce Leske: [00:03:30] probably has to be correct. I don't think we have detected. Is that what's happening? [00:03:33][2.6]

Rohan: [00:03:34] Is that what's happening? I mean, he will put a tried in [00:03:38][4.8]

Alec Renehan: [00:03:39] by the time we finish recording. [00:03:40][1.1]

Rohan: [00:03:40] My count is twenty bucks later after those views. So, Sahraoui, [00:03:44][3.7]

Bryce Leske: [00:03:45] you have downloaded the Comsec Pocket app, but last episode we talked about, you know, there are many different options out there from micro financing apps and also your sort of full scale online brokers purely through convenience. I think, you know, you had a Commonwealth Bank account and you just sort of thought this was the most the easiest way for you to start your journey. Yup. Downloaded it. Any initial thoughts? [00:04:07][22.0]

Rohan: [00:04:07] Yeah. So it was pretty straightforward to download. The setup was pretty easy. I think at one point it just asks for your Commonwealth login details. [00:04:14][6.9]

Alec Renehan: [00:04:16] Give us those live on that. [00:04:17][0.9]

Rohan: [00:04:18] No, I know had it pre saved unlike you Bryce into safari. So yeah it was good to go and now I've had a quick play with it but held off from delving too deep because obviously as per the very strict instructions you gave me, we're going to do it here. [00:04:34][16.3]

Bryce Leske: [00:04:34] I just want to jump in there and say what you've done, downloaded how to play is something that I like and spoke about on Get Started Investing series. A lot of people fall over at the hurdle of trying to pick the perfect broker from the get go. Someone like yourself who probably spent hours and hours researching your 60 inch fork monitor. Thirty two on a comparison website has jumped straight into this with probably much less sort of vigor than you would have done with an electronic purchase. And I think that's a good thing at the end of the day, because the message is you don't have to choose the right thing from the start. [00:05:08][33.5]

Alec Renehan: [00:05:08] Yeah, there's no lock in contract with brokerage. It's not like a gym membership where they sign you up for life. You can move it any time. And so what we like to say on our Facebook group, when people ask about which broker to choose, and I'm pretty sure we would have said it on the get started investing series as well, is this is a don't let perfection be the enemy of the good situation. [00:05:27][18.6]

Rohan: [00:05:28] Your favorite saying it's [00:05:29][1.8]

Alec Renehan: [00:05:31] it is up there into the top three favorite song for me [00:05:31][0.1]

Alec Renehan: [00:05:33] But yeah, you can always change. There's no cost to change. Both Bryce and I have multiple brokers, and that's just because over time we've found other ones that are more suitable for our needs at that time. And so if anyone out there who's stumped on that step, you know, what's the right broker to choose, really, they all give you access to the same market and so well, you know, unless you're finding one that gives you access to the US market. But the majority of Australian brokerages will give you access to the Australian market, and that's all you need to start. You buy the same shares. You know, Commonwealth Bank shares a Commonwealth Bank share regardless of which broker you buy it through. So, yeah, don't let perfection be the enemy of the good. I'm going to get that saying it again. And Roee has embodied that by downloading an app and getting started. [00:06:16][42.7]

Bryce Leske: [00:06:16] Absolutely. Now, we do have a bit of structure to this app. So, as always, but I thought it would be a good idea to start just by understanding, are there any burning questions that you've got with anything related to anything? We'll take note of them and try and answer them, because I think the whole idea of, you know, the outcome of this is just to make sure that we're actually getting you into the market. So without going to date, but any sort of major burning questions that we could sort of help with [00:06:39][22.7]

Rohan: [00:06:40] first and foremost. And I guess I'm sort of advertising my ignorance on this one is I thought that the app could sort of would let you invest in particular shares until I downloaded it and had a quick play. And it seems to be only ETFs, which is fine for the moment. But I guess when I want to graduate to that next step of picking my own stocks, yeah, I'll probably need some guidance on where to from here. [00:07:03][23.6]

Bryce Leske: [00:07:04] Yeah, that's fine. [00:07:04][0.7]

Alec Renehan: [00:07:05] That's an important question. And it kind of cuts against what I just said about, you know, every brokerage giving you access to the same things. An important caveat there is what you've downloaded. Comsec Pocket is known as like a micro investing app, and there are really three in Australia that allow you to invest in smaller increments. So they give you more access to the market, but they're limited in what you can actually invest in. Outside of those three micro investing apps, then all brokerages are essentially the same. And I think for a lot of people and for you just getting started trying to figure out what the hell's going on, starting with the micro investing app, is a really good place to start because you don't have to put as much money in the brokerage as lower. And, you know, you're not paralyzed by choice of trying to do individual company research. But the drawback is, you're right, you can't actually buy a specific share in a specific company. But once you start I recokn , then it'll be a lot easier for you to understand what's going on, what functionality you want out of a broker. And then the decision on what broker to actually sign up with hopefully will be a bit easier, hopefully. [00:08:04][59.0]

Bryce Leske: [00:08:05] Any other questions? [00:08:05][0.4]

Rohan: [00:08:06] Yeah. So another one would be that you buy these ETFs in units. And I'm also interested to know about what determines the per unit cost. I'm looking here and firstly, I'm guessing that change, right? Yeah. Like on a daily basis. Sort of sort of Vibs. And secondly, why are some way more expensive than others? And is that an indication of the kind of return that you ought to expect? [00:08:31][25.6]

Bryce Leske: [00:08:32] So let's we will be getting into what is actually available and what you can invest in later in the episode. So I'll take note of those and we can revisit them when it's a bit more appropriate in the episode. But I think all very good questions that we will definitely answer anything else. [00:08:46][14.2]

Rohan: [00:08:47] So I in my sort of cursory research over the last week, I had to look at what stocks are sort of trending. And, you know, aside from just the Equity Mates Instagram, spamming me with a bunch of different content. [00:08:58][11.4]

Rohan: [00:08:59] It's good. It's good. [00:08:59][0.5]

Rohan: [00:09:02] Aside from just that and obviously Tesla's going through the roof and all that, you've got to have your head in the sand to sort of not have. I'm right about that. I noticed that some of the microchip companies were big players, as in like they had big movements. And I was kind of wondering why that would be. I didn't look into it any further because I thought it'd be good to sort of bring it up here. But AMD in particular. And what was the other one in video? Yeah. So what's the deal with microchip processing companies sort of taking off at the moment also? [00:09:28][26.3]

Bryce Leske: [00:09:28] Well, that's a great Segway. We asked what you wanted to invest in in the last episode, and I think your statement was whatever's going to make me the most paper [00:09:35][7.1]

Rohan: [00:09:37] sounds about right, which is fair, combined [00:09:39][1.6]

Rohan: [00:09:39] with ethical investing as well. But the other question I had was, is there going to be a solid return on that? And interestingly enough, I think we're looking on the CommSec app, the sustainability leaders ETF is by far and away the cheapest one. So what's the deal there? [00:09:56][16.8]

Bryce Leske: [00:09:56] Yeah, good question. And I think we should talk about price and what moves it and that sort of stuff later. But let's go back to what you've been thinking about investing in. Where have your thoughts sort of gone over the last sort of seven days or so when it comes to, you know, you've spoken about particular stocks, ETFs. You're obviously well read, which we mentioned last week, what you sort of thought process. [00:10:17][20.9]

Rohan: [00:10:18] Well, I guess right now with covid playing big unicyclists, how do we leverage that? Like, where are the opportunities with Covid and I Renesys been harping on about the Viall makers? [00:10:30][12.2]

Rohan: [00:10:31] Oh, yeah. Yeah. [00:10:32][0.5]

Rohan: [00:10:32] So what's what's the deal there? Because I've also been reading that they might not be able to manufacture enough, but I suppose at one point supply will catch up. So aside from these vol makers, where are the other opportunities? Like obviously is going to be those biotech companies that are actually making the vaccines? Can you invest in most of them? Because a lot of them are like universities and stuff? I don't I don't think you can buy, like, shares in Oxford or maybe you can. I don't know. [00:10:55][22.5]

Alec Renehan: [00:10:55] That's a good question. And we will come back to your microchip question as well. In terms of investing in Covid, I think there's probably a number of ways to play with. [00:11:03][8.0]

Rohan: [00:11:03] But investing in covid, I'm [00:11:05][1.6]

Rohan: [00:11:05] going sure [00:11:07][1.9]

Alec Renehan: [00:11:08] that is a good clarification. I think the first way is you can invest in vaccine manufacturers, but you're right, it's like how do you invest in Oxford University? But what you'll find is a lot of the. Diversity studies and a lot of the light nonprofit and government funded studies in partnership with industry, and a lot of the time that's just because industry has the balance sheet to really fund a lot of that research. So the Oxford study is obviously being done by Oxford Uni, but it's actually in partnership with a biotech company, Astra Zelinka. And that big [00:11:40][32.3]

Rohan: [00:11:40] fan. Yeah, I think one of [00:11:43][2.0]

Alec Renehan: [00:11:43] the top three pharmaceutical companies for you. Yeah. They're a company that's traded on the London Stock Exchange. And so if the Oxford vaccine is the vaccine that is commercialized and scaled first, Oxford may have done the research, but AstraZeneca is a way that an investor can benefit from that partnership. The first way is you invest in the vaccine. I think that's probably the lowest probability way of doing it, higher probability ways of doing it, asking like what are the associated industries that will benefit from the trends that are emerging out of Covid? So like Zoom the video, telecommunications, you know, everyone knows it has just had a crazy its share price just topped five hundred bucks a share, started the year around the 60 mark. So it's up, you know, 600 something percent for the year like it is killing it. So, you know, that's one there's a whole bunch of other trends that are accelerating. So, you know, the move to online retail. So you might look at some of Bryce favorite stocks that are doing well in the online space or the Amazons and stuff of the world. [00:12:43][60.4]

Rohan: [00:12:44] So can I just ask obviously, like JB Hi-Fi was going really well as well, if you want to invest in whatever that company was one of my favorite biotech companies and JB Hi-Fi and Zoome, they're obviously not going to be in the one ETF unless there's someone has jumped on a Covid ETF. Hey, not a bad idea. Not a bad idea. So I guess that would come then down to investing in those companies separately because J.B. would be probably in the retail or the tech. [00:13:12][28.5]

Alec Renehan: [00:13:13] Yeah, yeah. There would be one index where all three of those companies probably see it, but there's like an all world index. I would assume that all three are big enough that they fit in that. But that's [00:13:23][10.3]

Bryce Leske: [00:13:23] 8000 companies. [00:13:24][0.8]

Alec Renehan: [00:13:25] Those three companies aren't going to move that index materially. [00:13:27][2.2]

Rohan: [00:13:28] They might have my other favorite biotech companies. [00:13:29][1.7]

Rohan: [00:13:30] I'm going to say they probably will. [00:13:31][1.2]

Alec Renehan: [00:13:31] So, yeah, you're probably looking at multiple ETFs or, you know, if you got a high conviction on those three particular companies, you'd buy those stocks. [00:13:38][6.8]

Rohan: [00:13:39] Well, we've got a high conviction on one or two. [00:13:41][1.8]

Rohan: [00:13:42] So take it back [00:13:43][1.4]

Bryce Leske: [00:13:44] to some of the basics here, because what you've done is exactly what we kind of try and talk about, which is to use what's going on in your environment and what you know as the basis for trying to figure out what is there available in your investing universe. A lot of people often struggle and think about trying to get into stocks, Carina's and that sort of stuff, which I'm assuming you haven't done at all. [00:14:04][20.7]

Rohan: [00:14:05] I don't know what it is. [00:14:05][0.6]

Bryce Leske: [00:14:05] Fair call. And you've essentially just kind of thought, well, what is trending or what is going on in now in the economy at the moment? And how can I somewhat take advantage of that? So I think that's a good call. Just enough. Why did you know that you can invest in Manchester United? [00:14:20][15.0]

Rohan: [00:14:21] I did know that, yes. And as much as I love my beloved boys, not convinced on that front. [00:14:28][7.5]

Bryce Leske: [00:14:29] Yeah, well, since their peak back at the end of 2018, the stocks are slightly down. Forty three percent. That's less than their positions on the letter. [00:14:36][6.7]

Rohan: [00:14:36] So, yeah. Okay. Well is there button. But anyway we digress. [00:14:44][7.3]

Bryce Leske: [00:14:44] So outside of Covid [00:14:45][1.1]

Rohan: [00:14:46] Dollars suck [00:14:46][0.2]

Bryce Leske: [00:14:48] outside of Covid. Are there any other you know you mentioned the microchip stocks Nvidia how did you actually like come across them. [00:14:56][8.0]

Rohan: [00:14:57] Just a bit of Googling which I think it's pronounced in video invidia. [00:14:59][2.6]

Rohan: [00:15:00] I say Navidea. Oh is it also. And gurgling what though. I can't, I can't [00:15:08][8.5]

Rohan: [00:15:09] remember the exact phrase but knowing me would probably be something like interesting stocks. Twenty twenty or. [00:15:13][4.1]

Bryce Leske: [00:15:13] Oh okay. So you're actually just looking for some inspiration. Yeah. Yeah. Nice. Yeah. I mean that's nothing wrong with that. [00:15:18][4.8]

Alec Renehan: [00:15:18] Yeah. Yeah. To answer your question. Well, first of all, some of these microchips are extremely volatile, so they move a lot day today. There are a few big trends and there are also a few particular events. Invidia acquired a company recently, so potentially that's why they shot up. And that's why you saw the Taiwan Semiconductor AMD a invidia are sort of taking the industry by storm. And Intel is really suffering as a result. Like a lot of the traditional microchip players are hurting because the way that microchips are produced and stuff has changed, Taiwan Semiconductor is changing the industry. So I think there's probably just some bigger macro trends playing out. And that's why those stocks are particularly hot right now. But like if you look at some of their share prices, they've actually dipped a fair bit recently, like in the last couple of weeks, just because they are quite volatile. Their prices move a fair bit [00:16:05][47.1]

Bryce Leske: [00:17:17] So speaking of the Covid play, I mean, we might start with that one in your comment around, is there an ETF covid ETF? There is an ETF called the iShares Global Health Care ETF. It is available on Comsec Pocket. I think they've called it health wise or something like that. It actually gives you exposure to 100 companies in global health care, biotech, pharmaceuticals and medical equipment. And if you go out and look at the top holdings, Johnson and Johnson number one holding well, they're in the race for the Covid vaccine, United Health. There's a whole bunch of others in there, Pfizer, that are all sort of indirectly in some way related to what's going on at the moment. So it's actually not a bad play to sort of think about that sort of exposure. So, yeah, it's something to consider. [00:18:04][47.4]

Rohan: [00:18:05] Just quickly, going back to the Navidea, as you called it, I'm having a look now. And under the Sustainability Leaders ETF, interestingly, the top companies for Apple, Invidia and MasterCard, how does that play into sustainability? Like is it just that the internal green policies? [00:18:24][18.6]

Alec Renehan: [00:18:27] a really good question. And it's a [00:18:29][1.5]

Rohan: [00:18:29] I've got a couple [00:18:29][0.4]

Alec Renehan: [00:18:31] sustainability. It's really like beauty is in the eye of the beholder situation. Like one person's sustainable is another person's unsustainable. There's a number of different sort of, I guess, screens or ways that these ATFP providers and index providers come up with sustainability. So some and I would assume or actually I'm not sure about those three companies, but some are like negative screens. So they basically say we don't want to be in gambling, alcohol, tobacco, fossil fuels, weapons manufacturing. And if you're not in those industries, then you're sustainable. So it's like a negative Ren they just exclude certain industries. [00:19:09][38.0]

Rohan: [00:19:10] Is there like a supervillain ETF that does have all those things? [00:19:13][3.4]

Alec Renehan: [00:19:14] Probably, yeah, I'm sure that would be. And I'm not sure how well it would do because the thing is sustainable companies generally have performed better, so maybe not the best investment, but then there are other ways that they screen. There might be a sustainable one, but it's the screen is like environmental sustainability. And so they are like, if the, you know, MasterCard, Invidia and stuff like that are procuring renewable energy and got a whole bunch of commitments in that space, then it's like, all right, well, they're sustainable. Alternatively, it could be like if they're outperforming their industry. So like if Invidia is more sustainable than amde in Taiwan Semiconductor and Intel, then it's like, okay, well, they're the best in class. But generally what you find is that the sustainability world is bigger than you would expect. [00:19:56][41.8]

Bryce Leske: [00:19:56] So in this specific situation, Roee, this ETF is the EFFY, which is a beta shares global sustainability. The portfolio is made up of large global stocks identified as climate leaders that have passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations. [00:20:19][23.2]

Rohan: [00:20:20] So that's like in their line of business, they're making the right choices, not that those companies themselves don't invest in. [00:20:27][7.1]

Alec Renehan: [00:20:28] And you could really set me off on a rant [00:20:29][1.2]

Rohan: [00:20:31] that's not going to. [00:20:31][0.5]

Alec Renehan: [00:20:32] Yeah, yeah. So I mean, like a classic question in sustainable investing is ExxonMobil. I think their R&D budget over the last X number of years was like three dollars billion, and that was for oil and gas exploration [00:20:43][11.7]

Rohan: [00:20:44] and trading them up. And then what about. Oh, yeah, yes. [00:20:48][4.2]

Alec Renehan: [00:20:49] And they're obviously unsustainable because they're in oil and gas company JP Morgan. On the other hand, in that same period, they invested, you know, tens or hundreds of billions of dollars in funding companies that were investing in oil and gas exploration projects. But at the same time, that is a tiny proportion of the total amount of money that they've blended. So on an absolute basis, they're investing more in the fossil fuel exploration industry than Exxon. But on a relative basis, it's a tiny proportion of their book, which one's more sustainable, which one's less sustainable. So there's a number of fraught questions around sustainability that different index providers will answer differently. And so the most important thing if people want to invest sustainably, is to dig under the surface and actually look at what the ATF holds and then decide if that aligns with your values. [00:21:39][50.1]

Rohan: [00:21:40] So this is really interesting to me because I'm looking at more of the stocks under the Sustainability Leaders ETF. And yeah, it's like obviously Tesla's in there, but it's Visa, PayPal, Netflix, Toyota. I would not have thought unless I obviously clicked in and done a little bit more homework that those stocks would be under the sustainability leaders category. I would have thought it'd be like, I don't know, a company that's investing in like converting oil to fuel or converting like, what is it, the bio diesel fuel thing or like go solar, solar plant, onshore, wind farms, all those ones. [00:22:12][32.7]

Alec Renehan: [00:22:13] The universe becomes a lot smaller if it have that tight on sustainability. [00:22:16][3.2]

Rohan: [00:22:16] And that's why I was. Asking last week's episode, as much as I would like to. Wouldn't necessarily be a good investment because I can't really see those things in the short term being as profitable as the Teslas or the apples of the world. But this inspires me with a bit more confidence, because I know that these guys, these guys know what they're doing. [00:22:35][18.2]

Alec Renehan: [00:22:36] I don't want to go too far down the sustainability rabbit hole, but I'm going to ask one question to Rory just to get his thoughts. So AGL is big Australian energy company owns a lot of, you know, fossil fuel like coal fired power stations and stuff like that. But at the same time is one of Australia's biggest investors in renewable energy generation. Sustainable, unsustainable. [00:22:56][19.3]

Rohan: [00:22:57] I guess if there was some sort of metric, which I'm sure there is, to determine whether the good that they perform is better than they want to get sued by these guys, but they're not good. Yeah. Then that would be it, I suppose. [00:23:12][15.1]

Alec Renehan: [00:23:12] Yeah. Yeah. I mean, there's no good answer to a lot of those questions. So it's just that again, it's why you got a scratch under this. So it's a good question. You ask, [00:23:19][6.8]

Rohan: [00:23:19] like for example, a company that I'm quite familiar with that will go unnamed is a massive emitter of pollution, basically, but that's just the way that their business operates, like there's no other way around. [00:23:30][11.0]

Alec Renehan: [00:23:31] That's highly vague. But I guess the way you can make it a bit clearer is they run a lot of transport services, but the services that are essential. [00:23:38][7.2]

Rohan: [00:23:39] Yes, yes. But they also purchase a whole bunch of carbon offsets. So I suppose that sort of negates it. If the industry that you're in, there's no other way around doing what you do other than creating emissions. I guess the only other way and you had a go at me about this, too, is to offset it. So what's the difference? Yeah. [00:23:57][18.3]

Alec Renehan: [00:23:57] So I think let's not get too bogged down in the sustainability conversation. We have done sustainable industry Dollars before, so I think people can go back and listen to them. [00:24:06][8.5]

Bryce Leske: [00:24:06] The main thing is it sounds like sustainability is on the watch list or the shortlist. [00:24:11][4.6]

Rohan: [00:24:12] It is on the watch list. [00:24:13][1.1]

Bryce Leske: [00:24:13] Nice. [00:24:13][0.0]

Alec Renehan: [00:24:14] It would be good to move towards making a decision. But I guess before we really get down into those details, is there any other things that you've sort of thought about or any companies that have caught your fancy or, you know, any other industries or trends that you're interested investing in? [00:24:29][15.2]

Rohan: [00:24:29] Yes. So another one is, as we spoke about in the last week, try investing like what you know, and maybe this is one for well, maybe it might be captured in one of these ETFs. But the airline and travel industry has been taking a serious hit at the moment. But I like to think, well, I hope that it's not going to be like this forever. So would it represent value to get in now while they're sort of suffering from a long term play, knowing that in the next few months or even the next couple of years, it's not going to bounce back. But if you look at it 10 years down the road, you actually got it at a very good price. [00:25:03][33.1]

Alec Renehan: [00:25:03] So in a nutshell, yeah, potentially [00:25:05][1.7]

Bryce Leske: [00:25:06] it's good thinking. [00:25:06][0.4]

Alec Renehan: [00:25:07] It is good thinking. [00:25:07][0.5]

Bryce Leske: [00:25:08] My question would be, how do you know who's going to come out next three years? [00:25:11][3.1]

Alec Renehan: [00:25:11] Is it going to be a virgin that collapses or is it going to be someone that actually can survive? [00:25:15][3.5]

Rohan: [00:25:15] Well, that's a two prong sort of question, because one would be on the assumption that I'm investing in individual companies. So I obviously probably would not want to do that because I don't want to be investing in the asset of the future. [00:25:26][11.3]

Rohan: [00:25:27] No, I would [00:25:29][1.7]

Rohan: [00:25:29] probably be leaning towards investing in an ETF that encapsulates those things because there are people whose jobs are to know what has a fighting chance of coming out of this thing alive and what probably doesn't. [00:25:40][11.5]

Alec Renehan: [00:25:41] Now, that's an important thing there where you've just said it's people's jobs to know. The important thing to know about ETFs is they're not actively managed. So it's not like there's a fund manager saying, like, you know, this company is going to do poorly, so we're going to exclude them and this company is going to do really well. So we'll put more money into them. [00:25:58][17.7]

Rohan: [00:25:59] Who's picking [00:25:59][0.2]

Alec Renehan: [00:26:02] Let's use an example that would include a lot of travel related industries. So in Comsec pocket, there's an Aussie top two hundred which tracks the two hundred biggest Australian stocks in that would be Qantas flights that are and a bunch of other travel related companies. But by virtue of the fact that they're in the 200 biggest companies, they're going to be in that ETF regardless of what their future prospects are. They're just in there by virtue of their size. So that's the important thing with ETFs. And over the long term, active management actually historically doesn't really outperform large companies just on an index. But yeah, it's not like someone's picking and choosing there. [00:26:38][36.4]

Bryce Leske: [00:26:39] But that's half the idea of an ETF, is that you get the overall movement of everything that fits within that sort of wrapping. Otherwise, you're best putting your money with someone who is going to actively manage and try and pick winners. Even the sustainability one, for example, they would have run a screen that says these are the top 100 stocks that match our criteria. But then they wouldn't go in and say, well, actually, we don't actually think that that's going to perform well. They'll just say these are the top one hundred. And regardless of the movement, we're just going to track the aggregate movement of all 100 stocks. [00:27:09][30.2]

Alec Renehan: [00:27:09] So, yeah, you're betting on the trend or the market, like the Aussie top 200. You're betting on the Australian market doing well. Oh, like the health ETF. You're saying that the. Health industry as a whole is going to do well, and in every ATFP there will be stocks that do better and stocks are the worst, but you're betting on it in aggregate. [00:27:24][14.8]

Rohan: [00:27:25] I find it interesting that micro investing does sort of afforded the opportunity to do that. I don't know why, but I would have thought that to get into ETFs and stuff, it would be a higher cost of entry. Micro investing I sort of had in my mind, on the same wavelength as penny stocks. Like I would think like Jordan Belfort. There's just like if you if you're going to invest under a grand, what's the point? You're going to end up with something pretty. Hagon Yeah. [00:27:49][23.9]

Alec Renehan: [00:27:49] No, I mean, that's really the beauty of ETFs. And what they've done for the market is that they've made accessing large companies and a large group of companies so accessible, both in terms of cost, like the fees are so much lower than getting someone to actively manage it. And also the initial amount you have to put in, you know, you don't have to go out and buy 200 individual stocks. You can just buy it in one trade. And then that's the third thing. It's just in one trade rather than, you know, multiple trades. So, yeah, that's the beauty of ETFs. They've really changed the game for retail investors like us. [00:28:22][32.7]

Rohan: [00:28:22] Yeah. The lack of effort that I've had to put in to do this is pretty much next to nothing, I think is a pretty great way to dip your toe in the water. [00:28:30][7.6]

Bryce Leske: [00:28:30] Yeah, definitely. For your interest, there is an ETF that follows the airline industry. It's called us. It's called Jets' Classic ETFs. [00:28:38][7.9]

Rohan: [00:28:39] Is it an acronym? [00:28:39][0.4]

Bryce Leske: [00:28:40] Nope, that's it. [00:28:41][1.1]

Rohan: [00:28:42] We can we make one up for sure. [00:28:44][2.7]

Bryce Leske: [00:28:46] And it provides investors access to the global airline industry, including airline operators and manufacturers from all over the world. But they're not going to pick and choose. It's just you're going to get that. So if you're backing in that globally, the airline industries are going to recover, that might be one worth looking at. I don't think it's available through your platform at the moment, partner. [00:29:05][19.2]

Alec Renehan: [00:29:06] And it's lost half of its value in twenty twenty years. [00:29:08][2.4]

Rohan: [00:29:08] Well, that was what I was saying. Like it was it's really cheap now, but it could bounce back globally I think. Yes. Eventually, when you said it was a US company, USA lines for me it's going to be a no for me Dollars. [00:29:22][13.7]

Alec Renehan: [00:29:23] So that's, that's an important distinction. So it's a US based ETF. So you buy it on the US exchange, but it holds global companies so similar to this health care one that's in the Comsec pocket of sustainability or sustainability in the closing pocket out there. They're based in Australia. So you buy them on the Australian exchange, you buy them through an Australian app like CommSec Pocket. But they don't just hold Australian stocks. They give you exposure to, you know, the global health care industry or the most sustainable companies globally [00:29:51][28.0]

Rohan: [00:29:52] on the US market. Just maybe as a note for another point, we can come back to what's the deal with buying them and how much of a hit do you take in currency conversion and things like that? Because I, I don't know about you guys, but I don't have bulk USD sitting around in a bank account. No, somewhere [00:30:08][16.5]

Rohan: [00:30:09] you don't know. But it depends on your interpretation of bulk is [00:30:15][5.9]

Alec Renehan: [00:30:15] processed for different bank accounts, each with a different [00:30:17][2.1]

Bryce Leske: [00:30:20] nice. So this is a great point in all of the ETFs that you're going to buy through CommSec pocket. They are all bought through the Australian Stock Exchange and domiciled here in most instances, meaning that the operators are here in Australia and it's going to be in Australian dollars. [00:30:37][17.1]

Rohan: [00:30:37] How does that work when one of the ETFs is global? One hundred. The other one is emerging markets talking about China, Taiwan, Korea, India and more. [00:30:44][7.1]

Bryce Leske: [00:30:45] Yes. So let's take the global one hundred, for example. So iShares is the operator of that. What they do is you're essentially buying into the iShares ETF. What they then do is go out and individually buy all those stocks and bring them into and wrap them up. And you're buying a share of that whole pool. Does that make sense? Yeah. Yeah. So that's how you get international exposure literally through the Australian Stock Exchange. [00:31:12][27.0]

Rohan: [00:31:12] You're buying the basket based in Australia. Yes. And they're getting the items from all over the shop. [00:31:18][5.6]

Alec Renehan: [00:31:18] This guy gets it and then they take [00:31:20][1.8]

Rohan: [00:31:20] we won't go too far down this path. But for this one in particular, the iShares Global One Hundred, they take out all the currency fluctuations. [00:31:28][7.6]

Bryce Leske: [00:31:28] So to your point about unit ETF units and let's take the global one hundred as it stands and at the time of recording [00:31:37][8.5]

Rohan: [00:31:37] seventy seven point twenty four. [00:31:39][1.3]

Bryce Leske: [00:31:39] So one share of that whole basket is worth seventy seven point twenty four cents as that basket. It's almost like CPI really, as that basket moves in price by virtue of each of those stocks moving up and down, moving up and down the aggregate price movement, it then translates to a change in price of the unit price. That's essentially where you make your money. [00:32:02][22.9]

Rohan: [00:32:03] I still don't understand, though, why some units are more expensive than others [00:32:09][6.2]

Bryce Leske: [00:32:09] without going into too much detail. But really what happens is when a provider such as Beta shares or shares any of these providers who go out and create the basket. They arbitrarily just say, all right, we're going to start this ETF at ten bucks. It doesn't matter what price they start. And then from that point, the movement in the basket of stocks then from that point changes the price of the ETF. So if one provider decides to start, there's at 50, the other starts at 10, you're going to have differences in ETF prices. Don't use that as a way to judge ETFs against each other, though, because that is completely the wrong way to look at it. Just because one is nine points and one is 90 Dollars, it has nothing to do with the relationship between each other. [00:32:52][42.6]

Rohan: [00:32:52] So to answer my earlier question, it's no indication of the kind of return that you would know. [00:32:56][3.6]

Bryce Leske: [00:32:57] If you think about it this way, if you put 50 bucks into the ETF, that is nine dollars and 50 bucks into the ETF, that is ninety dollars. And they both go up 10 percent. You're going to make the exact same amount of money. [00:33:09][12.0]

Rohan: [00:33:10] OK, but can you put 50 bucks into an ETF that's worth ninety dollars. You can buy five nights at once. [00:33:15][5.3]

Bryce Leske: [00:33:15] So through technology and through apps like Comsec Pocket and other micro investing apps out there, this is one of the beauty of these sorts of things, is it does allow you to do a minimum of 50. So what it will do say is it will say, all right, that units 90. So we'll give you 50 bucks worth of one unit. [00:33:33][17.5]

Rohan: [00:33:33] OK, yeah, yeah, yeah. [00:33:34][1.1]

Bryce Leske: [00:33:35] So it's a good question around price. So that's how the price moves. Don't necessarily worry about the actual price of the ETF. I'd be looking at more what is in the ETF. Yeah. And what is going to drive the performance of those stocks. [00:33:47][12.2]

Rohan: [00:33:47] 10 units worth of a nine dollar ETFs could be more lucrative than 190 dollar. [00:33:54][6.9]

Alec Renehan: [00:33:55] Let's say that exactly the same ETF, you know, they're both tracking the ASX 200. Both have the same management fee. Both everything's the same. If you buy 10 units of a nine dollar one or one unit of the ninety dollars one, what you're actually doing is buying exactly the same thing, because all they're doing is they're taking your money and spreading it across all the companies in that ETF, as Bryce was saying, as it moves, it just tracks it from there. So really, if you're buying exactly the same ETF, but the unit price is different, it should really be the same. [00:34:26][31.8]

Bryce Leske: [00:34:27] So in terms of your question around wanting to make the paper, [00:34:29][2.3]

Bryce Leske: [00:34:32] What's going to outperform you really need to be thinking and you obviously already are. What is the underlying holdings of those ETFs and what is going to be the macro events or the macro pressures that actually change the price of those shares? And you can see the percentage of holdings, like there's a couple in here where, you know, Apple and Microsoft and sort of the make up the top 10, 15 percent. Well, obviously, the price movement of those shares are going to have the most impact on the price of the ETF. [00:35:01][29.4]

Rohan: [00:35:02] That sort of brings me to another question. And I mean, I don't want to be driving this thing, [00:35:06][4.3]

Rohan: [00:35:07] but the [00:35:07][0.4]

Alec Renehan: [00:35:07] whole point of this is for you to drive it. [00:35:09][1.5]

Rohan: [00:35:09] So you are talking about the sort of macro pressures that influence the share price movement. On that note, another one that I sort of have a bit of interest in is how will the emerging markets and specifically the emerging markets ETF be affected by what's going on with covid? I guess that also then would come down to what is held in those ETFs. I'm looking at it now on Alibaba, Tencent, Tomalin, semiconductors, bunch of people. I don't know, Reliance. [00:35:36][27.1]

Bryce Leske: [00:35:37] Yeah, it's an interesting one because emerging markets, you know, you're thinking sort of the Argentina's of the world and those sorts of things. They look at number one holdings, Alibaba. [00:35:45][7.5]

Rohan: [00:35:45] I wouldn't be thinking Argentina at all, would you? Because their economy [00:35:48][2.9]

Rohan: [00:35:49] going well at the moment. I don't think so. It frontier [00:35:50][1.9]

Bryce Leske: [00:35:51] investing. It doesn't mean that the economy is going well. [00:35:53][2.6]

Alec Renehan: [00:35:54] It's about the size of the company still. So basically the size does matter. Size don't matter in investing. Yes. So yeah, the emerging market ETFs are always interesting one for that exact reason. It's like what countries count as emerging then leads to what companies are in there. Obviously, if China is included as an emerging market, then it dominates the index. Reliance is India and there obviously a massive company. And so they will be a big part of a lot of emerging market ETFs. But yeah, China is the one that will really determine what's in there. And if China is in there, you're not really getting exposure to like emerging markets, as you would probably think of them. You know, like the the BRIC countries, you know, the Brazil, Russia, India, China is in BRIC. But you know what? [00:36:41][47.1]

Rohan: [00:36:42] I do know what you mean, which is also why I'm surprised that Samsung has been thrown in here, because South Korea, to my mind, has emerged. [00:36:49][7.1]

Rohan: [00:36:50] Yes, it has well and truly emerged. [00:36:52][2.4]

Rohan: [00:36:53] Yeah. So I would be surprised you're throwing that in there. [00:36:55][2.5]

Alec Renehan: [00:36:55] You could basically rename it like non Western ETF. And so yet again, similar to sustainability, it's an important one to look under the Rappa and see what companies are being held. But hey, like if you're getting exposure to Alibaba, Tencent, Reliant and Samsung and Taiwan Semiconductor, that's not a bad basket of stocks to be holding at the moment. [00:37:12][16.9]

Rohan: [00:37:13] It's not. It's not. But I guess the second part of my question would be how will they be? By Covid and yes, it comes down to what's in those baskets, but more broadly, taking aside those baskets of the ETF at the moment, do you see them? I guess they're taking a hit at the moment. If you look at like what's going on in India, but do you see them bouncing back? [00:37:32][18.3]

Alec Renehan: [00:37:32] Well, I mean, this is a deep question by Covid is an interesting question given how stock markets have performed recently. Like you would say, America has probably been top five countries in terms of worst handling of Covid. [00:37:47][14.3]

Rohan: [00:37:47] Many would say, number one, [00:37:48][1.0]

Alec Renehan: [00:37:49] I mean, Brazil and India running, right? Yeah, yeah. You know, wherever you place it, it has not performed well, but its stock market has performed really well. When you think about how individual companies are affected by covid, you, first of all, have to think about firstly, these are the biggest companies with the strongest balance sheets. Like if any company is going to survive, it's generally the big publicly traded companies because they have so much cash, they're generally quite profitable and they have the ability to raise more money quite easily compared to the smaller competitors. So the number one thing is like you can't just look at a country and say they've done well or poorly. Is that how these individual companies are faring? And then the second thing is sometimes how the actual company is faring and how their stock price is faring a quite different. So it's a deep question that requires a fair bit of study. I think if you're going to go through an ETF and think about how they're affected by Covid the way I would approach it, investing for the long term is by far and away the most important thing you can do. You're going to hold these units well beyond covid. And so whilst there might be some short term disruptions in some of these companies or some other companies and some other ETFs you hold, I would be thinking more. What's Alibaba, Tencent, Taiwan Semiconductor going to look 15 years from now? Twenty five years from now, and base your thesis on that and how these are these markets going to emerge and what what's going to happen to is there going to be an emergent middle class with a lot of spending power that supports these companies? You know, companies like Alibaba and Tencent will benefit from that in China. Will they change an industry like Taiwan Semiconductor? Will they become massive global exporters like Samsung? You probably want to think more long term than that, because the Covid question is a really good question. It's a really hard one to answer. And you're going to hold these things beyond Covid. Okay, yeah, that didn't really answer your question, but hopefully the deflection made sense. [00:39:38][108.6]

Rohan: [00:39:39] Sure. [00:39:39][0.0]

Bryce Leske: [00:39:40] All right. I just want to circle back on the currency thing. I'm just having a squeeze through the app. And it does say at the bottom of the info, if it is exposed to currency outside of Australia or not is something to take into consideration. But I wouldn't necessarily worry about that. [00:39:53][13.0]

Rohan: [00:39:53] And would you also need to think about how you think that that currency is going to perform? [00:39:57][3.4]

Bryce Leske: [00:39:58] That's sort of like an experienced investor thing for, you know, for us, it's not necessarily a major consideration to worry about, to be honest, because then you've got to start playing the currency game and there's more and more forces that come into it. Don't let that put you off. [00:40:12][14.3]

Rohan: [00:40:12] And the only forex really [00:40:13][1.2]

Rohan: [00:40:15] and not because I like that is. So let's just kind of recap here. And I think it's been I think it's [00:40:21][5.2]

Bryce Leske: [00:40:21] been great conversation. You know, you've obviously put a lot of thought into it. But I hope that what has come across is that you've really not necessarily done any technical analysis or worried about charts or worried about sort of the fundamentals of business, worried about valuing stocks. And I think the main message that we try and get across is you don't need to worry about all of that sort of stuff when you are just starting to dip your toes in the water. So that's probably the real key message here and something that we try and get across. So Ren did promise alive investment at the start of the year. [00:40:52][30.9]

Alec Renehan: [00:40:52] So we don't want to we don't know for sure or into anything. Do you have a few in mind? And we're happy to narrow it down to one and make a decision. [00:40:57][5.7]

Rohan: [00:40:58] Yeah. So this sustainability leader one has got me more inspired than what I was previously because I was thinking, yeah, I can't really say wind [00:41:07][9.4]

Alec Renehan: [00:41:08] turbines, wind [00:41:08][0.7]

Rohan: [00:41:09] turbines really fueling a [00:41:11][2.4]

Rohan: [00:41:11] profit generating profit. [00:41:14][3.0]

Rohan: [00:41:16] But yes, really back some of the companies in there, the sustainability leaders. One would be one that interest me, emerging markets as well, and probably global 100. I don't know why, but I'm just not that interested in well, not not interested, but less interested in the Aussie tops. Two hundred in the Aussie dividend's one. [00:41:34][18.3]

Alec Renehan: [00:41:35] Yeah. Yeah. No, I'm surprised you didn't go tech savvy. I would have thought you'd be all over the tech companies. [00:41:40][5.2]

Rohan: [00:41:40] Yeah, but the thing is that they're largely thrown into some of the others as well. [00:41:44][3.7]

Alec Renehan: [00:41:44] Yeah. Yeah. Good observation. [00:41:45][0.9]

Bryce Leske: [00:41:46] Great point. And that's something you should definitely consider when you're looking at these is called ETF overlap. You might buy the tech savvy and then the sustainability leaders and find that the top five companies might be very similar, if not exactly the same. [00:41:58][12.2]

Alec Renehan: [00:41:58] Yeah, yeah. Well, I mean, I would I would hazard a guess that the global one hundred and the tech savvy, the top five probably are the same. Yeah. [00:42:05][6.5]

Bryce Leske: [00:42:05] So in which case you kind of just doubling down on the same thing. [00:42:08][2.5]

Rohan: [00:42:08] So that diversification, [00:42:09][0.9]

Alec Renehan: [00:42:13] sustainability is always going. [00:42:14][1.2]

Rohan: [00:42:15] sustainability. Ren is a throwback to what your. Passionate about or used to be passionate [00:42:19][4.1]

Rohan: [00:42:19] still passionate, still passionate, just [00:42:21][1.9]

Alec Renehan: [00:42:21] not paid to be passionate about it anymore. [00:42:23][1.3]

Rohan: [00:42:23] Okay, fair enough. [00:42:24][0.6]

Rohan: [00:42:24] Sustainability and probably I'm tossing up between global 100 and emerging. You know what let's call it. Let's just do all three. Oh, wow. [00:42:33][8.2]

Rohan: [00:42:33] Oh, well, not only are we going to get the first about overlap, we might get the first Three-pronged alive investment. I got go home. [00:42:41][8.2]

Rohan: [00:42:42] All right. [00:42:42][0.2]

Alec Renehan: [00:42:42] So you put that trade in because dead air isn't great content. We'll wrap this episode. You tell us once it's done and how it was great. [00:42:49][7.2]

Bryce Leske: [00:42:50] As I said before, the main sort of takeaways from this for me Ren with it, you don't need to know the ins and outs of all the companies that you're going to be investing in to actually make your first step. There are a number of apps out there that make it incredibly easy and then taking the next step, ETFs on top of that, just make it even so much easier. Take the confusion out of all that sort of paralyzing feeling of trying to pick one company over another. He's obviously pretty keen here to get into some of the tech stocks and some of those big microchip stocks. And obviously, he's found an ETF that tickles his fancy. [00:43:24][34.2]

Rohan: [00:43:24] So, yeah, I've just done it. Oh, he's done it by the time he's done it. How did you find it? [00:43:30][5.2]

Rohan: [00:43:30] Very easy. I have a couple of questions. [00:43:31][1.2]

Alec Renehan: [00:43:32] We're going to do a third episode. We'll let you sizzle on this first investment and then we will sort of recap. And then I guess we'll have a conversation about how you found it and where you're going to go from here. So save your questions for the next episode. This was a good conversation and hopefully people listening takeaway that they actually know far more than they think. You know, Roee, someone who's just interested in the news and observing about what's going on in the world, covid, technology stocks, all that stuff, you can start forming a thesis just with what you know already. And there's a pretty famous investor. Well, one of the most famous investors, Peter Lynch, who wrote a book wound up on Wall Street that's worth writing. And he sort of spoke about just investing in what you know. And, you know, we have this great ability as just consumers in the world to actually have great information flow. Like if all of our friends are buying Nike shoes, we know that Nike is a stock is in demand and is doing pretty well. And, you know, if all of our friends are moving from Instagram to Tick-Tock, then we know what's happening. And not No. [00:44:30][57.7]

Rohan: [00:44:30] One thing about our friends. You're the only [00:44:32][1.8]

Alec Renehan: [00:44:32] one. And so I think this whole conversation has just been a reminder of that for me, that we actually have great information just from living in the world and using a lot of the products that these companies that we want to invest in produce. And you can form a thesis of that and you can start investing of that. [00:44:46][14.4]

Bryce Leske: [00:44:47] Absolutely. Rohe, we thank you for episode two of Getting You Started Investing. It's been an absolute pleasure having you on or fun, as always. [00:44:55][8.6]

Rohan: [00:44:56] Thank you very much. I just did a second one as well. [00:44:58][1.7]

Rohan: [00:44:58] Well, wow, this guy is going to be a big investor. [00:45:01][2.9]

Bryce Leske: [00:45:03] So Roee has certainly shown that it is possible to start small with Comsec pocket. You can download Comsec Pocket in the App Store or play store and absolutely get started today. Looking forward to the next episode where we're going to touch on portfolio construction, how to manage things from here and what's next for Robi's investing journey. [00:45:22][18.7]

Rohan: [00:45:22] Thank you very much, guys. Hopefully, Bear on you next time. [00:45:22][0.0]

[2426.0]

More About

Meet your hosts

  • Alec Renehan

    Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

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