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Asset Classes: The Ultimate Guide to Building Your Investment Portfolio

HOSTS Alec Renehan & Bryce Leske|18 May, 2021

We continue our chapter series with a deep dive into all your questions about assets! An asset is any resource that can be owned or controlled and has economic value. Everything from your house or your car, to a business’ intellectual property, are assets. Alec and Bryce talk about elements that beginner investors should think about when making investment decisions around assets, especially when making judgements on risk. They also talk about which asset class produces the best returns, what the most popular asset classes are, and why they could be useful…

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Have you just started your investing journey? Head over to Get Started Investing – Equity Mates 12-part series with all the fundamentals you need to feel confident to start your investing journey.

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Bryce: [00:01:09] Welcome to Get Started Investing feed podcast. We cover all of the basics that you need to start your investing journey. Are you joining us for the very first time and is this the very start of your investing journey? Well, before you dive into this episode with us. Our fate is designed to go from the very beginning, so we strongly recommend you scroll up and start from episode one. If you're feeling brave and just want to dive in, then don't let us stop you. Here at GSI, we unpack all the jargon and the confusing bits, hear your investing stories with the goal of making investing less intimidating. And we want to have a good time along the way. My name is Bryce and as always I'm joined by my Equity Mates Ren. How are you going? [00:01:44][34.8]

Alec: [00:01:44] I'm very good. Bryce back for the next chapter in the Get Started Investing feed story. Yes, we've done three parts on investing styles. We've interviewed an Equity Mates community member, talked about investing styles. Now on the next chapter, this book keeps getting written. [00:02:03][18.8]

Bryce: [00:02:05] This book keeps getting written and we're going to be doing the next few episodes focussing on assets. [00:02:11][5.9]

Alec: [00:02:12] Welcome back to school work on asset class. [00:02:14][2.5]

Bryce: [00:02:15] We're going to asset class. There are many different assets that we can invest in. And the good news is a lot of it can be done through the share market, which we're going to touch on today. Ren is going to be your teacher today on the student. [00:04:20][125.0]

Alec: [00:04:22] No, I don't suppose I'm going to go [00:04:25][3.1]

Bryce: [00:04:26] All right. [00:04:27][0.8]

Alec: [00:04:27] So, yeah, the last chapter we spoke about how like how you invest, you know, figuring out what what the right style is, based on your temperament, based on your interest, based on how much time you can commit all of that stuff. So if that's the how this is, then the like the what the what you're actually going to buy do is let's start with some definitions. What is an asset? [00:04:49][22.1]

Bryce: [00:04:50] An asset is any resource that can be owned or controlled and has economic value like you Ren you're an asset, everything from your house. To your car, to a business's intellectual property. These are all assets. Anything that you can really derive value from. [00:05:07][17.0]

Alec: [00:05:07] Yes. Yeah. So anything that you can own or control is element one. And anything that has economic value is element to. [00:05:14][6.7]

Bryce: [00:05:14] Yes. Is an umbrella or an asset. [00:05:16][1.5]

Alec: [00:05:17] Uh, yeah. On a rainy day. Well it's yeah. It's definitely an asset. If you can sell it, it's an asset. Well is it is a good investment on a rainy day. We're just talking about this because Bryce got stung with a triple surge over fair because it's raining in Sydney and there'll be a lot of rain shot in this area very well. [00:05:43][26.1]

Bryce: [00:05:44] So that's an asset Ren. But when you're when it comes to investing, you might have heard about people saying, you know, have you thought about which asset class you're going to be investing in or have you thought about how you're going to build a portfolio with different asset classes to give us the definition for an asset class? [00:05:59][15.2]

Alec: [00:05:59] Yeah, an asset class is just a group of assets that all share the same characteristics. So property is an asset class and then every different type of property is an asset. You know, everything from residential property to office buildings to warehouses to farmland like that, that can all just be grouped together under property or, you know, currencies is an asset class. And then the assets are Australian dollar, US dollar, Japanese yen. You get the point. Yes. Um, so yeah, it's just like a it's a broader term. It's the parent term. The category. [00:06:35][36.1]

Bryce: [00:06:36] Term, yeah. And I think what you mention there is the characteristics is the key point when it comes to thinking about asset classes. And later on in the next episode we'll take a bit of a Deep Dive on some of the key characteristics for the asset classes that we're going to go through today and how you might be able to build a portfolio of different asset classes. So Ren, there are plenty of assets out there in the world, but there are some that are considered to be your major asset classes that a lot of investors, professional investors and retail have the opportunity to to build and and and invest in. I think a lot of the time when we go through each of these is it'd be good to have a bit of a quick discussion around the risk profile because a lot of the time begin to base their investment decisions. I feel around like perceived risk of certain asset classes. For example, I'm not going to start investing in shares because they're perceived to be risky property, safe as houses, you know what I mean? Sure. [00:07:33][57.0]

Alec: [00:07:33] Maybe we need to introduce a common phrase like safe as houses for shares, secure shares, and then maybe people will start thinking that it's safe. [00:07:42][8.6]

Bryce: [00:07:42] Yeah, let's start that movement. [00:07:44][1.1]

Alec: [00:07:44] But big property have done really well with that. [00:07:46][2.0]

Bryce: [00:07:47] They have done very well. [00:07:49][1.3]

Alec: [00:07:50] The start the starting point here has to be, though, that every asset we're talking about here is investable through the share market. It's one of the more common misconceptions that you can only buy shares in the share market, but you can access any type of asset through the share market. If if an asset has value and investors see a way to capture some of that value, there will be a fund or an ETF for a different product that will try and give you access to that as other investors. So in some ways, it shouldn't be called the share market. It should be called the asset market investing the liquid, [00:08:27][37.1]

Bryce: [00:08:27] the liquid asset market. [00:08:28][0.8]

Alec: [00:08:29] The point of that being that if you're like, what the hell are these boys talking about? Property and currencies and commodities. We can't invest in those. [00:08:37][8.0]

Bryce: [00:08:38] You can think again thinking. We're going to show you how at the end of this episode. Well, let's start with one of the most common asset classes that I think everyone would have, and that is cash and currencies. [00:08:50][12.4]

Alec: [00:08:51] If if your definition of assets are they can be owned or controlled and they have value, then the money we have in our pockets is definitely both of those things. So the Australian dollar has value and we can own it. Same with every other currency around the world. And over time, currencies, well, not over time. Every day currencies get more or less valuable against each other. The currencies values are constantly moving. And so you can invest in that change. But money, money is an asset. Yeah, that's that's the kind of insight you come to. Equity Mates and Get Started Investing feed is [00:09:28][37.2]

Bryce: [00:09:28] an asset to give you an indication of the size of the market when it comes to cash and currencies. A whopping six point six trillion dollars exchanges hands on the forex or the foreign exchange market every day. Which is pretty phenomenal. [00:09:46][17.4]

Alec: [00:09:46] That is phenomenal. [00:09:47][0.3]

Bryce: [00:09:47] Huge, huge amounts of of money changing hands. People are investing and trading and trying to make a profit on on the Australian dollar versus the US dollar or the US. Dwan. [00:09:58][10.2]

Alec: [00:09:59] Yeah, right. Yeah. Well well, to be clear, because you often think like, what value is these people adding to society? Just just trading, you know, basis points here and there of these different currencies. Foreign exchange markets actually do have a really important function for businesses to, like, hedge their foreign currency risk and to enable international trade and all of that stuff. And that falls into that that six point six trillion as well. Yeah, all of global trade falls into that number. Yeah. [00:10:29][30.1]

Bryce: [00:10:29] I mean, it's pretty phenomenal. [00:10:30][0.5]

Alec: [00:10:30] No, I've got a question for you. Um, how many currencies are there in the world? [00:10:34][3.9]

Bryce: [00:10:35] There would be 120. [00:10:37][1.9]

Alec: [00:10:38] No, 180. Oh yeah, [00:10:41][2.7]

Bryce: [00:10:42] almost. Okay. I'm going to say one hundred ninety two. But then I thought no, [00:10:45][3.7]

Alec: [00:10:46] no, there's more than one hundred and eighty two countries in the world. I think they're ninety six at last. Uh honestly there's probably even more now. You know this is just a random off the off topic thought. But you know how in Pokemon it was like the whole thing is you got to capture all 150 Pokemon. Know what that was like? The game in Pokemon, Lucky Catch, all of them got to catch them all. That was the tagline, maybe we should make an Equity Mates game. Got to own them all and say who the first person to own a bit of all. One hundred and eighty countries are alike. There would be some easy ones, but there would be some tough ones in our account. There would [00:11:19][33.6]

Bryce: [00:11:19] be. Surely there's a market that provides access. [00:11:22][2.6]

Alec: [00:11:22] All right. Once you get into like the one seventies, you probably got to be boots on the ground in some of these countries. [00:11:27][4.5]

Bryce: [00:11:29] All right. So cash and currencies, huge asset class. And when we speak about asset class, we're talking about all those 180 currencies all all wrapped in one. How do you think about risk when it comes to cash and currency? [00:11:42][13.0]

Alec: [00:11:43] Look, the Australian dollar, the US dollar, you're you're pretty safe. You know, there there'll be Bitcoin people listening to this that will be telling me that I'm wrong. But look, it's backed by strong governments with strong economies and. You're relatively safe if you are someone in Venezuela or Argentina, how you thought about cash and currencies as an asset, that would have a very different answer. So currency is it's relatively stable in where we are and where a lot of our listeners are listening. But that's not a universal thing. [00:12:16][33.2]

Bryce: [00:12:17] Yeah, yeah. I would say, though, as well that if you're trying to trade currencies to make money, there are a lot of factors that you need to consider. If you're know [00:12:26][9.8]

Alec: [00:12:27] honestly, if you're not a professional or you don't have access to professional level. Yeah. Computing power and stuff like that, you're just you're fighting algorithms that are quicker, are able to smarter, able to, like, suck in more information more quickly and like, yeah, sure. You can make money if we're talking about sorry if you're talking about the risk of trying to make money for it, trading then very high. Yeah. Yeah. [00:12:51][24.1]

Bryce: [00:12:52] All right. So the second asset class that you'll often hear about is commodities [00:12:57][5.1]

Alec: [00:12:59] like commodities, talking about [00:13:00][1.6]

Bryce: [00:13:01] commodities otherwise known as raw materials, really their inputs that are used in the production of other goods and services. So if you think about, you know, the top 10 most traded commodities in the world, you've got crude oil, raw material, coffee, natural gas, gold, silver, sugar, corn, wheat, cotton. You get the you get the vibe. It's all those raw materials that are then traded on and either refined or included in the process of producing other goods and services. And people can invest in them and people trade them. And it's a pretty big market as well. [00:13:37][35.9]

Alec: [00:13:37] So I think the key thing when you're thinking about commodities and how they're different from other traded goods is that they are just standard. And, you know, there are multiple people creating them by drilling them from the ground or growing them or whatever. But they're just they're commodities. They're replaceable. They're interchangeable. Corn from Iowa in the US is much the same as corn from, you know, Darwin in Australia is much the same as corn from Russia, it's corn. And so you see that there there's just an international international commodity price that everyone sort of trades around the world based on. Some like oil has a few different benchmark prices. But yeah, commodities are just interchangeable goods and you just have a global price. In many cases, you have a global price for sugar, for gold. And you as an investor can say, well, I think gold is going to get more valuable because there will be less supply or there'll be more demand. Same with corn. I think I Iowa corn growers are going to lose subsidies from the Biden administration and there'll be heaps less corn growing and that means the price will go up. So you're literally just investing in something that is just it has a universal price, is replaceable, and you're really just thinking about supply and demand. Yeah. [00:15:04][87.1]

Bryce: [00:15:06] So the size of the gold market, if we continue on that trend, it's a 10 trillion dollar market that might sound massive, but wait till we get to some of the other asset classes in the world, but are still pretty sizeable market for for gold and kind of backing off what you were just saying there, Ren around. It's really just a universal price for me. The risk with commodities are they're very cyclical. [00:15:25][19.4]

Alec: [00:15:26] So so a lot of people talk about commodities being cyclical. And it's probably worth explaining just why that is the case, because a lot of people, a lot of financial industry people would just take it as a given. The reason that commodities are cyclical is because the cost to produce these things is generally fixed, like the cost of drill oil out of the ground or the cost to grow up acre of corn. It's generally fixed. That cost doesn't move much, but prices move as demand changes. And so when prices are really high hopes, the people are like, oh, it makes sense to to drill more or to grow more corn because prices are fixed and I can sell it for a really high price. So I it when people go into the market, which increases supply and then prices drop, when prices drop, people like it doesn't make sense to drill. It doesn't make sense to grow corn. So I stop supply shrinks and then prices go up again. And so that's why they generally move in cycles. It just it's all about like the amount of people drilling or growing or anything. [00:16:28][62.0]

Bryce: [00:16:29] Yeah. It's also about the demand side, though. It is like this. For example, if you look at the iron ore price at the moment, it's being driven by demand from China. Yeah, not because there's more people, but what you get, not because there's less people. [00:16:41][11.5]

Alec: [00:16:41] But what you'll say is that all of these marginal projects start coming online. More and more people are coming online. At some point, yeah, demand will shift, but at some point demand will slow. There'll be too much supply and then we'll see the prices go down the other side. Yeah. [00:16:57][15.5]

Bryce: [00:16:57] So it's a. Demand supply game, [00:16:59][2.0]

Alec: [00:17:00] yeah, yeah, well, I mean, we can start talking about the intricacies of demand, but I think the easiest way to conceptualise it is on the supply side. [00:17:07][6.7]

Bryce: [00:17:08] So let's move to a government and company. Debt is another asset that you can invest in. Yes. Really, otherwise known as the probably the most common term that you would have heard for these is bonds. What this asset class is, is really giving you the ability to loan money to government or private companies. And in return, they will pay back that that money over a set period of time with interest. And that's going to be traded and sold as an investment. But generally speaking, if the Australian government wants to raise some money to build new roads or infrastructure projects, they'll go to the market and say, we need to raise a billion dollars and they'll sell government bonds to do that. And you can buy those bonds and then have a very, very secure investment that will pay interest over a period of time. [00:18:01][53.0]

Alec: [00:18:01] Yeah, I mean, the easiest way to conceptualise bonds is think about when you go to the bank and you get a mortgage, this is the government going to the market and doing the same thing, getting money upfront and agreeing to pay interest and pay it back. [00:18:15][13.2]

Bryce: [00:18:16] Pretty simple. Yeah, yeah, sounds simple. Sounds great. It's actually really hard to get access to bonds as a retail investor. You need a lot of money. [00:18:25][8.5]

Alec: [00:18:25] Yeah. Yeah. Well, no one, honestly, like the market is not set up for retail investors now. More and more people are trying to get involved, but the market was set up for governments and big companies to sell it to banks. [00:18:39][13.4]

Bryce: [00:18:39] Yeah, yeah. So as we said, commodities, the gold had a 10 trillion dollar market. Bonds just blow that out of the park worldwide at the bond market is worth one hundred and nineteen trillion dollars. The US alone takes 46 trillion of that. So it's a it's a huge market and enormous amounts of money are invested and traded from a risk point of view, given that it's backed by some of the most powerful governments in the world or some of the most powerful and biggest companies, these are considered very secure investments. In fact, they're so secure that they're almost classified as risk free. [00:19:19][40.0]

Alec: [00:19:20] Well, essentially, you know, for the US government to default on a US government bond, the [00:19:25][5.3]

Bryce: [00:19:25] world's in trouble. [00:19:26][0.4]

Alec: [00:19:27] We've got much bigger issues than your investment portfolio, like the world financial system will be in serious strife. And and, you know, there are riskier bonds. Let's like let's not say that all bonds are created equal like government. U.S. government bonds are probably the safest in the world. Then you go up the risk to other governments, up the risk curve to big companies. Then you start as you get into like weaker and weaker companies, you start getting into what is known as junk bonds, and they can be pretty risky. And people made a lot of money trading them. But on the whole, for a bond not to pay you back, a government or a company is going to have to go bankrupt. [00:20:05][38.0]

Bryce: [00:20:05] Yeah, very unlikely. So then we have property. We can't forget property, particularly here in Australia. I would suggest that it is the most loved asset class here in Australia. Yes, property is property. I don't think we need to explain too much about that. But as you said at the start, it is broader than just residential. You've got commercial property. You've got, you know, farmland and then go [00:20:31][25.9]

Alec: [00:20:31] outside, look at some buildings. Yeah, that's old property. [00:20:35][3.5]

Bryce: [00:20:36] It's a five point five trillion dollar market here in Australia, which is just for residential alone. So pretty, pretty massive, which sort of dwarfs the size of our share market, which is not surprising. 36 trillion dollar market over in the U.S. so pretty massive. [00:20:52][15.9]

Alec: [00:20:52] Yeah, which is interesting because what that seven times about four of them, they have heaps more than seven times our population. So on a per capita basis. [00:21:03][11.0]

Bryce: [00:21:04] Yeah, yeah. They've also got some very cheap housing. [00:21:07][2.6]

Alec: [00:21:07] They do it [00:21:08][0.8]

Bryce: [00:21:10] in terms of risk profile. I think people, as we said at the start, think that property is safe, as safe as houses. And I mean, look, yes, you would be right to think that house prices only go up if you read the news every day here in Australia. [00:21:22][11.9]

Alec: [00:21:22] But you would not be right to think that, let's be clear, [00:21:24][1.7]

Bryce: [00:21:24] but you would not be right to to think that properly. And it's it's you know, if someone was to show you the price fluctuation of your house day to day, I'm sure people would think of it a little bit differently. [00:21:36][11.6]

Alec: [00:21:37] Yeah, well, I just think like that we have grown up in a world of ever reducing interest rates. Yeah. And the biggest determinant of house prices is interest rates, because if the bank is giving you your mortgage at a lower and lower interest rate, you can afford to get more and more. You can afford to borrow more and more, which pushes prices up because everyone can borrow more. So that that's been the the secular trend, I guess the the tailwind that is really propped up the property market. What happens if interest rates turn is the question, look, property is not unsafe and like the thing is, you can always live in your house even if you're underwater on it. You probably don't want to be paying for it. But yeah, I like property is seen as safe. It is a relatively safe investment, but interest rates, interest rates, interest rates do not go blindly into property. Well, don't go blindly into anything, but just be aware of where we are in a potential, you know, multi decade interest rate cycle. Yeah, yeah. Um, one thing that I always want to stress with property, because everyone is like. Property is so expensive, you can't access it for the majority of people, it's just you locked out until you're in your 30s. Yeah, except on the share market you can buy rights. [00:22:57][80.0]

Bryce: [00:22:58] Yes. Which we will touch on [00:22:59][1.2]

Alec: [00:23:00] in a sec. OK, I'm jumping the gun here. [00:23:02][2.4]

Bryce: [00:23:03] Well, yes, you can. I mean, as we said, you can buy all of these, but let's just close it out. Well, we can chat about it afterwards. [00:23:09][5.7]

Alec: [00:23:09] Okay, fine. Yeah, there was a lot of run up there for us last year. Yeah. [00:23:14][4.6]

Bryce: [00:24:32] Let's close it out by, obviously, one of our favourite well, if not the favourite asset class here at Equity Mates, and that is equities, equities are simply shares in company. And that that's really all there is to say. [00:24:44][12.9]

Alec: [00:24:45] Look, I mean, we've done plenty of episodes on this, but equities are, you know, part ownership stake in a company. [00:24:52][6.6]

Bryce: [00:24:53] Yeah, 109 trillion dollar market globally. If you were to take all the all the listed companies in the world and their market caps, some of the major stock markets, you would have heard of the Australian Stock Exchange, New York Stock Exchange, the Nasdaq, the Footsie over in in Europe, in London, there are 60 exchanges around the world and the U.S. makes up 56 percent of the global stock market value, which is no surprise there, considering the companies that they have listed. So, yeah, one of our favourite asset classes, no doubt. [00:25:24][31.3]

Alec: [00:25:24] Yeah, yeah. And look, we have Covid of some of the major ones. There's a lot more we didn't touch on cryptocurrency. We didn't touch on art. We didn't touch on cars, wine, baseball cards or Pokémon cards to Pokemon reference in one episode. That's interesting. Yeah, NFTE, all of these things capture value and our stores of value in many ways. You know, you you can sell it for something and you can be relatively confident with at least some of those asset classes. You know, Art, you can be relatively confident that it will hold its value and you can sell it. There's a there's a concept that you might not want me to introduce here, given you've already told me to pause on something else. I'm going to try and introduce it will save you. Let me know if you think about all these asset classes. There's a question that Seth Klarman asks in his book Margin of Safety, which has really stuck with me over my investing journey that I think is worth putting in when we're talking about all these different asset classes. Are you investing or are you speculating? And with a lot of these asset classes, what you're doing is you're you're buying them with the hope that someone will pay more for them in the future. Like if you buy a piece of art, it's not like generating you any money while you own it. You buy it because you hope someone will pay more in the future. Or if you buy, you know, like some some wine, I guess. Same thing. You you keep it in a cellar. It's not making any money. And you hope someone pays more for it in the future. Compare that to like shares where they're creating while you own them. They're getting more valuable people, the companies hiring, people working hard, all that stuff, blah, blah, blah, making your money, paying you dividends or property you like. If you buy property and you rent it out, you're earning rental income while you own it. And so for me, the way that I like to separate all these different asset classes in my head are assets that. While you own them, they're productive and they're making you money and then ones that you just aren't because you hope to sell it for more in the future. Are you investing or are you speculating? [00:27:36][132.2]

Bryce: [00:27:38] Nice. So to continue with Ren massive run up when we talking about Equity Mates the most exciting [00:27:44][6.3]

Alec: [00:27:45] property, we're talking about [00:27:46][0.8]

Bryce: [00:27:46] property. The most exciting part for us is that the share market, as we said at the start, gives you the ability to invest in all of these asset classes and create a portfolio. You don't have to go out and buy a solid gold nugget. You don't have to go out and buy a barrel of oil. You don't have to go out and buy a suitcase of US dollars. You don't have to knock on the door of the U.S. government or the Australian government and ask for them to engage in a loan with you. All of these are available through the share market, which provides some pros and cons, a lot more pros and cons for us. And it's an awesome opportunity. [00:28:27][41.5]

Alec: [00:28:29] Well, talk to us. What are the pros? [00:28:30][1.2]

Bryce: [00:28:31] So the pros firstly, as we've just mentioned, this is accessability. You can access all of these assets through the stock market very easily from the comfort of your own home. Yeah, around the world as well, both domestically and internationally. [00:28:45][14.4]

Alec: [00:28:46] So and I think accessibility is two things. The first one is like the ease of buying, as you were saying. It's not like there's some arduous process of actually getting this stuff. It's you go into your brokerage account, put a few numbers in and say, oh, like three letters in to get the stock ticker or the Clode, say how much you want to buy hit by its online shopping, online shopping for assets. Not bad, but it's also accessibility in terms of the minimum cost that you need to access it. So, you know, bonds are normally traded in fifty thousand dollar parcel sizes. The property is obviously, you know, I don't know what the average house in Sydney or Melbourne is, but [00:29:24][38.1]

Bryce: [00:29:25] one point one is it [00:29:26][1.0]

Alec: [00:29:27] must be nice and all. But, you know, same with a bunch of these other assets. You know, if you wanted to actually buy the minimum quantity of gold from like a gold mint, you're probably talking thousands of dollars. The share market enables you to buy fractions of all of those things. So the cost to get involved, it's much lower. You can buy a few dollars worth of gold or maybe a few hundred dollars worth of gold, a few hundred dollars worth of property, a few hundred dollars worth of bonds, which is something that you couldn't do if you were actually trying to buy those things physically. Yeah. [00:29:59][32.3]

Bryce: [00:30:00] Speaking of cost, Ren another massive advantage of the share market and buying all these assets through the share market is actually the cost of buying. If you think about the costs associated with buying a house, you've got stamp duty. You've got to save it for the deposit. You've got to pay the agency fees. You've got to pay for marketing in demesne or wherever you want to. Real estate dot com. The costs associated with buying and selling is incredibly high compared to, say, a five dollar brokerage fee that you pay to access property through the stock market. Equally, if you were to try and go out and buy a barrel of oil, literally, you'd probably have to. The costs associated with that driving they're getting in the trailer, getting out all the way over to Saudi Arabia or wherever the barrels of oil are going to be, it's going to cost you a fortune to do so. You can do it just by paying brokers. [00:30:47][46.4]

Alec: [00:30:47] I'm sure you Australian oil, they [00:30:49][2.0]

Bryce: [00:30:49] would very I'm trying to think of an expensive option. So the costs associated with buying these [00:30:54][5.2]

Alec: [00:30:55] you know, these people may remember in twenty twenty how oil went negative. Yeah. A lot of that was because traders were actually going to have to physically take possession of the oil barrels. Now like we don't want that. So we'll pay you to take it off. Yeah. Yeah. Because yeah, you're right, it's an expensive thing to have to actually take possession of it and figure out what the hell to do with it. Yeah. [00:31:15][19.9]

Bryce: [00:31:15] Yeah. And finally, a big pro is liquidity. Now this is a bit of a pardon, the jargon if you've just started your investing journey. But liquidity really means the ease and speed at which you can turn something into cash and and liquidate. It is is really where that term comes from. So if you were to think about, for example, trying to sell a house, if you needed to sell your house to get some cash. Within the next three hours, it's highly unlikely that you're going to be able to turn that around because you have to put the put it on the market to do some inspections, then close it out with the lawyers and the banks. Then you're going to get a check from whoever's bought it off. You need to cash the check and finally you get the money into your account. Now, that's not going to take a matter of hours. It's going to take a matter of days. So you can't really get that cash quickly, whereas the stock market, you can sell your shares or whatever asset class you've bought through the stock market within a matter of seconds and easily and quickly get access to to your cash. So the stock market provides the ability to turn all these assets to and from cash with relative ease and speed, which which is important when it comes to building portfolios and that sort of stuff. So another probe of buying asset classes through the stock market and then one confirmation I'd be interested if you have any Ren, but is ownership. So, yes, you can buy property through the stock market, for example, rates, real estate investment trusts. But that doesn't mean that if you did so, you could then go and live in one of the houses that was part of the real estate investment trust. Whereas if you owned the home directly, not through the stock market, you actually have ownership of that house. So, yes, you need to think about, for example, if you buy an ETF that gives you access to the gold price, you need to be careful about whether you actually have rights to some physical gold or whether you're actually just buying, I guess that the price of gold. So you just need to be careful about the ownership of the assets that you're buying and think about if that's important to you. [00:33:22][127.0]

Alec: [00:33:23] Yeah, and I think the other thing with ownership is decision making, like if you are buying a real estate investment trust to get access to property and you're like, I think the market's at the top, we should sell loans. Let's hear that. Yeah, I mean, you could sell your units, but it's not like. Yeah, yeah. You just all you can do is buy and sell your holding. You don't have any, like, decision making control over the assets. Yeah. But yeah, I think look for me it was a real revelation when I realised that basically you could build a whole diversified portfolio just through assets that were available to the everyday punter like you and I on the stock market. Um, I own a lot. We own a little bit of crypto, some, who knows, you know, percentage of the portfolio. Um. Irons and gold through the share market. I obviously own stocks, not not all, not a lot of commodities outside of gold, not a lot of property, no debt. So, yeah, the main one for me, I mean, I'm pretty aggressive in my investing at this stage, but young enough to be. Yeah. Do you own any of these other assets in your portfolio? [00:34:41][78.8]

Bryce: [00:34:43] Wine, cars, art and furniture. Yeah. [00:34:45][2.3]

Alec: [00:34:45] Must be nice. [00:34:46][0.6]

Bryce: [00:34:47] And then. Yes, Krypto obviously stocks. Yes. A bit of property and infrastructure. No government bonds. Yes. Commodities and yes. [00:34:58][10.9]

Alec: [00:34:58] Currency actually. Sorry I do own some company debt. I Macquarie Macquarie issued some hybrid notes which I like kind of like bonds but are traded on the stock market. Let's not worry too much about Ren think of them as just bonds. Yeah. So I do own some debt as well. [00:35:15][17.0]

Bryce: [00:35:16] Nice. Well that gives you a bit of access and exposure to the major asset classes that are investable both on the share market and off. We're going to spend the next episode discussing the key characteristics for some of these assets and why you might decide to buy them. They're all used for different reasons. And then we'll have a look at building a portfolio with these different asset types using the share market. So stick around for asset class. A couple of episodes to go, but Ren will pick it up next week. [00:35:47][31.0]

Alec: [00:35:47] Sounds good. [00:35:48][0.3]

Speaker 3: [00:35:49] Get Started Investing feed is a product of Equity Mates media. All information in this podcast is for education and entertainment purposes only. It is not intended as a substitute for professional finance, legal or tax advice. The hosts of Get Started Investing feed are not financial professionals and are not aware of your personal financial circumstances. Before making any financial decisions, you should read the product disclosure statement and if necessary, consult a licenced financial professional. Do not take financial advice from a podcast. For more information, head to the disclaimer page on the Equity Mates website, where you can find the ASIC resources and find a registered financial professional near you. In the spirit of reconciliation, Equity Mates media and the host of Get Started Investing feed acknowledge the traditional custodians of country throughout Australia and their connexions to land, sea and community. We pay our respects to their elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people today. [00:35:49][0.0]

[1929.9]

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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