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The Fierce Girl's Guide to Finance

Get your shit together with money

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Invest like a boss

If you can shop for clothes, you can shop for shares

“Nobody in my family has ever bought shares. It’s all new to me. I’d like to be able to do it myself. Is there an ‘easy way’? Probably not.”

This is part of a message I got from an old friend recently. And I loved it!

I loved that she was taking an interest in investing. I loved that she was thinking about her future. I loved that she was stepping outside her comfort zone.

So … is there an easy way?

Yes and no.

The mechanics of it can be easy. Sign up to an online broker and make some trades.

A harder part is knowing what to buy (more on that below).

And the hardest part is feeling legit.

It’s a challenge, believing we have the right to be here, doing this thing that has always been done by “smarter/richer/more important” people – and mostly men.

But it’s time for you to join this world. And I’m here to give you your ticket.

I’ll admit: this post is kind long and involved. But hang in there.  

For many people, investing is a whole new world. New language, new ideas, new ways to think. It takes a while to feel comfortable.

It’s like learning anything though. If you ask the average bloke about the merits of skin serums vs moisturisers, he will look at you blankly. That’s because society hasn’t told men that skincare is important, or socialised them to believe that the way their skin looks is crucial to their social success. So they haven’t learnt about it.

But just because it’s new, doesn’t mean it’s beyond your skill or knowledge.

Don’t worry, Fierce Girl is here to help!

I thought a lot about my friend’s question and figured that if you’ve ever gone shopping for a particular outfit, it’s a similar process. Say you need something to wear to a wedding.

Step 1. The Brief

There are a bunch of things to consider. The time of year; the accessories you have and the ones you need to buy; if your stilettos will sink into the grass; the dress code (does formal mean a long dress?); how fat/skinny you feel right now. The list goes on.

There are also the practicalities. How much can you afford to spend? How many weekends do you have to go shopping? How many weeks do you have up your sleeve to buy online, get it delivered and return the five dresses you hate?

It’s a lot of thinking. But we do it, because we are competent, empowered women.

And that’s the energy we need to bring to investing.

This is my one and only ‘designer’ dress that gets dragged out for nearly every event. 

When you’re in planning mode, some factors to consider are:

  • Your goals – is the money for a general nest egg or ‘f*#k-off fund’; for a bigger purchase down the track (e.g. a home deposit); will it be part of your retirement savings? Being clear on that will help with the next point…
  • Your timeframe – are you likely to need this money in the next five years? If so, maybe just stick it in a high-interest savings account. Shares can be too ‘up and down’ for a shorter period. But for a longer period, you can possibly tolerate a little risk and volatility – i.e. you have longer to ride those ups and downs, and let them smooth out over time.
  • Your own mindset – financial advisers like to talk about ‘risk tolerance’. In one sense it’s determined by the timeframe – the more time on your side, the more risk you can handle. But there’s also your own personality. If the thought that your share portfolio could fall dramatically will keep you up  at night, then it’s probably better to go with a more ‘conservative’ portfolio. Don’t sell yourself short on this – some risk is needed to make money. At the same time, don’t go against your gut if it’s going to make you unhappy.

Step 2. The Research

Lady Gaga sorting through stock tips

The wedding outfit can require some serious thought, especially if you’re likely to see your ex-boyfriend or some chick from high-school who was mean to you.

Research is the answer. You scroll Instagram, makes wishlists on The Iconic, and wander the shopping mall at lunch. You also flick through a few fashion magazines for ideas – haha just kidding, what is this, 1997?

At some point you decide that ‘formal’ can definitely include cocktail length dresses, because, well, there’s a perfect one on sale at Rodeo Show.

You can apply this solid skillset to researching your investment options.

The first question is whether you want a DIY approach or someone to pick things for you.

The DIY Approach – Direct Share Investing

Nobody does DIY quite like Fifth Harmony

You can pick a few companies to invest in, then buy their shares (technically, they are called equities, but let’s stick with the common name here).  You do this directly through a real-life or online broker (discussed in this post).

Some challenges with this are:

  • you don’t know if you’re paying a fair price  – unless you go deep into their financial statements and think about things like price-earnings ratios.
  • It’s harder to spread the risk. The more companies you invest in, the less it matters when one goes badly. ‘Diversification’ is a key investment concept, and it’s hard to achieve it unless you have a lot of money to plough into shares.
  • It can be more stressful – Related to the above point, owning just a handful of companies means you watch them more closely and get emotionally invested in their ups and downs.

Personally, I’m not a fan of direct investing. But some people are really attracted to it because they like the control it gives them, or they enjoy all the research and trading.

But if this doesn’t sound like you then, another option is a managed fund.

Pay someone else to be smart

Back when I got married, I would never have pulled my wedding dress off the rack when I was shopping for it. But the lady at Baccini & Hill has dressed a few brides in her time, and she knew exactly what would look good on me, because she’s a professional.

Belinda wedding dress
Please enjoy this photo of me eating a party pie in my expensive wedding dress. But it looks good right?

If you want your shares to be professionally managed, you have two main choices:

  • Active Management – someone (usually a team) does all the research, selects the companies to buy and then does the buying/selling at the appropriate time. You pay fees to the manager for doing all this work (usually a percentage of the amount invested). Picking a fund manager is a whole topic in itself, which I’ll save for another time.
  • Passive Investing – This is where your portfolio mimics the performance of the market, instead of someone picking the best shares for you. It means costs are much lower, but you don’t have a chance to ‘beat the market’ (i.e. make more than the average investor).

Passive investing – through Index Funds and Exchange Traded Funds (ETF) – has grown in popularity in recent years. It could be worth considering if:

  • You’re not fussed about beating the market and are happy to earn the average
  • You don’t like paying a lot in fees
  • You want to start with a small amount (like, a spare fifty bucks or so)

It’s not as DIY as direct investing, but it’s also not as hands-on (or costly) as active management.

The cheapest way to access this type of investment is through an ETF provider – such as Vanguard, iShares or BetaShares. If this appeals to you, I recommend reading ASIC’s explanation, so you understand what you’re getting into.

You can also invest in Index Funds through a manager like Vanguard – i.e. you put in an application directly with the manager, rather than buying on the exchange. The difference between these approaches is subtle – check out this article for more details.

Still confused/scared/intimidated?

If you are baffled by how many products are on offer, and which one is right for you, a roboadviser can help.

Companies like Stockspot, Six Park and Raiz put together a basket of ETFs for you, based on your needs and preferences. There is a fee, but it’s generally a lot lower than paying a human adviser.

Speaking of humans, don’t rule out getting an adviser if you are really serious. Just like a personal trainer can get you over the fear or walking into a sweaty weights room full of men, an adviser can guide you through the world of investing.

You’ll pay for the privilege, but if they give you the confidence to step into investing, you could potentially make that money back over time.

Step 3: Get cracking!

I know this is a lot of information, and I’m not recommending you jump online and buy, buy, buy right now!

Do some more reading (or watching videos) to get your head in the game.

However, don’t wait to be an expert. Perfect is the enemy of done.

You can get started with a small amount of money, find your comfort factor, and then build from there.

And remember, if you can go shopping for clothes, you can go shopping for shares.

If Julia Roberts can do it, so can you!

Here are some more of my articles to help you get started:

 

 

 

 

 

Why investing is just like wearing false eyelashes: the pep talk you’ve been waiting for

A long time ago I bought a variety box from Sephora that came with a set of Huda Beauty false eyelashes.  I often looked wistfully at this wonderful creation.

If only I were that kind of woman. You know, the type who can skilfully apply false lashes and breeze out into the night.

Well dear reader, it turns out I am.

My friend Amara provided encouragement and coaching. I watched Huda herself apply them in an Instagram video. She made it look not that hard.

And so, with a wedding to attend, I figured it was now or never.

First attempt was clumsy. They seemed huge, I could feel them attached to my eyelids, and they obscured my vision slightly.

But by the end of the night, having consumed at least an entire bottle of champagne and taken about 347 selfies, I was telling anyone who’d listen that they had become part of me.

‘I’m actually a cyborg now: part human, part eyelash’. You’re dead right, I am an entertaining wedding guest.

Wedding Selfie no. 243

So anyway, I pulled them out again for Cup Day, because well, why not look good if work is paying for your lunch and booze?

Cup Day selfie no. 67 – please note my crown

This time it was much easier; they stayed in place easily and I quickly activated cyborg mode.

Then this week, I lashed up for a Fierce Girl photo shoot (more to come on this). By now, I managed to do it no-stress, first time and at 6am. Kim Kardashian, eat your heart out.

The reason I am telling you this otherwise tedious story, is that it proves a point about life, cosmetics and investing.

I had previously approached the issue with a lack of confidence. I was overawed. “I’m not the type of person who does that”, I told myself.

But I’ve almost mastered it now, thanks to gentle encouragement, online research and a first attempt that felt, frankly, clumsy and uncomfortable.

I also chose a quality, trusted brand. (Surprisingly, the $3 ones from Daiso are vastly inferior to the $40 ones from Sephora. Who knew?)

If you’ve thought about investing, but been overwhelmed by it, you should take heart from this story. And the next one.

I met a bloke at the ASX Investor Conference in Brisbane last week. I call him a ‘bloke’ because that’s what he is: a salt-of-the-earth fellow with a broad Queensland accent.

If this were a meme, the conversation would go:

Nobody:

Absolutely nobody:

Queensland bloke: You know what, I’ve made an average of 7% a year since 1999 by investing in shares.

Consider: if old mate had invested $10,000 back when Britney was singing Hit Me Baby One More Time, then added another $500 per month, he’d have made up to $285,000 by now. (That’s an estimate only and doesn’t allow for the sequencing of returns, but you get the picture).

If he does the same for the next 10 years, it could jump to over $600,000, thanks to the magic of compound interest. As the Backstreet Boys said in 1999, I Want it That Way.

 

Oh baby, baby, how was I s’posed to know that I should have been investing in 1999, instead of drinking cheap wine and flirting with boys?

Following this unsolicited disclosure, I asked my new friend some questions. He holds about 25 stocks at one time (pretty standard). He picks them based on broker reports, media articles and a good old dose of gut instinct. His best performing pick was Blackmores – bought in at $10 and it’s now over $200 per share. Part of his rationale? He saw the products in the pharmacy and knew the brand.

He also picked some dogs, like Slater & Gordon, where he threw good money after bad. (Nothing about investing in a law firm sounds attractive to me, but … each to their own.)

He lost a lot in the GFC, but hung in there and the portfolio recovered over time.

And that, my friends, is how you make money in equities.

I’m here to tell you, if old mate Queenslander who lived on a farm for twenty years can do it, you can too.

There are different ways to access listed investments. A fund manager can do it for you, you can buy a low-cost ETF, a roboadvice provider can hook you up, or you can just choose them yourself. I’ve written a whole post about it here.

The overarching message is this: anyone – including you – can build their wealth through listed investments. You need some baseline knowledge, a willingness to try and a good deal of patience.

You can always start small – exchange-traded products don’t have a minimum investment. (Well, technically buying one unit is the minimum).

Of course you need to be mindful of risk and time horizons. A rule of thumb is that shares suit investors who have at least a five-year time horizon. That allows the ups and downs to balance out over time.

And diversification is important. Old mate had actually lost money on the property he owned (it was in the country) so was happy he had his wealth spread across different asset classes.

Long story short, if I can nail false eyelashes, you can totally nail the stockmarket.

From Arts student to Finance nerd: if I can invest, then you can too

I’m the least likely finance blogger.

I dropped maths in Year 12. Messed up chemistry because ‘I didn’t know there’d be so much maths in it!’.

Picked a university course devoted to History, English, French and Latin. Because of course employers want to know if you can decline a Latin noun (I can, but it hurts my head these days).

The important point here is that contrary to popular belief, you don’t need to be good at maths to be good at money.

The maths can be handled by the calculator in your phone or the Excel on your computer. All those times spent crying over an inability to do long division? Wasted. (Serves me right for being such a geek.)

Having observed a bunch of people in the finance industry, and quite a few rich people, I can tell you there are qualities that make you good with money that have nothing to do with your grasp of trigonometry.

Let me share a few of these qualities.

Confidence.

This is the big one. In the finance industry, it often veers off into arrogance, and while that can make people insufferable in conversation, it does help them to take action. 

Let me be clear, I’m not talking about being reckless. What I’m advocating is a willingness to educate yourself, do your research, form a view and then take action.

As long as you’re following the basic principles of investment, taking action is generally better than doing nothing at all. (Basic principles like don’t put all your eggs in one basket, don’t chase ‘get rich quick’ schemes, don’t borrow more than you can afford).

You can always start small until you build your comfort factor. Basically, if you can operate with even half the confidence of a mediocre white man, you’ll be fine.

Curiosity.

There is no one, single way to get ahead with investment. Some people swear by property , others love a managed equities fund and some think ETFs are the way to go.

Personally, I think a bit of everything is good – it’s pretty much how I think about dating: spread the risk and reward, and avoid catching feelings for anyone in particular.

But the key is to do your homework. Read about the things you might invest in; hear from different commentators and sources; pick up magazines or newspapers that cover new topics. Always keep learning.

One of the world’s best investors, Warren Buffett, spends five to six hours per day reading five newspapers and 500 pages of corporate reports.

I mean, if I were that rich, I’d probably allocate at least half of that time to watching Rupaul’s Drag Race and drinking martinis* … but you do you, Warren B.

Clarity.

It’s hard to get excited about anything if you aren’t clear on the ‘why’. Too many of us just stumble around with our money, hoping for the best. Will we have enough stashed away for Christmas, next year’s holiday, or some far-off but vague retirement? Fingers crossed!

Ladies, I want you to be crystal-fucking-clear on what you’re trying to achieve. If you’re saving for a specific thing, write it down, give it a timeline, give it a spreadsheet.

If you’re investing for the future, get down and dirty with what that future entails. Is it a lifestyle? A destination? A few years out of full-time work to raise kids?

Whatever it is, the more you can picture it and feel it, the more motivated you’ll be to work towards it.

Right now, I’m in a period of transition, and my old goals are giving way to new ones. (Hot tip: you can always change your mind about your goals). So now, I’m focused on a short-to-medium term lifestyle goals.

When I was in Year 12, my bestie and I would keep ourselves sane during the HSC by picturing the cute outfits we’d be wearing clubbing (picture Sporty Spice circa 1996).

Right now, I’m getting pumped about the ability to wear jeans, feminist-slogan t-shirts and a pair of Air Max 90s from my (possibly-excessive) collection. The more I can push those smart, corporate Review dresses to the back of the wardrobe, the better.

Sure, wearing trainers isn’t everyone’s jam.

But that’s the fun of it right? We all have different goals and dreams and views on footwear. But having clarity about your own goals is one of the best damn motivators around.

And guess what, I even made you a worksheet to help you work out some goals. You’re welcome!

So there you have it Fierce Girls. The Three C’s of Getting Rich.

That’s totally just something I made up then by the way. But it sounds convincing and who doesn’t love a listicle, huh?

Long story short, you can get on top of all these investing stuff, with a bit of time, attention and a touch of fake-it-til-you-make-it attitude.

*Probably have already overallocated my time to these pursuits, to be honest. 

The ultimate ‘get started’ guide to investing (and stuff)

So, you’ve made the decision.  It’s time to put on your serious-lady-suit (Romy and Michelle style) and get busy with money.

Whether daunting, exciting – or both – you need to start somewhere.

And that’s where it can come undone. What do I choose? How do I choose? What should I ask?

All very good questions. I can’t promise I will answer all of them, but let me give you some starting points on your journey.

I want to invest in ETFs

Exchange-traded funds are a popular, low-cost way to invest in a range of asset classes, from shares to bonds. I’ve written more about them here.

If you’ve done your research and want to get started, first thing you need is a broker. As the ‘exchange-traded’ name suggests, ETFs trade on the Australian Securities Exchange. While the days of guys shouting at guys on chalkboards are over, brokers still need to do the trade for you. There are lots of well-known online ones like CommSec, but the nerds in the forums I hang out in reckon Selfwealth is the cheapest.

Speaking of brokers – a great opportunity to appreciate Leo in Wolf of Wall St

If you don’t want to go down that road, you can consider an app like Raiz or a Roboadviser (see below), and they do that part for you.

In terms of choosing which ETFs, you really need to spend some time with your friend Google.

I want to invest in a Managed Fund

Rather than buying or selling units on the ASX, like with an ETF, you apply for units in a managed fund, directly to the company. There is usually a form to fill in (online or paper), you give them money and they give you units in the fund.

There is also an ASX service called mFund, which allows you to bypass the old form-filling grind. It does require a broker or financial adviser though – so if you have neither of those, probably not worth the effort.

In terms of how to choose a managed fund, it’s kind of like saying ‘how do you choose a dress?’. Do your research, have a clear idea of what you want, keep a keen eye on prices (fees), and get recommendations from friends. There is a handy tool on the mFund site to get you started.

Pretty sure Gaga did some solid research on this dress.

I want to get Financial Advice

First up, be clear on what you want and how much you want to spend. (This post may help).

Money Coaching – this is the mani-pedi of the advice world. It helps you with goal-setting, budgeting, cashflow, saving, and everyday money goals. It’s more like a life coach, in that it’s not regulated by ASIC and they can’t legally tell you what to do with your savings – they mainly help you accumulate the money. Sometimes they have affiliated services to take you to the next stage.

I see a lot of people who think they want financial advice, but really want money coaching. It’s way cheaper because there isn’t a bunch of expensive compliance sitting behind it.

People like Vivian Goh are leading the charge in this area.

The most iconic manicure of them all

Robo Advice – Let’s call this the fractional laser treatment of advice: yay technology!  These services use powerful algorithms to give you an investment plan. You tell them your goals, and the friendly robot builds a portfolio to achieve them. Stockspot and Six Park are two of the bigger players in Australia – they have lots of helpful articles on their websites, with more information.

Comprehensive Financial Advice – This is the full day spa treatment of advice with a price to match. It looks at your whole financial picture: goals, retirement planning, risk tolerance, tax issues etc. But it takes a lot of time and compliance on the adviser’s side, so you’re looking at upfront fees or $3000-4000 or more, with the option of ongoing service (and fees).

How to find an adviser? Check out this post. 

I want to sort out my super 

Sorry but this is the only pun that makes super interesting

So, you want to merge multiple accounts, check your insurance, review your investment options or generally find out WTF is going on with your retirement savings (yeah girl!).

Call your main super fund. If you want to roll multiple accounts into one, the fund will do the heavy lifting for you. If it’s other questions, they are generally pretty helpful and can often provide ‘limited advice’ at no cost.

Don’t know which one you should pick? The big-name industry funds are pretty solid, but you can also check out this website for more information.

Made to measure? Ready to wear? All about off-the-plan apartments

Last week I witnessed the glorious sight of 120 women drinking wine and listening to a seminar on getting started with investing.

Girls Just Wanna Have Funds was a puntastic pleasure. I liked Molly’s description of investment being like the free weights room at the gym: full of men and very intimidating.

(Personally, I am that bitch – the one who struts around the weights room, frowning at men who don’t unrack their weights).

Anyway, the seminar focused a lot on listed investments such as shares and ETFs. This is great, because they can be a wonderful way to get started. (Click here for an explainer).

But I know that when many Australians think of investment, they think of property. And so, I wanted to talk about something in the news recently: buying off-the-plan apartments.

I know people who have done this successfully, so I’m not here to throw shade at the whole idea.

But when a big developer went bust last week, it added to the negative headlines around this sector. Remember the infamous Opal Tower, whose residents were evacuated at Christmas thanks to some big concrete cracks? It was followed by a similar issue in Mascot recently.

As a result, people are scratching their heads about whether purchasing off-the-plan is such a great idea. So, let me give you a quick rundown on the pros and cons of this style of investment.

Why do developers sell off-the-plan?

So they can borrow money to build. Most developers don’t just use their own money for a project; they usually need a loan.

And the lender wants to know that buyers have put their money on the table to provide ‘debt cover’ for the loan. Once the lender feels comfortable that they could be repaid if things go wrong, they’ll stump up the money for construction to start.

Why do people buy off-the-plan?

Lots of different reasons, but here are some:

  • Brand spanking new – nobody else has lived there when you move in. Some people really like that. You can often choose the fixtures and finishes too, so it is like buying a made-to-measure wedding dress  – the design is standard but the details are yours.
  • Lock in a price upfront – this is appealing in a rising market. Say you agree to pay $500K and then the market rises by 5% over the next year – your asset has increased in value by $25K without you doing anything.
  • Have time to save up – the time that the developer spends marketing and building the property is often a couple of years. So, you have that time to keep saving and boost your deposit/reduce your mortgage – all the while knowing you have locked in a price that won’t go up.
  • Depreciation tax benefits – when you buy a property as an investment, you may be able to claim ‘depreciation’ as the property ages. It’s quite complicated, but it can give you some tax benefits.

So, there are definitely upsides to the idea. But there are some risks to consider too:

The project may not go ahead. The developer normally has to wait and sell a good chunk of the units – maybe 75% or more – before building can start. In the market peak, when projects sometimes sold out in days, that wasn’t such an issue. But at this point in the cycle, sales have slowed significantly.

So, it could take months or years to reach the minimum debt cover; and in the worst case scenario, they never get there. That doesn’t mean you lose the deposit – you have just have that cash locked up in some sort of trust account, earning little to no interest. The contract should have a sunset clause that says if the project doesn’t start by X Date, the buyers can have their money back. So, be clear what that date is when you sign up!

The value of the property might fall by the time it’s finished. As explained above, you can make money in a rising market by locking in a price and just waiting. Perhaps that $500K unit is worth $550K the day you move in.

But in a falling market, it can lose value instead, and the unit is now valued (by a professional valuer) at $450K.

It’s only a paper loss at this stage – i.e. you don’t lose the money until you sell it. But where it can cause trouble is if you’re getting a mortgage. The bank will agree to lend a percentage of the VALUE, not the PRICE. So, if they are providing 80%, it’s 80% of that $450K. If they won’t go any higher, you need to find the extra money somewhere else. If you can’t find it, you may have to walk away … and lose the deposit.

The finished building may be poor quality. That’s what happened with the Opal Tower. Most finished buildings end up with some defects, anything from broken tiles to leaking windows. Many only appear over time, and the builder is contractually obliged to fix them within a certain period from completion.

It’s when that period is over, or when the cause of the problem is unclear, that things can escalate.

I should point out that this isn’t unique to new buildings. My own apartment block is 20 years old and had a very expensive water seepage issue a few years ago. That’s why the strata has insurance and collects a sinking fund. Although if that’s not enough, you can get hit with a ‘special levy’. Home ownership can be hard!

The developer could go broke before it’s finished. This is a remote risk, but the key is to be aware of what your contract says. We don’t know all the facts yet, but word on the street is that Ralan, the developer who just collapsed, had convinced its buyers to release their deposit to cover interest costs. This is highly unusual – some are saying it’s even illegal – but the fact is, everyday buyers wouldn’t have realised what they’d signed up to.

And if it’s true (as some have suggested) that the conveyancers they used were recommended by the developer, it’s even fishier.

Life pro tip: whatever big purchase you make, always get your own, independent advice, from mortgage brokers through to lawyers. Don’t use the people your vendor recommends!

So, should you buy off the plan?

It’s totally up to you. Like every single investment, there are risks and rewards. The key is to see them all in advance.

One option is to buy recently completed apartments –  this ‘residual stock’ may be marketed as ‘Final Release’ and is made up of the units that weren’t sold in the pre-sales period. They don’t want to dump them on the market in a fire sale, so they sell them off one by one. These are an option if you want a brand new place, but also want to see it first – like a wedding dress that’s ‘off the rack’.

Overall, any investment comes down to your personal goals and preferences. Buying property for investment creates concentration risk – i.e. putting all your eggs in one basket – but some people like the feeling of being able to see and touch their investment. If you’re buying to live in it, the risks (and benefits) can be different, but they still exist.

Before you make any decision, be sure to have a clear view of your timeframe, risk appetite and lifestyle preferences. And please, if you do go ahead, get decent legal and tax advice. Think of it as part of the cost – you need someone providing you with objective advice and pointing out any red flags.

 

Two insider tips from the finance industry that may just make you rich

Haha sorry about the clickbaity title. But it’s kind of true. These two things may just help you get past your fear and lack of confidence about investing.

You see, there are a lot of vested interests who like to make investment seem haaaard and scary and complex. (So you pay them to do it for you, ya see?).

But it doesn’t have to be that hard, I swear. So, here I offer you two truth-bombs to consider.

1. It’s all about the big picture, not the details.

There’s an investment concept called ‘asset allocation’, and before you hit the snooze button, let me explain why it’s important. It refers to the big ol’ mix of investments you have, like a  recipe.

A bit of property here, some shares there, here’s a parcel of bonds, and here’s a pinch of alternatives!

Each ‘asset class’ has its pros and cons, and when you mix them all together you get a delicious mixed fruit cake. (psych! fruit cake isn’t delicious at all).

People selling you investment products will often tell you theirs is the best. Performance this, fees that. But you know what’s more important than the separate ingredients? The recipe you start with.

(Actually that assertion is a hotly contested debate in the industry, on a par with the great Kimye vs T Swift battle).

Broadly speaking though, having a good, diversified mix of investments is pretty damn effective for building wealth. The recipe should be matched to your goals and timeframe.

When you go to a robo-advice service like Six Park or Stockspot, they are helping you choose the right recipe for you. They’ll also help with the ingredients, of course, through ETFs and Index funds (more on that below). So robo-advice can be a good (low-cost) way to get your head around the whole shebang.

The takeout: Don’t worry about finding the ‘perfect’ fund manager or picking the ‘hot’ stocks. Just make sure you have the right mix of investment types (i.e. asset classes) to meet your goals. 

2. Investors do stupid things … all the time.

That’s why markets are so choppy. At the moment, some of the most valuable stocks on the ASX are trading way beyond their intrinsic value. Take Afterpay – the favourite frenemy of the cash-strapped millennial shopper.

It’s currently overpriced because investors are piling into it in a frenzy.

The stock is currently trading at an astronomical high – a Price Earnings (PE) ratio of over 180 forecast earnings. You don’t need to know what a PE ratio is, you just need to know that even hot-tech-fave Google only has a PE of around 20.

Basically this stock is as popular as a fidget spinner in the playgrounds of 2017 (and personally, I think it’s heading for the same fate).

Markets boom and they bust. Particular stocks are in fashion, then they aren’t. Investors get caught up in ‘irrational exuberance’, and pile into the same companies, based on a good feeling and some comforting projections in an Excel sheet.

When a professional investment manager does this, it’s called ‘active management’, and they charge handsomely for it. Unfortunately, they aren’t always worth the money.

But you can avoid these professionals and their big bets by just ‘tracking the index’. You see, there’s an alternative to active and it’s called – surprisingly – passive!

Rather than picking particular investments, you just follow the market. The passive-vs-active debate is a long-standing one and I’m not here to adjudicate. (Unlike Kim vs Taytay, where I am team Taylor to the death).

I will say, this week the New York Times published a piece (which I stumbled across today – after I’d planned this post), where the author opines:

I had accepted the imperfect choices and high fees imposed by so-called active mutual funds, and I had compounded those liabilities by buying and selling at the wrong times.

“The Dalbar data leads to the inescapable conclusion that most investors, this one included, are bunglers: We panic and exult at the wrong moments, impairing our chances of success.”

He goes on to conclude:

“Most people, including me, would be better off if we gave up on being smart and stuck with a simple approach: long-term holdings of diversified, low-cost index funds, using only money we can afford to tie up for years.”

So if you are wondering how to get in on this passive investing gig, you could do worse than read my aptly titled post ‘WTF is an ETF‘, or check out Canstar here. If you want to dip your toe in the water, I like Raiz, because you can invest a small amount.

The takeout: there are simple, low-cost ways to access investments like shares, and they are totally within your reach and skillset. 

3 Key Investment Concepts explained by The Spice Girls

It’s Sunday morning, I still have glitter all over my face from last night’s Oxford St make-up, and I’m drinking coffee in bed. The only thing that could make today better is dropping some knowledge bombs on you all.

If you didn’t hear about the Great Disappointment of 2019, last week Mel B told us that The Spice Girls were coming to Australia, before clarifying that actually it was just a vague intention.

Anyway, since this Girl Power phenomenon was a huge formative influence on my life, I decided to give them their own Fierce Girl post. And sneak in some learning at the same time.

So, here I give you three important investment concepts they should really teach at school but usually don’t.

Capital Growth – this is when an investment or asset increases in value over time, without you having to do anything.

Capital Growth is the Spice Girls of the investment world. For that brief moment of joy where we thought the band was touring Australia, my friends and I considered how much we’d pay for tickets. ($1000 was too much, $999 we agreed was ok). Those girls haven’t made an album in decades but they get more valuable over time!

With assets, homes are the most common example of a capital growth play. We buy them and hope they’ll double in value every seven years and in a rising market, that does happen. But all markets follow a cycle, so if you buy at the wrong time, you may either miss out on capital growth, or see it go backwards. (Read this post for more info).

When people buy shares, they are often looking for capital growth, especially if it’s an up-and-coming company that doesn’t make a profit. You don’t get any dividends in this case, but hopefully in a few years those $1 shares are worth $5. I already wrote a whole post about how buying shares is like choosing husbands (here). But when I think about it, it’s kind of like creating a girl band. They could end up as the Spice Girls, or they could go the way of Bardot (sorry Sophie Monk).

Ouch, my nostalgia-o-meter just kicked into overdrive and I feel old AF

Yield – Income – Dividends

These are all basically the same thing, and refer to the cashola you earn from owning an asset. Also known as passive income.

Do you ever wonder how Sporty Spice seems to live an A-list lifestyle, even though we haven’t heard much from her since the 1999 dancefloor banger ‘I Turn to You‘?

Yep, that’s right, she’s living off royalties. Apparently all five girls have co-writer credits for their songs and get paid when people play or perform them.

This is the kind of passive income I want in my life, but since I have zero musical talent, and am probably past my prime girl-band age, I’ll have to buy some blue-chip shares instead.

Retirees are big on ‘yield stocks’ like Telstra and the Big Four banks, because they need  income to live on day-to-day.

For myself, as a young investor, I’d rather re-invest that income to grow my nest egg, and in fact many companies have an option for doing this. It’s called a Dividend Reinvestment Plan (I know, they could have catchier name). Say you have $1000 worth of Telstra shares and they pay a 7% dividend, instead of taking that $70 and putting it in the bank, they just give you $70 worth of their shares. It all happens automatically once you sign up for it, and you don’t need to pay a broker (which is normally the case for buying shares).

It’s as easy as letting Spotify create a Pop Queens playlist for you. (Athough, tbh, I’ve made my own and it’s great. You’re welcome).

When it comes to property, rent is the key income stream. If you have an investment property where the rental income is enough to cover the costs of the mortgage, strata and other bills, it means it’s positively geared. (‘Gearing’ refers to debt, so it basically means the income is greater than the cost of servicing the debt).

If the rent isn’t enough to cover the costs of owning the property,  you have to put your hand in your pocket to top it up. This means it’s negatively geared – as you’re making a loss on an investment.

If you’re thinking ‘wait, what, why would anyone want to make a loss on an investment?’ then you have obviously never experience my dating life, which is all about putting in more than I get out. (Although I’m down with that now).

The key insight here is that investment losses are tax deductible. So, say you have to cover $10,000 a year of investment property costs each year, you can reduce your taxable income by that amount. i.e. maybe get a sweet little tax refund.

Like, I see how this is good for people who hate paying tax to the government (ok, literally everyone). But I personally don’t relish the idea of finding extra money all the time, which is one of many reasons I don’t have an investment property. But if you do, that’s great and no judgement – you do you, boo!

I just think people get excited about negative gearing but forget they are still making a loss, AND the strategy relies on the property increasing in value (capital growth) to make it work. Which is not happening much at this point of the cycle, and also is dependent on where and what you buy.

Anyway, this isn’t meant to be a rant about Australians’ obsession with property, but a rant about how important the Spice Girls have been to our lives (if only I had a photo of my platform sneakers from 1997.) So let me get to the next point…

Diversification 

Of course there are more investments you can make than just shares or residential property. There are bonds, REITs, commodities, infrastructure etc. A sensible portfolio will have diversification, and that is exactly where the Spice Girls have excelled.

Each member is unique and brings something different. Well, I think Posh’s contribution is minimal, but someone may want to fight me over that comment.

When we were young women looking at the fab five, we could all identify with something, whether it was their hair colour, fashion sense or personality. Having a bit of everything helped to make a great band.

Finance is the same. If you just put all your money into property, then you might be missing out on the returns of shares, for example. These asset classes are often ‘uncorrelated’, which just means they do their own thing: while property is falling, the sharemarket could be soaring – which is happening right now. So if you have a bit of each, you spread the risk. When Ginger Spice was in a bad place of eating disorders, yoga videos and questionable solo songs, Posh was marrying Becks. Markets and people all move in their own cycles.

Wow, this was quite a long post so if you’ve stuck with it, well done. Your prize is a night on the Spice Girls red bus, which is now an Air BnB. Enjoy!

Sleep well surrounded by 90s nostalgia, Fierce Girls!

I got totally rejected by a guy the other week.

Baffling, I know.

So, we met online, organised to meet for a drink and he walked in and looked pretty cute.

He’s gainfully employed, seems to have his life together and has a command of basic English – all of which you can’t take for granted in modern dating life.

We are having a good conversation and it turns to investment. He has a couple of investment properties; one of them is okay-ish and one of them is a dog. But he’s planning to buy another one.

So in my very direct way I’m like, ‘what about diversification?’ and ‘why go further into something you’re clearly not great at?’. Then I continue, ‘Haven’t you thought about shares? Can I recommend you research low-cost indexed funds? Your investment strategy sounds pretty dumb’.

In the retelling of this to my friends, the general consensus was (in Whitney’s words) ‘boner-killer’.

Whereas I thought I was helping him reassess his life choices in a positive way, apparently I was just coming off as a difficult, mouthy blonde.

You won’t be surprised to hear I didn’t get asked for a second date.

All week I kept thinking of Clueless, when Cher says, ‘did I stumble into some bad lighting?’.

Money, men and masculine energy

But my sad/non-existent love life is not the point of this post. What I started thinking about was the great sense of confidence old mate had about his investments, even though, in truth, he was not that good at it.

To his credit, he has done something. He’s made a move, and he’s owned it.

I think of this as a masculine kind of energy. Apparently I have a bit too much of that myself, because no guys ever want to date me. But what’s wrong with backing yourself sometimes?

What I see sometimes in the women around me is a lack of confidence in their financial ability. They see money as something complex and threatening. They think of ‘investment’ as a big, scary word.

So they leave it alone,  do a budget that gets them through to payday, buy a house they can just afford, pay their compulsory super … and that’s it. They don’t plan world domination.

Or they let their partner do the heavy lifting on the finances, and thereby open themselves to him making a bad decision on his own.

So I’d like to throw a challenge out to all my ladies. How about we all be a little more blokey when it comes to money?

And I don’t mean ‘use things without reading the instructions and then screw it up’.

I mean ‘hell yeah, I’ve done the research, spoken to the experts and educated myself. I’m going to take action’.

What sort of action? Well that depends where you are on your journey. Perhaps it’s starting out with the above-mentioned low-cost index funds. Maybe it’s buying an investment property. Maybe it’s adding more to super. Maybe it’s just setting up a high-interest savings account.

The key is to make a decision. Don’t second-guess yourself to the point of paralysis. Educate yourself to the point of confidence. Then go out and OWN IT.

Just don’t use it as a dating strategy, or you’ll end up like me, watching Chvrches concerts on YouTube, in my underwear, writing blogs and eating 85% dark chocolate.

Wait, that sounds fucking awesome … no wonder I’m single.

It’s not you, it’s them: why finance seems boring AF, and what you can do about it

If finance seems about as exciting to you as a relationship with Aidan, I’ve found one of the reasons why.

I had this insight while witnessing one of the beloved rituals of the investment industry: roadshows.

It goes like this: you have an investment product to sell. You want stockbrokers and financial advisers to sell it, so you go around town presenting to them. There is a PowerPoint that’s been through 20 versions. A slightly weary senior management team who has given the same spiel three times that day. And a group of finance people who vie to ask the smartest-sounding questions.

I’ve  been at a couple of these briefings lately, and holy hell, what a sausage-fest they are.  At the first one, there were no women in the audience. At the second one, there was just one among about a dozen men.

So, there are all these statistics about women’s lack of participation in investing. Women invest less, feel less confident about their decisions and often leave it to their partner (some good stats here).

And when I look at who’s running the show, I think ‘well, duh’.

What’s does ‘women’s investment’ look like?

I’m not sure, really. One of my inspirations, Sallie Krawcheck, is a serious boss-lady who has thought about it a lot. She used to be CEO at a giant finance company, and these days she runs a women’s investment firm called Ellevest. (It’s in the US, so I haven’t invested with them, but I totally would.)

Sallie has a lot of data and insights into why a female-focused investment firm needs to exist, which I won’t replicate here. Check out the website here.  Broadly, we have different goals, income patterns and attitudes to money – so why not have our own approach to investment?

But nearly all women have worn men’s clothes before. Maybe you stole a perfect t-shirt from your husband, shopped in the men’s underwear section, bought a pair of Cons, or inherited your dad’s 1970s maroon tuxedo jacket and worn it out on the town (thanks dad!).

So you would know that just because something is designed with a man in mind, doesn’t mean it’s wrong for women. And investing is the same.

Sure, most investment products were created by a bunch of guys with a serious Excel spreadsheet addiction. And yeah, they are packaged up and sold by a bunch of guys in suits. And the language and marketing around them is created without women in mind.

Who cares? Invest anyway!

Let’s not wait for the finance industry to achieve gender diversity. I’m not sure it ever will. Instead, let’s take matters into our own hands. Here are three things you can do right now to take control of your finances and low-key smash the patriarchy.

  1. Educate yourself – Take time to understand the basics of money management, investing and financial lingo. This website is a good start (of course!) but there is also a wealth of information out there (pun intended). Start at www.moneysmart.gov.au, get to know The Barefoot Investor, head on over to www.financy.com.au, or just ask your smart, financially literate friends where they learnt about money.
  2. Make a plan – You don’t have to go and drop a few thousand on a financial planner. Set a SMART goal, map out a plan to get there and then allocate your funds accordingly. This is literally the basis of all financial planning, so if you can do this for your next goal, you’re streets ahead. (Some goal setting tips here)
  3. Dip your toe into investing – Not all investments need $50k in cold hard cash to get started. Microsaving apps like Raiz (formerly Acorns) can get you acquainted with investing on a small scale. You can buy an Exchange-Traded Fund (ETF) for a few hundred dollars (learn more in my post here). If you love property but can’t afford your own place, you can buy a little bit with companies like BrickX (I haven’t invested with them so I’m not endorsing it, but you can always do your own research). The point is, you don’t need to be a baller in a suit, wearing a Rolex, to get started as an investor.

Remember: just because  the finance industry is dragging its feet on gender diversity, you don’t have to miss out  on making money. Take charge and take your seat at the table!

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