Personal Insights: 'Jumping on opportunity' and 'maintaining the rage'

This led our Head of Portfolio Services, Mitch Sneddon and I to come up with a plan to get more of these real-life stories for you to read and listen to. So we contacted ‘Adam’ and asked if he would be interested in a short interview about his experiences with investing, he agreed and below is his story.

We haven’t used his real name, nor any of his personal information, but the transcript below was from the phone interview we had.

Adam’s investment story is one that we think is very worthwhile reading – enjoy.

Host: Evan Lucas (EL)
Guest: “Adam” (A)

EL: Adam, the biggest issue that we know with retail investors is inertia, but also that fear of going through the process, of actually taking that step of getting in. Did you find that as being one of your biggest problems or were you more confident in yourself and knew what to do? What exactly drove you at the start?

A: What drove me at the start essentially was, I had some funds sitting aside – I’ve got a separate business which is accumulating some cash and I didn’t really have a lot of options to invest that in a good fashion or to give some sort of decent return. I didn’t want to potentially go full risk, but I’m happy with a sort of moderate to high-risk appetite with certain things. But looking at the ETFs that are available through the portfolio that you guys had, they seem to be attractive to me anyway and quite a simple way to get into the market without putting all your eggs in one particular share. If you can spread it across a range of shares through those ETFs that you’ve got available, I didn’t find it too difficult to get in.

EL: Drilling into that point a bit more, ETFs, you said you sort of jumped into ETFs because their ease and it was simple… Was it also because having that ability to diversify was easier? And, not having to necessarily go down the path of having to actually individually check up on 10 to 15 stocks etcetera to get yourself to the other side? Was that also another reason why you went with that option or is there other reasons?

A: A bit of diversification for me. I’ve got two – I’m running my own self-managed super fund with my wife as well and we’ve got individual shares in that, but this was a bit more of a diversification into overseas shares in the US and elsewhere, Europe, Asia… I think if you put in a few different markets it’s obviously going to soften those peaks and troughs anyway. That was the reason for getting into the higher growth and the international equities funds initially and then, once that was established and we’d put some money into those, then I looked at the equity growth portfolio as well, more just as a basket of Aussie shares that were a little bit more risky – which I didn’t mind having some sort of, like I said, risk added on there.

I didn’t want it to obviously be the entire portfolio. I’ve pumped it up a bit more than I thought I was going to, to be honest, but that’s okay. I’ve got a third of that in those sort of growth shares and the other two-thirds essentially between some more stable Aussie shares and then US and Europe and Asian shares. That’s a pretty broad mix for me and I like that diversification there.

EL: Going back to your point about your international shares – as that ‘international investment opportunity’ is something Australian investors aren’t great at, was that something that enticed you about looking outside of the box? International equities investing for Australian investors has always been a bit tricky and was that the other driving force seeing that international equities have done significantly better than our market over the last 10-15 years?

A: Yeah, certainly was. I mean, rather than try to buy individual overseas shares, it just seemed like it was quite laborious. I didn’t get into it too deeply to be frank, but I sort of did a little bit of investigating and it seemed like there was some complicating factors there where if I could invest in this, like an InvestSMART International Equities Fund that have got four or five ETFs that are paddling all those good solid big consumer companies, Apple and Microsoft and Alphabet, etcetera, all those FAANG guys. If this is an easier way of getting into there, then fine – and you’re not putting all of your eggs in that basket either. I can’t remember exactly what the split is, but those big companies don’t make up the entire fund, it’s 20 per cent of it or around that sort of mark.

Then there’s other shares that are in there of course that will mix it up. Getting exposure to those big solid companies at a time when they probably couldn’t get much cheaper, one would think. I started in, I think it was June this year, and that was obviously in the middle of all of this COVID situation. There were some pretty cheap shares out there, it was a good time to get in. I’m thinking for the long-term as well, I’m looking at this as a sort of a 10-year horizon, keep looking at it and then figure out what to do after 10 years. You know there’s going to be some peaks and troughs during that time, you’ve just got to wear that. There wasn’t a much better time than in the middle of the pandemic to try and get in there, right?

EL: Exactly right, and you’ve sort of transitioned me into my next question for you. Not only your time horizon, which you’ve already said is 10-plus years, it’s more the goal you have with those funds. Clearly, you’re looking to grow them - is there a specific goal? Is it because cash is no longer that attractive? What was your goal to actually do all this, to sort of look to that 10-year horizon? Because that’s also, we think, one of the real important things that people sometimes don’t have, is that goal. What exactly were you looking to do?

A: Yeah, cash wasn’t returning anything, it was a waste of time. We’ve got property as well, so I wanted to look outside of our properties and have something like this as another way to diversify, to basically grow wealth, so that by the time I hit 50, which is nine years away, I’ll have options. I mightn’t want to work anymore, I might decide to work part-time – it’s just good to have those options. My wife and I are working towards that as a goal, to pay off as much as we can from our residential asset base and then if we’ve got this as a good cash sum in 10 years’ time to figure out what to do, do we just work part-time and maybe get an income from this on a regular basis, or what to do?

We’re not entirely sure yet, other than I think if we can get this up to a significant sum in that 10-year period, then you’ve got options, right? Especially if you pay down your debt on the residential side because the rates are so low at the moment. I’m in no screaming rush to – like, if we pay all that off in 10 years and we’re only paying 2.5 per cent on our mortgages and we can make 8 to 10 per cent a year on this, well then I’m happy to have both of them running in concert, to be frank.

EL: Just finally, to finish up on all of this, because it’s a fantastic insight into someone who’s very, very clued up with what they’re doing, the next question then becomes your management of it over the next 10 years. You’ve suggested that you’re obviously going to make continuous contributions. Are you going to move down your risk curve as things get towards the back end of your timeframe? What’s your thought process now with how you’re going to manage this and the strategy you’re going to use over the next 10 years to reach those goals that you’ve got by the age of 50?

A: I think I’ll just maintain the rage, to be frank. I think I’ll keep the same portfolio that I’ve got, because I’ve got that High Growth Portfolio, I’ve got International Equities and then there’s also the Aussie IIGF fund. I think between those three, I’m pretty well diversified from a geographic perspective with Asia, US and into Europe, and some solid Australian shares as well, some stable ones, some that have got some growth potential there too that you guys have identified. I’ve had a look through all of those and they’re ticking along quite nicely in that IIGF fund anyway. I think that’s returned something like 10 per cent in the last couple of months since that’s been in place – I think it’s only about six or seven weeks. It’s been a great success, we had a few rippers in there – you know you’re going to have a few performers, you hope, but you just hope you’ve got more that are, than aren’t.

So yes, to answer your question, I think I’ll probably maintain a similar structure, having regular deposits and just having them automated is quite important as well I think, because then you don’t even realise that you’re contributing to it, it’s just happening. Providing you’ve got a budget in place to be able to facilitate that, I think that’s the key, just being organised, saying you’ve got ‘x’ for your mortgage and it’s just like paying another mortgage, as such, but it’s just going into a different investment class or different asset category, right? But it’s the same sort of idea and it’s going to grow more than – well, hopefully it’s going to grow into a decent sort of sum so we can have some options in that 10-year period, that’s kind of what I’m aiming at.

EL: Thank you so much for your insights, it’s been a fantastic interview and good luck with the investing into the future.

A: No dramas at all.

If you would be interested in telling your investment story – please don’t hesitate to reach out to us here on invest@investsmart.com.au