Podcast | This is your Captain Speaking Q&A session 2

This is your Captain speaking is a monthly Question and Answer segment where I unpack some of the most popular questions from the Financial Independence community.

If you have a question for the Captain, the best place to ask is the CaptainFI Facebook group or by leaving a comment on blog posts.

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This is your Captain Speaking Q&A session 2

Transcript

[00:00:00]Captain FI: Ladies and gentlemen, this is your captain speaking. Welcome aboard captain thigh, the financial independence podcast.

[00:00:24]Captain FI (2): welcome to another episode of captain fire, the financial independence podcast, where I opened the cockpit to some of the best and brightest in personal finance, as well as those who have reached or are on their way to financial independence. Before we get started, remember nothing said, here is financial advice, and you should always do your own independent research before making any financial choices with that being said, I hope you enjoy the episode and learn something new.

[00:00:52] Welcome. Welcome back to another episode of this is your captain speaking, the Q and a where I spill all the [00:01:00] GOs and the latest updates on my fire journey, as well as answer questions that have been sent in from you, the listeners. Okay. So first up captains uptight. I have left. Full-time flying in Sydney.

[00:01:16] It’s pretty exciting. I know I shared this earlier with a lot of you guys on social media. And I got a lot of raised eyebrows and people asking what. Cause I hadn’t really spoken a lot about it prior to letting the cat out of the bag. Yes. I have wrapped up, I’ve basically been during, down I leave balance as well as doing I guess administrative style work and I am packing up.

[00:01:43] So when this is released, I’ll probably be back home in Adelaide. But for now I am living amongst a apartment of boxes. Everything’s getting packed up. It’s been a bit of a stressful Period. I’m not gonna lie. I’m trying to [00:02:00] get this apartment back in shipshape. I have been here in this one bedroom apartment for four years now since 2018 when I moved to Sydney.

[00:02:08] And yeah, it’s been a great home. I’ve really enjoyed it. But now it’s time to move on. So I am moving home primarily to look after my family as I’ve shared My parents both have a terminal cancer and they’ve been struggling with that and other health complications. So going home, being able to spend some quality time with mum and my dad the time that we do have left as well as help sort out some of the estate issues such as the farm needing to be sold, which is a bit sad, but, just that happens right.

[00:02:40] So what am I going to be doing? The apartment market in Adelaide. Yeah. It’s actually pretty crazy. So I haven’t actually found a place. So when I hand the keys back, technically I’m going to be homeless. So gee, what a way to achieve fire? Just quit your job and become homeless. Sounds a bit ridiculous.

[00:02:58] No, I saw I’m going to be [00:03:00] crashing with friends and family. So the is packed. Everything’s pretty much good to go. Just waiting for the removalists and a road trip down. Now. I’m really sorry. Everyone I had of course planned a. Pretty awesome. Road trip down. I was going to be coming down through Canberra Victoria, Percy coming down the coast there and through Melbourne and the great ocean road.

[00:03:21] And I had planned to actually, do some meet and greets actually get out and catch up with you guys in the community. I know a lot of people showed interest in doing that. So unfortunately due to the COVID outbreak and the lockdown, that’s not going to be possible. So I’m really just going to be lining it.

[00:03:37] Straight across the guts to Adelaide, but Hey, when I’m there, I’ll set up and I’m sure this, this lockdown will pass and I’ll be able to nip over to Melbourne sometime soon. So in terms of the finance? No. So massive changes here. I did invest into online managed funds. I put pretty sizeable investments into both.

[00:03:57] And they’re both in that rowboat sort of [00:04:00] online investment space and excited to share a bit more information about that over the next few months . Otherwise I’ve just continued my auto invest. It just keeps ticking over in the background.

[00:04:09] I literally haven’t even thought about it once. Since I set that up crypto, yes, ouch. I think everybody’s had a. Bit of a correction on their crypto portfolios. So don’t worry, we’re all feeling it. My portfolio basically halved and I think some of my tech stocks didn’t go too healthy either, but Hey, as I previously mentioned, my aim was to get somewhere around that 1% crypto portfolio. And that’s really just a part of that core satellite investment strategy. With the bulk of the investments in relatively lower risk, boring funds. And then just having a little bit of a play with a very small amount.

[00:04:43] So look, otherwise everything else is going quite well. I’m doing my best to squeeze out a net with update on the blog for you guys. Before I head off on my road trip all I really need to do is punch it out. Then Chuck the computer in the back seat of the car and off I go. The website [00:05:00] portfolio itself is actually doing really well.

[00:05:03] I’ve managed to tweak up one of my newer portfolio sites and that started to regularly dropping a hundred bucks a month now, which is cool doing that through AdSense and Amazon sales. That’s really cool too. Basically build an online business there and diversify my investments a little bit.

[00:05:19] Talk a bit more about that on the blog as well. And even in terms of, and fire staff actually got a few interesting little developments in the pipeline for you guys soon negotiating with a couple of different companies about potential sponsorship. Don’t worry. It’s nothing too sauce.

[00:05:35] And I’ll let you know. As soon as that comes out

[00:05:37] so I think that’s pretty much. Everything about me basically packing up the apartment and heading home. Oh yeah, of course. What am I going to do when I get home bright? That’s important. Look. So I’m going to be doing a, essentially a part-time engineering job.

[00:05:51] So I didn’t want to fully, leave the workforce because Hey it’s diversified income is important and I didn’t want to just burn [00:06:00] this massive income stream. So I had a good chat with with Vince Scully actually recently at the pub. And yeah, he convinced me that perhaps going out guns, bleeding, blazing, and burning bridges.

[00:06:11] It’s not the most sensible way to move forward. And yeah, looking at basically just moving to a, an office type job one or two days a week. So we’ll see how that goes. So the negotiations are all in place. But that probably won’t be for a couple of months. So again, I’ll just be enjoying time with the family when I get home and good chance to work a little bit more on the book and obviously punching out some good content and recording a few more podcasts for you guys.

[00:06:40] Okay, so on to the questions had some really interesting questions come through this month. Hopefully hopefully you get something good out of these. So the first one came from Suki who commented on the forum. She asks, does anyone invest in the share market via their super [00:07:00] and any insights, whether it’s better to invest in international shares or just Australian shares within my super.

[00:07:07] So Suki. Yes, actually most, if not, everyone will have their super fund invested into what at least a portion of it invested into the share market by default. For most of those of you, you don’t make an election. You usually assigned a default fund, which will itself have a default balanced option, which is usually a split of growth and defensive assets.

[00:07:31] And really it’s usually not appropriate for most people. So it’s super important to find out your details through HR and, or log into your account. So basically find out where the super is, what what provider it’s with logging in and check it out. So most of us will have the option to choose a risk tolerance or like investment profile which we’ll split know into different assets.

[00:07:54] The standard answer is there’ll be options to set like conservative, balanced growth or [00:08:00] aggressive, or, there’s something along those lines. Personally, I one, I don’t particularly care for that. Terminology, I think it’s not particularly intuitive, but anyway I personally go for the aggressive option with an equal mix of Australian and international shares because I’m quite young.

[00:08:15] I have really good safety buffers. I have other investments. I don’t have any dependents. And so I want more exposure to shares and less to fixed income, right? Because I’m investing for the longterm, but here’s the thing, right? You need to sit down and work out what your strategy is. What’s appropriate for one person might not be appropriate for another person.

[00:08:36] So broadly speaking though, Australian shares will tend to focus on paying high dividends. Whereas international shares tend to focus more on capital growth. So that might influence your choice in viewer looking it in terms of cashflow or tax efficiency. So I even considered for a long time going international only in my super fund.

[00:08:57] And that way the tax on the growth would be [00:09:00] delayed. Whereas if you have a cash flowing investment, which is, churning out dividends, then every time they churn out a dividend, that could be potentially a taxable event. So it’s something there’s no, like quick answer, you have to basically figure out what, your investment risk tolerance is.

[00:09:17] And From there, you can actually sit down and work out. Okay. Is this a good product? Is the structure right? How do I want to sort out tax minimization and all that kind of good stuff? Again, it might be worth actually sitting down with a financial advisor. If you’ve got anywhere around, a hundred thousand dollars or more in your super it’s well, worth chatting to a financial advisor to get some actual licensed advice on that.

[00:09:38] So anyway, hopefully that that answers the question. Yes, you can invest into the share market via your super pretty much everyone does. And there are a lot of people who actually opt for just international shares in their super, all right. Next one. Comes from Liz who actually sent a email and Liz asked, is [00:10:00] it worth entering competitions to try and win prizes?

[00:10:04] Is this a valid strategy or side hustle on the way to financial independence? And look, this is an interesting question, Liz. I think it depends. So for me personally, other than winning the lottery of life, and being born in Australia with loving parents I’ve only won two other prizes in my life.

[00:10:20] Yeah. So one was a guest, the jellybeans competition in grade four that was epic. I ate a lot of jelly beans that day and more recently actually won a scale model of an aircraft that I had flown pro previously, which was really cool. So I had that on display at my home for a while. When I actually reached out to the fire community about this I found this actually a huge number of people who sort of semi-professionally into competitions as a side hustle.

[00:10:48] Many were able to consistently net over $10,000 a year. And some of them were even able to like back this up with proof and showed me like screenshots. Had spoken to Liz who writes the [00:11:00] teaching brave blog.

[00:11:01] And she actually let me know that she had won her car on a radio competition On kiss FM, and that she regularly wins things like movie and concert tickets. And thankfully her work’s pretty flexible. So she can be at work and scan radio stations and call in to snap up prizes.

[00:11:20] So it was a bit, it was really eye-opening for me to learn that there’s actually a huge sub-industry of people that do this. In general though, I’m not sure how valid this is. For the majority of people in terms of like return on investment, but it could be considered similar to things like credit card or bank account churning, or like online surveys, that kind of thing.

[00:11:41] Yep. It could be worth entering them depending on how much you value your time. And if you’re really good at it you have some kind of competitive advantage then. Yeah. By all means like try and win some. Some prizes and I’m pretty sure it’s a homie to it, but I’m pretty sure prizes that you win are not taxable as well.

[00:11:57] So I think you just get them just awesome. So [00:12:00] next question comes from Bren. Who’s asked what kind of satellite stocks do people own outside of their core portfolio? This is something that I alluded to earlier in the app when I mentioned that my core investment portfolio was boring. Things like index funds and property.

[00:12:19] So a core and satellite investing approach is basically a risk management strategy. So for example, you could sit the majority of your portfolio in one asset class or risk portfolio, and then compliment that with some smaller satellite investments in other classes or risk profiles.

[00:12:38] Usually the core approach is. A lower risk asset. So that could be something like index funds, diversified mutual funds or even residential property. And then the satellite is a smaller investment in a, like a higher risk, more high risk, high reward asset that may even have an asset metric risk [00:13:00] profile, like some individual stocks, cryptocurrency, or even commercial real estate.

[00:13:06] So everyone’s gonna have their own like ratios and risk assessments for the particular asset classes. But common choices include like a 90, 10 95, five, or even a 99, one split. And personally I’m going for the 99 one split. So the logic here is that the overall risk adjusted return should be roughly equal.

[00:13:27] If you invest a small amount of your portfolio into cryptocurrency, or even like a penny stock early on there’s always a risk that it’s going to go to zero, right? But for some of them, there’s a chance that they’re going to do a hundred X, many people actually did that and that small satellite investment, either went to zero.

[00:13:45] Which didn’t really damage the portfolio by March, or it massively appreciated in value, which should have dragged the whole portfolio up. And so the whole core satellite approach allows you to make more of a sort [00:14:00] of sensible investment into the risky assets. . Amy asked in the forum, I am trying to execute a plan in a will and need to transfer assets from a deceased estate into a trust, but don’t know who to ask for advice. What should I do?

[00:14:16] First of all, Amy, I’m really sorry to hear about your loss. This kind of thing is never easy. Especially when grieving, it’s a really complex topic and you should definitely seek professional advice. You probably gonna need to talk to a financial advisor and accountant and ultimately an experienced estate lawyer who can cover things like estate planning.

[00:14:35] Execution and administration wills, power of attorneys and asset protection. So a financial advisor or an accountant, won’t likely be able to answer these complex questions alone. But they might be able to put you on the right path and it might be cheaper than going straight to an expensive lawyer, so they could help you put a bit of a plan together to take to the lawyer, which might help you save time and billable hours.

[00:14:56] And they also may be able to refer you. To someone in the network.

[00:14:59] So [00:15:00] this next one made me laugh. Lawrence sauce. Hey captain fi what is an option? It was cheaper than the standard share on the ASX. Should I buy one? But look, I’m pretty sure the lion king answered this one for us. One day, Simba, the sun will set on my time here and will rise with you as the new king.

[00:15:25] This’ll all be mine everything, the light touches. What about that shadowy place? Booza option that’s beyond all borders was never go there. Simba. Actually something like 90% of all options, traders lose money. And personally, I lump this into the same category as like Forex trading day trading.

[00:15:48] And I’d even go so far as to lump some certain L MLM pyramid schemes in with these options that like. A really complex financial product. And as far as I know, it’s more of the realm of advanced [00:16:00] fund managers, who they use them to tinker with risk adjusted returns. And it’s all to do with what you perceive, where the market’s going to go.

[00:16:09] So it’s essentially, like you could think of it as you were making bets about. How the share market is going to move or how a particular asset class is going to move. So that sounds a lot like active fund managing. It sounds as pretty much as far away from passive index investing that you can get.

[00:16:24] So it’s probably not the kind of fire you want to be playing with.

[00:16:28] ADL are you asked about robo advisors? So he has asked me Katz. And have you looked into robo advisors or online investment in Australia? I’m considering using res, but what other options are there? Hey, ideal. Good question, mate. Look, I’ve actually spent a bit of time on this lately. I have been using a couple of micro investing platforms in the past.

[00:16:52] So I’d classify res and spaceship as a pretty good beginner eh, micro investing slash robo investing [00:17:00] platform. And I’ve had funds. With them for well over a year now. Not a huge amount, literally just a trial with a couple of hundred bucks in age. More recently though, I’ve been researching the big daddy versions of these, which is where you go when you want to get serious about online investing.

[00:17:18] And as far as I can tell probably the two best ones in Australia, our stock spot and six park. So they’re a bit more professional. They let you use ETFs. They have chess sponsored instruments for those who that, Find that important. And they basically quiz you and they come up with a portfolio that’s suited to your risk profile and sort of personal circumstances.

[00:17:40] So they’re actually learning to provide robot advice, right? So by doing this quiz, which is like an onboarding risk management technique they can assign you what’s most appropriate. And it’s a really low cost business model for them. So they’re able to really lower the [00:18:00] price of the management fees compared to, I guess what you’d be paying a conventional financial advisor stock spot and six park up both slightly different in terms of like fees and what you get.

[00:18:10] So stock spot invest in gold. It’s a bit more of a simpler portfolio. Whereas six park use property, securities as a method of diversification. So I think for both of those options, you really just need to get into the PDs and have a look at what’s actually in the portfolio and how, whether it suits you or not.

[00:18:28] Yeah. So to learn more I decided to put a fairly big chunk of money in each and I’ll be reporting on this in my monthly updates. And it’s I’ve called it, referred to it as my hands-free portfolio. Cause we have to give everything a cool name to make it sound great.

[00:18:42] But anyway yeah, so those are the four options that I think might be good to look at. Again, you just have to check out each one mate, and figure out which one suits you. They all have different fees, right? So you just gotta you just gotta suss out, weigh up what you get from them and the fees that they charge you to work out what the best one is for [00:19:00] you.

[00:19:00] And no one else can figure that out, mate. So good luck. Oh, okay. Another one that’s related to this. Yeah. So Darren’s asked, Hey, do you invest in gold? Yes, because I recently invested in a diversified managed fund through stock spot which was the Topaz or the aggressive fund.

[00:19:19] And that’s roughly 10% gold. That means I do have some gold exposure. But, it’s not that simple. So when you, when I consider it like my index portfolio, I would estimate that in my Australian shares my Australian index fund, I probably have about 2% exposure to gold and other precious metals because of the inclusion of the big mining companies.

[00:19:41] And same goes for the international index funds, but it’s a bit less, probably, maybe like 1%. So this is because like big mining companies, they dig up the ground and they process the oars refine it and sell it, being gold or other precious metals. And they take up a portion of the total market cap.

[00:19:59] So it’s [00:20:00] not huge, but I think it’s somewhere around 1%. Other than those two sort of indirect ownerships, I don’t have any direct physical gold or silver or gold ETFs.

[00:20:11] Now I’ve always been a big fan of Warren buffet and he famously trashes gold as being unproductive. So he’s more in favor of buying productive businesses, which is basically shares. But then you also have a lot of like very smart and educated fund managers and finance professionals like Chris Brickey, who are pretty keen on using it in their portfolio.

[00:20:34] And, every time I get explained this from one of these boffins, it makes so much sense while they’re talking to me. And basically using gold as a hedge against inflation. And it sounds really cool. All right. So as a result, I have been more carefully researching and thinking about a position in gold and precious metals.

[00:20:52] And I’ve been thinking about maybe either a gold or silver ETF, either buying an unallocated bars. Or [00:21:00] even physically secured bars or coins. So I recently published a pretty big article on the blog. If you want to read up a little bit more about investing in sort of gold and precious metals in Australia and probably over the next few months expect to see me make more of a decision about whether I’m going to start acquiring some gold.

[00:21:19] All right. So we’re to finish up now with one more question. This one comes in from Dane who wanted to ask my opinion on ethical investing. Ethical investing has been on my radar for. Sometime I’m actually in the process of writing up a bit of a detailed article with all my findings and I’ll be inviting a really cool guest on the pod soon to discuss this exact topic right now.

[00:21:48] Look, I’m a bit of a. Skeptic. Yeah I’m naturally a bit cynical. So I’m very wary of the whole green washing thing. Western investments are sold as green or sustainable options without them actually [00:22:00] being all that good. So it’s so fashionable right now. You see it all over the news.

[00:22:04] The TV, I’m sure you’ve seen ads from Hostplus about their ethical investing funds. So that you can, you can feel good and sleep at night, knowing that you’re making a difference to the world. I’m personally, I’m a little sass on how these ethical indexes are even constructed in the first place.

[00:22:18] So for example, many of them seem to cut out nuclear power generation, which by the way, is proven to be one of the safest, Cleanest and most reliable forms of power generation. And for everyone that says, oh, we let produces nuclear waste and pollutes. The environment will, first of all, you can burn typical fish and react to waste in a modern, fast reactor.

[00:22:38] Yeah. So there’s plenty of awesome research out there that support nuclear generation. But a lot of this just gets emitted from the index. So look without doing a deep dive into ethical funds at the moment, just trying to look at this one on face value. We have seen some really cool results from many ethical funds, [00:23:00] but I would postulate, maybe that’s due in part to some very high concentrations in the tech sector. So a lot of companies in the tech sector are quite flexible and progressive. So they’re able to comply with some of the ethical index, like employment and management standards, which by the way are awesome. And that’s helping to bring about meaningful sort of social change and changing the way we invest.

[00:23:24] But I don’t want my portfolio overly concentrated in one specific asset class, as that goes against the principle of diversification and spreading out my risk. Ultimately though if we wanna talk about, doing the right thing and living an ethical life, the most important thing here is to be an ethical consumer, right?

[00:23:44] It makes a hell of a lot more of a difference if you do not buy cigarettes than if you do not invest in British tobacco. Just taking the example, if you hate cigarettes and man cigarettes are so bad

[00:23:58] and so you might say look, [00:24:00] I’m never going to invest in tobacco companies if you don’t buy cigarettes, that company is not going to be making a profit. So how profitable and how long do you think that company is going to be in business? So of course cutting it.

[00:24:13] Boycotting, unethical products is the most powerful step to being an ethical consumer. All right. So with that being said, I don’t really know enough about this topic, so I’m sure I’m going to have people writing in and schooling me and letting me know. If you have something meaningful to say, either jump on the blog, leave a comment, jump in the social groups and get in touch and let me know.

[00:24:35] . So I’ll let you guys know when I’ve sussed out, whether I’m going to invest in ethical funds or not, but at the moment, it’s a, maybe for me. So anyway, I better wrap it up there. It’s getting really late and I need to clean the walls in my apartment.

[00:24:50] Because I want to try and get my bond back. Cause it’s a decent stashes stash of cash. Anyway, hope you enjoyed today’s episode and looking [00:25:00] forward to recording the next one from my new home in south Australia. All right. Cheers bye. Thanks for listening to another episode of the captain fire financial independence podcast.

[00:25:14] So read the transcripts or check out the show notes, head over to www captain fire.com for all the details. If you have a question for the captain, make sure to get in touch, you might even make it on the airwaves. You can reach me online through the captain fire contact form. We’ll get in touch through the socials.

[00:25:36] I’m active on Facebook and Instagram as well as a number of online finance and investing forums. And finally, remember the information presented on the show and the links provided, oh, for general information purposes only. They should not be taken as constituting professional financial advice. You should always do your own research when making [00:26:00] any financial decisions and make sure it’s appropriate for your personal circumstance.