Podcast – Nathan Birch

by Aussie Firebug | Feb 15, 2019 | Podcast

Summary

Are you ready to exit the matrix?

Investing in his first property at 18, and starting his first business shortly after, Nathan Birch was able to ‘retire’ at just 24. He has appeared on such programs as 7 news, Sunday Night and Triple J’s Hack and his story is so incredible it’s hard to believe!

We delve into so much more than just investing today, Nathan has in his own words, some alternative views about the entire systems that we are born into and some really thought-provoking commentary in regards to money.

Some of the topics we cover today include:

– Property Investing
– Is Australian property heading for a crash?
– How to finance more than 6 properties
– BitCoin
– Cryptocurrencies
– Hyperinflation

And much more!

It’s a big one today so maybe grab a coffee, sit back and enjoy.

PS.

Nathan talks about the Financial Claims Scheme (government guarantee of $250,000) being removed last year, but this is not the case. The FCS is still in place FYI

Show Notes

Podcast – Peter Thornhill

by Aussie Firebug | Jan 18, 2019 | Podcast, Popular Podcast

Summary

Huge Pod to start 2019!

I have the man, the myth, the legend, Peter Thornhill himself. Author of bestseller Motivated Money, Peter is famous in the FIRE community for his teachings on dividend investing and why it’s the best strategy for Australians to retire comfortably. And for someone who is currently receiving over $400K a year in passive income via dividends… when he talks, we should listen!

In today’s episode we chat about:

– Peter’s background in investing
– ETFs vs LICs
– How Peter invests
– Capital gains vs Dividends
– International diversification
– Labor removing the franking credit refund
– Why Peter uses a financial advisor
– Debt recycling

and much more

Show Notes

Podcast – Portfolio Reporting – Sharesight

by Aussie Firebug | Dec 21, 2018 | Podcast

Summary

What do you use to track your portfolio’s true performance?

Does your reporting software take into consideration things like franking credits? DRP? Share splits over time? What about currency movements?

I have tried countless reporting tools and for Aussies, there is none better than Sharesight. And the best thing about it is that it’s free if you have under 10 holdings.

Today I have the pleasure of speaking to Doug Morris, the CEO of Sharesight, the best share portfolio tracker for Aussie investors.

But Sharesight does a lot more than simply telling you the true performance of your portfolio. There’s a bunch of other useful tools and features available and some of which we are going to cover today.

In today’s episode we chat about:
– How Sharesight can help show your true performance
– Tax reports to making lodging your tax return a breeze
– Historic data to quickly see how a theoretical portfolio would have performed in the previous decade or two

and much more

Show Notes

Transcript:

Aussie Firebug: Hey guys, welcome back to another episode of the Aussie Firebug podcast – the Financial Independence podcast for Australians where I interview clever people who have already reached, or are on their way to, Financial Independence and occasionally different products and businesses that I believe can help you reach FIRE sooner!

What do you guys use to track the performance of your portfolio? Do you actually use anything at all? Do you even track the performance of your portfolio?

Today I’m chatting to Doug from Sharesight, which is by far the best portfolio tracking software out there. It’s an Australian, actually I think it’s’ a New Zealand, company but like most things we will claim them as Australian. It’s a company, anyway, that does performance tracking of your portfolio and it’s really a must, especially come tax time. It also takes into consideration things like franking credits, things like DRP, share splits over time, currency movements. I believe that every person that invests in Aussie shares should have an account with Sharesight because one of the best things about it, is that it is free for under 10 holdings. And if you have more than 10 holdings, stay tuned for the end of the pod to see how you can get a discount. I’ve got something special for you guys at the end.

Basically, we are going to chat to Doug today and what it can offer investors and how I use it as well. I think it is really crucial come tax time because it makes tax insanely easy and we are going to go into it in the pod, but it really, really is a must have for tax time unless you want to go through it yourself and generate it all. It’s really exciting and there are a whole bunch of features as well, that we are going to talk about in the pod, so stay tuned and we are going to get into it now. Cheers.

Aussie Firebug: Welcome back guys to another episode of the Aussie Firebug podcast. Today I have the pleasure of speaking to Doug Morris, the CEO of ShareSight – the best share portfolio tracker for Aussie investors. But Sharesight does a lot more than just telling you the true performance of your portfolio. There’s a bunch of other useful tools and features available and some of which we are going to cover today. Welcome to the podcast Doug!

Doug Morris: Thank you very much Matt for having me on. I appreciate it.

Aussie Firebug: No worries. Now why don’t we begin with: For those that have never used Sharesight, can you give us a brief description of exactly what Sharesight is and how it can help Aussie investors?

Doug Morris: Sure, so Sharesight is fundamentally a portfolio tracking tool It is cloud based software and we focus on performance reporting but we do so at a really accurate level and as a result of that we can product tax reports for investors as well. So we don’t offer anything like execution, or financial advice or stock recommendations, we just stay very focussed on the administration and the tracking of investment portfolios.

Aussie Firebug: Awesome. When was Sharesight first created mate?

Doug Morris: Yea, we are sort of an old startup. We’ve kind of been around since before the entire FinTech movement took off, so we launched in 2008 actually. We were started by a father and son team over in Wellington, New Zealand. So the father, Tony, was a pretty keen investor – a former accountant. And his son was involved in the tech space, not really an engineer himself, but knew enough about it to be dangerous. So Tony, the father, was basically saying, look I need a way to track my performance. And what he was doing, like many of our clients did before they found us, he was doing it in a spreadsheet. He was going in and updating share prices manually, he was trying to combine things like dividends and corporate actions and build some fairly elaborate macros and formulas to work out annualised performance. He just couldn’t figure out for the life of him, why there was no software out there that did this? Because you don’t get this information from your online broker and he just really wanted a way to kind of distill his investment performance in terms of annualised money rate of returns so it can be practical and sort of transferable to other areas of his financial life. So that is really kind of the kernel of how we got started. The guys then built out a Kiwi version with the local nuances there. But always with the view of going over to Australia, just given the size of the DIY market here and some of the inner complexities of things like franking credits and capital gains tax here in Australia. The rest is kind of history.

Aussie Firebug: Interesting, it’s funny that you mention that. I didn’t know it was created in New Zealand. A couple of things I want to touch on, I’m detecting an American accent from your voice so I’d like to get into how you got involved with Sharesight but before we do I’m not too sure if you are aware but Australia has a history of claiming things from New Zealand as our own, a lot of sporting players and I actually think even Phar Lap is a New Zealand horse and we claim it as ours.

Doug Morris: And of course, the Pavlova debate as well.

Aussie Firebug: Well there you go, I’ve always thought Sharesight was Australian. So I’m sure there are some New Zealand listeners that will now have a bit more ammo in regards to that argument online and at the pubs and what now. So going back, 2008 was an interesting year to launch such a software, considering what happened.

Doug Morris: Yea I know it’s funny, the guys only now reflect on the fact that they were launching a DIY investment software into the teeth of the financial crisis, but I think for markets like New Zealand and Australia, they were certainly affected, but not at the scale of things in the States or Europe. The guys, at that time it was just the 2 of them working away at this thing. These kind of tools should be performance-agnostic – what I meant by that is if the market is tanking or the market is on a really long bull run (which we are seeing both of recently) people should stay on top of their performance but obviously human psychology doesn’t always dictate that.

Aussie Firebug: Absolutely, absolutely. And it is so important, you touched on the true performance because that is very critical when determining how well your investments did. Because I know if you talk to 10 different investors they might have…before such such software as Sharesight, maybe not in 2018, but previously and I’m sure the founders of Sharesight can attest to this as well, a lot of people were missing a few things with their returns and calculations. I know a common one, and I see it to this day in articles and things, they might not factor in Franking Credits or something like that. They miss out on the overall true return of investments which is just so important. I remember when I was Googling, before I found Sharesight which I use and I think is the best, for tracking your shares, there just isn’t a whole bunch that does the true reporting especially specific to Australian circumstances. It definitely has filled the need. It sort of took me by surprise when I was doing some research for this podcast, really, was there no other software on the market, back in 2008, that was doing this?

Doug Morris: Yea it is true. So where you’ll find annualised money-weighted calculation methodology really done appropriately at the cost base level, factoring in dividends and corporate actions and all the rest, you’ll find that in institutional realms. So if you’re a fund manager or a quant or something like that, you’ll have access to some of those tools. But of course, those are big software systems that are totally prohibitive, cost-wise, to the average self-directed investor. And even at my previous career at MorningStar, where I spent 8 or 9 years, they had portfolio watchlist tools but they didn’t really capture true performance. And it is so important, because what I hear a lot when I’m at the pub, sorting casually just saying what I do or talking to investors at various events, I say “How do you track your portfolio”, that’s my leading question and often people will say, I just rely on my broker. Which I just cringe, because that is not an accurate representation of your portfolio because in most cases, your broker doesn’t factor in how long you have held the investment, they don’t factor in dividends either. If you look and say I bought these shares 5 years ago and you are up 200%, that might look really good but when you annualise it, it actually comes down quite a bit. You see it in the press all the time, especially with property, a celebrity bought a 10 million dollar property and sold it for 20, doubling their return. Yea but, they owned it for 12 years and they spent 6 million dollars fixing the place up – these are all the things you need to factor in to investing as well. When you break it down into annualised terms it is transferable to other parts of your life. You get paid in salary,m you pay school fees, you pay a mortgage, you think of interest rates. They are annualised and it shouldn’t be any different in your share portfolio.

Aussie Firebug: Absolutely, it is so important, you read articles about performance of asset classes, and property is a popular one, but usually there is a bias on most articles or they are trying to push some sort of agenda or they are working for some different company, so of course they are going to leave out certain things. And I have even seen it the other way, anti-property people will look at a return from a property but they won’t factor in leverage and the actual how much money cash on cash return, they will just look at the overall return of the property and say that shares outperform but if you actually look it cash on cash you get a different story. So it goes both ways, it’s not just one asset class.

Doug Morris: People misquote stock market indices all the time as well. You hear all the time, the NASDAQ is up 38% on the year. Yea great, but how are you, the investor, investing in the NASDAQ. Are you buying an ETF, are you buying some shares in the market? When you kind of break it down, are you actually going to execute on that. That’s where tracking becomes so important.

Aussie Firebug: Yes, absolutely. Now I wanted to ask before we got off on a tangent, how does a, I’m guessing you are from the States with that accent?

Doug Morris: That’s right, yes.

Aussie Firebug: How does a yank come across to Australia and get involved with a company like Sharesight?

Doug Morris: I’ve been in Sydney for about 10 years and I originally came down with MorningStar. I got my first job out of uni with them, working in their asset allocation research division and I wanted to move more into the client-facing and sales and product realm. And they launched a program where they trained us up and sent out to various international offices. I was given the choice of Toronto or Sydney, and being from Chicago I said I’m not going to move to Toronto, it’s even colder and it’s close so send me down to Sydney. It was supposed to be a 1 or 2 year stint and I ended up falling in love with the place and staying. So I worked here for a number of years with MorningStar. Then a former colleague of mine who invested in Sharesight and was a power user himself came along and asked me if I wanted to join the team. From there I sort of worked away and became CEO after a couple of years. The basis of my interest in Sharesight though was always in the product area in MorningStar where I worked on software products for self-directed investors and financial advisors. I always thought that there was a lot of opportunity out there in terms of helping people look at their real data with these software tools and empowering them to make better investment decisions, really.

Aussie Firebug: Excellent, excellent. Now I guess it sort of depends what weather you prefer but yea, Toronto… I have been to Toronto before, sub 15 with wind chill versus the hot beaches of Sydney, eh might have been an easy decision for you. Although Toronto has the Raptors and the NBA so I do like that.

Doug Morris: They do. No, Toronto is a good city. Nothing against Toronto

Aussie Firebug: And do you know I’m actually from Victoria and they say Melbourne and Toronto are very similar so and I always have liked Melbourne. Yea, Toronto, I’ve got family there it’s really a nice city but the cold, man! It’s freezing when I went and I only went in the winter and it’s bloody cold although I do snowboard. Although there aren’t really mountains near Toronto, you gotta go west to get to the snow but yes, it’s a good city. Moving on, I wanted to talk about. We know that Sharesight has awesome, kick-ass reporting, true performance of your portfolio, but the other thing I use it personally for is for tax and tax work. It makes tax work an absolute breeze. Now recently, you made some changes to the way that Sharesight does the tax admin work for ETFs especially. And from what I’ve read, I haven’t used it yet, it makes it a breeze for Aussies to do their tax returns, can you go a little bit into these changes and why Sharesight makes tax returns super easy for Aussie investors?

Doug Morris: Sure, so because the way Sharesight works is we actually get the cost basis for all of your investments, we go down pretty deep in terms of the data in terms of the data that we require to get your portfolio set up and running and as a spin out of that we offer our clients, capital gains tax reporting, unrealised capital gains tax reporting and also, taxable income (i.e, dividend income) reporting as well. Our aim with these reports is to give you a really good steer on what your actual tax liabilities are, without going as far as having a seamless way to lodge those taxes. What kind of happens/the way this kind of develops is that it was always, i’m not going to say easy, but more straight forward to calculate tax, be it movements in capital or taxable income, on listed shares. So you bought or sold shares in a company, you receive some dividends – yes, there are some complexities around the franking credits but once we built for all that, it kind of took care of itself. There’s always a few nuances here and there with various corporate actions but those tend to be kind of a manual, off-market sort of transaction anyway so we can help our client base as they popped up. But then what we saw happening was the rise of ETFs. This wasn’t a surprise based on how popular ETFs, and similar vehicles, have become overseas. For example, when I actually interviewed with MorningStar which is all the way back in 2002, I was interviewing for an internship at the time. A piece of advice that I received was Do your research on ETFs and I didn’t even know what an ETF was. At that time they were in the realm of institutional investors, they were using ETFs to park some cash or to hedge, institutional strategies but as we know ETFS have become mainstream because their low cost, liquid and now-a-days there is an ETF for everything; active ETFs, passive ETFs, there’s really esoteric things out there like crypto ETFs.

Aussie Firebug: I was just about to say, is there a Bitcoin ETF? I didn’t think there was yet.

Doug Morris: There are, it depends what country and I’ve seen a lot of stuff in the press about how they kind of get close and the regulator will knock them back. I would exercise extreme caution when it comes to those, and definitely do you due diligence.

Aussie Firebug: Yea, I just don’t understand. I guess it would be easier for most people, I don’t know why you wouldn’t just buy the Bitcoin yourself? Why you would have to go through and ETF?

Doug Morris: That’s right. You always are going to need a way out of buying the underlying asset itself, and if you can versus buying a sort of packaged investment around it. Just to give you an example of popularity, we offer a Self Managed Superannuation function inside of Sharesight so you can apply that tax setting to your account. And we looked at the data recently and I think it was back in 2008 if you looked at the trade inside of SMSF portfolios, ETFs only accounted for 2% of those buy and sell trades, in those portfolios. Fast forward 10 years, I think the number is 22% of trades inside of SMSF portfolios are ETFs. Which is just a huge increase and if you assume that people are buying and holding ETFs, they aren’t trading them, certainly not on a day trading basis AND if you think of your average SMSF trustee you are going to be doing a lot of buying and holding. I suppose from a lion share in a portfolio, those ETFs are making up more and more of the overall dollar composition of those portfolios.

And so we started to get feedback from our clients, via Twitter and our client forums and from various places, that our tax reporting just wasn’t quite rich enough for ETFs specifically. So we said alright, this is something that we have heard before we’ll just go back to our data providers and huddle internally and figure out if we can do something about this. The problem really turned out to be a lot more complex than we anticipated and we were actually given a lot of help in this regard via our partners at Six Park, who are a robo advisor that uses Sharesight as a platform, so we sort of teamed up on this one. What we did is we went door knocking, we knocked down the door of the ASX, we knocked on the doors of various share registries, we went to the actual ETF providers themselves such as Vanguard and it was just really difficult to get a straight answer on the components of these distributions.

And before I get too far into the weeds and this is kind of the ways it worked, if you buy and hold ETFs you receive distributions. You receive 2 a year or 4 a year depending on when you receive those payouts. Each distribution is actually comprised of hundreds, if not thousands, of dividends and other payments from all the underlying companies in the ETF. And a lot of those ETFs are investing locally, but some of them are investing overseas as well and some are investing in other asset classes like fixed interest, cash, bonds and all that. And you are left with this this sort of mess of a distribution every time you get paid, and that’s all well and good over the course of the year because Sharesight was displaying the gross and the net dividend. But then what happens at the end of the financial year is you get a tax report, an annual statement, from the registry. And if you’ve seen one of these, from say Computershare, you’ll know how complex they have become, especially since the ATO has now rolled out a new taxation treatment to these things called AMIT, which is just another layer of complexity that I won’t get into right now. But basically, and you’ll have dozens of components in there that you’ve been paid over the course of the financial year. So our client base is basically coming back to us and sayings, look, I’ve got all these dividends, how are these selected in Sharesight? So this is what took us on the hunt for this data and what we ended up doing was, Computershare came to the table and they were able to deliver us accurate breakdowns of these ETF distributions throughout the course of the year, so we plug those into Sharesight, retrospectively. But for the ETFs that we were not able to get data for, we built kind of a pro-rata tool so that you can actually take your statement and can whack in the end of year figures and Sharesight will automatically cascade those back in time, to give you accurate breakdowns.

I think the crux of this problem is that investment trusts, like managed funds, they were really designed to be like here, take my money and then send me a report at the end of the year because I’m going to trust you with my funds and you do your thing and just post me a statement. But ETFs, from a technical standpoint, are trusts, people like you and me are buying them and selling them all the time and are using tools like Sharesight and so their expectation is that they have this always on mentality where they want to know performance and dividends in real time. They are looking at our mobile app and are logging in a few times a week and relying on a paper statement at the end of the year, just isn’t good enough for the plugged in investor who is using ETFs in their portfolio. So at the end of the day, we were really able to make a huge improvement to the accuracy of our ETF distribution tax reports and based on the feedback we have received we have hit the mark but to be totally honest, we still don’t know what the correct answer or way to do this and there is really no guidance from anyone out there on this So we feel like we may be setting a bit of a standard for the industry so it has been really interesting, and I would say, nerdy, but we are proud of the work that we have done and the investors seem to be pretty happy with it so far.

Aussie Firebug: So I’ve got a question about that because last year, I had a relatively complicated tax return just with a few things, because I invest through a trust myself and I went through an accountant because I have an accountant, and my goal eventually, when I reach FI and I move into the retirement phase, is to sell my properties off and just be 100% passive income via ETFs and LICs. When I’m at that stage, I plan to do my tax returns myself which is where a tool like Sharesight really comes in handy, but my question was, last year I used a combination; I had reports from Sharesight that I forwarded to my accountant but I also used the Vanguard reports that you talk about, that distributed a few months after the end of the financial year. Are you saying that you have access to that data once it is released from Vanguard, you know exactly what it is or the investor still needs to have that tax report from Vanguard and plug it into Sharesight to make it 100% correct? Can you just clarify that part?

Doug Morris: Sure, it’s a great question. Where we are up to at the moment, the Vanguards of the world or the Aus Shares or the Beta Shares, the providers themselves (the fund managers, if you will) they only do this exercise of the tax reporting/dividend reporting at the end of the year. So as we get that we will backfill that information inside your share portfolio

Aussie Firebug: So that’s automatic, you guys know about that?

Doug Morris: Yes, that’s right. So we know about that at the end of the financial year, we won’t know about that though for each dividend that has been paid throughout the year, if that makes sense. We are only as good as the data that we can get from the provider themselves and if you think about how complex this must be for Vanguard, right? You’ve got millions of investors in these really complex structures, they must have, quite frankly, some hellish process to go through and figure what you (individual investor) are actually liable for, on a distribution basis. Because what we’ve actually seen, is that, even if I hold, say, VAS (Vanguard Australian Shares) and you own VAS as well, and we’ve owned it for a similar time period if we have remarkably different balances in that particular ETF, our payouts might be different because of the way that the cash is actually distributed to investors via the registry. So, that’s actually quite interesting, it’s a big end of year process and what you’ll find in Sharesight is that around hopefully September (although this particular year, since it was our first go at this it was October) you will being to see the breakdowns added to your portfolio automatically.

Aussie Firebug: Ok, so October/November. Will Sharesight users be notified of that or will you just see it in the tax reporting report?

Doug Morris: Indeed. So what we will do is in the platform itself, we have a messaging capability. We will push a message saying, hey we’ve updated the end of year tax details for you.

Aussie Firebug: Great, awesome. That’s very good to know. If you are concerned about your tax liability throughout the year, it might not be 100% accurate (that’s sort of what I am getting) but at the end of the financial year, come October/November it should be all good for the previous financial year once you have received those reports and put them into the system.

Doug Morris: That’s right. So throughout the year it will be accurate or very close to being accurate for performance reasons which is kind of the most important things as you go. But then come tax time, there is a bit of a catch-up period and then we backfill the tax information.

Aussie Firebug: Awesome, for me, I like to lodge my personal tax return as soon as possible and for those people that do invest in shares in their own name, it might be annoying to wait a few months but I have no issues with waiting a few months and having the reports come out and then just having one place where I can either generate the report and send it to my accountant or I can generate the report and fill in my tax return myself. It’s all my investments all in one report and I’ve seen a few articles as well that you’ve posted, which I will link in the show notes, about the step by step where abouts in your tax return in the ATO form, where you fill out and what data you need to enter here and there. It’s really good. Is there any work to integrate directly? Like if you are doing a tax return yourself, can you integrate directly to myGov, or anything like that, is there anything like that in the works?

Doug Morris: We haven’t actually progressed that in any kind of seriousness, we’ve definitely talked about how cool it would be. Because at the moment, what we find that most of our clients do, they file themselves using our reports and in fact, even on our taxable income report now, you’ll see the alpha-numeric codes that you need when you are filing the tax that you know this is field 10A and this is your total for that, so we make it really easy, honestly kind of a two tab solution. But the alternative to that, is that if you are working with an accountant, and they are using Xero, who we have a linkage with, they they can be filed straight through there so that is the alternative but unfortunately, no direct sync from Sharesight at this time. Which is also a function of the fact that we are operating in several global markets, and so, prioritising one tax integration verse another is tough stuff.

Aussie Firebug: Nah, that would be next level. Yes, as I said I will link the article in the show notes, and it is very straight forward. It shows you exactly where you need to go to when you are launching your return and what data needs to go in where…it is really cool. So we know Sharesight has awesome performance and awesome reporting and tax reporting which are the two main purposes that I use it for. Are there any other awesome features that I am missing out on that I don’t know about?

Doug Morris: Yea, it is a pretty deep product. I mean, the nice thing about Sharesight is that it is simple enough for your beginner investor to use, but it is complex enough for your sophisticated investor as well. So I put myself in the middle of those two spectrums. What I use personally quite a bit is custom groups. Custom Groups is a lesser known feature in Sharesight. What it allows you to do is build your own kind of worldview of your investments and so throughout the product you can choose to group by market, or country, or sector or industry, which is all kind of stock standard stuff. But Custom Groups allows you to come up with your own classification system and then literally drag and drop the companies or ETFs or whatever you own into those classifications. And so my worldview as an American living in Australia, takes a core satellite approach, who favours tax; who likes ETFs; there is really no standard asset allocation that works for me, so I build my own. I have, like I said, a core satellite approach where I have my blue chip tech stocks that I know I am not going to sell, I have a few more speculative tech stocks that I want to keep a closer eye on. I’ve got some retirement savings in The States and I’m in some Super here so it allows me to customise exactly how I look at the world and then therefore I can apply that to other parts of the product. So, obviously, you want to look at how you are performing in each one of those customised groups and you can look at your exposuress as well. You can apply the Custom Groups feature to reports, like the Diversity report, which shows you how your exposures change over time based on how you view the world.

Aussie Firebug: Awesome, have you got an article about Custom Groups that I can link to on the site?

Doug Morris: Yes, sure we can find you one.

Aussie Firebug: Awesome, I’ll put that in the show notes then. And I’ll check that out myself because that is something that I am not using which sounds awesome. What’s next for Sharesight? Anything else being cooked up in the kitchen that we can look forward to?

Doug Morris: The product is never done, we are always building out the product. A couple of things that we are focussing on. One is just more broker connections, there are so many online brokers out there and there are a lot of these international brokers moving hard into Australia, as well. They are really low cost brokers, so if you indeed looking to cut down on your fixed cost for investing I would encourage you to take a look at some of these. One that we are working hard to integrate with right now is Interactive Brokers, and they are huge. I mean, they would be bigger at a global scale, they are much bigger than a CommSec even. And they offer access, low cost access, to any asset class you can imagine. If you want to trade US shares, you want to trade European ETFs, they even have support for cryptocurrencies in their platform. That is a really popular broker for hardcore DIY investors so we are looking to integrate with those guys. Which really just means that the flow of trades will be automatic with a Single Sign On. Apart from that, we are brainstorming some ways that we can do a bit more to leverage our user base. We have really grown the user base to a pretty large scale now and building a community of investors is something that would add some real value and some benefit. One idea that we are workshopping is, what if we had something like “Investors like you”. So based on anonymous data, that we could glean from you and your portfolio. What if we could connect you to other investors who had similar investment appetites as yourself, and build a community around that. We are looking to leverage our own scale to provide some value for our client base.

Aussie Firebug: Interesting. Maybe like a social media aspect like a forum or something? I have to say, I didn’t have this as one of my questions but I gotta say it now because I use them – Selfwealth is the broker that I use and the last time I checked, you didn’t have native integration. The way I integrate SelfWealth with you guys, for my trades, is I send an email. I have an automatic rule that when I get the trade through SelfWealth, it sends an email to that special email that you set up in Sharesight and the trades come through semi-automatically. Is there anything in the works to get SelfWealth integrated natively?

Doug Morris: What you’ve described is we support their contract note. If you make a trade, you can set it up to where Sharesight will automatically process your contract note and store it against the trade. But we do not have a facility for automatically importing the historical trade, at this time. The way we make those decisions is if you get on our customer forums and you vote it or you post about it, we definitely look at that for the stuff that we build next. That would be my encouragement to anybody that wants that deeper level of integration with SelfWealth to do that. A stop-gap measure in the meantime is, you can export your trading history from SelfWealth; it will come out as a CSV or an Excel file. You can easily just upload that into Sharesight as well, and it’s really the same process with a couple more clicks, rather than that API.

Aussie Firebug: It’s not a dealbreaker or anything, but I just had to say it out. I think I’ve tweeted you guys a few times like, “Hurry up with the SelfWealth integration” but I’ll get on the forums, I’ll get the Aussie Firebug community to help out.

Doug Morris: We are pretty democratic about what we build, even in my position as CEO, if I say, “Hey, you know what would be cool to build?”, the developers often come back and say, “Here is the stuff we are already working on and you need to prove the case”.

Aussie Firebug: That makes 100% sense. I work in IT myself so I agree with the developers but I’m just being greedy. Anything else you want to chat about Doug, or anything that we haven’t covered?

Doug Morris: No look I really appreciate the opportunity and again, circling back to ETFs and look, I’m an ETF man myself. And what I love about them is the diversity and the exposure that they offer. Because this world was locked away from aussie investors for a long time and really keen to see where they take our portfolios and it will be interesting to see what happens here, especially with the Share Markets as they are getting a little unsteady at the top.

Aussie Firebug: Absolutely, it’s going to be interesting the next 24 months, but I don’t like to time the market that is not what we do on the race to Financial Independence to Retire Early. Time in the market beats time in the market, so we stay the course but it’s going to be interesting, we’re going to see who can hold their nerve in the next few months maybe but that’s another story. Look Doug, it has been an absolute pleasure chatting to you, thank you so much for coming on the show. Sharesight is a fantastic product, I use it. It’s free for your first 10 holdings and then there’s pricing after that but recommended to anyone. It’s the best reporting tool that I’ve come across by far. So thanks for coming on and chatting today mate.

Doug Morris: Thank you very much mnate, I appreciate the opportunity.

Aussie Firebug: Wow what a podcast, I hope you guys enjoyed it as much as i did creating it. Sharesight really helpful software, really really good performance portfolio. tracking software and the fact that it’s free for 10 holdings or under is just insane i think. The time and efficiency you get generating those reports for tax time is so so good. And a lot of people in the firte community will have 10 and under holdings just because we tend to invest in a few ETFs or LICs and we don’t have an array of holdings. The value that you get from that free plan is just insane. I love that they offer that. For people that have over 10 holdings and would like to sign up with Sharesight which I totally think is worth the money, especially if your having just a starter or an investor plan. I did mention at the start of the pod that i have something special for you guys, and I do. I actually have a special link and if you sign up you get the first 2 months for free. So the link is aussiefirebug.com/sharesight. If you use that link and you’re a new account, or you’re coming from a free account, and you want to move to a starter or investor plan, you will get the first 2 months off the price and you’ll get those first two months for free. That’s only for Aussie Firebug listeners so aussiefirebug.com/sharesight. Check it out, since we’ve recorded the pod I’ve upgraded to the investor plan, so I get a few more features now and I really, really enjoy it. The ability to create the dummy portfolios so I can have as many different portfolios and I can do historical planning, it really helps me write my articles and if I’m ever thinking what would a portfolio of this mix look like, or have looked like or would have performed in the last 20 years and I can seriously just whip it up, and spin it up and have a look at the performance of that portfolio in a matter of minutes. It’s really really powerful and there’s the whole custom grouping things, it really solid software and the tax reporting of it is just next level. Like I said at the start and during the pod for aussie investors that invest in the share market, really a must have, it’s the best reporting software that’s out there and it factors everything in that’s unique to Australia which I really, really like. So check it out, it’s got the free plan but if you need to do the investor plan not the starter you can use my link, and that’s Sharesight. I’ve been using these guys for over a year now and I really, really like them. Now moving on before we wrap up this pod, I of course like every single podcast will read out the iTunes comments that you guys have left me.

I’ve got a few here since I last read these out, but starting on the first one I’ve got… Oh I cannot pronounce this name rat-rat-ratsnatag, I have no idea how to pronounce that, they gave me five stars anyway, and they write: “Thanks Mr. Firebug for the crisp and real life interviews, especially for Aussies, very helpful”. Thank you, the name I cannot pronounce. Thank you for that five stars.

Our next submission, or our next review comes from ‘Fire Fields’ – “Five stars, must listen, i can’t put this down. We are so lucky to have such great local fire content available”. Aw, thank you very much.

Next comment comes from sarafxds, hard names to pronounce this week – “just one thing, five stars. Just one thing, i love, love, love your podcast but please stop saying ‘aks’ – a k s, your knowledge and passion is fantastic but I can see my grammar teacher wincing everytime you say it”. Ah, do you know what Mrs. Firebug had a chuckle at this one because my grammar is horrible, it always has been. I’m borderline dyslexic, i get pulled up, i get emails nearly every single week about spelling mistakes on the website or in my emails or something, so i will try my best. I feel like i know I’m saying that incorrectly, and everytime i say it i i think to myself i should edit it out, but I’m just going to try and avoid the word so i’ll just stick to ‘they write in’ or ‘they write’ or something that avoids ‘aks’ which just sounds wrong doesn’t it? Anyway moving on, thank you for the five stars anyway, Sarah .

Our next review comes in from ‘Jjz71’, all these bizarre names this week – “Great podcast, five stars. This podcast should be compulsory for every adult in Australia. Way too many people spend 40 plus hours a week making money for someone else and neglect their own finances”. Oh look, I don’t know if it should be compulsory but I thank you for your review I do think that finance, in general, should be taught a lot more in school and should be its own subject, that is something I strongly believe in and I hope one day something like that happens, so I guess we’ll just have to wait and see.

The next comment, “5 stars, very well done”, comes from Clarkernucci, “I’m making my way through your podcast, and I think they are really great, full of a lot of really insightful tidbits, such as PocketBook, etc. My only bit of constructive criticism, and you made have already fixed this, would be to invest in a better quality microphone” Thank you for your review and the 5 stars, and I definitely upgraded my microphone and I am getting better at editing the audio quality so I cringe whenever I hear my first episode, or even my first 5 episodes, because the quality is almost unbearable but I’m getting better and I feel like they are better quality these days so just get to the later episodes and they get better, or as you continue to listen they should get better. Thank you for your five stars anyway.

Our next review comes from, Orielton Investor, “5 stars, love your work.Love the podcast Aussie Firebug, looking forward to future learnings and the LIC and ETF journey”. Cheers, thank you very much.

Our last one today, comes from Trent. “Absolute must listen. Hands down one of the best finance podcast. Excellent that it has an Australian perspective on the FIRE movement. Thanks.” Thank you Trent and thank you everyone that puts in a review. It really makes a difference to me when I see a review, I really, really enjoy reading them.Thank you so much for everyone that has put in a review. If you want me to continue to make more, please drop me a comment and a rating on iTunes. Just search for Aussie Firebug on iTunes and you will find me. I’m on all the podcast app and I’m actually on Spotify now – that’s actually big news. I need to update my website but I am on Spotify now so please add me. You can also find me on SoundCloud at soundcloud.com/aussie-firebug. Show notes for this episode can be found on my website, at aussiefirebug.com.

Thanks a lot guys and I will see you next time.

Podcast – Investment Bonds – GenLife

by Aussie Firebug | Nov 20, 2018 | Podcast

Summary

Have you ever heard of an investment/insurance bond?

I probably did somewhere along the journey and most likely disregarded them as soon as I heard the word ‘bond’. But don’t be fooled by the name (like I was), there are a lot of advantages that these investments offer and in my opinion, are the best way to invest for children (your own or others).

But it doesn’t stop there. Investment bond can offer a legitimate tax effective alternative to the traditional ETF/LIC route that most Aussies adopt in the pursuit towards FIRE.

There are a few specific rules that need to be followed

In today’s episode, I chat to Catherine Van Deer Veen who is the CEO of Generation Life, an Australian investment and insurance company that’s been around for 15 years currently managing 1.3 Billion dollars for investors.

If you’re thinking about investing for your kids, nieces or nephews or are looking for a tax-efficient alternative investment product, this is the podcast for you!

In this episode, we talk about:

What exactly is an Investment Bond
What Generation Life can offer to investors
The specific rules that you must follow in order to reap the full tax benefits

and much more

Show Notes

Podcast – Strong Money Australia

by Aussie Firebug | May 20, 2018 | Podcast

Summary

Our guest today is Dave AKA Strong Money Australia. Dave reached financial independence at the ripe old age of just 28. Dave is originally from country Victoria but moved to Western Australia at 18 to take advantage of the mining boom. Roughly 2 years into a job, Dave got a new boss and suddenly going to work each day was a struggle. He discovered investing and financial Independence shortly after and after 8 more years of work, 8 investment properties and a lot a stocks later, discovered that he had reached financial independence.

We chat about Dave’s early years at work, questioning the 9-5 day grind for the next 50 years, investing and much more.

In this episode, we talk about:

Daves struggles with work early on
Questioning everything
Transitioning from property investing to shares
Dividend growth investing
Listed investment companies (LIC’s)

and much more

Show Notes

Transcript:

Aussie Firebug: Why don’t you just start off with a little bit about yourself, mate?

Dave: Yeah, so my name’s Dave and I’m originally from country Victoria but I moved to Perth when I was 18 years old and then I worked as a factory worker basically in a sheet manufacturer and then as a forklift driver and a store man at a dairy factory. The first job was for roughly two years and then the second job was for roughly about eight years and I now live in Perth with my longtime girlfriend and my dog.

Aussie Firebug: Cool, and so you’re 28, is that right?

Dave: Yeah, just about to turn 29.

Aussie Firebug: About to turn 29. And so you left country Victoria roughly ten years ago, did you say?

Dave: Yeah, yeah. Just after I turned 18 basically.

Aussie Firebug: Yeah, so what made you decide to pack up shop and head over to the other side of the country?

Dave: Yeah well I was 18 and I needed a job basically and country Victoria was pretty quiet on the jobs front especially where I’m from; there wasn’t much happening there and I had a couple of mates that actually came over to Perth about probably six months prior and they were telling me how many jobs were available at that time because this is basically the middle of the mining boom back then so there was just jobs for anyone who wanted them so I thought if I’m going to have a better life I’ll probably need to go somewhere where there’s a decent job so that’s why decided to move.

Aussie Firebug: You’re right, and what was that like- heading over there at such a relatively young age, 18 year old bloke, kidding off with a few friends would have been a bit of fun?

Dave: Yeah. So it kind of happened quite fast. So when my mate told me how many jobs there are, I started Googling jobs online and started finding just your average jobs paying $20 an hour or something in a factory and I thought yeah, I could probably do that for forty hours a week and that’s pretty decent money where I’m from and back then so I didn’t really think too much about it. It was basically I could stay in country Victoria and not have a job or I could move to Perth and start making some half sticks and money that would actually get me somewhere and so being one other matter decided to pack up and drive across and actually when I got here, I had $800 in my bank account so didn’t really plan ahead too much because I just figured that there were that many jobs that it would probably work out alright.

Aussie Firebug: Well $800 in your bank account, incredible. Now, I was going to talk about this a bit later but we might as well just bring it up now. So on your side you’ve got that you’ve reached financial independence at the age of 28, can you just talk a bit about how you– so you went over there and got this job, $800 to your name, like no other investments or anything prior to that?

Dave: No, nothing at all. Just my whooping savings there.

Aussie Firebug: So $800; so how do you get from 18 years of age with $800 to financially independent at 28, can you just walk us through the steps of you know, discovering investing and stuff like that and what led you to save so much money?

Dave: Yeah. So I’ve always been probably more of a saver than a spender and as soon as I got a– I did end up getting a job I think within about ten days so my savings didn’t go down too much from $800 so then it was just the case of I was renting with a friend and it wasn’t really costing me too much so even at my $20 an hour wage, I managed to save a reasonable amount and then we ran about moving into a bigger house but with more people which sort of made the rent cheaper. When I reached out and I was like we could save a bit more and then that job had a decent amount of overtime so started taking up a bit of overtime and started building up my savings and back then you could get maybe 5% or maybe even 6% in your high interest savings account so I thought I was doing alright there. So I did that for a couple years then I started thinking that I’m going to have to learn about investing or something because this savings account is pretty cool but it’s probably not going to make me rich so I started researching about investing and I think initially I actually Googled ‘How to get rich’ basically because I was sort of getting a bit depressed looking around at all these older guys at my work and they sort of were hoarding along and they didn’t really look happy and they were just working every week to pay their bills and it just didn’t seem like that was for me so I wanted something different.

Aussie Firebug: You didn’t want to end up like them?

Dave: No, I didn’t want to end up like that. I just didn’t like such a limited life with no choices; you’re basically just working to survive and you never question anything and you just keep doing the same thing every week and it didn’t seem like it was for me.

Aussie Firebug: How many years into the job did these thoughts start creeping into your head?

Dave: Probably round about two years into it, maybe a year and a half, I was maybe 19.5 and we actually got a different boss at that work place. It was fine until we got we got this different boss and then he was just a nightmare so I just thought like man, why do people put up with this and I just started questioning everything: why do people just work forever for a shit boss they don’t like and I don’t know, it just didn’t appeal to me, the regular work forever lifestyle and to get nowhere so I thought that I had to do something different to end up with a different result.

Aussie Firebug: Absolutely, I’m definitely hearing you and I think a lot of people go through a similar thing. You know it’s good if you like your job and that’s awesome but you know, all it takes is management to change or a different boss or a co-worker that you don’t particularly get along with and all of a sudden your great job can turn into a bit of a nightmare. A similar thing happened to me. Just towards the end of my job, it was a great job- I changed jobs the start of last year- and my old job was fantastic but then management changed and it just wasn’t as good anymore. I didn’t really want to come to work to do my job anymore and you know, I had the opportunity that I took it but I had a strong savings and I wasn’t locked in to that job which a few people were, they had to rely on that job to pay the bills and stuff but I could sort of switch jobs and take a bit of a pay cut and still manage.

Dave: See, that’s the thing- it gives you that flexibility, doesn’t it?

Aussie Firebug: Absolutely.

Dave: So even if you love your job today, just to say that next year, you might wake up and all of a sudden realize you don’t actually love it that much; you’re just doing it for the money and then you get a different boss and it just becomes not very enjoyable anymore.

Aussie Firebug: For sure, for sure. So you get this new boss and then everything changes?

Dave: Yeah, basically I just stopped enjoying work really so I didn’t want to be there anymore, I even stopped going overtime. I just did not want to be there and then it got to the point where they actually called me in and my attitude was so bad that they basically said, “We know that you don’t want to be here and it’s got to a stage where we don’t really want you here’s maybe we should just part ways,” and I said, “Yeah, that’s probably a good idea,” so that was my last day at work for that job.

Aussie Firebug: And that was two years in, in WYO, roughly two years in?

Dave: Yeah probably almost two years, about a year and a half, almost two.

Aussie Firebug: Okay, and so you’re Googling ‘How to get rich’, have you discovered you know, investing in financial independence at this stage or you’re just sort of on the cusp of that?

Dave: Yes, I didn’t really know it was a thing back then. I was just sort of Googling how do rich people actually get rich and the Google results come up with the old favorites of property and shares, you know? So I thought well, shares are a bit scary with the market crashes and the fluctuations that don’t really make much sense so I thought when I get another job and start saving, I’m going to get into property and that’s how I was planning to get rich.

Aussie Firebug: The Australian dream.

Dave: Yeah, the Aussie dream mate.

Aussie Firebug: So you get this new job and?

Dave: Yes, so I got a new job and it actually to my surprise pays better than the old job so I was suddenly surprised there and actually I’ll just go back a bit, just before I got this next job, I actually took maybe three months off and lived on my savings over the summer because we were living in a beach house in a coastal suburb, just me and maybe I think it was about four or five other blokes. So I had these savings built up and I thought I actually don’t have to get a job straight away so I might just enjoy the summer while I’m here, just in this beach house because it might not be here next year and then I’ll get a job after that. So I had a bit of a taste of what it’s like to have some money and not have to work and I thought it was the best thing ever really and I thought I’ve got to have me some more of that.

Aussie Firebug: It sounds good. I could just imagine a young bloke with his mates in WYO enjoying the summer without working living off some money, yeah I could see how that’d be nice.

Dave: It was amazing. It was just a bit of a taste of what it’d be like to be rich because we actually lived in, it was like a rundown mansion basically in a coastal suburb here and because it was so rundown, it was quite cheap to rent it especially between five blokes so we were living in a pretty fancy area right across from the water and it was pretty cheap but we loved it and it was just an awesome summer off really and a bit of a taste of what I wanted in the future.

Aussie Firebug: A few parties were had at that place, no doubt?

Dave: Yeah, definitely.

Aussie Firebug: So did that light a fire under your belly to really get back stuck in to the workforce, earn some money and you know, reach the goal?

Dave: Yeah, it really did. I probably haven’t thought about it that much but I think it did. It just showed me what savings can do. You know, if you’ve got savings in the bank you actually have a choice then; you don’t have to just work every week forever with no end in sight. You actually can choose to spend your time differently.

Aussie Firebug: Yeah for sure, couldn’t agree anymore and also it’s good for your mental state at work anyway if you know at the back of your mind well, actually like even now, I’m not financially independent but shit, I could 10 years of working and I could live off you know, what we’ve got at the moment so in the back of my mind, I’ve always got that you know, if I really wanted to I could just scour back to two days a week at odd jobs and live for a decent while without having to go back to work even if it’s just a year or so just to recharge the batteries, I’ve always got that option but I’m really liking my current job at the moment so that’s not something I’m going to do but it’s very healthy to know that you’ve got that option.

Dave: Yeah, it’s like a bit of extra comfort there you know. You’ve got that flexibility and you know that if you get too frustrated that there is actually a way out and you don’t have to put up with certain things and it’s just a different way to live mentally, isn’t it?

Aussie Firebug: For sure, for sure. It’s very underrated sort of say, “You get to financial independence and maybe I don’t want to stop working,” and that’s perfectly cool but you’ll find a lot of people say that they get to financial independence and sometimes their job becomes even more meaningful, you know it’s the same job but once they reach that number, suddenly they enjoy work more which is a weird side effect but yeah, a lot of people say that happens.

Dave: Yeah. It’s funny, isn’t it? Because it’s the same job but the point is they get to choose to get that job, they don’t actually have to anymore.

Aussie Firebug: Correct, yes very important mindset shift.

Dave: It’s pretty subtle but it’s pretty powerful at the same time.

Aussie Firebug: Yeah right. So how long were you in this second job for?

Dave: I was in that second job up until last year. I worked there for I think it was roughly eight years.

Aussie Firebug: Nice, nice. And it was seamless sort of work like in the warehouse, was it or?

Dave: It was a warehouse but it was a milk factory so it was just a refrigerated warehouse that was a bit more pleasant in the Perth summers. You’ve got to work in a refrigerated warehouse, it’s pretty good in summer.

Aussie Firebug: Yeah, cool, cool. So what happened during those eight years? You had your great summer and you got stuck into work for the next eight years? You just wanted to work, is that what happened?

Dave: So I think I was just about 20 when I got this job and it paid decently better than the last job and there was a little bit of overtime as well so I’d start getting motivated about saving and I had a little bit of savings left from my time off so I wanted to add to it so I started doing lots of more hours at this job and started building up the savings and started reading about properties since I’d decided that that was what I was going to do and then it was about to be a case of just keep learning about how I’m going to be able to buy enough properties to retire and build up the savings as fast as I can by just hardcore saving and being super frugal and trying to do those deposits on buying properties so I ended up being able to save a bit, I think maybe- I can’t remember the numbers man, it was maybe like 60-70 grand when I was turning 22 and I bought my first property with that one and then in the next twelve months after that, ended up buying another property with more savings that I did. I ended up just doing so much overtime. I didn’t have much free time, I just wanted to save, save. So I ended up buying another one and I was 23 and at that point, I’d met and moved in with my partner at the moment. I think we met and moved in when I was about 20 and so our finances were separate at that point but she bought a property as well around the same time that I bought mine she had a fair bit of equity in our house because she’s a fair bit older than me so she’d had a prime for quite a while and paid a lot so she ended up tapping into that equity to buy her investment property and then we sort of teamed up promptly and joined all our finances together and it sort of made it a lot easier to save because we’re on the same page and we wanted the same goals and so we just cooled down and started planning together. We have equity in this property and some equity over in this property and we combined with our cash savings and we can buy another one and we just sort of snowboarded from there I guess just through the combination of savings and some equity in the properties that had grown a bit in value and back then it was sort of easy to borrow a lot of money, not so much nowadays, but back then it was. So that really helped us be able to build that portfolio in a fairly short amount of time so that was quite handy and so then it got to the point where I think I was around about 25-26 and our equity was building a bit. We still had a fair bit of savings each year even after paying for the properties because they were mostly negative cash flow capital city properties in Australia so as you probably know, the rent doesn’t cover the bills so you’ve got to put your hand in your pocket. So we still had savings after paying for those and that’s when the finance started to become harder to get, harder to get loans and the regulators sort of started cracking down on loose lending so it became quite hard to borrow and we basically maxed out at that stage and borrowed as much as we possibly could. So we ended up with savings that we weren’t sure what do with because we really didn’t want to pay down debt because we thought we could get a better return investing rather than paying down debt so I actually started looking into where else we could our money in and I was pretty hesitant at shares for a while and that’s why I ended up choosing property. I decided to do a bit more research, I ended up coming across this approach that’s basically investing in shares but instead of focusing on the proceeds, you focus on the dividends and I thought that that made quite a lot of sense since the share price fluctuations for me didn’t seem to make a lot of sense and didn’t seem all that reliable to base an investment strategy on. So we started buying shares that were dividend-focused and we found out about educational material like Peter Thornhill’s book which is ‘Motivated Money’ and the videos on his website which helped us quite a lot in understanding basically just how the share market works and why you should focus on the income and not so much on the share proceeds. It just really put things together for me and it just took away that fear that fear that I had about shares because like a lot of property people, I was pretty afraid of the share market; I didn’t think it made a whole lot of sense and so I went to property in the first place but we started investing our savings in these dividend paying shares like at least with investment companies and some other dividend stocks and we started getting these dividend checks and they were quite a lot and we felt oh this is actually pretty easy: You just put your savings in, get a dividend check and you can reinvest your dividend or you can do what you want with it so it just gave us something more concrete where we were getting these regular returns and we didn’t have to worry too much about the market going up or the market going down so we started focusing more on that. And around this time– I’ve gone blank for a bit mate.

Aussie Firebug: That’s alright. So much to get through so I’ll sort of just let you go on because it was really good what you were saying so I’ll just let you go on but a few things I want to touch on: So first question is actually, how did you meet your girlfriend if you’re doing all this overtime?

Dave: That’s a god question. it was such a long time ago, I think she was in [00:21:41] for a night out, we’d wanted to be friends for a bit and in that moment we just sort of met up and just got to know her well and just went from there.

Aussie Firebug: She might have come to a party at the rundown mansion.

Dave: No, I think it was at the [00:22:01] actually.

Aussie Firebug: Fair enough. Right, what a story! Basically eight solid years and I can relate to it so much. You know you being born in Australia, if you want to make money it’s pretty much probably shoved down your throat in every direction with your parents, your uncles, your aunties, the media, everything is all property, property, property but as I discovered as well, the share market is also– they’re both really good asset classes to be honest but like it depends what you want do and how you want to do it but they’ve both got the merits. Now, you guys started buying properties in capital cities, did you say? Was it like Sydney-Melbourne area?

Dave: Yeah, in Perth we started with, because that’s our city so everyone buys around their own city first, and then so we got quite a few here which haven’t actually done much for us to be honest.

Aussie Firebug: When you say quite a few, how much are we talking here?

Dave: We have four here.

Aussie Firebug: Four in Perth, okay and you’ve still got those?

Dave: Yes we do. One was our house which is rented out now because we’re renting ourselves and we had two in Melbourne, one in Sydney and one in Brisbane.

Aussie Firebug: Wow! My Math is what, seven, is that right?

Dave: A seven and our own house so eight altogether.

Aussie Firebug: Wow, eight properties, incredible. So did you buy the first four in Perth to start with and then you ventured outside the state?

Dave: Yeah, yeah that’s right.

Aussie Firebug: What made you invest outside the state because when you were buying in Perth, it would’ve been peak in the mining bloom I’m assuming so the yield would’ve been pretty good?

Dave: Yeah, so I think the first two properties I bought were actually positive cash flow because the rental returns were actually good back then, I think it was around 2011 so the rental returns were pretty good back then, not so much now though. So they didn’t cost me too much so I was able to save up the next deposit actually quite easily.

Aussie Firebug: So what made you go to Melbourne and Sydney?

Dave: Yeah, it was basically just a diversification thing so if Perth struggled for a while which it ended up doing, then we’d have properties in other cities that would hopefully have grown in value so we could harvest equity from there to continue buying, that was basically the idea; not having all your properties in the one place sort of gives you more optionality and a bit of diversification as well.

Aussie Firebug: Yeah, great. So did you end up with the eighth investment property before you went to shares, like once you went shares, was it no going back or did you double in shares and then still bought investment properties along the way?

Dave: We basically started buying shares straight after we bought the last investment property.

Aussie Firebug: Which was what year?

Dave: That was at 2015.

Aussie Firebug: Yeah right, 2015. We’re of similar age and I can definitely relate to the lending restrictions and everything like that. You know back in the early teens- teenies, whatever they call the 2010’s to 20’s, you could get a loan or more importantly, you could withdraw equity so ridiculously easy. I did it three times with my three investment properties when they went up in value like I did the 20% deposit, it went under 80% loan: value ratio and then I just topped up eighty and it was literally an email to my mortgage broker saying, “Hey, Commonwealth Banking is worth this much, this is the loan, can you like get out the extra 20 grand,” and like literally two weeks later, it’d be in my account. Like that was easy, didn’t cost me anything, like it was just so much easier.

Dave: Yeah, they were sort of bending over backwards back then.

Aussie Firebug: Yeah, I know and the last time I went to do it like it was just so much more difficult and I just don’t even bother to do it now like at the moment it’s just really hard but you’ve got to make the most of it when you get it right. Like that was an opportunity back then that you did and you got all these properties and you used that to your advantage and you know, what kind of position you’re in now.

Dave: Yeah, so we didn’t actually know that obviously, we didn’t know that the finance arena was going to get a lot tougher, we just basically stuck to our strategy which was borrowing as much as we could and luckily it tended to work out more times than not but yeah, I don’t think anyone was sort of guessing that this was going to happen and that it was a short term thing. We just assumed that that’s the way it is and you’re always going to be able to borrow what you need if you’ve got a decent income and you’ve got some equity, the banks will sort of maybe bend the rules a bit and yeah.

Aussie Firebug: When I was crunching the numbers, as long as the cash flow was strong, I wasn’t afraid to loan money to buy properties. I got a lot of people saying oh, “You got your third property you know, all this money and debt,” well I’ve got my parents and uncles and aunties that run businesses and we’re talking millions of dollars they’ve got to juggle so I sort of was brought up with “There’s good debt and there’s bad debt.” So it wasn’t like a scary thing for me to do if the numbers worked and I’d figure out you know, this is how much the property gets from rent, this is how much it’s going to cost, factor in a 2% increase in interest and if the numbers make sense, I’m just going to go for it and luckily the banks’ lending in Australia at that time allowed me to do so. But I think if started again today, I wouldn’t be able to do that like to get three properties. With today’s restrictions, there’s no way, I couldn’t like that. Really, my gains from 2012 when I first built to the last one I bought in 2015 really has like amplified my net worth in the last couple years so you’ve just got to make most of it when it’s available.

Dave: Yeah, that’s spot on. I mean a lot of people are afraid of debt and I just figure that if you’re going to make a total return that’s not so high then the interest payments, it sort of makes sense you know. If you’ve got plenty of extra cash from your job or from the asset itself then even if interest rates go up you’re going to be fine and as long as those assets have half decent returns over time, you’re probably going to come out ahead.

Aussie Firebug: Yeah and like it cuts both ways like if you leverage an investment and it does well, it’s implied and if it does poorly, that’s amplified as well but I think it’s just about being smart with the cash flow is what I always look at when people ask me about property. As long as it’s got strong cash flow, then I don’t care about housing value. If Australia goes through recession and it goes down half price, as long as the rent doesn’t go down half, then you know I can absorb 20-30% rental loss across the three plus an interest rate and I can still hold through that downturn and if you’re crunching the numbers with your investment properties, can you do that because that’s something that you need to consider, not so much how much it’s worth- it’s all about how much it’s bringing in, that’s how we’ll look at it anyway.

Dave: Exactly, that’s a smart way to look at it. Outside it was more prime, the best located properties that we could afford to hold and there’s definitely some luck involved you know. I mean if Australia did have a recession in the last few years and houses probably did drop in value, we probably wouldn’t be retired today because if the value is going to be less than the loan that we have against it, we’re not going to be able to sell it and put the money into shares so there’s definitely some luck involved there no question.

Aussie Firebug: For sure, for sure. So you discover shares, what year was that, 2015 were you saying you bought your first shares?

Dave: Yeah, that was in 2015.

Aussie Firebug: And who- I’m going to put a link in the show notes- Peter Thornhill, was it?

Dave: Yeah, Peter Thornhill.

Aussie Firebug: I actually haven’t heard about him, what’s his story?

Dave: So he might be seventy by now but he’s an ex-finance guy, used to work for fund managers back in the 80s and 90s and so he knows what goes on in there in the share market space and so after he retired, decided to become an educator and he runs courses actually in Sydney and I think sometimes in Melbourne. It’s like a one-day training course of how the average investor should approach the share market and it’s not about studying things, it’s just about that pure fundamental education of how the share market works, what you should focus on, what you should ignore and he’s got a few videos on his website that basically explain the same thing and they just really helped me in cutting through the rubbish that you see basically spoken about in the media about the share market nonsense that goes on and he just explains it in a simple term that even a beginner and a property guy can understand and it just makes a lot of sense and it just took away that fear of the unknown of the share market for me and just gave me something to focus on that really struck a chord with me, the income of shares, just made a lot of sense.

Dave: Yeah right, so this guy really help you understand what the share market is, what should focus on and then I’m going to put a few links in the show notes as well because you have some really good articles about your thoughts on dividend investing and these investment companies and we’re going to them in a second. But so just to stay on track with the title line here, so you listen to this guy, Peter, and you start investing in what in the share market back in 2015?

Dave: Listed investment companies mainly and some dividend stocks as well.

Aussie Firebug: So you were after that dividend focus?

Dave: Yeah, exactly.

Aussie Firebug: I liked how you said before as well, how you get the dividend, you basically just dump your money in this thing which is the share market and it spits out some money at you and you think well this is good, I’m not really doing anything because I got the same feeling when I first got my first dividend like well, didn’t do anything! Like I didn’t have to manage anything, I didn’t have to do like jack on, on it just popped out. It is a magical feeling, isn’t it?

Dave: Definitely. I think that’s why there’s such a love for many people for dividends because it sort of feels like easy money. I mean the company could retain and just there but just to check in the mail or the deposit into the bank which you’ve exerted basically no effort for, there’s no headaches, there’s no property manages or bills associated with, you just collect it and go or you can reinvest it back in and it’s just extremely easy.

Aussie Firebug: Yeah so and you fall in love with investing in the share market, is that fair to say?

Dave: I think that’s fair to say.

Aussie Firebug: And what happens then? So your strategy is shifted, is it, from buying properties to everything in share market and just talk us through a bit about like did you sell down a few properties or you still got all of them, how did that go?

Dave: Yeah so a few things happened at once. In that time around 2015, the finance space was changing. There was absolutely no way we could even have borrowed the amount that we had borrowed at that stage let alone get any more so that was part of the reason for the shift to shares. And then growing knowledge on the share market and of dividend investing really helped us see what kind of income that we could create and because of the lack of expenses really associated with that and the franking credits in Australia, the income that you can get from shares is actually very, very high here especially compared to capital city property. So it became kind of obvious that well, we’re not going to be able to just draw down some equity because originally our plan was to have this big portfolio and we could just draw down a little bit of equity to live on which was sort of doable back then 10-15 years ago but it wouldn’t be doable today. So we started realizing that that was not going to happen so even if we decided to sell out and just have a couple of mortgage rate properties because they were capital city based, you’re only going to be left with a yield of maybe 3% if you’re lucky so your million dollars might get you 30 grand after expenses but then a million dollars in property shares might get you say, 55 grand or something like that of income so it became pretty obvious that we were going to have to change and we were going to have to basically just change our direction and switch assets and just put more money into shares while we take out money selectively out of property over time.

Aussie Firebug: Nice, and it’s so funny because I went through a very similar mindset, I was all on the property same thing. I wanted to own twenty properties and pay off ten and just be like this multi-millionaire property guru but same thing, it just seemed like properties are a good wealth builder at the start of your journey because capital gains can definitely be amplified by the original investment. But once we first had a go at investing in the share market and we got those dividends and stuff like that, the more I thought about it you know with the headaches of property I thought they’ve served me well like they’ve had great gains so far, there’s no shame and I think this is a mindset thing for people which I always find funny. Some people always either are pro-property and hate the share market or pro-share market and hate property but like you can do both, right? They’re both great asset classes so we are shifting now from the property mindset now to more share market but that’s not to say that the properties haven’t great, they’ve been our best performers in our portfolio but moving forward and if you want to retire early, it makes more sense having that passive income that the share market helps you with so totally understand you’re coming from and it’s good that you realize that you know, eight properties deep, some people might think that your mind was made up like that was where you were going to go so it takes a big person to sort of switch strategies and say, well the air force one isn’t going to get us where we want to be and now I’m going to do this so kudos!

Dave: Yeah, exactly. I mean if the information that you’ve got changes then you should change your mind. You just don’t keep going and going just because you’ve been doing it all along, that doesn’t make much sense to me. So it started becoming obvious that we’re going to need to change and so rather than just ignore the information that we had, we sort of swallowed our pride and changed course. But it’s funny you say you wanted to have like twenty properties and make yourself a millionaire, they don’t tell you about that in a magazine, do they? They just tell you about, you just borrow some money, collect these properties and then in 5-10 years, you’re like super rich and you don’t have to work anymore and it looks so easy.

Aussie Firebug: Yeah it’s a small job and I’ve only got three. I could only imagine the amount of extra work you have to do for eight.

Dave: But do you manage them yourself?

Aussie Firebug: No I don’t but like even then the accounting stuff that goes in what and where like the in-house, there’s definitely management involved, there’s work involved.

Dave: Yeah, exactly. Another thing was how you’re saying about some people being pro-property and pro-shares. It’s funny because now that I’ve been talking to quite a few shares guys and quite a few guys who are doing both, I’ve noticed that a lot of the shares converts used to invest in property but when I was investing in property, I hadn’t met anyone who had switched from shares and I started thinking lately I think it’s just the ease of use and the simplified approach that you were talking about earlier, how you just get this cash payment and you’re like well, that was easy, I didn’t have to do anything. And so even if people get lower returns, they don’t mind because it’s so much easier or whenever you know; you get to that point where you’re not really interested in leveraging more end, you just want to simplify the process. You just want this cool lazy income string that’s coming in.

Aussie Firebug: Yeah, for sure. I think it seems to be the natural progression for a lot of people especially in the fire community to start off with property and I think it’s a good asset class especially if you’re like a cheapy or like some sort of tradee that you can put your skills into the investment. That is a real plus that you can’t really do with shares; like you can’t really add value to shares but there’s a lot of different ways you can add value to property so if you’ve got the time and energy and like you don’t have commitments when you’re young, I think you can really thrust and leapfrog your portfolio in the early years but then as you move to be older like we are, the passive income of shares becomes a lot more attractive so I think that may explain a little bit why it’s more of a natural shift from property to shares.

Dave: Yeah, I think you’re spot on there. I mean if someone’s a builder, they can obviously add a lot of value at very little cost to them you know because of their contacts and skills and suppliers and whatever so I think that’s a good point that you make for the average Joe, there’s a– I can’t remember what I was going to say there.

Aussie Firebug: I think it was that the passive income is just a lot more attractive, right, for your average Joe?

Dave: Yeah, yeah exactly. It’s just super simplified; there’s just nothing to do. It’s almost like a savings account. You know you just swipe your money away from one account to the other, buy a parcel of shares and get back to work or go back to the beach or whatever you were doing before.

Aussie Firebug: And the best thing about the index style investment which you know, you invest in listed investment companies which also follow a slightly managed but its similar index style investing.

Dave: Yeah, it’s very similar.

Aussie Firebug: There’s no research to be done, that’s what I love about passive investment is you don’t have to study any box, you don’t have to read anything, you don’t have to be watching certain stocks, it’s just the price is set, the day you want to buy you buy and that’s it. There’s no waste of time, you literally can do it on the phone, you can do it overseas, you can stick to a really high performing portfolio investment strategy with little effort involved. It’s definitely a huge positive for that style of investing.

Dave: Absolutely but I think a lot of people, especially property and I was like this myself, they just hate the CMF and I think it’s– I wouldn’t call ignorant but some people, I think it’s just the fear of the unknown. They see the scary headlines oh this went up today and this went down today and they think, what the f***, how does that work? You know, why has it done that? Because they don’t understand it and there’s only bad things associated with, there’s no good deed. It’s assumed that it’s some kind of crazy casino and you either buy these mining stocks and try and get rich from it. There’s no the slow and steady passive income stream approach.

Aussie Firebug: Yeah, I couldn’t agree anymore and I can’t really blame them that much because unless you are looking for it, all you have to do is think about property prices in Australia in the last 50 years and you think about the share market, the GSE especially 2008 and they’re hearing all these horror stories of people in these cases and their pension money and stuff like that. I can’t blame them too much but once you dig deeper a little bit below the surface and see that no, there is actually a very well backed investment strategy for the share market, then it opens your eyes up a bit.

Dave: Yeah, I mean the GSE was obviously a big event but I know some shares guys who say that there was a massive effect of speeding up wealth creation because IRA would buy these companies or buy these index funds or these investment companies that were trading at super cheap prices on really great yields and it just amplified their returns from then on.

Aussie Firebug: Yeah, kudos to them to have the mental strength to go through that and I’d like to think if I was in a similar situation, I would look at that event as a fire sale for shares and buy everything cheap but you never know until you go through it, until you actually see a portfolio half in value or even worse you know, you never know what you’re going to do.

Dave: Exactly, exactly. No pun intended there, fire sale?

Aussie Firebug: Fire sale, yeah. Sorry, continue.

Dave: I was just going to say another thing I think with property and shares is that the approach that we’re following year with the income stream and the dividends, you don’t have to do anything, it’s all actually really boring and I think that that’s kind of what’s off-putting to young people, I know I would’ve thought it was extremely boring and I’m not going to follow that, I want to get rich and I’m not going to get rich with this silly dividend each year. I know I need to borrow some money and go and buy a half a million dollar asset and get rich that way. I think it’s partly how young people are wired, wired for risk so I think that until we get a little bit older and see things a bit differently then we start seeing this boring approach with this income stream is not too bad after all.

Aussie Firebug: Could not agree any more, I was the exact same like I have to do something outside the box, this strategy that a lot of people working are recommending, it’s too easy. It needs to be more complicated and it needs to be harder for it to really be where the big bucks are. Yeah, definitely thought like that as well when I was younger. Yeah cool, so did you end up selling some investment properties to part more money into the share market?

Dave: Yeah, so what happened was we started investing in 2015 into shares and started collecting these dividends and realizing that that was going to be the income stream for us in the future. So we sold a property last year to generate quite a bit of free cash to invest in the share market and also to have cash in the bank sort of for us to live on as we’re joining up our shares as well because obviously we’ve only invested for a couple of years. We were tired that the income stream wasn’t large enough to sustain services so we used part of the money from the property sale to live on and part of it to invest in shares every month so the income stream gets larger and larger over time and last year, we sold the second property and basically did the same thing. We put a bit of a lump into the share market and we also chip some more into it each month and we used some of the money to live on as well. So I plan to do this for the next probably like ten years. So the plan is to sell off the properties slowly to minimize capital gains tax and also to try and sell at opportune times in certain markets so we decided to sell our Sidney property last year and the year before that was one of our Perth properties. So our third property will probably be the last to go because it’ll probably going through its growth cycle maybe some time over the next 10 years you would say so it’ll probably be the last to go. So we’re just trying to do that and optimize the outcome.

Aussie Firebug: Yeah nice. Now that’s a cool story and I quote from an 18 year old going to WYO and getting this job and then buying these properties, discovering the share market and what you’re doing now, the selling of the properties, awesome stuff. Do you just want to touch on a little bit more about when you actually found out you were financially independent?

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