House or pension: what to focus on first? Ask Us Anything

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0:50Hi guys, we've run out of content ideas again, so we're back from answering your questions. We got a good question today from Brooke. When I started work, the advice was to buy a house and then worry about your pension. Do you still think that's true? No, no. Emphatic answer. No, God, what horrible advice in my opinion. I mean, like look at it this way, right? If you're our age, you're dead old actually. If you're my age - Stop it, mate. I'm like one year older than you. The cheek of it. You look it as well. Probably like six months. I look, stop it. I look younger than you, babe. You do. Look at this hair.

1:27You do, right?

1:30if you're our age you're in your 30s you're going to need more than a million pounds in retirement to to so you know if you're taking four percent of it if you want 40k a year you want a million quid in retirement so and then that's not even inflation adjusted in all likelihood you're going to need a couple million in retirement to have like you know a retirement that most people would expect that they would have so that means that your pension is probably going to be the most valuable thing that you own. Your house might be up there, but it's going to be your house and your pension right there.

1:59So you should start focusing on that straight away. Because the thing about a pension is the longer you invest into it, the bigger it gets and the easier it gets. You want to leverage that time, that compounding. And also I find that through the auto enrollment scheme, which most people listening will be part of, they get the contributions from their employer, which doubles the amount of money that's going in. So actually that leverage is significant, especially early on. I think even if you're up to your eyeballs in personal debt, you're homeless, blah, blah, blah, but you've got a job, you should be paying into that pension.

2:34Because most people after tax deductions and all of that, they don't really notice the money all that much. It kind of just gets fired away. And you can, you know, my younger brother,

2:48who's, he's young and reckless. You know, I'm just like, just pay into the pension because in 10 years you'll be like, oh God, actually I shouldn't have spunked all the money away, but at least I've got that. I don't, I just think that's. Where do you think, do you think this is a shift in the times like 50 years ago with this being good advice and then now it's not so good advice? Yeah. Why do you think that's changed? Because people who got rich off one asset class always tell the next generation that they should do that because to them it worked, but just what worked for the generation before doesn't mean it will work now.

3:20There was a period in time where, you know, DVD players were a great idea. And there's a guy who got rich off DVD players. If he's telling people now, you need to be in the DVD game. And to be fair, physical media is making a comeback. But you know what I mean? There was a time when car, like the guy who invented the tire or whatever - Yeah, Blockbuster and all these - Yeah, yeah, these - Times changed. Previous generations. there was a time when you could jump on the housing market at four times your income and ride that sucker all the way up and 10 bang your money in a few generations in like 30 years i don't it's not that feasible anymore and for your nan to be like oh you know just buy bricks and mortar that's what we did yeah it's like well it was a lot cheaper yeah yeah makes sense i just i just i mean i'm not the best investor like well not the best example of like it's just like a sensible investor.

4:11But I mean, I've started contributing to my pension. So like, I definitely think that's, because you can see it in the long run, like property, you never know what's going to happen. But like with your pension, you're going to use it and it's going to be valuable and you can see it growing. So it's - This generation of people who say, oh, buy a house and don't worry about your pension have probably got defined benefit pension schemes that pay them a guaranteed income. And then the state pension on top of that, most people our age are looking down the barrel of your pension will be worth what you paid into it and you're probably not going to get a meaningful state pension so it should be worry about your pension and then look for a house in my opinion you know your house doesn't make you rich it's just it's just like on paper money your pension is what's gonna pay for you where there's originals where there's originals nice underrated sweet mate that and Fisherman's Friends what are Fisherman's Friends?

5:03that's gotta be a northern one they're more like a form of torture than they are a suite I don't know No, they are though. They're kind of like herbals. Do you know herbals? They're like very strong. Do you remember herbals? Yeah. They're nice. I used to like the herbals. You've got such a strange palette, Damien. No, I like herbals. Fisherman's friends, like I think they're there to unblock your nose. Yeah, like very, very strong, right? Yeah, like mentally kind of - Like mentally, yeah. Yeah, but a herbal, a herbal is goated. They're really good. They remind me of my childhood.

5:40Next question is from Blue Mousy. Interesting name. I've heard arguments that investing in the US is effectively investing globally as any US large cap is sucking up value from all over the world. So this is this idea that 65 % of the global market is the American market. It's that dominant. It's that big. A better example of this might be the FTSE 100, which is what, T? The top 100 companies in the UK stock market. Yes, well done. But the FTSE 250 is not the top 250. Yeah, what is it? It's below the top 100. So the next 250 below the - Showing off now. I know, right? Showing off. That's what you do when you watch this podcast, you learn stuff.

6:23Yeah, yeah, yeah, yeah. You go home, watch yourself. Fascinating thing. Love that guy. Yeah, so the FTSE 100, people will say that is the top 100 companies in the UK, but those companies are international businesses. Vodafone and BP and things like this, they make most of their money internationally. So you're not getting a good representation of the UK economy by buying them. Because the cash flows come from external countries. Whereas the 250, as you mentioned, people say that's much more reflective of the UK economy because they tend to be UK businesses earning those UK pounds. So when you buy America, you are buying, say, Apple, who sell their wares all over the world.

7:09But they do still have exposure to the US markets as well. I think with globalization, I mean, again, there's two parts to this question. You could say that by buying a global index, you're basically just buying America and you're heavily exposed there anyway. and that the US large cap stocks are so big that they're really global companies. But I still buy a global index because of this thing of, I believe in humans and I believe in human potential. And I don't think the extent of human potential is in the States. Yeah. Because at a global index, you get benefits of like India and China and things like that.

7:45Yeah, exactly. You get that exposure. And, you know, fast forward, right now, America has the big companies, the tech companies. And I imagine for the next 10 years, they will continue to do that. But in 20 years, could there be a business from China that we all use? TikTok. China, as Donald Trump would say. Yeah, I have to have my China. China. Or India, or maybe the UK sorts its shit out. But France, so France have got LVM, you'll know more than me. Yeah, Louis Vuitton. Yeah, yeah. A whole house of - Yeah, basically a monopoly on luxury fashion. And I buy a global index because of the reasons we've discussed at length before, but you know, Blumhouse is true in the sense of saying, if you buy in the US, you're effectively buying the world because the world revolves around the US for now.

8:34For now, but that could change. I mean, we are kind of in the middle of some wars and China is growing in power. So like, you never know. So it is good to - Nothing lasts forever. Nothing lasts forever. And yeah. And also with this whole AI and tech boom, like the Middle East, not the Middle East, the Far East Asia, They're very big in like Korea, China, Japan. They're all big in like tech, AI, electric cars. So these things that could be big in the future, if you're investing in the global fund, you get the benefit of those companies as well. Yeah, it's like how much is the fact that America speaks English factored into their dominance in the sense of anything that they produce can be easily consumed by the whole world, like media, right?

9:12Yeah. Western media. But now you could say that through large language models like ChatGPT, an Indian person can be pretty convincing as English So they might be able to have products that are native to them that they convert and that resonate with us. Because if you see something with Indian packaging, you might be like, oh, that's not for me. It makes it easier to compete because you look more convincing to those audiences. You look more native in the same way, I might be able to flip it to a Chinese audience where I go in there and I look like I'm speaking Mandarin and they just accept the product more, who knows?

9:43I would love to see you speaking Mandarin.

9:52This is not financial advice. Like we say a lot on the podcast, investments can fall and rise. In fact, it's almost a guarantee. Remember, past performance is no guarantee of future results. So your money is at risk with investing. Also, remember other fees may apply.