The investing advice I wish I knew earlier - Toby Newbatt

30:01Not bad. And they also help you complete security questionnaires up to five times faster, which is great because everybody hates filling out forms. If you're a business that needs to prove security and compliance, visit vanta.com forward slash making money to sign up for a completely free demo today. That's V-A-N-T-A dot com forward slash making money. There's a link in the description though, so you can just click that. Super clever guy. This was like the first days of quantitative trading. so using computers and algorithms to basically do short-term trades and beat the market. Now, effectively, yes, Jim Simon is one of the only examples who've really done this, but that is definitely more trading rather than investing, so they're not holding off stuff for the long term.

30:42I believe he compounded his fund, not compounded, but every year, it's like 60 % a year, but not compounded, but every year he's in the same amount of money. Shorter career than Warren Buffett, but more higher percentage return, and he died, he's dead. But he's a guy that you could go, he knew how to beat the market and he wasn't selling a course on it he locked himself in a room and made money they kept those algorithms locked down that's what everyone would do because again if you do let's say I'm sure there are patterns out there which some short term traders are using which are working like 90 % of the time I'm sure there's probably something out there an event happens in the world or all because these algorithms are so smart now as well so you've got to think if you're going to be a trader you've got to compete with all these things because most trading now is automated it's done by a computer or an algorithm somewhere I mean there's even software out there that I know of, you know, it's scraping Twitter, it's scraping the news.

31:29It's looking for different keywords about certain stocks, certain events, because that data is then sold into these firms who are then using that to trade. They scrape Wall Street back. They scrape everything. Yeah, exactly. So they're looking for sentiment because they're not long-term investors. It's in and out, like swing trades and like little... And you might see some of the hedge fund as well who you might have heard something for buying the order flow or profit for order flow. What's the real technical term? It's payment for order flow. Sorry, payment for order, not profit for order flow, but they do probably, but being able to pay for the orders up front from a broker, it's actually legal in the UK.

32:02I think it might be legal in Europe. It's how Robin Hood makes them. Yeah, so you sell the orders to a company who gets to see the orders in advance. They know that lots of buys or sells are coming in and then they can front load their orders. That is cheeky. And that's legal in America, which is crazy. They're also the market maker. But they're the market maker as well. They're the person who places the order. So, you know, they make... I'll put my order here, then put all these buy orders right after my order. I'll place an order in front of that. Yeah, and then just drop them all in. So you could argue they're beating the market, but not in a traditional way.

32:31They are making the market. And you could argue, yeah, well, whether that's right or wrong. I know you probably don't want to talk about books all the time, but I do think that people love books, and I think that people want recommendations for what to read. I'll put a list of some of my favourite books together. I'll ask you, have you got any books? Mine's just Psychology of Money. Okay. That's my favourite. It's a classic, yeah. It's really good. It's very accessible. Do you know he wrote that in 30 days? Really? Yeah. So he had 12 months to write it and the classic psychology, he just delayed it and delayed it.

33:00And then his wife went to him, write the bloody book. So he just locked himself in a room in one December and just bashed it out and seven million copies it sold. I know, it's gone crazy that one, hasn't it? Yeah, he's done very well out of it. But it deserves it. But if you look at the book as well, it's like, it's story, then explanation, story, explanation. And it's like the universal language of story. It is. And I think people obsess about money with the how, not the why. And what he answered was the why and showed, you know, there could be someone who's worth 100 million who is willing to go to prison because they want to be a billionaire because they feel poor in their community.

33:39Yeah, exactly. And that is fascinating to everyone, isn't it? So I think that's a great book. Well, have you got any? A favourite one? You know what? I was thinking about this. Other than money, which I think is a good basis for UK investors just to get started so that it covers everything there is a book which is a bit underrated it's called um the millionaire next door and this is a book which is decades old and the author it's thomas stanley i think it's they think it's by they interviewed like 500 millionaires in america i think it was must be 80s or 90s anyway they interviewed them because they wanted to find out well how did you make all your money how are you successful you know what's the secret and um it was really really interesting and the bottom the bottom line i don't want to spoil the story for anyone but really the people that are really wealthy basically don't buy new clothes they drive used cars like yeah and he painted this picture of the average millionaire in america was like you know age 50 something they lived in a very average house they drove a seven-year-old car they went on one holiday a year most of them like owned a business but they just lived very frugally whereas it's quite interesting because most people would imagine if you're a millionaire you go on flash holidays you've got a fancy cub actually those people weren't if someone has a big house and a fancy cub all you're really learning is that they've got a big house and a fancy cub they spend a lot of money on those things they spend a lot of money which could mostly be debt but yeah that's a really interesting one so yeah that's a millionaire next door I'd love to do an updated version of that in the UK so if you're they would just it would just all be inside the M25 and it'd be like anyone who bought a house in their 70s or 80s but yeah I don't know if there's someone's listening who could facilitate that.

35:20Who's got data? Who could contact 500 multi-millionaires and just who are open to share in their journey? I think it'd be similar, actually. Multi-millionaires, yeah. I think if you talk about like low single digits, it would be just anyone that's retired over 60. The average millionaire in the UK would probably be over 60. Well, that's it. And that shatters the dream or the vision that, oh, if you're a millionaire, you must be flashing the cash. But actually, most of these people have very sensible, boring investments. It would all be in pensions and property as well. Yeah, it's pensions, it's property, it's index funds, it's boring stuff.

35:47but it's a real eye-opening book. So all the people we see flashing the cash are all just pretenders? Well, not necessarily pretenders. Behave me. Imagine if I just pull out a big gold shade with diamonds on this one. Not pretending about that. Midget on my necklace. No pretending about that. No pretending, yeah. Because, I mean, if you're a millionaire, you should be enjoying life. I would hate to be a millionaire, you go on one holiday a year and you just got a big house and a car. I think life is about experiences. I think that's a good balance because I'm going to keep talking about books in this one.

36:21But you might remember in Psychology of Money, there's a story about a guy called Ronald Reed. He was a guy in America. He worked as a janitor and like a mechanic. Super boring job. He dies. He passes away. And he donates like$8 million to charity. And he didn't even tell his family. They're like, what? How have you got this much money? So basically, every paycheck, he would just buy stocks, like blue chip stocks. I think it was like IBM and other stocks. but he just kept buying them for his entire life, basically, and just kept stacking. But you wouldn't know because this guy would literally walk into, he would go into a hospital cafe with like secondhand clothes on, looking a bit like a tramp.

36:57You know, people would offer to buy him coffee and he dies a multi-millionaire. He's like, I'll buy your whole life, mate. Yeah, which is a bit extreme, but I agree with that. It's probably too extreme. I want some sort of balance. My personal view is, what's the point of doing all this investing stuff to die rich? I'm not trying to die rich, definitely. But it is interesting. You could go the extreme. That's one of my books. We'll get to that in a second. But I think with The Millionaire Next Door, I think the lesson is as well, perception of wealth is not aligned with what wealth is. Most people think a millionaire is someone with a Lambo.

37:25Really, that's someone with 10, 20 million. It's like at that level. Like I said - You know, like the luxury holidays and all that, you need millions, not 2 million quid. You know, if you, because otherwise a Lamborghini will drain that in a few years, you know. And I know we've both done videos on this, but when you ask people, okay, well, what does someone in the top 10 % of the UK earn? and it's way less than you think. And it's funny, you look at the studies and it's like people assume to be in the top 10 % you're making like a quarter of a million pounds a year. But at the moment, I think it's about 60 something, 65.

37:55I think 650 grand is the top 1%. That's the top 1%. Obviously the top 1 % starts getting silly. But it's earners, yeah. So it's like there's a lot of people that don't earn any money, but they've been billionaires. Yeah, obviously those people. But you realise the perception of wealth is very, very weird. And people think that someone on 100 grand is like uber rich. It's wealthy. But yeah, going back to that book as well, there were plenty of people in that book, again, who earned loads of money, but spent it all. So you had these doctors in America who were only like three, four, five hundred thousand dollars a year, but they had no wealth because they've got free cars, a boat, big house, country club membership, and they don't save anything.

38:33Yeah. So the savings rates are cool. One of the books that I've got is Diary Zero because I like that book. Yeah, Bill Perkins. Yeah. I tried to pick some books that weren't just how to invest. So Die With Zero, which is this idea that you should spend it all before you die. I did enjoy that book. I know you got it. You don't need a book. You wrote that book. Although I will say it's different when you've got tens of millions of dollars. Yeah, I'll spend it all. You got to get off to zero first. You can't just ride zero the whole way. I'm dying with zero. Get broke or die trying. For what you're talking about, we were talking about story before as well.

39:05The book that got me into personal finance was The Richest Man in Babylon. Yeah, classic one. I know it's a bit lame, but I think for anyone who's like, I think that's a better Rich Dad Poor Dad. Do you know what I mean? Yeah, because I read Rich Dad Poor Dad, obviously it's one of the books, and I can understand why it got so popular, but... Robert's gone a bit off the rails. He's gone a bit off the rails, and it's a bit, yes. What's he doing? He's crazy, man. Crazy. I'll let Damien take his podcast. Robert's been smoking something. He got local. Yeah, yeah, yeah. He's gone like red pill kind of conspiracy.

39:39The bit of aliens. He might even think that the earth's flat. I don't know. He's kind of... It's like telling people to buy gold, buy silver. The world's going to end. The stock market's going to crash. But it's weird coming from the guy who's kind of promoting, you know, not stopping your time and money and investing and property and stuff. There's a lot of these... This is interesting about who to listen to, the charlatans of the book. So Napoleon Hill's Think and Grow Rich is probably one of the most overrated books. But it's weird how people still value that one. And it's weird as well. There's a bit of paradox.

40:10Do you know that book? I've heard of it. I haven't read it. It's all lies, basically. Yeah, so the start of the book, sounds really good, right? Because of what I remember, he says, at the start of the book, he's interviewed, he says, I've interviewed loads of business titans and loads of rich people and I'm going to tell you what they told me. And you think, oh, this is going to be great. It's like a collection of all the best knowledge. Rockefeller was the guy who said he had access to. Yeah, and then you keep reading it. It just, well, first, it gets weirder and weirder. Put it that way. And then you don't believe half the stuff he says.

40:36but then also that it gets very mumbo jumbo it's all about yeah just um mindset mindset which is important but it goes too much into the mindset of just imagining you're going to be rich and thinking about things and not giving up there's some good lessons in there but it's very overrated and there's definitely nothing about investing in there or assets and liabilities so it's weird because it's like if you search by top sellers in finance and investing it's always up there i don't really it might be up there because it's but i don't know he wrote he said that he interviewed all these people after they were dead so they couldn't contest it and like some of them are like ruthless business tycoons who've written their own books and none of them talk about mindset they talk about like you know buying up competition and owning markets and monopolies and he was like oh you just got to think about how you want to be rich you know what happened maybe people like the book because it's like simple simple and they're like oh i could do that maybe it's just my mindset you could be right positive attraction the secret is another one right yeah that's what i was thinking of this kind of vibe put it out into the universe and it'll come to you.

41:35Exactly, yeah. Now, that is definitely not what I talk about on my channel. We talk about investing. You've got to do something because if you do nothing, well, inflation, that's another story. But yeah, that's an interesting one. Yeah. Napoleon Hill's book. I also got Who Moved My Cheese. Do you know that book? I don't know that one. No. So when I wanted to - It's quite an old book. Yeah, it's quite old. It's really short, a real short story as well. You learn, I haven't got the attention to read big, thick books. Right, okay. I like academic papers, but not. but yeah Who Moved My Cheese when I wanted to quit my quit my job to go full time YouTube Sasha Yantian recommended it to me and said read that and it's basically about you know grasping grabbing opportunities when they present themselves it's about a load of rats but it's good very good yeah and that gave it to me when I was like 13 or something yeah oh interesting it's about like same with the rich dad pulled out same with the D's not being comfortable and sitting there and you know going after the opportunity yeah you gotta go after it and I think that's like an important lesson for people you know this I think this all ties back to yeah everything we're talking about today investing making money for yourself because it's not going to come to you you you've got no bother chasing cheese have you you quit your job i mean i did well not not many people know this is a bit of an exclusive you know for the podcast um i know you didn't want anyone to tell me that i was like i'm using that so yeah so basically going back to the start of the conversation but um i've spent my kind of my smell like it sounds weird saying i spent my career i'm like i'm a young like an old man um i worked in it sales effectively so it's selling um technology could be laptops servers data center cyber security into different companies public sector etc so i did that for nearly 10 years in different resellers and different vendors and then uh basically the last when i when i parted ways my last job for some reason which i'm not really sure why why i think i'd had enough of um it sells because it's quite a cutthroat world and at that point i was just like you know i want to do something for myself, I've been watching all the American YouTubers, the finance YouTubers, didn't find many UK voices.

43:36And I was like, hmm, I'm going to do this. Naively, obviously, because you don't do that thinking about it. It comes back to like just buying a stock, which because you saw someone, your friend told you. So yeah, I started the YouTube channel that day with no job and was like, I'll give this a go for a year and touch wood it's gone alright three videos I did three videos a week when I started which was brutal I mean that was just working that was just script, film, edit he just wanted it for nine days no, no Damien, you know relax, he didn't do anything else didn't have a podcast to run around for now but yeah I did tell you I went into it full time so that is bad advice don't do that if you're going to do a YouTube channel but I knew that I couldn't, well, I couldn't have done IT sales job and do a YouTube channel.

44:30I would have no time left. So I thought naively, I'm just going to do this from day dot, go for it. And that's where I ended up today. So you can get there. You don't have to want to do it full time, but I think it's good to show the journey because we're just all, we're all different. There's not one size fits all. I think in this, in this finance journey and investing journey, you think you just do this, you just get that. People don't do that. I don't do that. I'm an investing hypocrite. Damien's an investing hypocrite. You aren't investing. We're all hypocrites, aren't we, right? To a certain extent.

44:57He doesn't own any individual stuff. Dave was like, pass investing, get into a fund. I'm like, Dave, I just made this money. He's like, wait, tell me a little bit about it. He's like, you piqued my interest. I was like, oh, look at this Solana trade. He's like, tell me more. No, I've got my 10 % that I mess with, right? To keep my busy hands. Yeah, because Melania coin is going to go to the moon, not Frenchie. It's not. No, it's not. So how do you invest? So the majority of my investing is exactly as I preach. It's low-cost passive index funds, but I still have some individual stocks, which I did a video recently.

45:30The individual stocks have done really well because I pretty much bought all the bottoms in 2022. You bought Alphabet, didn't you? I got all the bottoms of most of those ones, but that has meant that that part of my portfolio looks quite big, but I don't add to that. So I've said to myself - You've just left it. That gets left there. It's not an insignificant sum of money, but all I add to is index funds. I don't spend any hour of my day looking at individual stocks anymore. So no more stock picking for you? I don't say never, never say never, but I've got enough there that I'm happy. To just watch it.

46:04To watch it, let it slide. You don't get tempted to tinker, have a little sell here? A little bit, a little bit. Not when the market feels a bit racy as well. It's more tempting when there's like, they're down. That's when you start to go, oh, now Google looks more attractive. Exactly, yeah. Not all-time highs. That stuff's so difficult. So yeah, on that point, I feel way more happy, no matter about all-time highs, putting my money into an index fund than I would do picking stocks. That's a psychological thing. But yeah, I just add to that and just make the most of the tax advantage. But if we had a downturn now and the market took 20 % share, maybe you would go, I would potentially, yeah.

46:38I'm not someone who has loads of spare cash on the side to do that because I strongly, I think time in the market is an absolute fool's game. But people are still going to do it no matter what. I've got a dip bag. I'm sure you do. I've got to now I'm sure you do I know I have everything in the market at all points any spare cash straight in the index yeah exactly but it's just easier to buy so that's what I do and I just make efficient use of ISAs all stocks and shares ISA and self-invested personal pension because like you being self-employed looking at no one's paying into my pension so I need to do that myself and the benefit for a limited company is not really good isn't it you've got a limited company and you're a director putting into a pension is so tax efficient there's no corporation tax to pay if you're a higher rate earner as well there's great tax breaks that money just goes straight in there so you have them to extract it from the business that's what that's i think probably the most valuable thing i've learned i can pay less tax if i just put it into my pension yeah like sweet see you tax man you're not getting this the the uk like um as much as people you know crap on the uk for investing perspective like we've got a lot of cool you don't call them tax loopholes but we've got a lot of benefits easy access accounts like isis and pensions they're world class an investing account you can put 20 grand a year into with no taxes and it's flexible you can pull money out any point i don't really know any other countries have got that and you know america's have got their um they've got their rough ira but that's like six thousand dollars they can put in a year we can put 20 000 pounds in and then pensions you can put 60 grand a year in up to 100 you've got the junior accounts as well you've got the junior accounts yeah i got my hundreds of thousands of pounds a year in a family and take your tax bracket down yeah you can you can reduce that But all this stuff, most people don't know.

48:15This is the thing. Instead, we're all here buying individual stocks instead of getting less tax. There's far more general investment accounts than our stocks and shares isis, which is a bit head personal. Going back to the journey, which probably sounds like we've all had, really. We all started off in stuff we probably shouldn't do, playing around the market, using the wrong accounts, finding these stocks and shares isis and pensions so late in our life. But no one's out there to tell us. Podcasts like this, we're trying to get to people who've just never... I just wish someone got to me earlier.

48:43Yeah, that's it. I found you, mate. Don't worry. Daddy's here. Pop up. This is going to be the thumbnail now, is it? Daddy's here. Daddy's home or something. Damien would just start going to be like a big pig with like lots of nipples and then he's got... You've been speaking to him. I have not been speaking to him. He's got A1T, you on 1T. He sends me daddy pig memes all the time. I do send Damien a very weird pepper pig meme. Because at some point he'd reference daddy pig and yeah. He's like, how's the video going? I'll send him the view chart and I'll just get this like daddy pig image. It's like flashing in multi-colours.

49:19It's very weird. And he's got no like, no, it's like weird. Yeah, it's creepy. If someone looked at mine and Damien's like WhatsApp messages they'll think, what's going on here? We definitely get reported. That you're both canceling. I think most people can relate, right? With the WhatsApp. So what about then? Let's talk about the markets in particular. What about US dominance? How do you think about that? And are you concerned about the exposure that your global index has? This is a great topic. I think I could talk about this one all day long. And I've made so many videos on this one. It's always like S &P 500 versus global index.

49:52What should I do? And it's almost like saying, oh, what about QQQ? What about the tech stocks? I mean, basically, why don't I just put all of my money in the stuff that's done really well, because surely it's going to continue. Well, we all know that that might not. However, nowadays, things are a bit more confusing. So back in the day, 20, 30 years ago, S &P 500 or American stocks, for example, these stocks would do most of their business all inside the US. So you'd get no international exposure to companies that did their business abroad. Nowadays, almost every big company in the S &P 500 or in the US market are all the big stocks and they do a lot of their business outside.

50:33So I checked the latest data is the S &P 500, it's about 71 % of their business is done nationally and 29 % is done internationally. So that's quite a big chunk. And it's about the opposite, if not a bit more extreme when it comes to UK stocks. So the UK market, 75 % of their income, the FTSE 100, comes from international. So it's a very weird market. So I look at those things and think, OK, well, the traditional argument has said that you don't want to put all your eggs in one basket. You want to be well diversified. But is the American market diversified enough? And you could make a strong argument.

51:06The 70-30 is reflective of the size of the market. It roughly is. Because 65 % of the global stock market is America. It's almost like they have a global equity. They do. But then you also think, so like I mentioned on the FTSE 100, you've got plenty of companies, they're not amazing companies, but you've got plenty of big companies that sell everywhere. You've got other companies in Europe like LVMH, you know, Louis Vuitton, Moet Hennessy. You know that one, don't you? Yeah, you know that one. Unfamiliar. He was pretending I've never heard of these brands before. But you think you've got all these companies, they're not as...

51:37There's lots of household names out there. And just because they're not headquartered in the US, does that mean I don't want to own them? Because if we come back to that position and having a bit of humility, none of us have any idea which company, their share price is going to do really well. Going back to the research and the books, there's a great book called 100 Baggers. So it talks about companies which have 100 bags, that's companies that have 100x their share price, right? and there's only been during the period that he looked at the market there's been like 365 companies who have ever 100 bags in I think it was like a 40 year period it might be more could be less yeah to correct me on that one and the median time it took a company to 100 bag was it's like it's like 16 years so anyway bit of a tangent on that one from like a penny stock to well it could be from anywhere it's Monster one of them yeah so I was just about to say Monster Energy right just because it's a crazy one now Nvidia has now overtaken it to be the best ever stock that there's ever been performance wise.

52:34NVIDIA is the best ever. Yeah, from IPO to now because it overtook it massively recently. But before that, it was Monster Energy. So it wasn't a tech stock. It wasn't a crazy household name like Apple. It was Monster Energy, which is crazy, really. Which is pretty bad for you, right? Well, yeah, arguably. Not for your wealth, mate. I'm not that myself. Again, we're going to go on all sorts of tangents as well because this question is so fascinating. So you've got diversification. Well, you could argue you've got diversification in the S &P 500. But then I would argue because we're so global now in the way companies sell that just because a company is headquartered in the US, it could get all of its revenue from Europe and the UK.

53:13So it's not as easy now as just saying global or US for diversification. I always default back to having been a bit more global. If you added my individual stocks, yeah, I'm probably weighted a bit more toward the US. But that's the way the market has deemed the values of the companies. So I always default back to just saying being global, because I don't know for the next 10, 20, 30 years if European stocks, emerging markets can't research the future. Some people think you can, as I said, but I would default to that. But I can play devil's advocate for all sides. This is the point. I could argue now against you for this argument really strongly, and both are compelling.

53:58And this is why I go global, because I think it's like, you're making a decision if you go America, aren't you? Yeah, to a certain extent you are. You're betting on the market to a point, whereas you can just own the globe, and that has served people very well. And then you can go get on with your life and focus on your day job. Now, I know that the annoying thing, I suppose, for global investors like us is that we look at S &P 500 charts and we're like, you know what? That's quite a lot. You miss out on a couple of percent a year. That's a lot in your lifetime. And then you say, should we just continue with that?

54:28Because the S &P 500, although it is a passive index fund, there's a committee who chooses the stocks that go onto it. So I forget if it's every month or every three months, but they meet to basically demote the crap ones and put new companies in. Now, a global index fund isn't really doing that. It's just tracking the market. So the S &P 500 almost gets a little bit of active tracking. They kick out of the crap and they put new stuff in. There was a debate if Tesla should go in. There's a debate around micro strategy. With Tesla, it rose so quick that they were going, is this just a bubble? So should we kind of include it to kick it back out again?

55:01That's right. Obviously, it made it into the index. So they don't just put you in because of your size. So they do look at volume and stuff and ownership. So it's quite an interesting one. But yeah, I always come back to that ignorant position that says, I have no idea what's going to happen to the market, what company is going to do best. Because let's talk about this new AI revolution, right? so ai you could argue is the future probably yeah ai robotics automation probably the future but the internet was the future back in the dot-com bubble cars were the future back in 20s 30s 40s right but the companies that started then weren't the ones that succeeded now and i don't know how you can identify which ones are going to succeed so it may be the big companies of today which might end up being the winners.

55:49It could be the open AIs, it could be the Teslas, or it might be a company that's never started yet, or from China or from India, who's literally two people in a shed right now, who could turn out to be the biggest company in the world. And do I want to bet that they're going to be in America? They might be, there's a good chance they might be. But why do you need to bet? I just think, I don't know. I mean, I think you said it in one of your videos, like the performance of the past 40 years or whatever doesn't mean that it's going to happen again. So America's been dominant for so long. China's just released this AI and it shook the whole stock market and crypto market in.

56:21One, no one saw it coming. So like just that kind of makes me feel I'm happy that I'm in a global and I'd rather stick to global because if suddenly China just goes like that and America goes like that and you've got it all in the S &P 500, it's not going to be, it's going to hurt you a lot more than if you're in a global fund. I think so. I think so, but I could be wrong. Like Damien, I'd happily, I could make a very good case for S &P 500. Because the American market is structured in a way that supports it's in their DNA it's in their DNA and also any national government their job is to look after you know not look after the stock market but they're going to promote their own market they're going to have good tax strategies or low corporation and they're so big and powerful that they can do that through force through tariffs they're going to dominate that through tariffs you know like literally if their market starts to slide they will push against the world you know and so they've got tools to put the dollar I mean the dollar is so dominant right So I think even if America does slide, it's a long way down.

57:18And I reckon that you could pick either strategy and do very well for 100 years. I think the bottom line of this argument is it almost doesn't matter which one you pick. I think there's far more important things to worry about. And that is getting money into the market for as long as you can, as consistently as you can. Those are the core investing foundations, which sounds so easy. It's like a fitness influencer saying, right, if you want to get some big muscles. I really do have big muscles. Yeah, I've already seen this man doesn't need any bigger muscles. They're massive. But if you want even bigger ones, you go to the gym, you know, four or five times a week and you need to progressive overload.

57:52You need to do these exercises. And that sounds obvious because you're like, well, doesn't everyone know that? But everyone doesn't do that. Yeah. And so they're like, let me take this pill or let me like do this special diet or routine. Everyone wants the Ozempic fat jab and they can get themselves slim. And that might work for the short term, but that's not the long-term answer to your diet, is it? and it's also like you know do do the compound lifts that eat well and go to sleep you know these are the things whereas people would be like oh if i hold the weight like this or like this you know and this is the debate too much yeah it's like 10 reps or 11 reps yeah when i think just just choose one but just do the reps and do the consistent or they'll go to gym and not eat right or go to gym and like sleep one hour and it's like why am i not growing because you're not eating right because you're not sleeping so it's like following all the steps what about um what about market weighting though so one thing that i do think about is you know market cap weighted indexes and then equal weighted and you know you look at it and the equal weighting surprises you at how well they've performed over the years yeah sorry just for some of our our listeners who may be new to the channel please explain what um equal weighting is no i'm here to hit the buzzer don't You don't pay me for that.

59:01Tess, please. Expert. Market weight's heavier and equal weight's lighter. No, basically, so a global index fund... I saw what you did there with the gym thing. That was slick. You get the best guess. He's like a baby dame, isn't he? All hail daddy pig. Oh, no, don't. You paint me out like a dick. This is going to make the podcast. Leave the pig emojis in the comments, guys. Little daddy pig emojis. We'll pick a winner in the comment section, Peppa Pig funds. Yeah, so look, a passive index fund is organised. So you've got all the companies in the world and it's like, okay, well, how do you sort them?

59:39So if you put£100 into a passive global index fund, how do you sort them? So market weight basically says the biggest companies in the world will get more of your money when you put it in. So they're sorted. So Apple is still the world's biggest company. Is it like£3.5 trillion or£3 trillion? It's like 5p in every pound will go to Apple. Yeah, exactly. because it is so much bigger than the rest of the company. So they're all just sorted by the size. Bigger than the whole of the UK market. Yes, which is just Apple. So 4p will go to the UK, 5p will go to Apple. Yeah, which is insane. So that's a traditional passive index because you're letting the market cap, you're almost letting the market decide those weights.

1:00:14Because you think about, if you come back to the foundations of investing, why is Apple worth what it is? It's just that is the price that the market, all of us have agreed it is. we agree that we want to pay however many$240 it is per share or whatever it is now, that's what we've agreed. And equal weighted funds flips on its head and says, rather than doing that, we're going to put 1p for every 100 pound to every single company the same. And every three months, we will just sell the winners and buy the losers, if that makes sense. So they just keep balancing it. I think it's every three months.

1:00:48Now that strategy over certain time periods has done well. I think over the latest time period, it's not done too well. I'm not too sure. We looked at this and I was pretty confident that market cap weight would have done well. And we showed that equal weighting had done very well for long periods of time. At this game, it's like another debate that I don't think you need to have with yourself sometimes. But there will be periods where the equal weight does better and people will be like, Look, I told you. I know, I know. But again, that is an active strategy, I would argue. It is. Equal weighting.

1:01:20Because a passive strategy is letting the market decide the weights. Letting the market decide. Like anything you buy, the market decides how much. A Lamborghini is priced like a Lamborghini because that's what people have happily paid for a Lamborghini. The price of milk is the price of milk because that's what the market has determined. Milk could be£10 for a bottle, but they would probably sell 20 times less if they charge that. So the price of a stock is just what the market agrees it is right now. And we're obviously just guessing what we think it's worth based on future cash flows, which is the nerdy way, because we don't know the future.

1:01:53Yeah. The issue is the biggest companies might just become bigger because of inflows from passive funds. That's a really good argument. So Apple just gets all this money flowing into it and just keeps growing because they're hoovering up all the cash. That's always an argument that people, active investors, bring out. They say, oh, index funds have completely skewed the market. But that argument was basically made when index funds were created. back in the 60s and 70s. There's posters which would say that index funds and passive investing is anti-American. What's American is paying loads of fees.

1:02:26Index funds have basically lost a lot of people a lot of money over time. They replaced the active market. Because active managers have finally actually got to get their act together and prove themselves. And it's funny you said that, actually, because I think the spread now, there was, it might be a couple of years ago, but passive investing overtook active by a couple of percentage points. It's 51%. It's about 50-50. So there is still so much active money in the market these days from institutions, from private hedge funds. So those big market moves you see when companies release their earnings, like they're going to be this quarter for the big tech firms, that is not passive index funds moving that.

1:03:01So people shouldn't be worried too much. And you're talking about funds, right? You're not talking then about individual holdings. The retail market is huge. The retail market is big. Like 50, when people are like, passives overtaken active, that's only funds. Then 10 % of my portfolio is in, you know, like individual stocks, so is yours. So the large majority of the market is still active. Yeah, there's a huge active market. Actually, I've made a video on this as well, because in order for you to buy passively, you do need an active market. I was about to say, we need active. We do need that.

1:03:34So, and it comes back to human psychology. We can't all just buy passively. And it wouldn't work like that. Because in fact, anytime we buy passively anyway, there's someone selling the underlying stocks at some point. Anytime we buy, someone's selling. Because there's plenty of people who are taking money from their investments and living their life at the moment. And plenty of people over the next few decades who are going to retire using their index funds and their investments. So not everyone can do it. Not everyone will do it, but most people should do it. Thank God for the belief that people think that they can be at the market.

1:04:03Because they wouldn't even exist. It's true. In fact, thank you everyone out there watching who is an active investor who thinks they're amazing and God's gift to investing, my heart goes out to you because I'll buy my boring investing index fund and I'll probably outperform most people. So I'm pretty happy with you. Thanks for the help. Yeah, thanks for the help. There's a best performing asset ever, Bitcoin. Yeah, Bitcoin. What do you think about crypto? I'm definitely a fan of Bitcoin. Good man. As something which is very interesting. It's the only asset class which is completely outside of the traditional finance world.

1:04:35So I think there is a lot of value there. There's lots of downsides to it. I definitely think the rest of the crypto market is mostly scams of people wanting to just make money from people, aka Trump and Melania, as a few examples. I do think there's some space to have a bit of Bitcoin in your portfolio. Not financial advice, obviously at your own risk, but because it is that completely separate asset class. It's not... But you do see it as an asset class. I certainly do. I think it's the kind of cuts out the bag now, right? Like it's so big, it's over a trillion. No, it's obviously big because of the network effect that people are buying.

1:05:13It's a part of that because the closest thing to compare it to would be gold, right? Because people buy gold because there's a limited supply in the world. And it's almost separate to central banks and all this kind of thing. And it's a store of value. Now, Bitcoin could be a store of value if people use it as that. It's very volatile because people aren't just using it as that. but i do think it has a strong there's a strong argument for it i would still not be putting all my portfolio in it and my focus is always going to be on index funds and using tax advantaged accounts but i i definitely think bitcoin has a place somewhere this is this is i think it's the moderation in the debate it's like people are either like it's rat poison squared or if you've not got every penny in it you're an idiot and it's like it's so like it's very polarizing someone Someone commented in the comments on YouTube, they're like, once they started talking about Bitcoin, I stopped watching.

1:06:06And I was just like, what would you say to people who just hate it? Do you think they should do a little bit of research, keep an open mind? I'd ask why. Why do you feel so strongly about it? Why do you feel... Why do you get emotional over it? I'm genuinely interested why does it make you angry. Because the older I get, I sound like an old man, but I'm all for just pick what works for you, whatever strategy you want, and just go for it. The biggest thing, whatever you do, you're going to have to do it for a long time. Now, please don't pick Bitcoin because it's gone up the most recently. Because that strategy is terrible for almost everything that's ever happened.

1:06:44Especially because it's existed for like 15 years. It's nothing in the grand scheme of things. Exactly. The history is not very good. And again, you could argue, you could say Nvidia. It's gone up the most recently. Therefore, lots of people are buying it. It's one of the most traded stocks. Every single day, it's the most traded stock on the stock market. It's overtaken Tesla now. Tesla used to be just consistently the most traded stock in the stock market. So I think there's a place, I think for our generation as well, you know, I'm 36, so we're technically millennials, which is really weird to say that.

1:07:10But at least when talking to our generation, if you said to them, oh, do you buy gold? They'd be like, no, I'm not a boomer. They'll say, but do you buy crypto or do you buy Bitcoin at least? They'll say, yeah, I got some. Bitcoin's something like most people have got, but they don't like to talk about it too much. And certainly, I don't talk about it too much on my channel. I think we've got bigger problems to worry about in the country like most people don't even use an ISA or a pension. But I still think if you want to get that next level and you've got a bit of money and you want to speculate a bit, I think it's better than gold as a store of value.

1:07:41I think it is a very good store of value. I'm definitely not, yeah, I'm not anti it. I'm pro it. I'm pro to a certain extent putting a little bit of money into it. Your speculative pot, if you want to have 5 % or 10 % of your portfolio in speculative stuff, 1 % in Bitcoin. If it does what it promises, 1 % will be enough. If it dies and crashes, 1 % won't kill you. And I think, you know, if we all sit here and say, we can't forecast the future, we can't research the future and we all don't really know what's going on. So we just buy a global index. Maybe an extension of a global index is a bit of Bitcoin, you know, because it is like, it's just part of the wider global economy now, right?

1:08:17It definitely is. Yeah, it definitely is. I do agree. And I think where I lose it is like, people are like, oh, this crypto and that one. And, you know. Yeah, that market. it's wild that people can just scam their audience consistently it blows my mind that it keeps happening got it in our comments uh someone wrote oh hi guys i've lost my seed phrase for people that don't know that's how you like secure your crypto so literally on our video they're like i've lost my seed phrase uh oh no this is this is my feed seed phrase and wrote out all the words and so that people will be tempted to like try and steal their money and then they'll be like can you help me recover my money and it's basically just a scam yeah like there's so many i think that's why it gets a bad reputation yeah unfortunately this is this is the dark side of investing in finance and people are going to slide into it because there are promises of riches and the the worst thing is it's like the lottery every you know every week in this country on a wednesday or saturday or whatever it is or friday someone's going to win the lottery most likely and similar with some cryptos some of the early people will make a lot of money but for one person to make a million pounds a lot of people have to lose much smaller amounts together you're losing you're taking someone else's liquidity when you make money someone else is losing yeah it's a zero And it's probably a lot of money because it's so aggressive and volatile.

1:09:27So you've just got to be so careful out there. But it does apply to most investments. I think it's a good story for most investments is that we don't know which investments are going to succeed. So my philosophy is own all of them. And there's never been a better time to be able to own all of these investments. Is it easy now? It's so easy now. Remember, going back to what I said earlier, ETFs and mutual funds, all these things, and index funds, they've only been invented for a couple of decades where they got really popular. before then, it's unheard of. Yeah, I'm buying an investment property at the minute and I'm going through that experience as someone who is very overweight to the stock market.

1:10:02And the whole way through, I'm like, I should have just bought a bloody ETF. It's painful. We were getting a bill for solicitor grand, but then he's like, oh, I also need 50 quid to check your ID. Of course you do, yes. And you need you to pay for our solicitor on this. And I'm like, what? It's like the fees, the complication, the delay, it's been months. and the whole time I'm like I could have literally just gone boop and like and it would have been done and I'm sure like the leverage is the reason I'm buying because I can I can get the mortgage impact and becoming a greedy evil landlord and you know I can't wait till Damien appears on Slumlord Slumlord or something it's a Channel 4 documentary Matt Allwright road traders just hustle harder bro yeah like yeah just yeah it is crazy I think it's funny the UK actually isn't it If you ask someone on the street, what's the best thing to invest in?

1:10:54Most people, I think, would still say property. Because you can see it. It's physically... Have you got 50 grand in cash? I think it depends on it. If you ask an 18-year-old, I don't know if they're going to say... But you're going to say something else. They'd say XRP, wouldn't they? They would say crypto token. We did a video on, I don't know, funds or something. And someone was like, yeah, yeah, forget all that, mate. You're a fool if you don't buy Bitcoin and get X percent a year. And I'm just like, yeah, you're really simplifying it. It's not that simple. Well done to me. I'm loving this.

1:11:21like, I mean, you can't speak to all these great minds and then just be like, they're all telling you, buy passive index fund. And I'm like, no, I'm buying crypto. Yeah, why are you rich? Yeah, exactly. You've got to take in some of this advice. Yeah, no, I had someone in the comments. I did a video about, I don't know, average returns or something. And then they were like, why would anyone buy an ETF at 9 % a year when you can get 100 % in Bitcoin? That was pretty much it. I was like, is this a serious... And I see this comment all the time, though. Well, it's reasonable. Well, I think this is, you know, genuine people who are new to investing and I can't really blame them.

1:11:54They say, why would I buy something which has performed worse? I buy the stuff that's performed good, right? I totally get that. And that's a trap we fall into as humans because basically we see patterns, we see the most recent performance and this happens time and time again. And all the bubbles you've seen in history, which you can go back to, you know, the tulip bubble, the South Sea bubble, the dot-com bubble. we as humans we chase the stuff that's gone up the most recently because we think it's going to continue but if you also look at it like entry level to getting a property in london for example it's crazy whereas you can buy 100 quads worth of bitcoin and because it's only been around for 15 years all the young people all they've seen is like bitcoin going like that yeah over like the last it's hard to tell a fit like a 20 year old that 15 years ain't a long time that's my whole life mate we're not we're not trying to be the richest person in the graveyard here but yeah And that's why investing is so difficult though, because it sounds easy.

1:12:46Again, it goes back to fitness and eating well. Some of it is so boring. Again, you've got to progressively overload your muscles if you want to grow them. Yeah, but that requires a lot of hard work and eating the right diet over many, many years. Consistency. You see a little bit of progress week to week, but it's really, really hard. And that also is why most people just won't start and do it. And people say, you're preaching very basic stuff, but most people don't do this. What's the latest stat? It's like 7 % of people have got stocks and shares, ISAs in the UK, or whatever the numbers are, in any given day.

1:13:18Who's got cash, ISAs. Loads of people save money. So they understand that in the UK, we're good at saving. I know a lot of people don't do a very, you know, a lot of people struggle to save anything. But those who do, there's a lot of money out there in premium bonds, in short-term market. Those are 1.8 trillion in cash accounts. Now, some of that is for short-term use, but a lot of that, I would wager is on people that have never wanted to invest it and are quite scared about investing because they don't know the next step because no one's told them. We've got Martin Lewis, fantastic about this, people saving money, getting good deals on their home utility, saving a bit of money here.

1:13:48But that next step of investing, it should be easier. It's like the old phrase, I'll just keep the money under my mattress. Yeah, under the mattress. And that's what they did, it's like savings account under my mattress. Can you blame the nation for not trusting the banks when they caused a global financial crisis? And like, unfortunately, we link investing with banks, even though they're not the same. Barclays is not. You know, it's a company, you can buy but it's not the stock market but we we tie these two things together don't we yeah we hsbc and and invest in other same things somehow even though they're not it's a shame really but channels like this you know podcasts like this out to the nation and our channels hopefully we try and do we try and do our bit really but i don't know if you come up with any other exciting ways to get this message across which can be quite boring but you know damien does it pretty well I want to talk about global crisis.

1:14:36How do we fix Britain? How do we get people excited? Let's talk about the impending doom that is the globe. So it feels like we've been through a lot in the last few years. And I think we had an economist sit opposite us that said that 50 % of all of the biggest crashes over the last 100 years have been since the year 2000. The market is a lot crashier. nowadays how do you kind of rationalize this and how do you look at the world that feels like it's changing it feels like america's like pulling up the drawbridge feels like it it feels for the first time like we're in a different kind of spot yeah doesn't it this time is different yeah this is a great argument as well now this this it reminds me one of my favorite charts again if you zoom out on there's a there's a really cool graphic it's got like the s &p 500 and it's got all the crisis and recessions that we've seen and all that reminds me of the world is always changing.

1:15:30Things are always changing. They're not predictable at all. COVID is one good example. And this just reminded me that, well, coming back to the way you invest, I just invest with a way that says I have no idea what's going to happen. Our enemy for all of us is inflation. And what you do after that is up to you. But the thing we need to invest in is assets. And assets can be anything. Socks and shares is a popular one. Gold could be one. Bitcoin could be one. Property could be one, but we need to invest in some kind of assets. As long as we know that, after that, fill your boots, do what you want to do, not your financial advisor, pick something, but you have to have some kind of assets.

1:16:08And I think at least with the stock market, the way it is now, generally on how easy it is to access, the fact that we can put a few quid in and be owners of companies is amazing. That's incredible. Because in decades gone by for our parents' generation, there was no way that you could get into the stock market for 25 quid or a pound. without any fees the dealing fees alone would be 25 quid you need to spend you need to invest a thousand quid to justify it and like that's a big leap for the first ever time to be like give me a thousand pounds worth of BP and exactly you'd be relying on someone on the phone to tell you what you should invest in they'll say oh I've got this hot stock for you it's called Xerox because yeah photocopying's the future bro or like what is photocopying yeah what is photocopying yeah I didn't work for you did it no it didn't I got hit more you're not qualified to hit the buzzer damn it It's like Thor's hammer.

1:16:57It only works for me. Isn't that funny though? Our generation, because we used floppy disks, didn't we? Well, just about, right? I remember having some homework I'd put on a floppy disk. Well, no kid will ever know what a floppy disk is now. They think it's the save icon. Kids will know what landline telephones are or like analog clocks. Yeah, the clock with the hands. Is that what it's called? Which is crazy. Sounds about right. They still have those, mate. Yeah, no, but... Clocks with the hands. No, honestly. because check it out because a lot of young people we've got a lot of young person he's got a lot of young people have like apple watches or they just have their phones so they literally don't know how to tell the time because they don't yeah i know what you're saying but um yeah the bottom line is yeah the the world is always changing i personally don't worry about any of that stuff i always think like what kind of world would we need to live in where businesses aren't making money.

1:17:50Where it's that bad that people have stopped going out to try and make money. I mean, it's the end of the world, isn't it? Basically. Yeah, I think you've got worse problems to worry about. For example, if the stock market went to zero, which in theory, that would have happened because money has no value anymore. We don't know. The next 10 or 20 years could be the worst time to invest ever. It could be the worst. But I would rather invest than not invest. We have to do something, basically. And it all comes down to that. So yeah, I don't know what's happening in the future. And like, even if the markets provide no return, what you've done is you've saved in a tax efficient way.

1:18:27And I think if you're paying inside of a pension, for example, you're getting minimum 20 % tax relief. You're probably getting an employer match as well, which is doubling your money. So you've got a really good return there. And it's got to go, it's got to drop in half, basically, for you to even, you know, which would be one of the worst market crashes ever. Of course it would. And one thing to note as well, we'd all be in the same position. yeah we'd all be in it and you'd still have a pot of cash of some sort because it's not going to go to zero unless we're all in the street fighting over cat food worst case you've got a savings account which has lost you money which is terrible but you still got something you still got some savings you still got some tax efficient savings and yeah i don't really know another way to live life you've got to do that without doing and actually going back to your point in pensions this is a really important one i think we we sit here talking about investing but almost everyone in the uk if you have a workplace pension with auto enrollment you're an investor so it's it's in our benefit and i think actually we're gonna have a stronger country if actually more people were incentivized to know they own a little bit of the businesses they go and buy from every day i think about the boomer example and like how everyone sits and goes god they had they had the red carpet rolled out in front of them and then i think let's think of the life of a boomer you had like the the cold war you had the 70s plenty of strikes and thatcher ripping up the country basically at points and then you had the 90s and the dot-com bubble you know they had the 90s where interest rates shot up and everyone was getting repossessed and everyone's just like oh boomers had it so good and think of like the lived experience was one of chaos you know throughout it where they had all these massive events that we look at and go like they must have felt like the world was going to end of course yeah and they ended up at the end going oh look at all the money we got and that's it that's a story along time investing and i think that you know maybe in 30 years, we'll all be sat here going, millennials have done all right.

1:20:12Yeah, we've done all right. We've done all right. We've done all right. Gen Alpha, you're fucked. They've all got Bitcoin and it went to zero. That's it. Enjoy the hot weather. Global warming. Turn that thermostat right on me. You'll be in your big warm house looking at us like, you should have invested. Yeah, yeah. But no, I think it's, I think, you know, we discredit that every generation has struggled or had these events, they literally thought that the world was going to end. There was proper fear around nuclear war. There was a doom headline in every newspaper in every week of every generation that's ever happened.

1:20:49Yeah. It wasn't just like one day. It wasn't one day. It was a prolonged period of time. And we're going to have the same. And it's partly because fear sells. But also, we live in an unpredictable world. I go back to some of the books I read. One book's called The Black Swan. And it just reminds us about the future is unknowable. And things happen that we don't expect and we can't even think about. For example, you could argue that the pandemic was unknowable, which is unknowable, but there's other things out there which are completely not even unthinkable, which might happen. Flash crash years like we've had with DeepSeek, for example, which wiped out loads of money off the stock market, mostly recovered, but all these things are basically part of the market so that the sooner you just embrace that this is the chaos, this is the rollercoaster, the better you get.

1:21:35But it's really hard to explain that to a new investor until you've been through it. I mean, I don't know about you guys. I still look at my investing accounts every day. Part of my job, I could argue. Every day, I look at it like four or five times. Last thing I do before bed. I'm in a chin that I haven't looked. Yeah, I know. As soon as we get off the podcast, David's like, what's going on here? It's a bad behavior. You might fix. I'm more out of, you know, just habit now, just looking at it. But the best investors over time... Keep looking, keep looking. Schmeagel. Yeah. So which book makes you rich then, Toby?

1:22:06Come on. which book makes you rich? You've read 40, which is the one that makes you rich? Well, the comment just comes up all the time, which is the smart-ass answer is if you want to get rich, make a book about being rich. I was going to ask where your book is. Yeah, you should just summarise your 40, like this is the only investing book you need. Yeah. Yeah, the truth is no book's going to make you rich, but a very basic... But Toby knew about Will. We do our best. We do our best. We try and help you along the journey. I'd love to be able to have, probably like your channel, in 10 or 20 years' time, many decades' time, to be able to look back and have tens or hundreds of thousands of people that can say, I started investing.

1:22:41You've got that, mate. Why do you think you've not got that? He did, Toby, all the time to me, he's like, oh, your channel, your channel. I'm like, you've got 100 ,000 subscribers. He acts like he's a tiny little channel. He's got his huge channel. All right, daddy pig. Mommy pig's still pretty big. You're doing. Yeah, no, it's cute. What I mean is I just love to look back and someone to say, oh, I started investing because that video you did then. and in 20 years time oh you know this made such a difference because you should give yourself a bit more credit mate like you've got you're leaving a really good impact there you know on people and i think you are you lean more into like the market as well and you're there for those times when people do panic more than i am you know in terms of like you react quicker and i think that's a really valuable service and in the world today because in the times when the things burn which they always do, you're there going, don't worry, it's okay.

1:23:33You're like the guiding hand, whereas a lot of people are like, oh my God, I told you this was going to happen. Apparently every crash is a great opportunity to make a YouTube video. I hope people realise that. And I do have the shocked face occasionally. I don't think I've put flames in my thumbnail yet, but I do put red now and then, but you have to get people's attention. But the message from me will always be the same. So it's going to be a bit boring, but it will always be, these things happen.

1:23:59please remember this is not financial advice like we say a lot on the podcast investments can fall and rise in fact it's pretty much a guarantee past performance is no guarantee of future results so your money is at risk with investing and other fees may apply as with everything financial please do your own research we really encourage that because no one cares more about your money than you i'm damo anti this was an episode of making money from our company most it was filmed and edited by the team at Flow Spire, Jack and Ben. It was produced by Ruth Edwards and brought together by Will Stollerman.

1:24:29What about Ruth and Toothless a Dog? Yeah, shout out them too.