Mailbag: incl. Invest or pay off the mortgage? July 7, 2024

27:51I'm going to give you a couple of book recommendations, mate. You've heard these before. Jim Collins' Good to Great is spectacular. Grab Peter Lynch's books, One Up on Wall Street and Beating the Street. They are a really, really nice way. Lynch does a nice sort of categorizing different investment ideas. and they're not the only way you should do it they're not the way i do it necessarily but they're a great way to think about how to categorize some of these companies and think about the markets they operate in the way they work um can i can i just add to that very quickly i've got to be careful here just i've outlined what i do yes because it works for me and it works for me after a long period of trial and error and i honestly in 10 years time i can't guarantee you it's the same approach i'll be doing then because it's an evolution and it's a journey There are plenty of investors I know.

28:36Actually, you and I are very different in a lot of ways. Yeah, yeah. You know? Similar approach, but very different executions. Oh, man, you've been in the market. I've been in the market. Hey, there's more than one way to skin a cat, right? And there are some people who just do it in ways that I think are just completely inappropriate for me, but it works for them. So not only is it an approach that, you know, has to make sense, but it has to make sense in your context relative to your life experience, your temperament, et cetera, et cetera. Sorry, Matt, I cut you off. no it's a good point i there is no and because there's no algorithm there's no easy way to summarize how to invest and it's really really really hard because ran with a really thoughtful list of stuff there but each one of those you know two word three word phrases terms simple but not easy it's books and it's and it's you know a competitive advantage like what is that how do i assess that who has them who's better than someone else's what's that worth how strong is it there and there's one you know so i i'm i'm always feeling sorry for you not because i don't think you can do it you absolutely can um it you know it's entrepreneurs say you know if i'd known how bad it was gonna be i would never have started i kind of feel like that's a bit the same investing honestly if i knew now how much i didn't know at 21 when i started doing this i'd be like yeah i'm out you know like i like business and it's interesting and exciting but i go i'll go and something else at the time because i how much how much i have to know what how do i get all that and the answer honestly is for you see only everyone else listening it's just it's just reading like it's just honestly it's just reading and trying and reading and trying and that's a really unsatisfying answer because we all would love a bit of an easy hey just do this just do this just do this and it's really hard to do um so yeah read i would read those books as a starting point uh read the essays of warren buffett one i recommend regularly because he talks about a whole lot of great stuff and you'll just absorb so much good stuff and then the great thing about investing is knowledge is cumulative and so whatever you don't know now which is a lot not because you're young but because you can't know what you don't know when you when you're just starting um you will build and build and build and build and build and you'll be surprised in five or ten years where you get to but it will take that long if you're really keen and serious not not five years of full-time work grab a book read it when you go to bed read it on the train read on the bus you know listen to a book in the car um they're the places i'd start i really think if I just did that, you're on a very, very, very good starting point.

30:53It's hard, but it's worthwhile. And if you're interested in it, give it a red hot go and see how you go. Yep. Mate, one from Rob. It's not Rob, who is it? Sorry. Sam. Hi guys, couple of broad questions here. If you could go back in time to tell yourself one thing about investing before you started, what would it be? And two, what have been some of your regrets when it comes to investing outside losing money? He says, what have been some of the highlights apart from picking multi-baggers? That's a lovely question. There was a couple of questions, Sam. Yeah. The first one would be stay humble. Nice.

31:28I think that's a good one for me. I mean, you're talking there about the, you know, you wouldn't start a business if you knew what you were in for. I mean, thank goodness for the naive optimism. Right. You know? Yeah. I don't mean to sound dismissive. I mean, I was just a classic young, dumb male that thought he was smarter than everyone else and that, look how easy this is. And if I didn't have that, I wouldn't have started. And I had to fall on my face a few times, spectacularly. So I kind of ate the humble pie, but I could have ate less of that if I just started out with a little bit more humility.

32:12you know i think yeah i don't know it's like it's like it's like trying to describe and i'm not a golfer but you know describe the perfect golf swing you can do that all day long but then the execution is very different i just you know and speaking of evolving in in in your journey i mean i i started out very much as you know prices going up trend lines all that nonsense and then then discovered buffett and was very conservative and sort of blue chip and you know and then i like dividend stocks and then i went to small i just it just changes and evolves and that all over but just stay open-minded stay humble i think that's i think that's really good advice to to to give to someone and understand that you just you can't rush it you know you just it's a journey and it's a long journey but gosh it's a rewarding one like and it's not i mean yeah monetarily but but in so many more ways than just that i just think it just understanding understanding finance and markets is a study on human nature and society and really grand kind of things maybe i just say that to to to make it so you know i haven't wasted my life in a craven pursuit of wealth uh that's right but i do think it's true i i i yeah that's that's what i would go with the first the first answer um i i'm going to i'm going to make it even more basic than that i hear you're absolutely right ram it's a great one investing why i'll give you i'll give you my original answer i'll prove the answer my original answer was going to be a payout for quality um i i mean quality like as in as ram said before so-called blue chips i mean genuine quality and and growth as well where i missed out was that's too expensive that's already finished growing yeah i'm too late yes i'm too late um i was too conservative probably wanted too much certainty and while that meant i probably didn't have as many losers i never as many big winners and the big wins would have well and truly outperformed the losers so um that's that's it more more basically though sam um particularly for young people is the money is made in the contributions and the time not in the stock picking so for all we talk about investing and we talk a lot about investing if i had put more money aside more regularly earlier i'd have a lot more now even if i'd made those same mistakes because compounding is compounding right it just is that's so excellent how do i save the next 10 bucks a week had i started two years earlier how do i you know whatever whatever like add those up um honestly that's what i would have done and and just just on that quickly buffett do we everyone you know it's just a household name these even people who aren't in investing know who he is but he didn't really come onto the scene until he was in his 50s or something right yeah i mean within as a public figure yeah yeah in certain circles absolutely he was known but outside of that he was it was obscure you know and and he often joked because he started at seven like he said if he started earlier it would have you know and the the other thing with buffett too is i think he made uh what is it well you'll remember the stat like he made 90 of his money after the age of 60 or some some like it just it's that it's that compounding maths that breaks your brain a little bit he's obviously an incredibly successful and wealthy man but if you actually look at the aggregate dollar value and his net worth it was just like most of it was made in the last whatever very small period so here you go Warren Buffett was worth uh so this is a Morgan Housel article he had 81 and a half sorry I have to pick it look it up anyway

36:0499 % of Buffett's net worth was accumulated after he was 65 there you go Margaret Housel writes quote if Buffett retired at age 65 you would never have heard of him yep Margaret Housel is a great writer His skill is investing, but his secret is time. It's a great line. I hate Morgan Housel because he's much better than I am. That's such a lovely line. He's an insanely good writer. Can I give you another one? This was what blew my mind. Just to give you the idea of compounding. So there's this example here, right? So let's take Wembley Stadium, the big stadium. We've got a watering system that in the first minute, we see one drop of water is released.

36:42In the second minute, two drops of water. in the third minute uh three minutes and so on and so forth how long does it take to fill the stadium the answer is that after 44 minutes before half time the stadium is starting to overflow right um and uh it's got to scroll down a little bit here but it's just like it's it's only in the last it's like it's empty up like a minute after 30 minutes it's it's a little bit of a puddle of water and then it just it just explodes the exponential function is just what does einstein say it's like the um most powerful force in the universe and it really does mess with your brain so i'm really doubling down on your point here but start start and and and as charlie munger says the first rule of compounding don't interrupt it exactly um there's a great there's a great line i I've looked it up.

37:35Same kind of story, mate. So there's a, I'll try and horribly paraphrase it, but you get the same idea. There's a, you have a pond and there's a lily pad in the pond. And in 30 days, sorry, it doubles in size every day. Right. In 30 days, it's going to be, it's going to fill the pond entirely. The day, day 29, it only covers half the pond. Yeah, exactly. right so so the last that last double this is this is true with investing i say all the time the whatever you whatever you retire with this is let's say you want to save a certain money by retirement whatever whatever amount you want with million dollars ten million dollars a hundred thousand dollars whatever the number is half of that will come in the last depending who you are seven eight nine years of that journey half of the final every dollar every day up to that no matter when you start by definition if you double your money every seven years half of whatever you end up with happens in the seven years before you retire.

38:35Whether you've been saving for one year before that, for 80 years before that, the last double is half of your final amount in that last period. And so if you can extend that out, if you can make that longer, if you can do it for further, that's where the real value is. And I think that's, we're kind of flogging the dead horse here. But yeah, if I tell myself, the other thing I would do, just a slight attention, but not really, not what I would tell myself, what I would do for my younger self is automate it. because i've said a million times before i remember seeing maths in years eight or nine and my maths teacher explaining how we save a certain amount of money every year between eight and thirty might be a thousand dollars a year between eight and thirty we retire with a million dollars at 65 whatever that was and i was like i still remember it that was that was amazing so what did i do nothing sweet fa right i literally did nothing for years now i hope i've caught up reasonably and you know it'll be what it'll be between now and retirement but the yeah yeah so So that's what I tell myself.

39:31If I could find a way, and you can't put a young head on an old head and young shoulders, if I could find a way, I'd make myself do it. So my super is so bloody awesome. Whenever anyone tells you about how terrible super is or how it's their money or you have to take it out for that, having someone make you at 18, put money aside for your retirement is the world's worst thing until you hit 65 and you will bow down and kiss their feet for making you put that money away. Second part of the question, my second question. Some of your biggest regrets when it comes to investing And then what have been some of the highlights?

40:02Yeah. So the regrets are - Apart from multibaggers. Easy one. We're relates to multibaggers. And I've mentioned this plenty of times. I mean, I have held more than one stock that has gone to zero. And I've certainly held plenty that have dropped 90 % plus. Yeah, I guess I regret them. You know what I really regret? I regret selling my shares in ProMedicus at$8. I didn't sell all of them. And then I sold some at 12. I continually, I looked at it the other day just because I wanted to like. Hate yourself, yeah. Hate myself. I try not to look. I bought these things. And I bought, for me at the time, it was a big position.

40:42I bought 80 cents or something like that. And I was under a dollar, right? And then I sold and I sold. And I thought I was being clever because I had to re-weight. The value proposition wasn't as good. It's 120 something dollars today. Yeah. Like it's not even a hundred bagger. It's 140 bagger. Like that, if I had my regret, and it's not just that one example. There's a lot of examples of that where I was just too cute, right? Too clever, where I thought I needed to, you know, the saying is you never go broke taking a profit. Yeah, you might not go broke, but you don't cover yourself in glory either.

41:16Now there are extremes here because there are counterfactuals where it's like, well, actually I held, I bought a bunch of Pointera way back in the day, a very cheap price and sold a bunch at, you know, after it had gone up 10 X really glad I did because they're back at four cents. Right. Round trip. So I actually did bizarrely well on that by, by recognizing, well, at the time it was like, this is silly price. It's not worth that much. And I, and I took, I didn't time it at the bottom. I didn't time it at the top, but my regret is still, when I look at those past sell decisions, they were not done because the company wasn't executing.

41:55You know, They weren't done because the competitive position wasn't strengthening. I mean, everything about the investment thesis got better and better and better and better. And to your earlier point, don't worry about overpaying for quality. The same can be said of don't worry about holding. Don't worry too much about value when you're holding as well. When, and this is a super crucial point, when you're dealing with an extraordinarily high quality company. and so just just yeah that's what haunts me at night is is selling multi-year compounders that really had no maybe maybe it was a little bit to be said for trimming and and monitoring it but just like locking in these profits was just so dumb easy easy answer nice um

42:49I kind of the answer about one thing you tell yourself kind of goes back to the regrets right because that's the same thing that you tell yourself how to avoid the regrets how to maximize your gains kind of the same thing so I'm trying to separate something out I this sounds like a stupidly obvious one or whatever we're talking about Buffett I didn't buy you a near enough Berkshire Hathaway shares years ago like in terms of in terms of lay down Mazars again Again, a bit like we were talking about the other day, there are plenty of companies who have done better than Berkshire. Like hundreds of them because Berkshire's big and lumbering and it's not going to grow at such a rate and whatever.

43:23That's also true.

43:30But Berkshire was available at different times at really cheap prices and I didn't buy more and it's like you didn't have to be very clever. Warren Buffett's Warren Buffett and it really wasn't that hard. So could I have bought other things that have done better? Yes, of course. But sometimes when the obvious is staring you in the face, sometimes just pick up the dollar bills on the ground or the dollar coins on the ground. It's just not that hard. Do you remember when Apple was at a PE of 12? Oh, yeah. I was working with you at the Titan. Had that to the list. Apple, 12. Oh, my goodness. That's all you need to know.

44:01That's the thesis. It's Apple. The PE is 12. Buy. Sell a kidney. It is incredible. Buy, you know? The highlights. That's, I mean, you're right. I mean, apart from the money, that's kind of the point. I mean, I love doing it. It's a great, great job. I get to talk to Ram. I get to hear from our listeners. I get to help our members and readers at The Fool. I know it's about the job rather than investing, but that's kind of the highlight. The highlight is being able to actually turn it into a job and actually love the job. It's very easy for your hobby to become your job and then for you to kind of hate your hobby because it becomes a millstone.

44:38So that's a pretty big highlight. What else? Oh, can I... I'm going to humble brag. Not even humble, actually. I got to meet Warren Buffett and Charlie Munger as their Berkshire Hathaway shareholders. That was kind of just... That's hard to beat as a highlight. It's non-monetary. That's kind of fun. Yeah, I don't know.

45:03I think... I'm going to disagree with the premise of the question, Sam. I'm going to say... We say part picking multibaggers. the highlight's actually been putting myself on the path to financial freedom the the lifting of the i went there was a time in my life when i was young i had a motorbike praying and at that point the officer had decided he wasn't sure whether i was responsible the car was responsible for it car was obviously responsible and it was just one of those i think he was being not very kind and i know he thought i was doing the wrong thing or something i don't really know anyway and he said well maybe your insurance won't cover it if it's your fault you'll have to cover the other car as well and i'm thinking i don't have that much money i can't i don't have the money to cover that what am i going to do from here and that's about as low financially as i've been i was living by myself i had a mortgage at the time um i mean year like a million years ago and i was like man this could all really come unravel real fast if i had to pay you know multi thousand dollars you know five figure sums to fix this car on my bike and everything else i don't have that money i just don't have it and i don't have the equity in the house i just bought the unit it was a unit um and now now what do i do you know um and i've again it wasn't i was i had a roof over my head i had a good job i don't cry for me i was fine plenty of people who get much tougher and have been and still are uh but that's that's as bad as my finance has got um and now i'm on a path to financial freedom i can't retire tomorrow but i can hopefully retire in a few years time as we talked about the other week um that'll that'll come uh and so the highlight is actually being able to use the power of compounding also my skills not about that i couldn't with an etf to put myself on the path to financial freedom.

46:38That's probably the key highlight, I suppose. Is that too motherhood? No, I like that. I was going to go with, I've been right for the wrong reasons before. So there've been plenty of situations where I made money, but I got lucky. At your point, Tara, over the last five years, down 10 % from day one to day 500. Yeah, I believe that. I'm just going to look it up now. tell you what i did so the and the uh where is it so i i would oh well i'll do this while i while i talk there's no satisfaction in that i think with with honestly looking at it it's just like oh gosh you dodged a bullet you got lucky you know but there is something incredibly satisfying when you're right for the right reasons i'm buying company x y and z that's cool yeah yeah that's Because I think I see reality for what it is and I see the future for what it is.

47:40And maybe it's the broken clock analogy where, you know, twice a day a broken clock is right. But, you know, when it happens, it is so satisfying, you know. It's good for the ego, isn't it? Even on situations where I've lost money, but I recognize that I was wrong and it was a bitter pill to swallow. and I recognized the folly of my reasoning and I sold out and I sold out at a loss. And then I look back and go, oh my gosh, it actually fell another 90 % from there. It's the old saying, you know, a stock that down 90 % is something that's lost 80 % of its value and then halved. Exactly, yes. And there's a great sense of satisfaction in that and it helps reinforce the correct mental models when you can look at it objectively.

48:27and I find that fundamentally just incredibly satisfying. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

48:41We might finish with a question from an anonymous questioner who starts by saying, Hi, Scott and Ram. Please keep this one anonymous. So I will. Well done. I've had a margin loan in the past, but I've never owned an investment property and feel that I've missed some easy leverage gains by not doing so. You and me both, Mr. Anonymous. Andrew Page, really? So I was fascinated by the discussion recently about borrowing equity from the home to invest in the market. This idea really appeals to me. I'd be interested in your thoughts on a possible means of applying this approach. First, withdraw equity from the family home on an interest-only basis into an offset account with a potentially variable interest rate?

49:24From this account, make fortnightly payments into my and my wife's super accounts, which are set to invest all contributions into low-cost Australian international share index funds. Set the payment amount at half to 1 % each per payment so we're fully invested over two to four years. Take any buying opportunities that precipitous market falls present to invest a larger lump sum to accelerate this. At retirement, withdraw lump sums from our super accounts to repay the home loan in full. Enjoy the passive income from the remaining compounded earnings into retirement. The above assumes no negative gearing benefit from the home loan, but no taxation on the investment inside super either.

50:02Not sure how to treat the interest payments on the loan. Should I actively pay off from income or withdraw from the offset account, i.e. borrow more than I'm intending to invest? Some background. I'm 12 years from being able to access my super and we own our own home. Sorry, Ram. For those on a longer time frame to retirement, alternatively, the fortnightly payments could go to a joint Vanguard account outside super with a similar investment profile. so the capital could be accessed before retirement in case of emergency, but then there'd be annual tax payments on the earnings and discounted capital gains tax to pay at withdrawal.

50:33Not sure this could be offset against interest payments as the loan is secured by the home, not the investment, so it's a less attractive proposition all round. Thanks, Rob. Initial thoughts, Rob? So, touched on it before, right? So, let me just summarise all of that. Just take some equity out of the home and invest in the market. Yep. Yeah, do it. Especially when you're in a scenario. Not personal advice, of course. I mean, especially in a scenario where you've basically paid off the house, right? So you've got collateral on a loan that can't be called in unfairly, if you want to use that term.

51:15You're putting it in, you've still got many years left before retirement, so you can afford to take the long view. the interest rate on the money that you borrow would be significantly less than what you would get through a margin loan. And it's your earlier point, was it this podcast or the last one we did? But you said that as long as the return you're getting is greater than the interest you're paying, there's a positive spread in that. That's going to make sense. As long as you can cover the repayments if the share price of all the dividends don't come through. That is absolutely true, yes.

51:45So the danger lies in the extremes. And again, it's just that idea of being too cute by half, you know, but if you were to borrow 20, 30, 40 % of your house value even, it's going to have to really go pear-shaped for you to regret that over a 12-year stretch. And it could if you just ape into a bunch of dumb meme stocks. But if you're sensible about it and if you're indexing, then it's – you will always look – no matter what you do, you will look back and go, I could have improved upon that. That is always true. But I would say of the many possible paths forward from that point, there's not too many that would end in a scenario where you would have significant regrets.

52:31As long as you do it well. That's the key. And I agree with you. I agree with you, Ram. And I'm not saying you're wrong. I just want to add that because it's kind of to my mind. So I'm a regret minimization guy, not an outcome maximization guy. yeah uh i want to so i'm a bit more conservative than ram in terms of that that kind of approach as you guys know from listening to us talk for ages on this stuff um but i think i don't think ram's wrong i think you're wrong rob i think uh i think a couple things so firstly um there is some timing difference between the super being due and the loan being taken out and you do kind of lock yourself in a little bit for that period which is fine these aren't These aren't negatives, they're considerations.

53:15So if you take money out now, put it in super, you can't get the money out for 12 years and you want to move house, you've got a mortgage and a debt to pay off. If you lose your job, you've got a mortgage to pay off. Again, because you're taking out the equity, right? So at any point during that period, the mismatch, we're talking about banks, we're talking about Silicon Valley Bank. What do they do wrong? They screw up their timing. They borrowed long and sold short of the way around. I can't remember which, it doesn't really matter. They basically, they bet they could match their, or duration is the word they talk about here.

53:43you are going to make a 12-year bet that you can't redeem for 12 years. In the meantime, you have 12 years of obligations. Just be mindful of that. It could be fine. It could go badly if you've got the income. Maybe you can't work. Maybe you stopped working. You really wish you could have that income back. You wish you could sell your house and downsize, whatever else. That money's kind of locked up. That's okay. Just be mindful. That's what you're doing. Secondly, you're going to invest it over the next two to four years. It's entirely possible that you invest it over the next two to four years and the market's high and falls and it doesn't get back to that height or it takes a long time to get back to that height.

54:12so this is the opposite of dollar cost averaging this is one lump sum over two to four years and then letting it ride again i'm not saying it's a bad thing just saying that that's the implication of of what you're doing um the debt thing's not a huge deal there is always a chance the bank calls the loan um margin calls and shares the bank can call a mortgage loan they don't generally they're probably not going to i think the chance are remarkably small but they're not zero until the bank calls the loan tomorrow and you say but the money's tied up in super and the bank says, I don't care. It's your problem, not mine.

54:44That's my only concern about using super. It's tax effective. Very, very tax effective. I love super. Everyone should contribute as much as they can to super, but within the limits. But you are locking it up and you are putting yourself at some risk of duration. So just be really careful with that. What do they say about a bank? It's someone who will lend you an umbrella when it's sunny and ask for a back when it's raining. It's raining, exactly. Such a good line. Other than that, I don't have a big deal. Look, you'd want to do the maths on, depending on what your tax situation is, whether you should borrow the money and invest in your own name and therefore get the tax deduction on your current income rather than get the tax advantage gains inside super.

55:27So if you put the money in super, you're right, Rob, you can't claim. This is a really important point, actually. You can claim a tax deduction. I'm not an accountant. You can claim a tax deduction. If you borrow money to invest, you can claim the tax deduction. You almost certainly can't do it if you borrow money and put it in your super. Even if the super then invests. Because super is a different mechanism. You're putting it in a fund over there. Now, accountants may disagree with me. If they do, that's fantastic. Just be careful because the structure is different. Particularly if you borrow the money now, but they drip it into the market for two to four years, the money that's not invested over that time wouldn't be tax deductible.

56:02Now, Rob, you're saying you don't want to make it a tax deduction. You don't want negative gearing, which is great. So it works perfectly for you there. Just for anyone listening who says, I can improve on Rob's because I'm going to get the tax deduction. you must match the use of the funds with the debt doesn't have the same asset you can secure against the house it's fine if i take a million dollar no way to be honest if i take a hundred thousand dollar um uh line of credit out of my house and put it directly into my composite account and buy shares with it i can claim the tax deduction on that if i take it out i put it in the offset account that i slowly invested over time convincing the ato it's the same thing is a tougher ask and again maybe you can maybe you can't i'm not a tax accountant uh i'm not again I'm a regret minimization guy.

56:38So I'm going to be like, you know what? I don't want to have those difficult conversations with the ATO where they say, actually, you can't do that. Give us the money back, the tax deduction you've claimed. So just be careful of that. I don't have a massive issue with it either. My biggest issue as always is behavioral. I would do it. Do I think everyone should do it? No. What side of that are you on for each person? That's an open question. Yeah. There was one thing Rob said in that. No, I've got the name wrong. sorry, anonymous, to take advantage of during market drawdowns. Yeah. If I had a dollar for every time I said that or I heard someone else say that.

57:17Thank you for that. Yeah. Because it's not, I mean, I'm sorry. I'm saying my phone on silent. I'm sorry. I'm sorry. Gosh, something's blowing up. Everyone says that. Yeah. And no one does it. And the reason no one does it is because the reason markets fall is not because everything's great. The reason markets fall is because there's huge uncertainty. We all look at the GFC and go, oh, I should have bought. It's like, well, there were plenty of very smart people who thought the world was going to end and we were going to enter into a Great Depression unlike the world had ever seen before. There was very smart and reasonable people who thought that COVID was going to send us back to the Stone Age.

57:59So when markets fall significantly, it's because we don't know how this is going to play out. The mothership has just landed on the White House lawn. Are they friendly? I don't know. Markets aren't going to go, hey, everyone, let's just not sell and see how this goes. No, they sell. They shoot first and ask questions later. And it's such an important thing because every crash looked at in hindsight looks as the opportunity as it was. But it's not obvious at the time. It's really not. And here's the other trick is that even if you somehow overcome that immense challenge of going, gosh, I have no idea what's going to happen here, but I'm going to go out and invest.

58:41You're not going to pick the bottom. You're going to do that. And then it's going to fall another 30%. And it's going to sit there for six months. And the whole time there, your partner's going, you're an idiot. You're an idiot. What have you done? You've doomed us all. And your friends are saying that. And your voice is saying that. And everyone's saying that. And so it's kind of like, so I have lived through enough cycles where I do, I'm dumb enough where I get excited when markets fall. Even though my net worth is falling, I think, well, this is an opportunity. But every single time without fail, even the more recent ones, I dribbled in fractions of what I should have.

59:18Fractions. I was buying in COVID. Did I buy near the bottom? No. Did I buy a lot? Not really. Not as much as I could have or should have. so i just i just point that out because it's a really noble the the the person who says i'm going to do that i think is is already ahead of most people intellectually to to recognize that this is opportunity um it's just never going to be straightforward in execution never will be yeah and i'm saying all of this from my little pulpit i will not do the right thing next time totally totally now i i will say i didn't sell anything during the um gfc i didn't sell anything during the COVID crash.

59:56No. I've got some runs on the board. Not that I'm a genius, just that I have a very reasonable expectation. Next time I won't do it either. And by the way, as I've said a million times, 90 % of us say we're above average drivers, right? It can't be true. So just kind of keep that in mind in terms of thinking about that likelihood. You think you'll do the right thing, but will you actually do the right thing? I don't know. I'm not saying you won't. I'm just saying, please just give yourself some rope because again, regret minimization. did I make a little bit of extra money by pulling out some redraw yes did I make less money did I lose money because I pulled out the redraw then invested it, then the market dropped 20 % I sold it, that was stupid, I didn't put it back in and now I've got a mortgage with no investments maybe, will you be that person no of course you won't be, neither will anyone else listening except some of the people listening will be and it's one of those things right if it's not you it's me, it's not me, it's you but if we both think it's not going to be us, well guess what, it's going to be one of us and so are you really sure you're going to be that person and I guess the world's hard about saying this everyone says oh no but i am going to be that person it's like this is why when people say should i use marginal loan no the answer is no but can it be used well yes it can should you use it no why because you all think you're all gonna be that person i think ram thinks remember the same example so i said before i didn't sell during those two periods that's right did i did i play money in during that period no i did not so i the same as ram now i at least didn't sell so i know i'm good for that it sucked market fell 40 it sucked the amount of money I lost you over that period was like just, you know, sand slipping through my fingers.

1:01:26It was awful. Yeah. But, but at least I didn't sell. But some people did. By definition, the market was trading every day. Yeah. When the market was at its lowest, that 38 % fall, someone sold an ASX 200 ETF that day at the very bottom. Yeah. Someone bought. A lot of people did. And BHP. And well, that's the exact, someone else bought. But my point is, someone's always going to be selling at that point. You don't have to be you. Another thing just to mention on that as well. really not having a go at you here. There's just, is these, I say this more, I'm saying it out loud for myself because I need, it's like, I need to repeat it again and again and again.

1:02:03And this is a point that you often raise, which is a good one is in anticipation of more money has been lost in waiting for the crash than the crash itself. So you go, I'm going to get this pot of money. I'm going to put it there. I'm going to wait for the crash. Well, if the crash happens tomorrow and you, you overcome all those difficulties we just spoke of. Great. if the crash comes in eight years time after the market's gone up 5x and then it drops back 20 percent you you've you've the opportunity cost of that is massive so so the it's different when you're dealing with lump sums and and the easy answer here is for those going well what the hell do i do given all that well the easier answer is spend less than what you earn and continually buy right just just dribble it in sometimes you'll be buying high sometimes you'll be buying low So it tends to work out.

1:02:51We talk about diversification as the one free kick you get in investing. I'd say dollar cost averaging deserves that label as well. Yeah. But it is different. It is different though if you get an inheritance or you decide to draw down on day one. So maybe you could do it in a legged fashion. And you'll regret it, right? You will guarantee to regret it. Yeah, that's right. Because you'll be like, oh, I should have taken it all out at once or I shouldn't have waited. You won't know. but that's the the the point of dollar cost averaging is that it averages you and and an average isn't the best yeah but but it's not the worst which is the point which is the beauty of it exactly yeah yeah um an average is good average is good right yes i think we've done this yeah the other thing the only final point i'll make about this it goes back to the original conversation we had about what's the best thing paying off the mortgage or or investing the same is true in borrowing the money yeah so you've got to be able to borrow that money you've got to be able to invest it at a rate which exceeds that at which you could have otherwise saved here's the thing so i'm gonna our question has 12 years till retirement that's enough time for a double and a half that's a pretty good win right if you can if you can deliver that the flip side though is you get the double and a half in gross terms then you pay tax on that and then you have a or you're doing super i suppose maybe not actually um but you're paying six six and a half percent whatever you're going to cost you interest only maybe you're paying seven there's between seven and maybe a market return of 8 % or 9 % or 10%.

1:04:15It's not heaps. The upside here is just worth thinking about it relative to the downside. And I'm not trying to dissuade anyone, really. I guess I'm allergic to debt in general, so maybe I am a little bit subconsciously. But if you're going to earn 10 % and pay 7 % for 12 years, 3 % of you, I mean, you take it, right? It's not nothing. I don't want to... But if you're going to take out, I don't know, 100 grand and you're netting 3 % for 12 years, I mean, 35 grand is a lot of money, but equally it's like, just ask yourself relative to the size of your super, relative to the size of your home or value, for example, relative to the risk you may take or not, the sleep at night, whatever else.

1:04:55Just, again, I don't want to, it sounds silly to say 35 grand is not worth chasing. Of course it is. But if you're paying fees and you're paying whatever and just, I don't know how much of that is left and how much risk you're taking to get there. If I could borrow at nothing and get 10 and do it for 25 years, that compounding starts to work, right? So just have a think about that. And the reason I say that is because whatever you're going to pay back in interest, you can just make in cash contributions to super in the first place and be done with it. And particularly if you're going to contribute over two to four years anyway, the last dollar goes in eight years before the end of that period.

1:05:24If you just kind of save the interest cost every month and put it in super, I'm not sure it'll be all that much different relative to the returns you're going to otherwise make. And I don't know. Again, money's money. I'm not saying don't take it. Like if someone offers me$35 ,000, I'll slip it under the door. I'd open the envelope and pocket the cash. but also just think about the ROI and the relative gains or otherwise and the cost of repaying it. Just when you make those, you do it again, like I say regularly, put it in a spreadsheet, work it out, work out what it looks like and then say, do I feel good about the risk or the chance I do something wrong or the rep mark goes down or whatever else happens?

1:05:59Yeah, I do. Yep, great, do it. Oh, look, it's a bit close to the line. Maybe it felt like a good idea, but it's not quite there. Cool. Then you know that too and you can go from there. Yep. By the way, that's the banking business model, right? It is the banking business model. You know, No, you just, it's a small net interest margin, but it's a margin on money that I literally just created out of thin air. It's like, I'll do it, right? I'll do it. The better they have, we don't have. Exactly, that's right. Yeah, yeah, yeah. All right, mate, I think we are done. Will you come back on Friday? Yeah, try and stop me.

1:06:28I could, but why would I do that? No, don't, don't, please. Have a great week, and until next Friday, pull on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.