Mailbag, incl: Should I sell my AFIC shares? January 18, 2026

24:37It's just like, oh, you've got to do this and you've got to do that. You can't be a true Bitcoin unless you do this. Yeah, no, I don't like that stuff. It's a bit hardcore. I would say this. I'm not a fan of CoinSpot. I'm not a fan of any of the crypto casinos because, yes, you can buy Bitcoin there, but you can buy Litecoin and Ethereum and Solana and Cardano and all of the other nonsense that are out there, which are just plain outright grifts and scams. and there's always some fringe group that I really are upset and annoyed with that, but that's just the reality of the situation. The fact that you and I can spin up a coin, get it listed and dump it on a bunch of people just doesn't seem ethical to me and it kind of feels a little bit, you know, not even adjacent to the mission of fixing the money and fixing the world.

25:22This is just an outright grift. And when you look at the returns that these businesses make, they make it all on trading. It is a gambling. Everything that everyone hates about Bitcoin is kind of right, except that it's not Bitcoin, it's crypto. It's all this other kind of nonsense. And I just, it feels a bit unfair. I'm like, oh, Andrew, that's a bit harsh. And there's probably someone who works at Coinspot who's getting angry at me right now. It's like, you guys know what you're doing. You are selling something that has absolutely zero utility value. It'd be different in the year one or two of this stuff, But like crypto is a broader theme has been around for almost a decade now.

26:04There's not a single product market fit that they have come up with, you know. And we're waiting. We're waiting, guys. But I tell you what, everyone who's bought it has pretty much had their rug pulled on them. And it's just not right. It's not right that you and me can launch a coin, reserve 40 % of the holdings for ourselves. We're completely decentralized only in name and not in any other way, shape or form. We can audit it. We can change it. We can dump it. We can just, it's everything that Bitcoin and hard money is not and it's sickening and it's wrong and these guys make money off it and I cannot support anyone that does that, you know?

26:43Is that, can I challenge you kindly? How different is that from a legitimate business that offers gambling services or even in a comp sector that you buy and sell crap companies as well as woolies? and there's no broker you say, well, I'm only going to work with a stock broker that lets me buy and sell shares in profitable companies or ones that haven't had capital raised since the last 12 months or we kind of say, well, shares are shares and they're all being traded. I'm not making the Bitcoin as crypto argument, although I think we've thought of that before. I guess I mean more the degree of grief for the broker when the broker is just facilitating a transaction.

27:17You know, how reasonable is it to say, well, actually, you can, CompSec can buy and let people buy and sell, you know, crap companies and gambling is okay and legal, so it's legal, so people should be able to do it, so they're just providing service people want. And then there's like, well, how is that different from, other than for the mission, is it really that unreasonable for someone to say, if I want to buy and sell Scott coin, you want to buy it, I want to sell it. I mean, I could, you know, I could try and find some other way to do it or I could use a trusted broker to at least know the transaction itself was legitimate.

27:46How is that? Is that different? When I go to Sportsbet, I know that I'm gambling. Sure. I'm not, Sportsbet's not out there. saying that this is prudent investment activity. I know what I'm doing. I'm gambling and I know the odds are against me. And if I'm too thick to work that out, there's actually government mandates that actually say, you will lose your money. Do you want to continue? Yes. And that's fine. I'm no judgment. If you want to gamble, have fun. I enjoy gambling, right? I've done plenty of time, put some money on a blackjack table or whatever. It's fun, but I'm not investing, right?

28:18Like, let's be real here. These, you know, Cardano is probably the worst of all. You know, it's out there trying to pretend to be something that it's not and can't ever be. You know, and that's what's egregious here. That is what's the evil thing. You're trying to pretend to be something great than what you are. You know, and then like at least there can be plenty of penny dreadful stocks on the ASX. But, you know, ostensibly there's a business there and they're trying to make money, right? Like that's you can read the annual report. It's all audited. I know what I'm getting when I buy a penny stock.

28:51Okay, what is it? oh, it's four guys in an office somewhere and they're trying to find copper in the middle of the Pilbara. Okay, cool. I can make my own analysis on this. I'm not Ethereum sort of saying, oh, we're out here as the world computer or whatever the latest narrative is because they change every two years because they figure out that no one's buying the scam anymore. You know, that's the deception there. And the only reason it exists where it does is the same reason that Uber and Airbnb, to follow our conversation from last week, things just appeared and they just front ran the regulation.

29:20It was there before anyone could do anything about it, right? That's the coin, not the exchange though, right? Isn't the exchange a degree of abstraction from that where it's, you know, it's still saying, I want to buy, you want to sell, here's a marketplace, you can do that. Well, I'll tell you this. Isn't that what CoinSpot are doing? I tell you, like, I will have... I'm not making the argument, by the way. I'm a devil's advocate. Yeah, I know what you're saying. I actually, you know, with the Trump coin and the Melania coin, I actually respect that more than I do Ethereum. You said that out loud.

29:48And the reason is that, like, they just say, oh, it's a meme coin. It does absolutely nothing. And we control it all and we've given a whole bunch of it to our mates. Like, okay. At least it's like, you're honest, right? What do you expect? I want to be a degenerate trader in this air token that has, you know, is Trump coin ever going to be the world reserve currency? No. Is anyone going to store their life savings in that? No. Is any corporate or sovereign going to, like, build infrastructure? structure around. It's just not going to happen. Someone will one day, just to please Trump, just to try and get a contract signed, and be like, but Donald, we bought a billion dollars with a Trump coin.

30:26Okay, you can have the contract. But it's too deep to get into at this point here, but it's a very hard rule to climb over. You can go back to the coin that are on the exchange again. I will one more time drag you back to the exchange bit. So I get the coin thing, but I'm going back to the exchange. If I want to buy a Trump coin, I've got to buy it somewhere, right? Look, my opinion, but I don't want to put my moral judgments on it. They're not breaking in the law, right? They'll argue that they're providing a service. Ask yourselves what the people are running this. Pretty much one of the interesting things is when you look at quote-unquote crypto, they all just tend to be ways to acquire more Bitcoin, right?

31:00Even the perpetrators themselves know that this is, you know, we're not holding this stuff, right? This is just something to flick and change and rug pull just so we can get more of the real deal. It's a one-time invention. It's a very hard thing for people to understand. and these people know. And if, like, they're either idiots. And it's different if you're sort of like a bit of a tourist or you're new to this kind of area. But people who are running these crypto exchanges have been in the space for a long time. And if you haven't worked out what this is, you are knowingly selling. You are knowingly selling grifts.

31:31And maybe, maybe you can be generous and say, okay, the top four or five are legitimate. I don't think so, but maybe you do. But there's like 19 ,000 different crypto tokens that are out there. Like you want to tell me that they are not all scam and you're listing them because you people will trade them. And every time someone trades them, you make a clip of the ticket on that. So it'd be fine if you sort of say, hey, come and be a degenerate trader on this thing. These things are absolutely worthless and it's a greater fool theory. But be our guest. They're not, though. You read the website. Oh, the future is this.

32:03And what is it? DeFi, decentralized finance and crypto. And, you know, we've got all these just these big Rube Goldberg machines of absolute nonsense. and they either should know or do know. And either way is very bad. And I do not, I personally, I shout out to Hardblock, shout out to Bitteroo, shout out to the Bitcoin-only exchanges because as I said, they have turned their back on many millions of dollars in revenue because they don't want to hurt people by selling them this nonsense. All right, look, I don't know. I always get angry emails when I say this because, oh, no, it's not. It's this and it's that.

32:36And it's like, fine, fine. But I'm just doing my part and throwing cold water on it and everyone has to make up their own mind. And screw you, CoinSpot, do the right thing.

32:48They won't. There's too much money. It's like telling the drug dealer, it's like, you know what? Just sell the weed. Stop selling the heroin. It's like, yeah, but we make heaps of money on heroin. I know, but it destroys lives. Yeah, we're not going to do that. That's who you're dealing with. Fair enough. Sounds pretty clear. We've got a question from someone who calls themselves, Young-ish bastard. So let's go with that. Good morning, Pod Machine. Young-ish bastard here. Pseudonym due to the nature of the question. May the Pod Machine continue its educational, humorous, ranty reign until the great digital coin in the sky shoots to the moon.

33:27And Scott, the converted one, Phillips, and Andrew, the stubborn, sage, Paige, sail off with their Costanza-esque cold wallets into the sunset. Thanks, I think. Why is it Costanza-esque? Is this not a life you believe? Is that what he's getting at? Yeah, it might be. I'm not sure. Maybe youngish bastard, you can let us know what you mean by that because I'm not sure whether to be, to feel praised or criticised, possibly just, yeah, I don't know, both maybe. All solitas aside, he says, thanks for the education and entertainment over the years. Listening to this part has helped me quickly learn about the Australian market, economy, and a bit of politics, which has been quite handy since immigrating four years ago.

34:07That's cool, welcome. Thanks for coming into our great country. Hope you make it better and hope we look after you. On to the question. And please only general advice. You know it. I'm 35. Sorry, Scott. Bastard. Married with a young boy. Congratulations on both of those things too. We're about to sell our house and move to Melbourne for work. We were lucky enough to buy a house about three years ago and we'll end up with a pot of fiat equaling anywhere between$325 ,000 to$375 ,000 after the sale. We plan to rent for at least 12 months and potentially up to three years while we determine whether Melbourne is the place for us.

34:46Now to the question, what do we do with the money? Do we, one, ape into a mortgage immediately following the great Australian right of home ownership? Two, increase the SAT stack and wait for the moon? Or three, go on a massive shopping spree? In all seriousness, it's a bit nerve-wracking to not have a piece of hard asset home ownership, but we will likely never have this amount of cash to reallocate in our working lives so want to do it correctly we had a similar question not long ago here's the rough plan says youngish bastard two-thirds in a high yield interest savings account for the eventuality that we purchase again in the next few years with the remaining one-third allocate a portion to super pay off a car loan put a large portion ETFs a small portion you know individual investments and a small portion to sat stack.

35:33Your thoughts? Cheers, youngish bastard. Youngish bastard, I do want to... I would love to know where you're from, only because I just... I love that you get the humour already. So I'm going to assume it's probably somewhere with English as a first language. And with the cheers at the end, I can't decide. I'm going to go... I'm going to guess... I'm looking through the wording. I'm going to guess... England. Let me know how we've gone, youngish bastard. So short of aping in a property or just stacking the sats and waiting for the moon, two-thirds high-interest savings, kind of preserve some sort of purchasing power hopefully for a while while they work it out.

36:10A third across super, car loan, ETFs, individual investments and some sats. What do you reckon, mate? These are so hard, these questions. I mean, whenever you've got a reasonably narrow timeframe, I actually do lean towards the savings account, you know, Because it's just going to be there. You're going to get a terrible return, but it's going to more or less be there. And, you know, if you're getting a decent amount of interest, you'll probably at least stay even with inflation and spend that in the future. Because the reality is, is whether it's stats or whether it's S &P ETF, I mean, those things are volatile.

36:50So, you know, there is a temptation to sort of say, well, three years feels like a good amount of time. there's pretty good statistical odds that, you know, the market will be higher by then. Put it in that. But you do hesitate though because it's like, well, there are plenty of scenarios where the market dropped 50 % and then stayed there. There's plenty of lost decades over the last 100 years where it was like, oh, it actually turned out it was a really bad investment. I mentioned recently Microsoft took 15 years to get back to where it was and that's Microsoft. Microsoft, like not, you know.

37:20So it's super hard. Where you've got some, if there is, if there is, we are definitely buying in the next two to three years, then I would probably just at least 50 % cash for the buffer. If it's like, well, that's the plan, but we're not wedded to it. And if it turns out we have to wait four or five or six years, then I'm more inclined to go for the quote unquote risk assets. Because if, you know, heaven forbid, there is a correction or a crash or something, you've got time to write it. I was like, gosh, that really sucks, but it's all a paper loss. I fully expect the world and the market to recover.

37:57I guess we just have to wait a little bit longer, then that gives you a great deal of comfort. So never a forced seller be is my motto. Yes. And if you've got a definite timeframe, you know, we're buying in the year 2027, well, it's like, well, you're going to sell then no matter what the market is. And that's not necessarily a good situation to be. So, but given the way that you framed it, again, you can do a little bit of each, right? Yeah, yeah. A little bit of each. It's probably the thing he's going to do. He's going to put most of it in cash and then do some stuff for the other stuff, yeah.

38:29I mean, here's the other thing. No matter what you do, with the power of hindsight, you will look back and regret it. Correct. You will regret no matter what you do because you'll be able to, again, with hindsight, go, I should have done that. I mean, there's a scenario where Bitcoin's at a million dollars in three years' time and you go, I should have put it all into Bitcoin. Yeah. there's a scenario where it goes to zero. I was like, wow, thank God I didn't do that, right? So I'm really nervous at these questions because I don't want to give a false sense of confidence when I certainly can't predict the future at all.

38:59So I think you're going in the right direction there. I think so too.

39:08I've talked before about the asymmetry and the difference of an under-occupied home versus an investment property. and I will come back to that very briefly because I think it's important and I tend to err towards wanting to buy sooner rather than later if you're going to eventually and that is simply because if you buy and the price falls it doesn't matter because you're in the house for the next 40 years right you're 35 let's say you live to 95 right so you've got 60 years of home ownership ahead of you in some way shape or form and if you're going to buy at some point if you buy now the price drops that sucks if you don't buy now the price rises a lot you might be locked out of that category of dwelling.

39:45Maybe location, maybe size, maybe number of rooms, maybe unit versus house, whatever it is, right? So a simple example. You buy a million-dollar property, again, as Andrew will say, that's a half a bedroom in the back blocks of Penrith these days in Sydney, given the movement on prices. You buy a million-dollar house today and it falls by 20%. You've got an$800 ,000 house. You're kicking yourself. You're pretty annoyed. You're annoying. You're yelling at me. You're replaying this episode just so you can rage listen and blame me for suggesting that maybe buying a house wouldn't be the world's worst idea.

40:13But you own a house and you'll pay it away. You own a mortgage. You'll pay it off over time or maybe you won't. If Ram's right, you should hold the debt. But either way, you've got a dwelling. As long as you maintain the payments, either make them or don't. Sorry, either pay it off or just maintain the minimum payments, whatever it is. You have a dwelling, it's yours, and you've got – and I know you don't like the property ladder, Ram, and it's not the right analogy either, but you've got to hook in at a level. I've got to think of a better way to describe this. But let's be generous. A million dollars buys you a two-bedroom unit in a suburb 15Ks from the CBD.

40:48Is that reasonable? Maybe, I don't know. 20Ks, whatever. Anyway, you're there. Now, let's say you – and it falls to$800 ,000 and you're annoyed. Let's say you don't buy a million dollars from 1.2. Well, you can't borrow 1.2. All you could borrow was a million bucks because that's all the bank would lend you. Now you've got to buy a one-bedroom unit rather than a two-bedroom unit or you've got to buy 30Ks out from the city rather than 15Ks out from the city. Now, you still have a dwelling either way. It's not the worst problem in the world, but the level you're now in on is just a couple of rungs below where it was previously.

41:14And I know the ladder's rubbish because you don't clone the ladder. It's dumb. But you know what I'm trying to say. So basically the category and the attributes of the property, you just don't have – there are choices that are taken from you if you don't buy and prices rise. I said before, and I don't have an answer for this. and should I borrow money and buy a place for my young bloke so at least in somewhere between 7 and 12 years' time he's not priced out of the market because the property goes up another X percent a year stupidly and for all the reasons around thinks it's dumb, he's right about.

41:48And I go, well, sorry, dude, if I bought something for you, I've taken a loan on your behalf in 2025, you could have had X, but I didn't, so now in 2035 you've got X less something else because, again, prices have gone up so much. So I say that youngish bastard to say, I have a preference towards if you're going to buy something, buying sooner rather than later because of the asymmetry of those outcomes. Because if the price falls, you've still got the place and in 60 years time, you might remember the price fell in 2025 or 2027, but it's not gonna be a big deal. And you've got the place you want, you've got the amenity you want from that place.

42:22I'm not saying buy straight away, by the way. I'm just saying, generally speaking, the longer I waited to buy, the more uncomfortable I would be and the more risk I think I would be taking relative to the potential return. Personally, that being said, Ram's exactly right. If it's two or three years, high yield cash, get as much as you can with a guaranteed deposit institution. If you got somewhere over 300 grand, split it across two different institutions because the government guarantee maxes out at 250. And while it's not likely to be used, there's no reason not to. So at least do yourself a favour.

42:51Again, not advice, but a suggestion. Half that in each of two means you're covered for the whole amount. If you put it all in a single account, you're only covered up to 250. In the very, very unlikely event of a crash where the government doesn't make you whole, very unlikely, but again, why take the risk, right? Just do it because why not? For two accounts rather than one, you might as well. I would pay off the car loan if it was me because car loans are generally going to have a higher interest rate than either a mortgage loan or frankly, than inflation even under some, if you use M2, the money categorisation or money category, it's unlikely to grow faster than car loan interest generally.

43:25It's got a particularly cheap interest rate. So pay off high-interest debt always, always, always. If you've got any credit card debt, pay that off. If you've got any afterpay, pay that off. You should get rid of the stuff because it's – even if you're in Ram's camp of carry some debt because it makes sense. And, again, I don't have an intellectual issue with it. When the debt cost is higher than the inflation, you're not afflating away the debt. I don't know what the opposite is, deflating up the debt or something. I don't know what it is. Either way, you're not getting better again. The real cost is rising.

43:51You're going further. Right, exactly. And it's what the debt is held against you. if it's a low-interest, non-recourse debt against an asset that's likely to appreciate. That's good debt. I've got 25 % credit card debt because I went to wet and wild every day and had a grand old time. I was like, I don't know if that's the best use of your money. That's probably a bad debt. That was a great year for you though, wasn't it? It was a great year. No regret. No regrets. In terms of the one-third, two-third thing, I guess the other thing is it depends on what you're thinking about doing with the one third in three years time if you're going to cash it anyway and go back to put it all back to a house then i'm kind of back with ram of like just leave it in cash right because why take the risk other than the car loan thing which i would do because it just makes sense um if you don't need that extra third well then you're really what you're saying is two thirds for the house one third is for long-term investing anyway and the answer is very very different at that point because then it's not a three-year thing it's a it's a long-term thing so splitting it feels smart kind of a bit of everything in there for you to minimize your regret if that works for you, by the way, psychologically do it.

44:50I wouldn't say don't. But I would say if you want the full amount at some future point, divvying it up, maybe you got more, maybe you got less, but again, regret minimisation. At least you know what you've got. If you get interest rate, a decent rate on it, cash in the bank, high interest account, I think that's hard to go past for less than five years personally.

45:15Any other thoughts? I mean, I just, I I'll just make the point again as I always do. The nominal or perceived return on your place of residence is absolutely irrelevant. I know no one else agrees with me. Yeah, correct, correct. It doesn't matter. All that matters is how easily you can service. It's kind of like rent. I'll just make the point if you're new to the pod. You buy the house at$2 million, it drops 50%. Well, if you were going to have to sell because you were moving somewhere, well, the whole market's fallen 50 % give or take, so it's a wash. Every$2 million house is now worth a million dollars.

45:51Yeah, exactly. Yeah, it's like, no, but property always, I'm going to miss out. It's like, yeah, but the house that you'll be buying has gone up as well. It only matters from an investment perspective. Other than that, it's like, can you afford the repayments? And there's a lot of return that just is non-financial. 100%. Like the security and safety of somewhere to raise a family without some knob and, pardon me, real estate agent coming along with the white glove and going, oh, it's a bit dusty. That was the polite description. Oh, the amount of nonsense I have had to deal with. You've got terrible rental history.

46:21I had bad luck, but it's not an uncommon story. Check out some of the Reddit threads that are out there. There's people out there. It's awful. Renting is a great idea on paper. The reality with rental protections that are out there. And again, before other people write in, there are some really awesome landlords. I know there are, but you yourself will know that you're in the minority. Look, and I say it, I say it working in the financial services space. 90 % of my peers I would, you know, happily throw under a bus because they are not nice people. So, you know, people in glass houses, which is the reality of things, right?

46:56Like we just call it. I don't think if we did a survey, right, we just, there'll be a few people that are annoyed because that's what they do and they take it as a personal affront. But everyone else goes, yeah, it's totally on point, these scum-sucking middlemen who do no value and just make life difficult so that they can make extra 20 basis points on their return. Here we go, most of our listeners. Connor says... No, I don't think so. I think if you've been with us for a long time, you're going, mm-hmm, yep. In that case, there go the pitchforks from our listeners who are still here. Tortures are being lit and pitchforks are being sharpened.

47:33Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

47:42Connor sent us a question. Hey, guys. Given my list of injuries is longer than an annual report, I won't be bending the knee for fear of not being able to get back up again. So let's get straight down to business. Fair enough, Connor. Well, that's no good. No, but, you know, it's OK. Seeking your opinion on AFIC. Am I right that's an Australian foundation investment company? Keep talking. I shall do some research. It's known as AFIC. The code is AFI. I think it's an Australian foundation investment company. As a long-term investor chasing dividends, says Connor, I purchased a good chunk of AFIC shares many years ago.

48:16However, over these many years, its price has gone backwards. Sure, once I take into account dividends, I'm in front, but only just. I was considering selling, banking a capital loss, and shuffling the funds into a dividend-producing ETF. And he mentions VHY, which is Vanguard's high yield, or the Vanguard ASX 300 ETFs, for instance. However, I then read three motley full articles recommending AFIC, with the latest being December 8. Do you stand by the articles? And is AFIC a buy or hold when compared to the Vanguard ASX 300 ETF? You've only used the ticker, Connor, but I've got to try and translate as I read.

48:57I wouldn't want to be a translator for quids. And other ETFs. Further, is it a buy around the current price, around$7? When compared to the$7.50 it owes me? Now, Connor, I'm going to say before we even start answering the question, you know better than to ask about historical pricing as well. Doesn't matter how much it owes you, it only matters how much it is now, what the future looks like. I'm thinking, AFIC will be one of the most highly held stocks among retail, quote, investors. And there's a lot of us in the red. So please, can you enlighten us all with your wisdom? Many thanks, Connor. But I'm going to start with the middle bit of the question I'll throw back to you, only to address the Motley Fool bit, which is important.

49:33We don't make formal recommendations of companies on the Motley Fool site that is available for anyone to read. We have premium services where we make formal recommendations. We don't ever make informal recommendations on the free site. That will be articles written by our analysts talking about why they might own them, maybe. I haven't read the articles, by the way, in question. It might be so-and-so fund manager says it's a buy, but you will not find a Motley Fool recommendation on the Motley Fool, fool.com.au free website. We will make formal recommendations on our paid services only. So you need to know that.

50:09We do also say at the top of all the articles, this is the opinion of one author, blah, blah, blah, the official language. It's in a yellow box. We're pretty clear. I don't say that, by the way, to in any way avoid the question. I'm very happy to answer the question, but really, really, really, really important, I'm glad you asked because I get to say it, Connor. What's on that? What's on the website? is not a recommendation to buy or hold at current price or any price at all. So please keep that in mind. Tristan Harrison wrote one on the – so Tristan wrote on the December 8th a dividend store that every Australian should consider buying in his view.

50:47December 3rd, the dividend stock you can sit your watch to. November 30th, there was an article – a five stock he thinks – five investment stocks he thinks people should buy. So, yes, our writers do say, but we say here, you're reading a free article with opinions that may differ from the Motley Fool's premium investing services. So please keep that in mind. I say that only just to be really, really clear about the playing field before we start talking about it. Ram, what do you reckon? AFIC or an ETF? ETF. Easy. Why? Well, these guys don't know what they're doing.

51:23We joke about the lawyers and yes. I'm looking at the website while you're doing it, right? Oh, he's aspirational and we're doing this and it's kind of diverse, blah, blah, blah, all these fancy. And I'm just like, well, okay, cool, it sounds really good. Let's have a look at how you've done. You didn't just show up out of the blue here. It's like I'm not even these. Bring on the lawyers if you want to bring them on. I'm just going to be stating facts here. Andrew Page, P-A-G-E. And the facts are you're making$0.21 per share in earnings in 2017. You're making$0.23 today, right? You know, you're just not good at investing.

52:01Now, maybe you had an incredibly bad 10-year period, but I reckon every... Well, I don't reckon. The facts say definitively that a very, very low-cost Vanguard ETF passive fund has smashed the returns. Is there a chance that the returns you're looking at, though, because an investment company don't recognise the value creation unless it goes through the P &L? Look at the listeners just said it. He's not happy. No, no, no. Shares have gone down, man. But I'm talking about earnings of an investment company. Buffett says this all the time. I'm going to say I'm going to agree with you, by the way, in the end.

52:36Right. But Berkshire would say, Buffett would say, Berkshire, here's our financials, ignore them, because they don't represent the actual value of the business underlying for all different accounting reasons. So I'm holding out the question. I don't even know the answer in a fixed case. I'm holding out the question as to whether or not earnings do give a reasonable assessment of the value creation for the company or whether it's a case of, you know. So, again, SOPAT is a great example, right? Some of their earnings are equity accounted. Some are on the dividends only. Some are something else. And so, try to work out the actual value of the – you can't use the earnings alone to work out the value of the business.

53:06Some combination of NTA, net tangible assets and earnings and other stuff. Okay, okay. Sure, sure, sure. So, this is the great thing about dividends because dividends are cash. Yeah, that's right. It's money. They're there or they're not. It's there or it's not. There's no account. I did the money into my bank account or did it not. So, let's do that, right? Let's do that. Okay. Okay, 2017, 24 cents, 2025, it's actually been stuck at 24 cents right through to pretty much just this year and they got a bit of a bump up. I bet you there was a special dividend or something in that. But even if you, so it's just basically flat for close to a decade and then even if you just take the beginning and the end, that's compounded at a growth rate of what, 3.4 % or something, you're not good at your job.

53:51Now, the market over that time has gone really well. We're doing nothing other than just owning the market. So I'm paying a management expense ratio that's well above what an ETF charges. Nothing wrong with that. Everyone works for money. Like, if you're providing a good quality service, you deserve your fee. But look, you've either had a very, very unfortunate set of events over a very long period of time, or you're not good at what you do. Yeah. I mean, I just, look, I'm the first person to sort of say over a short period of time, ah, it's volatility, Mr. Market, can be a bit silly, you know, look at the fundamentals and that.

54:27But there is a period of time, and I think in 10 years we would all agree that if you, as a quote-unquote investment specialist, have not outperformed the market net of fees over that period, what are you doing? And this is, I'm not having a go, I'm very much having a go. I'm in a mood. but afi uh not a they're not robinson crusoe here as i just said before 90 of the the snakes in this space are just worthless waste of space it can absolutely leach on society and i wouldn't make that accusation in this specific case but i mean you can see where i'm getting at here right yeah so i was like fool me once shame on you fool me twice shame on me it's like how long do you have to lose money with these guys before you just go you know what you don't deserve my money now i'll say all of this and they'll go to the moon and they'll smash the market over the next 10 years.

55:22But I mean, I'm not seeing anything here that's setting my world on fire. And there's probably someone from the company will listen or someone will play the clip to someone there and they'll all get very upset and very offended. And that's fine. That's fine. But prove me wrong. The return on equity, I'm just looking at it here, is consistently below 4%. In other words, take Take the net assets of the business, put it into an ING account, you get a better return. They're not good at what they... Let me sharpen this up for the lawyers. Historically, they have not been good at what they claim to be good at.

55:58Yep. And you do what you like from that. So that's the easiest answer we will... I will ever... The easiest question we've ever had on the pod. Which one? ETF. Yep. I will end up at the same conclusion. And I think, as you rightly said, Connor's made the point in the question. Again, I'll say very quickly, it doesn't matter what it owes you, Connor, please ignore the previous share prices. It doesn't matter what you paid. If you paid$2 or$100, the share price is now$50. The only thing that matters is where it goes next. Absolutely irrelevant. It doesn't mean you feel differently. The person who bought it to him and holds it$50 will hold it for dear life because they'll be like, look how well it's gone.

56:33It'll keep going really, really well. And the person who bought it at$100 and sells it, it's like, I'm getting rid of this dog. Or I'm going to hold it just until it gets back to$100. Then I'm going to sell. None of those things make any sense whatsoever. I mean, this is the kindest possible way, Connor. Only matters what happens next, right? So if$7 goes to$8, hold it. If$7 goes to$6, hold it. That's not sell it. Don't hold it just because you paid$7.50. It's just irrelevant to your calculus moving forward. I completely agree with you on the performance thus far of the listed investment company.

57:02Historical fact. You can disagree if you want. You can call the sky purple, but it's blue. Let me say I agree with what you mean. in the way you're characterizing it. Here's the thing. These guys were created, these sorts of businesses. This one, is it Argo? Yeah. Argo Investments, I think. These guys were created when ETFs didn't exist. And they performed a really, really useful service for a period of time, which was, I'm a know-nothing investor. I've got a lump sum. I've saved it. I've inherited it. I've sold a business. I've done whatever. And I want to invest in the Australian market. And I want a diversified investment.

57:33I don't know my BHPs from my Rios and my Telstra from my News Corp. and I don't want to know, what can I do? And a stockbroker would say, let me help you buy and sell shares every year for the next 20 years and we'll buy, sell, buy, sell, buy, sell, buy, make a lot of money. A decent financial planner would have said, well, I'm not sure, but a diversified investment that covers the market and gives you a reasonable return might be something you should consider. And these were the only way you could do it. And that's how they've operated, how they've always operated, what they were there for. And a lot of people still own them.

58:00Own them largely because of the day or maybe their parents or their uncles or someone else said, well conservative reasonable investing you want to invest in you know a diversified investment company blah blah blah and so maybe affix one for you and they have a massively whether we're loyal shareholders now who are despite those results still saying but no they're great because they do this and do that and i get the the the sentiment but ram's 100 right at the end of the day are you matching or beating the market or are you losing to the market and if you're losing to the market, stop losing to the market.

58:34I don't have a reason to believe, and I won't say I have a reason to disbelieve, but I have no reason to believe things are going to improve for Africa anytime soon. By the way, there was a special dividend, mate, two and a half cents a share, and they're going to pay another special. Yeah, another special this year. So what do you do? I think as an investor, in general, you shouldn't just extrapolate from the past, but track records tell you something. And track records tell you something, particularly when you have no ability to forecast the future. So if I'm Woolies, if I'm investing in Woolies or look at Woolies in investment, I can kind of look at the past and I can kind of take a reasonable view of the future and go, oh, I don't know, maybe, maybe not, maybe there's more back being sold, maybe there's fewer, maybe population grows.

59:14I'm talking about this on a recent podcast. Maybe population grows, maybe, you know, this price increases. Okay, I can kind of make a case for Woolies profits growing. If you're an investor in AFIC, you're going to sit there and go, they've had my money, they've got my money, they're going to have my money in future. um do i know how that person is going to invest it do i know which trades they're going to make next no do i know who's going to be running the company next no okay well how can i possibly look at the future with any clear uh you know even a rough view of the future no all i can do is look at the past and say they kind of have been doing this they'll probably keep doing what they've always done because that we're just that that's the most past performance is no guarantee future as the as the legal disclaimer always says but if you don't have any other way of looking at the future past is kind of what you've got to go with.

59:57And so to Ram's point, that's kind of where you look at that and go, well, where else would I go? Here's the other thing. If you look at what they're doing, it's worth highlighting to some degree. By the way, mate, can I share this with you? I've just opened the report. I've got some nuggets here, man. I've been having a quick look at the annual report. So AFIC delivers their own numbers compared to the ASX 200, including Frankie. Now, I don't think you should necessarily include Frankie. Maybe, arguably. Anyway, either way, whichever you do it, over the past 10 years, AFIX gained 9.8 % per annum and the ASX 200 is 11.2 % per annum.

1:00:34You know, to Ram's point, that's kind of the way it goes. And think about what they own, right? So you're paying a management team to pick, in order, BHP, Commonwealth Bank, NAB, Westpac, CSL, Macquarie, Westfarmers, Transurban, Goodman, Telstra, ANZ, ResMed, Rio, Woolworths, Coles, Car Group, Woodside, ALS, ARB, Brambles, I know we'll stop there because that's just boring everybody else. In other words, they're buying a shadow index. They're not beating the market doing so. And they're taking a fee out of the savings. They're taking the fee from the returns of the company. It's a company. It's not a fund.

1:01:09It's a company. And you own shares in the company. So the company is paying the costs of the people who are running the company. I see no... How much is that? Just hold that thought. I'll come back. I see absolutely no reason, no justification, to own an LIC in general versus an ETF, unless they are going to give you specific, deliberate, measurable outperformance and or investment variance from the market. Now, I listed those companies. The weightings will be slightly different between the ASX and affix. So how are they trying to add value? They're trying to say, well, buy a little bit more of BHP than the market weight, a little bit less of CBA, a little bit more of CSL, a little bit better of Goodman, and that's how they hope to get them roughly right and so the ones that are overweight go better.

1:01:58That being the key word. Well, that's the thing, right? So why not just own the ETF? And the only reason you wouldn't is if you thought Africa would likely to deliver you excess performance. Now, Ram's talked about the history. I've talked about the present, and no one knows the future. So why would you own this rather than ETF? You might on promises, you might on hope, you might on something else, but if they haven't beaten the market in the past, if the stuff they own is roughly market matching and no one knows the future. I say it all the time. If you can't beat the market, buy an ETF and go fishing.

1:02:36Frankly, over the last 10 years, Afic Shells would have been better if the company had wound itself up and gone fishing or just bought an ETF itself. They have made less than they would have had they just simply bought the ETF. Will the future be different? I don't know. Would you bet that it will be? No, absolutely not. Cheer your nuggets round. Seven, eight, nine, ten. I'm just going through some things here. So as an organisation, they've got 10 analysts, they've got a board, they've got a CFO, a company secretary and the rest of it. I probably would get, it's an investment company, so I'd be surprised if the total staff count was more than 30.

1:03:13Yeah. Let's be generous. It's 50. Yeah, yeah. Right? Now you've got 10 analysts in there. By the way, these 10 people with all credentials as long as you're on, I'm sure, but the 10 masters of the universe here combined, even index hugging, still underperform the market, right? We've made that point. What do you think the administration costs are for this enterprise? I don't know. Tell me. Have a guess. In dollars or percentages? Dollars. Oh, I don't know how big. Administrations in staff costs or more than that? I'll break it down. So there is... I'm just in the urge to Google, by the way. I'm trying to be, I'm trying to have authenticity.

1:03:49I mean, there's rent and stuff. That's what I'm trying to work out. Dude, they're not going to work from home. You need a shiny office, right? So you've got that. Anyway, I'll cut to the chase. It's$22 million in administration cost. You go, well, that's, wait, 22 million? Yeah, yeah, yeah, yeah. How many people? Probably 30, call it 50. Okay, well, that's interesting. Dig into that a little bit more for me. It's like, well, thankfully there's an annual audited report that gets produced. And I just can Google search it up and click on it And what is the CEO, Andrew? The CEO gets$1.5 million a year.

1:04:21They did forego a bonus. I mean, what a hero. What a, just the self-sacrifice. I just, I can't imagine it. But there's also this funny, it's actually if you look at just pure employee remuneration, let's round it up to$16 million. Okay? Whoa. Can I get a job? He's like, what is the purpose of this? This is the purpose of this. I don't even feel as though it's been too hackneyed or craven to sort of point it out. It's like, this is a good business, man. Like, if you can scrape together this many people and turn around and fail at the, you know, your raison d 'etre, to beat the market, to fail at that and still extract$22 million in administration expenses, the vast majority of which is staff pay.

1:05:11After underperforming them. I mean, at a point, I've got nothing. You reach a point and you go, actually, I've got to respect that. I mean, you have survived this long and you have convinced people to put money into it. How did you do that? Like, that is fantastic. Like, hats off. Do you know what's worse is you're describing all this and these are probably some of the lesser, lower cost fund manager around. If you line them up, these guys will be 90th, right? In terms of the degree to which they are taking the mickey, to use the other word. Oh, it's just, you know, I've said nothing. I'm really happy to say all of this because there's, I mean, lawyer up.

1:05:56I mean, what can... There is a defence called truth, right? And this is just all... I'm just referring to your own audited and ASX published announcements here as well. Now, I will concede that maybe there is something I am missing, But the facts of the matter are over a decade you've underperformed the market. Each year you're extracting somewhere in the vicinity of$20 to$25 million in cost just to index a hug, to hug the index. Badly. You've got a whole bunch of investment analysts that just clearly are not good at their job. And the question is, should I keep my money with them? No. Posting to turn it right.

1:06:34Make things not turn around. Honestly, I genuinely mean this. if I'm missing something crucial here. But I reckon you could do that for zero administration fee. Or point, what are these index funds, like 0.1 % or something now? The Vanguard, is it the S &P? It's 0.04%. Okay. It's stupidly, stupidly low. Like so low. I mean, how is this still an industry? Yeah, that's true. How is this still an industry? I will say, I'm not going to defend Affick at all. What I will say, though, is the criticism you highlight it all right we said a million times the average fund loses to the market and and and most off i think i don't overdo it because you know it's large enough already it's something like 80 percent of managed funds lose the market after fees now this isn't a managed fund it's a listed investment company so it's slightly different but the simple reality is if you're trying to beat the market and you carry fees or costs just costs odds are well on average you must on average lose to the market because the fees are attracting for the market return.

1:07:39And then because of that, most fund managers will lose to the market. And these guys were a very reasonable investment idea when there were no ETFs because it gave you an ETF-like ability to access the market. Rather than picking 10 stocks and being wrong, you picked the whole market, you paid a bit in fees and you got an okay result and a bit less in the market was fine because the fees are the fees and at least you got something and it was pretty good over time and better than trying to pick your own stocks and wondering whether BHP or Rio was the better bet if you didn't know stocks. Perfectly reasonable.

1:08:07To your point, though, there is – actually, I'll clarify. I guess there's no reason for a listed investment company. There is no reason for a passive or an index-hugging listed – Solpats is a listed investment company. I'm a shareholder, a very happy shareholder. I've done very nicely, not because I'm a genius, because Solpats have just done a wonderful job of running their business. There is a reason to own Berkshire. Same thing. There is a very good reason to own listed investment companies that outperform the market because you get the outperformance. Owning them as a proxy for an ETF, zero, absolutely zero reason to do so.

1:08:38I am a big fan of for-profit companies. If I'm a customer, I'm an even bigger fan of not-for-profit companies. And I'm a massive fan of Vanguard. I own some Vanguard ETFs. Why? Because the unit holders own the fund. There is zero incentive, maybe there's a little personal incentive to bump the pay packet of the CEO. So there's not zero incentive, but there's no profit margin motive. There's no need to kind of increase fees to cover more profits for shareholders who want more money. If they get bigger, if they do better, they return lower fees. It's just like it is Jack Bogle, as Warren Buffett has said, is probably the most important innovation in investing in our lifetimes and probably for our lifetimes is the index fund for all the reasons we've just talked about.

1:09:19So do I hate AFIC? No, it's been fine. The returns have been okay. If you owned it for 10 years, you've done well. You've 9.8%. Great. Good on you. You just haven't done as well as if you just simply got invested in the market itself. And I'll tell you, 11.2 % minus 0.04 is still more than the 9.8%. I mean, I'm looking at their website, underperformed over one year, over five years, over 10 years. It's just ridiculous. The managing director is on$943 ,000 per year as a base, right? And actually in the last year, what was that, the year that they massively underperformed? Yep, that's one by half pretty much in a rising bull market.

1:09:58where Blind Freddy could have just thrown a dart at the board and made money, he still got a$439 ,000 annual incentive. But there was$534 ,000 incentive forfeited. But, you know, the sacrifice. Good on you, Mark. Good on you. Because Lamborghinis are by themselves, right? It's just, I mean, as I say, at a point you can, it's kind of like those pastors in the US, those megachurch kind of things. Like, that works? You can convince people to tithe you like 10 % of their income. Like it's like it's so outrageous but at a point it's kind of like I'm just probably a little bit disappointed that I can't do that morally or physically, you know, but it's just.

1:10:45You know what? It's too. I'm being very harsh and I'm being very nasty but A, I don't think it's deserved and it's just B, there's a real emperor's new clothes dimension to our industry as well. It's just like the deference. I mean, I said to you off air, I just get so sick of these fund manager puff pieces in the AFR. It's just like, you know, why can't... How this fundy starts his day. Yeah, how he starts his day. He takes an ice bath at 4.30 in the IM. You're like, does he? Well, maybe he needs to change that routine because he sure ain't good at his job, right? And it's just, it just makes me sick.

1:11:23Again, I'm not going to defend AFIC, but I want to broaden the point because AFIC is not the most egregious example of this by a million miles. What does that say? Right. That's my broader point, right? That's exactly my point. So for whatever group we throw at AFIC and justified from everything Ram said in terms of returns and whatever else. But Bitcoin's the scam here. Well, Bitcoin's the investment companies are generally speaking lower fee operations than managed funds because they normally, generally, that internal company structure kind of limits the... Because they're not charging a fee based on a percentage of performance.

1:12:01You know, if a fund grows, it gets more money. And so that's kind of like, you know, as 80 % of them alludes to the market, I think it's by no means even close to the most egregious. They're probably not in the top half, I would argue. If you look at costs of investment management by organisation, these guys would have been the first 100, I'm sure. maybe$100 ,000, definitely not$50 ,000. You know, the$22 million you highlight, Ram, we say, oh, that's ridiculous. Man, think about the fee structure. Think about the fee, what's the right word, extraction of some of the larger funds. It's got to be, you put a zero on it, surely, right?

1:12:40The money that some of these big fundies are making and losing to the market is just extraordinary. I'm just looking at the corporate office here at Collins Street, Melbourne. Beautiful marble arches. I bet it is. Just fantastic. you'd say, well, I mean, really? Yeah. And meanwhile, by the way, so Pat sold their pit street office and moved because they get some money for it. It was like, what's better? Berkshire's run out of like a really modest commercial block in downtown Omaha, Nebraska. Correct. You know, it's just like there is, look, and this isn't, there are funds out there who generate incredible returns for investors and they are the people that just, I will applaud their success and applaud their wealth.

1:13:23It's like you have earned the right for a big pay packet. You know, you have absolutely generated value. These guys are extracting value. Probably not enough to move the needle, but it's just sort of like you'd probably do a favour to shareholders if you downsized your office and maybe took a more conservative pay packet. Anyway, we've really thoroughly destroyed it. And you're welcome. We're good enough to consider. Put it that way. Bring it. Bring it. Page P-A-G-E. Oh, yeah, you know, you can find me. I'd love it. I would love it. I went to George Costanza. I would love it. I would love the opportunity, you know, to argue this.

1:14:06I would love it, Gerry. I would love it.

1:14:11This is the last podcast recording of the year, and I suspect we've probably come in pretty hot. So I hope you've enjoyed it. We are back next week with some brand new content. As I said, all pre-recorded, as the joke goes. But, yeah, we might even try and catch up on some of the headlines of the last month, maybe, if relevant. Otherwise, a usual episode on Friday and then a brand-new mailbag come Sunday. And we cannot wait. Until then, Fool 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.

1:14:49Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.