Mailbag: incl. What do you want in life? July 16, 2023

27:09And the ETF providers know that, so they charge you more fees for the thing that they provide. So if you say, I want a passive ETF, they kind of go, well, I guess I got to charge you low fees for that. When you want a hyper leveraged gold bear China ETF with bells and whistles and tinsel, they're going to charge you almost full price and you'll pay managed fee type prices. So managed fund type prices. So just be careful with how broadly you stretch the ETF definition when it comes to passive investing. Second thought is similarly, but slightly differently, what's growth and what's dividend and who decides that, right?

27:46So conceptually, you kind of go, okay, growth should be better because we get growth and dividends should be better because we're getting dividends. It's also true that over stretches of time, which are often up to a decade long, certain strategies happen to do better than others because the market just thinks a certain way. So it's been a great time to be a growth investor between between 07 and about 2021. Growth smashed value. To the extent you like these terms, I don't, but the extent you do, when you break it up and go, here's one, here's the other. In the last two years, value has smashed growth.

28:16So which is better? Well, then you're bringing timing into the mix. Now, you're talking about a retirement portfolio. If you had to sell your growth stocks at point X, if you had to sell your growth stocks today and you bought them two years earlier, you're locking in a pretty significant loss to then transfer across to dividends. So once you start to become active in a passive strategy, it kind of starts to break down a little bit, at least conceptually. Doesn't mean you can't do it. It just means you're adding more activeness than perhaps you're planning to because you're liking the ETFs. All of that said, the other thing is think about, don't make this a driver of your decision.

28:51We've talked about that a lot, but think about the tax implications. So yes, on one hand, you get a capital gains tax discount any gains you're selling the growth etf on the other hand you get a tax benefit from the dividends that you might earn in a dividend etf or even just as ram says a general etf you get franking credits probably in a general etf in australia it must be close to 80 franked i would speculate ram um most of the miners but banks will pay frank dividends so you know it's probably going to be 80 85 franked there's tax benefits there as well um and then And then as you say, think about the need for income and what you're doing with it.

29:27Part of my portfolio is set up for Never Sell, which is, Leo, your question, where I bought stuff and I'll happily disclose it. I bought some units in the VAS, Vanguard Australian Shares ETF, which is Ram's exact point before, and sold Pats. That part of my portfolio, two companies, because I don't want to ever sell them. I hope that not only, if I can do a wealth compounding job well enough, not only will they provide income for me through my entire life, reinvested for now and then harvested in retirement, I can then pass them on to my kids not needing to sell the shares. Now, maybe it doesn't happen that way.

30:00Maybe I splurge or maybe something else happens or I need the money or my investing is no good. But I'm trying to actively in that group of companies actually avoid the capital gains tax event. Why Solpats and why the VAS ETF? Because I don't expect to have to sell them. As a conglomerate, Solpats is kind of protected as long as they don't screw up. And as an ETF, same thing. Now, I wouldn't do that with Woolworths, for example. As much as I love Woolies, I don't know what happens to Woolies in the next 20 years. If at some point I choose to or am forced to sell, I have to crystallize the capital gain.

30:27So I've just simply said, part of my portfolio is literally the forever portfolio in theory. No guarantee, not absolutely locked in, but that's the plan. On the other hand, our listeners know I own a whole lot of companies, including some growth stocks that don't pay dividend currently because I'm hoping that generates value over time. As I get closer to retirement, I think I'll be adding more to that forever part of my portfolio, or at least the dividend part. But I'll be selling opportunistically rather than not. Now, I don't think I would do that with an ETF. I don't think I would ever buy a, quote, growth ETF.

30:58I certainly wouldn't buy a dividend ETF, by the way. And here's the other thing, Leah. They are horribly, horribly concentrated in Australia to a couple of sectors, most particularly banking. Now, banking stocks have great dividend yields, but we've talked so many times about diversification. I assume you know by now our thoughts on that. Suffice it to say, I'm not going to chase the yield at the expense of portfolio concentration and extra risk. So honestly, you do what you want to do, Leah. If it was me, I wouldn't buy anything labeled growth ETF and I wouldn't buy an Australian dividend ETF.

31:27I might buy a US one if I was in the US, but I'm not. And I like the frank credit, so I wouldn't buy a US dividend ETF. But I wouldn't buy a dividend ETF, I wouldn't buy a growth ETF. So to Ram's point, I would do a combination of both, buy an average ETF, take the dividends, reinvest them for now, and then harvest them at some future point is how I am thinking about that part of my portfolio. Now, I'm also buying individual stocks, which you're not, which is fine. But that's where mine's a little bit different to your proposal. Rem, any more thoughts on that? Oh, just to complicate things a bit more, because why not?

31:58So just while you were talking there, I'm just looking at some various growth and yield ETFs. And what's interesting is that just looking at the various ones there, even within that category, the difference in performance is pretty stark. So you could pick a - It becomes active, right? That's the problem. You pick a yield fund because you want a low-cost, passive so-called sort of approach to getting yield. I pick one. We both have the same itch. We just scratch it slightly different ways, slightly different products. You know, in one case, I'm up 13 % compound over the last three years. You're up 8%.

32:30Now, it's quite a big difference, actually. And notionally, we're both sort of doing the same kind of thing. I don't want to name names here on the ETS, but you'll see it yourself when you start searching various ones. And then there's also something to be said. I mean, I'm just looking at the Vanguard high yield one as well. I mean, over the last three years, it's a little bit of 33 % return. That's pretty good. That's not bad. The high growth one, if you just focus on one, again, it's a question of definitions, but one that came up was the one that focused just on the all technology sort of index in Australia.

33:00It's only done 8 % over that period. That's not what you would expect. Again, but it's three years. You know, we could be having this conversation a couple of years ago or a year and a half ago. I'm just saying, whoa, the technology one has just thumped anything else whatsoever. So it's kind of, it just gets all very, very difficult. You'll know in 10 years exactly which one is the best one to buy, which is why I kind of land with you. Just go for the average passive ultra low cost one. And then as and when your circumstances change, make the appropriate differences. Yep. Changes. I think that's right.

33:33I think that's right. No, I think that's right. And, you know, as I said, I love passive ETFs. once you start adding anything in front of the word ETF, growth, dividend, cybersecurity, gold, defensive, progressive, leveraged, any of those words. Once you add those words, what you're really adding is a three-letter word, F-E-E. They're finding ways to charge you more by adding activeness to the ETF, which is not at all what you're looking for. So yeah. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

34:10all right let's get one from justin mate uh he says hello scrammers it's apparently some sort of portmanteau of scott and ram i suppose shout out to you both for all the time and energy that goes into making genuinely helpful material thank you mate i find to be a breath of very logical fresh air in this age of information overload the last three years have taught me oh dear have taught me loads from first principles up well that's good i started by investing a dollar into an etf every time scott said by definition and whatever ram would say uh raisin was it was it raisin raisin detra raisin detra thank you raisin detra it is now worth 700 million dollars and compounding away nicely you're welcome yeah exactly well justin just we have a commission on that by the way i'm answering the call out for mailbag questions he goes i know you have touched on it before but can you guys please do a more comprehensive analysis of the pros and cons of investing in stocks inside a discretionary trust.

35:08I understand one major drawback is the additional accounting costs. But if one already has a trust set up, these costs would largely be in play already. What are the other considerations one would need to be aware of? I understand you're not accountants, but I have a fair idea of what my accountant would say, i.e. barber slash haircut, et cetera. Keep up the good work. Cheers, Justin. The quote, of course, Justin referring to, for those who don't know, is never ask the barber if you need a haircut. Of course, because he'll say, yes, of course, I'm a barber. but that's what I do. So, mate, I don't use a discretionary trust, but you've mentioned it before.

35:42Do you want to just quickly do it? We don't do a comprehensive analysis, Justin, I have to say. That would require more tax knowledge than we have, and frankly, we wouldn't hide ourselves out as being able to provide a comprehensive analysis. But, mate, what are the pros and cons as far as you're aware? The pros aren't as pro-y as they used to be, and although that sort of disadvantages those that have a trust, and I've got all my shares in a family trust that we set up. Actually, the 10-year anniversary will be in November of this year. Hey. I don't think it's actually helped me too much. And the reason it was done in the yesteryear was because my pet rabbit could earn some money and my three-year-old could earn some money.

36:18And, you know, I could take advantage of various free thresholds, tax-free thresholds. Gosh, try and get that out. This all sort of got clamped down, rightly so, well before I set up my trust. but someone at the time convinced me, you know, it gives you more flexibility. There are legitimate things you can do. It will come more into its own when the kids get older. And I just, I really just sort of like, it's the trust that makes all the money and must distribute any profits at the end of the year. But I've got control over who gets it. So some years, because of our specific circumstances, I'm starting up a business startup and all of this kind of stuff.

36:59A lot of years there, I had zero income. So guess what? the trust gave me all the distributions for that year and then in years where i've paid myself well that's not it makes as much sense so it gives you it gives you flexibility around that now it costs money to set up and it costs money every year because i've got to get it audited i've got to get separate accounts filed and the rest of it and it can be significant um so i i i generally think actually you know it's it's depending i'm gonna say it but it depends right it depends on Another dollar in the fund. Yeah, it just depends on your personal situation.

37:33This is where an accountant is going to be invaluable. And yes, they might have a bias to want to sort of set one up for you because it's something they can charge a fee on. But just ask the question. You don't have to follow the advice. But why? Why, Mr. Accountant, Mrs. Accountant, would I want to do this for? And they'll be able to give you actually really good answers far beyond what I'm capable of giving. But I would say in my own experience, I don't think it's actually been worth the cost and effort so far for me. Okay. I don't know well enough, Ram. I'll throw just a couple other thoughts.

38:02First is you can use a trust for asset protection so that if you happen to be in a business where you're likely to get sued by customers or for whatever other reason, if Andrew is sued, the assets of his trust are separate to Andrew personally. So they can take his house and his computer and his hat, but they can't take the shares of his trust. So there's that. It does, as you say, mate, let you distribute the income as you choose to, which is useful sometimes. Even the adult kids thing, that they're only going to be in a low bracket and happy to have a distribution from your trust for tax benefit for a certain number of years till they work themselves.

38:33And it's like, hey kids, can I use you as a tax dodge? No, thanks dad, I'm happy to, you know, I'm earning my own money, thank you. Don't enter my tax bill. Or even if you give them the money to pay the tax bill, it just gets, it gets, it's very, very difficult to get real value. For me, it's the asset protection and the ability to choose in certain, so if you were a couple, for example, and one of you isn't working, the other one is, great opportunity and you're likely not to continue to keep working. If one was going to retire much earlier than the other, those things start to be useful, I suppose.

39:01Can I just add on that quickly, though? Why I sort of say it hasn't been particularly beneficial for us because we could have just made certain choices with the names that we chose when we bought the shares, which would have had the same effect, really. It doesn't need the flexibility at the time of distribution, though. Yes. If unexpected circumstances change, you can't go, oops, Andrew gets more this time and the other time his wife gets more. Yes, that's true. yes um yeah break your chain of thought there yeah no no in terms of in terms of downsides uh there aren't many other than cost the other thing just to be mindful of is you have to distribute the income every year you can't retain the income in the trust so you don't get a choice of timing you just get a choice of recipient generally speaking again there are probably other tax rules you can do you can also combine companies and trusts and all sorts of stuff company can be the trustee of the trust and the trust can own a company it gets very messy very quickly uh but just just kind of bear that in mind the company can be the beneficiary of a trust there's a whole lot of things that can happen um so that that's when you want to go and talk to your accountant on that one you just want to make sure the benefits actually outweigh the costs by significant amounts given the yearly cost of it we just talked about keeping fees down and adding adding a whole lot of costs for multiple years um by the way the other thing is the trust needs to be wound up which is not going to be an issue for most people in most states i think the length is 80 years uh so there was a there was a capital gains tax event forced on the trust at some point in most jurisdictions depending on the setup and again, see your accountant for that.

40:22Again, if you're 62, not going to be your issue but your beneficiaries, your AIs, may have to wind up the trust at some point and then have to liquidate all the assets and pay capital gains tax. That's just a thing. Is that a big deal? Probably not if it's big enough and the set problem, not yours but just be mindful of that as well. Yeah, I see accountant too about the pros and cons of putting it under a company structure. There's all kinds of options that are out there. Yeah. I mean, this is why it's what accountants do, right this is where where i think and this is with with all due respect i sort of say this is don't ask your accountant what shares to buy and you know it's just in the same way that you shouldn't ask us too much on taxation advice exactly it's we're giving the broad brush strokes but we're not going to be able to yeah exactly yeah yeah i and and and that's that's being very general and maybe a little bit unfair but it's not the service you're providing is i need i need a guide through this labyrinthine, you know, tax code.

41:16And I just want some, I just want to do things sensibly in a cost effective way. What's the best, what are the options, pros and cons for each? What are your personal recommendations? But always, always, always make that decision yourself. I think that would be just so invaluable to really arm you with the right considerations. And they're worth every cent that you pay to them for that service. It's a really good one, because it's a nightmare out there in terms of what's possible and how you go about. And it's why I think accountants are going to be around for a while, even if they are run by AIs.

41:47It is worth, look, keep the bar and haircut thing in mind, absolutely. Also keep in mind the fact that there's a lot of groupthink in any industry. Frankly, Ram and I are unusual, although maybe he and I are separate with our own groupthink, but we're not like most investors, but most investors will tell you, you must have some money in resources because the resource sector is big in australia do you is that the reason why yeah of course it is really why um um breaks down very quickly the group think is real um just keep that in mind and even the accountants with the best intentions will have a an element of group think and they're also generally pretty conservative unless you find a you know renee rifkin high flyer accountant um that's an old reference people who are older than us um you know that they will probably say well just in case maybe do this that's complete it's a great advice just be mindful of whether it is appropriate for you right is that you know have a trust because if someone sues you you've got that protected okay what are the chance of being sued what are the costs of that protection then you've got to make your decision and so on and so forth yeah i i had a experience where i don't use them anymore um reasons that'll become apparent but when saw them and just sort of saying listen i just want to i've just time to get serious about some of this stuff this is ages ago you know you start earning a bit of an income and building up some savings and the rest of it and this guy pushed so hard towards a negatively geared investment property structure.

43:06No. And so hard. And I just like, okay, well, you know what? Believe it or not, I'm open to it. But wait a second, I'm losing money each year? Oh, yeah, yeah, yeah, but you pay less tax. Yeah, but I'm losing money. Oh, don't worry, you'll make it up on the end. Now, as it, ironies, I should have taken that advice because as the way history unfolded, it's actually, that was brilliant because the capital gains were so substantial. But it's a great example of how the investment advice crept into that because he was coming at it from a tax minimization sort of standpoint. But the crux of the whole argument did rest on significant long-term capital gains on the property.

43:47So it turned out that that was right. That was a good – as it played out, that was a good bet. But let's not forget for what it was. As I said before, just you can't look at the outcome and then judge the merits of the idea at a particular point in time. So, yeah, it's why I sort of say, you know, if we're couched in any advice, there'll sometimes be sort of certain investing beliefs, ideologies that creep into that. And so some of the accountant, I don't think he was thought he was making any investment advice, just like, hey, you do this and you can save some tax. but but what he couldn't answer and what i really pressed him on was but what if property doesn't go up i mean he looked at me like i just said i'm from mars right so he couldn't wrap his head around and again he was probably right to sort of say that at the time to think that at the time but just be be mindful of that certain prejudices will be brought to bear when when giving taxation advice great example hey yeah my one from luke g'day scott and ram i've got one for the mailbag This is Luke!

44:48My name is Luke, we know, and I've been a long-time listener and fan of you guys on the podcast machine. Ram, they like the podcast machine, I'm telling you. They're my people. I'd love to have your insights on a quote I heard recently. You can have anything you want in this life, but you can't have everything. Decide. I'll read that again. You can have anything you want in life, but you can't have everything. My own current juggle is wanting a bit of acreage on the outskirts of Sydney where I can renovate a family home buying a late model four-wheel drive Toyota that's practical and reliable and creating a large enough investment portfolio that we can replace our incomes with.

45:28So I think that's the combination. Sorry, it is and, but I think he means versus. How do you guys choose and put weightings on the different wants in your lives? For the benefit of listeners and myself, could you please share some stories of the trade-offs you and your families have made so far? All the best and keep up the great work. What a great question. That is awesome. I'll swing first on this one, mate. Yeah. I've thrown you in the deep end a couple of times and you can jump in. Go. Go for it. This is a perfect question, Luke. And I'll give you a quick plug. Aussie Firebug is an investing slash finance blog on the interwebs.

46:04And Matt from Aussie Firebug did an interview with me on the Good Oil recently. The Good Oil podcast is the other one we do. Have a listen. Just a shameless plug there. But it's a really fascinating question because we talk a little bit about this. and it's a really really important one Luke my we've for a long time let me go back half a step when you're on a decent wicket it's an easier decision and conversation to have there are people for whom these choices aren't choices because they don't have the incomes to make those choices so I want to start by saying I'm very very fortunate that I have been able to choose some of those things there are people that I know people that will listening to this right now is like what do you mean i can make a choice i'm struggling just keep make ends meet what else what other choices do i have and that's absolutely true i think there is something to be said for uh there's a great quote um the thing about the rat race is even if you win you're still a rat uh which i which i quite like it's a bit a bit unfair but there is a there is a real element of thinking about what is success for you in life right because i think the other thing i'd add to that luke is you sort of said okay i've got the you know the home the acreage the car or creating a portfolio i think the other one is kind of like both or um when you say large investment for there to replace our incomes with what income do you need based on what lifestyle choices you make now you can live in some wonderful regional parts of australia and buy a house for a third of what you'd pay for a cbd house now you people are saying well then i can't earn this of income i would earn the city i was like yeah you probably don't need that income because you bought a house it's a third of the price so now what do you want to do well i can't get a job well maybe not the job you want but if you get another job and it was satisfying and you have more leisure time and you could buy a house for a third of the price what would you do now i'm not saying i've done that i haven't we moved to barrel which is in regional australia um not that far from the city and we pretty much swapped a nice house in sydney for a nice house with a bit more land in barrel all we didn't save a lot of money we didn't make a lot of money but it was a well worthwhile trade for us we could have got if i convinced my wife you'll hear this on the podcast if i could have convinced my wife to move another you know 40 minutes away and save another half the house i would have done a heartbeat uh but you know we and to your point about compromises that was the thing right she wanted to be closer she wanted some shopping and good coffee and people and you know social whatever if we moved too far away she wouldn't have had that and that's completely fine for us because that's what we wanted to do so that's my first example of having that choice.

48:33Second one for me is the house versus the investment portfolio. We made a decision as a family, oh, man, it must be, was it the first time you were around when you were on the podcast with me? Probably five years ago, maybe longer now. COVID makes life weird. To take some money and rather than invest that money in shares, to actually pay down the mortgage. And that was a very specific decision we made because my wife was more comfortable with having a lower mortgage than a bigger portfolio. That's not exactly the trade-off you're talking about here, Luke, but it was just straight out, I feel more comfortable with more of the mortgage paid off rather than I want to maximize my investment portfolio.

49:11Now, would I have done differently? Yeah, personally, if it was just me, yes, I absolutely would have. But it's not just about me. In fact, you know, life is, I'm okay, but I love my wife and family more. So I'm happy that, you know, I get to keep them and make some good choices. And that's a really easy choice, right? It was mathematically, would I have been better off staying invested? Yeah, absolutely. And you do the math since, right? I can show you what that would have done. but you know are we are we happier more comfortable more content yeah absolutely so i think that's that's absolutely something to think i would just encourage our listeners ram to i don't get all too um left-wing or you know buddhist meditation or whatever else you want to kind of accuse me of um but just think about think about what what you actually need from life what you actually need from your portfolio how much money you actually need to replace your income what your needs and wants are matt on the podcast talks about the fact that actually if you choose to just have lower wants then all of a sudden you don't need to replace as much income and it's not sacrificing stuff it's just like you know what actually what do i what do i need versus what do i have because that's the things i've been taught to need and that's the things my friends have and so i've aligned my living standards with theirs i grew up in a house with two old cars a color tv in the lounge room a black and white tv in the in the living room uh we had fish and chips once a week on a Friday night my childhood was spectacularly good now I'm not saying we should all go back to that necessarily I'm just saying the point is you'd be surprised what you can actually what's what's actually meaningful and useful and satisfying uh social media makes it harder keeping up the joneses makes it harder reality tv makes it harder you know we were lucky we didn't have all that kind of rubbish to deal with we had three tv channels blah blah I'm old I get it uh but you know just just kind of keep that anyway I think you are keeping that in mind Luke so I can't give you specific advice.

50:55What I would say is just think about what trade-offs you can choose to make. Don't necessarily make them if they're not for you, but just remember that replacing your income is not just, could I replace an income that I'd need if I lived in Sydney's eastern suburbs or New Farm in Brisbane or Turek in Melbourne? Or could I live in regional Victoria or at the back of Cooktown or something in Queensland or the Barossa or wherever else you want to live um there are a whole lot of other choices maybe you can't your job maybe your job doesn't take you there i'm very fortunate i can um have a think about those things right it's just such a personal question i mean i'm happy to reflect on my own sort of stance but it's it's one that no one can answer for you but i think the way the question was framed i just 100 agree that's kind of where i my life goal is that to basically just more or less replacing in fact less than the income if i could own a house outright uh yeah i'd probably be happy to I live a few hours outside of Sydney, so I'm not completely cut off from my little social network.

51:54Yeah. But, I mean, if I owned a nice house sort of outright and I could generate 50 grand a year, probably job done. You know, that sounds not what you might expect. But, you know, when you take away either a rental cost or a mortgage servicing cost, that's$1 ,000 a week, more or less, you know. I just – it's just me. I don't like fast cars. Well, I like them, I guess. I've got no desire to own one. I don't yacht. I like go on holidays every now and again, but I don't need to travel business class around the world trip. And it's just – I figured out a long time ago that the most scarce and valuable commodity in the world is time, right?

52:37And I've only got so much of it and could run out tomorrow as far as I know, right? So I look at some people in our industry whose business cards are very impressive. whose LinkedIn profiles are amazing, who have probably been earning 300 grand a year plus for 10 years, who live in beautiful houses and have, but they have aged not well, you know, because the company owns them. They work ridiculous hours. They don't know the kids. They're unhealthy as hell. Who are the kids? Yeah, or the wife or the partner or whoever it happens to be. And I'm not even saying, oh, that's wrong. Look at them. Ha, ha, ha.

53:11What a dumb dude. That's their choice. And there are a lot of people that find a lot of satisfaction in those kinds of careers. But I know thyself, right? And I know myself. And I would happily have a much lower income but much more flexibility in how I sort of spend my time. And frankly, you know, I reckon if I – I don't need to win the$20 million Powerball. If I won a couple million dollars, that's it. I'm out. Mic drop. Done. You'll never see me driving past in a Ferrari, but you probably will see me with a big smile on my face. and the years left in my life to pursue it in the most enriching kind of way.

53:49Yeah, Luke, by the way, Toyotas go forever. Don't be scared of buying a 10-year-old one rather than a two-year-old one. You don't need to do that. We have a 2016 Prado, a 2018 Hilux, and they have both fantastic gear cars. One was X-Demo, one was used. They do everything we need them to do. They're great. If you keep your desires in check, it's amazing what you can do in your life. It really is. Can I add a couple more things? Please, mate. Charlie Munger says that greed isn't the worst of the deadly sins. It's envy. Envy is really just so horrible. It's only one of the deadly sins that doesn't make you feel better.

54:25It makes you feel worse. Yes, right? At least with gluttony, I get to eat a bunch of ice cream. I won't mention the other ones, but there's an upside to them, right? Remember this. The Joneses aren't as rich or as happy as you think they are. And in fact, that isn't just something that the poor people say to make themselves feel better. There is a lot of good clinical research that will show you the general levels of happiness, life satisfaction. They scale extremely well when you're sort of hand to mouth, right? So if you're barely getting by and you're under a huge amount of financial stress and that goes, there's a big uplifting quality of life.

55:01But someone who goes from 1 million to 2 million to 3 million in net worth, their actual happiness doesn't last. It levels off really, really quickly. and it tends to be the same as other people. So it's all the big parts of wisdom passed down throughout the ages. If you've got your health, you've got your family, you've got your friends, that's really the things that matter the most. One another, actually just recently I read something which reminded me that this huge diminishing returns with sort of purchases, vanity purchases, you know, things that make you feel good. I'm going to splurge a little bit of money in this and go on a bit of a shopping spree.

55:38um what they found was that infrequent splurges actually being incredible happiness so treat yourself right like every now and again go out and splurge and spend your money it's that's what it's for money's a tool right and it's like that's but when you're doing that every weekend it's it's a treadmill that you just it actually brings you no satisfaction right when your body gets used to a certain level of of whatever it is then you need more to make yourself feel better again it's a drug like any other drug yeah once you get used to a certain level of you need more for the hit and the the other the other bit of study which is really um interesting is that the value at a once you get above that subsistence point in a lot of these sort of trappings of wealth when you boil it down we always like to think we're very sophisticated kind of intelligent creatures we're just you know we're half a percent different from a from a chimp right and and one of the things that you need to know about humans is that social status is extraordinarily important to us and everyone goes oh it's not important to me i go my own way you know rebel without a call like no you're not it's massively important and and that is that it's actually for very good reasons because if you were shunned by your society you'd be kicked out of the village and you'd probably die very quickly so we we are we are hard coded to fit in and to signal to other people sort of how happy and and whatever we are and it's it's just a nonsense when you think about it don't be trapped in it you know i don't i don't have any desire to i don't i don't think there are too many people who sit on their deathbed and go wow that number in my bank account is so good yeah that's right no one does it no one does it so you know we all know this to be true in our heart of hearts so it's just worth it bears repeating and just reminding ourselves actually backed by a lot of good science it sort of shows that these age-old wisdoms are true yep 100 % mate I think it's um it it's and it's not easy to and it's you know talk about social proof part of it is like what if what if I go and do this thing it doesn't work out the answer is we'll do something else but you know to opt even weirdly enough the the mental toughness or whatever it is that that requires you actually opt out of the rat race because that's what else is doing it's really really hard everyone else is doing this thing and therefore it's right if i don't do that thing frankly you'll get some grief from people who don't like you're doing something different to them because frankly either they're they're jealous of it or or whatever you know why would you go and do that thing because i'm happy doing that thing well but you're missed this on i'm not doing that thing so i i can't validate your decision because it's different to mine i've got to validate my own decision by making you know but by assuming people need to be like me those very things are really really challenging for humans to to to deal with um i will i'll give a wrap check out the aussie firebug blog um nothing no no no money changing hands nothing involved in it matt's a nice guy a really smart guy as we're talking about he does a particular thing in life he's been doing it for years um but it's actually a lot of the community there is is exactly that it's just it's just the the kind of psychological mental whatever emotional parts of stepping away from that stuff and really reconsidering actually wouldn't i be just happy doing x y and z i mean it was up to me mate i'd be on 100 acres an hour and a half away from here and it cost me a fifth of my house and i'd be in a tin shed me more than more than me too me too yeah unfortunately no i can't convince my better yeah and probably probably fair enough too but i think that's the issue with with um well i shouldn't i shouldn't sort of gender it but i I think with the fairer sex, they're probably right.

59:10They're much more interested in social connections, where I think there's guys at a certain point, who needs society? I'd be more than happy 100 miles away on my little plot of land just tinkering about. Correct, correct. And there's probably something to that as well. Hey, mate, let's finish off with a really, really quick one from Tim, who says, Good morning, fools. He says in brackets, schools and drools. I guess that's our new... I'm not sure that'll catch on, Tim. Let's see how you go. What is the best ETF exposure for Australian shares, considering the Vanguard ASX 300 is so concentrated in two industries, brackets banking and mining?

59:46In your opinion, would it be better to choose an equal weight ETF or maybe just a global market cap fund, which includes Australia, brackets just, comma. Thanks from the Anti-VASA. Gee, I've got to pronounce that carefully, Tim. I'll get us all in trouble. Anti-VAS being the code for the ASX Vanguard 300 ETF. Best ETF for Australian shares, Ram, go. Yeah, I think VAS. I mean, I don't say it with super high conviction. I've got a very small amount of my wealth there, I think through a bit of super or something like that. I mean, I'm very mindful of the concentration in that. And I'm pretty anti-banks at the moment.

1:00:29So, you know, I'm not going to be buying it anytime soon. But I think if you want an answer that is evergreen, you go with that because it is – I mean, come back to first principles. We want the average. For better or worse, that's the average of the ASX market because that's the way it's built up. And the other things you can do as well, I think you can account for that. You can sort of say, well, I'll buy a VAS, but I'll also make a selection of investments over here that will help diversify that risk away to some extent. But yeah, it's a really good point that is made. It is. So my general thoughts on this very quickly.

1:01:08I have units of the VAS. Here's the thing. ETFs balance themselves out over time. Now, you don't want to necessarily buy something that's going to go down. But if you'd owned an S &P 500 ETF 25 years ago, you would have had General Electric, Nike, General Motors, and whatever else. and that would be, you know, over time, they've gone away and the Amazon's, Facebook's, I own Amazon, Apple, trying to think of things, I don't know, Nvidia, Tesla, Netflix, if I haven't said they're ready, they rise. And so to some degree, ETFs are, you know, they balance themselves out. It's a lot of banks right now.

1:01:40Honestly, if the banks sucked, the ETF would suck for a while. So I'm not saying it doesn't matter, but at some point, you know, they kind of find their own balance almost by definition. It's one of the beauties of them. They're not self-balancing and that's just re-weighting, but they just, you end up with the biggest companies being the biggest shares. And the market itself has done really well over time despite those changes in structures. So there's that, I own shares in the Vanguard Global ETF, which does, as you said, Tim, have that combination of global and local. I like, I own both. I'd probably say some sort of combination of both is probably what I would do.

1:02:09You said just Australian shares. So given you asked that, then you asked, you kind of responded to the global solution. But yeah, if I was building an ETF portfolio, I think a combination of, I own VS, I own VGS is the global one. I think they're both great ETFs. And in some combination, that would get you a very long way towards super long-term results. I wouldn't do an equal weight ETF because they rebalance every quarter. I think we actually did this one on an upcoming episode or one that's been on account of which order we're in now. Maybe one in the past. Because they rebalance, I like the idea of equal weight, but it's hard to maintain an equal weight over time.

1:02:43You're buying it now and then never reweighting it loses out because you missed out companies that come into the index or you hold companies that leave. So that's bad. but if you reweight it all the time you don't get the compound growth of those who start small then grow big so you're kind of condemning yourself to always getting that it doesn't mean it can't outperform just it's just it's structure makes it a little bit more difficult to own for a super long term investor on a passive on a purely passive basis it's a bit tough so yeah I would combine the two any more on that mate? no I answered well beautiful well I think we've got one more week of pre-recorded episodes and then we'll be back But make sure you do tune in next week and make sure you fill up the mailbag for us.

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