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Equity Mates' top tips for beginner investors

Emma Rapaport  |  12 Oct 2018Text size  Decrease  Increase  |  
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Two friends, Bryce Leske, 27, and Alec Renehan, 25, launched the 'Equity Mates Investing Podcast' almost two years ago with the aim of breaking down the world of investing, and making it more accessible to everyone.   

Morningstar.com.au caught up with Bryce and Alec  when they were in Sydney last month to talk about  the high and lows of their investing journey, and asked them to share the lessons they have learned along the way.

1. Forget stock picking

BRYCE: There are so many options out there and people get put off by trying to pick the perfect stock. My piece of advice would be don't let perfection be the enemy of the good. You're never going to nail it when you start.

Sign up for a broker, get a sense of the market with an ETF or a LIC where someone else does the stock picking for you, feel how things move, and over time you will start to feel more comfortable.   

ALEC: Even if you are stock picking, you're going to get some wrong, and that's fine – don’t get hung up on it. The important thing to remember is that there's an asymmetrical upside.

You can only lose what you put it, but you can get back a lot more by being lucky, or right. It may not be perfect, it may not be pretty, but giving it a go is the best way to learn.

Friends fists together

2. Fools pay fees

ALEC: For us it's not about paying zero fees, it's about minimising what you're paying for. If they are two products which are identical, go for the one with lower fees.

BRYCE: If you put $1,000 bucks with Warren Buffet in 1965 in Berkshire, you'd have $4.3 million dollars. But if you put it in a hedge fund with the typical fee structure of 2 and 20, you would have $300,000 – which for $1,000 is a pretty good return – but your fund manager would have $4 million.

Fools pay fees – paying high fees over a long period of time has a significant impact on your overall return. As a beginner, if you're only putting $500 bucks in at a time but paying $20 in brokerage, that's four per cent that your stock needs to go up just to cover the cost.

3. Diversify and dollar cost average 

BRYCE: We interviewed Alan Kohler for the podcast and always ask our guests what's something that you would tell your 20-year-old self. Without hesitation, he said if I was your age I would be dollar cost averaging* into one or two stocks, and just doing that for the rest of my life.

I think it's a pretty important lesson to learn because the advantages of doing so and quite significant. You're minimizing the risk on pricing exposure over a long period of time. It's not hard to do an I think it's an important concept to understand and to put into practice. 

*Dollar-cost averaging is a way to buy more of an investment when it’s cheaper and less when it’s expensive. How? You simply invest the same amount of money every week, month, or paycheck so that, as an investment’s price falls, you automatically buy more shares.  

On diversification, we're talking about diversifying your risk source. Not necessarily buying the NASDAQ and then Facebook and Twitter separately because then you haven't really diversified at all. For us it's about buying your oil ETF, something tracking the NASDAQ, the ASX 200 index, your bitcoin.

ALEC: Maybe not bitcoin at the moment…

4. It's never been easier, just get started

ALEC: You have investing apps which make it incredibly easy for people to get started now. But it's not just that. It's about the accessibility of information. Never have we had more access to things like Morningstar and other services, giving information. Investor calls are now online. There's financial Twitter, Reddit, and podcasts.

You can sit in your room at home and have access to information that only the most connected fund managers would have had 50 years ago. 

Best ideas light bulb 

5. Patience is a virtue

BRYCE: Chasing the quick win is definitely something that a lot of investors our age try to do. I've tried it myself, to double my money, and it’s a great feeling when you get a win but it's not a sustainable strategy. My dad told me: "I'm 55 years old, I've done what you're trying to do, you're trying to double your money in 2 days – it's not going to happen." 

If your expectations going in are that you're going to instantly make a 50-100 per cent return you're going to be bitterly disappointed, and probably quite disengaged from the whole process. I think one of the biggest things I've learnt just by looking at the returns in my portfolio is that the stocks I've been patient with have been the ones which have been the most successful. 

 

You can listen to episodes of Equity Mates via the Apple Podcast App, PodBean and Sticher. In their latest episode, the pair interview co-founder and managing director of Platinum Asset Management Kerr Neilson.

 

More in this series

• Investing Basics: Investing Basics: understanding your listed investment company

• Equity Mates: "We were foolishly overconfident investors"

• Investing Basics: How to build and invest your emergency fund


Emma Rapaport is a reporter with Morningstar Australia, based in Sydney.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

is a reporter for Morningstar.com.au

© 2019 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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