Yahoo Finance 13 wealth lessons from 6 finance experts
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A panel of financial, investing and mindfulness experts have encouraged women to take small steps to improving their financial wellbeing.
‘Just start now’ was the resounding message from Fidelity Australia managing director Alva Devoy and Burman Invest chief investment officer Julia Lee, who were panellists at the Women’s Money Money Movement Wealth and Wellbeing breakfast event on Thursday.
And it only takes small shifts in mindset and introducing some ‘microsteps’ to just make that first step, according to eToro popular investor Sharon Connolly, Rich Woman author Kim Kiyosaki, Thrive Global Asia-Pacific managing director Alex Christou and Yahoo Finance editor-in-chief Sarah O’Carroll.
More from the Wealth and Wellbeing Breakfast Club:
We’ve summarised some of the key tips and takeaways from the investing breakfast morning:
1. Don’t let inexperience stop you
If you don’t want to invest because you’ve never done it before, or don’t know the first thing about it, remember this: everyone started out here.
Sharon Connolly is one of the most popular and successful investors on the online trading platform eToro.
But it wasn’t always this way; in fact, she didn’t know anything about investing for decades, and was in a tough financial position when she first began.
“I made my first trade by accident. I was 42, had just got divorced and was barely making ends meet,” she told the Breakfast Club on Thursday.
“Then, in 2013, I got given a $20 voucher for eToro. I had zero interest in trading, but I thought it was worth using the voucher.”
She invested the money in Facebook because it was a brand she knew, then promptly forgot about it.
When she checked back on the account months later, her $25 had turned into $65. Connolly’s been hooked ever since. “I had no idea things could turn around that quickly, so I started to get interested.”
WATCH BELOW: Sharon Connolly reveals how she turned a voucher into $200,000.
2. Don’t assume investing is difficult
You don’t need tens of thousands of dollars to start, and you don’t even need a financial adviser; in fact, Devoy said investing can be as easy as buying a pair of shoes online.
“I would say every woman in this woman has bought something off The Iconic? Right? Seriously, it is as easy as buying a pair of boots on the Iconic.”
The first step can be as straightforward as just creating an account with an online trading platform.
Then, look to free resources available online on how to choose your stocks or investments.
3. Start sooner rather than later
This is due to the simple, but important, concept of compounding.
“The more time you spend investing, the more your money will work for you,” Lee said.
An initial investment of $10,000, with monthly $100 top-ups, could turn into more than $1.3 million dollars in 50 years’ time, she said.
“So I think the key is start as soon as you can, do it regularly, [and] it doesn’t have to be a huge amount.
“The amount of time you spend invested is a powerful way to be able to build wealth.”
4. Figure out your risk appetite
The first thing to know is that women are often more risk-averse than men when it comes to investing.
A Fidelity Australia study from 2019 found that nearly half of women (46.2 per cent) prioritise minimising risk when investing, compared to just 26.8 per cent of men.
Meanwhile, women are more than twice more likely to describe their appetite for financial risk as “very low” (33.8 per cent vs 15.7 per cent).
Understanding your risk appetite will help guide your approach to your investments. According to Devoy, men tend to be ‘performance-oriented’ (such as taking pleasure in high returns) while women are ‘goal-oriented’ (such as saving for a particular item or event).
“We are risk averse, and that’s really good to know, so we’ve got to de-risk investing for women and women have to de-risk their investments as well,” Devoy said on Thursday.
One way to de-risk is to look ‘behind’ the investment itself. Taking Bitcoin as an example, Devoy said she wasn’t a fan of the cryptocurrency because she “does not understand the supply and demand economics” of it.
But what underpins Bitcoin is an entirely different matter.
“The technology that sits under Bitcoin, being blockchain, is phenomenal. It’s an enabler technology,” she said. “I’ve just shown you a de-risking tactic.”
Additionally, your age will be one determining factor as to how much risk you’re willing to accept in your investments. If you're younger, you have more time to ride out the highs and lows; but if you’re older, you’ll be looking for more stable income.
“If you’re going to put money to work, the mindset shifts … from earning money to making money,” said Devoy.
“If you’re going to put money into markets, you’re going to have to accept some risk. So you’ll have to judge what risk you can accept.”
One approach is to thoroughly research where you’ll put 75 per cent of your portfolio, with the other 25 per cent for riskier “bets”.
A good rule of thumb, Lee added, is to adjust your risk according to how old you are. “Whatever your
age is, that should be the approximate percentage of your safe assets.” If you’re 20 years old, 80 per cent of your investments should be in growth assets with 20 per cent in cash accumulating interest, while 50-year-olds should split this 50-50.
5. Understand what drives investment markets
Observe what’s happening in the world, the investing chiefs advised. Lee uses a thought experiment in which she pretends to ‘time travel’ two years into the future and asks herself which investments she wished she had purchased.
For example, one change already happening is that travel will start to pick up again, especially as more countries contain the virus and administer vaccines.
“I imagine that we’re just about to start travelling again,” Lee said. “I can imagine that once people are confident enough, travel [will be] like a coiled spring.”
And if travel is up, consumer spending will go up, and oil prices will shoot up too as fuel becomes in demand once again.
Want to know whether the share price of a company will move up or down? “Find the drivers of that investment,” Lee said.
Taking JB Hi Fi as an example, the electronic store’s share price plummeted at the end of March – but then rebounded strongly in the final months of 2020 as the global surge in online shopping drove sales growth.
“Write down one or two positive drivers and one or two negative drivers to work out what the share price is like [and] whether it's likely to go down.”
In the case of JB Hi Fi, Lee predicted its share price would remain high in the short-term, but could drop as people spend more on travel.
6. ‘Embrace the volatility’
Investments will naturally rise and fall. But this shouldn’t hold you back from investing altogether.
“It’s the up-and-down movement that allows me to get a better return on my investments,” Lee said.
For example, buying a property during a downturn would see the property increase in value when the housing market eventually bounces back, she said.
“And if you just did that two or three times in your lifetime, there’s your nest egg. So it’s about not wasting that volatility, and I like to think: when everything’s falling, well there’s an opportunity there.
“Often I like to embrace the volatility instead of getting scared by it.”
7. Find the niche
If you can spot a trend that no one else has spotted, or turn tidbits of information from your network into an advantage, you may have an edge.
“Investing is all about doing something where you have a little bit more than the next person,” said Lee.
One of her friends is in the fashion industry, and Lee said she was always asking about fashion trends and what’s happening.
One of the reasons why she invested in retail during lockdown was because her friend had told her they had experienced their best Mother’s Day ever.
Why? There were no staffing costs and less rent to pay. “I immediately knew that these types of stores were going to do well.”
8. Don’t overlook opportunities in Asia
During the pandemic, Australia’s stock market – which has historically been very reflective of Wall Street and the European indices – was relatively insulated thanks to Asia, said Devoy.
China in particular has been the first nation to rebound from the crippling economic effects of the pandemic; in fact, it was the only economy in the world that expanded during 2020, and has set itself a GDP growth target of more than 6 per cent for 2021.
“We’re in a New World Order now where we are sitting in the part of the world that you want to be investing in,” said Devoy.
While there’s a lot of interest in well-known US companies and brands like Facebook or Google, don’t limit yourself to these household names, she added.
“I would encourage you to look closer to home to China and seek out advice on investments in these areas.” For instance, China, as a growing middle-class economy, is spending more money on activewear, and health and wellbeing.
“I actually think China is going to make the gains, and just be the blockbuster here.”
9. Leave the decision-making to the experts
If all of this is too overwhelming, remember that there are experts who are paid to make investment decisions for you.
“Sometimes you might not have time to do all the research,” said Devoy. One way to invest in the stock market is to buy a ‘bundle’ of companies through exchange-traded funds (ETFs), some which mirror benchmark indexes such as the ASX200.
“You could take a ‘basket’ of retailers and invest in those if you didn’t want to put a bet down on one name.”
It’s Lee and Devoy’s job to invest money for other people, Lee reminded.
“Don’t feel pressure that you have to learn all of this in a hurry,” said Lee. “The key is just to get started.”
10. Engage with your super fund
Australia’s superannuation system is under-recognised, and has contributed more to our society than we realise, said Devoy.
“If you have a super fund – look up what you’re invested in,” she said. “If you haven’t taken charge of your super, it’s likely you’re in a balanced fund. But you might actually be able to afford more risk,” she said.
If you’re not ready to start investing, taking charge of your super may be your first step, Devoy added. “Maybe that’s where you start to take control of your finances.
“When we’re in really, really bad situations, we all feel better when we take control. That very very simple thing will actually … help you move forward.”
11. Pretend your money is a business
Rich Woman author Kim Kiyosaki told Yahoo Finance that women needed to take their money as seriously as if it were a business – and this means picking up the lingo.
“If women started treating their money as a business, because it is, and started by learning the language of money – income, expense, asset, liability – then they would be so much farther ahead of the game.”
WATCH BELOW: Kim Kiyosaki's tips for a woman to take charge of their financial future
12. ‘Microstep’ your way to healthy habits
There are tiny steps you can do to manage your mental wellbeing, and this will impact your performance which will ultimately flow on to how you approach your finances, said Thrive Global Asia-Pacific managing director Alex Christou.
They’re as easy as leaving your devices out of the bedroom before you go to sleep, or getting enough sleep.
There are also affirming statements you can say to yourself to make differences to your mental mindset, such as: “I can focus on what I can control”, or “I can take care of myself, which helps me to take care of my team and company”.
13. Ask yourself what being ‘rich’ really means
What does being rich actually mean to you?
The first step on the path to true wealth creation is being able to answer this question, said Yahoo Finance Australia editor-in-chief Sarah O’Carroll, who said the pandemic had thrown millions of lives and livelihoods into chaos.
During COVID-19, the issue of mental health came to the fore – at the same time that interest in the stock market took off.
“In 2020 many things we took for granted were suddenly taken away from us and it taught us the value of our freedom, the value of our health and the value of our personal relationships,” said O’Carroll.
“There are many pillars of “wealth” to consider, including mental, physical and social wellbeing,” she said.
So whatever you want to focus on, write it down; just articulating a personal goal, whether mental or financial, can help you along the way to making it a reality.
“If you do nothing else this morning, just write down one goal or dream that you want to achieve, and carry it around in your wallet or your bag,” she said.
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