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Equitymates operates under Australian Financial Services License 540697. I will say this about investing. Everything you do learn is sooner than that. What I learned at 20 is you can... Welcome to another episode of Equity Mates, a podcast where we explore what's possible in the world of investing. If you've just joined us for the first time, a massive welcome to the community.
My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you going? I'm very good, Bryce. Very excited for this episode. There is so much happening in markets, so much that we're going to cover in this episode. We've got a community question on how a couple can achieve their financial goals. We're going to talk about Kathy Wood and how she left a billion dollars on the table. But before we do that, we're going to look at the news of the day.
Now, Bryce, there are four points in the year when all of the noise leaves the market and the whole investing world holds their breath and hopes for the best. Nvidia release their earnings. I know. It can be a very nervous time for a lot of investors. Well, the market in general, because where Nvidia goes, the market goes. It drives the sentiment at the moment. 100%.
So NVIDIA have reported their third quarter earnings and they have beaten expectations for both sales and earnings. Revenue has risen 94% for the quarter. However, it is slowing. 94% still pretty crazy. Yes. Compared to the previous three quarters of 122%, 262% and 265% respectively. So...
Yeah, tough to keep up with those numbers, to be honest, quarter on quarter. It is, it is, especially when you've got a higher and higher base that you've got to... Exactly, exactly. But still pretty impressive numbers. They've also put out forecasts for their fourth quarter. Year-to-date growth of about 70%. So, again, slowing down from the 265 a year earlier. Year-on-year. Year-on-year, yes. But growth nonetheless.
And the market, I mean, it wasn't a violent reaction to it. Yeah, I mean, after hours trading, it was down like 2%. Yeah. But that was purely based on... Expectations. My big watch out for 2025, to be honest, is... this company and what happens when they when they don't beat like it's gonna be it's gonna be a bloodbath so yeah it'll be pretty brutal yeah but maybe they will just keep beating
They won't. They won't. Anyway, let's move on. Here's a wild stat for you. So, NVIDIA has had crazy growth. Everyone's piled into it. It trades at a 68 price to earnings ratio. Hub24 trades at 130 price to earnings ratio. It's ridiculous. So it's not even the frothiest stock in the market. No. Speaking of frothy stocks, though, Mr. Beat Up, last week, did an honourable mention to Supermicro. Yeah.
Because it had been pumped. If people haven't listened to that episode, Supermicro sell server racks that NVIDIA chips go into, right? So they've been a big AI winner as well. but they'd given almost all their gains back from earlier this year down over 80% because their order to quit and refused to sign off on their results. Then the NASDAQ threatened to delist them. It was all going wrong for Supermicro.
but Mr Beat Up, Simon, came in the studio. Honestly, the week before in the office, it's all he would talk about. Super micro, super micro. And we were like, bro, I don't think you should... say it it might get delisted it was hanging on a thread it was hanging on a thread um
However, since then, they've been able to maintain the listing for, I think you said, for at least another 12 months and they've signed an auditor. So, yeah. So, they've got a new auditor. BDO is going to be their new auditor. They've signed... submitted a compliance plan to the NASDAQ and basically the idea of them being delisted has kind of...
that threat has subsided. Yeah, for now. So because this isn't the first time they've gone through this. Well, they've been delisted before. Yeah, exactly. So hopefully they've learned some lessons from the past. As a result, stock was up more than 30%. So well done to Mr. Beatup for picking that.
And finally, Ren, Chinese phone maker Huawei has acknowledged it is feeling the pinch of US trade restrictions. Yeah, so I think this is an interesting one to just keep in mind as like the Trump... administration comes back into power the china restrictions are working and this has been a biden policy that continued the trump policy from
the previous trump administration but they basically cut china off from all advanced technology particularly semiconductors and huawei's latest news really shows the effect that that's having so huawei are building chips on a seven nanometer process which is three generations behind the cutting-edge Western technology. TSMC, the Taiwanese company that sort of...
is the leaders in semiconductor foundries, they expect to start production on two nanometer chips in 2025. So losing access to TSMC, but most importantly, losing access to ASML's technology, the Dutch... lithography company um has really set china back so it's just it's an interesting which is what the us wanted yeah yeah uh so it's going to be worth paying attention to as the china and u.s technology Competition heats up. Yeah.
So there's plenty going on in markets at the moment. We are just in the midst of US reporting season as well. If you want to keep up to date with what's going on beyond just listening to the podcast, we have a daily newsletter that goes out where we share news headlines from markets around. the world to keep you up to date and informed in less than 10 minutes so make sure you subscribe to that we'll put a link in the show notes or you can head to our website to sign up
So Bryce, we've got a community question here. This one came via our website from Chris. So I'll read it out and then you can... I'll write it as a question. So Chris wrote, my fiance and I are at the beginning of our investment journey. Our goal is to retire early at the age of 55, which is 23 years away with a portfolio of $1.5 million. million dollars.
We've been dollar cost averaging $100 a week into IVV, the S&P 500 ETF. Currently, our portfolio is $5,000. Our plan is to soon increase this to $200 a week. But before we do that, we want to understand how we could diversify Nice. Love the goal. Love the goal. 1.5 years. So they know their number. They know their time horizon and they know how much they can invest.
Chuck it into the calculator. Well, you see, this is the thing. So, you were going to rate the question. You like the question? Great question. Yeah, great question. Keep the questions coming, equitymates.com slash contact or there's a link in the show notes. Yeah. So, I think this question, it brings up...
up for me as i was reading it it makes me think of the importance of projections because as much as we love those numbers they know when they want to retire they know how much they want to invest and they know how much money they want at retirement The numbers don't quite align. The numbers as they are now. Yeah. Yeah. And so I think this is important wherever you are, whatever your goal is, to just stress test your assumptions and to think about how realistic they are.
I put their numbers into a compound interest calculator starting at $5,000, investing $200 a week for 23 years, which is how long they said that they want to retire at 55. If you put... 10% return a year, that gets you $872,000. So about half of what they need. And so I think the next step when you're projecting your own financial goals is to think about what can change.
And really, when it comes to investing, there's three variables that you can change. The amount that you invest, the time that you have and the rate of return. Yes. Any other variables? No, that's pretty straightforward. Savings rate, which is the amount you can invest. So then I said, all right, well, let's pull each of those levers and see what needs to change to get to that goal of a 1.5 million.
million dollar portfolio so the first one is the amount that you invest so if you keep all other things equal they chris and his fiancee would need to invest 350 a week rather than 200 a week to get that $1.5 million in the next 23 years at a 10% return. So that's the first one, the amount you invest. The second is... An extra $7,800 a year from $2 to $350.
yeah okay it's like if you're already investing 200 a week yeah depending on how much you earn like it's not crazy yeah and you don't have to get there day one you have to get that incrementally yeah but so that's that's one that's positive Thank you. Yeah, well, I mean, it's not like you've turned around and said, oh, we need to rejig it, and sorry, guys, you need to be doing 1,000 a week.
That is true. I haven't said that. No. So that's good. So that's the first variable. The second variable is time. Yes. You can extend your timeline and you can let compounding do its thing. If Chris and his fiancee want to invest 200 bucks a week, they get that 10% return a year. And obviously 10% is kind of finger in the air, but that's the number we're using. Rather than getting there in 23 years, it would take 29 years. So that takes them, they said they've got 23 years until they're 55.
So add another six years. So they would be retiring at 61 rather than 55. Yeah. So my thinking with this as well, it's like 55, you're going to be pretty close to accessing superannuation. True, true, true. So it's kind of like if the $1.5 million is X super, sure, all of these numbers, you're going to have to kind of... tweak but if it's inclusive of super as well it's even more realistic that by the time you get to that 55 60 you're going to have between two portfolios 1.5 and
About $1.5 million. Yeah. Because as you've said, if they do what they're doing now, they're going to have $872,000. plus what's in their super. You're saying they're investing 200 a week outside of super and then there's that automatic, it's going to soon be what, 12% of their salary being invested into super. And if you just need to adjust your time horizon from 23 to 29, years, an extra six years.
You're going to have the bulk of it at the 23-year mark. Or you're going to have 872,000. Yeah, exactly. You're going to have 872,000. Well, that just goes to show how strong compounding is. Yeah, yeah. You add another six years and you double. Compounding is a powerful... Let that be a lesson. So that's the second variable that you can pull. You can extend your time horizon. The third one is increase your rate of return. And this is where Chris's question really...
but I think it was important that we covered all the variables. And in layman's terms, that means? Rather than assuming 10% a year, can you get a higher average annual rate of return? Yes. So... If you want to get there in 23 years, if you're investing $200 a week, you've got $5,000 to start with, you need 14% rather than 10%. Which really means what we're saying here is you need to try and be beating the market.
and choosing asset classes and investment strategies that are going to help you do that. Yeah. So if we just pause here before we go too far down the can we increase our rate of return and how would we do that rabbit hole? If I was Chris and his fiancée, I would be seriously considering about all three variables and not just chasing how can we max out our rate of return. And the reason for that is just...
You are going to increase the volatility. You're going to increase your risk. And if like retiring early is something that you really want to do, what you don't want to do is go like, you know, 20% allocation into crypto, 50% allocation into a portfolio of individual stocks.
find that you're actually not as good a stock picker as you think, and all of a sudden you blow yourself up a little bit. If they have the capacity to increase how much they can invest, particularly as time goes on and incomes might rise over the next 20 years. And if they are comfortable pushing their 55 to 58, 59 years old, I mean, you're very close without having to tinker with active management and all sorts of various bits and pieces to try and outperform the market. Yeah. So...
Now let's get to the... The question that Chris actually asked. Long wind up to get to the question that Chris actually asked, which was how can we invest more aggressively to achieve this goal earlier or end up with a higher amount? So Chris wants to juice his rate of return. Yes. So Bryce, what can you do?
Okay, so, look, active management is one way to do it. Try and find managers that are investing in asset classes that are, you know, predominant, well, that are growth asset classes and that have a track record of doing incredibly well and outperforming.
There is risk in that. Can they do it and sustain it for 23 years? That's a big thing. And you'll need to keep a close eye on whoever you choose as an active manager. Fees are a lot higher as well. So that's the first bucket if you're trying to outperform. Second is to create a portfolio.
of individual stocks or at least have a weighting towards individual stocks to get you returns on top of your core portfolio. The challenges with that, you're going to need to spend a lot of time researching and getting an understanding of which stocks are going to outperform.
have a lot of high conviction in them. You don't want to be rotating around too much. So those are probably the two main ones. The third is then, I guess, feeling the need to dabble in assets that are much higher up the risk curve. the Bitcoins of the world and those sorts of things, which I think over a 23-year time horizon, you don't really want to be doing that either.
So, well, maybe you buy half a Bitcoin and let it sit there for 23 years and see what happens. To be honest, I don't think that's a crazy strategy to have some allocation. A little bit. Not 100%, though. No, no, no. No, no. Wow. No. Last 10 years, it would have been pretty good. True. Q, yeah, Bitcoin enthusiasts. Anyway, so those are the ways. So, yeah, I think everything you said I agree with. It's like there's heaps of ways you can beat the market.
Yeah. We didn't even talk about Australian property. True. That is another thing. Find a way to get leverage. Yeah. So there are heaps of ways that you can beat the market. The challenge is... You need to be willing to do the work. You need to find a good active manager and then monitor them like you almost would an individual stock.
And if you find that they're underperforming or their strategy isn't, they're not investing according to their strategy, you need to move. Same with individual stocks. Crypto as well, you've got to watch it. But like... You can definitely beat them. 14% isn't unrealistic. Well, look, here's the thing. It doesn't have to be one or the other as well between like market return or, you know, let's go right up the risk scale. You can build a portfolio that...
as a nice mixture of both. Yeah. So look, Chris, we can't give you personal advice. So we can't tell you what stocks or active managers to buy. There's certainly plenty of general advice on this podcast over the years that you can listen to. We've actually revealed our whole portfolio. There's...
It's not unachievable, though. Both of which have done more than 14% in the last year. So there's maybe some starting points there. Morningstar have a full list of all Aussie ATFs and you can just sort by performance. And so for this...
You want to have a long track record. So the longest time horizon that Morningstar have here, 10 years annualised, top... performing hyperion's global growth this is for active uh no this is just everything okay so all aussie etfs so top is hyperion about 19 a year over the past 10 years second biggest S&P 500. There you go. 16.5% over the past 10 years. So...
If only that continues for another 30 years, we're all good. Well and truly on the way. Obviously, a number of active ETFs have only come to market more recently. So if you look at five-year track record, do you want to guess the top performing over the past five years? Bitcoin. No, they don't even have a five-year track record on the ASX. Fang. No. Leveraged. No. Wow. Simpler.
Simple. Oh, ASX, like S&P 500. NASDAQ. NDQ. NDQ, five-year annualised, 21.6%. Oh. Yeah, yeah, yeah. We don't have to do anything. Second best, Loftus Peaks, global disruption, 21.3%. then beta shares geared, JGUS, 19.7. You know, HAC has come in at number five, 18% over the past five years. So if 14% is a benchmark, there's plenty of options to get you there.
It's not unrealistic. It's not unrealistic, yeah. Do the projections, Chris. But I think, yeah, as I said, my takeaway here, it's not out of the question. Few things that you can tinker with, and as Ren's pointed out, like if those numbers continue, no guarantee, but like, wow. Yeah, and if you're not, Chris, I think...
what we want you to leave this segment with is the importance of putting the goal into uh project like projections and actually saying what needs you need to achieve and if the goal is realistic and the job to be done yeah the job to be done yeah yeah yeah We're going to take a quick break and on the other side, we're going to look at an active manager who will be kicking themselves after missing a billion dollar opportunity. We'll be right back.
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Plus, with 99% UK coverage, you can do your best work wherever you are. Head in store or search 3Business. Terms apply. Welcome back to Equity Mates. Well, Ren, we started the show with NVIDIA, so we're going to end the show with NVIDIA. But we're going to look at it through the eyes of one of the most outspoken fund managers. In the world, and that is Cathie Wood. This is just a brutal story. So...
Kathy Wood, for people who aren't familiar, was, like, the growth investor. Still is. Still is, yeah. She's known. She built a reputation for investing in, like, disruptive technology through her arc. ARK Innovation is the flagship product listed over in New York. But I was having a look at Cathie Wood recently because we haven't heard a lot about...
in this like AI hype cycle, she was massively prominent in 2021. Since the start of 2023, so almost two years, the NASDAQ 100 is up 87%. Yeah. Wild. Just actually wild when you think about it. Cathie Wood, investing in disruptive technology, innovation, you'd think in a moment like this she would have done better? Yeah, you would think so.
Up 78%. Wow. So not bad, but not even beating like a benchmark index for her. Yeah. Yeah. And it confused me because Cathie Wood has been like a long-term NVIDIA bull. Yeah. And, like, NVIDIA's driven so much of this performance. In fact, she's been bullish long-term on three of the hottest things right now. NVIDIA, Tesla, and Bitcoin. True. So she should be... cheering if anyone should be killing it in this market so the question is how yeah how is she underperformed
And this, you know, in our previous segment, we were talking to Chris about how if you're choosing an active manager, you have to watch them closely, treat them almost like an individual stock in terms of how up-to-date you are. This is why. This is the risk of active management. management because Kathy would long-term Nvidia bull. Got out at exactly the wrong time. So I had a look and pulled the numbers. So in November 2022, ARK held a little over 770,000 shares of NVIDIA.
Yep. She held them for a long time. Long time. Yeah, yeah, yeah. Now, since then, NVIDIA has gone on a 10 to 1 stock split. They did that in June of this year. So those 770,000 shares would actually be 7.2%. 7 million shares today. She started selling in November 2022 and was completely out of the position by January 2023. Which is when it went... Now...
Split adjusted those shares in November 2022 would have been worth $110 million. So she had $110 million worth of NVIDIA shares, which she sold. Today... those less than two years later, those shares would be worth $1.14 billion. So when you said before the break, she left a billion dollars on the table, literally, it was a billion dollar mistake.
So this would have been her journey. So 2022 to 2023, we know what happened in markets. It was a bit of a- Interest rates were rising, tech sold off. So during that period- So she would have... I mean, she's been holding them since like early... In the teens. So she definitely would have been up. But 2022, the stock was down 50%. Yeah. She sells out at 2023, at the start of 2023, and watches it rise 900%.
900%. Yeah, well, I guess, yeah. 110 million goes to 1.14 billion. Yeah. Brutal. Wow. Yeah. Wow. So what's the takeaway from that? The takeaway is we should find out what her thesis was to sell. Like, you've held this long. Yeah.
It's not like at this stage, AI wasn't a thing either. That's when everything started really kicking off. ChatGPT launched late 2022. So that was really kicking off. She should have had a line of sight on that because she's super bullish. Maybe that's why. So maybe they sold because there would have been an uptick pretty quick uptick around chat gpt launching all these ai stocks would have had a bump so from october 2022 to the start of 2023 nvidia was up 30 okay
Not enough to be like. That's a fair bit in like two months. Gosh, you would have freaked it if she was holding for the next two years then. So for me, there's two takeaways. The first is what I already said, like just the risk of active management. Never sell. Let your winners run. Investing, yeah, investing in a certain way or like projecting that they invest in a certain way but then just picking the wrong stocks. Because like she was...
directionally and thematically right. She was right on AI. She was right on a lot of this technology, but she just got out at the wrong time and was in the wrong. She would have been in AI exposed stocks. She would have cut the position. all the way up for the last two years anyway. It would have got so big. Yeah. So that's the first takeaway. The second one is...
This is so on brand for us, but like the beauty of the index is that owning a bit of everything means you don't miss out. There's some stat that all share market growth over the last hundred years has been driven by like 4% of companies. And each generation, it's different companies. We know the companies. Today, it's Nvidia. The last decade, it was like the big tech stocks. But, you know, you go back over history and there's different stocks that drive the market at different times.
And the name of the game in investing is just don't miss those stocks. And that's why the index has been so powerful and has driven such good returns for investors and has been enough for so many investors is because you can't miss them.
You can't. Yeah, because of the structure of the index. You get everything. That sucks for Cathy. That does suck for Cathy. It mainly sucks for ARK Innovation ETF investors. Yeah, big time. Who would have thought they should have picked up, who should have... benefited from this especially if they rode arc all the way down in 2022 yeah the fact that they've
Could have just done better holding the NASDAQ. Literally. It is pretty brutal. But anyway, given that it's an Nvidia-themed week, we thought it was worth chatting about. And who knows where it's going to go in 2025. We will certainly be watching closely. Now, before we wrap, a reminder of... our sister podcast, Get Started Investing.
On tomorrow's episode, we will be reviewing the hottest ETFs that have come to market in 2024. And there have been plenty. And some have been performing incredibly well as well. So make sure you head over there to get up to date with what's come to market.
But Ren, as always, great to chat stocks, indexes, all things investing. We'll pick it up next week. Sounds good. You have been listening to an Equitymates Media production. In the spirit of reconciliation, Equitymates Media acknowledges the traditional custodians of countries. We pay our respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today. Transcription by CastingWords
And if you're unsure, please speak to a financial professional. The hosts of this podcast and their guests may have positions in the companies mentioned. Equitymates Media operates under an Australian Financial Services Licence 540697. And the impressive IONIQ 5N shows how far the brand has progressed. Smart speaker. Search Hyundai. High and dye. Hairdressing salon did speak. No, Hyundai. Iron guy.
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