You mentioned leveraged ETFs before, I wonder if you want to dig.
Into it a little bit. Yeah, So I'm a big I'm a big fan of leverage, and I guess for those that are unsure of what leverage is, just think of it as like your home loan. You put in a deposit and then you get a loan from the bank to give you. You know, you put in one hundred thousand, but you actually get to go out and buy a million dollar property. And so what you're putting in is amplified by the loan that the bank gives you, and that applies to investing generally. But ETFs now give
you leveraged exposure. So what it means is for every dollar that I invest in the ETF, the ETF provider might go out and invest two dollars on your behalf because of the way that it's structured, and what it gives you is, as I said, an amplified exposure. They do come with a lot of risk though, because some of them are two times exposure three times exposure. And what that means is, let's say you know, the ETF goes up five percent in one day. If you have
two times it's going to go up ten percent. If you have three times, it's going to go up fifteen percent. Now that sounds awesome and you can make a lot of money doing that, But with leverage, it goes the other way as well. So if it goes down five percent one day, it'll actually go down ten or twenty percent or whatever the sort of gearing ratio is. So it's something that you need to be very very clear on why it is in your portfolio, and you need to be very conscious of the impact that it can
have on your total returns. There are some products that are available at the moment that have very moderate gearing, and I think it reflects the demand from retail investors at the moment to kind of get into these interesting, sort of more sexy ETFs. So I would say, but just be careful because now you're seeing crazy leveraged ETFs out there. You've got leveraged bitcoin, Like, why would you
want to go leverage bitcoin three times? Leveraged bitcoin? Bitcoin can rip thirty percent in one day, like you would be up and down, you'd be a rollercoaster. Leverage, Tesla, leveraged you name it. There There are plenty out there, So buyer beware and really understand what.
You're buying and whose money is that at.
The end, like it's your money. But as I said, whilst it can be incredibly fun on the way up, you can lose it very quickly on the way down. For example, I have two leveraged ETFs. One is leveraged to the US, one is leveraged to this train market, and over the liberation period I watched it creater. You know,
tens of thousands a day, thirty forty draw down. If you're in a position where a you've invested money that shouldn't be in the stock market altogether, or be you've invested your deposit for a house for example, or you didn't really understand the impact that that could have. Seeing your portfolio drop forty percent in twenty four to forty eight hours could be life changing, Like it could really impact you.
How did it feel when it happened to you?
Well, luckily, yeah, I was like, oh God, so luckily. I've been through it before with COVID and for me, very long term time horizon here. And the thing that I always remind myself is there is not a twenty year period in the US market, particularly, there is no twenty year period that you could find where from beginning to end you would have lost money. And also we would look back at any market crash and wish we'd
bought more. And so for me, like, sure, the market ripped and my portfolio absolutely created, and I was like, this sucks, this hurts, but like, I'm fortunate enough to have been doing this podcast a while to know that it's not the be all and end all, and if anything, it's not only going to recover, but it's going to continue to recover and go to all time highs at some point in the future. So for me, I understood
what was happening in my portfolio. But if you've just bought them blindly and seen the pullback, you could have had a different I guess feeling of what investing is.
And by the sounds of it, it's like you run a pretty diversified portfolio.
So my portfolio is I run a core satellite approach, which is a very simple investment investment strategy. It's where you think of it like that your house. You're building the foundations, you're building the core, something that is going to sustain and last for a very very long period of time and that's done using index ETFs, and so I split mine in four. I have an index ETF that tracks the US, one that tracks Australia. Both of
those are leveraged. Then I have one that tracks all of Europe, and then I have one that tracks Asia. So really what I've got there is four ETFs that have global exposure. It doesn't matter if I guess the advantage of that is if US is doing really well and Asia is not doing so well, they kind of
balance each other out and vice versa. At the moment, we're seeing US pool back a bit, Europe's going really well, and so as a whole, my portfolio kind of like acts as like the bedrock of my investments, which then gives me the enjoyment or the security in some way to take the remaining twenty percent and invest it in some of the thematic ETFs. So, for example, I've got one that just tracks tech companies. Here in Australia, we've
got some great tech companies. But I don't want the banks, I don't want the miners, I don't want retail, I just want tech. So one that tracks tech. I've got one that tracks semiconductors. As I've said, and then a few individual stocks. So the idea with that part of the portfolio is that you can a have a bit of fun, hone your craft in investing in individual stocks, but also try and beat what you're doing in the core.
But I know that because it's only twenty percent. If I suck and that has does really poorly, I still got eighty percent in what I know and believe is going to be a very good long term investment.
Yeah. So I always think of it as like the garnish or it's like that's just your taste, like that's that's the stuff that makes your portfolio unique to you and interesting to you. But that strong foundation is like you know, I like a good to me as good sleep at night, as priceless. So I just like never and missed in a way that i'd be that would ever like contribute to a sleepless night something that whatever.
It was happening, and that all comes. Yeah, it's a good point. Like you can we see a lot of portfolios come through the community and some people might have crypto as their garnish, or they might have just stocks from Europe as they're garnish, and yeah, it's a good way to put.
It, Yeah, what makes it interesting?
Yeah?
Actually, and I.
Should say I should say as well though, if you're just starting, you don't need to worry about the garnish like you don't have to do that. You can just have a core as your investment portfolio and that's it. You can just choose index ETFs and away you go. So don't feel like you need to have it at a little bit of flavor and spice. But if you I find what a lot of people do is they'll start with the core. Get comfortable that haven't lost all
my money. I'm starting to get interested in this. You know what I might experiment around.
The sides awesome And so we you know, last time I caught up and we've already talked about like Warren Buffett. He's come up in our chat today. It's hard to talk about and visiting about bringing up Warren Buffett. So he's stepped back from his role. What do you any thoughts on them?
I mean it's it's sad. So he stepped down a CEO of Berkshire Hathaway, which is his holding company or his investment vehicle. We did a segment on it recently and he has delivered five point five million percent since gosh, yeah, five point five million percent since he started Berkshire back when he was mid thirties or whatever it was, which is just an incredible investing story. He's delivered almost twenty percent year on year for fifty years, which is unprecedented.
I don't think anyone will ever do that again. So for him to be stepping out of the investment ecosystem, I think we're definitely going to miss him because he has provided so much value to me, to Alec, the other Hulf Equity mates, to a lot of people around the world. Really his investment letters that he does every year, the books that he's written like just full of full of wisdom. So it will be sad to see him go, But I think what he's built the company is enduring
beyond obviously himself. He's got someone his sidekick, stepping in to continue running Berkshire, and I would be surprised if that immediately changes over night. But I think the biggest thing I've learned from him and Charlie, his co founder, was it just goes to show what like staying mentally active for as long as possible I think has serious
positive implications on your health and and your lifespan. Charlie died at ninety nine, Warren's going to turn ninety five this year, and they both Warren is still and Charlie was until the day died so mentally active in investing. And I'm not saying it has to be investing, but I think one of the big things I reflect on on both of those is just staying engaged and staying mentally active, I think is something that I will remember them both by for sure.
Yeah, awesome. And I think the other thing is like it really breaks the mold around like, you know, I think one of the world's most successful in visitors. But yet the approach is so kind of simple and easy to understand, you know, and it's often like this cool calm voice which hints the wisdom, like everyone's got their favorite quote. Yes, And I think it's that thing that goes, hey, it's not just good beginner advice, it's just good investing,
you know. It's just it's just like like you know, the courset, like all these different ways of approach, like approaching investing, dollar cost averaging, you know, these things. It's not just when you get started, it's actually you know, these are really good tools that can lead to really great successful I agree. I think he's been a really good person that.
Positive like so like life lessons, business lessons, and I think to tie it back to ETFs is he's realized over his fifty years of investing that the best investment really for long term is the index ETF, so much so that he've said that ninety five percent of his wealth when he dies, which is hundreds of billions of dollars, is going to be put into a low cost global index fund. And because he's so confident that that, over a long period of time, is more than that needs.
And so for someone who's spent his whole life picking stocks to come out and say that that that you don't need anything more than that, I think, like, you know, you've got to pay attention to