Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby, Well, the editor at The Australian. Now, folks, we've had a few days to digest what it all means about Donald Trump arriving rebounding back into the White House. But what does it mean for investors? And this is actually a very front end center and extremely important development for investors. There are aspects to it about our market that's going to matter straight away, for instance the big miners.
That's going to be tougher for them, for instance. But more importantly really is that if you don't have global shares, you should have and if you're not in you can't win. It's as simple as that. Now, if you look at our market over the last over the year to date, over the last twelve months, we are up something in the order of eight percent, Okay, and that sounds fine. Here's the thing. The US market's already up twenty four percent, right,
three times more. You're making three times more money in the US and no one knows the future. But does every indication that this Trump bump as they called it when he was in power the last time, will continue this time? I would actually argue the conditions for shares. US shares are better now than they were, particularly blue chip US shares, not so much the tech leaders and
smaller and medium cap American shares. And just as the week has passed, starting to see the shape of this Trump financial administration, which is all the show is interested about on this occasion. So we're getting people like Idan musk Is going in as to what they called the efficiencies are We'll see how that works. I imagine Ian mrsk has about five hours a week to give to
that job. But importantly, probably more importantly, it's a man called Scott Bessent, because in its Treasury secretary, that's an extremely important job. He's a fund manager, billionaire fund manager. So whatever else he is capable of, we'll assume that he is a pretty capable investor. And you can see straight away that the American share markets continues to rise,
and so does our market. Now, what I'm really interested in is what have Australians actually been buying and investing in up until now on the US markets and on our own markets as well, where you can easily buy ASX listed ETFs that are that are invested in the US market, which is a very simple way in actually, but also is it changing and how might it change? I've got the ideal guests. She's been on the show before. It's Jemma Dale, head of investor behavior at Naptrade, that
is the online broker. How are you, Jemmer, I'm well, thanks, How are you good? Good to have you on the show again.
Lovely to be here.
We have talked in the past about this whole area. Before we start, just tell us give us a picture of you would of what we might call the traditional situation with Australia and the Wall Street share market. I gather it was largely younger by that, I mean under thirty five that were actively buying individual shares in the US, and older investors were a bit slower, but occasionally they'd buy ETFs. Is that still the case and what shares do they like?
Yeah?
Such a good question because the demographic shifts, I think how largely due to what was available at the time people started investing.
Yeah.
Really, it's not that people are lacking in education or even appetite for a lot of different things. It just depends on what is easy and accessible at the time you started. So most of our older investors have fairly rich and deep bossy equities portfolios. They started, let's say the nineties with the big floats, so they owned CBA and they bought it very cheaply and they've done very nicely out of that. And they owned BHP, and they own the big Australian companies, and they would have bought
Woolies in the float, all those sorts of things. And a lot of our baby boomer investors have these portfolios that are dominated by big Australian names. They're very familiar with the companies, they know what they do, they've held
them for a long time. They probably have quite substantial capital gains liabilities attached to those positions, and it has taken them time to diversify offshore because pre let's say two thousand and ten, you would be mostly probably twenty fifteen, let's be honest, mostly looking at unlisted managed funds.
If you wanted to.
Buy international equities and diversify your portfolio. The big thing people used to buy was Platinum Asset Management, Platinum International Fund. They would buy that as an LIC. So there's a lot of stuff that people did hold that they would buy quite time ago and some of the other listed international options.
But broadly speaking, they just built their.
Portfolios in domestic equities and then they've taken their time to get more international exposure. And online brokers have made a big difference. It's much much cheaper and easier to buy stuff now that is not just domestically focused. You don't have to buy it in the float and then wait for your statement every six months. And also you can buy directly.
You can just buy a thousand dollars worth of Walt Disney, or you can buy a thousand dollars worth of Coca Cola. That was just impossible.
Basically, it's impossible, and if you could do it, you'd have to ring a broker and it cost you one hundred dollars to buy a thousand dollars worth of stock, so it was very difficult.
So now it's much less expensive.
It's very transparent as well, so you can see what you're paying an FX, you can see what you're paying for the stock. All those sorts of things. You can hold them in roughly the same portfolio. So younger investors that's how they've chosen to invest, because they have access to it and it's affordable and The other thing I think that's made a dramatic difference is we've got really high quality research now, realisticly for free everywhere Google, but also inside your platform.
You have to be special to get that research.
The research you can get now on the standard platform is better than the average fund manager had in the nineties. Right, It's amazing what's available. So it's just much more accessible. Funnily enough, though, yes, we do have younger investors who buy directly offshore, so NAB traded to US, UK, Germany, Hong Kong, there are other markets. Obviously ninety plus percent for US as in the US. That's really what people want.
Yeah, and why wouldn't it be, because the vast majority of the MSCI, the Morgan Stanley Capital International Index is US anyway, and that's probably even more true with each passing year as the US does so well. But tell us then, what up until very recently were the favorite stocks or funds, which invariably will be ETFs that Ustreans have been buying on Wall Street.
So it's an awesome question.
It's actually been quite concentrated at the top end. There's a really long tale of individual things that people will buy, but they tend to be one or two trades a day, like the very it's a long long tail, but it's very concentrated at the top end.
Yeah, bits and pieces, but we are so who's at the top end, So.
If we strip out the rats and mice, it was all about Apple for probably the first five years that we had international trading available, leading up until COVID. Then there was a real regime shift, if you want to call it. That all about Tesla. And I think I've told you this before. At one point Tesla was our eleventh largest holding on the platform, above Rio, above Woolworth's,
above all of these big Australian names. It was enormous, big chunk of that was capital appreciation, like people who bought it relatively cheaply and it had just run very hard. But it was all about Tesla for a while. It's still largely about Tesla apart from those people who bought in video and it's rocketed and that is a capital appreciation story, much smaller base.
Oh yes, yes, in Vidia of course, Yeah, the AI chip maker supreme. Okay, so in Vidia being the new kid on the block, Apple being the original of the species, Tesla all the time, I expect and still there anything else Berkshire Hathaway Microsoft.
So then you get the other sort of megacap tech names plus Berkshire Hathaway. So Berkshire Hathaway absolutely, and I love it when you occasionally see someone buy their Class A shares, which are many hundreds of thousands of dollars. Remember the first time I saw a single three hundred and fifty thousand dollar stock and I was like wow, but people would buy one.
But generally you can buy it cheaper, right because it's Class B and.
So you can buy Class B which is the split version, it's the same thing, and you can buy smaller parcels. So yes, we see Berkshire Hathaway absolutely, and people do like to accumulate that over time. Microsoft absolutely big favorite
last twelve months in particular. It's sort of got a bit on sexy for a while there, but it's very much back Apple, Amazon, Alphabet, Microsoft, All of the sort of Magnificent seven names are in there, but it's very much the more sexy consumer facing stocks that were super popular. Meta was never that big, which I find really interesting because it's not quite as.
Fun right well, it's for all of Colster Meta being Facebook the shares. Okay, now here's the thing. So those are the main shares, and you didn't mention ETFs, but I think they'd probably be a very good proxy for interest as well. So far, what ETFs exchange traded funds, index funds are popular that people are using to buy the US market and Wall Street.
Yeah, this is such a good question, right, because you do have the option of just buying a domestically listed ETF that gives you the EXPOSU and the underlying holdings. It's not a synthetic, so you're buying that exposure, but you're just buying it at home, and it's much easier from a tax perspective. It's just a bit cleaner for people. ETFs they start with the ASX two hundred, and I
find this fascinating. So if you look at our numbers, it's ASX two hundred daylight global exposure, but as you say, it's based on Miski World usually, and so it's mostly US exposure.
And then SMP five.
Hundred, okay, not NASDAK look here and.
There, but it is not anywhere near as dominant as you would imagine it would be. Okay, Niche exposure is unkind, but it's very much a sleeve of people's portfolio. They start with the ASX two hundred to build a core, and then they go for these other things. And they'll go S and P five hundred, First or World and then they'll go specifically Nasdaq or some other neat.
Okay, all right, that's interesting. And the individual shareholdings are what are There is a bigger money in them than in the ETFs.
In aggregate, they're probably close to even. But when you consider the ETFs are a handful and the US equities is a long list of things. And I did say when you look at the individual trades, the will be one or two things.
What's fascinating is.
In the one or two trades at night, some of them are half a million dollars, so they're not one thousand dollars. Some of them can be enormous and much larger sometimes with people with very specific preferences. It's just there's not a large pool of people without preference.
Okay, okay, really interesting. One thing I want to talk to you about just quickly before the break is this. HSBC issued a survey recently and they said the number of Australians intending to invest overseas is actually declining, and that less intend to do it next year compared to last year, which I found a baffling, be hard to believe. This was before Trump was elected. Button, what do you think?
Look the joy of my job.
We see a lot of surveys and we participate in some, and we ask our customers and our clients to participate in some that are run by third parties. And there's always a fascinating lag but doing what people say they're going to do and what they actually do. I can guarantee you if the market falls twenty percent in three weeks like it did in COVID for thirty percent three weeks during COVID, we will see a massive influx into
Australian and international equities one hundred percent. I would put my house on that people will do what the market presents them with as an opportunity. So if the market continues the way it has, I can see people being reluctant to put more money into US equities if they fall off a cliff, I can see them chasing them very hard.
So you think because they think they've run too hard.
So very clearly in our data set, you can see that people are nervous about where the market is. You ask which stocks people hold and what they trade, but if we talk about what they're doing, Tesla is more of a sell than a buy at the moment. In video is more a sell than a buy at the moment, and that is primarily because people think they're quite toppy,
and also their portfolios get really out of whack. If you've hold held those things for a while, you can end up with fourteen percent of your fourteen percent of your portfolio in a handful of things.
Or ninety or ninety depending.
On when you're starting what else you've got. So people you know they will rebalance at some point. It's going to come back.
So our investors do get nervous when the market's really toppy and they will take money off the table. We see it in Australian banks in particular this year, like they've just been.
Trimming and trimming.
Because they go one hundred and fifty dollars for CBA is mental. It didn't grow its revenues by fifty percent.
That's right, and every broker in town says they're worth a hundred. Yeah, but every broker's wrong so far Okay, we'll hold it. We'll hold it right there. Back in a moment. Hello and welcome back to the Austriallians Money Puzzle Podcast. I'm James Kirby. I'm talking to Jemma Dale from NAB, head of Investor Behavior. Always great to talk to Jemma. Very good to culture this week as we're starting to get a sense that we were starting to
understand first of all, that Donald Trump is back. More than that that's a Republican president markets like Republican presidents. It's entertaining, I must tell you historically to find out that on an annual basis that Democrat presidents during their regime have higher returns paranum on the market than Republican presidents. Republicans would argue that the Republicans come in and clean it up, of course, just like the Libs would argue
that's what happens here. But we'll put that to one side. There are the facts that that Democrat president sees paranum returns have been higher than Republican presidents over a long period of time, and I've done a whole report on that in the Australian recently. But here's the point I want to make. So the thing with Trump is that, of course there's this sugar hit at the start and excitement by the markets because they've got a pro market
president coming. In longer term, there's concerns about Tariff's protectionism and other issues such as strength of the US dollar and what that might mean, bond yields which are being going up even though the US FED has been cutting rates. So various signals coming out there. But from an investment point of view, I think, folks, the outstanding dimension of this is that there's a sense that the US markets will continue to be good, but it won't be the
big tech stocks. This is the narrative at the moment. We don't know if it's right around, but the narrative is that the big tex stocks will struggle now under a Trump because he's not as globalist as his predecessors.
That's one thing. Secondly, then that implies that the traditional US blue chips, the Coca Colas, the Disneys, that they will actually do better than the magnificent seven protesla to one side, because obviously test it's just this complete one off, and now you have Musk literally inside the White House cabinet. And then also there's a sense that US small caps will do better than big caps, and I are certainly looking at the US small cap ETFs. They have been
really good. Forty three percent I see up in a year on the US small cap ETFs. That is a hell of a return for an ETF. What do you think about that, Jemmy, Do you think you don't see anything in your numbers to suggest that people are moving in that way yet responding to those ideas.
I think it's really interesting.
We we're only talking a week ago that people were thinking this would be an extremely tight election. No one was predicting a clean sweep, no one was predicting a very dominant Trump presidency. And so the fact that everyone's come out and gone right, this is what's going to happen in the market is hilarious to me because we were all wrong about a week ago about pretty much everything. Pundits and polsters. Some would argue that the betting markets
were accurate, but even those took a while. They moved very hard on the day, they took some time.
They were right in the last forty eight hours, yeah.
They were, but forty eight hours no prizes, surely, but you had a favorit of data to work with in the last little bit. So it's quite fascinating to me that everyone's got a strong view and they're very confident what's going to happen now and you should shift accordingly. Look, there have been I'm just trying to unpick all the different parts of that. The one that you haven't mentioned that I am hearing.
A lot is energy. That energy has to be part of the mix because there.
Is a specifically old world energy gets a better run.
Ye traditional energy.
Traditionally oil and gas.
Yeah, let's call it traditional energy. A couple of different things. One is there's just this insane demand for energy for building out AI.
And data centers.
So that's a story that's been going all year and everyone's talking about it, and pretty much every fund manager I speak to is like, look and as are.
What they are.
We've already seen in video run super hard. On the sort of more tech side of things. Realistically, is how you're going to fuel these things. That's the issue. And let's talk about the data centers and how we power them. And that's why uranium's on a run, because we think nuclear might be the solution. We're going to talk about three Mile Island.
All of this stuff. So there's that component which is very interesting.
I didn't do this research myself, so I need to attribute it appropriately. The guys at Plato Asset Management did some work this story about the tech giants going and actually buying nuclear power plants because they need to be able to fuel their own extraordinary demands for power as AI kind of grows exponentially.
So so what does it mean? Sorry for shareholders then what does it mean?
So this is quite interesting, Like you're an Australian shareholder, you're starting to look to the resource sector. So even though we're quite concerned about lack of super exciting stimulus out of China and the downward pressure on commodity prices as a result of affair bitive stuff going on there, if there's insane demands for power and traditional energy, that's not bad for Australia as a sort of primary producer.
In those areas.
That's quite interesting to me, and I'm hearing that a lot, and we see that a little bit in our numbers. What I was going to say, though that piece from Plato that I'm saying that traditional energy stocks did better under Biden and renewable energy did better under Trump, which is hilarious. Right, So everything you think should happen doesn't.
That is a fact. I saw that report and that the oiding gas didn't do us well under Trump mark one, then people thought it would do. That doesn't mean it won't do better under him second time round. Okay, Just in terms of just looking over at various parts, like what does it mean that the Magnificent seven mightn't be quite as good relative to the rest of the market than they have been under Trump?
I think the challenge is they have run so incredibly hard. Any risk for downside is going to cause quite significant contraction potentially in those share prices. Right, They're all priced for absolute perfection, and so that there's always downside risk for those guys. There's I think, given how the major appointments are being made currently, and they're happening in real time, right,
you and I are getting updated by the hour. Who's in charge of what, who's in charge of what, and what they think and how they do stuff That is that will probably take some time to play out. So I don't feel anyone needs to be chasing anything at the moment. Mostly what we see from our investors, they're taking money off the table.
The one thing you didn't mention though, that I do.
See our investors really interested in is crypto and particularly bitcoin.
Yes, so that is coming through quite strongly.
By buying bitcoin. What ETFs or so.
One is micro Strategy, the company which is one hundred percent invested in bitcoin, and then the other is bitcoin ETFs, which are listed in the US. These ones specifically, they're very small trades, I must say, and it's not huge numbers of people, but they've gone from being or two weigh down the list of popping right up in the last week. And there are many bitcoiners who believe that Trump and Elon in particular are very pro crypto and therefore there's a real opportunity there.
And it's up ninety percent this year. Yeah, it's been incredible.
If you're not already in these things, is it the time to chase them?
I don't know.
For those who are already holding, it's a bit of a different story, I think.
Yeah, right, okay, And I'm sure listeners are aware that Trump part of his campaign was to go propriate pro crypto and to deregulate around crypto, and most importantly to create a situation where bitcoin could be a strategic reserve asset for the US, which is a spectacular piece of information if he goes that far, and it means that bitcoin basically ranks beside gold and the US dollar inside the US administration. Now that hasn't come to pass, but
he's said that. Not everything that Trump says comes to pass, of course, but it's worth anning. We'll take short break. We've got some a very good multi park question which I think will probably capture the entire segment in a moment from Deton. Hello, welcome back to the Australian's Money Puzzle. I'm James Kirby with Jemma Dale, and we are having
a great discussion. I think about Trump, what it means for investors, what it means for Australian investors in particular, and I think in the early part of the show there it's worth just covering off a couple of things there, As Jemma said, the favorites of Australian investors they buy ETFs, or they buy the Big seven, the tech stocks that we are all familiar with, or they buy Berkshire Hathaway. That seems to be a Warren Buffet's Berkshire hatway. They're
the leaders and they haven't changed. For what it's worth, we don't see any change so far in the numbers. People aren't betting if you like that there'll be a swing towards the traditional blue chips or oil and gas Exxon and Co. In the US just yet. The other thing is Bitcoin, which course is absolutely racing up on the back of the fact that Trump wants to make it a part of strategic reserve in the US. And Elon Musk, another pro crypto person, has become actually inside
the administration of the Trump cabinet. I noticed though that he shares the job, which would suggest that he said, I can only spend so much time on this one. Donald, All right, now Declan's question bear with me here. It's in several parts. It's really interesting. In your recent episode, you said if people opt to invest in ETFs via super funds, the fees should come down. In fact, the super funds actually charge additional administration fees to access these options.
My wife and I left. We will mention names here on this occasion. It's never advice, remember, it's only information. I think we can mention the name because it's the biggest super fund in Australia. My wife and I left Australian Super to set up an SMSF four years ago. And then he makes the point that Australian Super has the lowest fees, among the lowest fees out there. But even still the Australian Super fees with the member direct option would add up to more than what a cost
to run our SMSF. I'll have I will have Australian Super on the line to me after this show. Don't you worry about that? Anyway? His main point is over the four years so far, our SMSF has outperformed the option that they might have taken in the big super fund by one percent perannum. And what we're doing is very simple. We invest in a few ETFs from some of the major players, all of which have a long track record and very low fees. Okay, a couple of
very interesting points there. The funds, the big industry funds which dominate the super fund sector, do offer ETF options, and they all do, and they put in ETF options for the simple reason that they I would say, at least that I would say they were worried that the ETFs were so successful that they knew people would actually say, listen, I just put my money into an ETF, start an SMSF and have really low fees, so they included them in their menus. That would be all the big funds.
You would expect them to have ETF options. Whether it is cheaper or not, that will depend entirely on your SMSF, the structure of it, the way you do, the nature of the accountant and order shows, etcetera that you use. But I'm no doubt it could be cheaper. I'm sure it could for somebody. What do you think of that basic observation, Gemma about the ETFs inside the big super If you had a choice of an ETF heavy SMSF or an industry fund where your focus was ETFs, would there be much difference.
So the comment I would make is that an ETF is just a rapper. It would depends on what you're buying as the what the actual composition is. Right, So if you're buying the ISx two hundred and the s and P five hundred and index based ETFs like big global indices, most super funds, not all will offer an index option. So you could just go into the index option in your public office super fund, which is theoretically much cheaper and giving you exactly the same underlying exposure.
So I'm very pro ETF. I'm very pro SMSF for the right person, right, they're fantastic things. A lot of the big super funds do offer index options, and they're super cheap, right, Like an ETF is five basis points if you're buying the really big indices, and an index based option inside a superfund should be very cheap because they're very cheap to run. You're not paying professionals, you're just getting it done for you. So the fair comparison is not between the member direct option and an ETF.
The fair comparison is between the index option and an SMSF. With ETFs, and frankly, it depends on how much money you've got in the fund and who you're employing to run it for you and all that kind of business.
Yes, yeah, and are you comparing apples with apples in terms of the waitings and the exact choice, et cetera. And the other thing. If I if I was about to call a journalist who had just read such a piece of correspondence out, I would say you're you have to take a global view, holistic view. Yeah, you're getting your insurance, You're getting your insurance cheaper through your fond and all that day would have plenty of answers on
that one. But a really interesting point, Decline, And you know it comes up all the time, and I would just say also that people often say to me should I get ETFs or should I put the money into super? And I do regularly say, you do know you can get ETFs in your super. You do know that that won't you, which people don't always know. But Decline certainly knew and was able to compare the two, and in his case it was better to have an SMSF okay,
thank you declin now. Final question Andy, employer contributions and yearly caps aside, is there any difference between salary sacrificing one hundred dollars a week or five two hundred being fifty two weeks at the end of the financial year and claiming it as the concessional contribution? Do I ultimately get the same tax saving. I'm just risking the game of timing the market rusus time in the market. It's tempting to do so and jump in late answer, there's not.
A huge difference, Like it's there's not a huge difference. I mean it's really part of it is discipline, Like are you going to put.
When you say that's not a huge difference, do you mean history would suggest.
History would suggest, Well, I think it's more behavioral than anything else. Are you going to make sure you put the one hundred dollars aside? You know, if you get paid weekly, whatever it is, if it's monthly, whatever, are you going to put the money aside and have it at the end of the year and have the discipline to do it and not accidentally miss the cut off date for your super fund or whatever. Because just these little things that trip you up.
But what about dollar cost averaging?
Yeah, so dollar cost averaging is very effective, but I think to an extent it is mostly the discipline of making sure you do it. But if you're putting it in a mortgage offset account for the full year and then putting it in with a deduction, maybe that's very effective.
You I think there's a few variable.
Maybe that's very effective if you have a mortgage like that.
But don't talk to yourself, don't.
Touch yourself, and it's not advice Andy, And by the way, just in case starcat averaging, folks, you do know what this is. I hope. It's the theory that very regular set identical payments paid through the season, monthly or weekly or whatever, over a long period of time, you will be better off because you don't get caught in market crashes or downturns. So on average, you pay about the
right price all the time. So for the times you pay too much when the market's hot, you also buy in the low times and it strips out the human tendency to try and grab a bargain, which is pretty good.
Again, that's behavioral, right, Like you can look at it over a different times frames and it works.
This is your thing, right, investor behavior, your head of investor behavior.
It depends, Like there are times when it's a terrible idea. If you're just dollar cost averaging up, you might as well just board at the beginning and off you go. But it depends if you have also a lump some to work with. If you don't have a lump sum to work with, it's irrelevant, isn't it. You have to dolar cost average because that's.
Your only way of getting in.
If you have a lump sum and you're nervous about timing the market, then it just takes away the anxiety. So again I think the maths is less important than the behavioral element, which is just making sure you get in.
The healthy habit is it of investing in that manner. I think it's very good. And I must say that doesn't mean I do it myself. I do it, of course, because I do it in my super, because my super was clipped off my salary. So to that extent, the contributions are of cost averaging, but the distribution it's human to look for the cheap opportunities. But it's quite strong, folks, it's really good dollar cost averaging. If you want to know more about it, writing and let us know and
we will have a show on it. Look, it was
always a strong theory. There was a period when it went out of fashion, and it went out of fashion during the ghastly period of two o seven to two oh nine where the market's felt fifty percent in a long slow way over two years, and the unfortunate fund managers who stood on stage and propounded on dollar cost averaging, they had a bit of answering to do to people who said, well, I've been following your idea and the market just keeps going down and we'd get periods like
that again. But his long, we just.
Brought all the way down. That's awesome. It's better than bang all the way up.
As long as you kept going right, as long as yeah, as long as you didn't say, ah out, I'm not doing this anymore and you missed the turn. You got to keep doing it. You can't fool around with this dollar cost averaging. You have to stick to it. It's very interesting. Let us know if you want to hear more about it. Okay, we're running out of time. Jemmy Dale knab trade ahead of investor Behavior. Thank you very much for coming on the show. Great to have you.
Thank you so much. It's always fun.
It's always fun. Thank you, and let's have some emails, folks. The email is the Money Puzzle at the Australian dot com dotu talk to you soon.