Red-hot sharemarket - your next moves

percent in the last twelve months. And more than that, there are so many signs that this market has got the ideal conditions to keep going. On a broad basis, there's always things you can worry about, and you can always worry. I can tell you about a slump or a surprise setback or a correction in the September or October period when the Americans get wobbly every year as they face Christmas. Winter is coming. You've seen Game of Thrones,

you know what it means, same thing in the share market. Now, on top of all that, we've got Donald Trump, who you know. I think we might as well take it as read this morning that the markets at least think he's going to be re elected, and there's like a sixty to sixty seven percent probability in the money markets right now, but that he will be re elected. That means a Republican administration, that means pro business administration, and

that means a big lift in stocks. Traditionally, you know Trump first time round, from the day he was elected to when COVID arrived the US market went up sixty percent or so, people will be thinking that there's a good chance that will happen again. So I want to talk about chairs today, and just before I start, by the way, one or two pieces of correspondence about when I talk about chairs, and do I have a conflict of interest, et cetera. I mean I have an SMSF

and of course I want to invest. I have all the things that you have in terms of shares, just to clear the air in terms of ordinary shares. This isn't ETF re funds in my portfolio I have. I try to keep it to ten always. Just now, these are the ten shares I have. I am not going to give you wastings aroundthing, but here they are. Are you ready? Come on with bank CSL Hansen technology a quarry bank. Quarry technology NAB, Next, DC, Cube, Ramsey and Reo.

Some of them I've had for twenty years. Some of them I've had four a year. My guest today is a regular on the show Friend of the Show. It's Jemma Dale, head of Investor Behavior and SMSF at NAB Trade. Oh are you, Gemma?

you can see their performance. It's very hard to get excited about the performance of your ETFs, to be honest, and some of the very well diversified components of your portfolio, even though they're going to be thousands of securities by the time you add them all, lot would be my guess, and so you've probably got exposure to thousands of things, and yet you look at the ten that you can definitely put a number on and worry about those. And

we're all the same. We all do it very You've got a lot of banks in there, but you're doing very well out of them, so certainly can't complain at the moment.

to Mcquarie Technology relatively recently. Anyway, I'm just putting that out there, folks, just to clear the air, and because we're going to talk about shares today. Exclusively because I think it's a terrific market. Jem At tell me, first of all, because you see all the data and a trade and you see what's coming in and what people

are doing. Do you detect any change in the flavor of shared trading, the volume of shared trading, the demographics of shared trading in this last few months as people are starting to realize, gee, the market's damn good for quite some time.

Was when the vast majority of our new accounts were opened, and in the subsequent sort of twelve months, so people came to investing during that period and had this incredible opportunity to buy shares at a very discounted price, and then they rocketed back very quickly. So many of our

investors have had a really interesting first experience. If you started training for the first time in nineteen ninety nine, you had a very different experience that somebody started in two thousand and A lot of people you know who have been around for a long time felt that was a normalist that period, but it was your first experience, it wasn't right. That's what share investing is for you now, and so those people are familiar with a pretty strong market.

That's half of our investors. Those who've been around a long time tend to have much bigger portfolios. I've had a lot more time to build up their wealth. You mentioned you've got CBA and McCrory and CSL. They're the kind of shares that have made people a lot of money over the long term. You know, if you're buying those in the nineties, and a lot of our investors were, then you have done extremely well. Those people are moving money around but feeling reluctant to throw a lot of

money at this market, which I find really interesting. So our cash book is very high at the moment. Newer and younger investors are mostly buying ETFs and just buying them consistently as a wealth creation strategy. That's a very common strategy now more and more people are doing it, and they're pretty agnostic as to mine market movements. They will buy more on a down day, which I find fascinating.

So you think they're agnostic, but they're very aware of what is going on in the market, and they will absolutely buy more if the market gets hammered in the US overnight and futures are down, they will throw more into an ETF that day than they would if futures were really positive. But it's a long term strategy for them,

and they tend to do it consistently. And then our more mature investors are a little bit anxious, right They're seeing CBA above one hundred and thirty dollars, They're seeing prices that feel quite stretched in some areas of their portfolios. And because those portfolios have been around a long time and tend to hold things they're very familiar with and know very well. Yeah, they're a little bit of nov I would guess, you know, they're not super keen to chase these prices.

will say the thing, we're obsessed. Why do we talk about individual shares when ETFs are so important or they may be for our listeners because they're the swing factor. Right, that's the difference between having an ordinary year the same as everyone else, winning big or losing. And that's I think that that will never I don't know, but I don't think that will ever change. That will never go. The attraction of shares and the particular attraction of shares

that they can do so well. And ETFs are fine, they're great, but you will never ever do any better than the norm.

S and P five hundred. As this second option, it is a long way behind. So people start buying the ASEX first and then they diversified beyond that, which I find fascinating. And yeah, the appeal is really obvious, which for so many young people and so many people new to market, I don't know what to buy. That's always the biggest question. I don't know what to buy. ETF just takes that problem away for you. Right, just buy the whole market. You'll be fine. And as you say,

then you don't have any opportunity to outperform. You're going to get the market minus the tiny feet. But you're gonna get market. That's great. It's better than enough, right, it's very good based on how performance has been over the last twelve months. There are many others who are looking for something much better than that, and they feel very strongly about making their own choices. Funnily enough, they

tend to be more experienced investors. They're not young people, you know, willing to bet their shirts, right, it's quite the opposite. It's people who are very experienced. They know what they're doing, and they're absolutely going to try to get a better return than the market or and it was something I didn't ask you about your portfolio. They've got a very specific need. So a lot of our older investors invest for yields, and they are not looking

for high growth. That's not what they're after. They're not going to take a punt on ZIP. They just want yield and that's what they're going to invest for.

driven that performance. There's a lot of people making comparisons to sort of the ninety nine two thousand era right now based on the hype around AI, but we haven't seen the pullback. We thought we saw it in twenty two, and it just came around again, right.

to puntificate as to where it's going. But a couple of things I do want to ask you when we sit there now as investors on the share market, so we look at that, we look at the return on the share market, and it's well above average, okay above average on historical figures. It's above average on recent figures.

There is four percent inflation of course, okay, so really you know, you got to put that in If you say, oh my my shares did ten percent last year, it's great, Yeah they did, but it's four percent inflation, so you got to put that in mind. When there was no inflation, six percent would have been the same. That's one thing. And we have the dividends. The big dilemma I think for Australian investors is you mentioned about so many people who want yield and the older very broadly, the older

you are, the more you want yield. It's as simple as that. And by the time you retire, it's all you want, right. I talked to someone the other day, very very well known financial journalist, and they are for the first time in their life, they're looking for advice because they're so confident in their own ability that they never thought of asking anybody as for advice before. But I said, well, what do you want? You know, what do you want? And this person simply said, I just

want income. We hit his wife and just want income. And that's what happens when you get to a certain point, and that's fair enough, and you maybe do you think you lose your nerve as you get older as well in terms of investing.

You've got to build it fast, you know. When you're young, you've got to build it fast because you're coming off with such a low base, Whereas when you're older, it's about the preservation of what you have and you're far more to lose. And we know about sequencing risks, so for anyone who's not familiar with the concept, you understand it intuitively, but it's really there's a lot of academic work around it now. Sequencing risk is effectively when you

are drawing down on your money. So say you have a million dollars to provide for your retirement and you're taking out fifty thousand dollars a year. If you suffer a massive downturn in the market in year one, and that million dollars turns into six hundred thousand dollars, which sounds dramatic, But this happened to a colleague of mine in two thousand and eight, two thousand and nine, he was back at work.

it out of a million that might be growing. So that sequencing risk, if you suffer an adverse event right at the beginning of your retirement, is very damaging to the long term outcome of your portfolio and your wealth frankly, and your lifestyle. So people, it makes sense to be anxious about losing a lot early in retirement in particular, And as you get older, does it matter so much?

You're okay? The vast majority of older people I speak to and retired people they don't want to draw down on the capital at all, and retirement they want to preserve the whole lot and just live off the income. And that's where that desire for yield comes from. It's not a really chunky yield. And I don't want to think about drawing down on the capital. That's too much risk for me.

should be careful. And we had actually awn on the show Very Interesting a few weeks ago about that whole issue about how you know, I mean, yes, you'd rather not draw down on capital, but similarly, you're not going to live for a thousand years, okay, there is a point of which you could safely actuarially make an esspence say okay, and as soon I live to one hundred and ten, you know, and then you can walk backwards

from there. That would be I would imagine safe enough for most people even today with the longevity risk that we have. But on the market and where it's going. So we crossed the eight thousand mark on the ASX two hundred the other day, big number very important milestone, important to show that we are in blue sky, that the ASEX is really starting to move, and let's just put the US to one side just for the moment at this part of the show and talk about the ASEX.

One other very big change occurred just around the same time that was happening, and that was that that our market is, as everyone knows very much based on two things, banks and minors and BHP had been the biggest stock in the market for years, and CBA on Monday morning this week, because I was going to do a story gem about how it was going to overtake BHP, and as I was doing it on Monday morning, I had it actually written, and I had it written in this

way that said it's going to overtake. I had a about lunchtime, I looked again and the numbers had changed around and it had overtaken. So a bit of luck that I was able to say on the day, hey, CBA is after becoming the biggest stock. It happened before my eyes. But and I think this time around it is going to stay there. And I think it's stayed there before about four years ago, it was there for a year. And here we are again. What does that mean?

Do you think that our biggest stock is a bank now and the banks are under the pinning our ASX now, not the miners.

through home loans. It's a very strong franchise and it continues to maintain this massive premium over the other Australian banks and over other global banks because over literally decades, it's continued to maintain its margins to an extent, you know, better than others, let's put it that way. It continues to have this very strong footprint and have the largest home loan share in the Australian market. The Australian homelan market continues to hold up despite constant predictions of fallen

house prices. All of the things that are supposed to undermine the share price of CBA and the Australian banks just don't come to fruition. It doesn't mean they never will. It just means that it's called the win. Don't make a trade for a reason shorting the Australian banks. It has cost a lot of people a lot of money. We keep thinking that can't continue to grow at this right in terms of the share prices.

They're saying it since late last year. That doesn't mean, as Jemma says, they will be wrong in the future, But I tell you what, right now, they're wrong. So the point I'm making is that we have the banks now dominant on our market, and then we have the miners, and we have the usual suspects CSL and some of

the biggest stocks. Macquarie Bank two also never forget in there very much, so now in the top ten, even though it's an investment bank and not typical and would have a lot more risk and a different nature of risk than what we might call high street banks, the big four that we all know. So, Jemy, what are your troops on n AB trade? What else are people buying?

Because you know, one of the things that I always think about one of the great quotes about stock market investing is that it's you can look at a stock and you can have your opinion on us, and you could be very good mathematically. You could have it all worked out, and you might think that it's going to go up, and that's all fine, But actually what matters is whether other people think it's going to go up.

That's what matters. Right. So I'm digging here and I'm trying to find out from you, what are your database are millions of investors? What are they looking at now? What are they like?

and they tend to be very thoughtful about it. There's a lot of talk about how ignorant retail investors can be, and they refer to the dumb money. We just don't see that at all. You see quite the opposite, very thoughtful, very well considered investing. And the COVID period was the classic example where people went out and the top ten stocks were stuff your mum would tell you to buy. All big four banks were in there, all four of them. BHPM re overre in the AASX two hundred ETF was

in there, right, that's what people bought during COVID. Every single one of those things has performed extremely strongly since, and it was an incredible opportunity. So to your question about what peop doing, they are all loaded to the eyeballs with banks. Right. Everyone has bought banks at various points over the last couple of decades, in some cases back in the nineties, and then they bought a ton more during COVID, which was a brilliant decision across the board.

If you're buying three of the big four sort of sub sixteen dollars, you had a good time, and you know seventy dollars range for CBA. People have so many banks, right, and so they're not buying banks at the moment. This is not what they need. There's been a very dramatic rotation into materials, and that's been going on for about twelve months now.

kind of flirt with it again at the moment. But we just have seen this real shift back to materials from an investing perspective because people feel that perhaps everything's not fully priced yet, whereas they feel with financials they are, and then when they're looking to the broader market, there's sort of less that people are excited about, and we start to see more ETF investing in someone.

may be ahead in the rest of the year. Back in a moment, Hello, Welcome back to the Australians Money Puzzle podcast. James Kirby here with Jemma Dale from NAB Trade. So, Jemma, I thought the market was pretty looking pretty good. I

thought the US markets were steaming along. Because I'm looking at it for forty years, I'm very aware that the September October period is our damn rocky period in global markets because of the US, and the US now represents Just to reiterate, folks, the US represent sense seventy percent of the global market just now. The Morgan Stanley Capital International Index. That's extraordinary. What happens in the US is of extreme importance to what happens to all markets, including ours.

And if it rises, we will rise with it, and if it falls, we will fall with it. And so it really matters. And so we leads us to the question, if Trump wins with his pro business agenda, with his track record of lifting markets the last time, with his track record of pushing old industry, fossil fuels, oil coal, he's anti certainly anti environmental advocacy. He's not pro electric cars despite all the money Elon Musk wants to give him. He's going to dictate to a serious extent the nature

of the market as it comes along. Used to be mixed on tech. But he now has JD Vance as he's running mate, as he's the VP who is big with Silicon Valley, backed by Peter Thiel, who I'm sure you will know who's behind Planter with that extraordinary preamble. It's tough, isn't it, Gym. I ask you what difference will trumpon make? Just tell us what do you think?

And despite the market's extraordinary enthusiasm for cuts, historically, the Fed is cutting because the economy is falling off a cliff, and so those first cuts are quite positive for the market, and then after that it all looks very bleak, and so you actually you want to you can get out in front of the first couple, and then after that it really looks ugly. In terms of what Trump is going to do, it's fascinating. So the first question I think for a lot of investors what is going to

happen with tax cuts at a corporate level. If we look at his first election win, there was a dramatic uplift in corporate profitability post Trump, and it was all tax cuts. Every dollar of it was tax cuts. That has some implications for an economy that is as heavily indebted or a government that's as heavily indebted as the US. So there's a lot of questions about the US dollar. There's a lot of questions about what happens with the treasury and the debt that is being carried currently and

being raised regularly. It is it's quite extraordinary to try and unpick the range of things that are on the table currently. There's tariffs as well, and trade wars that may start again do we know about this? And obviously feeding into the Nasdaq at the moment, there is talk that Jamie Diamond may become the next set the Secretary of the Treasury. That is very appealing to a lot

on Wall Street for a lot of reasons. I love that, but I think that would also come the market a bit because he's obviously not known to be a highly political character. He's known to be money guy. He knows what he's doing.

and more of this talk about d dollarization. Can you explain what the theory is about the US dollar, what could happen to it and what would it mean for us as Australian investors.

And more to the point that everyone has been happily devaluing their currencies against the US, which allows them to export to the US and has, in his view and advances an interesting choice, hollowed out American industry, particularly manufacturing, that you can't produce goods in the US because they're too expensive to export. He mentioned tractors, which is quite interesting.

So his view is when you've got a very strong dollar, you're hollowing out US manufacturing the sort of Middle America that votes for them, and to that extent, he does not want a strong US dollar. He would like the dollar to fall relative to other currencies, which would allow them to be far more competitive in export markets in manufacturing, but has hum implications for everybody else. And so it's interesting.

I mean Australia, the US is not our number one you export market, and the things that we export are not easily substitutable. So your point about iron ore is a really good one. Right. You're not going to go and get your iron or from a waterbup places. There are alternatives, and most of it goes to China. Then the question becomes, if China can't export to the US, do that have implications for Australia When you look at a company like CSL where their earnings are pricing US dollars,

is that a problem. So you can see ripple effects across so many different areas, and this is I think why so many people would be very keen for someone like Diamond to go in and be working with the administration to ensure that maybe some of those implications are thought through before we aggressively try to devalue the currency.

But for some companies and some sected the implications and quite significant.

is going beautifully. Remember folks, that just because gold is going up doesn't mean the gold miners go up because they have to mine and often they get it wrong big time. But in the main they should do better.

often said, one of my favorite job titles. It's funny when I go on other people shows they say, oh, I love your title wealth editor, but I like kind of investor behavior. I must say I love that one.

because how do we know? But what do you think, Gema?

existed for a long time it's really broken. Private equity buy it up, get in there, restructure it, turn it around. That's quite different to infrastructure, where your goal is effectively to own something that generates a pretty consistent return over time.

very It depends on what you're comparing. Infrastructure is a really good example of where it's a very broad term that covers a lot of different things, and you need to look at the underlying assets to got is this something I want to invest in? Because the performance will be dramatically different. We saw during COVID that all of these things that were supposed to be great long term investments that just spit out a long term return and you don't have to worry too much about volatility, ended

up being very volatile. Toll roads, airports, all of that stuff complete disaster during COVID did the exact opposite of what they were supposed to do long term because of very dramatic change in the world. So the other thing that is very important to some people, less so others, but absolutely matters if you're an institutional investors. There's a lot of energy exposure in some font So you'll see some with thirty percent more exposed to non renewable energy

sources fossil fuels, let's be frank. And then they will have pipelines which are also, let's be frank, non renewable energy sources. In most cases that can be forty or fifty percent of the assets, and if that's not for you, you need to think about that. But also there are a lot of institutional investors who will not touch something

that's fifty percent fossil fuels. It's just a much bigger universe than perhaps people anticipate and you want to look at what is actually being held in it and think long and hard about whether or not it's for you and whether you think it's going to perform the way it wanted to. Right.

like it. Okay, really good, thank you for that, Gemma. Now Bruce cleverly puts in the second question, and that's always fine. Folks. You can put in two questions. If they both make sense to me, and they're both relatively succinct, they have a very good chance of being read out. Okay. The second one is the debate over the minimum amount required for a self managed super fund rages on. One

factor often mentioned is the running cost. Scary figures are sometimes used last year our SMSF costs a total of two thousand, six hundred. That's the tax turn preparation Order's an asseic. No, no financial advice, as we didn't use any, and we keep getting lesters from people offering to do it for less. Can you explain the discrepancy between the quoted figures. This is a great question, Bruce, again, two in a row. Well done, Bruce. I'm the same, okay.

I have ANMSF for about twenty years and I get letters all the time from these people. I don't know how they get my name and address. I love to know how they get it, because I didn't give it to them, and they're offering. They just said the SMSF owners. They don't actually know who I am, but they've got enough information to get a letter to my home and they offer to do my SMSF for tiny amounts. The discrepancy,

I imagine, is the same as anything else. You know, You'll have two people drop it a leafless in your door, saying they'll clean your gotters, and one says they'll do it for fifty bucks, and one says five hundred. And you can kind of guess why one's fifty and wants five hundred. Maybe that's rather simplicitic. Gemma, who is Russ You must remember at a SMSF at one of the nation's biggest banks may have a more sophisticated answer. Ah.

at her hourly rate. It's probably a very poor decision on their part, but you know it's got to be done. So this is I find this fascinating and I've looked at this so many times, and it's always worth noting who has done this research and emphatter commas about what the cost is and what their motivation might be for putting it out there. The assumption is often that you have a financial advisor, which in your case was Bruce.

Is not the case right, you don't have an advisor, so you can chuck out several thousand dollars worth of fees that have been assumed in this situation. And there are always a lot of assumptions. The other thing they will assume is asset management fees, So they assume that

you have managed funds generally, well they used to. Maybe they will say now they're actively managed dtfs and they will put in one hundred basis points for that, or one hundred and fifty basis points for that, or they might assume you have a retail managed fund and it might be two hundred basis points for that, so they layer them right, So they go, your accountant's going to charge you five thousand dollars a year, and then the order is going to charge you one thousand dollars a year,

and then you are going to pay two percent of your assets if you're in managed funds. Now they may have brought these down because obviously fees, all of these things have fallen dramatically over the last ten years. So I'm not quite sure exactly what their assumptions are. Now they have hopefully reflected the market a bit better, and then an advisor fee, so many people will pay an advisor a fee of anywhere between sixty and one hundred

basis points if you pay an asset based fee. So once you add all of those things up, you can be talking ten thousand dollars plus to run a fund. But the vast majority of people don't do that, right, Like, when I look at what we have on NAB trade, which is a very meaningful number of estimatests, they're people running their own share portfolio. There's no holding cost because they're hint based assets, and they just sit on the platform.

Then you get your statement at the end of the year and just give it to your accountant, so you give it to your administrative.

They have it because they have a business, real property in there, because they have other assets in there that are quite complex and would not otherwise be able to be held inside super So for the vast majority of people, you have a self managed super fund for a specific set of reasons. A lot of people do it just for control because they want to run it themselves. If you're doing that and you're only holding shares and ETFs,

your running costs are super low. If you have a far more complex and you're trying to hold those assets for specific reasons, and you wanted to own business for your property, so you can own a property that your business leases from your SMSF inside super that's an amazing strategy. For some people, you might want to borrow to by property inside souper, which is much harder to do than it used to be, but it does work for some people,

usually very wealthy people. That's got a completely different set of costs, right, So you can't compare these things again, not apples with apples. If you're happy to cost your paying and a couple of grande a year is not bad. You're just not Those assumptions that you use are just not relevant to you. Don't worry about it.

which I didn't even know. But I also, I mean, you get what you pay for you would think as well.

advice in that cost of running an SMSF. It's a lot of assumptions.

Thank you so much, Thank you and we'll talk again. Okay, folks, do recall that we have an email which I would love you to send some questions, observations, complaints to the Money Puzzle at the Australian dot com dot au. Talk to you soon.