💰📊🚀Trading vs Investing: The Truth About Making Money | Andrew Baxter

Summary

In this lively podcast episode, Andrew Baxter from Australian Investment Education dives deep into the nuanced debate between trading and investing. Baxter elaborates on the distinctions, benefits, and challenges of each, emphasizing the importance of skill sets and personality types in the financial world. With personal anecdotes and examples, he demonstrates how both approaches can be leveraged for financial success, highlighting the role of education and the strategic use of assets to build wealth.

Highlights

• Understanding the skill set required for effective trading and investing is essential for mitigating risk and enhancing rewards. 🧠
• Baxter emphasizes that while trading typically involves short-term asset plays, investing seeks long-term growth. Patience pays! ⏳
• He discusses how transaction costs and risk management differ between real estate and stock market investments. Weigh those fees! 💰
• Examples show how timely decisions and market understanding could enhance investment outcomes, like sculpting property assets. 🏠💼
• The discussion draws parallels between different assets and how strategic planning affects both short-term trading and long-term investments. Plan on! 📈

Key Takeaways

• Skill over luck: Successful trading and investing heavily rely on skill, not just market moves. Sharpen your tools! 🔧
• Time is key: Distinguishing between trading and investing often comes down to time frames. Tick-tock! ⏰
• Personality types matter: Your personality can influence your financial success. Know thyself! 💡
• Diversification is vital: Balancing both trading and investing can create a robust financial strategy. Two heads are better than one! 🤝
• Education is power: Knowing the right strategies and the market can turn the odds in your favor. Hit the books! 📚

Overview

Andrew Baxter, from Australian Investment Education, navigates the complex waters of trading versus investing in this insightful podcast. With a keen eye on the clock, he distinguishes between the short-term hustle of trading and the long-term patience of investing. Armed with anecdotes and real-world strategies, Andrew emphasizes that the key to financial success is a strong skill set, whether you're eyeing quick trades or substantial investments.

Delving into the heart of trading, Andrew pulls no punches as he highlights the importance of transaction costs, risk assessments, and understanding market mechanisms. He clarifies that trading isn't merely about quick returns; it's about strategic moves and calculated risks. Meanwhile, investing demands a different set of skills, focusing on patience and the ability to ride out market ebbs and flows for eventual gains.

Sprinkling in personal stories, Andrew shows how different personality types can play significant roles in financial decisions. Whether you're an achievement-driven go-getter or a security-focused planner, knowing your financial DNA can guide your strategy. With education as a backbone, blending both trading and investing can prepare anyone for a fruitful financial journey, illustrating the wisdom in mastering both worlds.

Chapters

• 00:00 - 01:00: Introduction The introduction chapter discusses the relationship between risk and reward, emphasizing that these are influenced by one's skill set. It argues that without the right knowledge or skills, everything may appear risky and the potential rewards will remain low. The chapter highlights the importance of having sharp skills, particularly when dealing with fast-moving assets. This includes abilities related to technical analysis (such as understanding charts, support/resistance, volume, moving averages, Bollinger bands, RSI, etc.) and a solid grasp of economic fundamentals and their impacts.
• 01:00 - 04:00: Trading vs Investing Overview The chapter discusses the differences and similarities between trading and investing, emphasizing the importance of being decisive and possessing a particular skill set. Short-term trading requires quick decision-making due to its narrow window compared to long-term investing strategies. The chapter sets the stage for exploring whether one can engage in both trading and investing successfully.
• 04:00 - 06:30: Time Frames in Trading and Investing This chapter discusses the theme of time frames in trading and investing, emphasizing that the information is applicable across various asset classes and not just the stock market. The host, Andrew Baxter, along with co-host Mitchell Renal, introduce the topic and highlight the key differences between trading and investing, such as differences in risk, rewards, time frames, and asset types. The chapter encourages proactive engagement rather than passive note-taking and aims to answer critical questions like whether one can do both trading and investing, and which might be more suitable for an individual.
• 06:30 - 11:00: Assets Suitable for Trading The chapter begins with the host making a transition into the topic of trading and investing, emphasizing how these terms are often used interchangeably. The main focus is on the notion of making your money work harder in a way that aligns with your comfort level to achieve desired financial outcomes. Despite the interchangeability, the chapter highlights the significant distinctions between trading and investing. It starts by focusing on trading, pointing out that many people identify with one approach without fully understanding the differences or may even have misconceptions about them. The hosts also share personal anecdotes from their experiences in trading and investing.
• 11:00 - 15:00: Skill Set Importance The chapter discusses the fundamental difference between trading and investing, which is mainly the time frame. Trading often involves shorter time periods, ranging from days to weeks, unlike investing. The conversation underscores the importance of the time frame and hints at other factors like asset types that differentiate trading from investing.
• 15:00 - 19:30: Risk and Return in Trading The chapter titled 'Risk and Return in Trading' explores the effectiveness of day trading as a means of making money. It highlights that while some individuals, including the speaker, may have experienced moderate success, statistics reveal that over 95% of day traders lose money. Approximately 3% break even and only about 2% actually make a profit. The challenges associated with day trading are largely due to the necessity of staying closely tied to the market and possessing a unique set of skills. Day trading involves buying and selling within the same day, adding to its complexity.
• 19:30 - 26:30: Personality Types in Trading This chapter discusses the various personality types involved in trading, emphasizing that not everyone can thrive in this field. It mentions that trading is not limited to day trading, but involves entering and exiting positions over relatively short periods, although what constitutes a 'short period' can vary greatly among traders. Some might see a week as lengthy, while others may view a decade in the same light. The chapter suggests that any duration under two months can be considered a trading timeframe.
• 26:30 - 35:30: Investing Overview Investing covers various timeframes from short-term to long-term, even within what might seem like contradictions such as "shorter longer term." In the context of trading, assets are typically dealt with in a shorter term compared to traditional buy-and-hold strategies. Trading tends to involve assets like stocks, options, futures, and CFDs, which are more exotic than standard shares. The focus is on items that demonstrate the capacity for movement, as trading involves frequently getting in and out of positions.
• 35:30 - 40:30: Risk and Return in Investing This chapter discusses the concepts of risk and return in investing, emphasizing the importance of fast price action and the ability of certain stocks to generate substantial returns in a short period. It highlights Nvidia as an example of a stock that can perform well quickly. The chapter also explores alternative investment strategies, such as trading property and using property options to engage in sophisticated trading without owning the property. It emphasizes that the focus is on short-term investment strategies.
• 40:30 - 50:00: The Importance of Advice in Investing The chapter highlights the significance of seeking advice in investment strategies, focusing on the transaction costs involved in short-term investments. It discusses how certain taxes, like stamp duty and capital gains tax, can significantly impact returns, especially when buying and selling properties within a short timeframe. The chapter emphasizes careful evaluation of these costs to determine the viability of a trade or investment.
• 50:00 - 53:00: Combining Trading and Investing This chapter discusses key aspects of combining trading and investing strategies effectively. It emphasizes the importance of choosing assets that not only show movement but also have low transaction fees to optimize profit margins. Additionally, the chapter highlights the advantage of leverage, particularly with instruments like stocks and derivatives, which can enhance potential returns. The discussion also notes the necessity of operating businesses within a tax-efficient structure.
• 53:00 - 54:00: Conclusion The chapter discusses the dynamics of volatile versus less volatile trading assets. It is noted that a small movement in a volatile asset can result in a significant impact on the position. The conversation suggests that more volatile assets, like stocks, are preferable for trading compared to bonds or property, which are less volatile and slow-moving. The central theme revolves around the risk versus reward paradigm in trading.

💰📊🚀Trading vs Investing: The Truth About Making Money | Andrew Baxter Transcription

• 00:00 - 00:30 so risk and reward to me is more likely to be determined by the skill set that you're going to have because if you don't know what you're doing everything is risky and the rewards are going to be pretty low so if you're someone that's going to be working with an asset that's faster moving you need to have a sharper set of skills and I don't just simply mean in terms of your ability to analyze so if you can read a chart you know support resistance volume couple of moving averages Ballinger bands RSI all the technical stuff there or you've got a good grasp economically on the fundamentals and the impact it might
• 00:30 - 01:00 have on a stock or sector well that's going to stand you in really really good stead so you got to have a skill set but number two you need to be able to be decisive because the window for decision making on something that's short term is far smaller than something that's a long-term type proposition hey guys welcome to this week's money and investing show this week we're looking at the perennial debate trading versus investing what are the differences what are the similarities and can you do both there's
• 01:00 - 01:30 plenty to take out of this it's not just about the stock market it's across other assets so don't just take notes make sure you take plenty of action we'll see you in the show hey guys welcome to this week's money investing show with me your host Andrew Baxter and as always my co-host and offsider Mitchell renal AB good to be here put the gloves on because we're going to be talking about trading versus investing today differences between both risk rewards time frames assets can you do both which one is better for you these are all major questions we'll cover today's
• 01:30 - 02:00 episode how's that for a segue I like that and look I've always like trading and investing I've seen as interchangeable terms because they're really about the same thing it's getting your money working harder in a way that you're comfortable with um to to get the outcome you're looking for but obviously there are some massive distinction so let's start with trading uh because yeah some people see themselves one or the other without actually realizing or really fully understanding or perhaps even having a a misunderstanding of what the difference are between them and we've done both anecdotally speaking so we offer some personal examples
• 02:00 - 02:30 throughout trading if we talk about the major difference from investing I think it comes down primarily in my mind to time frame absolutely think of trading I think shorter term that doesn't mean every single day it could mean four to 6 weeks for example yeah look it's very rare you and I agree on something but I'd have to agree with you 100% on that that the primary difference between them is time frame and then from time frame other things fall out like assets which I'm sure we'll talk about SO trading a lot of people oh trading is all super shortterm
• 02:30 - 03:00 you could be a day trader I've been a day trader um is it a very effective way of making money not really and I'm not talking about my personal experience I actually had a reasonable run at it the stats show that well over 95% of day Traders lose money and then about 3% break even and about 2% actually make money and part of the reason for that is you have to be so close to the market day trading is we in and out on the same day H and there is a particularly sort of unique set of skills skills that you
• 03:00 - 03:30 need for that which is very much not nearly everybody it's a very very small number of people can do that but trading isn't just about day trading it's about getting in and out of a position over a relatively short period of time now who you talk to about long and short periods of time will vary massively for some people a week is a long time others a year is a long time others A decade is a long time so everyone's got their own point of reference for trade uh for for for time frames I think realistically for trading I think anything under two months is what I would consider as a a trade just to give us a a working
• 03:30 - 04:00 timeline for this conversation agree and and then within that it could be extremely shortterm to medium-term to to to to longer short term if that's not an oxymoron gotcha so assets within trading right so we've established it typically shorter term when I think of trading I think more of assets like stocks options Futures cfds slightly more exotic than your standard Buy and Hold shares right well because you're looking to get in and out of something it's got to be something that can move
• 04:00 - 04:30 you've got to have a fast faster price action that said you can have stocks I mean think of Nvidia that have the ability to put on you know substantial amounts of money in a short period of time so you could trade stocks too they're not uh they're not uh excluded from this list where it starts to get harder when you've got slower moving assets that aren't going to get the job done that said you can trade property you can even use property options to Trade property without owning the property if you really wanted to get to a level of sophistication but certainly shortterm so it's going to it's going to be short term it's going to be an asset
• 04:30 - 05:00 that has the ability to move and because you're intending to get in and out of it in a reasonably short time frame one of the things you've got to be really minded of and this helps determine whether something is viable for trading or investing is you got to look at the transaction cost so you could buy a particular property for example and the transaction cost is quite prohibitive to move in the short term because if you think of something like stamp Duty for example that's going to take a really big bite out of what you've done if you think about capital gain STX it's going
• 05:00 - 05:30 to take a really big bite out of what you done assuming you're not organized in a more tax efficient structure so the the the asset needs to be something that moves but it also needs to be something that has low transaction fees so that the margin the profit margin is there for you and and I I suppose to an extent what also can make it attractive is if there's an ability to use leverage in there to amplify uh the return too so you you spoke about stocks derivatives they have the ability to be geared up in
• 05:30 - 06:00 in in plenty of different ways where a relatively small move in the underlying asset can be quite a big move in in the position in itself so the tener of the conversation you would say that more volatile assets traditionally or volatile stocks for example within the equity space would be better for trading I I would as you say very find it very hard to trade bonds or Trade property because they're typically less volatile and slow moving that then poses the question of risk versus reward when it comes to trading look I think if you've
• 06:00 - 06:30 got a level of and do you know something I want I know how organized you are as a person I'm going to switch up the syntax of where we're going with this conversation let's talk about skill set first of all okay all right and then come back to that point if we may so if we can park that for a minute so risk and reward to me is more likely to be determined by the skill set that you're going to have okay because if you don't know what you're doing everything is risky and the rewards are going to be pretty low so if you're someone that's going to be working with an asset that's faster moving
• 06:30 - 07:00 you need to have a sharper set of skills and I don't just simply mean in terms of your ability to analyze so if you can read a chart you know support resistance volume couple of moving averages Ballinger bands RSI all the technical stuff there or you've got a good grasp economically on the fundamentals and the impact it might have on a stock or sector well that's going to stand you in really really good stead so you got to have a skill set but number two you need to be able to be decisive because the window for decision making on something that shortterm is far smaller than
• 07:00 - 07:30 something that's a long-term type proposition so it's about okay I've looked at the chart or the news flow or read the tape or whatever particular form of analysis that you like to look at and this to me ticks the box I like in my trading process and I've done the work in developing my trading process I'm getting in now now if you compare that then to the journey into buying a piece of real estate for example where you might spend several weeks because it's also a less liquid Market there's
• 07:30 - 08:00 less stock there's movement all the time with real estate you might be looking in a particular suburb or area or building for that matter where there's slower stock movement into there something might come up and you might be doing a due diligence comparable sales or or whatever it might be so it can be a slower moving it might be an auction at the end of the month you haven't got to make that decision there and then in which case it doesn't command that decisiveness around a process it still needs you to be decisive but with a bigger window to to consider that
• 08:00 - 08:30 decision if that makes sense so in regards to skill set then you know that's something that a lot of people would think this is only reserved for people who have been to University or who's a professional investor that's not necessarily the case I mean with Australian investment education that's what we do every single day right exactly right that's empowering Everyday People to be able to make these kinds of decisions and in fact and and I say this to someone that's got plenty of letters after my name the worst background sometimes you can have is steeped in Academia where it's all about the logic
• 08:30 - 09:00 and the theory versus someone that's going to just roll the sleeves up and it it it's met the criteria I look for and take the decision I look at some of our best clients their tradies and Farmers um typically versus someone that might be uh further along the academic Spectrum in terms of professional qualifications and they can be much slower in terms of their their decision-making because they want to see much much more empirical evidence before they do something so anybody can learn this it is a set of skills they binary skills it's other a trade or it isn't
• 09:00 - 09:30 there's no maybe it is it either is or it isn't if it's a maybe move on to something else and Away you go which then I guess leads us back to risk and return yes so the risk and return opportunity in a trade I would suggest in many instances can sometimes be lower than that of an investment because you're exposed to Market risk for much shorter periods of time you if you think about the stock market over every 10year period there's going to be a decent retracement if you're only in the market for a few weeks your probability of being in during that two weeks of
• 09:30 - 10:00 retracement out of a decade is a much smaller land mine for you to step on versus someone that's across the market for a significant period of time that said if you're someone that's across the market for a significant period of time you'll probably ride out that landmine going off versus someone that's trading is going to feel the pain fairly immediately because they're likely to exit and realize the loss there and then so there's a different risk return profile on their driven by time frame that said I think Traders typically are more in tune to risk management rather
• 10:00 - 10:30 than just simply buy hold and and let it ride out so in many respects the risk adjusted return can be a little bit lower for someone that's more active in the way that they're managing their portfolio yeah and I think skill set has a big determining Factor on this they interrelate quite nicely because your skill set allows you to tailor risk and reward if you know yourself you know what your skill set is you can then ratchet that up or down and that that's going to decipher time frame asset class what you're doing in there as well I I'll give you a real example of this
• 10:30 - 11:00 um we did a an advertising campaign oh was it 20 2023 which is if you had 30 Grand in the bank what to do with it I end up doing this trade with a couple of clients we end up buying NAB which is probably my least favorite Bank out of my least favorite Market being here here in Australia and it was to prove a point that even if it's a stock you don't like you can make some good cash out of it and I wanted to demonstrate what you could do holding NAB for a year versus holding it cash at the bank and at the time I think interest rates were like 5% on cash deposits and sadly the time 23
• 11:00 - 11:30 you know the cost of living was rising at about 6 and a half% so your net return was negative if you're holding cash so going through this examples we're going to try and hold this for a year my goal was to make about 16% over the year holding NAB stock so got into it picked up a couple of dividends doar 67 off the top of my head in dividends over the period of time I was in the trade sold call options over this trade and my whole goal was to be in and out of it at 16% within the year everything is moving along nicely it was well up into profitable territory and then the conflict in the middle East kicked off
• 11:30 - 12:00 so conflict in the Middle East is generally not great for markets there's a bit of volatility over the short term so I then bought some protection for that position so I sacrificed one month's worth of income to buy two weeks of protection to guarantee strong word to use but to protect and guarantee the profit that that trade was sitting in Conflict didn't kick off and escalate it went on for a long period of time but it didn't escalate in terms of its impact on markets ended up closing out that trade for 15.9% over seven months
• 12:00 - 12:30 so got out a bit early it's close enough to 16% now what I've just spoken to there if someone's not being educated on the world of investing particularly in the strategies that we use most of that would seem like go double dutch how can you protect gains and have a guaranteed gain on something where you can and this is why education and skill set is so so important because what that enabled me to do is to produce a great decent you 16 15.9% over 7 months is a pretty decent return by most metrics with Capital protection in place taking
• 12:30 - 13:00 away my downside risk that only comes from knowing the game that you're playing it's a specialist out of knowledge again it's the sort of stuff that we teach and that's quite different to someone that was an investor so I made what I wanted out of the trade I moved on now alternatively if we change that into an investment that stock has proceeded to move higher and higher over time and if I'd held it for the long term over say two or three years I would have made maybe 30 or 40% out of that particular stock by holding it for 3 years but I was content over 7 months to get that money worked it in the way that
• 13:00 - 13:30 I was after and so for someone taking that 2 or three year view that pullback which was a middle eastern crisis you would have just ridden out and come out the other side with a bigger net number but over a much longer period of time I wanted to take that money put it somewhere else get it working harder which I did y so they're really different philosophies but the goal is the same is to is to have peace of mind be able to sleep at night but actually make some money on the way that's about investing before we do that though just quickly personality types it's really important because there could be plenty of people out here listening saying which one should I lead which one should
• 13:30 - 14:00 I lead with when I think of trading psychology best personality types people that are particularly achievement driven because it's going to fuel on that exercise of learning more and developing a skill set which is necessary and secondly people who are detail orientated and very disciplined yeah security type personalities you think about the thought this recognition achievement security and social would be as a very blunt breakdown of the four major yeah um personality types when you look at this particular and you're right if you're if you're if you're an
• 14:00 - 14:30 achievement driven person you're going to work on Building Systems and discipline and skills because you you're driven to get to that next level yeah the interesting people in that group that would surprise many I think are the security-driven because often the security driven people are the quiet people in the room that sit back the the the almost the opposite corner to the the the recognition driven types who talk a lot about something but aren't necessarily as successful so these are the quied Achievers in the corner and generally speaking in in my experience through you a funds business hedge fund
• 14:30 - 15:00 business things like that is you need that balance of personality types you need your achievement driven drivers that are going to build systems that work very well and then hand those systems on to security-driven people that will follow them to the letter the most diligent focused people and we've got that balance in our office very very clearly very nicely and it works beautifully because you're using everyone in the skill set or the lane that they're designed to now at home you may not have the opportunity to have access to to those resources other than
• 15:00 - 15:30 through our team for example but understanding what your personality type is is I think not going to make you a better Trader or investor but it's going to make the journey much smoother for you because you'll be able to pursue that journey in the lane that suits you the most and it's kind of like if you're in a car and you're listening to the radio sometimes songs come on that you really like and you might sing along to and other songs are going to come on I can't wait for this one to be over I hate this song it's all music and it's all designed to entertain you but some
• 15:30 - 16:00 of it resonates with you and some of it doesn't so when you work out what your personality type is it's going to enable you to stay in the lane that's most suited and most enjoyable for you to follow that way it becomes a pleasant journey rather than one where you're listening to something that annoys you can I share a story with you you probably don't remember because it involves both of us just before I started here when I was working at the gym you may remember you said we got on really well you say go and look at my website come back next time I see you and tell me about it so I actually went away and the first thing I did was take the my financial DNA test and I remember
• 16:00 - 16:30 when we caught up next I said I'm an achievement driven or achievement based Trader and you said okay because that was also your personality type let's have a chat on the couch and I remember that vividly as being the very first thing I ever exposed to in stock markets with you and here are multiple years later and do you still bu the fact that you're an achievement driven TR 100% 10 times over and what have you built in the team around you in terms of the other personalities yeah we've got the complete different areas I think we've got a security base we've got achievement base and I would say we've
• 16:30 - 17:00 got a social base in there as well yeah I think that's right too and those things go together recognition I know this is an emission there and that's not a bad thing because you talk about personality types that can nail this and and and I do I remember that's making me feel older now because it doesn't seem that long ago but it's a number of years ago now seven years uh there you go um recognition driven Traders uh uh can be can be hard workk to manage because for them the the the the ability to talk to people about the fact I'm in the market I'm doing this I made this or I lost
• 17:00 - 17:30 this yeah is where they get their significance from and and unfortunately they're not the best foundations for longer term success because the motivation isn't about the outcome the dollars and cents in the account it's about the recognition of that outcome whether it's a really big loss or a really small one oh sorry a really big uh uh gain or a really big loss and I had this firsthand one of the private clients I used to coach over in the US um serious hitter like serious h position size minimum million dollar
• 17:30 - 18:00 position on any TR right and um I used to fly over once a month he paid me very very well he had enormous success in his business and lived there I remember the I used to meet him at the West in at Los Angeles airport we had a border him there we'd go and do our day and then I'd fly back to Australia we'd have din i' fly back whatever we did this for quite a period of time and one day he said why don't you come by the house so I I got a an Uber down to to where he lived at Manhattan Beach and as we're pulling up I thought yeah I didn't
• 18:00 - 18:30 imagine he'd live in an apartment and we' pulled in and then I realized it was his house and it sort of reframe things so very successful but he he he was a a massively recognition driven Trader and so for him trading was his little bit of fun so he could talk to his mates at the Country Club and the golf club a thoroughly nice guy I might add like a genuinely nice person and for him it was just about the recognition if you had a win his would always be bigger if you had a loss his would always be bigger and it was his absolute Nemesis and the
• 18:30 - 19:00 way I was able to I'm not going to say fix him because he he didn't need fixing he just needed some guidance which was with somebody of that sort of stature is quite hard to do yeah so what we put was a limit on his account biggest position he could take was 10 grand same trade right different dollars that changes everything so cranky I've got I said doesn't matter until you get that consistency and get yourself reigned in where the trading is for the right Reason Not So that you've got bragging rights um and it took us a little little while and then he got it and then we started to rescale again and it really
• 19:00 - 19:30 re it really changed his journey because then it was okay I get it the recognition I get now is how close to my trading plan I stick and he's had a long-term success since and just incredibly nice guy a lot of tell had a pretty good frequent fly membership back I was going to say in and out to LA in a day that's fairly pretty fair income yeah well worth it and and good to spend time with that guy to gave us this story today after all there you go and forone listening to this my financial DNA take the test cuz that's an absolute cracker let's move on now to investing so investing we've established difference
• 19:30 - 20:00 to that of trading major difference point of difference I should say rather is time frame so we think of investing slow moving Buy and Hold stocks property bonds those kinds of assets right 100% And I guess the attributes of these are that on the grind they they perform quite well um on the grind but you've got to give them time to grind time in the market not timing the so property is a really good example and look yeah you can lock out with property and pick an area where there's a subdivision going in or there's a new mine opening or some factor that kicks it along but generally
• 20:00 - 20:30 speaking that will be an example of a longer term asset also of course given the transaction fees around that is not something you can buy and sell that quickly uh without you know ratcheting up some pretty decent stamp Duty and capital gains which we both do as professional Traders I might to for our listeners we we do plenty of investing in property to right it's not property or shares it's property and shares you have to have both and I think this actually will bring us to a really nice conclusion on this I just had an idea what we've been chatting away um similarly with stocks if you've got you know blue blue chip portfolio of shares
• 20:30 - 21:00 and it's not blindly holding Blue Chip shares for the sake of it but if you stocks that are exposed to good sectors um that perhaps pay a dividend that covers a holding cost for you for the year and you're just going to sit back and let them do their thing and some people that are that would be more recognition driven as as an investor by think oh that's really basic anybody can do that the end game here is to make money that's let's face it that's what the end game of this whole exercise is doing is getting your money working for you and creating a gain so so if you take an investment approach and I've
• 21:00 - 21:30 fallen on the wrong side of this so this is a personal story where I havn't been on the right side of the Ledger and that was Netflix and I closed out of Netflix at that 270 bucks and thinking I've just killed cats I've traded this right the way through I was selling puts ex selling calls trading it quite aggressively this Stock's tapped out it's now $900 a share so if I have just sat back as an investor in that stock and left my left it to its own devices I would be Head and Shoulders ahead of where I was when I was Trading stock and that's not to say I'm a bad Trader I'm
• 21:30 - 22:00 pretty reasonable Trader but my view on that stock versus what it actually did weren't aligned and so being an investor can be extremely profitable too it's not that trading is where the excitement and all the decent returns are and a lot of the movies will sort of dramatize that very effectively for you you can make a heck of a lot of money out of other things I had a property in London that I should have sold and I didn't and I just held and held and held and held and held and that thing blew the roof off yeah because I had the patience to sit there and even when it had made a good return
• 22:00 - 22:30 not get the emotional fomo it can't go much High I sat and let that thing go and go and go and go and go and and and that was an insane property transaction for me it's probably one of my just thinking back now arguably one of my better overall returns in my property investing i' had some great property investing that one in particular singles itself out because I sat back and just let let the suburb do its thing and become gentrified and everyone wanted to be there and bang oh she went there's a lot of discipline involved with investing we associate discipline with a Trader in front of a
• 22:30 - 23:00 screen but I take the same example I've got I bought a house maybe 3 years ago as an investment property now recently I've had it valued and it's valued at far more than what I paid for it now the Temptation is oh great I can sell it and go and buy two I can do this I can do that then you actually think about it and you say this is what I'm paying tax this is what I paid for stamp duty this is what I've paid for someone to manage it actually the net return is not that great so stick to the plan don't sell it never sell it and You' be better off in 10 or years time and that's the same
• 23:00 - 23:30 with stocks or property you've got to just sit back and let time do its thing very much so and time is you talk about skill set you know to to adjust your risk and reward time is a great way of smoothing that over too you know and if you if you take you know long-term returns from markets might be 10 11 12% and as a Trader you might have those Spike highs in there where you pull a bit out but you could be on the wrong side of timing too so yeah I'm not averse to investing and I think property is a very good example of that I also have a a portfolio of of of listed
• 23:30 - 24:00 Securities not necessarily shares a lot of them are ETFs some of them are shares um particularly for my kids so every birthday I'll buy a slab and and you talk about trying to time the market I don't these orders just go in on my kids birthdays to buy a block of stuff yeah and I'll sit back and hold that and that's it and it's just an accumulation portfolio and my goal from that is that you know that that's going to be a great portfolio for my kids to not inherit but to pay for my retirement for me um and and uh and so on and and so you know the
• 24:00 - 24:30 level of sophistication on that yeah there is what I pick obviously I'm not playing pin the tail on the donkey I'm picking stuff that I've got a pretty concrete view but I'm also looking through a lens which is very different to my regular approach to markets where how I feeling about this in five or 10 years time in terms of what's behind it you are long-term macro factors that are going to drive this and if there are then it's a perfect hold and if it's something I'm just trying to time a little run up on the back ahead of an announcement it doesn't qualify for that portfolio totally so risk versus return
• 24:30 - 25:00 Then AB we know that the risk adjusted return for trading can be quite short sharp and fairly profitable investing we're looking at the long-term game so something that just ticks along you're probably going to ride out some bare markets or some pullbacks but spending 23 years time in there should prove to be fairly profitable look I I think you've got to have a lens and and and you know Tony Robbins talks about this extensively one of his books about trying to time the market is really hard the flip side is if you are coming into retirement and you've got a portfolio that's been a you
• 25:00 - 25:30 know bottom left top right charge and you think you know there's a there's a risk of you a pullback in the market a GFC or something like that you could give away 30 35% of your portfolio it's a 35% income cut and retirement not fun so do you close out and if you do you can almost guarantee it will keep going up and you've missed out on stuff and if you don't you line yourself up for that pullback in the market and we talked about the importance of skill investing isn't an unskilled space either because you've got to put money in you've got to have the fortitude to to leave it there and the self-d discipline that goes alongside that so where those skills as
• 25:30 - 26:00 a Trader can parley into what you can do as an investor is not as similar to what I talked about the NAB trade previously if you're in a position that's been on a really really strong run what's to stop you buying some put options to protect from the downside in that portfolio might cost you a couple of percent to do that but if you zero any downside risk the peace of mind that can come with that is priceless so being an investor you can still engage in some of the tools that we have available to us in our kit bag as traders to take long-term
• 26:00 - 26:30 trades and use trading tools to then adjust the risk profile of that and that makes enormous sense to me and it's something I've done you multiple times uh across Holdings that I have too yeah I think even something as simple as getting advice on an investment so say you've held a bunch of properties or a property for 10 20 years get some advice on what they might be worth and how you might be able to structure and sell and do whatever it may be I think even even just touching Bas like that yeah when I think about personality types too with
• 26:30 - 27:00 investing just to make a transition I think personality type someone that's fairly patient would be a classic investor right I think that's that's an important thing someone that doesn't make kneejerk knee-jerk reactions is critical because the time frame is not one uh for making neej reactions and to your point about getting advice could not I'm agreeing with you a lot today this is maybe my personality type is becoming more agreeable as I'm getting older must be that sang grea we had for breakfast so if you talk about something
• 27:00 - 27:30 that's a slow moving asset like property for example and you've held it for 10 or 20 years you go okay maybe might flick it and sell it some of the things that to consider on advice might be well number one is the zoning changed for where this property is because you're always looking to maximize the yield on the land space that you've got so if you're going to sell it if you go okay I'm in great position here I've got a a three-bedroom house I'm going to whack an extension on the back and turn it into a four house which moves it into a different price backet or maybe the
• 27:30 - 28:00 council have relaxed things because of work from home or an aging population where I can whack a granny flat on the back of it or at the back at the bottom of the yard because you know things have changed or maybe now they can subdivide a 900 square meter block into two blocks of 450 and I can put another dwelling on there by a side access or whatever it may be failing to explore those options has got the potential to cost you millions of dollars and it's been this beautiful slow moving long-term asset that's gone up in value and then at the 12th hour you've gone I'm going to get
• 28:00 - 28:30 rid of it because I'm wanting to put my money into something else or you know the yield on it when I'm renting it isn't that exciting anymore there's so much more value in that asset and again this comes down to what we talked about which is skill set or education or knowledge and it's having the the the education to say I'm going to ask an opinion on this or if you've got the skill set to yourself to work out what the zoning has changed to we just talking a very simple example on on a property and and it can be a game changer on that you know and and I've
• 28:30 - 29:00 seen this so many times I've done this with development where we used to um we bought a block of units it was 10 one better 10 two betters we bought the whole block and the intention was to convert the the one betters into two betters that was the whole plan and then having bought it and started that process the zoning changed in that particular suburb was in Melbourne and I was able to get three more dwellings on that property now this particular one had two Street access so one of the street accesses we put in a townhouse in
• 29:00 - 29:30 the Gap that was there and then we had approval to put another story to put two more dwellings on the top that had city views so all of a sudden you've got a really nice development that you've done this is a 1970s block that i' bought ugly duckling got it renovated so it looked mint extended the ones to twos the car park we sacrificed a number of car parks in there because few and few people drive cuz the tra that runs there and most people don't want anyone use public transport we put a stacker in the car park anyway so there still our barking available if you needed it and then took that empty space it was two
• 29:30 - 30:00 Street access to whack on a whole new development which pure profit two on the top pure profit by getting advice from someone that said you realize the zoning has changed and you can do this now now I wouldn't have known that and I've done a few of those and I rate myself as I I got an idea what's going on and that would have cost me so much money because that was all that was the the biggest chunk of the profit in that deal crazy and that's as an investor yet eliciting skills and advice from people and having the you know he talked about personality types not having an ego where I already
• 30:00 - 30:30 know everything and actually being open and humble to say hey what else can I do here whether it's your accountant whether it's a zoning consultant or whatever it may be a broker to look through your portfolio as we do for our clients you know people come in with a portfolio will help them with a spring clean we we say look use that for your tax loss this year get the benefit of the loss this year because it's it's a dog with fleas or get more of this or unlock the cash flow in that or whatever it may be getting advice is is is crucial and you're a Trader or an investor it can make a massive difference to your outcome so as we come
• 30:30 - 31:00 to the conclusion here I'm pretty sure we can agree on this one finally AB is that trading and investing you can do both absolutely I think you need to because you know if you wanted to put a a sort of conclusion around it the the kind of view I have is that trading is my cash flow generation and my assets are where I want to store my wealth so you use your strategies in the trading space to create the Surplus cash flow to buy more assets that are more passive in the way that they run and they of course spin out income but nothing like what
• 31:00 - 31:30 you're able to pull out of this and then you keep growing your asset pool based on the spin-off from the flywheel over here on the trading side and when you put it together like that it's a really powerful left right convers uh combination not everyone has a skill set for both not everyone has the appetite for both but in fact most people can do both if they get the right Knowledge and Skills hey that's what we do day and day out is teach those very nice we did say put the gloves on so left right good night thank you very much for the advice a segue out's even better than the segue in this time no comment cheers I'll see
• 31:30 - 32:00 you next time cheers there you have it guys make sure you like comment subscribe most importantly hit the notification button and we'll see you next week