2019 Your First Investment Portfolio Report PDF

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Portfolio Report

Contents How to Make Your First Profitable Investment ———-------—---------———--———--------------—------—------------------------------———-------------------------- Page 3 The Report I Never Planned to Write ——------------------———--------------------------------------—-------------———-----------------———--------------------------------------——----—- Page 4 Introducing …The Karate Kid ———---—-------—-------------------—----------------—-------------------------------------------—----------------------———-------------------------—----------------—------------------- Page 5 Diary of a First-Time Investor ------------------———--------------------------—--------------------------———---------------------------------———---------------------------------———---------------------------------- Page 6 Round One: Setting Up ----------------------———-----------------------------------------———---------------------------------———------------------------------------------------------------------------------------—----------------------------- Page 7 CommSec Pocket ------------------———--------—-------------—---------------------—-------------—---------------------—-------------—-------------------------------—-------------—-------------—-------------—----------------------------------- Page 7 Raiz ------------------——--———----------------—-------------—------------———---------------------------------———---------------------------------———---------------------------------———---------------------------------—----------------------------- Page 9 Spaceship Voyager ------------------———----------------—-------------—---------------------------—----------—-------------—---------------------------—------------------------—-------------—-----------------—-------------—----------------- Page 11 Round Two: Making The Investments ----------------------———-----------------------------------------———---------------------------------———---------------------------------—----------------------------- Page 13 Several Days Later … ------------------———----------------—-------------—---------------------------—----------—-------------—---------------------------—------------------------—-------------—-----------------—-------------—-------

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Introducing Vanguard Personal Investor ———-------—------------------------------------------——------------------—-------------------------------------—--———--------------------------------- Page 15 After a 70% Fall in the Share Price… Is Flight Centre a Buy? ———-------——-------—------------------------------———-------—-------------- Page 19 The $100K Live Portfolio ------—--------------——--------------------------——--————--—----------------—----—--------—-----——----———---——----—--------—----—--------—-- Page 23 Blueprint Business Portfolio ———-———------———----———-———------———-----—-———------———----—————-———------— Page 24 Legal Information —————---——————-----——————————————--———--————————————--———----—Page 26

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April 2020

Portfolio Report

How to Make Your First Profitable Investment It all started with a phone call. “Scott … do you think now is a good time to get started in the market?” It was the voice of one of my customer service staff, Louise. Louise is a lovely mother-of-three in her 40s who juggles working for me with taking care of her young kids. She’s usually very quiet, and prefers to focus on helping our customers out … but, to be honest, she’s never really shown too much of an interest in the investing side of things at Barefoot. So to have her call me about getting into the market was … interesting, to say the least. Next time I spoke to Mike I brought it up: “Mike … do you know Louise is asking me about what to invest in?” Mike’s response was classic: “Who’s Louise?” (Mike doesn’t tend to join in a lot of the customer service meetings here at Barefoot, though often that’s because he simply can’t get Zoom to work.) But here’s the interesting thing: Recently my friend Alan Kohler was on TV with a graph showing that the search volume for the term “How to Buy Stocks” is at record levels.

Source: ABC News

It seems that first-time investors (like Louise) have watched the recent crash … and are flocking into the market. Perhaps that sounds like you: Maybe you’ve seen share prices fall, and feel that now is a great time to start investing for the long term. But the idea of setting up a full brokerage account and putting $5,000 into the market scares you. So, instead, you’d rather test the waters with a hundred bucks or so, and you want a simple, no-stress way to do it. Or maybe your family and friends know you’re an investor and they look to you to provide them with guidance on how to get started. If so, this report is for you. Because this month we thought we’d do something different … and take a look at some of the apps that have been springing up aimed at people like Louise — to allow you to get started in the market easily. Let’s dig in.

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April 2020

Portfolio Report

The Report I Never Planned to Write

I’ll be honest … the report you are about to read is NOT what I set out to write this month.

And, truth be told, we were planning to give you a hardhitting review of which apps were worth your time … and which didn’t make the cut.

Here’s why: Calling it straight. Pulling no punches. Barefoot style! There are plenty of ‘fintech’ (financial technology) apps out there that promise to help you get started investing quickly and easily — without going through the scary process of setting up a traditional brokerage account. Here are some of them:

And so, a few weeks ago, Mike and I went through all of them with a fine-toothed comb. Mike spent a weekend in self-isolation at his place, doing nothing but reading through their product disclosure statements (PDSs). Don’t worry, I think he enjoyed it! Whereas I downloaded the apps and had a play with them.

Raiz

Six Park

Commsec Pocket

Stockspot

But when we’d finished, the results were surprising:

Clover

Intelligent Investor

We found … they’re actually all pretty good.

Spaceship Voyager

Goodments

They’re attempting to disrupt an industry which for literally centuries has ripped off small investors. The fees are a little high for our liking, given that many of them are buying simple index funds. Yet compared to what fees used to be on managed funds … up to 3% per annum, with ludicrous 5% entry or exit fees … they’re not that bad. Especially when you consider that the minimum amounts to start investing have fallen to, in some cases, as low as $5! So for this report I decided to take a closer look at three apps which allow you to get started investing in stocks, almost immediately, with literally a few bucks: Raiz … CommSec Pocket … and Spaceship Voyager. There was just one problem …

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Portfolio Report

April 2020

When it comes to investing, I am more Mr Miyagi than the karate kid. I’m not the target user of these apps. They’re for beginners, starting out with small amounts of money. So in that respect I’m hardly the best person to review them. But … I knew the perfect person to ask. I picked up my phone and dialled the number … “Hello?” Louise answered the phone.

This sensei wouldn’t be getting too hands-on with the instruction. Louise, an intelligent mum in her forties (who has never studied investing in her life) would instead have to figure out these apps for herself and tell me about what she was thinking. I wanted to know how a true student would approach this game, without someone telling her when to wax-on and wax-off. It was time for Louise to karate-chop her first investment. Over to Louise …

I leaned in and said “Listen, I have a deal for you … ” And I laid out the details of my offer: Louise was going to become the Daniel-san to my Mr Miyagi. I would help her make that first investment she asked about — by giving her $100 to invest in whatever she wanted, using the three beginner-friendly investing apps I mentioned above.

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Diary of a First-Time Investor By Barefoot Louise

Today my boss gave me $100 and told me to go on a shopping spree — woohoo! The catch? (Because, of course, there’s a catch.) I had to spend the money on shares to try out three investment apps: CommSec Pocket, Raiz (formerly Acorns) and Spaceship Voyager. And he asked me to keep a diary of my thoughts as I did so.

Just to tell you a little about me, I think of myself as being pretty tech savvy: I can navigate my kids’ Google School account, and I work remotely for someone who lives on a farm :) But I’m not someone who can code, or do TikTok. And all these apps were new to me. So, without further ado, here’s my experience …

(Don’t worry, I still get paid for that too. Yippee!)

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April 2020

Portfolio Report

Round One:

Setting Up

CommSec Pocket By Barefoot Louise Since I do the transcripts for ‘A Beer with Barefoot’, I remember Scott and Mike talking about this one last August when it came out — Scott said he didn’t mind it! I see that it’s rated 4.5 stars in the App Store and is apparently for ages 4+, so if it’s good I’ll get my four-yearold to play too. The app tells me I can invest with as little as $50, investing in one of seven investment ‘themes’, and I pay just $2 for trades up to $1,000 without any ongoing account keeping fees, with a box below it that says “learn more about fees”. I can’t really be bothered with that right now, because I have cash to burn and want to buy my shares. [Scott: CommSec Pocket only charges you for making trades (buying or selling). It’s $2 for trades up to $1,000, which switches to 0.20% of your trade value for trades over $1,000. There are no accountkeeping fees, though keep an eye out for the ETF management fees on their funds — more on those later.] It shows me an example of a rather exciting-looking portfolio with a current value of $1,209.88 and it’s up by $82.37 or 7.31%. Well, that sounds neat. The app boasts an easy set-up: Just open an account with your CommBank or CommSec details to start investing today.

Hmm. I don’t have either of those so let’s see how it goes. When it asks me how I would like to open an account today using my NetBank ID or my CommSec ID, I choose “I don’t have either”. It says, “Not yet a customer? No worries, it only takes 5 minutes to apply for a CommBank transaction account”. Then I’ll receive a NetBank ID so I can use it to open a CommSec Pocket account … and just start investing. Ugh. So I can’t use my existing ING account. That’s a pain in the ar— never mind. Set-up ends up taking me a bit more than five minutes (and that’s without reading any of the Terms and Conditions, Terms of Use, and Financial Services Guide). I’m also not happy about the fact that I need to open a CommBank transaction account — complete with a Debit Mastercard and everything, plus a $4 monthly account fee! But now that’s done I can set up my CommSec Pocket. Setting up the Pocket account from here on in is actually super easy and all I need to do now is set up a PIN and I can make my first investment.

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Here are the options it gives me: »

Aussie Top 200 — $22.43 per unit

»

Aussie Dividends — $22.67 per unit

»

Global 100 — $74.92 per unit

»

Emerging markets — $56.70 per unit

»

Health Wise — $101.27 per unit

I’m guessing that a ‘unit’ is like a share? [Scott: These funds are actually CommSec Pocket’s names for ETFs you can buy elsewhere: IOZ, SYI, IOO, IEM and IXJ. CommSec Pocket also offers ETHI and NDQ as its ‘Sustainability Leaders’ and ‘Tech Savvy’ options. Also, I find it very odd that CommSec Pocket listed the funds to Louise by their unit price. Far more important is the underlying management fee for the ETF. The fees on these funds range from 0.09% to 0.67% p.a. — you won’t see it come out of your account, but you’ll be paying it over the long term.] Okay, I’m ready to give them some money. I transfer funds into my new Commbank account, and now I’m waiting for it to appear so I can invest. I’ll check back in later.

Louise’s Summary: Can I use my own bank account? No, I had to open a $4/month CommBank transaction account. On a scale of 1 to 5, how easy was it to set up? Tough call. Once I had my CommBank account setup it was easy, but the added hassle of getting a new bank account brought this score to 2.5 out of 5 for me. How long did set-up take? The bank account and investment app probably took around 15 minutes to set up in total.

Screnshots from: Commsec Pocket

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Portfolio Report

pril 2020

Raiz By Barefoot Louise A bit of an introduction on this one: The boss tells me this is a decent app which is very popular. As if I need him to tell me this, though, because I’m often the one reading the thousands of emails people send him asking about it! Seriously, this app almost has a cult following. So I’m looking forward to checking it out for myself. Okay, unlike CommSec Pocket, Raiz tells me I can connect any credit/debit card or bank account. So my ING should work. YES! Thank you. It says I can invest any amount, any time. Go on. Ooh, apparently I’m going to get help from their Nobel Prize-Winning Economist and there are no minimums and no commissions! Sounds good so far. [Mike: I’m fed up with this claim from managers like Raiz regarding ‘Nobel-Prize-winning’ theories. They are referring to “Modern Portfolio Theory”. And while three guys — Harry Markowitz, William Sharpe and Merton Miller — were awarded the 1990 Nobel prize in Economics for developing it, it’s a theory that has since (and quite correctly) been largely discredited by the finance industry.] I’m told it should be up and running in five minutes. Okay, Timer set. Go. I get to link a Spending Account. It mentions some of the big banks (not ING). I need to search a little harder for that option, but it’s there.

Raiz opts to automatically round-up purchases in my bank account, you need to ‘uncheck’ this if you don’t want it. From there it’s a whole lot of questions: email addresses, DOB, phone numbers and security questions. And then yearly income, net worth and … my employer? I begrudgingly enter the details. [Scott: Perhaps they're getting this data from you to sell to third parties? It feels a little ... Facebook.] I can choose my investment time horizon — less than five years to 25 years plus. I can hear Mike Kemp’s voice in my head at this stage: “25 years!” Next, I get to choose from six diversified portfolios designed by the father of Modern Portfolio Theory, Dr Harry Markowitz (did I mention he apparently has a Nobel Prize? Raiz really wants me to know that.) The options are: »

Conservative

»

Moderately Conservative

»

Moderate

»

Moderately Aggressive

»

Aggressive, and

»

Emerald — ooh, what’s that? The Emerald portfolio page is ruby-coloured and says it “invests in mainly Australian and global socially responsible large cap stocks and Australian Government bonds”.

That looks a bit boring to me, and I’ve had the kids stuck at home for three weeks, so I’m going to choose Moderately Aggressive. Under closer inspection, this

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shows it’s mainly investing in Australian, Asian large cap stocks and Aussie corporate bonds. Lock it in, Eddie! [Scott: As usual I like to look at the fees. Unlike CommSec Pocket, with Raiz you pay fees based on how much you have in the account: $2.50 per month for accounts under $10,000, and 0.275% on balances over that.] Next, I get to select an initial investment. I’m going to go for $25. It’s going to take a day to do anything, so I’ll check back later.

Louise’s Summary: Can I use my own bank account? Yes On a scale of 1 to 5, how easy was it to set up? This one was pretty easy. I’ll give it a 4 out of 5. How long did set-up take? Setup was around 5 minutes, a little bit over because it

Screnshots from: Raiz

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Portfolio Report

April 2020

Spaceship Voyager By Barefoot Louise I’ve heard about this app. We used to (and still do) get a lot of younger people writing in about it. It’s targeted at the millennial market with a lot of fancy design, and a focus on tech companies and ‘where things are headed’. Scott and Mike have suggested there’s a lot of marketing spin going on … but maybe it works? Because, personally, I already have high hopes because the logo and design look really sleek compared to the others. And it doesn’t disappoint! After entering all the usual contact information and security details (minus the intrusive financial questions), it gives me two options: »

Spaceship Index Portfolio — which lets me “invest in Australia and the world’s largest companies”

»

Spaceship Universe Portfolio — where I can “Invest in 100 handpicked companies which we believe meet our ‘where the world is going’ criteria”.

The homepage features my balance, the index unit price, and performance of that portfolio the year to date (it’s in the green at 2.7%). That’s okay, isn’t it? I browse my portfolio and I get to see all the companies I’ve invested in. The top-performing ones being Netflix, Evolution Mining, Amazon and A2 Milk. They’re all doing pretty well, up around 20–30% year to date. [Mike: No point getting excited here. Rather than focusing on a small group of outperformers, realise that the Spaceship Index Portfolio holds 200 stocks – 100 Aussie and 100 International. So expect returns over the long term to be pretty much in line with general stock market movements. But there’s nothing wrong with that.] Winning!

I decide to be sensible and choose the first option, even though I like the idea of boldly going where no one has gone before and investing in the ‘Universe’. [Scott: I have to confess, these options really aren’t bad at all — especially the Index Portfolio, which charges a staggeringly low 0.05% fee on balances over $5,000. (The Universe Portfolio isn’t far behind at 0.1%.) Here’s the rub though: according to their website, they have $50 million in assets under management. A back-of-the-envelope calculation suggests they’re making a paltry $25,000 in fees per year. You have to wonder how sustainable that is.] I enter an initial investment of $20 and set up a new passcode.

I scroll down. Down, down, down a very long list. Eek. Flight Centre down 70%, Virgin Money down 55%, Boeing, Airbus, Qantas ... [Mike: Again, this is essentially an index fund, so Louise doesn’t need to worry about individual holdings going down either.] Breathe. Just breathe. Once again, I have to wait for the funds to go through, so I’ll call it a night for now.

That was easy!

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Louise’s Summary: Can I use my own bank account? I thought I should be able to, but I couldn’t actually find an option to connect my ING, so I had to use my NAB account. On a scale of 1 to 5, how easy was it to set up? 5, it was by far the easiest of all three apps. How long did set-up take? This one didn’t promise a five minute setup time but that’s all it took. The catch is funds took a long time to come through.

Screnshots from: Spaceship

Mr (Market) Miyagi Checks In I checked in on Louise after she’d set up the apps, as she was waiting for the money to hit her accounts. “How are you feeling?” I asked. “Excited”, she said. Personally I was quite impressed with how simple these apps had made it — this sharemarket-shy mum, who previously had NO experience with investing, ...