A Plain English Guide To Investing w/ Andrew Craig

Transcript

Unknown Speaker  0:01  

The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.

Christian Rodwell  0:19  

Welcome to Episode 174 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders. And I'm joined today by our founder, Mr. Kevin Whelan. Hello, Kevin Cruz, good

Unknown Speaker  0:29  

to be with you again.

Christian Rodwell  0:31  

Yes, and we've got a great episode today we have Best Selling Author of the finance book, How to own the world, Mr. Andrew Craig. And this is not a new book. It's been riding the charts for for several years now. Over 15 105 and four star reviews. So many amazing comments. And Andrew is a man with much to share, and we'll hear from him today. Yeah, I

Unknown Speaker  0:56  

mean, it's great to hear seasoned authors passionate about their subject eloquent in the way they can disseminate that and break it down into bite sized pieces. It's the art of a great teacher when you can do that. And Andrew does his absolute best to demonstrate some of those lessons for you, our listeners. And I think, given the value and how much he has to share, Chris, we need to get out of the way and let them just share it.

Christian Rodwell  1:26  

Yeah, absolutely. Before we do that, just gonna let our listeners know that we've got one more Academy webinar coming up in 2022. And that's Wednesday, the 23rd of November. So if you are looking for a community support, and really a structured process to help you build wealth to move from a place of financial insecurity to financial independence, then please do join us on Wednesday. 20 says Kevin and RB live on that webinar, we're going to be walking you through our nine step recurring revenue roadmap, and hearing from some of our members and showing you how we can help you to put that plan in place for 2023. Cool, okay, so let's head on over to our conversation today with Mr. Andrew cray. Andrew, welcome to wealth talk today. How are you?

Unknown Speaker  2:13  

Very well, I'm alright. Thanks, Christian, apart from the broken foot that I told you about when we were just having a discussion, but no, really good. Thanks, and delighted to be on the podcast.

Christian Rodwell  2:22  

Now. It's great to have you here, Andrew, and our listeners have been looking forward to this very much, and your book, How to own the world has been around some time. And I think I was a bit late to the party. You know, I didn't realise until actually not too long ago about this fantastic book. And

Unknown Speaker  2:40  

you're probably quite lucky, because the third edition is quite a lot better than the first edition. That's

Christian Rodwell  2:46  

right. I'd be interested to hear kind of the potted history in a moment. But I think your message really is all about simple investing, right. And by managing your own money, you'll be able to achieve higher returns and save 1000s of pounds in fees and charges. And I'm really helping anyone with this, right? Even if you've got a small amount, like 50 pounds a month is just how to learn how to invest better. So I'll ask you, Andrew, if you could sum up the principles of the book in just a few sentences, how would you do so?

Unknown Speaker  3:12  

Oh, that's a tough call. Well, I mean, I think that one of the first things is that investing is for everyone. Absolutely everyone. And it's important to distinguish investing from trading. And I think one of the big problems we have these days is that people go straight past investing into trading, particularly younger people, and they don't they conflate the two, they don't realise the difference. So the message is really that focus on investing, everyone should focus on investing, and it's a tragedy for our society that you know, an insufficient number of people invest in, what do I mean by investing? Well, investing just means doing something sensible. And actually, there's a huge range of things you can do. But if you do something sensible from the minute that you can free up a little bit of capital, maybe in your late 20s or early 30s, ideally, and if you do you invest in something sensible, every month by direct debit from that kind of age from your late 20s, or 30s, for the whole of your life, the sort of you know, there's tonnes of academic empirical evidence to credit this this statement, but you have a very, very good chance of becoming quite significantly wealthy. And so you know, that that'd be lies, the big picture top down, Isn't it a shame that financial literacy is really poor? And hardly anybody actually does that, you know, a vanishingly small percentage of our society does that the Americans are a little bit better about it than we are but but to be honest, even in America, probably not enough people are properly investing in property learning these skills. And then if you like, the second big picture thing, which is why it's called How to in the world is, you know, investing is notionally scary, you know, the reason that people destroy their wealth every year by being in cash ISIS, which you know, the moment are underperforming inflation by many percent, which guarantees the destruction of your wealth is because they're scared of the stock market. And you know, a big, big part of what we teach is you don't need to be scared of the stock market or investing. There are a couple of lenses look through what one is and why it's called How to in the world as if you if you see investing as a holistic, basically all assets in all major geographies that you have a geographical and an asset hedge. So in a year like, oh 70809, where the stock market halves, gold's up 20%, it was up 19 and a half percent in 2009. In dollar terms, oil hit an all time high in the middle of 2008 when everything else was plummeting, and it's the Rothschild family, Harvard and Yale University's Oxford and Cambridge universities, all the sort of smartest wealthiest people in history have invested in this own the world way. And the other corollary to that is, if you do that, if you basically set up something sensible to capture all major asset classes in and when I say all major geographies, you don't have to finesse it any more than basically the US, Europe, and Asia. And if you do that, in what are all major major asset classes, were basically shares property bonds, bonds is a bit of a sticky one, but interest rates cash, let's call it cash, and commodities and you know, the other the other core asset classes. And if you do that, particularly if you do it regularly, every month, so from your from the first time, you can invest until the time that suddenly you wake up and go, goodness, me, I've got a huge pot of capital I could potentially live on now. You know, that is a very kind of sleep at night way of approaching your finances. And the tragedy is that so few people are doing that. You know, one of our biggest battles is, that is human nature is, you know, fear of missing out. I mean, the stock market is the only thing or financial assets are the only thing in people's lives where they want to buy more when the price is high and less when the price is low. Is it like psychologically, and we all know about that, because everyone else is my mates made loads of money in crypto or, you know, oh, you know, there's been a massive crash the stock market that's already at, so I'll never do that again. And of course, that's psychologically the opposite of what you should be doing. And that the antidote to the waiters or immunise yourself against that thought process is just to learn enough to be confident about the long term outcomes of multi asset, multi regional investment, be very confident do it every month with a certain percentage of your your income, and in the longest time with your wealth. And you know, the smooth effects of that over 20 3040 years, there's a great book called The Millionaire Next Door, which is I'm sure many of your audience have read. And it makes the point that, you know, the very significant majority of millionaires are normal people who do this. And actually, the flip side of that is 70% of lottery winners are bankrupt within five years of winning the lottery. And there are 150, premiership footballers who are bankrupt having, you know, ridiculous amounts of money and any number you know, Boris Becker has just gone to prison for being bankrupt and lying to the tax authorities. I mean, it Well, long run wealth generation doesn't require massive income. And there are lots of bankrupt celebs who had massive income, but never learned this stuff. And there are lots of people from every stripe of every walk of life, who are millionaires by the time you know, even if you start on your late 20s, you can be a millionaire in your 40s, even with relatively conservative assumptions. And I always say it's a 20, ideally, a 30 or 40 year journey. Anyway, sorry, that's, that's a bit of a long, rambling answer as ever, but that does broaden its own the world all assets or geographies due every month. And then the final thing I will say, to continue my long rambling answer is, it's really important to ignore the news. The biggest rookie error in investing, not trading is oh, you know, Liz trust has been sacked. And, you know, the, the investing returns are negatively correlated to to paying attention to the news, if you understand the sweep of 200 years of the relevant equity markets and decades of human progress is the most important investing theme in history. And that's 59% returns and US equities since 1872. Notwithstanding what's happened this year, or what happened in 99 2011, and oh seven, or eight or nine. And if there are 2030, or 40 year investment horizon of your life, you just ignore the news and genuinely do that. Blah, blah, blah, blah, blah. And you said something sensible that you will make far higher returns than most people are either not investing in their in cash, ISIS, which is a disaster, or they're investing and then freaking out, because there's going to be recession I need to sell, you know, that's the worst possible approach to investing the best possible approach is just something sensible every month from your 20s or whenever you can afford to do that for 20 3040 years and you will be a millionaire. I mean, that's, that's the mathematics so just really intractable and empirically even with even on an average wage investing about 10% of what you save each month into the market and doing it sensibly over many years. You will be a millionaire or certainly you will end up with a high six figure pot at the very least. Sorry, I hope that so there you go with the minutes

Christian Rodwell  9:52  

no, that's fantastic. I mean, just what you're saying now about the term state you know, reminds me of the richest man in Babylon, right very small, simple book, which just as you know, fundamentals, which still apply today.

Unknown Speaker  10:02  

Yeah, absolutely. I love that that books have been in quite well, the version I had was written in quite amusing sort of Victorian language for it, you know? But yeah, exactly. Those are those I mean, that one suggests is a third, a third, a third, isn't it, you spend a third, live on a third and save a third, which I appreciate in this day and age seems pretty challenging. But you know, that hasn't been said, if you start with 10%, in your 20s. And gradually in charge, if you have, if you have a decent career, and you are quite successful, and you don't, you know, fill your fridge with champagne and spend 50 grand a year on holidays, or, you know, on credit cards, which seemingly lots of people do if you if you are able to live within your means, and be careful, even in the cost of living sort of situation like today, certainly by the time you're in your 40s or 50s, and you've had a decent credit, you can have higher saving rates and 10%. I think most people can if they really try.

Christian Rodwell  10:51  

Yeah, and that's the point, obviously, you mentioned in the book is about this term financial surplus. And you know, you have to kind of design your life, don't you to be able to put some aside.

Unknown Speaker  11:01  

Well, and it's, you know, there's only as you start getting into very political territory here, everyone's like, Oh, you know, you're right wing libertarian, and, you know, whatever else, but one of the exams always uses, you know, there's the sort of famous Buddhist monk in their orange robe with a wooden bowl of rice has nothing economically, literally nothing, right. And yet, you'd like to think most Buddhist monks, the Dalai Lama is quite content with their life. And so it's sort of slightly weird of chasing savings, I think, if you calibrate your life out of the gate from, you know, when you're a teenager in your 20s, well, and you've just calibrate your life in a way, that gives you a little bit of surplus, and that surplus can increase over time. And look, it's really hard when you're a student, and you've got student debt, everything else. But you know, life is a marathon, not a sprint. And I think, you know, even if you if you find something that position in your late 20s, just a small 25 quid a month for for your 20s. And then bumming it to 50 quid a month, 100 quid a month as you get older and older. And if you have any kind of career success, and you and you have that mindset, then you can get much bigger numbers by the time you're in your kind of late 30s, and 40s. And if you do that for many, many years, all of those 25 credit months that you did when you were 2526 27, working in a bar, or whatever will be, you know, with the power of compounding will be worth actually quite a lot. By the time you're 35 and will then be compounding still and that you know that the power of compounding is another key point in the book, which I know your your audience is very familiar with.

Christian Rodwell  12:26  

Yeah. And we've obviously emphasise the point. Law, you have the Andrew about, you know, time is is is is the key here. What about someone listening now who's already in their 40s or 50s? Or 60s? And feel like I've missed the boat here? What would be your advice for them?

Unknown Speaker  12:43  

Yeah, I mean, in 40s, I think it's fine, you know, but I think decisions needs one of the things we send our book, which, in my book, which is quite controversial is one of the options if you find yourself not being able to save and invest is to move apps, I mean, in all seriousness, like, it goes to the point of calibrating your life so that you can find some surplus for equity investing, because if you if all you have is cash and property, you're fundamentally imbalanced and your overall through your life returns are not as high not likely not to be as high as they could have been. So that's pretty radical. I don't think anybody therefore is right. You know, again, this sounds if you are if you find yourself in a really tricky situation, your 60s, and you've just, you know, as sadly, because we're so bad at financial education in this country, far too many people have done and then that's the other thing to say is, you know, the state pension system was set up in 1909. For anybody over the age of 70 when life expectancy was 47. So there were almost no people claiming a pension and millions and millions of people paying into the system. And now that's obviously flipped on its head head and the demographics mean that the government's simply no matter whether you're left wing or right wing, or Labour or Tory, or whatever, it's just if irrefutable maths, the only with, you know, why are we Why do we have such high inflation rates today, because the government's printing money that it doesn't have to pay out all its liabilities that you know, that nobody has the electoral strength or bravery to say that we just can't do this anymore. The system doesn't work the way it did when it was set up in 1909. And, you know, through the 40s 50s 60s, you know, it's much easier rather than standing saying, Look, this whole system doesn't work. It's easy to go with, we're implementing a programme of 100 billion pounds worth of QE and honestly, you know, because like John Maynard Keynes says, not one man and a million understands inflation, right. And it's all cut. That is what's coming back to bite us right now. I mean, I personally think that hope is not lost, because we'll maybe come on to this. But you know, real economic equity value creation happens from technological innovation and human progress. And I think that could ultimately kind of save us and create enough wealth to show that not everyone's living on cat food for years, but But you know, we are in a period of dislocation now, people are really experiencing that. But so but if you are, you know, if you are in your 60s and you've really never been able to build up the part and the venue Looking at the state pension and thinking, Oh, God, what a horrendous life. This may sound like a sort of naive and amount of things to say. But one of the most uplifting ideas, I think, in the modern age is that there's a guy called Kevin Kelly, who founded Wired Magazine, the kind of the number one tech magazine in the world. And he wrote an article in 2008, called 1000 true fans. And it, I would, I would exhort anybody to read that article who's kind of finds himself in financial dire straits, generally, because it basically it says that unlike any other time in history, the Internet gives us the option that the opportunity to access a long tail of, of you know, we're in the old days, basically, whether it's record companies, or lawyers, or whatever, they were gatekeepers that owned the market, and you know, 99% of the money went to the top 1% of companies, and if you weren't IBM, or you know, Tower Records, or GM clutching brands out of thin air, but you know, now like never before, up, if you have 1000 people willing to pay you a fiver a month for something through the internet, you know, a newsletter, or podcasts or whatever, that's 5000 pounds a month, you know, they're willing to pay 20 pounds a month, you know, everything, do the maths. And rather than thinking about getting away for an employer that might make pay you 40 grand or 30 grand, or whatever it might be if you get to a certain age and stage and you have skills, and you have knowledge and you're relatively dynamic, you know, you I know that one of your seven pillars is business, right. And I just think that it's actually notwithstanding the constant Whoa, that we have in the press about how dreadful everything is in Ukraine and Liz trust and what, you know, it's never ever in history been easier or cheaper to set up some kind of online business that might actually help you financially. And so so that, you know, you need to read books, you need to figure out how to do things, you need to write a business plan. I mean, that's the other empowering thing is, there's an awful lot of money out there in the world. And people with money have never been more challenged with interest rates as low as they are right. And inflation as high as it is to find real returns on their money. And I always say we have an entrepreneurs group, but we always talk about the fact that you know, the fastest route from a which is not being very happy with your life and being in trouble financially to be which is the reverse of those two things is to learn how to write a business plan. Because if you write a business plan that can pay you a wage, and you take it to, and it's compelling enough to telegraph to some angel investors or some high net worth individuals, that they will make a return that's above inflation, then then you can literally one business plan can change your life. And you know that sorry, I've probably got slightly off piste there. But I know, I know, business is one of your pillars. But we genuinely believe that, you know, maybe it's not for everyone. But it's an

Christian Rodwell  17:41  

agree and IP, right, we've all got IP, we've all got that experience knowledge. And as you say, if you can package that up into something that's valuable, then there's an opportunity.

Unknown Speaker  17:50  

Although I can highly recommend not relying on finance books. Even though how to own the world. As you know, one of the best selling finance books in the UK, I almost burst into tears when I see the you know, that is my publishers like congratulations, you're at wherever you are in the league table of finance authors this month. And then I just my eye goes across the page of the Nielsen unit numbers and I look at Nigella Wilson and Jamie Oliver, and think I really shouldn't be writing about food. But that in itself is very indicative. Like British people will spend untold millions on books about food and like pasture. And you know, whatever Nigel Nigella Lawson's latest cake is, and they won't, they won't spend any money on thinking about their finances. And like, ultimately, I mean, I like food as much as the next person. But ultimately, you know, learning about finance is so much more life affirming and so much better for your long term life experience than being a good cook. Yeah, it just literacy we sell 1000s of the number of copies that they sell, right? Finance authors and food authors. No, no, no, sorry, another another red herring.

Christian Rodwell  18:58  

That's nice. Okay, and just so much that I want to speak to you about so, you know, we've got we've got lots to cover, but it's interesting. Now, you mentioned your publisher, obviously, they're, you know, they take their cut and you mentioned the music industry and that was my background I worked at EMI and was in music industry for 16 years so you know, seen how that has changed massively and the independence you know, the independence that artists have now with that, but let's talk about fees in the financial world because fees really are the sort of Silent Killer one of the silent killers right. So, you know, what are your thoughts on this Andrew?

Unknown Speaker  19:31  

For us, it is actually quite a nuanced subject because you know, like anything else in life, you know, if you pay peanuts, you get monkeys, right? And so So whilst in my book, I have been very clear that if you can, if you acquire enough knowledge and you have enough confidence and particularly to start early enough, you start young on your investing journey, you don't need to have a financial advisor and you can do very, very simple stuff. You know, basically buy the market every month by direct debit in with an investment platform like interactive investor or Ha bell or Hargreaves, Lansdown or whoever else it might be, or Vanguard. And if any of you do that on autopilot for years and years and years, you will accrue loads of, you know, a really, really good amount of capital if you are doing every month you're putting your fingers in your ears ignoring the news and all the people in the pub telling you there's going to be a recession, you know, there's almost no correlation between financial market performance and real economy performance. By the way, recession, there's always a massive lag, it's completely uncertain. It's one of the great fallacies that there's going to be a recession, therefore the stock market will crash. That's basically there's there's a very, very scant relationship between those two things, which is another sort of rookie mistake people make. But in so that's one option. That having been said, though, there's a pretty well known, there's some well known researcher says the average person with a financial advisor retires with about 40,000 pounds more than the average person without a financial advisor. Now, that is a figure, which you should be quite suspicious of. Because just the tyranny of statistics, I use statistics and training. I mean, because obviously, if you correlation and causation, right, if you are the sort of person who goes and looks for a financial advisor, you are likely to be a wealthier person who's more interested in financial advice than somebody who doesn't even know what financial advisor is. So that obviously skews the numbers. But I do, but I mean, our whole my basic vision on that is, you know, dare I say, if you read my first book, How to own the world, you and your yarn, and you've got lots of time on your hands, you should be able to implement a perfectly sensible investing strategy, which saves you a lot of money on fees, because you don't need a financial advisor when you're 25, or 30, or 35, probably. But the older you get, you know, if you if you have managed to build up to 345 600,000 pounds by the time you're in your sort of late 40s, early 50s, let's say. And if you have children, particularly their inheritance, tax considerations, and now you've got property and you know, your affairs much more complicated. I think at that point, it's probably very good, it's probably sensible to use financial advice, and the fees are probably worth it. But you just you have to be very careful. I mean, the key thing is to understand what you're paying, and what you're getting for what you pay, and the difference between a financial planner and a financial advisor. But you know, you can do 30 years of just building being having a sensible thing in place and building your part. But when you get close to retirement, that, you know, financial advice is probably worth it from good financial advisors, because they'll save you, you know, and they'll save you significant amounts of inheritance tax by optimising inheritance tax planning. Yeah, just that alone is probably worth a few grand, right. Yeah.

Christian Rodwell  22:32  

Now, we've touched on pensions. You know, a little bit already, I've heard you refer to this black cloud pension crisis ahead, Andrew. And the question you get asked about, you know, should you put money in your ICER? Or should you put it in the pension? Any words on this?

Unknown Speaker  22:47  

Well, I mean, I often say that big picture as a society, and I'm talking about like global society, certain Western developed capitalistic societies, we're in a race between Mad Max and Star Trek, as in, you know, that things are so bad in terms of how badly run, you know, the West has been Britain, America, you know, Western Europe, for many, many years. It's not, it's not so bad in certain parts of Asia. But well, although Japan's bit of a balance sheet disaster and national balance sheet disaster, but but, you know, we we literally could have hundreds of millions of people confronting a retirement of utter poverty, because the government can't afford to fund them, and they haven't legislated for it themselves. So that's the kind of Mad Max, you know, post a dystopian future of like war over resources. And that, you know, frankly, that's the sense we all get when we contemplate Ukraine, and the cost of living crisis and the environment and all that, but, but actually, my genuine belief is that, as always, for the last several centuries, it's human progress as rising on the white horse to rescue us, right? Because it's human progress that solves all those intractable problems, like the environment. And, you know, Ukraine is a bit of a different situation, because those security matters are always, you know, something different, there's not much to do with economics. I mean, impact impacts us economically, but, but, you know, if we have enough companies doing enough wonderful things, and solving enough of our problems, like environmental degradation, or clean power generation, etc, etc, enough, in the same way that Apple, IBM, Microsoft, you know, out Google have created trillions of dollars of real wealth, and, you know, high speed trains and new buildings, and there's trillions of dollars of real wealth, and in the last few decades, has made the life a lot better for a lot of people in the world, if not in Western Europe and America, if we carry on that trajectory, and ultimately, technology can save us and technology can sort out that pensions crisis. They can because everybody's pensions and equities and equities, create trillions of dollars in new wealth. Well, that will save us. I think that's probably a few decades away, or at least one or two. And so in the meantime, yeah, we have a we have a pretty bad challenge. But to your question about the currency and ISIS and pension Ultimately, you know, I think a lot of people in the general population think the pension is some sort of monolithic thing. You're either in a pension or pension. I mean, a pension is just a tax wrapped account with which you can do any number of things. And so, you know, for most people, that the judicious use of pension and Eisah to shelter tax in different ways, is the optimal thing to do, as long as what you're actually investing in, in the pension and the ICER is also sensible. And, you know, so we just we teach people to be mindful of the of the right mix, and, you know, will, will the UK government's thought so Argentina in 2008, nationalised all pensions, so any private individual in Argentina had been saving all their life and a pension, goodbye, their money was gone to the state? With could Britain do that? And I don't know, I mean, maybe a future government will do that if things really go the wrong way. But which is why I think if you're young, you know, in some ways ISIS might be a good place to start, if you think about filling the pot ISIS first and then but but then again, if you have an occupational pension with a generous employee who matches your contributions, plus the taxpayer, you know, but the key thing is just knowledge. If you understand what a pension is, and what an ICER is, and your own personal circumstances, then you can, you can optimise the two and most importantly, put the right investments in both of them. Because as you know, having a pension is not much easier if you're making 2% a year and in an inflationary environment, 10% a year, but having a pension and having a clue. And actually, knowing what you've invested in over 40 years can make a massive difference to your life, right?

Christian Rodwell  26:36  

Yep, yeah. I'm enjoying it very much. You've alluded to the future, I'm going to come on to that in a moment, Andrew, because I know that that's a topic very close to your heart. And also, the second book that is, is kind of almost complete. So I'm really looking forward to hearing about that in a moment. But there's two more kind of assets I just want to talk about with you. Before we do that. One of them is property, because many of our members and we know everyone in the UK, right? Has this love affair with property. But property has been a great asset class and has helped many people reach financial security, financial independence, but you've got some quite strong views on property, and also an interesting formula, which, you know, really is quite a simple formula that you believe most people, you know, not really aware of when it comes to evaluating when a property is cheap or expensive. So would you mind sharing that for us?

Unknown Speaker  27:28  

Yeah, I think the thing about property is, I often get people pillory me for being like a massive property bear, which is just not true at all. All the only point I want to make about property is like any other asset class, you should just know, you should understand the basic metrics with which to interrogate whether something is expensive or cheap. And also one of the biggest, one of the most fallacious things about properties, particularly in the UK, is people don't think about property in real terms. They think about property in nominal terms. And so just to explain what I mean by that is, if you sit there and say, I bought a house for a million quid 10 years ago, and now it's worth two, you know, 2 million quid or whatever. How much is the value of the pound depreciated by in that time, both because of inflation and on global currency markets, right? So a 1 million pound house, let's just keep the masses and say you live in a part of the UK where a million pound house 15 years ago is still a million pound house, because it's not like Notting Hill in London or, you know, hot bits of Leeds or Aberdeen or, you know, what, if you're just in a place in the UK, we're probably not. And there are places in the UK where this is true, right? Where properties basically, almost gone sideways. And so you bought a million pound house 15 years ago, and it's a million pound house today. Okay. Well, 15 years ago, that million pound house was a 2 million US dollar house. Okay? Because it was $2 to the pound, it was your house was a $2 million asset in global purchasing power parity markets, like 80% of the world's stuff is traded in dollars. Like most of the stuff we buy, wheat, cotton, you know, copper, oil, everything right? So people go what is not relevant what it is absolutely irrelevant to life. It's why we're going through cost of living crisis right now. Part of the reason for that is because sterling is in such a perilous place. Right? So okay, so it was a million dollar house, it was a $2 million house 15 years ago. What's the cross rate dollar pound today? 112? I don't know. But let's just say it's a $1.1 million house, in dollar terms in the currency in which 80% of stuff is traded, you have lost $900,000. So everyone goes, Oh, I've already have a million credit still with me, but you're down $900,000 In terms of purchasing power of that asset for stuff that matters, which is why when you go to the supermarket at the moment, everything seems so egregiously expensive, like what's going on? So a very few people think along those lines, and you need to think about along those lines if you want to be property sophisticated about how you think about an asset class. Now, then the second thing, of course, is inflation. Because if inflation is 10%, and your property is a million quid There needs to be 1.1 million quid next year to stand still. And most people when they contemplate the development of their property as the property prices are not sufficiently accounting for real inflation. So it's like, okay, great, you bought a house in London in 1975, for 100 grand, and now it's a million quid. But then in 1975, the average salary was 10, grand, you know, in London, I mean, you know, and a car was like 300 pounds, and the pint was 10 P, and a Mars bar was one P, or whatever, you know, whatever it was, but people and I obviously, unpack all of that in detail the book. So when you think of property, of course, in many parts of the UK, particularly property has significantly outperformed real inflation. Today, it's been a great asset class in many parts of the country. But that's had a lot more to do with interest rate markets, you know, with mortgages, and with the decline in interest rates over the last 20 years than anything else. And obviously, that's now going into reverse potentially, I mean, we just saw it yesterday, you know, interest I mean, who, and that is, if you're contemplating property, and you're not thinking about where so the long run average of of us tenure for the last 50 years is 6%. And it's been as high as 13 or 14%. Right? So So, so the average of interest rates are 6%, which still half where average interest rates could be, you know, and what does that mean for British Property prices? Well, it's pretty scary, to be honest. But you know that, but that's so my that my basic position on property is just just when you go into property, be very careful that you model the cost of money potentially being very different in the future, what is today, which is happening right now, account for the further value, think of your property in dollar terms probably is the easiest, or at least in gold terms of spirits as that sounds, if you actually look at the, the price of gold versus the price of property, it probably tells you a great deal more about what the real value of British property is, than looking at it in terms of pounds, certainly, in terms of pounds. And so you know, if you do that, and it still looks good, then go for your life. Because of course, the other thing about property is, it's one of the very few assets where you can borrow money. So you get that gearing effect, which you can't get in a lot of other areas of investment. But you know, Gearing is great if it's going in the right direction, but it's really bad if it's going in the wrong direction, as lots of people discovered in the early 90s. And you know, many times before in history, so sorry, that again, the basic point is just make sure you're conversant with all these ideas before you, you know, a tragic thing that you see so much of is that are working both both both husband and wife, and a couple of working really hard, you know, Nanny looking after the kids dawn till dusk, really, really tough jobs. And between both of them spending more than 50% of their post tax salaries across the two of them to live in a house at these interest rates. I mean, that's just asking for trouble, right. That's that. And I just think it's tragic that we are so obsessed with property in the UK that people are willing to, like, maybe not be as ambitious about their house that they live in, you know, and that because that, I only say that because our motivation is, you know, we want to improve the financial affairs of as many people as possible. And the reason for that is because the second order benefits on your finances is you're much happier in that it's nothing less than that. So why make yourself potentially miserable by just sort of risking things at low interest rates? And anyway, yeah, sorry, I didn't want to get on that on like, but I'm not just an unrequited bear of property. I just think it's really important. Think about real and real versus nominal inflation, cross rates. And you know, what might happen to interest rates?

Christian Rodwell  33:36  

Notice interest interesting. And I think one of the things that attracts people to property and is definitely a great thing is the recurring income and that regular predictable recurring income on a monthly basis from rentals. You know, how do you compare that with the markets in terms of being able to actually create cash flow that you can spend and live your life on a regular basis?

Unknown Speaker  33:57  

Well, yeah, but that, that's great, if you've got your model, right, and your, you know, your rental income is, through the cycle it more than the cost of money and all the other costs attend, and like void periods, and new boilers and everything else, right. And, you know, in a rising market, everything looks rosy with interest rates, you know, 2%, or whatever, but they look very different with interest rates and 6%. And when also, you know, the economy is really challenged, and you can't find tenants as quickly as he used to in the past because everyone's unemployed, right? I mean, and as soon as you build enough resilience into your model to cater to those risks, you're fine and properties, great, but I just I worry that a lot of people don't right. But then in terms of that competitive market, well, you know, they are very different things. And of course, we again, we talk about owning owning the world means all assets in all geographical regions. And the thing about the market or going back to what I said earlier is, you know, very few people know, if you say what does the stock market return? Well, the US stock market the s&p 500, and that before 1956 or 97, it was the s&p Wish there weren't 500 companies back then. But the s&p go back to 1872 Between January 1870 to 1872. To be clear, 1972 and December of last year, the the annualised performance of the s&p was 9.23%. Right? And, you know, that's through lots of periods of inflation being very low in periods of inflation being very high. But that's the top headline number, right? And, like, if you if you think about how do you mean 9% returns pretty interesting return, right it and, but most investors only make 5%. Most of the most people who knowingly invest in the stock market, because they sell it highs, sorry, they sell it lows and buy it is because of the fear and greed dynamic. And they don't take themselves out the equation. They worry about the Gulf War or Libyan refugees or whatever, and it forces them to but but if you want to get near to that 9% return, which is a great return, then you need only buy every month for a long, long, long period of time. Now, that doesn't really help you in terms of cash flow, but it does help you in terms of wealth generation. And now you only need to do that with a relatively small percentage of your assets. Right? So yeah, it's different. It's different property, and it's a different part. But if you don't have that Prop, then you're likely to suffer from what we've what many commentators will underperformance risk, if you're not if you're not getting into the juicy returns, you can get from equities, the long run returns, and you have to wear volatility. You know, stock markets do crash by 50% or so every 10 years or so. And but that if you're buying every month, that doesn't matter. Because you know, last month you bought 1500, now you're buying at 666, and then 710, and then 900 until about the s&p and Oh 709. So it's very important that you have your system, you know, you're doing your long run, and you're buying every month to smooth those returns. But yeah, the market is very different to, to property with a wonder one of the things to say about that is, so one of the ideas we talked about is called 100 minus your age, which is a very simple and elegant way of legislating for that market crash problem. Because if you're 30, and you've got 10 grand and the market crashes, you've got 10 grand in the market. Now you've got five grand, that's annoying, and it's a little bit of a setback. But if you're 60, and you've got a million quid in the market, because you've got to create a great career and you've got a big pension, and it's in the market, and there's a fifth don't crash, you've got half a million quid, you've just lost half a million quid, those are two very different problems. And the way to get around, you know, as you get older, you need to be thinking more about the return of your money, not the return on your money. And the simplest and most elegant rule of thumb to deal with that that we talk about is 100 minus your age, which is simply that you subtract your age from 100. And that tells you what percentage of your assets should be in defensive assets. So you know, basically, if you're 60 60%, your assets should be in defensive assets and 40 should be an aggressive assets. And if you're 30 70%, coming in aggressive and aggressive is the market, the stock market, and 30% should be in cash or some kind of defensive assets, which is very hard with interest rates at 2%. Because that means it's kind of an underperforming bit of your but I've written about this a lot. But yeah, so demand the market won't give you I mean, you can you can you can get dividends from the market and at certain points in the market cycle. You know, the footsie is famously high yielding the total return of the footsie is I think the dividend yield the footsie about 4% at the moment. So that plus whatever you say in terms of top line performance is quite interesting. But I think with all of this, the simple thing is, is to just make sure you look at everything holistically, you have the right allocation to the right parts and the right timeframe.

Christian Rodwell  38:37  

Yeah, yeah. And without kind of going too far down this route. But would some potential cash flow strategies be trading or options?

Unknown Speaker  38:46  

Yeah, and that's fine. But we spend a lot of time talking about the difference between trading and investing, as I said, the beginning of the call, because Investing is for absolutely everyone. And it's a complete tragedy that, you know, far too few people in Britain know anything about or think about investing. You know, it's a tragedy for those individuals. And it's a tragedy for British society, because the more people invest, the fewer dependence on government, you know, the more likely people are to become wealthy, the more capital there is for companies doing innovative things. And it's a tragedy, we were really bad at that. Option, strategies, all that sort of stuff is fine. But I think you need to be sophisticated, you need to, you need to really understand that there's a lot of work involved in anyone, I always say, there's anybody who tells you, you can learn to trade and five minutes a day, they can trade in five minutes a day, because they've been doing it for 20 years. But I always say it's at least in a level, probably a degrees worth of knowledge to get good enough to be to protect the downside and actually make enough return in absolute terms. And that's the other point about trading is the biggest rookie mistake, which we've seen so much in the crypto market in recent years is somebody with two grand going Oh yeah, I'm gonna get into crypto and I'll make 100% a year you know, making 20% a week. I mean, just it boils my blood to be honest because it's so many Desinger and use people suggesting that's possible. And that's going to be real. You know, there's somebody was posting the other day that the making 20 20% a week every week. And I avoided that because I try and stay on message. But I felt like saying you do realise that mathematically, if you make 20% a week, every week, within a few years, you will have all the money in the world, you know, is that your Is that what you're suggesting that you're going to achieve? Because you're not going to achieve it. Because none of these people ever talk about the week they were down 10% or down 20%. And it makes me very angry that people are allowed to say that without being regulated. Because if you're talking about crypto or FX trading, you'd only be regulated by the FCA. And you can say whatever you want. If I say anything, I'm regular, the FCA my, everything's recorded for six years, you know, I have to be fair, clear and not misleading, etc, etc. And that is that is a real problem, which has just caused untold misery, bankruptcies, divorces, their own say suicide, right. And that that is a big failure of the system. But but so to say it's been true luck trading is fine. Traders, traders are fine, just I think you need us if you have 100 grand, and you're aspiring to make a couple of percent a month and you're willing to commit some time to it, that's great. Because in absolute terms, you maybe make two or three grand a month from a big pot of capital. If you have two grand and you need to make 100% a month, it's a total waste of your time. And you should spend that time getting better at your job and investing, not on trading. And I feel very passionate about that, as you can probably tell, because it is a tragedy that the you know, so many kids are watching tick tock and having really disingenuous people suggest to them that Kryptos will do this. And because they use unqualified language, they say you'll get you know, we'll do this, we're all going to be millionaires. And it's either, you know, in 99, in the.com, boom, the Internet was going to change the world. But 90% plus of the companies involved went to zero, and the crypto will be exactly the same. There will be massive crypto winners, which are the apples and you know, Microsoft and Google's of crypto but nobody knows what they are yet 90 plus percent of them are gonna go to zero. If the if the lesson of 9090 thousand.com is anything to go by. Yeah, yeah.

Christian Rodwell  42:06  

So much that we could continue to talk with there. But I really want to kind of switch gears a little bit, although it's not really switching again. But certainly looking now to what you've been focusing on more recently. And of course, you know, own the world then how to own the world up that's over 10 years ago, right when that the first so it's about time right for a second book. And I know you've written other books as well, but and your next book, our future is biotech. Tell us a bit more about this. Yeah. So

Unknown Speaker  42:31  

I was really, really honoured to I got a partnership with a boutique investment bank in at the end of 2014, where I got to specialise in biotech life sciences companies. So you know, medical devices, companies trying to cure cancer, surgical robotics, companies with blood tests to diagnose cancer instead of horrible invasive surgeries on generalists. I mean, just world changing, inspiring stuff. And I used to, I met so many companies in the world in the eight, I've now been focused on that stuff for eight years. And I've just met companies where you almost get goose bumps when you meet them. It's so thrilling, and it's so exciting. Because of that, I've spent a lot of time just looking big picture at all the new biotech. You know, Jennifer Doudna, won the Nobel Prize in 2020, for a technological CRISPR, which is a gene editing technology, which is, I mean, anybody wants to spend a bit of time reading the books, Walter Isaacson is a very famous biographer, published a biography of her physical, the code breakers thing. It's called on the floor over there. But anyway, so super excited about the sector. And when I decided to quit, I decided to resign from that job just over a year ago, to work full time on payments, violence and everything I'm doing and part of what motivated that decision, which is pretty significant personal financial risk for me like giving up a job and getting to do my own thing. But I did get a book deal with our publisher with the publisher of Hathaway in the world for a new book called our futures biotech. So I've written a plan. This is what this is, the book is going to be in it and how about that and I am, as you many of the audience will be aware of Yuval Harare, he wrote a book called sapiens and a book called Homo Deus was a huge so he sold something like 30 million copies of those books is like the biggest nonfiction. Author publishing success of the last decade or so, so slightly cynically suggested to my publisher, who's the target market for this book, our futures visor, anybody who's bought UVA. They gave me a book deal. Let's be fingers crossed, we sell it, we sell it for you. I don't. Obviously if we sell 30 million, I'll be very happy. But we'll see how we go see the readers give us some pre orders in fullness of time where your audience, but no, but it's really exciting. I've spent I literally went through 115,000 words on that book, like the other day, and I'm inching towards delivering the manuscript to the publisher. And we're gonna hopefully publish it next year. But the basic insight is that you know, how I said earlier, human progress is the biggest investment thing right? human progress is what has driven those 9% returns of US equities. So and that's been supercharged by the internet by smartphones, you know, that sort of, if you like the last century's be about physics, about about, you know, transistors and aviation and automotive and, and this, the next century is going to be about biotech for a very simple big picture reason, which is that you create value economically by solving human challenges. So you want to fly, where you create a lot of value by creating an aeroplane, right? You know, you want to move vast amounts of wheat and beef and all around the world, you create value by creating the supertanker industry in you know, 20 fun tankers and the automotive industry in everything else. And most of the problems we still confront as a species are problems of biological systems. So most obviously, in therapeutics, that's like, there are a lot of people who die of cancer, you know, that early onset dementia, Parkinson's disease, diabetes, obesity, loads of psychological disease, you know, autism, all that, where we have a whole bunch of modern plagues now that we're all living longer. And so companies that can solve those problems will create enormous economic value. And those problems are obviously they're not problems, you can well, there's convergence, because obviously, processing power is really important for for this sort of research. So it's the convergence of tech and biotech. But it's, it's the exponentially developing science, Nobel Prize winning science, that's going to, you know, gives us a real shot of curing cancer, and rolling back all sorts of other real real problems in the next few years. But biotech is also going to be crucial for a lot of things that aren't to do with curing disease. So rolling back environmental degradation, clean power generation, processing power, biological computers that use DNA instead of zeros and ones, you know, that's a real thing. It's, it's not science fact, is increasingly looking like science fiction. You know, Arthur C. Clarke, the guy who wrote 2001, A Space Odyssey famously said that any sufficiently advanced technology is indistinguishable from magic. And I've seen a lot of magic in the last few years that, you know, there's some really amazing stuff coming down the pipe, it doesn't get much coverage, because it's kind of you only read about it in like New Scientist or whatever. I think a lot of these technologies is gonna go quite mainstream in the next few years. So I'm writing a book about it. And we are, I was really fortunate this week, the Financial Times very kindly, right, I wrote an article about another plan we have, which is, we're looking to float a company on the London Stock market called the conviction life sciences company, which basically is going to invest in a bunch of companies that are delivering everything that I'm talking about. And I can't I can't say any more than that. Because until we published the prospectus for that, which is going to be imminently. I can't talk about it, or explain what it is in any more detail. But but but you know, basically, yeah, that's it's finishing our futures, biotech my next book, it's just this belief that it's the next leg of human progress is going to come from biotech. And let's hope you know that because, as I said, at the beginning of the book, there's an article on my website, you get to the opinion, page of planes finance.com, the most recent piece is called our futures biotech. And it's got the first chapter from from the new book. And, you know, one of the points I make is, it's not just about economic value creation, for curing cancer, it's actually just a really positive and empowering way of looking at the world. It's the, you know, if these in the likelihood that we have a Star Trek future instead of a Mad Max future, because, you know, we can cure disease, so our obesity and autism and diabetes and, you know, in terms of rolling back environmental degradation, it the things that biological biotech companies will be able to do to agricultural productivity in the next couple of decades, could mean that we could rewild more than 90% of the land that's currently used for livestock farming. It's very Star Trek, right. But that, that almost in one swoop gets rid of, like a third of our greenhouse gas emission problem, you know, and these technologies could and so everybody's sitting here, you know, Greta tunberg, the world is screwed, and, you know, shouldn't have children because everything, you know, it's we've never been more pessimistic as a species. Like when 6% of Americans think the world's getting better, only 6%. And like, 4% of Western Europeans or some horrible statistic like that, when in actual fact, there's a there's real hope that these technologies will make all of our lives longer, safer, healthier, but you know, we could all we could all be running marathons at you know, and I know that sounds crazy, but it's no crazier than one of the examples I use in the book is, in the 1850s, when the railways first started going out and about in Victorian England, There were articles written in the press, about railway madness, and they basically said that if you went if the human body went more than 20 miles an hour, it could result in madness, or death. And all these Victorian ladies Okay, well, I couldn't possibly go into Writing sort of rubbish, vignettes of Victorian ladies. But anyway, it was a very real concern. If you'd said to a Victorian, no, this is only five generations ago, whatever it is, by the way, if you go to China in the year 2020, and Japan, there will be millions of people travelling at 200 miles an hour, every single day of the week, all over both of those countries, China and Japan. You know, if you'd said that somebody in 1900, there thought you're completely insane. If you'd said to somebody in 1900s, that 50 years later, we'd have spaceships be putting people into orbit. And you know, people would be regularly routinely flying around the world in aeroplanes, they would have thought you were completely mad. And so and I genuinely think biotech is on the cusp of delivering a lot of really magnificent progress, which will make all of our lives so much better, and might just might solve the pensions crisis, because it creates it, you know, if we cure cancer, we deliver cert like robotics for elderly care, you know, we deliver it massively improved agricultural productivity in places like India and Indonesia and Latin America. It's gonna just be an architecture, you know, better buildings, buildings that that power themselves from solar, and there's so much to be positive about, but so little of it makes it in the public consciousness. And that's what are my little mission is at the moment is to put it all in a book, and then to try and, you know, do something about it in terms of a fund as well. Yeah, yeah. Sorry. That was a really, really, so got. No, I

Christian Rodwell  51:32  

was gonna say, so definitely, you know, head over to plain English finance.com. Because there's so many great resources there. You've got a community, obviously, where you're in there helping your members as well, Andrew, so So that's a great place, download that chapter. And when's the expected release date for that book?

Unknown Speaker  51:47  

So I said, LM manuscripts are the publisher of this Monday morning. And so can you can you read this now? There, there are two or three little sections left for me to finish with, because now I'm focusing on this IPO we're doing on the London Stock market for the next month, December in January is when I'm going to get back to top and turning it but I don't know. Because if it can take three to six months for the publisher to do the full edit and artwork and everything else. But I hope towards the end of the first half of next year.

Christian Rodwell  52:18  

Yeah, yeah. So that'd be 2023. And it's nice to end with some hope there. You know, because as you say, that, you know, the doom and gloom that the press and the media paints, and at the moment, of course, we're just in the thick of it. And, you know, it does affect people, Andrew, so I think just to, you know, round things off for our conversation today is just to emphasise that you just stick to your plan, don't listen to what others are saying. And for those that are worried about the next two or three years ahead, Andrew in terms of building their wealth, what are just some find any additional final words?

Unknown Speaker  52:52  

Well, I mean, the psychological and emotional side of it's really important, like it pays to be bullish. There's a great quote from a guy called Thomas Babington Macaulay, which is, by what's something like by what element is it that we see nothing but progress behind us and expect nothing but deterioration in front of us, right. And it's the human condition, humans have been getting better, wealthier, longer lived, politically freer, you know, sexually freer, that we've been getting nicer and better and better, and ignoring all the nonsense on Twitter and Facebook, broadly, you know, 100 years ago, or certainly 500 years ago, you're the risk that you've died in Mortal Kombat, as a man was extremely high. You know, and obviously, only 100 years ago with first of all Second World War, Vietnam War Korea, you know, Ukraine is dreadful, Yemen is dreadful, but the world is, in aggregate a much, much better, safer, you know, wonderful place we've got to the past, and how do you monetize that would have you believe in that if you believe in human progress, then you know, it's actually very simple, you just own make sure you own some equities. Because the companies that are delivering this growth in every sector of the world, the easiest thing to do is just just have exposure, whether that's to the s&p 500, which is the 500 American companies, which obviously, you know, they own a lot of earn a lot of their money outside of America, obviously, you know, Apple or Microsoft or whatever. But there's also a thing called the MSCI World, which is 1600 companies, the biggest companies in the world from America and Europe and Asia. So that's, you know, if you think that the last 50 years of American exceptionalism, maybe America's doing this, Ray Dalio, the biggest hedge fund manager and in the world wrote a book called the changing world order, which I'm sure many of your audience are aware of already, which basically said, you know, Amsterdam, Holland was the biggest power in the world, then Britain, then America, and now it's China. And so everyone should despair. And you know, I don't know, will it happen? I think there's a linear progression as well as a circular progression in history. When America to go from Britain, there was no such thing as an iPhone. So, you know, the My point is that the world changes. There are you can learn things from history, but the basis is always different because the world today is so different to the last time it happened. So who knows. But anyway, so that's it again, very, I've had too much coffee, obviously this morning, but, but basically, just make sure that you are well balanced in your finances across all assets, and whether whether I will geographies, and then you know, if you do that, and you stick to your guns, and you do it over several decades, you've got a really good chance of being wealthy. And then sadly, that message is, it's not taught in schools, you know, and it's, it's, you know, you certainly and by the way, you don't even learn it, if you do an economics degree, I can tell you from firsthand experience, so but you will learn it from my book, obviously. You said, yeah. But you know, we believe I'm a huge believer, everything I'm saying and I, in even in a small way we can help be a part of driving those innovative businesses. That's kind of why we're doing what we're doing. So sorry,

Christian Rodwell  56:02  

I'll shut up now. No, we could see your passion coming through Andrew, and really appreciate all the fantastic work that you're doing to to make your dent in the world. So thank you so much for sharing everything with us today. Definitely look forward to catching up with you again in the future. And good luck with all of your projects. And with the forthcoming book.

Unknown Speaker  56:20  

Thank you very much, Christian.

Christian Rodwell  56:23  

Wow, okay, so much, so much there. Great stuff from Andrew. And we'll dive in as we always do pull out a few of those lessons. I think just before we went into the interview, I talked about our webinar coming up on the 23rd. Kevin, just to let people know where to go to register. So it's a wealth builders don't

Unknown Speaker  56:42  

know where that came from. Yeah, it's a wealth builders.co.uk

Christian Rodwell  56:45  

forward slash Academy webinar, and join Kevin himself on the 23rd. And, alright, let's quickly go to Trustpilot. Because we don't want to miss out on the reviews we've had this week. And let me scroll through. We've had quite a few. But I'm going to pull out that and have a look here. Oh, going back too far. I saw one in particular that's coming. Oh, here we go from Andrew, who says great&