Aussie Finance Blog

Australian personal finance news, tips and advices.

  • Personal Finance
  • Frugal Living
  • Insurance
  • Life Hacks
  • Career
  • Contact
You are here: Home / Personal Finance / Don’t Pay 5 Porsches to your Broker!

Don’t Pay 5 Porsches to your Broker!

14/12/2016 by AFB

Check out this investing video series on www.kroijer.com by Lars Kroijer, who used to run a hedge fund in London. Basically it says you can’t beat the market, and explain why that is important.

For investors from Australia the message is – “don’t invest in Australia. You already have plenty of domestic exposure”. As an example, if you buy Australian stocks for your investment portfolio, you are adding concentration risk as you are already exposed to the economy via your job, house, insurance, etc. Instead you should try to decrease the correlation and concentration risk in a portfolio by investing globally. That way you lower the risk of losing money on your domestic investments at the same time and for the same reason (decline in local economy) that you lose your job, job prospects, your house is worth less, potentially your education worth less, etc.

The same argument holds as to why you should avoid over-investing in real estate. Most people who invest in property do so in geographic areas that they are already massively exposed to (near where they live). You might find that your local Sydney real estate market decline 30%, but that potentially happens while the world equity market is unaffected (like have been the case many times / places in the past). While a 30% decline in the Sydney real estate market would be bad news for most people there then at least your investment portfolio would offer some respite from tough local conditions.

So the core message of the videos is diversify broadly and cheaply and in the long run you would overwhelmingly likely do far better than if you try to beat the market by picking a portfolio of Australian stocks.

It’s as easy as watching a cute cat video online, except it’s about index funds! But if you spend six minutes watching the first video it change how you think about investments. Also, it may save you reading 200 pages of an investment book or give you a good riposte for next time a broker calls you with a hot stock tip….

If you buy in to the message of the videos it will make investing a lot simple going forward and you’ll probably be far less confused about all the choices out there. We are all much too busy to go through all the choice so the simple message is great. The philosophy that it’s ok to not be able to beat the market will help the young saver who is too busy making headway in a career to spend evenings and weekends trying to outperform. Anyhow, it’s certainly worth 6 minutes…

The series consist of five videos – here is a bit on each:

 

Video 1: Investing Demystified – (Intro Overview – Part 1 of 5)

The Investing Demystified video series is based on the premise that most investor can’t beat the market (or pick investment funds to do so for them). Those investors should only buy world equity index trackers for their equity exposure, and can easily implement the simple and cheap portfolio tailored to their risk profile. They will most likely be far better off in the long run as a result!

 

Video 2: Investing Demystified – (You can’t beat markets or pick a fund to do so for you – Part 2 of 5 )

Far too many people believe they can beat the market – and far too few people have any incentive to tell them otherwise.

 

Video 3: Investing Demystified – (Only buy cheap World Equity Index Trackers – Part 3 of 5 )

The only equity investment you’ll need to hold is a world equity index tracker – it is cheap and diversified. Crazy yes, but it really can be that simple.

 

Video 4: Investing Demystified – (The simple portfolio to suit your risk – Part 4 of 5 )

Vary the proportion of your portfolio that’s allocated to the lowest-risk assets – cash and government bonds – to suit your risk profile.

 

Video 5: Investing Demystified – (Implementing the Investing Demystified portfolio – Part 5 of 5 )

How to select the right products for your hyper-efficient best-in-breed passive portfolio, and how to keep your strategy on track.

Related Posts:
  • Investment strategies during economic downturn
  • What to look for when deciding on a super fund
  • 3 money-saving tips for buying a new car
  • Comparing car insurance
  • The top traits to avoid in a mortgage broker
Tweet
PinIt

Filed Under: Personal Finance

About AFB

Author of a few blogs and a student for life, because there's always something new to learn.

Follow Us

  • Facebook
  • Google+
  • RSS
  • Twitter

About

This blog was started because I realised that there aren't too many Australian personal finance blogs that write about personal investment tips, insurance, choosing the right credit cards and similar topics. Let me know if you'd like me to write about something new.

Tag Cloud

credit cards credit score health insurance home loan insurance investing mortgage personal loan real estate shares stock market superannuation

Comfort Spending: How to beat the $1400 a year habit

How will the relaxed lending regulations impact Australian borrowers?

Why is Savings Considered a Financial Investment

What’s the difference between a check card, a debit card and a credit card?

The Ultimate Guide to Paying off Mortgages

Disclaimer

All content provided on aussiefinanceblog.com.au is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.

Copyright © 2021 · Beautiful Pro Theme on Genesis Framework · WordPress · Log in