Dr James: 0:41

And welcome to this live stream that I’ve been looking forward to for a little while with myself and good friends, financial planner Look Hurley. We are here today to talk about finance, of course, but also make it really tangible and really actionable for everybody who’s in the audience. Because that’s the whole mission and that is the whole purpose of Dennis, who invests to take real financial knowledge turning into something that’s easy to understand and easy for dentists to comprehend and therefore empower them to be able to implement it into their life, which is really, really, really flipping cool. So, looking forward to that. In just a minute I’m going to bring the look on so he can introduce himself and talk a little bit about what we’re going to be talking about this evening, which is what assets we can put in our eyes. So, just before we do that, really super duper interested to know how many people have made it to this live stream tonight. If you are here and in the house live at 6 30 this Tuesday evening, can you please go ahead and throw a live in the comment section so that we know how many people we’ve got here and that we are able to connect with you and also for you to be able to participate in this live stream because there will be the opportunity to answer to ask rather questions and look will answer them as time goes on, if you’re watching this on the replay go ahead type replay in the comments section so we know how many people are watching it on replay live If you’re here in the flesh watching it this evening, this Tuesday, or replay if you’re watching on catch up, then what it means is we can tailor the content towards you and the audience. On dentists Invest is even greater detail as time goes on. Whilst everybody is typing that let’s bring, look on, look how you this evening. Very good, james, very good. So, look, there were people in the audience who have met you before, because I know that you’ve done a few podcasts on the dentists invest platform. There’ll be people who are also in the audience, who are yet to meet you one of those two categories. So for those people who are yet to meet you, might be nice to do a little bit of an intro about yourself.

Luke: 2:45

Thanks for the last 10 years helping dentists make smart financial decisions. I’ve been moving more recently into the space of financial coaching, as I find that quite rewarding, and obviously we’ve been working together on putting together content in the background.

Dr James: 3:03

We have. We have certainly been busy and you know it’s interesting, look, because obviously used to be a specialist dental advisor to the dental community and there was a lot of things that inspired you to take that leap in your career, take it to the next level and become a coach, and that is to say, empower dentists to get themselves to a position where they can invest their own wealth independently. And that’s exactly what we’re going to be talking about tonight. Of course, it’s not a flip and magic one. You can’t just be like proof. Now. Everybody has all the knowledge that they need. It’s a little bit of a journey, but where we come in is making that journey straightforward and as simple as possible by taking all the information that there is in the world about the subject of finance, distilling it down to what you need to know and then, as well as that, holding it towards dentists, which is really, really flipping cool. So, on that note, look, let’s go ahead and get stuck in. What assets can we put in our asset to accelerate our financial journey? Well, actually, just before we do that, I thought it would be really interesting to ask. There’ll be, broadly, two types of people in the audience whenever it comes to finance broadly, two categories of dentists. One category of dentists will feel like they’ve got everything sorted, like they’ve got a game plan whenever it comes to the finances. Just out of curiosity, how many people who are out there watching tonight would say that they’ve got a solid game plan whenever it comes to their finances? I’m just curious. I’m just curious how many dentists fall into that category. If you feel like you’re in that category, go ahead and type game plan in the comment section. If you feel like there’s room for improvement whenever it comes to your finances Interested to know, of course, most things there is always scope for improvement. What I mean is significant. What I mean is that there is knowledge out there, or you feel like there is knowledge out there that you have yet to come across, that you believe will really help you. Of course, as I said, that is the whole point of dentists who invest. If you feel like you’re in that category, if you feel like you’ve got a lot to learn, go ahead and type improvement in the comment section so we can see how many people fall into both categories and therefore tailor the content, like I was saying earlier. But anyway, whilst everybody is doing that without further ado, look. Feel free to go ahead and take the reins. What assets can we put in our eyes? How should that investment strategy look?

Luke: 5:20

If you enable sharing, I’ll just share my absolutely will.

Dr James: 5:24

My friend is all yours.

Luke: 5:26

Okay. So I thought we’d take quite a high-level view on this. So what I’ve shared is some charts put together by a company called Timeline who are quite active in the financial planning space. They have some really great software and they’ve got some interesting things to say in terms of investment portfolios and how they put together those portfolios. So what we’ve got on the screen is the historic performance of different asset classes since 1925. So we’ve got near enough 100 years worth of data on the growth of those different asset classes and you can see their numbered and the different colors that correspond with the key at the bottom Main ones for me. We’ve got at the top, their emerging markets, ie owning shares in companies that are listed in developing economies. We’ve got global equities, ie the global stock market, global capitalism, if you like. You’ve got a growth portfolio, which is really what they’ve done there is they’ve merged together global equities, a small portion in bonds and some emerging markets. You’ve got a balanced portfolio, which is the purple line. Lots of portfolios out there are labeled balanced. In this case, what they’ve done is they’ve put together 50% in global equities and 50% in global bonds. You’ve got global bonds, gold, uk property, that is to say, capital growth, that doesn’t account for rental income. If you’ve got a rental property and then you’ve got cash ie interest on cash deposits and really the whole point of looking at this is just to see, as a comparison, how those asset classes have performed over the last 100 years and what takeaways there are to guide us, using history as our guide, to work out what we should possibly consider for our long-term investment portfolios. And again, as you know, knowing your time horizon is absolutely vital when you come to put together an investment plan. What we can see is emerging markets £1,000 invested in emerging markets near enough 100 years ago would now be worth £18 million. Incredibly, global equities £1,000 would now be worth £14.6 million. Growth portfolio £8.2 million £4.1 million. What you have demonstrated there is the power of compound growth, the growth on your growth, the snowball effect of growth over time. The longer your time horizon, the more time you’ve got for your money to compound. For me, when you put together an investment portfolio, there’s different layers. We’ve talked about this in the past on your podcast. At the bottom layer, you have the underlying assets, the asset classes that you want to, or the mix of assets that you want to put in your portfolio. The next layer up, you’ve got the funds that you’re or I should say, the vehicles that you’re going to use to access those asset classes. For most people, that’s funds which are really collective investments, so pooling money from investors and putting it into a fund where you’ll then have a fund manager or a fund management company running that money. The next layer up is the type of account you choose to use to invest. Anisa is an example of that. A pension, ie a SIP, is another type of account that you might choose to invest through. The final layer on top of that is the platform that you use to gain access to those accounts. Through those accounts, you gain access to your funds and through your funds, you gain access to underlying asset classes. The very first decision that an investor should make is what asset classes do I want to ultimately end up with in my portfolio? Asset allocation is responsible for, depending on what research paper you look at, sort of 80 to 90% of your investment returns from your portfolio. So it’s absolutely vital that you make that asset allocation decision and put a lot of your energy and focus on that.

Dr James: 9:49

Thank you, luke, for talking about all the things that you just mentioned, and you know what, when it comes to our dentistry, we want evidence-based dentistry, right Like that is the main MO that we want to operate on off. Whenever it comes to how we help our patients, we want the stuff that we know the data says works and investing is exactly the same as that, which is why I absolutely love this chart and I talk about it a lot and share it with a lot of people who, I know, want to understand more about finance, and tonight is definitely a really good example of an occasion where we are doing exactly that. So here’s the thing whenever you look at this chart, whenever you see the data staring back at you, it’s literally a measurement of the appreciation, the average appreciation of all of these wonderful assets, since, effectively, records began since the very early years the 20th century, 1920s and you know, when you are making decisions with regards to what assets should go into your portfolio, don’t you want them to be aligned with the assets which have the most historical data to demonstrate that they consistently appreciate over time at the greatest rate? Well, heck, yes, you absolutely do, but here’s the kicker why is it that most people don’t yet have a nice portfolio which aligns with this data that we see in front of us. Look, because that’s a really common one, right, and in your experience as a formerly a financial advisor and currently a financial planner, it’s oftentimes that people’s eyes as portfolios they’re not actually orientated to get them the greatest returns.

Luke: 11:30

That’s right. I don’t think they necessarily have done the planning stage. They’ve just drive straight into the portfolio building stage, whereas I always advocate that people should go through an initial planning phase where they work out what the money’s for, what their goals and objectives are, what are the time horizons that are tied to those goals, what’s their risk profiles, and that should then feed into the asset allocation decision. For me personally, when looking at asset classes, you should think of things in terms of growth assets and defensive assets. A rational investor is about finding a balance between growth and defense. So if your time horizon is shorter, then you need to be slightly more defensive, because you don’t have the time to allow your portfolio to recover should there be a temporary market decline, ie a stock market crash. So the defensive assets would be well. The prime example on there is bonds. So you’re introducing bonds in a portfolio to dampen down volatility. It’s really much sort of you’re watering down the potential volatility but, as a result, you’re watering down the potential long-term returns because historically, bonds over long-time periods have underperformed equities. So equities are your growth assets and really making your asset allocation decision is deciding how much am I focused on pure growth and how much do I need to bear in mind the defensive position of the portfolio? If you’re a long-term investor and you’re willing to set and forget, then the rational investor is going to put all their money towards growth assets as long as they’re not particularly risk averse and there’s a danger of them being scared out of their investments and making the great mistake which is selling during a temporary market decline. So if you’re a long-term investor, you’re going to tilt your portfolio towards growth assets. Global equities are a prime example of that. Equities in general, but global equities you’ve got the diversification of spreading the money over different geographical regions. And bonds really are there for emotional comfort. They’re there to dampen down volatility. For shorter term time horizons, cash for me is either to be used as an emergency fund so say six months of outgoings or for short-term goals. So if you know you need to access and spend the money within, say, five years, then you’re going to tilt your savings towards cash. But for long-term investment portfolios, the rational investor is not going to hold lots of money in cash because inflation is just going to erode it. It’s going to eat away at your hard-earned money and you’re going to end up with less money in real terms once you factor in the increase in the cost of living.

Dr James: 14:20

Thanks for that. Look, guys, we wanna keep tonight’s webinar powerful, impactful and punchy. We’ve probably got time for one, maybe two tops questions, so if anybody would like to ask any questions, to look to avail of this amazing opportunity to benefit from looks, knowledge and experience, feel free to go ahead and type us in the comment section and we will get back to very soon before the conclusion of the webinar. Just while everybody is thinking of some questions, look, I had a question and this might be a little bit of a curve ball, but I’m hoping that you’ve got some figures and numbers on this front. Just how much difference can it make to our portfolios if we’re overly weighted in bonds or our portfolio is not as fully comprised of equities as we like it to be? Is there any figures or numbers you have in terms of how much it can cost us in terms of opportunity cost with time, or how much it delays or retirement Bye.

Luke: 15:20

I don’t have exact figures to hand but again, it depends on your starting point if you look at historic data in terms of when you started that journey. But look, as I say, with history as a guide, the long-term rational investor is not going to sacrifice the growth that’s potentially on the table and has always been on the table. For the long-term investor, directing money towards global equities Bonds are great for giving short-term, they’re great as a defensive asset for short-term portfolios, but for a long-term investor looking at multi-decade investing, you are, as you say, sort of it’s the opportunity cost of leaving money Sat there and risking exposure to inflation same as cash bonds because of inflation or will lead to less money in the portfolio, potentially over 10, 20, 30, even 40 years for somebody that’s starting out and putting money in a pension. So yeah, for me, the long-term position should be how much can you put into global equities without running the risk of being scared out of your investments because of the volatility that you will enjoy, which is key to understand, and that’s why we spend a lot of time looking at or talking about risk and talking about temporary market declines, and you can see on the chart here the historic UK bull and bear markets. It’s always worth putting things into perspective, but there’s also a chart on here which I just want to show you UK bear markets, if you do go into equities, yes, there is plenty of growth. Historically that’s been available. But you do have to be willing to sit tight when there is a temporary market decline, and those temporary market declines could be as short as a few months. So the global pandemic is on here. On a number 11 there you can see, three months before a portfolio worth 100,000 pounds would have recovered its value, or it could take considerably longer. In the case of Number one there, which is the Great Depression, 70 months before a portfolio would have seen a recovery. Now, that’s an extreme example, but it’s worth always bearing in mind that, yes, the long-term investor that directs a portfolio towards global expertise should see positive returns. But it’s not a smooth journey. It’s not a straight line. You’ve got to be willing to sit through the temporary market declines and sit in your hands and not react when things aren’t going to plan. On there you can see number seven 1972. So that was the oil crisis, which was really an embargo by Saudi Arabia on oil. It saw a huge shock to the global stock market and in the UK this is the UK stock market huge declines in, or temporary declines in, the stock market. Very topical that was a response due to a number of countries giving aid to Israel, so quite topical at the moment that was. Their response was to place an oil embargo and it just sent shockwaves throughout the markets. You had to wait a long time to get your portfolio back on track, but if you’re investing for 20, 30, 40 years, then you’ve got time on your side.

Dr James: 18:58

Good stuff, good to know. Well, you know what? I think we could actually derive some quick figures from that very first chart that you showed us. Look, and I get that this is obviously over a very long time frame, like 100 years. Most people’s investing careers is maybe 20, 30, 40 years, something like that, from the time that you start work to the time that you retire effectively. So in this example, over 100 years, a fully bonds portfolio with £1,000 initial investment in 1926. Is that the precise year? I believe it is. I think it’s the start point 1925 to 2021,. If you had a fully bonds portfolio, £1,000 would now be worth £564K, whereas a fully, 100% global stocks portfolio. Of course, we have to be careful. It’s not just any combination of stocks. You have to just go a few layers deeper on this. We look to be able to get these stated returns, but these are certainly a good example of what can be achieved. A global equities portfolio would be £14.6M. So let me just do some quick math. There. We’re probably talking about three times as much. Actually, you’ve got the zero, which turns that into £5M, and then if you times that by 5×3, that’s 15, and it’s just shy of 15. So that’s quite significantly more. It’s a little bit less than 30 times as much. So, really, everybody’s returns in their portfolios. They’re operating somewhere between those two numbers, should they be long-term investors. The point we’re trying to make is that, really, until we know this stuff, we could be inhibiting the returns that we achieve from our portfolio and therefore delaying the point at which we achieve financial freedom, which is the whole goal and objective of investing. Look, we’re going to wrap up around it now. Is there anything that you’d like to say in conclusion?

Luke: 21:05

Just the final chart I’ve put on here just shows the percentage of positive periods versus negative periods. So if you look at global equities historically in terms of calendar years, 77% of calendar years during that time rise have been positive. 77% of the years 23% have been negative. So let’s just say if you’re willing to sit through the one in four bad years, then you’ll benefit from three and four good years historically, and long may that continue.

Dr James: 21:35

Wonderful Look. Thank you so much for your time tonight and, guys, congrats on everybody who attended. This information is really useful. This is the stuff that you can use to expedite your financial journey which is the whole point of dentistry and invest Anybody who has been watching tonight. If you feel like you’re in a place where more of this knowledge would be able to benefit, you go ahead and type strategy in the comments section and Luke and I can get in touch with you very, very, very soon about how this can be achieved for you. It’s all about knowledge. It’s all about empowerment. Certainly, the more knowledge you have, the more empowered you are and the better investment decisions you can make. It’s been wonderful to host this this Tuesday evening. As I say, we have a lot of fun being able to stand on this side of the camera and talk to everybody on the platform about investing. These will be a regular feature on the Dental Student Invest channel, which we’re really looking forward to. We will be back next week with another special guest. His name will be David Hossine. He’s going to be talking all things tax. It’s another one to look forward to. Like I say, I’ve had a lot of fun tonight. Luke, thank you for giving up your Tuesday evening. I’m sure we’ll have you back on the platform again very soon. Thank you, james.