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Dentists Who Invest

Episode 250

Investing Insights

Hosted By: Dr. James Martin

James: 

Fans of the Dentists Who Invest podcast. If you feel like there was one particular episode in the back catalogue in the anthology of Dentists Who Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome.

Andrew: 

Welcome to the Dentists who Invest podcast.

James: 

All right, then, good stuff. So let me go ahead and put you on full screen, and actually what I’ll do is I’ll just change the settings so that you can share your screen as well, andrew, yeah, cool. So there you go.

Andrew: 

Okay, where’s my friend?

James: 

Can you see the room, because I think it’s very nice if you can see everybody yeah, I can, it definitely helps.

Andrew: 

Um, there we are right. Lovely stuff, lovely stuff. Let me just share screen and then we need to do that. Uh, can everybody see that? Yes, and everyone can hear me. Fantastic, well, look, um, thanks a lot, james.

Andrew: 

I mean I don’t know if you want to give any kind of preamble or about what you know, the group, what everybody wants to achieve, but I thought I mean I prepared a very first principles deck about you. You know our views on investment and the real kind of fundamentals around investment and what I often describe as the most important investment theme in the whole of human history, which is human progress, and so that’s what I’ve put up here on screen. It’s about I think it’s about 20 slides long. I can do it in about 20 to 30 minutes. I’m very happy to keep this as informal as you like.

Andrew: 

So if you have any questions, please just jump in and ask them whenever you like. But, james, I don’t know. You know, obviously I’m not. I know the audience are all in a certain industry, but I want to be. I want it would be useful perhaps to sort of understand the level of you know, I’m assuming that everybody’s actually quite sophisticated when it comes to investment. But you know, either way, I’ll always want to go back to that, or is that not a safe assumption?

James: 

Eric, lots of people have read your book, Andrew. And also, as well as that, a lot of the stuff that we talk about on this program is centered around your book, so there is definitely a good level of pre-understanding there. I had a look. Put it like this I looked pretty understanding. There I had a look.

Andrew: 

Put it like this I looked I looked at the deck that you sent me last night and it was perfect.

Andrew: 

So what you have is spot on, okay, great. Well, I’ll just trot through it and just sort of preemptive apologies, because people who have read the book, or maybe if you’ve seen me speak before and of course james interviewed me for dentists and vests a while ago and I and I do, um, use a lot of the same themes again and again and again, but I use this slightly cheesy Latin phrase, repetitio mater studiorum est, which means you know, learning is the sorry, repetition is the mother of learning, right? So I think what? It’s very easy in life generally to learn stuff and then not actually apply it. And so part of the reason that we repeat our message a lot across lots of different sort of media channels and stuff, and obviously through my books, is because understanding what I’m about to present is only sort of probably a third of the battle. Two-thirds of the battle is reiterating it and getting to the point where you actually take action and it changes your life.

Andrew: 

So here, you go, so I’m going to talk about owning the world and, as I say, the importance of human progress. And, as I say, please do leap in, because we’re fca regulated. I’m obliged to put that up at night, so give me a show of hands when you’ve all read it, it’s all right. I’m only joking, you don’t have to read it. Um, it’s there. It’s there because it’s supposed to be by law. So, um, you know, just to kick off big picture. So why? Why does our company, plain english finance exist? Why exist? Why do we have this? Why do I do what I want to do? And it’s a little bit sort of Californian and West Coast Americans have a kind of mission statement about what you do. But we mean it and we’ve been walking this walk for the best part of a decade now. So everything we do is about improving the financial affairs of as many people as possible and basically the vector through which we want to do that. I can now see james’s head.

James: 

Um, what a beautiful sight I’m seeing if I can make this screen any bigger, but I think that’s as big as it gets, okay well, james, I can share.

Andrew: 

I can share the pdf of this afterwards, by the way, it’s it’s.

James: 

I’ve actually, uh, just made it bigger there, so we’re good just to help you cool, um, and you know so.

Andrew: 

So what is so? How do you make people’s financial affairs better? Well, the number one vector for that is it’s all about financial literacy, and and you know, this seems like quite an obvious statement that the financial literacy is is very, very poor, even in the developed world where we have, you know, isis and pensions and all the rest, but throughout the whole world it’s really really bad, and that has serious, you know, ramifications for society and for individuals, and so our mission is to improve that, and you know as. So. I was very lucky to meet this guy, actually Mark Shipman, the guy I’ve got a quote here. I met him at a U2 concert of all places a few years ago, just quite by chance, and I realized he said my name’s Mark and his friend said I’m a financial author, and I said you’re not Mark Shipman, are you? Which was quite a nice moment because I’d quoted him at the beginning of my book. But this quote, I think, is a really instructive one one, and he says there’s an essential skill, life skill that’s never been and still isn’t, taught to the masses how to manage, control and invest money to protect and provide for your financial future. And I know that james and I are very sort of aligned in in that kind of statement. Does that resonate with people you know, whether it’s from school or even you know you can get I’ve got an economics degree from a good british university and and that gives you no practical, practical knowledge of any of this stuff around, actually the nuts and bolts of investment. So why is it important?

Andrew: 

Well, I would contend, parking Ukraine or the cost of living crisis, which is part of this problem in many ways, poor financial literacy is nothing less than one of the world’s very biggest problems, because it’s the reason that so many people struggle financially. And you know, the reason that so many people struggle financially again it seems really obvious is because they’ve never learned enough or in many cases, for a large percent of the population, anything at all about financial markets. And that’s a tragedy, because people on even only average incomes who understand financial markets can realistically aspire to become millionaires over time, and an awful lot do. And there’s a really famous book which I’m sure some of you would have read or be aware of, called the millionaire next door, which is a very american-centric book, but it basically it shows empirically that the the very significant majority of millionaires in America are not people who’ve had enormously high incomes or pop stars or whatever else movie stars. They’re just normal people who know about financial markets and particularly property and the stock market right.

Andrew: 

And then the other end of the spectrum, as an example of how this is all about financial literacy, there are the examples of people who’ve been on huge incomes or, you know, earned a vast amount of money who are bankrupt or otherwise really significantly challenged financially is our legion. It’s very, very easy to find examples. So 70% of people who win the lottery are bankrupt within five years of winning the lottery, which I always think is just an astonishing stat. How can you win $50 million or 50 million euros or pounds or whatever, and then be bankrupt five years later because you’re financially illiterate and you know, if you win that kind of sum or ever make that kind of sum, you should be set for life, indeed, with a much lower sum and a couple of other examples you know 150 ex-premiership footballers are in prison, most of them because they turned to crime to sustain the earnings and the lifestyle that they had as a premiership footballer when they were forced to retire at a relatively young age.

Andrew: 

And that’s tragic because so many of them make such poor decisions about investment and finance at a time in their lives when they’re making 50 grand a week, maybe. Finance at a time in their lives when they’re making 50 grand a week, maybe. Similarly, in America the average NFL player makes $750,000 a year. The average NFL player quarterbacks obviously make a lot more, but 80% of retired NFL players are broke, go bankrupt, which is just you know, and then loads of bankrupt celebs Karen Millen, you know, boris Becker was bankrupt and then lied about it and is in prison.

Andrew: 

You know, having won tens of millions of prize money in his life george best and his son, callum best so that’s a good example of how these things run in families. You know you can, you can run financial literacy in families or you can run financial illiteracy in families and lots of other examples, including, you know, sarah ferguson, who was part of the royal family. So even royalty is not immune, and so the point on that side is really just truly wealth is so much more about knowledge and habit and not necessarily about income. But obviously this audience you have a very particular advantage because your incomes, all other things being equal, are quite a lot higher than the average in the UK population, and that’s our key focus. But so if I James knows I can be a bit messianic and sort of you know, get on my soapbox about our message, but and that’s because actually okay, so that’s great. It’s great for the individual. If you become financially literate, you massively increase your chance of being wealthy. But far more important than that per individual individual because we all want to live in a nice society is what happens at the societal level and certainly what could happen at the societal level if this stuff was more widespread, because every single person who can take care of their personal finances, obviously that’s great for them, but it’s great for the state because it means that there are you know, there are fewer dependents on the state, there’s a bigger tax base Really important and I know this firsthand because I spent the last eight years working with life sciences companies, biotechnology companies.

Andrew: 

Those companies are really challenged in terms of raising money to do things like try to cure cancer, run clinical trials, develop medical technologies, medical diagnostics. It’s very, very hard to raise money for all sorts of innovative companies and it always has been, particularly in the UK. The Americans are a bit better than we are, but if you had more people who are financially literate, more people who are investors, there’d be more capital available for those sorts of companies and for, indeed, companies that are doing anything that’s of use and utility to humanity and for, indeed, companies that are doing anything that’s of use and utility to humanity and very prosaically but totally valid in my opinion, is that you know, money problems cause stress and divorce and people falling out arguments you know, 50 percent of divorces cite money as the prime cause of the divorce, and so financially literate people are happier people. They’re less stressed people. So if you add all of those things up, getting this, you know if we can in our small way make a million more people in the UK actually truly financially literate, that could pay huge dividends for British society. And you know, the same can be said all over the world. And that’s why we genuinely have a real sense of mission about this and why I’m willing to.

Andrew: 

You know, do calls like this at 10 o’clock on a saturday morning? Obviously, um, it’s, it’s about a lot more than just money and just quickly. You know how do we deliver that mission. Well, I think most of you know this um through my two books, particularly the first one, because the second one is much more of a work book. Um, and then, uh, excitingly, part of the reason I was able to go full time on playing with finance a year ago is because I got a two book deal from our big publisher and we’re going to produce a teenager and young adult focused version of how to Own the World because so many people have asked for it. You know, school teachers and university lecturers and uncles and aunts and grandparents have said you know, your books were really like your book, but it’s a bit inaccessible for my 16-year-old daughter or whatever. Could you write one for them? So we’re doing that.

Andrew: 

And then I’m also just about put to bed 115,000 words on a book called Our Future is Biotech, which goes to what I said in the last slide, because I spent eight years working with biotech companies and I think we’re fighting with one hand behind our back with these companies. They could be genuinely. These are technologies that could be changing the world, and I would assume that many of you guys are more conversant with those sorts of you know any medical technologies, all those things being called the many, because you’ve got the, you know, you’ve got the understanding to be. But I believe we’re on the coalface of biotech and life sciences delivering some really amazing things, but the the funding environment’s really challenged. So I wanted to write a book about that, to sort of set out in plain english finance, how exciting that sector is. Um, and so you know I think you know the rest of this we’ve got we’ve got a website, we’ve got an online community, we’ve got a very defensive fund, which is a global multi-asset fund, and we’re teetering on the brink of floating a company on the London stock market to invest in the biotech space, which is hopefully only a few days away from launching. So, as I say, I’ve only about another 10, 12 slides and I’ll trot through them, but just to unpack what my key focus is going to be in these slides is the fact that we’re all about investing and not trading, and just how important a distinction that is, because I think investing is for everyone and trading actually for a very small minority of people, and I’ll explain why I believe that.

Andrew: 

And a related corollary to that is we’re all about ignoring the news. You know one of the biggest rookie mistakes you can. You can spot an amateur investor a mile away when they’re constantly obsessed with what about ignoring the news? One of the biggest rookie mistakes? You can spot an amateur investor a mile away when they’re constantly obsessed with what’s in the news every day and how that may or may not impact their investments. There is very little correlation between the news and financial market performance, and one of the biggest rookie mistakes amateur mistakes is constantly focusing on what financial indicators are doing, what the economy is doing, whether there’s going to be a recession. You actually don’t really need to think about any of that, and investment returns are negatively correlated with that. The more you think about that, the lower your investment returns are likely to be.

Andrew: 

And I’ll explain that in a bit of detail. And as a sort of underpinning to all of that, human progress is the most important investment theme of all and you know, if you like technological development, I’ll explain that in some detail. But just to set the scene, um, firstly, what I tend to do is ask some key questions and then talk about some really important bad news and then some countervailing good news. This is just what I tend to do in these presentations. So, uh, but happy to. I’m not sure I’ll be able to hear you, but you can. I guess this room most of you will know what the average British salary is roughly. Does anybody know? Shout 32?.

Andrew: 

It’s usually about 30 grand, depending on who you are. So now, this is a bit of a movable fees because it kind of defends where interest rates and annuity rates are. But how much money do you need in your retirement pot to earn that? Let’s call it 30 grand a year, risk-free, you know, from from a cash or a bond um product that’s paying you a yield. If it’s 30 grand, $7,500? Yeah, I mean, that’s about right. I mean to keep the massive. If interest rates are 1%, then every million pounds creates 10 grand of income, right? So actually, if interest rates are 1%, then, risk-free, you’d need 3 million pounds to generate 30 grand a year of income, right? So actually, if interest rates are 1%, then, risk-free, you’d need £3 million to generate £30 grand a year of income.

Andrew: 

Now, obviously that’s slightly disingenuous because interest rates are higher and annuity rates are higher, but broadly you’re talking about a large six-figure sum is what everybody in this country needs in order to be able to reliably pay themselves just the average income per annum in retirement.

Andrew: 

Now let’s be clear if you don’t want to touch the capital, you’ve probably heard of a thing called drawdown, which means that you know if you do have a million pounds by the time you’re 60. You can divide that. If you assume you live 40 years, you can divide it and and take some money out each to run it down to zero. But the far preferable thing to be in a position to do is to live on the money from your capital rather than destroy your capital and then, if you have children, for example, uh, leave the capital to them and so okay. So let’s just say, for the sake of you, need a large six-figure sum to be able to do that. How much does the average british person actually have at retirement nowadays, not including their house, like pension and liquid assets? Don’t really know the answer to that, james real quick, guys.

James: 

I’ve put together a special report for dentists, entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistoinvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them.

Andrew: 

I’m really looking forward to hearing your thoughts. So well, the answer is £50,000. And generally it’s about £ grand the average man has and about 10 grand the average woman has still today, even now. Obviously because in a lot of families and a lot of couples sort of traditionally men have run the money and that’s why women often, you know, if they lose a husband or whatever, they can end up in that terrible situation. So you know, there’s a huge. This is, this is why this is one of the biggest problems in the world, if you ask me, and certainly in British society, is the disparity between what somebody needs to live a good retirement on and what the average person actually has. And this is really, you know, this is going to come home to roost in a horrible demographic bulge in the years ahead. And you know why should you care about that? Well, because of the bad news, because quite often, you know, I did a speaking event at Birmingham Uni a few months ago and some of the students said to me well, you know the government papers the last decade two, three decades already is that the government cannot afford to pay a living income to all of its retired population for a whole series of demographic reasons which actually have nothing to do with politics, and it won’t matter whether it’s the Tories or Labour, it’s just a mathematical inevitability.

Andrew: 

Because we were very enlightened, britain introduced a pension system in 1909. We were the second country in the world to do that, after the Germans. It was kind of our idea and their idea, and the Dutch as well, and it was for over 70s, at a time where average life expectancy was 47. Now that number is skewed by infant mortality, but not that many people actually live through two or through 70 years old. Only a handful of kind of you know, pampered aristocrats. Most working class people didn’t make it anywhere near 70, particularly if they spent a life working down the mines or on farms. And so we introduced a pension in 1909 for over 70s, when that meant that there were an awful lot of workers paying into the system and very, very few over 70s taking out of the system. Um, which was a great idea, um, but in this day and age, life expectancy for most people born today is probably going to be 100 or north of 100, and certainly 80 or 90. And we’ve already seen that happen in the last 40 years. And so if you want to retire at 60, or, dare we even hope, 50 or 55, you need to have enough to fund four decades of your life and sadly, governments literally can’t afford that. It doesn’t matter what your political position is, it’s just a inevitability. Japan is a really robust example of this, because when they put their social security system in place at the end of the Second World War there was something like 35 workers for every retiree, and already in Japan there are now only two workers for every retiree.

Andrew: 

No-transcript. Truly there is some countervailing good news that can kind of rescue us and I split that into three parts. So again, I think james talks about this stuff. Many of you will be familiar with this, but even if you are familiar with it, people don’t really understand the sheer power of compounding. You know compounding financially and also compounding in life, just getting better at things gradually over time and how. You know two friends in their early 20s who leave university with the same skills and earning potential and work ethic and fitness and diet habits. If one of them gets 1% better every month and the other doesn’t and just stays the same by the time they’re 30 years old, you won’t really notice much of a difference. One of them will have a slightly better job, might be slightly slimmer, but by the time they’re 60, truly, one of them will be a millionaire and set for life and the other one will probably be in financial trouble and that and that. That. That’s really insidious and sneaks up on you. But but, but if you make it, if you take, make use of compounding, it’s, it’s transformational and that’s why we we talk this story so often and one of when I’m doing, when I’m doing um journalist interviews or speaking to the general public who perhaps aren’t quite as sophisticated as this audience, one of the powerful ways I try to use to explain the sheer power of compound, the impact of compounding, is imagine that you can invest five thousand pounds the day your child is born, or your parents could, or a wealthy relative, just that you can put five thousand,000 into something the day your child’s born and just imagine that that returns 10% a year. Now we can you know people can scoff at that number.

Andrew: 

We’ll come on to justification for why 10% is not an unrealistic number. Well, how much would your child have on their 55th birthday with no further investment? So that’s just £5,000 invested once by the time they can first legally retire at 55. And the answer to that question is £945,000 compounding at 10% a year, or £1.2 million compounding at 0.83% a month, which is 10% divided by 12. So you know, because it’s £5,000, £6,150 and so on and so on, over 55 years, with no further investment.

Andrew: 

So compounding, you know, compounding of very small amounts of money over very large amounts of time, can make us all millionaires. And so then to come on to you know, why do we have a pensions crisis? Why are so many people impoverished? Why is the average person in Britain only have 50 grand? It’s a, it’s a problem of knowledge and habit, not really a problem of investing. It’s a, it’s a problem of knowledge and habit, not really a problem of investing.

Andrew: 

Um, and the reason that 10 is actually not entirely ridiculous and unrealistic I’ve put on this slide, so I’ve put you know, 10 will make us all millionaires. And how do you achieve that? Well, because of, as I said earlier, the most important investment theme in human history is human progress. And the American stock market, from the 1st of January 1872 until the 31st of December last year, averaged 9.23% per annum. So if you’re just an investor in US shares, as simple as that, buying the market every month regularly, you have a chance of being at or around those sorts of levels and if you’re lucky and you go through a period like the last 15 years, you’ll do quite a lot better than that. You might be at 11 or 12% and if you’re unlucky and you might do one or 2% lower than that, depending on what’s happening historically. But broadly you can aspire to high, single digit or low, double digit annual return.

Andrew: 

So that’s that 10% I talked, talked about, and that is a function of technological progress and population growth. And, and you know, the last century has been all about tech and physics, if you like. So automotive, aviation, energy, um, you know. Steel, uh, shipping containers, shipping buildings, um, and obviously, most recently, the internet silicon, you know, semiconductors, the semiconductor industry, smartphones, mobile internet, etc. Etc. And that is what has fundamentally underpinned real wealth creation and equity returns knocking on 10% for the last 100 plus years and, I think, the next century.

Andrew: 

I think it’s very easy to evidence the fact that the next century is going to be about biotech and will sustain or improve those double digit, like the likelihood that the world’s progress in terms of financial market progress will be 9, 10, 11, 12, even better, percent, because actually biotech exponentials are even more exponential than tech exponentials. So you can believe that wealth creation could actually now be going to get better than it’s been in the last century, and the reason for that is because you create real economic value. This is where finance is very real and the upside is very real. You create economic value by solving problems. You’re solving humanity’s problems. That’s how we create any value.

Andrew: 

Ultimately, when you boil it down, um, and most of our remaining problems as a species are problems of biological systems. So most obviously that’s in the, in the therapeutic setting, whether that’s curing cancer or dementia or autism or obesity or diabetes or whatever else. But, um, actually biotech is where the most exponential and interesting technology is coming from. That will revolutionize and significantly improve our clean power generation technologies. So bio-coated photovoltaic cells, for example. Alga culture you know being able to make aviation and automotive fuel from just adding enzymes to algae that we can grow in great fields out in the middle of the oceans. These things will revolutionize the way we use fossil fuels and also revolutionizing agricultural productivity. You know, biodegradable packaging instead of plastics and single use plastic bottles. All of those solutions to those problems are going to come from the biotech industry, in my considered opinion, having researched this for a while, and even improving processing power. So computers are binary computers. Still to this day, all of our chips are zeros and ones, and that’s been the technological paradigm for the last century, and we’re bumping up at the limits of physics in terms of our ability to make chips more powerful. And the solution for that is biological computers as dna-based computers, um, and indeed you’ll have heard of quantum computers, which is kind of related to that, but that could be a step change in the intelligence and processing power of our computers and that will generate real wealth.

Andrew: 

And then the final bit, the third piece of good news, which sort of is the antidote to the bad news about how screwed government finances are and how poorly most people legislate for their financial future, is that this isn’t that hard. And this is where I’m going to come on to the investing versus trading piece. Investing is not that hard and I always say you know that investing is no harder than learning how to drive a car. And it’s crazy that you go to the average person and say should most people learn how to drive a car? Is it normal to learn how to drive a car? I mean? What does everybody in the room think? 90 plus percent of people will say yes, right, it’s a pretty normal thing to learn how to drive a car.

Andrew: 

It takes no longer to learn how to drive your finances in terms of being an effective investor and making those sorts of high single-digit or low double-digit returns I talked about on the last couple of slides. But nobody does it and people say, oh well, financial markets, that’s for rich people, and that gets correlation and causality the wrong way around, because financial markets are not for rich people. It’s just that people who learn about financial markets are much, much more likely to be rich. You know, the richest 1% of people in the world nowadays are, in the main, the most financially literate 1% of people in the world, and that’s in large part to do with compounding. So all you need to do to achieve that is to own the world, which is why my book is called how to Own the World to capture that human progress and be as close to that nine, ten, whatever percent you can each year and, in this era of of inflation, because of all the money creation over the last five decades, to own inflation. And there are ways that you can benefit from the fact that we are in an inflationary era and do better than other people, whether that’s property or, potentially, crypto or gold, which I I favor because I think it’s the easiest thing.

Andrew: 

And then the only other thing you need to think about in terms of a very elegant approach to investing, to make investing easy and automated, is that you need to be conscious of your age and stage, and so we talk about 100 minus your age. So 100 minus your age just tells you, if you subject your age from 100, it tells you what percentage of your monthly investments should be in notionally risky things and what percentage should be in defensive things. So and but where risky might mean equities, for example, rather than cash or bond or gold. And so you know, if you’re 30, you should probably have 70% in the market and 30% in defensive stuff. And if you’re 70, you should probably have 70% in the market and 30% in defensive stuff. And if you’re 70, you should probably have 70% in defensive stuff and 30% in aggressive stuff.

Andrew: 

And the reason for that is because, if you’re 30 and you’ve got £10,000, because you’ve saved a few quid in your 20s, working in a bar or whatever you might be doing, and there’s a 50% correction in volatile assets like the stock market, which happens every 10 years or so. In the stock market, you’ve gone from 10 grand to 5 grand, which is annoying, but you have the rest of your life to benefit from those returns the stock market affords and build back up. And you know 5 grand isn’t actually that much in the grand scheme of things. Whereas if you’re 60 and you’ve done this for a lifetime and you’ve got to, let’s say, a million pounds because you’re well, you know you’re a dentist, for example, and you’ve been sensible and you’ve invested each month into sensible things If you lose 50% in the same, in exactly the same market crash scenario of a 50% correction and this is what happened in 07, 08, 09 and 99, 2000, the 30-year-old goes from 10 grand to 5 grand, you go from a million to 500 grand and obviously that is a very, very different problem with very different consequences for your life than the 50, the 30 year old losing 50.

Andrew: 

So that’s why you need to think about 100 minus your age and, if you like, if there’s a one-size-fits-all panacea approach to investment, it’s just to understand all this stuff and think about your age and and I do that in five-year chunks, because you don’t need to finesse any more than that. You could probably do it in 10-year chunks. To be honest, and you know so, it’s quite easy to do this, and it’s quite easy to build very significant sums, and sums that are big enough to have a very comfortable life and a comfortable retirement. But nobody’s doing it, because the very, very small minority of people care about this stuff, think about this stuff, learn about anything that we’ve just covered in the last few slides, and I think that that is quite literally one of the greatest tragedies of our time. You know, and I’ve said it’s probably one of the biggest problems of our time in terms of the aggregate human misery caused, um, both for individuals and for innovative companies who can, you know, do all these wonderful, innovative things and for society as a whole, um, and so, taking all of that on board, you know, I think it’s worth just taking a step back and saying what’s the what is all the point of me bleating away? What’s the point of all of this? It’s very simply to get to the point where, if you take this information on board, start with the end in mind, you can live well on the returns generated by your money, not the returns generated by your work. So you know, and your money is infinitely more scalable than the hours you have in any given day, week, month, whatever. And I think it’s.

Andrew: 

You know, we too seldom in our society take a step back and think just how empowering an idea it is that that is even possible. An idea it is that that is even possible because 99 plus of the human beings ever born in history it wasn’t, it wasn’t possible for them to do that because the fundamental technology of financial markets didn’t exist. Um, you couldn’t aspire to just stop working and live on financial markets and on your investments and dividends and whatever else. Um, and you know, thomas Hobbes, the British political philosopher, famously in his book Leviathan, described most human existence as solitary, poor, nasty, brutish and short. And the financial markets and knowledge of investment can turn that on its head and actually make life really secure and abundant for billions of people. So, but you know, know, as I say, for those who are willing to engage and learn and become confident in understanding financial markets, which too few people do, and you know, we’re very mission driven to try, and because I, because I genuinely see this as a silver bullet for humanity, I mean you could say society, but actually it’s much bigger than that. The more people understand this stuff, the better a society will live in, the happier and wealthier and more secure and abundant more people will be. So it’s all about.

Andrew: 

You know, what do you actually do? Brass tacks, well. What is owning the world? Well, the richest and smartest people have done this for centuries, and that includes the Rothschild family, harvard University, yale you know, all the Ivy League colleges in America, all their endowments, oxford University, cambridge University and what is that? Well, it’s actually really simple, and this is when I talk about investing. Being simple, it just means you need to own, ensure that you own, most major asset classes, and so you know. The simplest ones of those are cash or bonds, property, real estate, shares and commodities and, if you like, crypto, and we can perhaps have a Q&A about my thoughts on crypto.

Andrew: 

But I just think crypto is sort of unproven at the moment and there’s a lot more water under the bridge, and to me it looks a lot like the dot-com boom in 99. Everybody knew the internet was going to change the world, but that didn’t start. Stop 90 percent of internet companies that exist in 99 going to zero. And, you know, maybe crypto and blockchain is going to stay, change the world, but, for all we know, bitcoin could be the next nokia. You know, nokia was a 200 billion dollar company in 2000, and then it got destroyed by apple, and so was motorola, siemens, and so was erson, and now they’re all tiny companies, um, and and that could. The same might be true of Bitcoin and Ethereum, and I just think we’re too early in the cycle to have any confidence about what crypto might do.

Andrew: 

But that doesn’t mean you shouldn’t at least contemplate it as one of those major asset classes, for sure, just with a weather eye on the fact that it’s fundamentally riskier than the other ones, in my opinion. And then so it’s owned. All major asset classes in all most geographical regions, and the easiest thing to think about there is just the US, europe and Asia, which is pretty easy to do and, crucially, invest every month from as soon as you can afford to do that until the day you have enough to live on, which actually can happen. Best case, that’ll take 20 years if you’re quite a high earner, um, but you know, it’s amazing how quickly you know. I’m 47 now, so it’s 22 years ago. I was 25, I’ve. I guess I probably started investing when I was 23, so it’s you know, it’s well, it’s more than 20 years now I’ve been investing and and you know, it’s amazing, if you actually do that, how, how those years just go by very quickly and you get a great result and then, as I said earlier, ignore the news. So we’re just going to talk about what I mean by investing versus trading and ignoring the news on the next couple of slides. You know, I have this a lot.

Andrew: 

One of my great frustrations about what I do is that and this is particularly true of millennials at the moment and particularly true of what, given what’s going on, crypto is how many people who’ve never thought about investment. They don’t know what an ISA is. They’d never engaged with what their pension has been like. Boring, boring finance, no, not interested, not interested in finance at all. And then they wake up one day and get really, really excited about forex trading or binary options trading or crypto trading, and they go from to me that’s like, that’s like somebody, a white belt in karate or judo, going and fighting black belts the first time they go to karate or judo lesson and it’s just, it’s maddening and all, and it’s particularly prevalent in young people who bypass all the key products that have got two centuries of track record of wealth generation to the most dangerous and risky approach to finance.

Andrew: 

Um, because trading is no matter what anybody tells you, it’s extremely hard to do it well, it takes years to become good, it takes many hours a week to do it properly. And people who say, oh, I can teach you how to trade in five minutes a day, they can trade in five minutes a day because they’ve been doing it for 20 years and practicing or at least you hope they have. But anybody just starting off will not be able to do it in five minutes a day because you’re learning the ropes on something that’s quite difficult. To do it in five minutes a day because it’s you know, you’re learning the ropes on something that’s quite difficult. I mean, I always say that trading is roughly in, it’s certainly an a level’s worth of work and to do it really well, it’s probably a degree’s worth of work and so and and it’s often quite stressful, you know, even if you know what you’re doing, you know how to use stop losses, it’s time consuming, stressful and finally it’s you.

Andrew: 

This is why I feel particularly strongly about sort of 30 year olds who might have three grand of savings, spending two grand on some crypto or trading guru to teach them how to trade. Because the key thing about trading what really makes trading successful in absolute terms is trading quite a large amount of capital with a low risk. So if you’ve got 100,000 pounds and you only want to make 2% or 3% a month by using various trading techniques, you’ll at least be making £2,000 or £3,000 a month and compounding up. But if you’ve got £2,000, you’re probably better off spending your time on any number of other things which would be more valuable to you than sitting around staring at screens. And I feel, as you can probably tell, I feel quite strongly about that. And, as I say, don’t be a white belt fighting black belts and what we’re all about, what our business is all about. You know trading. Don’t get me wrong. If you are wealthy, you’ve got time on your hands. You’re willing to engage and spend time on it. Trading can be very good. I’ve done lots of trading in my life. I don’t at the moment because I’m too busy, but it’s not something that you know 28 year olds should be doing before they’ve done investing.

Andrew: 

Trading is for a small minority of people. Investing is for everyone, and it’s a tragedy that relatively few people invest too few people, in my opinion because it’s much simpler. It has a much higher probability of long-run success and actually making you a significant amount of money by the time you want to retire, and and that time can be quite early. If you do it well, it’s probably 90% admin and 10% asset selection. Once you’ve got the habit of investing every month into something sensible, it almost doesn’t matter what you buy within reason, I mean, obviously it does, but it’s much more important that you form the habit and actually taken the bull by the horns and sorted this out.

Andrew: 

And, crucially, a global, multi-asset approach to investing and own the world approach to investment means you can sleep at night and you can have real confidence that what you’re doing is the right thing, rather than having this as so many people do. You know finances, this horrible job that hangs over them for years and they stress about it and they don’t know what to do and they don’t know how to engage with it. This approach removes all of that and makes it very low stress, and there’s a quote there on the right-hand side from John Stepek, who used to be the editor of Money Week, and he’s moved to Bloomberg now, saying there are many roads to ruin in the market, some of them among others, but one, basically, a surefire way to have low returns is to set out as a buy-and-hold investor ie an investor and then try to turn into a market timer at times like these. That’s how you’ll have lower returns. And just to.

Andrew: 

I’ll unpack that on the next slide, but just before we do so, why is it really important to ignore the news, which is all part of my point about investing? Investing is something you do regularly, every month. It’s about admin. You do it every long period of time and you’ll have a large amount of money, um, and in doing that, you must ignore the news. Um, as I said at the beginning of the presentation. And why is that?

Andrew: 

Because of a thing called the availability heuristic, and that is a cognitive bias established by, you know, psychologists. So, basically, news is about things that happen, not things that don’t happen. Human beings focus on things that happen, not things that don’t happen, and that sounds a bit ridiculous, but it’s important, because it’s not newsworthy that the the world economy has grown from kind of 35 trillion us dollars of aggregate gdp to 100 trillion of aggregate gdp in the last 20 or 30 years, because it’s gradual, gradual and it happens over time. That’s not a new story. A crash, a stock market crash, is a new story and you know so. In the last three years there’s been endless coverage of COVID and endless coverage of Ukraine this year, but there’s never a headline that says that the UK stock market has created a trillion pounds of value in the last well, since 2009,. Or, as I say, the world economy has grown massively in the last 15, 20 years.

Andrew: 

Because of the availability heuristic and because editors like to say if it bleeds, it leads our media truly focus 99 plus percent of their attention on the 0.1 percent of bad things that happen in the world. And that’s really relevant to investment. Because I mean, if you go to the pub this afternoon and talk to some random people in a pub that you might meet and say, what are your, what’s your first thoughts on the stock market? The word that most people commonly associate with stock market is that it’s risky, and the reason they think that they think stock market investment is risky is because of this, because the only time the newspapers ever talk about the stock market is when it crashes, and that gives everybody a very, very full sense of the merit of long-run investment.

Andrew: 

And then a couple of quotes on the right-hand side there, but basically making that point, particularly Bill Clinton saying follow the trend lines, not the headlines. And the trend line, the most important trend line, is human progress and the fact that will deliver you really good returns. So you’ll be relieved to hear I’m two slides from the end now, guys, so you can. You can have a break from me bleating away at you very shortly. But, um, so what does all that mean for investment? Well, as I said earlier, you know, from 1872 until December of last year, the S&P, the biggest stock market index in the world, has done north of 9% and that would be enough to make you a millionaire over 20 to 40 years of steady investing. With pretty small numbers actually and I can’t remember the stats but a couple maxing their ISA can become a millionaire at those sorts of rates of return in eight or nine or 10 years. It’s not very long actually. But nobody’s making those returns.

Andrew: 

Because of the investing and trading and ignoring the news points I made, most investors are making about 5%. The reason is that because they don’t ignore the news, they don’t automate, they don’t stick to their guns. They sell at bottoms and they buy at tops because they’re always constantly trying to time the market. And if you time the market, you reduce, on average, your potential annual returns by about 4% and over a lifetime of investing that has a massive impact on your ability to become wealthy, which is why I’m really really stressed this point about ignoring the news and regular investment over a lifetime. And then the other point is that so that’s investors, but actually a very small percentage of the population are investors.

Andrew: 

Something like only 10 percent of people knowingly invest in the stock market without you know every. A lot of people are invested in the stock market through their pension, but very few people actually knowingly do it thoughtfully. So most people particularly in britain, where financial literacy is particularly bad and most people never learn about any of this stuff most people are making as little as two percent because they’re in a cash isa. They’re so frightened because of the news and because of listening to the news and, oh, you know, everybody always comes on to me and says you know, I loved, I loved your book. It’s great, I’m wanting to invest, is now a good time, because of Ukraine, covid, libyan refugee crisis, you know, syria.

Andrew: 

There is always a reason for people to want to not invest, and the answer is always ignore that and invest from. The best time to invest is always right now and for the rest of your life, and ignore all that nonsense. And so most people don’t do that. Most people are in cash, in a cash ice or whatever, because they’re so fearful of investment. They only ever hold cash, and particularly with inflation at 10%. You know, if inflation is at 10% and interest rates at 2%, you’re losing 8% of real wealth every year, and that’s the position that so many people are in, which is why so many people are struggling cost of living crisis, finding it difficult financially, without really understanding why.

Andrew: 

Because, as John Maynard Keynes said, not one man in a million truly understands inflation. I think that’s probably a little bit punchy. It’s probably more than 66 people in this country who understand inflation, but not that many who really understand it properly and really think in this way, and you know very few of our politicians for sure. Certainly not Liz Truss has demonstrated in the last few weeks, but you know, neither did Gordon Brown. Gordon Brown sold our gold reserves at an all-time low. You know, it doesn’t matter what stripe of government they are. Most politicians are very, very financially illiterate and indeed so are most of our, or many of our, mainstream journalists, because I very seldom see this stuff discussed in the press. But you know, the antidote to that is to know that investing is crucial for everyone, and investing regularly, each month, over time, will get you a great result. So, just to summarize, I love that quote on the right hand side, which is blocked by this little window, but it’s in terms of this idea about human progress.

Andrew: 

Thomas Babington Macaulay, a Victorian political philosopher, said by what principle is it that, when we see nothing, to carry on getting wealthier and, you know, innovating and having magnificent new products and actually a lot of that innovation is going to roll back environmental degradation and really sort out the world and sort all of our big, intractable problems? Because I think we have exponential problems, but exponential problems have exponential solutions. That’s a big part of what I’ve spent the last year writing about. If you believe all of that, all you need to do is own a good variety of most major assets in most major geographical regions.

Andrew: 

Focus on investing, invest direct debit each month, from the minute you can, until the minute you’ve got a lot of money, and be patient, ignore, believe in human progress, ignore the news and that fundamental approach to such things, unlike many others. Crucially, it means you can be very relaxed about life and get a good night’s sleep and have confidence in your future. Um, and that um you’ll be delighted to hear. Sorry, it’s slightly longer than I said, but um, that’s there you go. That’s what I wanted to say and I’m delighted to be challenged and told I’m speaking nonsense and I’ll answer any questions you might have thank you so much, andrew.

James: 

That was extremely enlightening and I think we all go andrew round of applause well, at least we’re turning up, despite the heat.

Andrew: 

my Eden, my friend, actually James, I forgot to say I meant to say at the beginning and I forgot. I’m really sorry I’m not in there in person, because it is much better in person. But well, I’ll show you just for amusement.

Andrew: 

So it doesn’t matter if your food is not normally that size.

James: 

There is a problem for me.

Andrew: 

I got back to my train station, my local train station, two saturday nights ago, um, actually after a day where james and I had seen each other this entrepreneurs of brent in london and um the the train, as the staff at my local station had managed to lock all of the exits from my train station, so I was like everybody was milling around trying to find a member of staff to unlock the side gate and let us out, and I was a food. I basically I thought I can jump over the fence, which I could do when I was 17 and 27, but apparently I can’t do now. I’m 47, so it’s quite a painful uh weekend last weekend, but anyway, that’s why I’m not there, with apologies I super appreciate it that you can come today virtually um give them what happened.

James: 

Let me thank you for that presentation and, yeah, a lot of this aligns with what we talked about in finance and you can tell that Andrew is one of the inspirations for me for the course. It’s actually the very first book I read on finance. Has anybody read?

Andrew: 

it. Oh wow, so you didn’t need me to just waste 40 minutes of your time shouting at you.

James: 

I can imagine that I swear by that. Anyway, has anybody got any questions that they’d like to ask? I’m ready.

Andrew: 

When do you get the Teams book on?

James: 

So you just have to ask questions.

Andrew: 

The book on the Teams.

Andrew: 

Hang on. Sorry, I can’t see the questioner or hear, Just getting this microphone All right yeah, sorry about that.

Andrew: 

Sorry, this is a small question first Can you hear R9?

Andrew: 

Yeah, yeah, yeah.

Andrew: 

It’s an easy one to solve, though. Where do you get the teams from?

Andrew: 

Oh well, we haven’t delivered it to the publisher yet, so it’ll be published. So it’ll be published. I hope it will be published about halfway through next year, but it’s quite exciting. So I’ve written it with a seven. Well sorry, they were 17 and 15 when we 16 and 14 when we started on the journey, and they’re now 18 and 16. It’s been a while and Gaia’s going off to university in the States and yanni’s actually just got a contract with the premiership football team, so that could be quite interesting. Um, uh, but but yeah, I’ve written it with two teens and it will be published next year, hopefully with some fanfare, and you know we’ve got um, a cartoonist drawing, but it’s quite, it’s a lot. Um, we’re hoping it will be really palatable for teenagers and young adults, because it’s got lots of breakout boxes and explanations and definitions and sort of cartoons as well, or cool hieroglyphics and pictures, um, rather than the rather dry version that you’ve all endured for adults. So sorry, that’s a very long answer. Next year. Basically, give us six months awesome.

James: 

Thank you so much, gareth. Hi Andrew, thanks for that.

Andrew: 

Dylan, a lot of the assumptions in these things are based on population growth continuing.

Andrew: 

I do hear some whispering of a slowdown in the rate of population growth?

Andrew: 

Does that?

Andrew: 

concern you in our lifetime, or is that something way off? No, because you’re right, it will be one. You know, what would be lovely is if um, I mean you obviously will be aware because it’s interesting a lot of people worry that population growth is going to explode upwards and just you know that’s going to cause the end of the world and environmental degradation and war, famine and pestilence and the four horsemen of the apocalypse. But actually the smartest thinkers in the world, people, people like Kevin Kelly, who founded Wired magazine, and lots, lots of others, have identified that actually one of our challenges economically will be a decline in population, probably, probably from about 2040 onwards. It’s very hard to predict these things. I don’t worry about that in terms of the economic paradigm because what it hopefully means is, roughly now the average person in the world very, very roughly, and these numbers are hard to get accurately but has about 10 000 us dollars a year. So in the developed, in the wealthiest countries in the world, like singapore or switzerland, you know, it’s 60 or 70 000 a year gdp per capita. In the poorest countries in the world, like chad or, you know, paraguay, it’s kind of between 500 and a thousand us dollars a year, but across theay it’s kind of between 500 and 1,000 US dollars a year, but across the whole world it’s about $10,000. And that number has been going up fabulously because of China and Indonesia and all these places that have been developing economically since the Second World War in particular.

Andrew: 

Wouldn’t it be marvelous if, 50 years from now, there are 4 billion people in the world, and not because there’s been a massive apocalypse, to be clear, just because there’s been a gradual? You know the replacement rate of children has not exceeded. You know we’re not growing exponentially anymore and those four billion people all have a 250 000 a year lifestyle. So so you know that that is a future that I think is eminently possible.

Andrew: 

I talk about being in a race between Mad Max and Star Trek quite a lot, and to me that’s a Star Trek outcome. You know the Mad Max outcome is a dystopian horror show where we’re all fighting over scarce water and riding around in souped up cars with, you know, whacking each other with chainsaws. But I think, the much more I genuinely believe that population growth will start tailing off, which will be marvelous for fish consumption, agricultural degradation you know the amazon, etc. Etc. But that we will get better as a society allocating and allocating on merit, wealth, creating wealth and allocating wealth, and we’ll all we’ll have a smaller population of much wealthier people, and I think that will happen.

Andrew: 

So I hope that answers your question so what do you think about the risk of the government waiving inheritance tax and pensions?

Andrew: 

the government being able to tax inheritance tax and pensions. I mean, yeah, um well, I’m a small government libertarian, so my, my basic position on all such things is the government do most things really badly and probably should do as few things as possible as a society. Um, so, uh, but unfortunately our political system is. It’s like winston churchill said that democracy is the worst form of government ever invented, apart from all of the other ones, which I always thought was quite amusing, um, but uh, I mean, yeah, I think I think there’s a risk that. So you probably know, argentina nationalised private pensions in 2008.

Andrew: 

And actually that struck quite close to home to me because I’ve got quite a few kind of middle-class Argentinian friends just from when I lived in New York, and they lived near me in New York and we all became mates and you know their parents, and they had spent years diligently saving into private pension schemes and overnight, the government just took all the money. Can you imagine what? And they had spent years diligently saving into private pension schemes and overnight, the government just took all the money. Can you imagine what that must feel like? I mean, just, you know, after 30 years, and the government said that was for the greater good. Now, will that ever happen in Britain? Let’s hope not, but you know, the more tricky the state of the government’s finances, the more there is a risk that those sorts of policies happen. So, yeah, sorry, I’m probably not answering your question very well, but I think the less government takes from its populace, the better, because the private sector tends to drive far better outcomes and far more effective outcomes than the public sector, based on the evidence of, I think, a couple of centuries of history, outcomes than the public sector in my, based on the evidence of, I think, a couple of centuries of history, with exceptions.

Andrew: 

The government has to do law and order and the government has to do, um, the defense of the realm, obviously, um, but, but and and but, to protect yourself against the risk that a future government, of whichever stripe, might either nationalize pensions or at least tax them much more heavily again. That’s why I think you just have to be financially literate and make sure that you have a good mix of things in a good mix of places, so that you, you know, unlike a couple of my argentinian friends, parents who literally just lost their life, their life’s work, overnight and have really struggled since uh, you know you have some stuff. You have different things in different places and you’re not, you don’t have all your eggs in one basket. That’s at risk of the government nicking it. Was I answering your question there or was I answering the question I chose to?

Andrew: 

here um. Yes, thank you. Okay, question here adam.

Andrew: 

Thank you. Question over here, adam. You talked about your new biotech portfolio that’s going online soon. If you were to want to invest in owner worlds and biotech, what sort of split between the two of those would you think would be ideal? Sadly, I genuinely can’t answer that question because it’s the so personal financial. In order to answer that question, I’d need to know how big your mortgage is, how much debt you’ve got, what your attitude to risk is, whether you’ve got any kids, how much you earn, what your plans are when you want to retire, how much you know. It’s never appropriate If anybody ever tells you you know, if you say to somebody I’ve got 100 grand and they tell you what to do with it, you should run a mile Because you know you have to know the granular detail of somebody’s personal circumstances. And then I was going to say, can I give you? No, I wish I could.

Andrew: 

I mean, you know our new. We’re a floating company on the London stock market. It is an investment company, so obviously all the money goes into the company and then that all that money goes out to be invested in. So it’s like Scottish Mortgage is investment trust, which many of you will know. Um, it is going to be a risk factor five out of seven, so it’s it’s.

Andrew: 

It is notionally a risky product, so you know it’s. Certainly don’t put all of your money in it, that’s for sure. But you know those decisions about whether you think it’s X percent or more than X percent, I’m afraid I can’t give a steer on, but obviously you know. So the website is going to be clscuk, not couk, just uk, and it will hopefully be up in lights in the next few days and it has everything prospectus, key investor documents, like all the legal documents and everything, all the risk factors saying run a mile, don’t invest in this which the government forces you to put on things like this, obviously. But yeah, do have a look. Thank you for the question, bodo, thank you. Thank you Any more obviously? But yeah, do have a look. Thank you for the question.

James: 

Thank you, thank you.

Andrew: 

Any more questions behind you, james, thank you, thank you so much. Uh, I just wanted to obviously a big thing, because I mean what you’re seeing it looks really simple don’t listen to the news, just automate it and invest and forget about it, and I think that’s really some advice, but it’s really bloody hard to do, but it’s just it’s. It’s hilarious because it is really hard to. But something that I’ve noticed in my experience with migrants, really financially illiterate, and as soon as I started to learn about finance, it really opened my mind and I was like, why the fuck have I never talked about this? So I turned 40 this year and it’s only during the last four or five years I’ve come into money and had that onus to learn.

Andrew: 

My question really is and it’s great to hear and I commend you coming out with a book for children and teenagers, because that’s where the education we should be trying to educate our youngsters so that they grow up literate. So how? And then in the book but how can we, how do you see we can be better at educating our young people. Hopefully I’ll be able to educate my kids, but here’s some visuals. You’ve got this book, but how can we get? Get into schools, educate them more publicly about the importance of saving and understanding the beauty and the wonder of compounding yeah, well, it’s a great question and it is genuinely a mission of ours.

Andrew: 

I mean, in a small way, I went to Birmingham, I went to Birmingham University, right, and I went back to Birmingham University in February, march of this year and presented to quite a big group of students in the you know, the old big hall in birmingham, and I hope that I’ll go back next year and present to even more, because I was a bit of an unknown about who’s this. You know boring bloke from the city who’s coming back, who was here before I was born, which is a bit freaky to realize. It wasn’t quite. But you know 97, I left birmingham, um, and I’ve done a bunch of secondary school assemblies, um, and so for my, the answer question, for my own part, is if, if I do things right and things go well, um, and and my profile raises off the back of this ipo we’re doing everything else, you can be assured, and obviously, with the publication of the book for teenagers next year, we’re hoping that there’s a chance of a collaboration with the publication of the book for teenagers next year, we’re hoping that there’s a chance of a collaboration with the Premier League because you know, the teenager who helped co-write it is. He’s got a what’s it called an academy contract with one of the premiership teams, but he may become a fully-fledged player and they’re very concerned about financial literacy amongst their players for the reasons I talked about earlier and lots of young players earning far too much money and not not doing the right thing with it. And we’ve also got potentially got a collaboration with the footsie uh, the financial times financial literacy inclusion campaign, the ft flick flic, which is worth a look, and the ft are putting a lot of money into that and trying to spread. You know, spreading financial literacy amongst younger folks secondary school kids in particular is one of their core focuses. We’re a small stone in the pond, right, our business and we’ve got an audience of x you know it’s well, it’s about 14 000 in our email list and a bit more on social and wherever else, and that’s growing. And we’re about to start spending money on advertising. But I do think that these I like to think that a lot of these ideas are so kind of compelling. I mean, you guys are all sitting here on a saturday morning. We’re having this conversation, right? I think there’s a lot more of it. There are a lot of groups out there in the world. It’s becoming more ubiquitous, people are more interested, millennials are more interested.

Andrew: 

And in terms of how you actually talk to your kids, I think the key thing, really beyond everything else, is just say look. Because I think one of the biggest problems with kids is they get really excited about crypto, they want to mine crypto and they want to do trendy stuff. They want to get paid for playing video games right, they don’t want to invest in, like the S&P 500. What’s that, dad? That’s boring, right. But if you could, just if all of us can somehow just explain to our kids well, just do this thing, this really boring simple thing, with this small amount of your money forever from now, and just trust me, just do that. Then you can do whatever you want with the crypto and the whiz bang and the weather, with the rest of what you do, but just do this little small thing with five to ten percent of your money from now and do that for the rest of your life. And we, if we can all convince our kids to do that and you know, indeed, I mean obviously I put money into my kids junior ices every year, right, and I mean one of my friends, a fund manager and he’s quite, he’s quite a clever guy.

Andrew: 

He’s been putting the max of the junior ISAs into his kids’ ISAs.

Andrew: 

They are six and three and between them they’ve got something like literally like a large six-figure sum in their ISAs because he’s bought like two or three companies that are up like 20X.

Andrew: 

It’s just, I mean, he’s like he’s complete luck and he smashed the lights out.

Andrew: 

But you know, those kids are going to wake up on their 18th birthday and have, like I don’t know, by then, three or 400 grand in their junior and, to be clear, he’s only investing nine grand a year or whatever. It used to be four and a bit grand a year for the first year or whatever, but I’m sorry that’s a bit of a spurious example. But I think if we all invest a little bit for our kids every month even the market rates of return. Now I contributed an article to the Mirror a few years ago called how to Give your 18-Year-Old £200,000 on their 18th Birthday, and the argument there was just like you max their junior ISA every year and you make market returns at a bit and they might have 200 grand on their 18th birthday, of course, then you’ve got to stop them from spending it on whatever 18-year-olds want to spend it on cars, clothes or whatever. But anyway, sorry that was a typically long and rambly answer, but I hope it’s very good that’s cool.

James: 

Thanks so much, andrew. Guys super, super super grateful and andrew can join us today. A massive round of applause, andrew.

Andrew: 

A massive honour to be asked, mate. Thank you very much. I look forward to seeing you soon. Is there no other questions? One more, I’m sorry.

James: 

Thank you again, andrew, for your presentation. This is somebody who knows it’s important to be financially.

Andrew: 

Thank you again, Andrew, for your presentation. This is somebody who knows it’s important to be financially literate, but not quite there yet. So in the past I’ve looked at investing in human progress, but I’ve done it through buying shares in my trading ISA account, whereas you mentioned investing in assets and not trade. What’s the difference and what am I doing there? I thought I was in this company, but I’m actually buying shares and we can do trade when it does better and I want to sell.

Andrew: 

So wait, did you invest in single shares? Did you choose to invest in Apple, or or, or? How did? What were you investing in? But yeah, so no, so it’s all about pots, and everything I’ve talked about today is that is the first, most fundamental part which, let’s say, you can save and invest 10 of what you earn every month. Right, that’s the most important part that if everybody does a half decent job with that from the age of 30 to the age of 60, they, they will do very well, right, just trying to make close to market returns and save 10% of your income every month, particularly if you’re a professional where your income might be 30 grand at 30 and 100 grand at 60, right, or whatever, and you’re on a journey, a trajectory where your income goes up. So what I’m talking about here is the part that’s not about single stocks and is the you know, invest, not trade, side of things. Because, to be clear, I think single stock investment, choosing single companies, is basically a trading activity, not an investing activity, unless you know because to do that successfully, you have to really understand what an EV-EDA ratio is, or P ratio, or return on capital employed, or return on invested capital, or you need to know what the management of you need to know whether the hedge funds are shorting the shares.

Andrew: 

You know my second book. I produced a big, long laundry list of things, things you should know and understand before you ever invest in a single share. Right? What I’m talking about in terms of owning human progress, which I’ve written in my second book, in Live On, less Invest. The Rest is all you need to do is own a big index, and whether that’s the S&P 500, which is the big American one, or probably more helpfully, for the next 20 or 30 years, because who knows? You know, america’s been the dominant hegemonic power for the last 80 years, since the end of the Second World War. We don’t know whether that will continue. So it’s probably easier to own something called the msci world if you want to own the world, because that’s 16, that’s the 1600 biggest companies in the developed world. There’s the msci all world, which is 3000 plus companies, which includes a lot of developing world companies. And you know, we don’t know, the next Apple might be a Brazilian company or an Indian company or an Australian company, right? I mean, we don’t know whether that American exceptionalism will continue, but that having been said, the S&P 500, a lot of the earnings of companies in the S&P 500 are global right, because Apple obviously sells a lot of iPhones outside of the States and Exxon sells a lot of oil outside of the States and Ford sells a lot of cars outside of the States. So the S&P 500 or the MSCI world give you the equity exposure to owning the world and you’re the proud owner of hundreds of companies.

Andrew: 

If you buy either of those things, right, so you don’t have to think about it. You don’t have to think about will this company, will Apple, go up or down or sideways. You just own the market which, as I said, is making 9% a year for the last 130 years or whatever. It is More than that 150 years. And but then the point? So that’s the equities bit. But then it’s really important to understand what to do about the real estate, the commodities, the cash and the bonds bit, what to do about the real estate, the commodities, the cash and the bonds bit and the right ratios between those. But that’s not as difficult as it sounds and you know. If you want to unpack it a bit more, have a look at my second book, live On Less, invest the Rest, which gives some sort of tangible ideas about how you think about that, particularly with that idea of 100 minus your age.

Andrew: 

But you know a lot of very wealthy people. I mean, if you’re lucky enough to figure this stuff out when you’re young and you have time. On your side there is a very purist school of thought that just says all you ever need to do is buy the S&P 500 or the MSC or the market. You don’t need to worry about commodities Because of equity drawdown. If you get to a point where you’ve got quite a few million of, you know, dollars, pounds, euros, whatever, by the time you’re, say, 60 and you stop working, even if there’s a 50 correction, you know let’s say you have four million dollars. Now you have two million dollars, but your life costs you a hundred thousand dollars a year. Let’s say it doesn’t matter and in the next few years it will bounce right. So for very wealthy people you can just be an equity purist.

Andrew: 

But that’s actually relevant to relatively few people, because if you get to a million, let’s say in a 50% direct correction if you’re 63, and then one year you’ve got a million and the next year you’ve got half a million. That’s very stressful and you know you’re going to think oh my god, how am I going to fund the rest of my life and my dependence and everything else when I’ve just I’m down half a million? So that’s why it’s really important to have this weather on 100, minus your age, to ensure that the closer you get to retirement the more risk off you are. But but you know, the younger you are, the more risk on you are. So sorry, it’s all explained in my book. I know it sounds a bit complex and nuanced, but it’s not that difficult and it’s quite an elegant approach, I think. Thank you, I hope that helps Top stuff.

James: 

It certainly does, andrew. Once again, thanks so much for joining us today.

Andrew: 

Thank you guys. Thanks guys, I’ll ring off then. Thanks, james, speak to you. Thanks guys, I’ll ring off then. Thanks James, good to see you.

Andrew: 

Speedy recovery get here in the flesh next time.

James: 

Yeah, hell yeah alright, bye guys, in a bit, my friend, see you soon. Yeah, that’s this is this, is this is this is this is this is this, is this, is this, is this is this is this is this is this is this is so things happen. Since Andrew’s on the screen, are you there? Yeah, andrew’s on the screen. He’ll be joined by the other, andrew.

Andrew: 

He’s going to be assisting us there. Andrew. Who’s this Andrew? What’s Andrew Andrew? Oh, probably, yeah, Probably Andrew. What I have to do if I’ve got the mic over this and just keep us in a little neutral, and what we’re looking forward to today.

James: 

So my name is uh, so I was a friend and associate, so if you enjoyed this podcast, please hit, follow or subscribe so you can stay up to date with information on new podcasts which are released weekly. Please also feel free to leave a positive review so others can learn about this podcast and benefit from it. I would also encourage any fans of the podcast to sign up to the free Facebook community from which the podcast originated. Please search Dentists who Invest on Facebook and hit join to become part of a community of thousands of other dentists interested in improving their finances, wellbeing and investing knowledge. Looking forward to seeing you on there.

James: 

Fans of the Dentists Who Invest podcast. If you feel like there was one particular episode in the back catalogue in the anthology of Dentists Who Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome.

Andrew: 

Welcome to the Dentists who Invest podcast.

James: 

All right, then, good stuff. So let me go ahead and put you on full screen, and actually what I’ll do is I’ll just change the settings so that you can share your screen as well, andrew, yeah, cool. So there you go.

Andrew: 

Okay, where’s my friend?

James: 

Can you see the room, because I think it’s very nice if you can see everybody yeah, I can, it definitely helps.

Andrew: 

Um, there we are right. Lovely stuff, lovely stuff. Let me just share screen and then we need to do that. Uh, can everybody see that? Yes, and everyone can hear me. Fantastic, well, look, um, thanks a lot, james.

Andrew: 

I mean I don’t know if you want to give any kind of preamble or about what you know, the group, what everybody wants to achieve, but I thought I mean I prepared a very first principles deck about you. You know our views on investment and the real kind of fundamentals around investment and what I often describe as the most important investment theme in the whole of human history, which is human progress, and so that’s what I’ve put up here on screen. It’s about I think it’s about 20 slides long. I can do it in about 20 to 30 minutes. I’m very happy to keep this as informal as you like.

Andrew: 

So if you have any questions, please just jump in and ask them whenever you like. But, james, I don’t know. You know, obviously I’m not. I know the audience are all in a certain industry, but I want to be. I want it would be useful perhaps to sort of understand the level of you know, I’m assuming that everybody’s actually quite sophisticated when it comes to investment. But you know, either way, I’ll always want to go back to that, or is that not a safe assumption?

James: 

Eric, lots of people have read your book, Andrew. And also, as well as that, a lot of the stuff that we talk about on this program is centered around your book, so there is definitely a good level of pre-understanding there. I had a look. Put it like this I looked pretty understanding. There I had a look.

Andrew: 

Put it like this I looked I looked at the deck that you sent me last night and it was perfect.

Andrew: 

So what you have is spot on, okay, great. Well, I’ll just trot through it and just sort of preemptive apologies, because people who have read the book, or maybe if you’ve seen me speak before and of course james interviewed me for dentists and vests a while ago and I and I do, um, use a lot of the same themes again and again and again, but I use this slightly cheesy Latin phrase, repetitio mater studiorum est, which means you know, learning is the sorry, repetition is the mother of learning, right? So I think what? It’s very easy in life generally to learn stuff and then not actually apply it. And so part of the reason that we repeat our message a lot across lots of different sort of media channels and stuff, and obviously through my books, is because understanding what I’m about to present is only sort of probably a third of the battle. Two-thirds of the battle is reiterating it and getting to the point where you actually take action and it changes your life.

Andrew: 

So here, you go, so I’m going to talk about owning the world and, as I say, the importance of human progress. And, as I say, please do leap in, because we’re fca regulated. I’m obliged to put that up at night, so give me a show of hands when you’ve all read it, it’s all right. I’m only joking, you don’t have to read it. Um, it’s there. It’s there because it’s supposed to be by law. So, um, you know, just to kick off big picture. So why? Why does our company, plain english finance exist? Why exist? Why do we have this? Why do I do what I want to do? And it’s a little bit sort of Californian and West Coast Americans have a kind of mission statement about what you do. But we mean it and we’ve been walking this walk for the best part of a decade now. So everything we do is about improving the financial affairs of as many people as possible and basically the vector through which we want to do that. I can now see james’s head.

James: 

Um, what a beautiful sight I’m seeing if I can make this screen any bigger, but I think that’s as big as it gets, okay well, james, I can share.

Andrew: 

I can share the pdf of this afterwards, by the way, it’s it’s.

James: 

I’ve actually, uh, just made it bigger there, so we’re good just to help you cool, um, and you know so.

Andrew: 

So what is so? How do you make people’s financial affairs better? Well, the number one vector for that is it’s all about financial literacy, and and you know, this seems like quite an obvious statement that the financial literacy is is very, very poor, even in the developed world where we have, you know, isis and pensions and all the rest, but throughout the whole world it’s really really bad, and that has serious, you know, ramifications for society and for individuals, and so our mission is to improve that, and you know as. So. I was very lucky to meet this guy, actually Mark Shipman, the guy I’ve got a quote here. I met him at a U2 concert of all places a few years ago, just quite by chance, and I realized he said my name’s Mark and his friend said I’m a financial author, and I said you’re not Mark Shipman, are you? Which was quite a nice moment because I’d quoted him at the beginning of my book. But this quote, I think, is a really instructive one one, and he says there’s an essential skill, life skill that’s never been and still isn’t, taught to the masses how to manage, control and invest money to protect and provide for your financial future. And I know that james and I are very sort of aligned in in that kind of statement. Does that resonate with people you know, whether it’s from school or even you know you can get I’ve got an economics degree from a good british university and and that gives you no practical, practical knowledge of any of this stuff around, actually the nuts and bolts of investment. So why is it important?

Andrew: 

Well, I would contend, parking Ukraine or the cost of living crisis, which is part of this problem in many ways, poor financial literacy is nothing less than one of the world’s very biggest problems, because it’s the reason that so many people struggle financially. And you know, the reason that so many people struggle financially again it seems really obvious is because they’ve never learned enough or in many cases, for a large percent of the population, anything at all about financial markets. And that’s a tragedy, because people on even only average incomes who understand financial markets can realistically aspire to become millionaires over time, and an awful lot do. And there’s a really famous book which I’m sure some of you would have read or be aware of, called the millionaire next door, which is a very american-centric book, but it basically it shows empirically that the the very significant majority of millionaires in America are not people who’ve had enormously high incomes or pop stars or whatever else movie stars. They’re just normal people who know about financial markets and particularly property and the stock market right.

Andrew: 

And then the other end of the spectrum, as an example of how this is all about financial literacy, there are the examples of people who’ve been on huge incomes or, you know, earned a vast amount of money who are bankrupt or otherwise really significantly challenged financially is our legion. It’s very, very easy to find examples. So 70% of people who win the lottery are bankrupt within five years of winning the lottery, which I always think is just an astonishing stat. How can you win $50 million or 50 million euros or pounds or whatever, and then be bankrupt five years later because you’re financially illiterate and you know, if you win that kind of sum or ever make that kind of sum, you should be set for life, indeed, with a much lower sum and a couple of other examples you know 150 ex-premiership footballers are in prison, most of them because they turned to crime to sustain the earnings and the lifestyle that they had as a premiership footballer when they were forced to retire at a relatively young age.

Andrew: 

And that’s tragic because so many of them make such poor decisions about investment and finance at a time in their lives when they’re making 50 grand a week, maybe. Finance at a time in their lives when they’re making 50 grand a week, maybe. Similarly, in America the average NFL player makes $750,000 a year. The average NFL player quarterbacks obviously make a lot more, but 80% of retired NFL players are broke, go bankrupt, which is just you know, and then loads of bankrupt celebs Karen Millen, you know, boris Becker was bankrupt and then lied about it and is in prison.

Andrew: 

You know, having won tens of millions of prize money in his life george best and his son, callum best so that’s a good example of how these things run in families. You know you can, you can run financial literacy in families or you can run financial illiteracy in families and lots of other examples, including, you know, sarah ferguson, who was part of the royal family. So even royalty is not immune, and so the point on that side is really just truly wealth is so much more about knowledge and habit and not necessarily about income. But obviously this audience you have a very particular advantage because your incomes, all other things being equal, are quite a lot higher than the average in the UK population, and that’s our key focus. But so if I James knows I can be a bit messianic and sort of you know, get on my soapbox about our message, but and that’s because actually okay, so that’s great. It’s great for the individual. If you become financially literate, you massively increase your chance of being wealthy. But far more important than that per individual individual because we all want to live in a nice society is what happens at the societal level and certainly what could happen at the societal level if this stuff was more widespread, because every single person who can take care of their personal finances, obviously that’s great for them, but it’s great for the state because it means that there are you know, there are fewer dependents on the state, there’s a bigger tax base Really important and I know this firsthand because I spent the last eight years working with life sciences companies, biotechnology companies.

Andrew: 

Those companies are really challenged in terms of raising money to do things like try to cure cancer, run clinical trials, develop medical technologies, medical diagnostics. It’s very, very hard to raise money for all sorts of innovative companies and it always has been, particularly in the UK. The Americans are a bit better than we are, but if you had more people who are financially literate, more people who are investors, there’d be more capital available for those sorts of companies and for, indeed, companies that are doing anything that’s of use and utility to humanity and for, indeed, companies that are doing anything that’s of use and utility to humanity and very prosaically but totally valid in my opinion, is that you know, money problems cause stress and divorce and people falling out arguments you know, 50 percent of divorces cite money as the prime cause of the divorce, and so financially literate people are happier people. They’re less stressed people. So if you add all of those things up, getting this, you know if we can in our small way make a million more people in the UK actually truly financially literate, that could pay huge dividends for British society. And you know, the same can be said all over the world. And that’s why we genuinely have a real sense of mission about this and why I’m willing to.

Andrew: 

You know, do calls like this at 10 o’clock on a saturday morning? Obviously, um, it’s, it’s about a lot more than just money and just quickly. You know how do we deliver that mission. Well, I think most of you know this um through my two books, particularly the first one, because the second one is much more of a work book. Um, and then, uh, excitingly, part of the reason I was able to go full time on playing with finance a year ago is because I got a two book deal from our big publisher and we’re going to produce a teenager and young adult focused version of how to Own the World because so many people have asked for it. You know, school teachers and university lecturers and uncles and aunts and grandparents have said you know, your books were really like your book, but it’s a bit inaccessible for my 16-year-old daughter or whatever. Could you write one for them? So we’re doing that.

Andrew: 

And then I’m also just about put to bed 115,000 words on a book called Our Future is Biotech, which goes to what I said in the last slide, because I spent eight years working with biotech companies and I think we’re fighting with one hand behind our back with these companies. They could be genuinely. These are technologies that could be changing the world, and I would assume that many of you guys are more conversant with those sorts of you know any medical technologies, all those things being called the many, because you’ve got the, you know, you’ve got the understanding to be. But I believe we’re on the coalface of biotech and life sciences delivering some really amazing things, but the the funding environment’s really challenged. So I wanted to write a book about that, to sort of set out in plain english finance, how exciting that sector is. Um, and so you know I think you know the rest of this we’ve got we’ve got a website, we’ve got an online community, we’ve got a very defensive fund, which is a global multi-asset fund, and we’re teetering on the brink of floating a company on the London stock market to invest in the biotech space, which is hopefully only a few days away from launching. So, as I say, I’ve only about another 10, 12 slides and I’ll trot through them, but just to unpack what my key focus is going to be in these slides is the fact that we’re all about investing and not trading, and just how important a distinction that is, because I think investing is for everyone and trading actually for a very small minority of people, and I’ll explain why I believe that.

Andrew: 

And a related corollary to that is we’re all about ignoring the news. You know one of the biggest rookie mistakes you can. You can spot an amateur investor a mile away when they’re constantly obsessed with what about ignoring the news? One of the biggest rookie mistakes? You can spot an amateur investor a mile away when they’re constantly obsessed with what’s in the news every day and how that may or may not impact their investments. There is very little correlation between the news and financial market performance, and one of the biggest rookie mistakes amateur mistakes is constantly focusing on what financial indicators are doing, what the economy is doing, whether there’s going to be a recession. You actually don’t really need to think about any of that, and investment returns are negatively correlated with that. The more you think about that, the lower your investment returns are likely to be.

Andrew: 

And I’ll explain that in a bit of detail. And as a sort of underpinning to all of that, human progress is the most important investment theme of all and you know, if you like technological development, I’ll explain that in some detail. But just to set the scene, um, firstly, what I tend to do is ask some key questions and then talk about some really important bad news and then some countervailing good news. This is just what I tend to do in these presentations. So, uh, but happy to. I’m not sure I’ll be able to hear you, but you can. I guess this room most of you will know what the average British salary is roughly. Does anybody know? Shout 32?.

Andrew: 

It’s usually about 30 grand, depending on who you are. So now, this is a bit of a movable fees because it kind of defends where interest rates and annuity rates are. But how much money do you need in your retirement pot to earn that? Let’s call it 30 grand a year, risk-free, you know, from from a cash or a bond um product that’s paying you a yield. If it’s 30 grand, $7,500? Yeah, I mean, that’s about right. I mean to keep the massive. If interest rates are 1%, then every million pounds creates 10 grand of income, right? So actually, if interest rates are 1%, then, risk-free, you’d need 3 million pounds to generate 30 grand a year of income, right? So actually, if interest rates are 1%, then, risk-free, you’d need £3 million to generate £30 grand a year of income.

Andrew: 

Now, obviously that’s slightly disingenuous because interest rates are higher and annuity rates are higher, but broadly you’re talking about a large six-figure sum is what everybody in this country needs in order to be able to reliably pay themselves just the average income per annum in retirement.

Andrew: 

Now let’s be clear if you don’t want to touch the capital, you’ve probably heard of a thing called drawdown, which means that you know if you do have a million pounds by the time you’re 60. You can divide that. If you assume you live 40 years, you can divide it and and take some money out each to run it down to zero. But the far preferable thing to be in a position to do is to live on the money from your capital rather than destroy your capital and then, if you have children, for example, uh, leave the capital to them and so okay. So let’s just say, for the sake of you, need a large six-figure sum to be able to do that. How much does the average british person actually have at retirement nowadays, not including their house, like pension and liquid assets? Don’t really know the answer to that, james real quick, guys.

James: 

I’ve put together a special report for dentists, entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistoinvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them.

Andrew: 

I’m really looking forward to hearing your thoughts. So well, the answer is £50,000. And generally it’s about £ grand the average man has and about 10 grand the average woman has still today, even now. Obviously because in a lot of families and a lot of couples sort of traditionally men have run the money and that’s why women often, you know, if they lose a husband or whatever, they can end up in that terrible situation. So you know, there’s a huge. This is, this is why this is one of the biggest problems in the world, if you ask me, and certainly in British society, is the disparity between what somebody needs to live a good retirement on and what the average person actually has. And this is really, you know, this is going to come home to roost in a horrible demographic bulge in the years ahead. And you know why should you care about that? Well, because of the bad news, because quite often, you know, I did a speaking event at Birmingham Uni a few months ago and some of the students said to me well, you know the government papers the last decade two, three decades already is that the government cannot afford to pay a living income to all of its retired population for a whole series of demographic reasons which actually have nothing to do with politics, and it won’t matter whether it’s the Tories or Labour, it’s just a mathematical inevitability.

Andrew: 

Because we were very enlightened, britain introduced a pension system in 1909. We were the second country in the world to do that, after the Germans. It was kind of our idea and their idea, and the Dutch as well, and it was for over 70s, at a time where average life expectancy was 47. Now that number is skewed by infant mortality, but not that many people actually live through two or through 70 years old. Only a handful of kind of you know, pampered aristocrats. Most working class people didn’t make it anywhere near 70, particularly if they spent a life working down the mines or on farms. And so we introduced a pension in 1909 for over 70s, when that meant that there were an awful lot of workers paying into the system and very, very few over 70s taking out of the system. Um, which was a great idea, um, but in this day and age, life expectancy for most people born today is probably going to be 100 or north of 100, and certainly 80 or 90. And we’ve already seen that happen in the last 40 years. And so if you want to retire at 60, or, dare we even hope, 50 or 55, you need to have enough to fund four decades of your life and sadly, governments literally can’t afford that. It doesn’t matter what your political position is, it’s just a inevitability. Japan is a really robust example of this, because when they put their social security system in place at the end of the Second World War there was something like 35 workers for every retiree, and already in Japan there are now only two workers for every retiree.

Andrew: 

No-transcript. Truly there is some countervailing good news that can kind of rescue us and I split that into three parts. So again, I think james talks about this stuff. Many of you will be familiar with this, but even if you are familiar with it, people don’t really understand the sheer power of compounding. You know compounding financially and also compounding in life, just getting better at things gradually over time and how. You know two friends in their early 20s who leave university with the same skills and earning potential and work ethic and fitness and diet habits. If one of them gets 1% better every month and the other doesn’t and just stays the same by the time they’re 30 years old, you won’t really notice much of a difference. One of them will have a slightly better job, might be slightly slimmer, but by the time they’re 60, truly, one of them will be a millionaire and set for life and the other one will probably be in financial trouble and that and that. That. That’s really insidious and sneaks up on you. But but, but if you make it, if you take, make use of compounding, it’s, it’s transformational and that’s why we we talk this story so often and one of when I’m doing, when I’m doing um journalist interviews or speaking to the general public who perhaps aren’t quite as sophisticated as this audience, one of the powerful ways I try to use to explain the sheer power of compound, the impact of compounding, is imagine that you can invest five thousand pounds the day your child is born, or your parents could, or a wealthy relative, just that you can put five thousand,000 into something the day your child’s born and just imagine that that returns 10% a year. Now we can you know people can scoff at that number.

Andrew: 

We’ll come on to justification for why 10% is not an unrealistic number. Well, how much would your child have on their 55th birthday with no further investment? So that’s just £5,000 invested once by the time they can first legally retire at 55. And the answer to that question is £945,000 compounding at 10% a year, or £1.2 million compounding at 0.83% a month, which is 10% divided by 12. So you know, because it’s £5,000, £6,150 and so on and so on, over 55 years, with no further investment.

Andrew: 

So compounding, you know, compounding of very small amounts of money over very large amounts of time, can make us all millionaires. And so then to come on to you know, why do we have a pensions crisis? Why are so many people impoverished? Why is the average person in Britain only have 50 grand? It’s a, it’s a problem of knowledge and habit, not really a problem of investing. It’s a, it’s a problem of knowledge and habit, not really a problem of investing.

Andrew: 

Um, and the reason that 10 is actually not entirely ridiculous and unrealistic I’ve put on this slide, so I’ve put you know, 10 will make us all millionaires. And how do you achieve that? Well, because of, as I said earlier, the most important investment theme in human history is human progress. And the American stock market, from the 1st of January 1872 until the 31st of December last year, averaged 9.23% per annum. So if you’re just an investor in US shares, as simple as that, buying the market every month regularly, you have a chance of being at or around those sorts of levels and if you’re lucky and you go through a period like the last 15 years, you’ll do quite a lot better than that. You might be at 11 or 12% and if you’re unlucky and you might do one or 2% lower than that, depending on what’s happening historically. But broadly you can aspire to high, single digit or low, double digit annual return.

Andrew: 

So that’s that 10% I talked, talked about, and that is a function of technological progress and population growth. And, and you know, the last century has been all about tech and physics, if you like. So automotive, aviation, energy, um, you know. Steel, uh, shipping containers, shipping buildings, um, and obviously, most recently, the internet silicon, you know, semiconductors, the semiconductor industry, smartphones, mobile internet, etc. Etc. And that is what has fundamentally underpinned real wealth creation and equity returns knocking on 10% for the last 100 plus years and, I think, the next century.

Andrew: 

I think it’s very easy to evidence the fact that the next century is going to be about biotech and will sustain or improve those double digit, like the likelihood that the world’s progress in terms of financial market progress will be 9, 10, 11, 12, even better, percent, because actually biotech exponentials are even more exponential than tech exponentials. So you can believe that wealth creation could actually now be going to get better than it’s been in the last century, and the reason for that is because you create real economic value. This is where finance is very real and the upside is very real. You create economic value by solving problems. You’re solving humanity’s problems. That’s how we create any value.

Andrew: 

Ultimately, when you boil it down, um, and most of our remaining problems as a species are problems of biological systems. So most obviously that’s in the, in the therapeutic setting, whether that’s curing cancer or dementia or autism or obesity or diabetes or whatever else. But, um, actually biotech is where the most exponential and interesting technology is coming from. That will revolutionize and significantly improve our clean power generation technologies. So bio-coated photovoltaic cells, for example. Alga culture you know being able to make aviation and automotive fuel from just adding enzymes to algae that we can grow in great fields out in the middle of the oceans. These things will revolutionize the way we use fossil fuels and also revolutionizing agricultural productivity. You know, biodegradable packaging instead of plastics and single use plastic bottles. All of those solutions to those problems are going to come from the biotech industry, in my considered opinion, having researched this for a while, and even improving processing power. So computers are binary computers. Still to this day, all of our chips are zeros and ones, and that’s been the technological paradigm for the last century, and we’re bumping up at the limits of physics in terms of our ability to make chips more powerful. And the solution for that is biological computers as dna-based computers, um, and indeed you’ll have heard of quantum computers, which is kind of related to that, but that could be a step change in the intelligence and processing power of our computers and that will generate real wealth.

Andrew: 

And then the final bit, the third piece of good news, which sort of is the antidote to the bad news about how screwed government finances are and how poorly most people legislate for their financial future, is that this isn’t that hard. And this is where I’m going to come on to the investing versus trading piece. Investing is not that hard and I always say you know that investing is no harder than learning how to drive a car. And it’s crazy that you go to the average person and say should most people learn how to drive a car? Is it normal to learn how to drive a car? I mean? What does everybody in the room think? 90 plus percent of people will say yes, right, it’s a pretty normal thing to learn how to drive a car.

Andrew: 

It takes no longer to learn how to drive your finances in terms of being an effective investor and making those sorts of high single-digit or low double-digit returns I talked about on the last couple of slides. But nobody does it and people say, oh well, financial markets, that’s for rich people, and that gets correlation and causality the wrong way around, because financial markets are not for rich people. It’s just that people who learn about financial markets are much, much more likely to be rich. You know, the richest 1% of people in the world nowadays are, in the main, the most financially literate 1% of people in the world, and that’s in large part to do with compounding. So all you need to do to achieve that is to own the world, which is why my book is called how to Own the World to capture that human progress and be as close to that nine, ten, whatever percent you can each year and, in this era of of inflation, because of all the money creation over the last five decades, to own inflation. And there are ways that you can benefit from the fact that we are in an inflationary era and do better than other people, whether that’s property or, potentially, crypto or gold, which I I favor because I think it’s the easiest thing.

Andrew: 

And then the only other thing you need to think about in terms of a very elegant approach to investing, to make investing easy and automated, is that you need to be conscious of your age and stage, and so we talk about 100 minus your age. So 100 minus your age just tells you, if you subject your age from 100, it tells you what percentage of your monthly investments should be in notionally risky things and what percentage should be in defensive things. So and but where risky might mean equities, for example, rather than cash or bond or gold. And so you know, if you’re 30, you should probably have 70% in the market and 30% in defensive stuff. And if you’re 70, you should probably have 70% in the market and 30% in defensive stuff. And if you’re 70, you should probably have 70% in defensive stuff and 30% in aggressive stuff.

Andrew: 

And the reason for that is because, if you’re 30 and you’ve got £10,000, because you’ve saved a few quid in your 20s, working in a bar or whatever you might be doing, and there’s a 50% correction in volatile assets like the stock market, which happens every 10 years or so. In the stock market, you’ve gone from 10 grand to 5 grand, which is annoying, but you have the rest of your life to benefit from those returns the stock market affords and build back up. And you know 5 grand isn’t actually that much in the grand scheme of things. Whereas if you’re 60 and you’ve done this for a lifetime and you’ve got to, let’s say, a million pounds because you’re well, you know you’re a dentist, for example, and you’ve been sensible and you’ve invested each month into sensible things If you lose 50% in the same, in exactly the same market crash scenario of a 50% correction and this is what happened in 07, 08, 09 and 99, 2000, the 30-year-old goes from 10 grand to 5 grand, you go from a million to 500 grand and obviously that is a very, very different problem with very different consequences for your life than the 50, the 30 year old losing 50.

Andrew: 

So that’s why you need to think about 100 minus your age and, if you like, if there’s a one-size-fits-all panacea approach to investment, it’s just to understand all this stuff and think about your age and and I do that in five-year chunks, because you don’t need to finesse any more than that. You could probably do it in 10-year chunks. To be honest, and you know so, it’s quite easy to do this, and it’s quite easy to build very significant sums, and sums that are big enough to have a very comfortable life and a comfortable retirement. But nobody’s doing it, because the very, very small minority of people care about this stuff, think about this stuff, learn about anything that we’ve just covered in the last few slides, and I think that that is quite literally one of the greatest tragedies of our time. You know, and I’ve said it’s probably one of the biggest problems of our time in terms of the aggregate human misery caused, um, both for individuals and for innovative companies who can, you know, do all these wonderful, innovative things and for society as a whole, um, and so, taking all of that on board, you know, I think it’s worth just taking a step back and saying what’s the what is all the point of me bleating away? What’s the point of all of this? It’s very simply to get to the point where, if you take this information on board, start with the end in mind, you can live well on the returns generated by your money, not the returns generated by your work. So you know, and your money is infinitely more scalable than the hours you have in any given day, week, month, whatever. And I think it’s.

Andrew: 

You know, we too seldom in our society take a step back and think just how empowering an idea it is that that is even possible. An idea it is that that is even possible because 99 plus of the human beings ever born in history it wasn’t, it wasn’t possible for them to do that because the fundamental technology of financial markets didn’t exist. Um, you couldn’t aspire to just stop working and live on financial markets and on your investments and dividends and whatever else. Um, and you know, thomas Hobbes, the British political philosopher, famously in his book Leviathan, described most human existence as solitary, poor, nasty, brutish and short. And the financial markets and knowledge of investment can turn that on its head and actually make life really secure and abundant for billions of people. So, but you know, know, as I say, for those who are willing to engage and learn and become confident in understanding financial markets, which too few people do, and you know, we’re very mission driven to try, and because I, because I genuinely see this as a silver bullet for humanity, I mean you could say society, but actually it’s much bigger than that. The more people understand this stuff, the better a society will live in, the happier and wealthier and more secure and abundant more people will be. So it’s all about.

Andrew: 

You know, what do you actually do? Brass tacks, well. What is owning the world? Well, the richest and smartest people have done this for centuries, and that includes the Rothschild family, harvard University, yale you know, all the Ivy League colleges in America, all their endowments, oxford University, cambridge University and what is that? Well, it’s actually really simple, and this is when I talk about investing. Being simple, it just means you need to own, ensure that you own, most major asset classes, and so you know. The simplest ones of those are cash or bonds, property, real estate, shares and commodities and, if you like, crypto, and we can perhaps have a Q&A about my thoughts on crypto.

Andrew: 

But I just think crypto is sort of unproven at the moment and there’s a lot more water under the bridge, and to me it looks a lot like the dot-com boom in 99. Everybody knew the internet was going to change the world, but that didn’t start. Stop 90 percent of internet companies that exist in 99 going to zero. And, you know, maybe crypto and blockchain is going to stay, change the world, but, for all we know, bitcoin could be the next nokia. You know, nokia was a 200 billion dollar company in 2000, and then it got destroyed by apple, and so was motorola, siemens, and so was erson, and now they’re all tiny companies, um, and and that could. The same might be true of Bitcoin and Ethereum, and I just think we’re too early in the cycle to have any confidence about what crypto might do.

Andrew: 

But that doesn’t mean you shouldn’t at least contemplate it as one of those major asset classes, for sure, just with a weather eye on the fact that it’s fundamentally riskier than the other ones, in my opinion. And then so it’s owned. All major asset classes in all most geographical regions, and the easiest thing to think about there is just the US, europe and Asia, which is pretty easy to do and, crucially, invest every month from as soon as you can afford to do that until the day you have enough to live on, which actually can happen. Best case, that’ll take 20 years if you’re quite a high earner, um, but you know, it’s amazing how quickly you know. I’m 47 now, so it’s 22 years ago. I was 25, I’ve. I guess I probably started investing when I was 23, so it’s you know, it’s well, it’s more than 20 years now I’ve been investing and and you know, it’s amazing, if you actually do that, how, how those years just go by very quickly and you get a great result and then, as I said earlier, ignore the news. So we’re just going to talk about what I mean by investing versus trading and ignoring the news on the next couple of slides. You know, I have this a lot.

Andrew: 

One of my great frustrations about what I do is that and this is particularly true of millennials at the moment and particularly true of what, given what’s going on, crypto is how many people who’ve never thought about investment. They don’t know what an ISA is. They’d never engaged with what their pension has been like. Boring, boring finance, no, not interested, not interested in finance at all. And then they wake up one day and get really, really excited about forex trading or binary options trading or crypto trading, and they go from to me that’s like, that’s like somebody, a white belt in karate or judo, going and fighting black belts the first time they go to karate or judo lesson and it’s just, it’s maddening and all, and it’s particularly prevalent in young people who bypass all the key products that have got two centuries of track record of wealth generation to the most dangerous and risky approach to finance.

Andrew: 

Um, because trading is no matter what anybody tells you, it’s extremely hard to do it well, it takes years to become good, it takes many hours a week to do it properly. And people who say, oh, I can teach you how to trade in five minutes a day, they can trade in five minutes a day because they’ve been doing it for 20 years and practicing or at least you hope they have. But anybody just starting off will not be able to do it in five minutes a day because you’re learning the ropes on something that’s quite difficult. To do it in five minutes a day because it’s you know, you’re learning the ropes on something that’s quite difficult. I mean, I always say that trading is roughly in, it’s certainly an a level’s worth of work and to do it really well, it’s probably a degree’s worth of work and so and and it’s often quite stressful, you know, even if you know what you’re doing, you know how to use stop losses, it’s time consuming, stressful and finally it’s you.

Andrew: 

This is why I feel particularly strongly about sort of 30 year olds who might have three grand of savings, spending two grand on some crypto or trading guru to teach them how to trade. Because the key thing about trading what really makes trading successful in absolute terms is trading quite a large amount of capital with a low risk. So if you’ve got 100,000 pounds and you only want to make 2% or 3% a month by using various trading techniques, you’ll at least be making £2,000 or £3,000 a month and compounding up. But if you’ve got £2,000, you’re probably better off spending your time on any number of other things which would be more valuable to you than sitting around staring at screens. And I feel, as you can probably tell, I feel quite strongly about that. And, as I say, don’t be a white belt fighting black belts and what we’re all about, what our business is all about. You know trading. Don’t get me wrong. If you are wealthy, you’ve got time on your hands. You’re willing to engage and spend time on it. Trading can be very good. I’ve done lots of trading in my life. I don’t at the moment because I’m too busy, but it’s not something that you know 28 year olds should be doing before they’ve done investing.

Andrew: 

Trading is for a small minority of people. Investing is for everyone, and it’s a tragedy that relatively few people invest too few people, in my opinion because it’s much simpler. It has a much higher probability of long-run success and actually making you a significant amount of money by the time you want to retire, and and that time can be quite early. If you do it well, it’s probably 90% admin and 10% asset selection. Once you’ve got the habit of investing every month into something sensible, it almost doesn’t matter what you buy within reason, I mean, obviously it does, but it’s much more important that you form the habit and actually taken the bull by the horns and sorted this out.

Andrew: 

And, crucially, a global, multi-asset approach to investing and own the world approach to investment means you can sleep at night and you can have real confidence that what you’re doing is the right thing, rather than having this as so many people do. You know finances, this horrible job that hangs over them for years and they stress about it and they don’t know what to do and they don’t know how to engage with it. This approach removes all of that and makes it very low stress, and there’s a quote there on the right-hand side from John Stepek, who used to be the editor of Money Week, and he’s moved to Bloomberg now, saying there are many roads to ruin in the market, some of them among others, but one, basically, a surefire way to have low returns is to set out as a buy-and-hold investor ie an investor and then try to turn into a market timer at times like these. That’s how you’ll have lower returns. And just to.

Andrew: 

I’ll unpack that on the next slide, but just before we do so, why is it really important to ignore the news, which is all part of my point about investing? Investing is something you do regularly, every month. It’s about admin. You do it every long period of time and you’ll have a large amount of money, um, and in doing that, you must ignore the news. Um, as I said at the beginning of the presentation. And why is that?

Andrew: 

Because of a thing called the availability heuristic, and that is a cognitive bias established by, you know, psychologists. So, basically, news is about things that happen, not things that don’t happen. Human beings focus on things that happen, not things that don’t happen, and that sounds a bit ridiculous, but it’s important, because it’s not newsworthy that the the world economy has grown from kind of 35 trillion us dollars of aggregate gdp to 100 trillion of aggregate gdp in the last 20 or 30 years, because it’s gradual, gradual and it happens over time. That’s not a new story. A crash, a stock market crash, is a new story and you know so. In the last three years there’s been endless coverage of COVID and endless coverage of Ukraine this year, but there’s never a headline that says that the UK stock market has created a trillion pounds of value in the last well, since 2009,. Or, as I say, the world economy has grown massively in the last 15, 20 years.

Andrew: 

Because of the availability heuristic and because editors like to say if it bleeds, it leads our media truly focus 99 plus percent of their attention on the 0.1 percent of bad things that happen in the world. And that’s really relevant to investment. Because I mean, if you go to the pub this afternoon and talk to some random people in a pub that you might meet and say, what are your, what’s your first thoughts on the stock market? The word that most people commonly associate with stock market is that it’s risky, and the reason they think that they think stock market investment is risky is because of this, because the only time the newspapers ever talk about the stock market is when it crashes, and that gives everybody a very, very full sense of the merit of long-run investment.

Andrew: 

And then a couple of quotes on the right-hand side there, but basically making that point, particularly Bill Clinton saying follow the trend lines, not the headlines. And the trend line, the most important trend line, is human progress and the fact that will deliver you really good returns. So you’ll be relieved to hear I’m two slides from the end now, guys, so you can. You can have a break from me bleating away at you very shortly. But, um, so what does all that mean for investment? Well, as I said earlier, you know, from 1872 until December of last year, the S&P, the biggest stock market index in the world, has done north of 9% and that would be enough to make you a millionaire over 20 to 40 years of steady investing. With pretty small numbers actually and I can’t remember the stats but a couple maxing their ISA can become a millionaire at those sorts of rates of return in eight or nine or 10 years. It’s not very long actually. But nobody’s making those returns.

Andrew: 

Because of the investing and trading and ignoring the news points I made, most investors are making about 5%. The reason is that because they don’t ignore the news, they don’t automate, they don’t stick to their guns. They sell at bottoms and they buy at tops because they’re always constantly trying to time the market. And if you time the market, you reduce, on average, your potential annual returns by about 4% and over a lifetime of investing that has a massive impact on your ability to become wealthy, which is why I’m really really stressed this point about ignoring the news and regular investment over a lifetime. And then the other point is that so that’s investors, but actually a very small percentage of the population are investors.

Andrew: 

Something like only 10 percent of people knowingly invest in the stock market without you know every. A lot of people are invested in the stock market through their pension, but very few people actually knowingly do it thoughtfully. So most people particularly in britain, where financial literacy is particularly bad and most people never learn about any of this stuff most people are making as little as two percent because they’re in a cash isa. They’re so frightened because of the news and because of listening to the news and, oh, you know, everybody always comes on to me and says you know, I loved, I loved your book. It’s great, I’m wanting to invest, is now a good time, because of Ukraine, covid, libyan refugee crisis, you know, syria.

Andrew: 

There is always a reason for people to want to not invest, and the answer is always ignore that and invest from. The best time to invest is always right now and for the rest of your life, and ignore all that nonsense. And so most people don’t do that. Most people are in cash, in a cash ice or whatever, because they’re so fearful of investment. They only ever hold cash, and particularly with inflation at 10%. You know, if inflation is at 10% and interest rates at 2%, you’re losing 8% of real wealth every year, and that’s the position that so many people are in, which is why so many people are struggling cost of living crisis, finding it difficult financially, without really understanding why.

Andrew: 

Because, as John Maynard Keynes said, not one man in a million truly understands inflation. I think that’s probably a little bit punchy. It’s probably more than 66 people in this country who understand inflation, but not that many who really understand it properly and really think in this way, and you know very few of our politicians for sure. Certainly not Liz Truss has demonstrated in the last few weeks, but you know, neither did Gordon Brown. Gordon Brown sold our gold reserves at an all-time low. You know, it doesn’t matter what stripe of government they are. Most politicians are very, very financially illiterate and indeed so are most of our, or many of our, mainstream journalists, because I very seldom see this stuff discussed in the press. But you know, the antidote to that is to know that investing is crucial for everyone, and investing regularly, each month, over time, will get you a great result. So, just to summarize, I love that quote on the right hand side, which is blocked by this little window, but it’s in terms of this idea about human progress.

Andrew: 

Thomas Babington Macaulay, a Victorian political philosopher, said by what principle is it that, when we see nothing, to carry on getting wealthier and, you know, innovating and having magnificent new products and actually a lot of that innovation is going to roll back environmental degradation and really sort out the world and sort all of our big, intractable problems? Because I think we have exponential problems, but exponential problems have exponential solutions. That’s a big part of what I’ve spent the last year writing about. If you believe all of that, all you need to do is own a good variety of most major assets in most major geographical regions.

Andrew: 

Focus on investing, invest direct debit each month, from the minute you can, until the minute you’ve got a lot of money, and be patient, ignore, believe in human progress, ignore the news and that fundamental approach to such things, unlike many others. Crucially, it means you can be very relaxed about life and get a good night’s sleep and have confidence in your future. Um, and that um you’ll be delighted to hear. Sorry, it’s slightly longer than I said, but um, that’s there you go. That’s what I wanted to say and I’m delighted to be challenged and told I’m speaking nonsense and I’ll answer any questions you might have thank you so much, andrew.

James: 

That was extremely enlightening and I think we all go andrew round of applause well, at least we’re turning up, despite the heat.

Andrew: 

my Eden, my friend, actually James, I forgot to say I meant to say at the beginning and I forgot. I’m really sorry I’m not in there in person, because it is much better in person. But well, I’ll show you just for amusement.

Andrew: 

So it doesn’t matter if your food is not normally that size.

James: 

There is a problem for me.

Andrew: 

I got back to my train station, my local train station, two saturday nights ago, um, actually after a day where james and I had seen each other this entrepreneurs of brent in london and um the the train, as the staff at my local station had managed to lock all of the exits from my train station, so I was like everybody was milling around trying to find a member of staff to unlock the side gate and let us out, and I was a food. I basically I thought I can jump over the fence, which I could do when I was 17 and 27, but apparently I can’t do now. I’m 47, so it’s quite a painful uh weekend last weekend, but anyway, that’s why I’m not there, with apologies I super appreciate it that you can come today virtually um give them what happened.

James: 

Let me thank you for that presentation and, yeah, a lot of this aligns with what we talked about in finance and you can tell that Andrew is one of the inspirations for me for the course. It’s actually the very first book I read on finance. Has anybody read?

Andrew: 

it. Oh wow, so you didn’t need me to just waste 40 minutes of your time shouting at you.

James: 

I can imagine that I swear by that. Anyway, has anybody got any questions that they’d like to ask? I’m ready.

Andrew: 

When do you get the Teams book on?

James: 

So you just have to ask questions.

Andrew: 

The book on the Teams.

Andrew: 

Hang on. Sorry, I can’t see the questioner or hear, Just getting this microphone All right yeah, sorry about that.

Andrew: 

Sorry, this is a small question first Can you hear R9?

Andrew: 

Yeah, yeah, yeah.

Andrew: 

It’s an easy one to solve, though. Where do you get the teams from?

Andrew: 

Oh well, we haven’t delivered it to the publisher yet, so it’ll be published. So it’ll be published. I hope it will be published about halfway through next year, but it’s quite exciting. So I’ve written it with a seven. Well sorry, they were 17 and 15 when we 16 and 14 when we started on the journey, and they’re now 18 and 16. It’s been a while and Gaia’s going off to university in the States and yanni’s actually just got a contract with the premiership football team, so that could be quite interesting. Um, uh, but but yeah, I’ve written it with two teens and it will be published next year, hopefully with some fanfare, and you know we’ve got um, a cartoonist drawing, but it’s quite, it’s a lot. Um, we’re hoping it will be really palatable for teenagers and young adults, because it’s got lots of breakout boxes and explanations and definitions and sort of cartoons as well, or cool hieroglyphics and pictures, um, rather than the rather dry version that you’ve all endured for adults. So sorry, that’s a very long answer. Next year. Basically, give us six months awesome.

James: 

Thank you so much, gareth. Hi Andrew, thanks for that.

Andrew: 

Dylan, a lot of the assumptions in these things are based on population growth continuing.

Andrew: 

I do hear some whispering of a slowdown in the rate of population growth?

Andrew: 

Does that?

Andrew: 

concern you in our lifetime, or is that something way off? No, because you’re right, it will be one. You know, what would be lovely is if um, I mean you obviously will be aware because it’s interesting a lot of people worry that population growth is going to explode upwards and just you know that’s going to cause the end of the world and environmental degradation and war, famine and pestilence and the four horsemen of the apocalypse. But actually the smartest thinkers in the world, people, people like Kevin Kelly, who founded Wired magazine, and lots, lots of others, have identified that actually one of our challenges economically will be a decline in population, probably, probably from about 2040 onwards. It’s very hard to predict these things. I don’t worry about that in terms of the economic paradigm because what it hopefully means is, roughly now the average person in the world very, very roughly, and these numbers are hard to get accurately but has about 10 000 us dollars a year. So in the developed, in the wealthiest countries in the world, like singapore or switzerland, you know, it’s 60 or 70 000 a year gdp per capita. In the poorest countries in the world, like chad or, you know, paraguay, it’s kind of between 500 and a thousand us dollars a year, but across theay it’s kind of between 500 and 1,000 US dollars a year, but across the whole world it’s about $10,000. And that number has been going up fabulously because of China and Indonesia and all these places that have been developing economically since the Second World War in particular.

Andrew: 

Wouldn’t it be marvelous if, 50 years from now, there are 4 billion people in the world, and not because there’s been a massive apocalypse, to be clear, just because there’s been a gradual? You know the replacement rate of children has not exceeded. You know we’re not growing exponentially anymore and those four billion people all have a 250 000 a year lifestyle. So so you know that that is a future that I think is eminently possible.

Andrew: 

I talk about being in a race between Mad Max and Star Trek quite a lot, and to me that’s a Star Trek outcome. You know the Mad Max outcome is a dystopian horror show where we’re all fighting over scarce water and riding around in souped up cars with, you know, whacking each other with chainsaws. But I think, the much more I genuinely believe that population growth will start tailing off, which will be marvelous for fish consumption, agricultural degradation you know the amazon, etc. Etc. But that we will get better as a society allocating and allocating on merit, wealth, creating wealth and allocating wealth, and we’ll all we’ll have a smaller population of much wealthier people, and I think that will happen.

Andrew: 

So I hope that answers your question so what do you think about the risk of the government waiving inheritance tax and pensions?

Andrew: 

the government being able to tax inheritance tax and pensions. I mean, yeah, um well, I’m a small government libertarian, so my, my basic position on all such things is the government do most things really badly and probably should do as few things as possible as a society. Um, so, uh, but unfortunately our political system is. It’s like winston churchill said that democracy is the worst form of government ever invented, apart from all of the other ones, which I always thought was quite amusing, um, but uh, I mean, yeah, I think I think there’s a risk that. So you probably know, argentina nationalised private pensions in 2008.

Andrew: 

And actually that struck quite close to home to me because I’ve got quite a few kind of middle-class Argentinian friends just from when I lived in New York, and they lived near me in New York and we all became mates and you know their parents, and they had spent years diligently saving into private pension schemes and overnight, the government just took all the money. Can you imagine what? And they had spent years diligently saving into private pension schemes and overnight, the government just took all the money. Can you imagine what that must feel like? I mean, just, you know, after 30 years, and the government said that was for the greater good. Now, will that ever happen in Britain? Let’s hope not, but you know, the more tricky the state of the government’s finances, the more there is a risk that those sorts of policies happen. So, yeah, sorry, I’m probably not answering your question very well, but I think the less government takes from its populace, the better, because the private sector tends to drive far better outcomes and far more effective outcomes than the public sector, based on the evidence of, I think, a couple of centuries of history, outcomes than the public sector in my, based on the evidence of, I think, a couple of centuries of history, with exceptions.

Andrew: 

The government has to do law and order and the government has to do, um, the defense of the realm, obviously, um, but, but and and but, to protect yourself against the risk that a future government, of whichever stripe, might either nationalize pensions or at least tax them much more heavily again. That’s why I think you just have to be financially literate and make sure that you have a good mix of things in a good mix of places, so that you, you know, unlike a couple of my argentinian friends, parents who literally just lost their life, their life’s work, overnight and have really struggled since uh, you know you have some stuff. You have different things in different places and you’re not, you don’t have all your eggs in one basket. That’s at risk of the government nicking it. Was I answering your question there or was I answering the question I chose to?

Andrew: 

here um. Yes, thank you. Okay, question here adam.

Andrew: 

Thank you. Question over here, adam. You talked about your new biotech portfolio that’s going online soon. If you were to want to invest in owner worlds and biotech, what sort of split between the two of those would you think would be ideal? Sadly, I genuinely can’t answer that question because it’s the so personal financial. In order to answer that question, I’d need to know how big your mortgage is, how much debt you’ve got, what your attitude to risk is, whether you’ve got any kids, how much you earn, what your plans are when you want to retire, how much you know. It’s never appropriate If anybody ever tells you you know, if you say to somebody I’ve got 100 grand and they tell you what to do with it, you should run a mile Because you know you have to know the granular detail of somebody’s personal circumstances. And then I was going to say, can I give you? No, I wish I could.

Andrew: 

I mean, you know our new. We’re a floating company on the London stock market. It is an investment company, so obviously all the money goes into the company and then that all that money goes out to be invested in. So it’s like Scottish Mortgage is investment trust, which many of you will know. Um, it is going to be a risk factor five out of seven, so it’s it’s.

Andrew: 

It is notionally a risky product, so you know it’s. Certainly don’t put all of your money in it, that’s for sure. But you know those decisions about whether you think it’s X percent or more than X percent, I’m afraid I can’t give a steer on, but obviously you know. So the website is going to be clscuk, not couk, just uk, and it will hopefully be up in lights in the next few days and it has everything prospectus, key investor documents, like all the legal documents and everything, all the risk factors saying run a mile, don’t invest in this which the government forces you to put on things like this, obviously. But yeah, do have a look. Thank you for the question, bodo, thank you. Thank you Any more obviously? But yeah, do have a look. Thank you for the question.

James: 

Thank you, thank you.

Andrew: 

Any more questions behind you, james, thank you, thank you so much. Uh, I just wanted to obviously a big thing, because I mean what you’re seeing it looks really simple don’t listen to the news, just automate it and invest and forget about it, and I think that’s really some advice, but it’s really bloody hard to do, but it’s just it’s. It’s hilarious because it is really hard to. But something that I’ve noticed in my experience with migrants, really financially illiterate, and as soon as I started to learn about finance, it really opened my mind and I was like, why the fuck have I never talked about this? So I turned 40 this year and it’s only during the last four or five years I’ve come into money and had that onus to learn.

Andrew: 

My question really is and it’s great to hear and I commend you coming out with a book for children and teenagers, because that’s where the education we should be trying to educate our youngsters so that they grow up literate. So how? And then in the book but how can we, how do you see we can be better at educating our young people. Hopefully I’ll be able to educate my kids, but here’s some visuals. You’ve got this book, but how can we get? Get into schools, educate them more publicly about the importance of saving and understanding the beauty and the wonder of compounding yeah, well, it’s a great question and it is genuinely a mission of ours.

Andrew: 

I mean, in a small way, I went to Birmingham, I went to Birmingham University, right, and I went back to Birmingham University in February, march of this year and presented to quite a big group of students in the you know, the old big hall in birmingham, and I hope that I’ll go back next year and present to even more, because I was a bit of an unknown about who’s this. You know boring bloke from the city who’s coming back, who was here before I was born, which is a bit freaky to realize. It wasn’t quite. But you know 97, I left birmingham, um, and I’ve done a bunch of secondary school assemblies, um, and so for my, the answer question, for my own part, is if, if I do things right and things go well, um, and and my profile raises off the back of this ipo we’re doing everything else, you can be assured, and obviously, with the publication of the book for teenagers next year, we’re hoping that there’s a chance of a collaboration with the publication of the book for teenagers next year, we’re hoping that there’s a chance of a collaboration with the Premier League because you know, the teenager who helped co-write it is. He’s got a what’s it called an academy contract with one of the premiership teams, but he may become a fully-fledged player and they’re very concerned about financial literacy amongst their players for the reasons I talked about earlier and lots of young players earning far too much money and not not doing the right thing with it. And we’ve also got potentially got a collaboration with the footsie uh, the financial times financial literacy inclusion campaign, the ft flick flic, which is worth a look, and the ft are putting a lot of money into that and trying to spread. You know, spreading financial literacy amongst younger folks secondary school kids in particular is one of their core focuses. We’re a small stone in the pond, right, our business and we’ve got an audience of x you know it’s well, it’s about 14 000 in our email list and a bit more on social and wherever else, and that’s growing. And we’re about to start spending money on advertising. But I do think that these I like to think that a lot of these ideas are so kind of compelling. I mean, you guys are all sitting here on a saturday morning. We’re having this conversation, right? I think there’s a lot more of it. There are a lot of groups out there in the world. It’s becoming more ubiquitous, people are more interested, millennials are more interested.

Andrew: 

And in terms of how you actually talk to your kids, I think the key thing, really beyond everything else, is just say look. Because I think one of the biggest problems with kids is they get really excited about crypto, they want to mine crypto and they want to do trendy stuff. They want to get paid for playing video games right, they don’t want to invest in, like the S&P 500. What’s that, dad? That’s boring, right. But if you could, just if all of us can somehow just explain to our kids well, just do this thing, this really boring simple thing, with this small amount of your money forever from now, and just trust me, just do that. Then you can do whatever you want with the crypto and the whiz bang and the weather, with the rest of what you do, but just do this little small thing with five to ten percent of your money from now and do that for the rest of your life. And we, if we can all convince our kids to do that and you know, indeed, I mean obviously I put money into my kids junior ices every year, right, and I mean one of my friends, a fund manager and he’s quite, he’s quite a clever guy.

Andrew: 

He’s been putting the max of the junior ISAs into his kids’ ISAs.

Andrew: 

They are six and three and between them they’ve got something like literally like a large six-figure sum in their ISAs because he’s bought like two or three companies that are up like 20X.

Andrew: 

It’s just, I mean, he’s like he’s complete luck and he smashed the lights out.

Andrew: 

But you know, those kids are going to wake up on their 18th birthday and have, like I don’t know, by then, three or 400 grand in their junior and, to be clear, he’s only investing nine grand a year or whatever. It used to be four and a bit grand a year for the first year or whatever, but I’m sorry that’s a bit of a spurious example. But I think if we all invest a little bit for our kids every month even the market rates of return. Now I contributed an article to the Mirror a few years ago called how to Give your 18-Year-Old £200,000 on their 18th Birthday, and the argument there was just like you max their junior ISA every year and you make market returns at a bit and they might have 200 grand on their 18th birthday, of course, then you’ve got to stop them from spending it on whatever 18-year-olds want to spend it on cars, clothes or whatever. But anyway, sorry that was a typically long and rambly answer, but I hope it’s very good that’s cool.

James: 

Thanks so much, andrew. Guys super, super super grateful and andrew can join us today. A massive round of applause, andrew.

Andrew: 

A massive honour to be asked, mate. Thank you very much. I look forward to seeing you soon. Is there no other questions? One more, I’m sorry.

James: 

Thank you again, andrew, for your presentation. This is somebody who knows it’s important to be financially.

Andrew: 

Thank you again, Andrew, for your presentation. This is somebody who knows it’s important to be financially literate, but not quite there yet. So in the past I’ve looked at investing in human progress, but I’ve done it through buying shares in my trading ISA account, whereas you mentioned investing in assets and not trade. What’s the difference and what am I doing there? I thought I was in this company, but I’m actually buying shares and we can do trade when it does better and I want to sell.

Andrew: 

So wait, did you invest in single shares? Did you choose to invest in Apple, or or, or? How did? What were you investing in? But yeah, so no, so it’s all about pots, and everything I’ve talked about today is that is the first, most fundamental part which, let’s say, you can save and invest 10 of what you earn every month. Right, that’s the most important part that if everybody does a half decent job with that from the age of 30 to the age of 60, they, they will do very well, right, just trying to make close to market returns and save 10% of your income every month, particularly if you’re a professional where your income might be 30 grand at 30 and 100 grand at 60, right, or whatever, and you’re on a journey, a trajectory where your income goes up. So what I’m talking about here is the part that’s not about single stocks and is the you know, invest, not trade, side of things. Because, to be clear, I think single stock investment, choosing single companies, is basically a trading activity, not an investing activity, unless you know because to do that successfully, you have to really understand what an EV-EDA ratio is, or P ratio, or return on capital employed, or return on invested capital, or you need to know what the management of you need to know whether the hedge funds are shorting the shares.

Andrew: 

You know my second book. I produced a big, long laundry list of things, things you should know and understand before you ever invest in a single share. Right? What I’m talking about in terms of owning human progress, which I’ve written in my second book, in Live On, less Invest. The Rest is all you need to do is own a big index, and whether that’s the S&P 500, which is the big American one, or probably more helpfully, for the next 20 or 30 years, because who knows? You know, america’s been the dominant hegemonic power for the last 80 years, since the end of the Second World War. We don’t know whether that will continue. So it’s probably easier to own something called the msci world if you want to own the world, because that’s 16, that’s the 1600 biggest companies in the developed world. There’s the msci all world, which is 3000 plus companies, which includes a lot of developing world companies. And you know, we don’t know, the next Apple might be a Brazilian company or an Indian company or an Australian company, right? I mean, we don’t know whether that American exceptionalism will continue, but that having been said, the S&P 500, a lot of the earnings of companies in the S&P 500 are global right, because Apple obviously sells a lot of iPhones outside of the States and Exxon sells a lot of oil outside of the States and Ford sells a lot of cars outside of the States. So the S&P 500 or the MSCI world give you the equity exposure to owning the world and you’re the proud owner of hundreds of companies.

Andrew: 

If you buy either of those things, right, so you don’t have to think about it. You don’t have to think about will this company, will Apple, go up or down or sideways. You just own the market which, as I said, is making 9% a year for the last 130 years or whatever. It is More than that 150 years. And but then the point? So that’s the equities bit. But then it’s really important to understand what to do about the real estate, the commodities, the cash and the bonds bit, what to do about the real estate, the commodities, the cash and the bonds bit and the right ratios between those. But that’s not as difficult as it sounds and you know. If you want to unpack it a bit more, have a look at my second book, live On Less, invest the Rest, which gives some sort of tangible ideas about how you think about that, particularly with that idea of 100 minus your age.

Andrew: 

But you know a lot of very wealthy people. I mean, if you’re lucky enough to figure this stuff out when you’re young and you have time. On your side there is a very purist school of thought that just says all you ever need to do is buy the S&P 500 or the MSC or the market. You don’t need to worry about commodities Because of equity drawdown. If you get to a point where you’ve got quite a few million of, you know, dollars, pounds, euros, whatever, by the time you’re, say, 60 and you stop working, even if there’s a 50 correction, you know let’s say you have four million dollars. Now you have two million dollars, but your life costs you a hundred thousand dollars a year. Let’s say it doesn’t matter and in the next few years it will bounce right. So for very wealthy people you can just be an equity purist.

Andrew: 

But that’s actually relevant to relatively few people, because if you get to a million, let’s say in a 50% direct correction if you’re 63, and then one year you’ve got a million and the next year you’ve got half a million. That’s very stressful and you know you’re going to think oh my god, how am I going to fund the rest of my life and my dependence and everything else when I’ve just I’m down half a million? So that’s why it’s really important to have this weather on 100, minus your age, to ensure that the closer you get to retirement the more risk off you are. But but you know, the younger you are, the more risk on you are. So sorry, it’s all explained in my book. I know it sounds a bit complex and nuanced, but it’s not that difficult and it’s quite an elegant approach, I think. Thank you, I hope that helps Top stuff.

James: 

It certainly does, andrew. Once again, thanks so much for joining us today.

Andrew: 

Thank you guys. Thanks guys, I’ll ring off then. Thanks, james, speak to you. Thanks guys, I’ll ring off then. Thanks James, good to see you.

Andrew: 

Speedy recovery get here in the flesh next time.

James: 

Yeah, hell yeah alright, bye guys, in a bit, my friend, see you soon. Yeah, that’s this is this, is this is this is this is this is this, is this, is this, is this is this is this is this is this is this is so things happen. Since Andrew’s on the screen, are you there? Yeah, andrew’s on the screen. He’ll be joined by the other, andrew.

Andrew: 

He’s going to be assisting us there. Andrew. Who’s this Andrew? What’s Andrew Andrew? Oh, probably, yeah, Probably Andrew. What I have to do if I’ve got the mic over this and just keep us in a little neutral, and what we’re looking forward to today.

James: 

So my name is uh, so I was a friend and associate, so if you enjoyed this podcast, please hit, follow or subscribe so you can stay up to date with information on new podcasts which are released weekly. Please also feel free to leave a positive review so others can learn about this podcast and benefit from it. I would also encourage any fans of the podcast to sign up to the free Facebook community from which the podcast originated. Please search Dentists who Invest on Facebook and hit join to become part of a community of thousands of other dentists interested in improving their finances, wellbeing and investing knowledge. Looking forward to seeing you on there.

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