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Dentists Who Invest

EP241 How To Own The World: An Interview with Andrew Craig Part 2

James: 

Fans of the Dentist who Invests podcast. If you feel like there was one particular episode in the back catalogue in the anthology of Dentist who Invests 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. Welcome to the Dentists who Invest podcast. Welcome back to the second episode in this two-part series. With myself and Andrew Craig, we pick up where the conversation left off in the previous episode.

Andrew: 

Now I’m slightly concerned. We haven’t talked about Bitcoin.

James: 

Bitcoin is on the agenda.

James: 

Bitcoin is on the agenda, absolutely. We had a few things. We’ve talked about the philosophy a lot, but maybe now the next few things that I had planned was more about the actual nitty gritty and the meat and bones, meat and potatoes of investing, because there is a school of thought. Now, I love your investment theories. I’ve read your book. I understand completely where you’re coming from. It’s about balancing capital appreciation with capital preservation. Okay, and that’s. You’ve got your bonds. You’ve got your bonds for the preservation, for when there’s a downturn, and your gold, and then you’ve got your stocks for the appreciation, for when the good times are rolling.

James: 

There is a school of thought. There is a school of thought that says, if you’re young enough and if capital appreciation isn’t something that you, let’s say, you want to take your profits within the next five years, okay, then you are more at the whims of the stock market, because you’ll know more about the stock market than me, but it’s been shown over five years that you’ll always have more money than what you started with after five years. So if you’re going into the stock market and you’ve got an over five years investment strategy, investment plan, plan for taking your profits, plan for your retire, all of those things that. Would it not be more? Because stocks have been proven to be the highest returning asset over any period of time, would it not be more sensible to have a 100% stocks portfolio and just take the hits and the ups and downs? What do you think?

Andrew: 

I covered exactly this in my second book, live On Less Invest the Rest.

James: 

Oh, I see. Yes, I wanted to ask you about your second book as well. We will delve into that.

Andrew: 

Yeah, so I guess perhaps I should, rather than ranting about the environment and Greta Thunberg, I’d have to focus more on this one. When you said what’s changed from the first book, well, I mean, so there’s a very simple answer to what you just said and it’s a very well-known, classic kind of approach to investment, which is a thing called 100 Minus your Age, and so basically what I’ve done this book really there was actually. There’s a five email series in the opinion section of our website. If you search plain English finance, 100 minus your age, you’ll find the first one of five. And basically this book is that five email series and a whole load of other stuff that’s emerged over the last few years, and really answering this has got really dull stuff like how to open an account with a stockbroker and what is an ISA, and this is much more nuts and bolts like prescriptive. This actually goes hand in hand with our Facebook community and you get it for free. You get the digital version of your joint, but 100 Minus your Age treats exactly the point you just made, which is basically, if you’re 20, so the so 100 minus your age is an idea that’s been around since probably the 1940s, um, and it’s pretty conventional in the states for financial advisors and they basically say um, yeah, if you’re um, the younger you are, the more risky your investments can be, the more equities there can be.

Andrew: 

So the old approach to in, like from the 1940s, probably until about 10 years ago was it’s basically 100 minus your age is what you own in equities. Or, put another way, you own your age in bonds. So if you’re 50, you’d have 50 equities, 50 cash and bonds or bonds, whatever. If you’re 70, you’d have 30 equities, 70 in cash and bonds. And if you’re 30, it’s the other way around you’d have 70 in the stock market and% in cash and bonds. And if you’re 30, it’s the other way around You’d have 70% in the stock market and 30% in bonds.

Andrew: 

And basically the rule of thumb is that you rebalance that every five years. You don’t have to mess about every year going, oh, 64, whatever. You just do 50, 45, 40, et cetera, et cetera. The problem with that idea in this day and age is that that worked far better when bond rates were 6% or 7% or 8% or 10%. So there’s a 54-year chart of the US 10-year, which is basically interest rates, the biggest global bond market, which kind of sets global interest rates-ish. I’m just trying to find it, but perhaps right. So that’s, I don’t know if you can see that, but the average yes.

Andrew: 

So, basically that’s, interest rates in the 80s were 15%. I used to make 11% in my post office account when I did my paper round when I was 12. And now they’re half a percent, okay yeah, and the average is probably about 6%. So you had a million, if you manage. There are two problems with that. Firstly, if you are 50, and you’ve got 50% excess, 50% bonds and cash in an area where you, where the 50% that was in bonds was making, you know, six or seven or eight or even 10%, that’s still really contributing to your ability to grow your wealth.

Andrew: 

Right Now that it’s half a percent or 1%, it’s really not. And so, to your point, you probably want to have a much higher allocation to equities, right? Because there’s no use in making half a percent or 1%. It’s going to really take you far longer to make sensible amounts of money. Going back to my example of 5,000, 945 000 at 10, it’s no good. If you’re making one percent, the maths don’t work anywhere near the same, right, you end up with nothing, I mean, and that’s called underperformance risk, which is a very real thing, and that is why no one should ever own a cash isa. In my opinion, it’s just the most disastrous. You’re losing real wealth every year. I think it. It’s a scandal that we have financial journalists in this country who actually talk with a straight face about which cash ice is shipping. It’s just ridiculous.

James: 

Yeah, because let’s not forget that when you put into a cash ice, it takes off your total life contributions, doesn’t it? There’s money you could otherwise be using. You’re 20 grand. Doesn’t that come out of your 20 grand?

Andrew: 

I think that’s right. You can’t do more than 20, so that’s right. Yeah, yeah, yeah. But if you want to save cash, just save some cash, whatever a month’s worth or three months’ worth or six months’ worth, whatever you feel comfortable with. But everything over and above that must be invested to beat inflation. There’s no point in having it sitting somewhere that is less than inflation, but anyway, but so. So if it.

Andrew: 

The other problem is with this low interest rates is in the. If you retired in 1995 when interest rates was six percent or whatever seven percent, and you’d managed to build a pot of a million quid, you’d be able to take a million quid and pay yourself 65, 70 grand a year of income off that pot. Right, because interest rates six and a half seven percent. Now you’re lucky if you can pay yourself 10 grand. So you’ve got a million quid that you’ve managed to get to by doing all the things we recommend over a lifetime. Fantastic result, except, no, because the risk-free income that you can swap a million quid for now is 10 grand a year. I mean, and people are again, this is a story that people don’t understand. That is a disaster. So anyway, the whole focus of this book is explaining.

Andrew: 

Okay, so rather than thinking about bonds and equities, what you need to do is think about aggressive versus defensive. So if you’re 50, you’d be 50% aggressive, 50% defensive, and you need to start thinking a little bit more in a more nuanced and sophisticated way about what defensive could be. Aggressive is very easy, right. Aggressive could just be the s&p 500, you know, the msci, world global, maybe a bit of bitcoin for some of your aggressive. Um, biotech small, I mean most people biotech’s been going 14 per annum for the last 15 years. Smaller companies have done 15 per annum for 55 years. Right, nobody knows this stuff.

Andrew: 

Now, the crucial importance is that they don’t do it every year reliably. They have massive volatility, so sometimes these things halve, and what you’ve got to it’s very important to deal with, to treat volatility as you as you grow wealth, right, so so, anyway, we, the investment fund we’ve launched, is explicitly for the defensive bit, and the idea is that you basically use backward-looking trend following and global multi-asset so that you’re in the S&P, you’re in the FTSE, you’re in gold, you’re in oil, you’re in whatever scenario, like last year, you come out and go into cash just using a formulaic, rules-based, backward-looking trend following strategy so that instead of when the s&p falls 55 percent, like it did in 07, 08, 09, you’re out and in cash. Whilst that happens now you never sell at the top and you never buy at the bottom, because that’s just the nature of it. But over evidence going back to 1872, it lifts returns and massively reduces that max downside. So that means that we hopefully I think we have a defensive product with a max downside of sort of five percent or ten percent, peak to trough worst negative year about six percent, but that can capture seven and a half eight percent um over a business cycle, which means that defensive bit of your money can actually get you to these terminal values you know and and pay you in retirement um.

Andrew: 

So that’s a bit again, a bit of a long-winded answer, but yeah, the way to think about being more into equities is to use this idea of 100 minus your age and, totally agree, if you’re 30, there’s no reason you shouldn’t have 70 of your cash in more aggressive things in biotech and smaller companies and and all of that stuff is covered in here. And if people don’t want to buy the book or join our group, it’s the five email series on the website and it’s all that. Content’s free, you know, it’s just accessible.

James: 

Cool, cool, yeah, because that was always I. I I’ve heard of the, the rule of 100 minus your age, and the stocks and bonds things, but now what you’re saying is that that’s slightly shifted in its thinking, in its narrative, and it’s more.

Andrew: 

We should be thinking about the now the, the idea that that proportion should be defensive rather than just aggressive just because in this, like in the 1960s or whatever, like if you were a retail investor, you could only buy bonds. You could only buy the dow jones or the us tenure. You couldn’t buy crypto and biotech and eat it, you know. So now this is again. Another point I made in the first book is the is how much better financial services are now. You have some. You know, I talk about 10 asset classes in my book. That’s eight more than just bonds and equities, right, so? So it’s a way of, but it’s a way of thinking fundamentally about aggressive versus defensive which one to choose, keeping it really simple. You know, um big, liquid, simple stuff. And and the other thing just say quickly is, of course, the.

Andrew: 

You could perhaps use 120 minus your age instead of 100 minus your age. For a couple of other reasons. Life expectancy has gone up a lot, right, so if you’re going to 100 minus your age is in an area where average life expectancy is like 83 years old. Well, if you’re going to live to 110, that’s not what you not much use to you. And similarly I’ve did, I’ve joked about this in presentation the other day one of my clients from the job that I just quit is 90 years old, bless him. He’s an amazing guy. He’s what he was. He made partner at a stockbroking firm in the early 60s and he’s still going right. And he can drink. I mean, last time I went for lunch with him he can drink more wine than you know, it’s just absolutely insane.

James: 

Top man, that’s impressive. I hope I’m like that when I’m 90. What was it 98? No, he’s 90. Oh, he’s 90.

Andrew: 

Although, to be fair, he was 88 the last time I went for lunch with him and I just don’t know how you do it. But but you know, the point being is that he’s still earning money at 88, right, he’s still earning a pretty decent crust, so he doesn’t need. He didn’t retire at 65, you know, he’s had 20 plus more years of earnings, so obviously that changes the equation. So he could be more risky than 100 minus your age. So he might use, actually he might use 130, 130 minus your age, which is crazy.

Andrew: 

But these are all, as I say, I cover all that in the second book, um, and you know, I like to think that it’s again whilst the last few minutes, this, this um discussion.

Andrew: 

It probably seemed a bit complicated and I’m speaking very fast. Actually, if you get down, you know what I’ve tried to do is paint the picture in a really simple first principles way. It’s like okay, so you’re 40 years old, what percentage aggressive, what percentage defensive and what simple things would you think about for each of those, and then kind of go la, la, la, la la and ignore all the you know the pick and mix stuff of this and that and sales people calling you, just go back to the most big, liquid, simple stuff like the s&p 500, or you know you might buy a buyer, but that basically outlines a sort of top-down way of thinking about it and doing that we’ve mentioned bitcoin a few times in your original book, you are, whilst you’re not necessarily negative about it, you are on the fence about it, shall we say, and you said that, whilst there could be massive upside, it also could be something that goes to zero.

James: 

And I believe, I believe from memory that you said if someone was planning to get involved with the space, to allocate no more than five percent of their total invested capital to the space. How do you? Has your opinion shifted since then? Are you still on the fence? Are you, are you even negative or bearish about it?

Andrew: 

look, I think so. To me, it’s quite simple right. It’s a. It’s a highly volatile, speculative, unregulated asset right, which means that I think it’s as appropriate for somebody’s portfolio overall as a very risky share right. So I would probably never put more than between two and five percent of my money into a very risky share, like a single biotech company or an oil and gas company that’s out in alaska trying to find oil and it’s you know, it’s on the london stock market worth 100 million quid. One day it might be worth two billion quid and you make 20 x your money, but you know, in the meantime it might also drill for oil and spend 100 million quid. One day it might be worth 2 billion quid and you make 20x your money, but you know, in the meantime it might also drill for oil and spend 100 million quid trying to get oil out the ground and find a donut and have zero and be worth nothing, right. So I because? But but the other thing about what?

Andrew: 

I guess if my thoughts have moved on further, the other thing is I think it’s really, really important that you think big picture about what you’re trying to achieve financially and what you need. I don’t actually need Bitcoin, I don’t need something that is unregulated, incredibly volatile, to achieve my own personal financial goals, and I think most people don’t. There are, you know. There are hundreds of thousands of companies, there are ETFs on whole indices, there is gold. There’s such a paradise of opportunity to invest in right, all of which is regulated. You know there is actually somebody checking that it’s real and that lawyers have gone over it and prospectuses have been written and whatever else, rather than some Chinese whale wakes up in the morning or Elon Musk tweets and suddenly the market’s you know, more than 50 percent, I don’t. Bitcoin could go to a million per Bitcoin, right, and it really could. It could be, but there’s incredible uncertainty over that.

Andrew: 

So what really pains me is what I see a lot which goes back to what we said at the top of the call, is the number of people, especially people of a certain age, let’s say, under the age of 40 or even under the age of 50, what I see on social media who have never thought about an isa, who don’t know what a share is, who’ve never thought about I don’t know what the equity market is. They don’t know how to buy the s&p 500. They’ve never looked at the footsie. They’ve never looked at how to invest in gold. They’ve not really thought about their pension, all this stuff that’s been around for 200 years, right, the technology of investment that mankind has been using for 200 years, and they’ve gone straight past all of that and they’re investing all their money and, in some instances, borrowing on credit cards to invest all their money in crypto because of the whole thing about, well, bitcoin goes to a million and I’ve seen people online talk about how they’re so excited that they’re going to be able to turn 500 pounds into enough to pay for the, you know, their retirement, their kids going to private school and retirement and so, and it it’s like I saw the same thing in 07, 08, I think that saw the same thing in 99, 2000, with different. 99 2000 was the dot-com crash, you know, when petfoodcom was valued at, like you know, 50 billion dollars, or I was losing money on every can of pet food and shit, you know, and what I just I think bitcoin is is an entirely bitcoin and crypto and it’s a very interesting space intellectually blockchain, what it might do for the world, ether, you know for sure, and and bitcoin could go to a million, um, but it, but I think that there’s real uncertainty about whether it will or not, and so, for me, I don’t want to deploy any capital in it because I don’t need to.

Andrew: 

I have very, very clear goals financially about what I need to get to in order to fund me and mine, look after my wife and kids and whatever else, and I have a real domain knowledge about a whole bunch of investments that I’ve been working with for 22 years, and so why would I risk any of my capital in something which Elon Musk wakes up and tweets and it falls through his phone? Even the risk reward is not attractive to me, because I don’t need to achieve my financial goals and live a great life. I don’t need to buy something that might go up a thousand percent but might go to zero, and I don’t want to. So, you know, having said that, as I said to you, I’ve just quit my job, um, and I have my, you know I need a lot of capital. I might not be able to pay myself anything for the next two, three years, right. So I’m slightly more risk averse, you know, right now than I might otherwise be.

Andrew: 

If playing with finance succeeds greatly and we end up with 100 million in our fund and you know big and everything’s going really well. At some point I probably will allocate a bit of money to bitcoin or ether or whatever, just because it’s interesting and it’s speculative and maybe it goes up a lot, but there’s no way in hell that it would be like 50 or 80 or all of my investments, and it drives me nuts how many people I’ll take, and I know you don’t take that approach, but there are an awful lot of really, really evil people online. You know, preying on people on facebook saying, oh, you know you can’t lose, look at it. And they do the most ridiculously so in the regulated arena. You would go to prison for doing what they do, which is, they say you cryptocurrency Y has gone from this to this, which is up 10,000. If you’ve done this, you’d be a millionaire.

Andrew: 

That is totally illegal to do, whether if you’re broking biotech or mining or normal equities and it drives me nuts that that’s not illegal. These people should go to prison, right, because it’s so irresponsible and any volatile asset. The other fallacious thing about that is if you say, oh, bitcoin’s gone from $100 to $60,000, right, that does not mean that everybody who owns it has made that return, because a hell of a lot of them bought it for $19,000 in December 2017, when they got super excited and it was on the press every day, and then we’re down to $3,000. The more volatile an asset class is, the more likely it is you’ll cock it up and because human emotion has a really, really strong part to play, right, and you’ll go oh, everybody’s buying, everybody’s selling. It’s just happened again in the last two weeks. Right, elon Musk wakes up one morning and tweets whatever. Then the Chinese do whatever. I don’t want to own something or expose my capital to something where there’s that risk, even if it might end up being worth a million dollars.

James: 

There’s nothing that you said that I would disagree with, nothing that you said that I would disagree with, nothing that you said that I would disagree with. I think that’s totally reasonable. And with investing that’s the interesting thing about it there’s no one shoe that fits and that comes into trading as well. There’s horses for courses, there’s different styles and people chase the gains inverted commas. But what works for you might not work for someone else. That’s the long and the short of it, okay, and absolutely Know yourself someone else.

Andrew: 

That’s the long and the short of it. Okay, and absolutely know yourself like. There’s a great book called uh, I forgot what it’s called, but dr van tharp, about trading um okay, van tharp, trade your way to financial freedom.

Andrew: 

Here we go over here yeah, and the first chapter he says you know, the most important factor in your success is you like. You have to know yourself, you have to know your risk tolerances. But, if I may, um, the other thing, the other point I wanted to make with apologies for interrupting you, though, because I think it’s really important is one of the great life lessons I think we should all learn and I’m still learning it at 45 is how you deploy your time is super, super important right, the 80 20 rule, like you get 80 results for 20 of your, so focus on the 20% of your actions that actually matter right Now. One of the other problems to me with crypto is it’s incredibly time consuming to do it well and to do it properly, and I don’t have the time. A call like this, writing a piece, a thought piece about ESG, whatever, is, to me, a far better use of my time than an hour spent looking at screens trying to work out what Bitcoin or Ether might do next week. Truly and I think that’s very, very firmly true for somebody in their 20s who should, frankly, be working to become better at whatever their main job is and the ROI on that activity will be far higher on a risk adjusted basis than the roi on messing about in crypto groups going. What’s it doing today? Is it up, is it down, hodl blood? You know what a waste of time like, so, like, and now I know you’re.

Andrew: 

The counter argument is if you’ve got five percent of your net, five percent of your net worth, you have somebody who’s got a good handle on what is cardano, what is ether, what, what are the merits of these respects thing and says, okay, so own 10 of them and then just leave them for 20 years because that could really materially impact your net worth. Yeah, that is probably a sensible thing to do, but I’d rather do that with biotech names. You know, I really would, because they might cure cancer. I mean, I I’ve got a couple of companies I think are literally worth 100 times what they’re currently trading at that I’m about to put in my pension, right, and that’s because they might cure cancer. I think that, to me, is a much more compelling investment thesis than a really uncertain new category of asset cost that’s unregulated and that can get winged around by Chinese people in Guangzhou. You know, because they’ve. You know, anyway, I’m ranting and I’ll shut up and let you say your piece, with apologies.

James: 

Real quick, guys. 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. I’m really looking forward to hearing your thoughts. No, it’s great. No, I love to hear your opinion on it. And, like I say you haven’t, you haven’t said anything that I would necessarily disagree with. When people get into the space, I don’t think they realize just how much time it takes to water the garden and plant the plants and maintain your portfolio, and whilst there are a lot of hacks to make yourself more time efficient doing that, there’s an absolute ton of those things that I learned through time that made me way more efficient. I would say you still have to keep an eye on it every day. As for actively trading it. For me personally, sometimes I go whole weeks and I don’t move anything around and then sometimes there’s volatility, there’s a flurry of activity. What I do is I make it a lot more efficient by setting trade alerts on my phone and on trading viewing so I know if it hits certain prices. I don’t have to be in front of the computer. But absolutely that is not for everyone, and if someone is not prepared to do that, then my argument would be that you shouldn’t really be buying many of the altcoins, so many of the alternatives to Bitcoin and Ethereum, because really we talked about pump and dumps and manipulation a second earlier. 99% of those are pumps and dumps Okay, 99%. And, by the way, this is coming from someone who loves crypto. Okay, this is that. This is coming from someone who loves it. Yeah, 99% are pumps and dumps. However, one of the best ways to invest in crypto although maybe you might not agree with it on an ethical basis, is to be able to suss which of those charts and which of those cryptos are pumps and dumps by assessing the chart. Okay, and once you can do that, you can be on the right side of the smart money rather than the person who’s still buying dogecoin or shiba inu at the prices that it currently is, because, come on, if you look at that, that is so clearly a pump and dump. You know what I mean. And there are people who bought that thing when it was really cheap and they’re selling to people like you so that they can make money. So absolutely anybody who is actively buying dogecoin or shiba inu at these prices.

James: 

I would encourage you to think twice about that. It is never something that I would buy the way it looks. At the minute we talk about market cycles, those are towards the end of their market cycle and as well as that, we mentioned something earlier. Maybe you I’m sure you’re aware of this. Well, you did. You did mention it. Actually, it is possible to passively invest in the crypto space, but there’s only, there’s only two cryptos that I would do that with, and you might even argue there’s. Maybe some would argue there’s three. Okay, those cryptos are bitcoin and either and binance coin, because as long as there’s binance, there will probably be binance coin. But the third one I’ve said, maybe not everybody would agree with that. Not even everybody would agree that ethereum is a good long-term hold, but the majority of the consensus in in the space would say that Bitcoin is your only buy and hold, because whilst the space has value, bitcoin will have value. That’s the philosophy that a lot of people hold.

Andrew: 

I’ll make a comment about it. So I was right. I was a stockbroker with Swiss Bank in 99, 2000 when the dot-com boom was going on, right, and Nokia. I believe thatia peaked at about 200 billion euros of market cap and it was like it literally was 80 of the finnish stock market right and everyone owned a nokia phone. I mean, you mentioned a nokia phone, everyone owned a nokia phone, right and everyone thought nokia. Nokia is the big dog. You know, big dog? 800 pound gorilla bellwether that is got has won the phone battle. It’s worth 200 billion euros. It’s going to be a trillion-dollar company. There are all these crazy prices and the idea that Nokia as the most powerful, strong mobile phone incumbent globally would end up. I mean, I don’t know what it’s worth to Netflix right now, but maybe 5 billion euros.

James: 

It’s nothing. Is it compared to what it was?

Andrew: 

It had a mobile infrastructure business and last time I looked at it it was worth about €4 billion. So it was just making mobile towers for Apple and Samsung to run there. And look, I’ve read a lot about Bitcoin. I’ve read a lot about the fact that the way it works it’s so intractable. The proof of concept, the distribution, all that good stuff is why it is the big bell with a blue chip that could, you know, have longevity and stuff. But I heard all the same arguments been about nokia that it was just unimpeachable, never gonna apple come it’s. It’s very rarely the first big dog that comes along in a new sector, whether that’s mobile phones in 98, 99 or crypto today that ends up, 20 years later, being still the one you know do you want to hear the spaces argument against that?

James: 

the spaces? The spaces argument would be that bitcoin and ethereum are effectively etfs of the space. Okay, so it’s the equivalent of buying maybe the s&p 500 or the fitzy or something like that, because it’s an index of all the cryptos. But again, you and I can say whatever, I can say all I like and you can say all I like. Basically no one knows. Okay, basically no one knows.

Andrew: 

That is the point yeah, and look, I don’t know that the biotech companies I mentioned earlier could kill cancer and go up 100x, right, I mean, or 10x or whatever. But I have a much better probability of getting that right as somebody who’s spent six and a half years working in biotech than I do about getting crypto right now.

James: 

Totally.

Andrew: 

I think that most people, whether they’re 25, 30, 35, 40, whatever who are gainfully employed in a job that’s quite demanding and takes their time, if they deploy their hours of time into that job and career progression, the likely ROI for them personally in their life is higher than deploying that time into learning about what, trying to figure out what Bitcoin and crypto and the ether will do. That’s my genuine view for most people. The other thing is, particularly when I see one of the ladies who works with us at Payingless Finance her son’s 13, and he asked if he could invest in Bitcoin the other day. He doesn’t know what an ISA is Now. To me that is really worrying. That’s really prevalent right now is that kids on TikTok, millennials, people at uni, whatever.

Andrew: 

Because the other thing is any speculative, incredibly volatile asset. If you’ve only got 5,000 quid of of savings, there’s no way you should be anywhere near it like you like wait until you’re 40 and you’ve got a hundred thousand. You know I mean, and I know that. I know you were an early adopter and I know that a lot of people, you know there are lots of people in the crypto space who did get in and have made hundreds of times their money. So they maybe put five grand in and now they’ve got 200 grand or whatever, and that’s that’s great. But you know that 200 grand I mean it may have mines are worth well over a minute, has over a million in bcc and ether and uh, you know, two weeks ago now it’s 600 grand, what like, and what happened? Sort of psychologically, I would hate to have to think, well, I’ve got, I’m down 400 grand in the last three weeks. Now is it going to get? Am I going to be down another 400 grand in the month ahead or I’m going to be back up for it? I don’t know and I don’t want my wealth. I don’t want to have to sit there on a sunday morning reading emails and looking at charts going geez, is it going to do that? Is it going to do that? I’ve got no interest because I don’t need to. I really, really don’t need to to.

Andrew: 

Well, ultimately, what is the point of all this investment stuff? Right it, as I said right at the beginning of the call, it is to get to the point in your life where you can live on your capital, not on your income. I mean then, if you like, to my point about my 90 year old stockbroker friend. Lots of people don’t want to do. People who love their job might want to carry on earning income, but it’s only to just to use financial products to help you become wealthy and have an easier life and be able to afford things you like and look after your kids and depend on whatever else in that endeavor.

Andrew: 

There are loads and loads and loads and loads of really good quality, regulated assets with which I can achieve that, and whereas I just think crypto is, you know it could go to zero. I mean if I know it’s distributed and you can’t. But but if you can’t distribute the person, if it is as illegal to go through etho with a usb stick with crypto on it as it is to go through with three grams of cocaine in your pocket, that’s not going to be very good for the price of Bitcoin. Central banks the world over, the three countries that have tried to replace the US dollar with gold in the last 20 years do you know what they are? Raoul?

James: 

PAL are.

Andrew: 

No, I’d love to hear though iraq, iran and libya okay, the three countries whose you know political leadership was mad enough to try and take on the american. You know what’s called the pax dollar and basically american hedgerow, the dollar global currency system. Because americans are disproportionately wealthy, because everybody uses the dollar. It enables them to do stuff that nobody else can do and take more than their fair share of the world’s economic output. What happens to those three countries? Because they say, well, screw you America, we’re going to trade our oil in a gold-backed Dinar. Now, how quickly did the tanks roll in?

James: 

That’s crazy. I didn’t know that. I had no idea.

Andrew: 

I don’t think a lot. Most crypto users I’ve seen without anyone else being asked about it. You know I get there are plenty of counter-arguments to what I’m saying. It’s really interesting. You know, it’s a wonderful technology to get rid of an intermediary and have proof embedded into the blockchain, all that good stuff and it’s distributed and stuff, but at the end of the day, if it starts to threaten America’s ability to project power globally, now there’s a great I forget the name.

Andrew: 

There’s a really good Bitcoin commentator. It’s like a Turkish name. He’s a British guy. He’s based in America. He’s quite prolific, no doubt Ron Paul, somebody Paul, not Ron Paul, but anyway it might come back to me. Anyway, he made a really good point which is a counter argument to my argument.

Andrew: 

So, ok, fine, but Bitcoin could easily be half a million dollars before it’s banned and actually in the last two years he’s been right it’s come from 3,000 to 60,000. So my argument that maybe one day America wakes up and makes it illegal to carry to use crypto on pain of seven years in prison, and so did the EU, and so did China, and so did Japan, and then what happens then? That argument has been valid for several years. In that time the price has gone from $3,000 to $60,000, and obviously now back down to $37,000 or whatever it is. But that’s a very, very dangerous game of Russian roulette to me with my hard-earned capital, like anyway, and I don’t.

Andrew: 

The overall conclusion, to go back to your original question, is I would certainly consider it for a small amount of my net worth at some point when my net worth is bigger, you know, and my net worth at the moment, the the the speculative, aggressive bit of my net worth at the moment is all going to be going into biotech, because I know these companies inside out. I think I have a pretty good handle on that space. I think companies that are going to cure cancer or dementia or have robots replace nurses in elderly patient care, and there’s so much incredible stuff happening. I think that is fundamentally more valuable than an untested, untried new type of investment that the government sort of well might make illegal in three years time yeah, I won’t disagree with anything that you said.

James: 

I won’t. I think we can both agree, andrew, that perhaps the number of people who get into crypto don’t fully realize what they’re getting into and maybe it would be helpful if they had more of an understanding of what that entails and also a better understanding of their circumstances, conventional financial instruments and how that reflects in their investing not only generally but also in the crypto space. Does that sound reasonable?

Andrew: 

that is. That is absolutely, and you know, and there are good guys. I mean, the trouble is, in an unregulated space where anybody can say anything they want, there are lots of bad actors, right, and that’s, and it’s hard to disaggregate the good actors. But you know, that’s you, that’s your battle to fight, and I wish you the very best luck with it. One other thing I wanted to say, though, um, before we move off the topic, because I’ve ranted about it and I didn’t mean to come across this, but you know, it is fascinating.

Andrew: 

And the other thing I was going to say to you is some of the very smartest and most successful people I know, including my best man you know, who was my best man at all, but my, when my wife and I got married who is a, has a very, very high profile job, um, and is a super low, you know, are huge bulls of crypto, like, and they think I’m an idiot, you know. And then, frankly, they’re smart, they are smarter than me, and it was like, but, but it but it comes back to the opportunity cost argument for me personally. For me personally, I have a very clear plan about what I want to achieve and what I can use which vehicles I can use. I don’t need crypto, but I just want to say that some of my very smartest friends have really drunk the Kool-Aid and see the vision and think it’s going to be totally transformational for the world and all that stuff. So you know I’m probably full of nonsense.

James: 

But that’s the part I love about investing is there is no one shoe that fits. And to pull you back to Van Tharp’s book as well we were just talking about it. There’s a lot of things. If anybody is trading and hasn’t read that book, please read that book. I’m going to hold it up to the screen now for anybody who’s listening to the audio version of this. It’s called trade your way to financial freedom and by it’s a by a man called k van tharp, and I quoted a lot. I quoted a lot in my trading.

Andrew: 

It’s not the only trading book I’ve ever read, but it’s definitely probably the best it’s one of the real, it’s like one of the foundational texts of you know, if you want to spend time on trading, you definitely need to read it’s seminal, honestly, and the way the guy the guy makes so many interesting points in it.

James: 

He makes the point that trading is 100 psychology. Okay, because if you don’t have your psychology down, it doesn’t matter what system you use, you’ll never be able to trade it effectively. And this other point that he makes that really sticks with me is that there is no holy grail in investing. This is the exact quote there is no holy grail in investing. There is just your holy grail and you need to find what that is. I love that.

Andrew: 

By the way, have you read Way of the Turtle as well?

James: 

I haven’t, but it’s on my to-read list. I recently read well, not so recently, maybe about four or five months ago Psychology of Money.

Andrew: 

Yeah, so I was on a call with him. No, way. Morgan Housel yeah, so it was this Irish. I was doing an interview for a big Irish investment thing and the two guest speakers were me and Morgan Housel and I was like bloody hell, yeah, he sold. I think that book sold 300,000 copies now. In fact, at two o’clock this afternoon I’ve got a call with his publisher Exciting wow. To talk about my next book. So with that, with the same publishing house. Don’t tell my current publisher that.

James: 

Yes, I don’t think anyone will listen to this podcast so we should be okay.

Andrew: 

I’m allowed to go shopping, but it’s an exploratory school. But no, you’re exactly right, it’s that point about how important you are and your ideas about money. But I mean, then again, that is a malleable thing. One of the biggest problems is people have all these totally incorrect beliefs about money. The stock market is a casino Wrong. Cash is king Wrong. Property can only ever go up and paying rent is paying somebody else’s mortgage Wrong. If you’ve grown up with all these beliefs that are just totally simplistic, that parents pass on to their kids and their parents are not financially literate, do this, do that and they’re just fundamentally unhelpful, wrong things, then one of the most important things to do in order to succeed in investment is to change those incorrect things by educating yourself. And you know, I flatter myself saying hopefully my book doesn’t element with that.

James: 

Educate yourself, everyone. The books are out there, the knowledge is out there. If anybody needs some recommendations on books, you know where I am on Facebook, andrew. We’re coming towards the end of this podcast now. I wanted to ask if there will naturally be some people listening to this who have yet to begin their investment journey. Do you have any words of encouragement that you’d like to offer them to begin?

Andrew: 

absolutely, I think, the most important thing. So we alluded to earlier, like my idea of ignoring the news. Right. Every week, almost without fail, I’ll get at least one email from somebody saying I’ve read your book, I really loved your book. Thanks so much for it. Um, I’ve been thinking about investing. My wife and I just wanted to get in touch because we’re wondering whether or not now is the right time to start investing.

Andrew: 

Because of Brexit, trump, syria, libya, coronavirus, boris Johnson, there’s always a reason to be scared of investment and to not invest, and my answer to them and I’ve written this up in some of my opinion pieces is the right time to invest is always now, ok, and every month for the rest of your life, as long as you’ve learned enough about how to do that in a sensible way, like, what are the main things and what?

Andrew: 

Like waiting until some sort of time when you know there won’t be Brexit or there won’t be coronavirus or there won’t be. There is never a time like that Because, as I said earlier, the press spend 99% of their life, of their time, focusing on the 0.0001% of bad things that are happening in the world. So we all have this completely fear-based, incorrect understanding of investment. So anybody starting out in their investment journey should sort out an ISA, should pay at least 10 percent of their um, whatever they can save, whatever they earn each month, into a sensible mix of investments. And I’d like to think that you know, that’s the theory and that’s the practice, right? Um, and just to repeat, I mean, if I may do a bit of a plug, yeah, no, I’d love.

James: 

I actually wanted to ask you about your new book, so I can see, see you holding up to the screen and for anybody who’s listening. Would you be able to tell us the title and a little bit more about?

Andrew: 

it. Yeah, so it’s called Live On Less, invest the Rest, and it’s actually we call it a workbook. So I actually had to pay a lawyer a lot of money to sign off on that book before we published it, because it’s quite prescriptive and it talks about our fund, for example. So you’ve got to be very careful about what you can and can’t say with stuff like that. You have an investment fund and it all has to be disclaimed and you know, hopefully I think anybody who reads it will see that it’s quite fair about the merits of our fund. In fact it’s only appropriate for certain amounts of your money and certain people and stuff. But basically it’s that 100 minus your age idea. But basically it’s that 100 minus your age idea.

Andrew: 

It’s really the nuts and bolts of how to implement a sensible, big picture, long-term approach to investment. It’s investing, it’s not trading. And I just want to say you know our Facebook group is a fiver a month. You can join through our website and everybody who joins the Facebook group gets that for free in audio and audio book and e-book versions. And you can join the thing a fiver, get it for free and then leave if you want to, um, if you don’t like it, um, so you know, or you can, or it’s available on amazon, um, along with the other ones. So, but I look, I find myself to think that that if you met, if you get through both of the books, you should, you should be like 80 to to 90% of the way to being able to confidently, or maybe even more, being able to like sap an ice and think about your pension and just get stuff sorted in a really prudent, long-run, boring, tortoise kind of approach to investment.

James: 

Thank you so much, andre, and thanks as well for being so generous with your time, because we’ve been on this call about two and a half hours investment. Thank you so much, andre, and thanks as well for being so generous with your time, because we’ve been on this call about two and a half hours. And what I was going to propose? I was going to propose that we split this into two podcasts, actually, because I think two hours is asking quite a lot of anybody to to sit through our rambling, so that might be quite nice, uh. So what? I will do everyone this. You’ll be listening to the second part of the podcast and this will be the, the conclusion that you’re listening to now, because this will, of course, be the second bit.

James: 

Andrew has been very generous with his time today. I’m so grateful that he’s managed to squeeze us into his day, because I’m sure he’s an incredibly busy person, what with your fund, what we’re replying to people on Facebook, all of those things. So thank you. You so so much, andrew.

James: 

If anybody who is listening to this is not on my Facebook group the Facebook group that spawned this podcast feel free to search it on Facebook. It’s for dentists who are wanting to raise their financial literacy and gain a practical knowledge about how they might invest sensibly emphasis on sensibly okay so that they can build a long-term money pot and retire and live financial freedom and all of those things that we’ve taught, that we’re conventionally told, that may be out of our reach. They’re totally within our reach and that is possible to do. You just need the right knowledge to do it. The Facebook group’s name is Dentists who Invest Community Group for Dentists who Enjoy Trading. I look forward to seeing you on there, if you found this podcast of interest today, andrew. Thank you so much once again and thank you for coming on the show.

Andrew: 

You’ve really enjoyed it. Speak to you soon.

James: 

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, well-being and investing knowledge. Looking forward to seeing you on there.

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