Title: Rebel Finance School 2026 — Week 6 Thursday Transcript
Session: Freedom Fund Audit: Is Your Money Working for You? | RFS 2026 Week 6
YouTube Link: https://www.youtube.com/live/3cObRcbRtJc
Course: Rebel Finance School 2026
Creators: Alan Donegan and Katie Donegan, Rebel Donegans
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0:00Hello and welcome to Rebel Finance School. We are deep in week six. This is the investment week of the course.
0:088 secondsWelcome to a brand new session that we have never run before on a Thursday or on any day of the week.
0:1717 secondsIt's brand new. We're excited to get into it to talk about is the are the investments or the things that you have in your freedom fund working for you
0:2525 secondseffectively? That's what tonight's all about. It's part of a wider thing that we're looking at of what your investments are. We're going to go next week is going to be more on funds and
0:3434 secondsfees. So, this is one element of a bigger picture that we're building towards over these investing weeks of the course.
0:4141 secondsExactly. And we're very excited to have you all here. Hello to everyone on YouTube. Uh hello to everyone on Zoom. It's going to be a really good workshop.
0:4848 secondsAnd hello to everyone who's on catchup watching in the future. I hope the future is bright.
0:5353 secondsSo, here's the question. Is what you've got invested working for you? Is it performing? Because on Monday, we found
1:011 minute, 1 secondthe asset shop. There it is. Hello, asset shop. Next to Greg.
1:061 minute, 6 secondsIt is actually next to Greg's on the high street. You will spot it on every UK high street. Um, and the question or the the idea is your money needs a job.
1:161 minute, 16 secondsYour money needs to be working for you.
1:181 minute, 18 secondsIt needs to be out there working and producing. And every pound or every dollar can only have one job at a time.
1:261 minute, 26 secondsIf you put it in a default fund, that's its job for the moment. If you put it in property, that's its one job. If you put an active fund or if you leave it in
1:341 minute, 34 secondscash and the idea here is uh of opportunity cost, meaning all the other jobs you could have given that pound. So
1:421 minute, 42 secondsby leaving it in cash, you're not having it invested in a global index fund. By putting it in the default fund, you've not put it into a property, for example.
1:501 minute, 50 secondsIt's all the other things it could have been doing.
1:521 minute, 52 secondsAnd some of your money is probably out there working very hard. And some of your other money is probably chilling, sipping a margarita, and doing nothing.
2:012 minutes, 1 secondAnd we want to put those pounds, dollars to work. They need to be working for you. So specifically tonight is about what's in this section, your freedom
2:102 minutes, 10 secondsfund. What is in your freedom fund? And is it working for you? We're not talking about valuable liabilities or cash.
2:182 minutes, 18 secondsWe're just talking about the Freedom Fund and now it's time to do a performance review. So, we're going to
2:252 minutes, 25 secondsget your pounds, do a performance review of them, uh, and and your dollars and check if they're working.
2:312 minutes, 31 secondsI thought I'd got away from performance reviews by not being in the corporate world anymore, but here we are.
2:362 minutes, 36 secondsHere we are doing a performance review of your Freedom Fund. Craig looks very excited about that.
2:412 minutes, 41 secondsI mean, who should who's not excited about performance review? Sometimes it leads to a bonus or a promotion or a pay rise
2:482 minutes, 48 secondsand it can do. Quick message from our lawyers.
2:522 minutes, 52 secondsThis is not financial advice. We're not trained financial advisers. We're not regulated. We will not sell you investments. You make your own decisions sharing our opinions and ideas which may or may not continue to work for us or
3:013 minutes, 1 secondyou. You are 100% responsible for your financial future. And there are no guarantees here except the money back guarantee. If you do not like the course, please see Derek
3:093 minutes, 9 secondsfor a full refund. And investments can and will go up and down in value. So,
3:163 minutes, 16 secondsthere's a new little warning because they can go up and down. And we're going to talk a lot about that in week seven, the roller coaster.
3:233 minutes, 23 secondsYou didn't close off a little refund joke. If you've paid for the course, something's gone terribly wrong.
3:273 minutes, 27 secondsSorry about that. And now, if you're watching on Zoom, please use the Q&A feature that enables the ninjas to find your questions and answers. If you're
3:363 minutes, 36 secondswatching on YouTube or catch up, ask in the comments. There are ninjas there who will help you and then we have a look at the comments as well.
3:443 minutes, 44 secondsMessage from our sponsors. I don't think we have any sponsors though. Please like and subscribe. It gives Alan a warm tingle and helps YouTube algorithm to
3:523 minutes, 52 secondsknow that this is something that other people might enjoy and get value from too.
3:553 minutes, 55 secondsSome people might go, I don't want to give Alan a warm tingle, so I refuse to like and subscribe. That could backfired. Yeah.
Chapter 2: Understanding the freedom fund
4:024 minutes, 2 secondsOkay. So, where are we on the map? the map here. We're at part five, investing, and the whole purpose of the course is
4:094 minutes, 9 secondskeep more of what you earn and put that money to work. That's the purpose. So, we're now on is your freedom fund
4:164 minutes, 16 secondsworking for you. We're going to talk about fees and the roller coaster risk and volatility of the stock market on
4:244 minutes, 24 secondsMonday. And then on the next Thursday, we're going to explain how to read a fund fact sheet. So you'll be able to look into your pension, your ISO, your
4:334 minutes, 33 secondsSIP, or your Kiwi Saver and work out what is actually in there. There's some overlap here. So there's going to be
4:424 minutes, 42 secondssome points tonight where we say hold your horses because we've got more coming up. Uh where we we'll answer your
4:494 minutes, 49 secondsdirect Thank you, Alli. That made me very happy that you both held your horses at the same time. um where we can
4:564 minutes, 56 secondswe'll answer all your questions today, but if it's coming up, we'll tell you it's coming up in the next session today.
5:015 minutes, 1 secondYeah. So, you'll hear us always talk about funds and fees and we're coming on to that more next week. Today is like is your money working effectively for you in what you have.
5:105 minutes, 10 secondsAnd we wanted to say even if you have debt or you're building your emergency fund, you probably have a workplace pension, a Kiwi saver, a 401k, a
5:195 minutes, 19 secondsworkplace pension, and you still need to optimize that. you still need to get that money working for you. Uh we've
5:265 minutes, 26 secondstalked about hold your horses, so we'll move on to the next one, which is we're going to use a benchmark to compare your
5:345 minutes, 34 secondscurrent investments against what they could be doing. And a benchmark is basically a measuring stick. So, we're going to see how what we've got in our
5:435 minutes, 43 secondsfreedom fund measures up to this benchmark, this mark of success or mark of average in our case, mark of comparison.
5:535 minutes, 53 secondsYes, our benchmark is going to be a lowcost global index fund. That is what we're going to use to benchmark.
6:016 minutes, 1 secondJust one clarification, when we say low cost, we mean low fee. So, there's different ways to invest. We're going to come on to fees next week, but when we
6:096 minutes, 9 secondssay low cost, we mean low fee. The fees that you have to pay to get invested are low and they're normally expressed as a
6:166 minutes, 16 secondspercentage. Now, the reason we're doing this is actually last year's course, we had quite a few financial advisers uh
6:236 minutes, 23 secondsentering the chat and giving us stick uh and one of them in particular said you cannot compare a St. James's Place
6:316 minutes, 31 secondsinvestment to a global index fund. Uh and he said because we give advice, we do this, we do that, you can't compare
6:396 minutes, 39 secondsit. And we thought long and hard about this and thought that's rubbish. You can compare it because you literally have £1
6:466 minutes, 46 secondsto invest and you choose do I invest it with the advisor or do I invest it over here and it's a direct comparison and
6:556 minutes, 55 secondsit's the same thing. Do you compare like a pound invested in property with a pound versus invested in an index fund
7:027 minutes, 2 secondsor a dollar? And you want to know which one's working the best. So he actually
7:097 minutes, 9 secondsinspired us to go, no, this is the exact comparison that we should be doing. Yes.
7:147 minutes, 14 secondsAnd for anyone watching St. James's Place, boo. So, we always do our best to compare apples with apples where
7:227 minutes, 22 secondsrelevant, but in this case, he was saying, "Well, you're not comparing apples with apples." And we're saying, "Well, we're comparing what your pound
7:307 minutes, 30 secondscan do anywhere." Exactly. Did I just sheep eat you there?
7:347 minutes, 34 secondsThat's fine. No one noticed. Uh, and then a quick shout out. Rachel's son is 9 years old today and currently watching
7:437 minutes, 43 secondsthe workshop right now to work out where he's going to invest his birthday money.
7:487 minutes, 48 secondsUh so I love that. Welcome to Rachel Son. We have no idea of your name, but please everyone say happy birthday to Rachel's son. Happy birthday and
7:577 minutes, 57 secondswelcome. Uh got request a quick recap of what Freedom Fund is. Okay, so if you
Chapter 3: Average returns and benchmarking
8:068 minutes, 6 secondsneed a refresher perhaps watch week two of the course where we introduce this in detail but for now we split your net worth meaning what you have into four
8:138 minutes, 13 secondselements. We've got freedom fund which is is that money working for me building towards my freedom
8:208 minutes, 20 secondsis invested and creating a return for me.
8:248 minutes, 24 secondsThen we have valuable liabilities. This predominantly is the home that you live in. It's not you can't eat the bricks in retirement, but it of course is
8:328 minutes, 32 secondssomething that if you choose to own your home has value and is an important part of your financial picture. Then you have
8:408 minutes, 40 secondscash and planned spending and that's money that you need for the short to medium term. A lot of people hoard cash and have too much cash. We want to get
8:488 minutes, 48 secondsit working for you and have some cash of course to pay for pizza and Lego, but need some need a lot of that working for
8:568 minutes, 56 secondsyou. And then finally, debt, which is uh subtract that from your amount because that's money that you owe someone else.
9:029 minutes, 2 secondsSo, there's a quick review. Your freedom fund is your money that's invested, which will allow you to eventually retire, whatever age that is. Okay. Anna
9:119 minutes, 11 secondssays she's a cash hoarder here and she needs help. We have a chart for you that will change that. Now, let's talk about
9:199 minutes, 19 secondsaverage returns. Average returns. This is what we aim for. The Donigans aim to be average. Oh, most areas of my life.
9:279 minutes, 27 secondsAlan, it's the average of all of the companies. So, if you invest in an index fund, you get the average return of all
9:349 minutes, 34 secondsthe companies in the list, not the average of the investors. Cuz what we found is average is way better because
9:429 minutes, 42 seconds95.5% of actively managed funds failed to get average over above a 5-year period. So, average actually makes you
9:519 minutes, 51 secondsstand out and is better than most. And we've taken average returns over the years because we our money is invested
9:589 minutes, 58 secondsin these lowcost global index funds. Uh we retired our freedom fund was a million pounds back in 2019. It's now
10:0610 minutes, 6 secondsworth 2.7 and that is from average returns which I'm quite happy with average returns.
10:1210 minutes, 12 secondsI really like average returns and I think you should get average returns.
10:1510 minutes, 15 secondsThey're pretty useful. And what we're trying to say is stop chasing.
10:2010 minutes, 20 secondsuh we're going to compare what you've got once to understand how well it's done. Then we're going to stop chasing
10:2710 minutes, 27 secondsextra returns or performance. We don't keep comparing. We compare once, choose a simple fund, accept average, and you
10:3510 minutes, 35 secondsget on with your life. That's the whole purpose of this.
10:3810 minutes, 38 secondsI would argue you don't even need to compare necessarily if you don't want to. If you once you've done these investing weeks and you understand the power of a simple global index fund, you
10:4710 minutes, 47 secondsdon't need to actually compare your performance or look at what your other funds have done other than understanding what they are. You don't necessarily have to go and do that analysis.
10:5610 minutes, 56 secondsI think you need to know what's in there and whether you want to change or not.
11:0011 minutesUm yeah, what we're actually searching for, what we're hunting for is within your current investments, are they expensive?
11:0811 minutes, 8 secondsAre they confusing? Are they concentrated? We talked a lot about concentration risk, which means having it in too fewer companies.
11:1711 minutes, 17 secondsPutting too many eggs in putting your eggs in one basket. Exactly. And are they underperforming?
11:2311 minutes, 23 secondsSo, have they actually got you a decent return? That's what we're searching for.
11:2811 minutes, 28 secondsAnd we're very excited to announce two brand new tools that are available for you tonight. Yes, we have new
Chapter 4: New investment tools
11:3711 minutes, 37 secondsspreadsheets. The ninjas will put the link in the chat. Craig is excited as he should be. We are too. And we'll also
11:4411 minutes, 44 secondsthe link will be in the YouTube description. So if you're ever missing links, look in the YouTube description or mission control and you will find
11:5111 minutes, 51 secondsthem all. Katie, what are these new tools? So number one is a rental return
11:5811 minutes, 58 secondscomparison. What does that mean? Well, you can put in all the different incomings and outgoings that you've had for if you own an investment property or
12:0712 minutes, 7 secondsa berlet, same word for the two different words for the same thing. And it allows you to see if you'd put that money in a global index fund instead,
12:1512 minutes, 15 secondswhat would have happened, which is phenomenal. It's the first time we've ever had that tool that you can do a direct comparison. Uh, and the second
12:2312 minutes, 23 secondstool is to compare your current investment with a global index fund. And this actually came from uh one of the
12:3112 minutes, 31 secondsninjas helped their friends to compare a St. James's Place uh investment with a global index fund and they wanted to see
12:3812 minutes, 38 secondsthe figures. So that spreadsheet will do it for you. This might not be for you.
12:4312 minutes, 43 secondsIt might be actually for your partner who's not on the course. You can show them the figures. It might be for your mom who's got different investments and
12:5112 minutes, 51 secondsyou can show them the figures. Um yeah, someone put in the chat about Wesian.
12:5612 minutes, 56 secondsThat's another one of these wealth managers, Edward Jones in the US. I don't know what the New Zealand ones are actually, but I know they exist. Um, but
13:0413 minutes, 4 secondsit allows you to compare any wealth manager, any active investment with a global index fund to see what does
13:1113 minutes, 11 secondsbetter over the time and it's super super new tools.
13:1813 minutes, 18 secondsExcellent. Are you all okay with that?
13:2113 minutes, 21 secondsAre you excited about the spreadsheets or are you thinking, "What the heck is this?" Okay, most people are happy. Uh if you're not, then uh please see Derek for a refund.
13:3113 minutes, 31 secondsUh little word on cash. So when we talk about the idea of getting your money working for you, one of the reasons we say that cash isn't working for you is
13:3813 minutes, 38 secondsthat over time inflation means that prices are going up. So the money that you have in cash is not able to buy as
13:4613 minutes, 46 secondsmuch in the future as it is today. And sometimes the interest that you earn in a bank account doesn't even keep up with that. Meaning that the money that you
13:5513 minutes, 55 secondshave cannot buy the same number of pizzas in 5 years time as it does today.
14:0014 minutesExactly. And we have an inflation chart coming up to bring that to life. So then two new tools uh are on this link. The link's in the chat in the description.
14:0914 minutes, 9 secondsAnd just so you know, it compares the investments to the Vanguard Footsie Developed World Excluding the UK fund.
14:1714 minutes, 17 secondsThe reason we use that one and not the Vanguard Footsie Global All Cap is because you have longer data for this
14:2514 minutes, 25 secondsfund. So the data for this fund goes back to 2009.
14:3014 minutes, 30 secondsThe data for the global all cap only goes back to 2016.
14:3414 minutes, 34 secondsSo that's why we have used that data in this one. Um but the whole purpose of this is to compare to understand
14:4214 minutes, 42 secondsnot to chase performance. We're not like out there looking for last year's winner and switching into it because last
14:5014 minutes, 50 secondsyear's winner is very unlikely to be next year's winner. So, we're checking what you already own, same time period,
14:5814 minutes, 58 secondssame currency after fees against a simple global index fund to work out what happens. And one we're going to
15:0515 minutes, 5 secondslook at tonight is the Vanguard Footsie Global All Cap. Why? Cuz it's an incredible fund. You can buy it in
15:1315 minutes, 13 secondsAmerica, it's called VT. You can buy it in New Zealand, it's called VT. And you can buy it in the UK and it's called Vafag.
15:2215 minutes, 22 secondsI don't know why we got such a silly name in the UK, but we did. But anyway, it's just called Vanzy. Vanguard Footsie Global All Cap. You own over 7,000
15:3215 minutes, 32 secondscompanies passively. So that's the diversification bit. Uh it has developed and emerging markets. So you get all the
15:4115 minutes, 41 secondsdeveloped countries and you get India, uh, Brazil, China and the emerging markets as well. So it's a global fund.
15:5115 minutes, 51 secondsIt has all sizes of companies, small, medium, and large. And the ongoing fees
15:5815 minutes, 58 secondsare 0.23, 0.23 if you speak American, not if you're English. We're going to come on
16:0616 minutes, 6 secondsto uh more about what is a high, low, medium fee and it actually varies by country as well but this is considered a
16:1416 minutes, 14 secondslow fee in the UK. Uh we are not sponsored by Vanguard. We get no money from Vanguard. Uh we personally invest
16:2416 minutes, 24 secondsour money with Vanguard. Uh mainly because they were the people that created index funds. Jack Bogle and his mission was to make it available for
16:3216 minutes, 32 secondsyour average person to be able to invest. and he's kind of a hero. Now, moving on, we're going to do what's
Chapter 5: The 10k test and fund analysis
16:3916 minutes, 39 secondscalled a £10,000 test, which is or £10,000, just currency agnostic,
16:4516 minutes, 45 secondswhatever it is. If you put 10K in X investment, how does that compare if you put 10K in a global index fund? That's it. Over time, what would it compare?
16:5816 minutes, 58 secondsWhat happened?
17:0017 minutesTime frame is critical. If we look over one year, well, that's quite noisy and
17:0817 minutes, 8 secondsit's not actually enough data to show whether it's good or not. And actively managed funds can do very well for one year and then very badly the next year.
17:1717 minutes, 17 secondsSo, it's one year is not a good time frame.
17:2017 minutes, 20 seconds5 years is better. You're starting to have more data to be able to look and to see what happened and have more information. And then 10 years is much
17:2917 minutes, 29 secondsbetter because it gives you a more uh a wider band of data. So you can actually see what's doing good or not. Uh if you
17:3817 minutes, 38 secondsclick the since launch button that is useful, but some funds only launched last year. So you have to be very
17:4517 minutes, 45 secondscareful of since launched. It depends when the fund was launched. And what we really wanted to say to you is short
17:5217 minutes, 52 secondsdata lies because over a time frame of one year, lots of funds can look clever.
18:0118 minutes, 1 secondIf you were just to flip a coin, you would beat the market 50% of the time.
18:0618 minutes, 6 secondsUh, and you it's easy to look clever over a year. It is not easy to look clever over 10 years because chance is
18:1518 minutes, 15 secondsless of a factor because you have to keep flipping the coin every year and then eventually you get to the point where you go, well, like it's just the
18:2318 minutes, 23 secondsaverage and that's what we're looking at. Uh, and this is also why we say to new investors, do you know how many people message us and say, I invested a
18:3218 minutes, 32 secondsmonth ago and it's down. And I'm like, a month? A month? That's not enough time to know what's happening. Uh so the longer the time frame the better.
18:4418 minutes, 44 secondsNow for the first time in the workshop so far I wanted to show you the actual website pages.
18:5218 minutes, 52 secondsSo we're going to go to the real pages and have a look at this.
18:5618 minutes, 56 secondsGoing to be a little bit careful with your search history on here Alan. Showing the world.
19:0019 minutesUh I'm definitely going to be a little bit careful of what is going on on my computer.
19:0619 minutes, 6 secondsOkay. So this is on Vanguard's website in the UK. It'll be very similar in the US and different countries.
19:1619 minutes, 16 secondsThis is the fund we've been talking about, the global all cap fund. Uh and you will see this bit here, accumulation
19:2419 minutes, 24 secondsor income, and this little toggle button. Accumulation is where the dividends are reinvested to buy you more
19:3219 minutes, 32 secondsshares. Income is where the dividends are paid out to you and you get cash when they're paid out. What are dividends, Alan?
19:3919 minutes, 39 secondsDividends are the profit from the companies that shared with the owners or the shareholders. Thank you.
19:4619 minutes, 46 secondsThen if we go down here, this bit always confuses people. NAV price. NAV, net
19:5319 minutes, 53 secondsasset value. It just means the value of the fund divided by the number of units.
20:0020 minutesYou don't need to ever look at this number. This number is kind of irrelevant to your life. So, I just
20:0720 minutes, 7 secondsneeded you to see it to know not to bother looking at it because lots of people when they read this website for the first time go, "What's the NAV?" And I can't afford £287.
20:1720 minutes, 17 secondsYeah. Cuz you can buy fractions of a unit. That is the price of one unit. And then people say, "Oh, I need to compare it to the price of one unit in a
20:2520 minutes, 25 secondsdifferent fund." We talked about comparing apples with apples just earlier. This is completely not comparing apples apples. this is apples
20:3220 minutes, 32 secondsand pineapples and oranges and frankfurtters that it's it's not something that's comparable across different funds. So don't use that as a
20:4020 minutes, 40 secondscomparison. Then this is where it tells you the number of companies it's invested in. So you own 7,460
20:4720 minutes, 47 secondscompanies. OCF stands for ongoing charge fee and that's how much you pay a year
20:5520 minutes, 55 secondsof what you have invested for them to buy and sell the companies and organize everything. So that's that. The bit
Chapter 6: Comparing active vs passive funds
21:0321 minutes, 3 secondswe're going to look at tonight is this bit called price and performance because it actually gives you quite a nice stats. Um you can look at the
21:1121 minutes, 11 secondshistorical prices if you want and it'll give you all of the prices. It gives you a price analysis over different time frames. I don't actually bother using
21:2021 minutes, 20 secondsthis chart very much. Um, this one here tells you what it did each
21:2721 minutes, 27 secondsyear. The rolling year means the exact year passed. So, it takes the date today
21:3421 minutes, 34 secondsor the the last date they've done the figures and then goes what's it done in the last year. So, in the last rolling year, it's created a 27% return.
21:4521 minutes, 45 secondswhich is quite amazing. You can also do the summary if you want to. And the summary sort of tells you like the one year, 3 years, 5 years, and 10 years.
21:5621 minutes, 56 secondsThis fund actually has its 10th birthday this November. We're thinking of throwing a party for it. You know, a party for the Footsie Global All Cap.
22:0422 minutes, 4 secondsUm, but it'll have its 10th birthday this November. This is actually the chart I use, which if we click since
22:1222 minutes, 12 secondsinception, you can see it started in November 2016. So, if you invested £10,000 in November 2016, you would now
22:2122 minutes, 21 secondshave uh just over £29,000, which is £190% profit in 10 years, which
22:2922 minutes, 29 secondsis amazing. So, that kind of shows you the the £10,000 test or £10,000 test that I was talking about. You can see
22:3922 minutes, 39 secondswhat you invested and what it would grow to over time. So, that is the first part to have a quick look at the Vanguard
22:4722 minutes, 47 secondswebsite. What do you think? Are you okay? Comments, questions, thoughts. Um, tell me what it was. Anna says, "Does
22:5622 minutes, 56 secondsthat 29 grand accude include accumulation?" Yes, it does. So, that's with dividends being reinvested. So,
23:0423 minutes, 4 secondsyour 10,000 uh you get dividends each year which buys more stocks and that compounds over time to equal £29,000 over the time.
23:1423 minutes, 14 secondsCraig says, "What about costs of holding them in different platforms?" We're going to do the costs of the platforms in week eight, but yes, you can buy a
23:2123 minutes, 21 secondsVanguard fund on all sorts of different platforms like Interactive Investor, Vanguard, uh, Invest Engine, Trading
23:2923 minutes, 29 seconds212, and they all have slightly different fees, which we're going to cover in week eight. Uh, Rosie says, "Is that with no extra money added?" Yes,
23:3623 minutes, 36 secondsthat's putting 10 grand in and leaving it to grow. Joanna says, "Do I need 10 grand to start? Can I start with £100?"
23:4423 minutes, 44 secondsYes, you can start with £100. So, you can literally put 100 in, start, and allow that to grow. And that's how we did it. Our first investment was like
23:5223 minutes, 52 seconds£100 or something. Uh, and that's how we got going. Uh, we just used 10K as an example of what it would grow to cuz
24:0024 minutessome people have more, some people have less, but it gives you a way to compare funds.
24:0624 minutes, 6 secondsOlivia, I want to invest now or should I wait until after the course?
24:1024 minutes, 10 secondsWhat are we going to say? Hold your horses. Uh after week eight, you will have everything you need to be able to
24:1724 minutes, 17 secondsstart investing, but we're building up the picture. So, uh we're just going to say relax, stick with us, go through it, and we will make sure you get there. Cla
24:2524 minutes, 25 secondssays, "We're in a time when prices are very high. I'm afraid it may crash." Uh CLA, week seven is going to be really fascinating for you. The short answer is
24:3424 minutes, 34 secondsthat the stock market will crash at some point. Nobody knows when, but crash is a part of the cycle. It's a natural part of how the stock market works. are not
24:4324 minutes, 43 secondsto be scared of. They're just a thing that happens and I know they can feel scary, but it's something you get used to over time. We're going to go on to all of that on Monday.
24:5324 minutes, 53 secondsYes, Monday will cover all of that. Now, you can put in a couple of questions about like how much can I put in? Can I put in random amounts? Yes, you can
25:0125 minutes, 1 secondinvest as much as you want whenever you want. Our friend Kathy calls herself a uh sofa investor, i.e., She randomly
25:0925 minutes, 9 secondschecks how much money she's got when she's sat on the sofa at night and then invests the extra and it just is random.
25:1625 minutes, 16 secondsUm, so what we're going to do next is I wanted to show you a comparison. So we're going to compare some funds and
Chapter 7: Case studies in performance
25:2525 minutes, 25 secondsyou can get comparison data all sorts of places. In the UK, the Financial Times Fund page actually does a really good
25:3325 minutes, 33 secondsjob of comparing. And I'm going to show you this and show you a real life example. Uh in other countries there are um Morning Star and some different
25:4225 minutes, 42 secondsplaces you can check to compare or you can go direct to the fund providers page and they quite often give you these
25:5125 minutes, 51 secondsstats. Now we are going to use for this comparison St. James's Place. Boo.
26:0026 minutesBut it's good for a comparison. Uh, we're going to use their strategic managed pension fund. Doesn't strategic make it sound fancy? It does to me.
26:1126 minutes, 11 secondsSounds very fancy, but let's do a comparison. So, the in the title it's got the word managed meaning that is
26:1826 minutes, 18 secondsactive. So, we talked about active versus passive before. So, passive meaning you just buy all the companies in the list, an index fund, and then
26:2626 minutes, 26 secondsactive meaning someone's trying to pick the winners. And that's what active or managed means. So, this is the Financial
26:3426 minutes, 34 secondsTimes website. Uh, and I'll just show you the summary to start with. This is the fund, the St. James's Place
26:4126 minutes, 41 secondsStrategic Manage Fund. It has a nice chart. Financial Times do it on £1,000 invested. So, if you invested £1,000 5
26:5026 minutes, 50 secondsyears ago, you'd have £1,400ish now. Uh, so that's over 5 years. That's
26:5726 minutes, 57 secondshow they do it. Um, they show you the cost. The one that we showed Vanguard calls OCF, they call net expense ratio
27:0627 minutes, 6 secondsbecause they like to confuse people. Uh but you'll see this one is 1.61%.
27:1127 minutes, 11 secondsThat fee is outrageously high. It is terrible, but people pay it because they
27:1827 minutes, 18 secondstrust the advisers. Uh it shows you it invests in large companies and their investment style is they are
27:2627 minutes, 26 secondssearching for value companies. So it tells you a few bits about it. It tells you who the manager is. So Jim Silinski
27:3627 minutes, 36 secondsis the manager of the fund with Richard Cowwell and Steven Thornber.
27:4227 minutes, 42 secondsWhy have you gone for reading people's names out there?
27:4527 minutes, 45 secondsAnd they are currently managing nearly5 billion pounds. So that tells you a bit about the fund. But to do the comparison, you actually go to this bit
27:5427 minutes, 54 secondscalled charts. Can you see at the top here charts? You click on charts and it'll give you a chart over
28:0228 minutes, 2 secondsdifferent time frames. I'm going to use 10 years because it's a nice comparison.
28:0828 minutes, 8 secondsAnd I'm going to compare two. You can use this button over on the right, comparisons. And you can type in and
28:1528 minutes, 15 secondsfind a fund. So I'm going to find the Vanguard Footsie Global All Cap and click compare. And you'll notice it immediately brings up a chart.
28:2728 minutes, 27 secondsAnd the bottom line, this blue one, is it blue? Yes. A bluey. Yeah, we'll go with blue.
28:3428 minutes, 34 secondsOkay. This blue one shows St. James's Place. And you can see it has grown over 10 years 84%.
28:4328 minutes, 43 secondsSo if you'd have put in 10 grand 10 years ago, you would now have 18,400.
28:4928 minutes, 49 secondsBut if you compare that to this orange line, which is the Vanguard Footsie Global All Cap, it has grown about £186%.
29:0029 minutesWhich means that if you put in 10 grand at the start, it would be worth £29,000
29:0729 minutes, 7 secondsby now. And so you can see which one you would prefer. Uh, so I'd love to know, would you prefer to have a return of £18,000 or £29,000?
29:1929 minutes, 19 secondsPlease vote now. Uh, I think if anyone actually votes for £18,000, uh, yeah, you're on the wrong course. Um, but
29:2729 minutes, 27 secondsthat's how you compare the different funds. And that chart is actually very useful for those different comparisons to have a look at it.
29:3629 minutes, 36 secondsAnd it's got a big library of funds, hasn't it? It's not just UK funds. You can put in US and New Zealand and wherever you are in the world. Um, you
29:4429 minutes, 44 secondsshould be able to find your fund. Well, it's got a big old library.
29:4929 minutes, 49 secondsExactly. And I just going to do one more fund because like just to show you how it works. This one's called the Lindel
29:5829 minutes, 58 secondsTrain Global Funds plc. Uh, that's the global equity fund. I wanted to show you this just so you could see some
30:0630 minutes, 6 secondsdifferent funds. This was a highly successful fund for a long time and very
30:1130 minutes, 11 secondspopular in the UK. Uh it has two lines because um the Financial Times likes to
30:2130 minutes, 21 secondsgive you a comparison. So the Lindsel one is the blue line. Uh the orange line is a global large cap growth equity. But it like that doesn't really mean
30:2930 minutes, 29 secondsanything. It we'll do our own comparison to actually look at it. But I wanted to go down here and show you this is its
30:3730 minutes, 37 secondsfees. Its fees are 0.53 which you know is not hideous but it's not great.
30:4430 minutes, 44 secondsIt's pretty high isn't it? So we've had a question saying well what's a normal fee? We're going to go into fees much more in week seven and week eight but to
30:5130 minutes, 51 secondsanswer your question 53 to me is is high. That's high.
30:5630 minutes, 56 secondsIn America and New Zealand you can invest for 0.06. 06.
31:0331 minutes, 3 secondsIn the UK, you can invest somewhere between 0.14 and 0.23.
31:1031 minutes, 10 secondsThose are kind of good fees for a fund.
31:1331 minutes, 13 secondsThat gives you a ballpark to know where they are. Um, you can see this fund has 2.21 billion pounds invested with it.
31:2331 minutes, 23 secondsSo, that's how much they're in managing.
31:2631 minutes, 26 secondsum they invest in large companies and their investment style is looking for value companies that they can buy to go
31:3331 minutes, 33 secondsup. I'm just going to show you down here. It tells you the top five holdings.
31:4031 minutes, 40 secondsUh this one here, Alphabet, that's Google's name. So the company that owns
31:4731 minutes, 47 secondsGoogle is called Alphabet. You have 10% of your money invested with Google.
31:5531 minutes, 55 secondsThe second one is the London, sorry, TKO Group Holdings. And if you don't know what any of these are, you can actually click on them and find out. So, you've
32:0332 minutes, 3 secondsgot 8.25% of your money with TKO TKO Holdings. And if you click through,
32:0932 minutes, 9 secondshere's TKO Holdings. Uh, and it is a sports and entertainment company that owns Ultimate Fighting Championships.
32:1932 minutes, 19 secondsuh and the world wrestling entertainment. Uh so they are a sports management company. Eight and a half% of
32:2732 minutes, 27 secondsyour money is in wrestling and fighting.
32:3332 minutes, 33 secondsUh which would scare me. You got London Stock Exchange, RLEX, which does
32:4032 minutes, 40 secondsfinancial instruments, and Nintendo. So you got 6% in Nintendo. But here's the bit I wanted you to get. Between those
32:4832 minutes, 48 secondsfive companies, 40% of your money is in those five companies. Do you think that is very diverse?
32:5832 minutes, 58 secondsNo, it's not diverse at all. That is concentration risk and that would scare me. I would never invest in that fund
33:0733 minutes, 7 secondsjust based on that that it's so concentrated. Um, but that's how they try and beat the market is by choosing
33:1633 minutes, 16 secondscompanies. So, let's actually do the comparison on the charts and have a look at this. So, we're going to do the comparison.
33:2533 minutes, 25 secondsI've got to the charts. I'm going to choose the 10-year max and do a comparison. I'm going to pick the Vanguard Footsie Global All Cap. And it
Chapter 8: Choosing the right investments
33:3433 minutes, 34 secondsadds the line. Now, here's the bit I wanted you to see. So the blue line is the the Lindel fund and the orange line
33:4233 minutes, 42 secondsis the Vanguard index fund. So the blue line is the actively managed fund. The orange line is the passive fund that just buys all of the companies
33:5033 minutes, 50 secondsand for the first four years the actively managed fund outperformed the market.
33:5633 minutes, 56 secondsThey managed to do their magic. They outperformed the market. Then it went flat and so did the other one. But then
34:0434 minutes, 4 secondsthey've struggled to like make any profit afterwards. So overall you're
34:1134 minutes, 11 secondsjust under 80% you would have got back if you'd invested in the actively managed funds. You put in 10k you get 18
34:1834 minutes, 18 secondsback. And we know the Vanguard fund you put in 18 you get about 29 back. Sorry.
34:2434 minutes, 24 secondsYou put in 10 you get about 29 back. Um, but I wanted you to see actively managed funds can outperform the market for a
34:3334 minutes, 33 secondsperiod and that's how they then persuade you to invest with them. Look, didn't we do well? But the chance of an actively
34:4134 minutes, 41 secondsmanaged fund outperforming the market over a long period is very very small.
34:4834 minutes, 48 secondsThey'll do well for a few years and then they won't. Uh, and I wanted you to see the difference between those two and to
34:5534 minutes, 55 secondsbe fair and to do this comparison saying like some funds do outperform for a while but we still would never choose
35:0235 minutes, 2 secondsthem because the past winners do not equal the future winners.
35:0835 minutes, 8 secondsBefore you do that next slide, we had a great question uh come in saying, well, how do they get away with it when the comparisons make it so obvious? Why
35:1635 minutes, 16 secondswould you go with those funds when it's obvious that there's something better out there?
35:2135 minutes, 21 secondsThe answer is the salesperson. They have amazing marketing. They have salespeople in beautiful suits. Uh they make friends
35:3035 minutes, 30 secondswith you and they persuade you to invest with them and they genuinely believe themselves that they can pick the next winner.
35:4035 minutes, 40 secondsThe data shows they can't, but that's what they believe and they have to because they're charging you
35:4735 minutes, 47 secondsmore to be able to beat the market and they have to believe they can. And sometimes they do, but over the long run.
35:5535 minutes, 55 secondsThey never do. So why do they actually do it? People believe it because of the fancy marketing, because they have names
36:0236 minutes, 2 secondslike St. James's place, uh, because they have suits, because they send you a birthday card, all of that stuff.
36:1036 minutes, 10 secondsThink about from the other side as well.
36:1136 minutes, 11 secondsSo, there's the sales pitch and then there's us as customers going saying, "I'm scared and overwhelmed by this stuff." And they give you a very
36:1836 minutes, 18 secondsreassuring thing, saying, "Well, I'll look after it for you." So, then you're like, "Okay, I've got a professional.
36:2336 minutes, 23 secondsThey're going to do it for me." It's it's very easy to accept that reassuring presence of saying, "Well, I'll do it
36:3236 minutes, 32 secondsfor you." Exactly. And they will charge you very high fees for it. There's a few people saying in the chat, some FA just quoted 5% fees.
36:4136 minutes, 41 secondsFinancial advisor. Yeah.
36:4336 minutes, 43 seconds5% fees is outrageous. We're doing fees next week, but you should be paying under half a percent.
36:5036 minutes, 50 secondsSo that is good fees is under half a percent. If you're in America, you shouldn't really be paying any fees. It's like 0.05.
36:5836 minutes, 58 secondsUm, but we still have higher fees because we're not quite as developed a market. Um, but under half a percent.
37:0537 minutes, 5 secondsSo, if anyone quotes you 1%, 2% run. That's high.
37:0937 minutes, 9 secondsClose the door. Run away. Go to another country. Anything. Get away from them.
37:1437 minutes, 14 secondsNow, uh Kathy's a bit confused. So, she's saying we used we've been saying Raft Gag and Vanguard Global All Cap. Those
37:2237 minutes, 22 secondstwo are the same thing. Raftgag is Vanguard's code for the Footsie global allcap. And then there's Footsie Develop World XUK. That is a different fund.
37:3237 minutes, 32 secondsWe're going to come on to this more in week eight when we talk about the different funds you can buy. For now, those are two different very well
37:4037 minutes, 40 secondsdiversified index funds that you can buy through Vanguard. At week eight, we're going to explain more what the funds
37:4737 minutes, 47 secondsare, how it works, where you go to buy them, all that stuff. the details of like getting into the details of actually buying and choosing your investments. That's week eight.
37:5637 minutes, 56 secondsAnd the Vanguard Footsie Global All Cap is a fund we'll talk about lots because it is one of the most diversified
38:0438 minutes, 4 secondsfunds you can possibly buy and you can buy that on any of the different platforms. Uh so you're not tied to where you have to go for it. And yes, we have tried to break down all the terms.
38:1538 minutes, 15 secondsWe have articles to back all of this up on the website and the course notes. So the course notes will help you if you ever feel like this is a bit too much.
38:2438 minutes, 24 secondsUh then the course notes will break it down and we will keep answering your questions until we get there together because that's our purpose is to help
38:3338 minutes, 33 secondsyou with this stuff. Now the summary of this section is the past winners do not
Chapter 9: The freedom fund audit
38:4138 minutes, 41 secondsequal the future winners. So just because a fund has done well in the past doesn't mean it will necessarily do well in the future. and the active fund
38:4938 minutes, 49 secondsmanagers, everyone is trying to beat the market. What does beat the market mean, Alan?
38:5638 minutes, 56 secondsGet better returns than average. That's the dream they sell you. And that's why people pay these big fees is because they think they will be able to get that
39:0539 minutes, 5 secondsdream. And to be fair, they've been sold that dream. Yeah.
39:0839 minutes, 8 secondsAnd to be even fairer, some of them actually succeed for a while. like that Lindel fund I showed you that succeeded
39:1439 minutes, 14 secondsfor four years and then it stopped and the winners change the fund managers change and no one knows the future which
39:2339 minutes, 23 secondsis why we say don't pick funds just get a simple global index fund and move on
39:3039 minutes, 30 secondsand that will beat most things. Now, we had a little comparison checklist. Uh you might want to take a photo of these
39:3839 minutes, 38 secondsthings, but if you're comparing funds, this is your little checklist. One, what does the fund invest in? So, a bit like
39:4539 minutes, 45 secondsI showed you on the Lindel thing. It showed you the top five companies it invests in and what percentage it is. Is
39:5239 minutes, 52 secondsit active or passive? Passive is the index fund. Active is where you've got someone choosing the investments.
40:0040 minutesUh number three, what is the fee? How much does it cost you to own this?
40:0640 minutes, 6 secondsNumber four, what is the benchmark? What are you comparing it to? Because we've had lots of situations where the active
40:1340 minutes, 13 secondsfund managers compare their funds to things that make them look good, but it's not a fair comparison. And it might
40:2040 minutes, 20 secondsreveal that the fund is perhaps not working hard enough for you. Cuz sometimes we look at the benchmark and it says we try to beat inflation. Well,
40:2940 minutes, 29 secondsinflation just means your money is worth the same in the future as it is now.
40:3340 minutes, 33 secondsIt's got the same purchasing power. It can buy the same number of pizzas in the future as it can now. We want our money to grow. So, the benchmark can reveal what it's aiming to do. Even love that.
40:4540 minutes, 45 secondsAnd then my next question is what did £10,000 become? Cuz that's a nice comparison.
40:5240 minutes, 52 secondsAnd we got to check the time frame because remember short data can lie.
40:5640 minutes, 56 secondslong-term data is far more valuable. And then finally, knowing what I know now, would I choose it again today? Those are
41:0441 minutes, 4 secondsthe questions we go through every time someone presents us with a fund and goes, "Tell me what this is." We look
41:1241 minutes, 12 secondsdown these things and that's what we work out to do it.
41:1641 minutes, 16 secondsAnd this is going to we're building the picture. So some of these we'll look at today and other ones of them are for next week. So what's the fee? What's it invested in? That's more for week seven.
41:2541 minutes, 25 secondsand we're going to do the fund fact sheet where we're going to go through actual funds and show you how we think about it and what to look out for
41:3341 minutes, 33 secondsexactly. Uh Paul says, "Is the benchmark return set by each platform or is it an industry fixed universal benchmark?" Uh
41:4241 minutes, 42 secondsI wish it was. The answer is every fund manager can pick their own benchmark. Can you see how that might be a problem?
41:5141 minutes, 51 secondsbecause you can just pick whatever benchmark you want to compare against.
41:5541 minutes, 55 secondsAnd then that's why they then say, well, you're not comparing apples with apples because your benchmark is different. What you're trying to beat is different.
42:0242 minutes, 2 secondsIt's like, well, that's where we come back to. Is your pound, is your dollar doing the best job it can be doing out there working for you? And a little
42:1142 minutes, 11 secondswarning on all this stuff. This is not about chasing the best returns. This is about understanding once what you've
42:1842 minutes, 18 secondsgot, then stop chasing better returns, own a simple fund, accept average, and get on with your life. And through this,
42:2642 minutes, 26 secondsyou might actually go, "Oh, my active fund manager has done better." And maybe they did. The problem is not that
42:3442 minutes, 34 secondsactively fan fund managers win because there sometimes they do. The problem is you don't know in advance which ones will win next.
42:4542 minutes, 45 secondsyou don't know which fund is going to outperform or not or when they stop winning or when you should stop uh
42:5242 minutes, 52 secondsswitch or stick and you kind of need a crystal ball for this which no one has got. And then finally that's why we
43:0143 minutes, 1 secondalways come back to the effortless investing which is pick one global index fund have low fees invest tax
43:0843 minutes, 8 secondsefficiently and leave it to grow. That seems to be the best way to get your money growing over time. And what we
43:1543 minutes, 15 secondsreally really wanted to say was you can just do this once and then go and live your life. That's the whole purpose of
43:2343 minutes, 23 secondsthis stuff is that you fix your investments and compare them once, change them if they're bad, keep them if
43:3243 minutes, 32 secondsthey're good, and then never do it again, and then spend time with the people you love. That's it. because there's not many people out there who
43:4043 minutes, 40 secondsactually um want to spend all their time looking at charts and investing and doing this and that. The whole purpose
43:4943 minutes, 49 secondsof this is to free you to live the life you want to lead. And that's one of the things we did when we optimized our
43:5543 minutes, 55 secondsinvestments was we optimized it so we could spend more time running courses for you and going to Disney World and building Lego and doing jigsaws. I don't
44:0444 minutes, 4 secondswant to spend my time looking at charts all the time. I want to live my life.
44:0944 minutes, 9 secondsAnd that's what we want for you is to organize your investments so you can go out and have adventures, be with the people you love, have joy, have fun.
44:1744 minutes, 17 secondsClarification point. I would like to spend all my time looking at charts, but not investment charts for the purposes of choosing what to invest in. Any
44:2544 minutes, 25 secondscharts. I just love them. Move on, Alan, please. Quickly.
44:2944 minutes, 29 secondsOkay, we're going to move on. So, we're moving on to the next section, which I just wanted to lay out the freedom fund
Chapter 10: Asset class performance
44:3644 minutes, 36 secondsaudit. Uh, so Katie doesn't own a suit, so I had to use AI to generate a picture of her in a suit looking aicious. I did used to own a suit.
44:4544 minutes, 45 secondsYes, this is what she looked like when she worked for Deote. Uh, the Freedom Fund Audit. These are the basic questions you need to ask. What do you
44:5244 minutes, 52 secondsown? What is it? What job is it meant to be doing? What return has it made in the past?
45:0045 minuteslike has it been a good investment? How much does it cost you to have said investment?
45:0645 minutes, 6 secondsHow much hassle does it create in your life? Cuz some investments take a lot of management and some don't. How much risk or concentration does it add to you?
45:1745 minutes, 17 secondsSo concentration is opposite of diversification. Diversification meaning you've got you haven't put all your eggs in one basket. You've spread your
45:2545 minutes, 25 secondsinvestments. Whereas concentration is the opposite of that. You've very concentrated very few number of investments which is what we did by having two
45:3345 minutes, 33 secondsinvestment properties in the same building and we were going to buy a third that is concentration which lives in the building as well.
45:4045 minutes, 40 secondsNext question is how liquid is it? I'm going to explain what liquid means in a second but how liquid is your
45:4745 minutes, 47 secondsinvestment? Um what would the benchmark have done? I compare it to the global index fund and then finally would I
45:5545 minutes, 55 secondschoose this again? What does liquid mean? Liquid means how easy is it to get to your money? Uh I had a picture of 50 pound notes frozen inside an ice block.
46:0846 minutes, 8 secondsThat means it's not very liquid. You'd have to melt it all to get your money and then you'd have to dry the 50 notes. That would take ages. That's not liquid.
46:1646 minutes, 16 secondsAnd liquidity is how quickly can you access your money. To give you an example, this was where our investment
46:2346 minutes, 23 secondsproperties were in Bazing Stoke. Uh it took us two years to sell the investment
46:2946 minutes, 29 secondsproperties. That is extremely illquid because it took us two years. You put them on the market, list them with estate agent. I don't think the estate
46:3846 minutes, 38 secondsagent did very much. The pandemic hit, the government changed, tail of woe. Two years later, we finally sold them. That
46:4546 minutes, 45 secondsis illquid. Whereas index funds in our ISER, it's 3 days from sale to cash.
46:5446 minutes, 54 secondsThat's liquid. You get your money almost instantly. Not quite instantly, but almost.
47:0047 minutesThen I wanted to do a little bit about bonds and bonds being liquid. And I don't know if you remember from week six, we talked about a bond is an IOU
47:1047 minutes, 10 secondsfrom the government or a company. So you lend them money, they give you an IOU, and they pay out interest. Now, bond
47:1747 minutes, 17 secondsfunds are more liquid because you can sell it today and get the cash in a few days.
47:2447 minutes, 24 secondsA bond directly with the government or directly with a company normally has what's called a maturity time frame. So
47:3247 minutes, 32 secondsthe government wants to know how long you're lending them the money for. So the time frame might be 3 months, 6 months, a year, 5 years, 10 years, 15
47:4147 minutes, 41 secondsyears. And you saying to them, you have my money for that period and you pay me interest along the way and then I get my money back at the end.
47:5247 minutes, 52 secondsYou can sell those bonds and guilts and different things. So, they are a bit more liquid, but you're locking your
47:5947 minutes, 59 secondsmoney up for longer. And then we just have a translation piece for you both.
48:0448 minutes, 4 secondsIn America, a bond with the government is called a treasury note.
48:1048 minutes, 10 secondsIn the UK, cuz we like to sound fancy, we call a bond with a government a guilt.
48:1748 minutes, 17 secondsIt just sounds fancier and it probably sounds more trustworthy, but they're both just bonds. That's what they are.
48:2448 minutes, 24 secondsThe finance world likes to use 17 different acronyms for the same thing just to confuse us. But once you get
48:3148 minutes, 31 secondsinto it, you'll start to go, okay, I know what a guilt is. That's a bond with the government in the UK. Know what a Treasury note is. That's a bond with the
48:3848 minutes, 38 secondsUS government. Um, they're all just bonds.
48:4248 minutes, 42 secondsNow, final bit on liquidity. Being illquid is not bad. It just means you need good planning
48:5148 minutes, 51 secondsbecause you need to know when you can get the cash, when it's coming back. And it can be bad because if you need the
48:5948 minutes, 59 secondsmoney in a emergency and you can't get to it, that's when problems and debt occur. So it takes really good planning
49:0849 minutes, 8 secondsand even with good planning, there's things happen that you can't foresee as well. So that is a downside of things that are illquid. the opposite of
49:1649 minutes, 16 secondsliquid. You can't get to them get turn it into cash quickly.
49:2049 minutes, 20 secondsExactly. Now, those are all the questions for the freedom fund audit. Uh the main question that you should ask is
49:2849 minutes, 28 secondshaving done Rebel Finance School, knowing what I know now, would I buy this investment again?
49:3649 minutes, 36 secondsIf yes, keep it. If no, sell it and change.
49:4149 minutes, 41 secondsThere are a couple of ash tricks. One is hold your horses. You got to understand the whole picture, platforms and different things. And two is there may
49:5049 minutes, 50 secondsbe tax implications of selling off old investments.
49:5449 minutes, 54 secondsSo just be careful of tax things. There are no tax implications if it's in an ISA, a SIP, uh a 401k, a Kiwi Saver.
50:0650 minutes, 6 secondsThose things don't have tax implications. So that's awesome. But if it's not in one of those accounts, it might well do. So that's the critical
50:1550 minutes, 15 secondspiece. Um Katie, so the idea with all of this is we want to look at what is in your freedom fund.
50:2350 minutes, 23 secondsYou've put that money to work. Is it actually working for you? Is it sitting in a hammock not trying as hard as it could be? So that's what all this is
50:3050 minutes, 30 secondsabout. Just to be able to gather that information to understand and then to start to once we understand the whole picture, choose what to do about it.
50:3950 minutes, 39 secondsOkay. Are you ready for some of the best charts you will ever see in your life? Alan, you set the bar quite high there.
50:4750 minutes, 47 secondsYou talk about benchmark. You've benchmarked us against the best charts ever in the world. And there are some great charts out there.
50:5450 minutes, 54 secondsThere are some great charts, but these ones have changed the way I look at things. And I think the mark of whether a chart is good or not is whether it
51:0251 minutes, 2 secondshelps you to think in a different way and helps you to think in a different way. So we had this slide from uh
51:1151 minutes, 11 secondsMonday's course which was about what assets exist. So the different assets that exist. You've got cash, bonds,
Chapter 11: Property as an investment
51:1851 minutes, 18 secondsproperty, stocks and shares, commodities, gold, crypto, speculation, and then yourself. So we talked through these on Monday, but we wanted to give
51:2751 minutes, 27 secondsyou a bird's eyee view of how they've all performed over the years. So, the
51:3351 minutes, 33 secondsincredible ninjas have gone off and found data all the way back to 1988.
51:4051 minutes, 40 secondsI was 10 that year. Uh, so they found data all the way back to 1988 for us to compare. So, here is a comparison of the
51:4951 minutes, 49 secondsmajor asset classes over time. I'm super excited about this. First off, let's introduce inflation.
51:5851 minutes, 58 secondsSo, this is inflation. And all of these start with what would a,000 pounds turn into if you put it starting in 1988 to today.
52:0652 minutes, 6 secondsSo if you had a,000 pounds in 1988, you need £3,02 today to have the same purchasing power
52:1552 minutes, 15 secondsto be able to buy the same number of pizzas, the same num same number of Lego, the same number of Lego sets.
52:2252 minutes, 22 secondsI feel like Lego inflation would be higher than this, but let's not go there. Um, does that make sense to you that like £1,000 in 1998 is worth £3,000 today because prices have gone up?
52:3452 minutes, 34 secondsInflation just means prices go up over time which the average over that whole period has been 2.9%.
52:4152 minutes, 41 secondsYou will notice that right at the end of the chart it sort of upticks and after COVID inflation went crazy for a period
52:5052 minutes, 50 secondsand you can see that on the chart. Okay, let's move on to the next one. This is interest.
52:5652 minutes, 56 secondsSo the average interest rates a bank would give you uh if you invested £1,000 in 1988.
53:0453 minutes, 4 secondsIt's not even invested really.
53:0553 minutes, 5 secondsPut it in a bank account. Yeah, you're right. It's not invested. Just put it in a bank account. You would have nearly £5,000 now, which is a 4.3%
53:1553 minutes, 15 secondsreturn on average. And the reason why recently bank account interest rate hasn't kept
53:2253 minutes, 22 secondsup with inflation is because of that uptick tail you can see at the end of the chart. But for a long time inflation
53:3053 minutes, 30 secondswas actually sorry interest was outperforming inflation.
53:3553 minutes, 35 secondsNow next one is bonds. This is actually UK guilts. And funny enough UK guilts haven't even kept up with inflation with
53:4453 minutes, 44 secondsinterest. Yeah. Thank you. Uh, and you got a 4.2% return over the time. Um, so you can see bonds and interest are very
53:5253 minutes, 52 secondssimilar. Inflation is lower. So they've just about given you a bit more than inflation. And then the final one, UK house prices. So this just look looking
54:0154 minutes, 1 secondat how house prices in the UK have changed over time. This is the average across the whole country. An average UK property, if it was worth a,000 back in
54:1054 minutes, 10 seconds1988, it would now be 6,000. just under 6,700 which is 5.1% annual return
54:1854 minutes, 18 secondsand this is the average of all properties so this includes Abedine Basing Stoke and London London went up a
54:2554 minutes, 25 secondslot Abedine didn't Barnsley was flat like different areas go up at different rates but this is the average of all of
54:3454 minutes, 34 secondsthem so if you'd owned the average UK property which no one actually owns but you know if you're thinking in aggregate across the whole country you might have
54:4254 minutes, 42 secondsheard People say some version of this of, "Well, I bought my house for 100 grand in 1988. Now it's worth 670 grand." Wowers.
54:5154 minutes, 51 secondsThat's amazing. They're like, "Yes, look at that." And we say, "Well, yeah, that's that's compounding. That's been
54:5754 minutes, 57 seconds5.1% growth on average since 1988." But people get really excited about that big change, that headline number.
55:0655 minutes, 6 secondsAnd that's why property has such a good reputation because you will have heard this story from so many people. But let's change our graph. And you will
55:1355 minutes, 13 secondshave noticed we've resized the graph now. Uh because we're going to add in gold. So here is gold. Uh gold was flat
55:2355 minutes, 23 secondsfrom 1988 to like early 2000s. Then it went up a lot until the com bubble and
55:3155 minutes, 31 secondsit last two years it's gone mental. Um it's gone up a huge amount. Um but if you average that out, it's gone up 7 and a half%.
55:4155 minutes, 41 secondsa year since 1988. That's the average return you would have got.
55:4855 minutes, 48 secondsAnd it says, should we be subtracting inflation from the growth?
55:5355 minutes, 53 secondsUh, you can do because we added it onto the chart so you could see it. We didn't really need to, but you can do and you can look at it either with or without.
56:0356 minutes, 3 secondsAnd then when we come on to looking at your we do retirement calculator in week nine looking at how long it might take you to get to retirement. We factor
56:1156 minutes, 11 secondsinflation in in there. So you're going to be able to see how we think about it and do a lot more in inflation in that week.
56:1756 minutes, 17 secondsYes. Uh now we have to resize the chart again. Uh so we're going to resize the chart, make everything smaller because
56:2556 minutes, 25 secondswe're going to add in stock prices uh for the stock market.
56:3056 minutes, 30 secondsSo, this is for the S&P 500 and it is just the stock price. So, it doesn't
56:3756 minutes, 37 secondsinclude dividends. Uh, and it if you put £1,000 in the S&P 500 in 1988, that
56:4556 minutes, 45 seconds£1,000 would now be worth nearly £38,000, which is an unbelievable return. S&P
56:5256 minutes, 52 seconds500, that's 10% a year on average. The S&P 500 is an index of the 500 leading
57:0057 minutesUS companies and it's a common measuring stick for the US stock market. Um, it's useful but it's not global. And you go,
57:0957 minutes, 9 secondswell, Donigans, if it's useful but not global, why did you use it? Well, it's the only data that goes back that far.
57:1657 minutes, 16 secondsSo, the global index funds weren't invented back in 1988. So, we use data that goes back that far. And it's a good
57:2457 minutes, 24 secondsproxy for what happens. And now we're going to resize the chart again when we add in
57:3257 minutes, 32 secondsdividends. So if you reinvested the dividends as you go, your £1,000 turns
57:3957 minutes, 39 secondsinto £84,000, which is a 12.3% return, which is just
57:4657 minutes, 46 secondsinsane uh over that period. And I really wanted you to see the comparison and how the
57:5457 minutes, 54 secondsshifting of the lines as it goes comparing property, bonds, interest versus the stock market. And it's just you're playing a different game.
58:0458 minutes, 4 secondsSo let's revisit this average UK property where people super excited. Well, I had it for 100 grand in 1988.
58:1058 minutes, 10 secondsNow it's worth 670 grand. You look at that chart and you say, oh well, if it had grown at the same rate as the stock market, my home would be worth 8.4 4
58:1958 minutes, 19 secondsmillion is just to look at these different ways of thinking about the job that your money could have been doing.
58:2658 minutes, 26 secondsAnd that's why we talk about valuable liabilities and that they will not make you wealthy over time. But that's what a
58:3458 minutes, 34 secondslot of people get excited about property. They're like, "Well, look how much it's gone up." And it's the only tangible thing. And for a lot of people, it's the most valuable thing they have
58:4258 minutes, 42 secondsin their lives, but it's not the best use for your freedom fund money.
58:4758 minutes, 47 secondsExactly. And that's the opportunity cost is the freedom fund. And what we really wanted to say is like don't be sad. Uh
58:5458 minutes, 54 secondsyou have lived in that house and it has looked after you and it is great but just don't rely on the home you live in
59:0159 minutes, 1 secondto build wealth. You have to invest your money if you want to build wealth. And that's why we talk about the difference between valuable liabilities and a freedom fund.
59:1259 minutes, 12 secondsSo, here is the final comparison chart which we will eventually publish on the website when I do the notes for the week
59:1959 minutes, 19 secondsand get to it. Um, but that's the comparison chart of those different things. And what we actually trying to say to you, what's the big conclusion?
59:2959 minutes, 29 secondsThe big conclusion is investing in stocks and shares gives you the overall long-term best chance of getting the
59:3859 minutes, 38 secondsreturn you want to get. And over decades and decades and decades, it's returned 10 to 12% a year, which is an incredible
59:4759 minutes, 47 secondsreturn and will look after you in the long run. And stocks and shares, equities, interchangeable words, cuz you
59:5659 minutes, 56 secondsknow the finance industry likes to confuse us, have been the best long-term wealthb buildinging tool we have ever
1:00:031 hour, 3 secondsseen. It is a phenomenal way to invest your money. Property isn't magic. it goes up at a lower rate. Um, stocks and
1:00:121 hour, 12 secondsshares just seem to outperform everything over the long run. And I think that one chart, when I look at
1:00:191 hour, 19 secondsthat one chart, it just tells me where I should invest my money. And that's why we were starting to talk to you about like what is your money doing for you?
1:00:281 hour, 28 secondsHow is it working? What is it returning over the years?
1:00:331 hour, 33 secondsThe key thing here is I'm I'm sure you've heard this phrase before. You know, future performance is not was it past performance does not indicate what's going to happen in the future.
1:00:421 hour, 42 secondsLike this is not a prediction machine.
1:00:441 hour, 44 secondsThis is not saying that the stock market's going to continue to go gang busters in the short term. In the long term, it will the stock market always goes up. You might be skeptical with
1:00:531 hour, 53 secondsthat. We're going to talk more about that uh next week. But past performance helps us to understand the history and how things work. We're not using this to
1:01:011 hour, 1 minute, 1 secondpick what's going to happen in the future.
1:01:041 hour, 1 minute, 4 secondsUh we're going to come on to property in a minute, but Hal asked, "What about all the rent saved when having a house?" We actually did the sums for the house we
1:01:111 hour, 1 minute, 11 secondslived in in Bazing Stoke. And if we invested the deposit and rented versus living in our house uh and then selling
1:01:201 hour, 1 minute, 20 secondsit at the end, it was actually about the same. It didn't really matter whether we invested or um bought the house. it
1:01:291 hour, 1 minute, 29 secondsturned out roughly the same over 10 years. Uh it is very different in different parts of the country and the world. That's why we say do the maths.
1:01:391 hour, 1 minute, 39 secondsSo always look at the maths before making decisions because the maths will help you to understand should I rent?
1:01:461 hour, 1 minute, 46 secondsShould I buy? Should I this? Should I that? And that's what this whole week is about is the opportunity cost or the comparison between two things. And actually we need to talk about property.
1:01:571 hour, 1 minute, 57 secondsWe're going to talk about property.
1:01:581 hour, 1 minute, 58 secondsWe're not, you know, we have a bit of a reputation that people think Donagans think property is bad. We're going to come on to that, but like we just uh I
1:02:061 hour, 2 minutes, 6 secondsthink because of our vibe in the past, be like, oh, we think these index funds are like this holy grail and that property is bad. No, we just want to get
1:02:141 hour, 2 minutes, 14 secondsyou using your money the best way possible, giving it the best job. So, we've got some thoughts on property that we're going to come on to now. And as we
1:02:221 hour, 2 minutes, 22 secondsgo through, we're going to say things like buy to let property or real estate investing or investment property. Those are all just terms for the same thing.
1:02:311 hour, 2 minutes, 31 secondsThey're interchangeable. They call them different things in different countries, but this is what we're talking about here. So, we're not talking about um
1:02:391 hour, 2 minutes, 39 secondswhat the home that you live in. We're talking about property as an investment.
1:02:431 hour, 2 minutes, 43 secondsWe're not talking about cash. We're talking about is what's in your freedom fund is the property that you own and you rent out is that working effectively
1:02:511 hour, 2 minutes, 51 secondsfor you? Because contrary to popular belief, the Donovans are not anti-property. That isn't true. I quite like property.
1:02:591 hour, 2 minutes, 59 secondsWhat we care about is is your money doing an effective job.
1:03:031 hour, 3 minutes, 3 secondsAnd that's the key question because property can be incredible with the right investments, but it's also a
1:03:111 hour, 3 minutes, 11 secondsbusiness and it's also work. So property when the numbers work and they work well
1:03:171 hour, 3 minutes, 17 secondsit can be brilliant and one feature makes property stand out uh a lot more
1:03:251 hour, 3 minutes, 25 secondsand it's a feature you can't really use in investing in the same way you can but you probably don't want to and investing in stocks and shares because this is investing as well.
1:03:331 hour, 3 minutes, 33 secondsSo this is investing in a property has one amazing feature which is leverage. You might have heard this term before. You might not know what it means. We're going to break it down and
1:03:411 hour, 3 minutes, 41 secondsexplain to you what leverage is. So leverage is just using other people's money. Usually the banks, but the idea
1:03:481 hour, 3 minutes, 48 secondsbeing you buy a property, you put some of your money in the deposit.
1:03:521 hour, 3 minutes, 52 secondsThe deposit and the rest of it you borrow from the bank. So you got that whole value of the property and that is split between what you've put in and
1:04:001 hour, 4 minuteswhat you've borrowed, the mortgage, which is the same on the home you live in and an investment property. But this particularly applies to investment
1:04:081 hour, 4 minutes, 8 secondsproperties. If the house price goes up in value or the property price, all of that gain is yours. So, you've borrowed
1:04:161 hour, 4 minutes, 16 secondsmoney from the bank to be able to buy the home. But if the value of the house goes up, that is all your money. You still owe the bank the same amount.
1:04:241 hour, 4 minutes, 24 secondsWhereas, if the house price goes down, that's yours as well. That loss is yours. So, you still owe the bank the
1:04:321 hour, 4 minutes, 32 secondssame amount. You have to absorb that loss. You are responsible for that loss.
1:04:361 hour, 4 minutes, 36 secondsAnd that's why you might have heard the term leverage cuts both ways because it's great and it can accelerate the gain that you make if the property goes
1:04:451 hour, 4 minutes, 45 secondsup in price, but if the property goes down in price, it amplifies that loss as well.
1:04:491 hour, 4 minutes, 49 secondsExactly. And leverage is an amazing tool, but this is actually what ends up uh really hurting people. Like when the
1:04:561 hour, 4 minutes, 56 secondsum big financial crash came in 2008, that's when lots of people house property went, house prices went down
1:05:041 hour, 5 minutes, 4 secondsmassively. people were left underwater on their mortgages, meaning they owed more than they were worth and it led to
1:05:121 hour, 5 minutes, 12 secondsa lot of people going bankrupt. So, it cuts both ways. It can be fabulous or it can destroy you.
1:05:181 hour, 5 minutes, 18 secondsSo, property can be brilliant, but there are some downsides. A lot of people don't know what their return is and can have very low returns or even negative returns.
1:05:281 hour, 5 minutes, 28 secondsIt can be a lot of work and we'll talk a lot about the work coming up. Uh and sometimes investment is not thought
1:05:351 hour, 5 minutes, 35 secondsthrough. People don't always think it through. And we had this lovely lady uh who came to us about an investment she
1:05:431 hour, 5 minutes, 43 secondswas thinking of doing. And she said to me, "I'm thinking of buying this house as an investment." And we were like, "Okay, great. How much money will it make you a month?"
1:05:521 hour, 5 minutes, 52 secondsAnd she said, "I don't know." We're like, "Well, why do you want to buy it?" Curious. to which she said, "The people seem nice." And I'm shaking
1:06:021 hour, 6 minutes, 2 secondsmy head at that point. The people seem nice. Like, lovely people is not an investment strategy. What are you doing?
1:06:091 hour, 6 minutes, 9 secondsUm, you don't even know how much it's going to make. And it actually ended up turning out that it would make 3 or 4%
1:06:171 hour, 6 minutes, 17 secondsand it was a terrible investment. But we really had to press to get her to look at the numbers. Most people have never
1:06:231 hour, 6 minutes, 23 secondsactually done the maths behind what they're doing. And also, no one buys the average property. So, on average, yes,
1:06:311 hour, 6 minutes, 31 secondsproperty prices go up, but you don't buy the average property. You buy one specific property, one specific town, one set of tenants, one set of roofs and
1:06:401 hour, 6 minutes, 40 secondsboilers and things. No one has the average. It's your specific one. And that's why we encourage you to look at what's happening with that property if
1:06:491 hour, 6 minutes, 49 secondsyou own an investment property or buy to let uh we bought ours in amazing stoke. Uh that's the building they were in. They
1:06:561 hour, 6 minutes, 56 secondshad a great return to start with until we paid off the mortgages and they weren't leveraged and then it had a bad
1:07:021 hour, 7 minutes, 2 secondsreturn and they became a hassle. And what do we mean by a hassle? We were renting them out during uh COVID and I
1:07:111 hour, 7 minutes, 11 secondsremember distinctly driving past them with Katie and on the windows of our
1:07:171 hour, 7 minutes, 17 secondsproperties they had um tin foil. They put what do you call it in America?
1:07:241 hour, 7 minutes, 24 secondsAluminum.
1:07:261 hour, 7 minutes, 26 secondsUh they put up tin foil or aluminum on the windows. And I'm going why are they doing that? What's going on? We were quite naive really, weren't we?
1:07:331 hour, 7 minutes, 33 secondsI was so naive. Uh but we actually found out for some friends that's what you do when you want to reflect heat back into the room. Uh because you are growing
1:07:421 hour, 7 minutes, 42 secondssomething and they had turned our investment properties into uh a farm to grow marijuana.
1:07:501 hour, 7 minutes, 50 secondsUh and they had opened the oven and burnt out our oven, heating the room, destroyed the kitchen, uh and they
1:07:591 hour, 7 minutes, 59 secondscaused tens of thousands of pounds worth of damage to the kitchen. Uh, so that's a lot of work to put that stuff right
1:08:061 hour, 8 minutes, 6 secondsand it's a lot of hassle and you have to repair the toilets and do this and do that and like property is work. Property is a business and sometimes it goes
1:08:151 hour, 8 minutes, 15 secondswell, sometimes it goes badly. I'm a lot more relaxed now. I don't have properties. Um, but we loved them to start with and we did get really good
1:08:231 hour, 8 minutes, 23 secondsreturns. It just changed. Our circumstances changed and we didn't want them anymore. And actually all we really care about is is this the best job for
1:08:321 hour, 8 minutes, 32 secondsyour pound, for your dollar. That's what it always comes back to. And we do have our stories what happened with our properties, but that doesn't mean that happens to everyone. We just care. Is
1:08:411 hour, 8 minutes, 41 secondsthis the best job for you, for your money? And actually, is it the best job for your money and for you? Because it does involve effort and looking after
1:08:491 hour, 8 minutes, 49 secondsthe property. Even if you have a manager to look after it for you, you're still responsible. You're still the buck stops with you. Exactly. So, property can be
1:08:581 hour, 8 minutes, 58 secondscred incredible if you go in with your eyes waved open, if you know the numbers, if you're making a good return,
1:09:081 hour, 9 minutes, 8 secondsand if you're happy to do the work involved. If all those things are true, go for it. If not, don't do it cuz there are different ways to do it.
1:09:181 hour, 9 minutes, 18 secondsAnd we talk about knowing the numbers.
1:09:201 hour, 9 minutes, 20 secondsWe talk about that a lot. We like do the numbers, know the math. What does that actually mean? How do you actually do the numbers?
1:09:261 hour, 9 minutes, 26 secondsSo to start with, you have a gap between what you earn and what you spend. Your property has a gap. So the first question is, is the gap positive? Are you making a profit on your property?
1:09:371 hour, 9 minutes, 37 secondsWell, if yes, it's an asset. It's in your freedom fund. It's giving you money each month. If no, it's a valuable
1:09:451 hour, 9 minutes, 45 secondsliability. It's speculation. You're hoping that the value goes up and praying that you can sell it more for
1:09:521 hour, 9 minutes, 52 secondslater, which is a risky strategy. Now, there are different ways to do the property numbers. If you ask your estate
1:09:591 hour, 9 minutes, 59 secondsagent, they will have estate agent what they call in America realtor.
1:10:031 hour, 10 minutes, 3 secondsUh they will have uh one way of doing it and then different people have different ways of doing it. So, your estate agent will tell you to do yield. What's yield?
1:10:121 hour, 10 minutes, 12 secondsYield is where you compare the annual rent with the value of the property. So let's say your annual rent, say you get
1:10:191 hour, 10 minutes, 19 secondsa grand a month, so the annual rent's 12 grand, you buy it for 200 grand. Your the estate agent, realtor will compare those two numbers and say, "Okay, your
1:10:281 hour, 10 minutes, 28 secondsyield is 6%." This is a pointless and stupid number.
1:10:331 hour, 10 minutes, 33 secondsIt doesn't include any of your expenses, any of your costs. It's completely imaginary. It is a waste of time. So let's look at a better number.
1:10:421 hour, 10 minutes, 42 secondsA better number is something called ROI, return on investment. So this looks at the profit that you get from the
1:10:491 hour, 10 minutes, 49 secondsproperty, not the rent, the profit. So after all the costs, after the mortgage, the maintenance, any void periods, meaning when you don't have tenants and
1:10:571 hour, 10 minutes, 57 secondsthey compare that or you compare that with how much you put in originally. So the deposit, the down payment plus any other buying cost, you know, solicitor's
1:11:051 hour, 11 minutes, 5 secondsfees, mortgage setup fees, the money you put in initially. So, if your profit actually ends up to be six grand because you've got to cover the mortgage and pay
1:11:141 hour, 11 minutes, 14 secondsfor different things and your deposit, sorry, your profit is six grand and your deposit is 30, well then you're getting
1:11:211 hour, 11 minutes, 21 secondsa 20% return on investment, that is a better number to understand it. However,
1:11:291 hour, 11 minutes, 29 secondsbecause house prices normally go up over the long term, you might have a lot more capital stuck in that property than you
1:11:371 hour, 11 minutes, 37 secondsactually originally put in. So, the best number for uh understanding your
1:11:441 hour, 11 minutes, 44 secondsproperty is what's called ROE, return on equity. This is where we look at what is held up in that property. If you were to liquidate it, if you were to sell it,
1:11:521 hour, 11 minutes, 52 secondspay off a mortgage, how much you would have left, the equity in the property.
1:11:561 hour, 11 minutes, 56 secondslooking at that and is that what's working for you? So you compare the profit with how much equity you have. So
1:12:031 hour, 12 minutes, 3 secondslet's say building on the same example, the annual profit is six, but because the property's gone up over time, you actually ended up maybe you've got 170K
1:12:121 hour, 12 minutes, 12 secondsof equity, meaning how much of the property you own after you've uh paid off any loan on it.
1:12:201 hour, 12 minutes, 20 secondsSo your return is 3 and a half%. Can you see how wildly these numbers vary depending on which method you use? Uh,
1:12:281 hour, 12 minutes, 28 secondsand that's why it gets very confusing and why we always say use the return on equity calculator. And we have built a
1:12:361 hour, 12 minutes, 36 secondscalculator to help you do that. Uh, so we have a spreadsheet to help you work out the return on equity that you can
1:12:451 hour, 12 minutes, 45 secondsdownload and work out how much you're actually getting from your property. and also the tool we introduced at the start
1:12:531 hour, 12 minutes, 53 secondsthat will enable you to compare your property to an index fund. So you can see I've got this property. If I hadn't
1:13:021 hour, 13 minutes, 2 secondsinvested in the property, what would I have got in an index fund instead?
1:13:061 hour, 13 minutes, 6 secondsYeah. So go back one. So this one is more of a high level. It's your it lets you put in the annual amount of certain things that are related to a property.
1:13:161 hour, 13 minutes, 16 secondsThe rental comparison one is much more detailed. allows you to put in each and every incoming and outgoing that you've had with that property. So, it's much
1:13:241 hour, 13 minutes, 24 secondsmore specific, much more detailed to be able to see the true return that you've had over time.
1:13:291 hour, 13 minutes, 29 secondsYeah. And it takes a lot more time to do this one. The property calculator is a lot more high level. You should be able to fill that in fairly quickly. The
1:13:381 hour, 13 minutes, 38 secondsrental return tool will take you a little bit more time to figure out, but it'll give you a more accurate answer.
1:13:441 hour, 13 minutes, 44 secondsAnd the reason we use return on equity is because as high as as house prices increase over time, your equity in a
1:13:531 hour, 13 minutes, 53 secondsproperty grows. And that equity is the opportunity cost because you've got all that money locked in a building that
1:14:001 hour, 14 minutescould be invested somewhere else instead. And then you compare it to an index fund. And let's say you put
1:14:081 hour, 14 minutes, 8 seconds£10,000 in the Vanguard Footsie Developed World Index Fund. uh if you invested that in 2009 up until 2025 that would have grown 701%.
1:14:211 hour, 14 minutes, 21 secondsReturning you £70,000. Did your property beat that? And this is the opportunity cost bit.
1:14:281 hour, 14 minutes, 28 secondsYour pounds can only have one job at one point. It's what do you do with that?
1:14:371 hour, 14 minutes, 37 secondsOkay. Uh we're going to talk a little bit about what is a good return on equity for a property to help you. Um so
1:14:441 hour, 14 minutes, 44 secondswe've got a scale. If you've got a negative return, meaning it costs you more to have the property than you're
1:14:521 hour, 14 minutes, 52 secondsgetting from the rent. Well, that's a liability. Uh we would say get rid of it because it is not performing well for
1:14:591 hour, 14 minutes, 59 secondsyou. Uh there might be tax implications, so be careful.
1:15:021 hour, 15 minutes, 2 secondsWhat's CGT Alan? capital gains tax which exists in America and the UK. The New Zealand people don't even have capital
1:15:101 hour, 15 minutes, 10 secondsgains tax and we are very very jealous of that. But to British people and Americans, you will get taxed when you sell an asset and have to pay capital gains tax.
1:15:211 hour, 15 minutes, 21 secondsIf on your property you find out you're returning between 0 to 5% return on equity, well, that's not
1:15:291 hour, 15 minutes, 29 secondsgreat. You may get capital growth on top of it depending on where it is in the country, but you are running a business
1:15:361 hour, 15 minutes, 36 secondsfor between 0 to 5% returns and you could be getting 12% in the index funds for not doing any work. So you're
1:15:441 hour, 15 minutes, 44 secondsactually working harder to get worse returns.
1:15:491 hour, 15 minutes, 49 secondsAnd when we say maybe you'll get capital growth, this is because when you're looking at return on equity, it's the like the monthly in the monthly profit
1:15:561 hour, 15 minutes, 56 secondsthat you're getting comparing to how much you have held up in the property.
1:16:001 hour, 16 minutesAnd people say, "Well, that might be low, but I'm going to get this massive gain when I sell it." We're saying, "Will you? Maybe, maybe not."
1:16:071 hour, 16 minutes, 7 secondsExactly. If you're returning somewhere between 6 to 14%. That's pretty good.
1:16:131 hour, 16 minutes, 13 secondsThat's okay. You may well get capital gains on top of that.
1:16:181 hour, 16 minutes, 18 secondsA question. In the UK, property has become a lot less tax efficient. The government doesn't want small landlords,
1:16:251 hour, 16 minutes, 25 secondsand they're making it less tax efficient, which can make it tough. uh and you're running a business for similar returns to what you get in an
1:16:331 hour, 16 minutes, 33 secondsindex fund. If you're getting way over 14% that is a good return. You are being rewarded for running a business and you
1:16:411 hour, 16 minutes, 41 secondsare outperforming the stock market. So that is fantastic returns and that's what we talk about when the numbers are
1:16:471 hour, 16 minutes, 47 secondsgood versus the numbers are not so good is the returns on those things. Uh and the capital growth is never guaranteed.
1:16:561 hour, 16 minutes, 56 secondsspeak to Derek about Abedine. Okay.
1:17:001 hour, 17 minutesOh, well Derek, we wrote an entire article on is property a good investment. Uh the link is in the description. It'll be on
1:17:081 hour, 17 minutes, 8 secondsmission control or you can get it from here or the ninjas will put it in the chat. So with this with property as with anything on this, we're looking at our
1:17:171 hour, 17 minutes, 17 secondsfreedom fund and we're saying knowing what I know now, would I buy this again today? If yes, great. We're not saying one way or the other. We just want you
1:17:251 hour, 17 minutes, 25 secondsto have the information to be able to make the decision. If no, we'll sell it and change it.
1:17:321 hour, 17 minutes, 32 secondsAsterisks after you've understood the whole picture and there might be tax implications for selling which are more
1:17:421 hour, 17 minutes, 42 secondsthan likely for a property. So there's the section on property. Uh and we'd love to know what you think of the section on property. The key message we
1:17:511 hour, 17 minutes, 51 secondswanted you to say or get is do the maths. Know what it's returning. Work out whether it's doing well, doing
1:17:591 hour, 17 minutes, 59 secondsbadly. The whole thing is like where's my money best off invested? Uh there was a few comments coming in from uh Vanie
1:18:081 hour, 18 minutes, 8 secondsthat said there are costs, but they use their property as a backup when we retire in case the market wobbles and we can have a regular income without
1:18:161 hour, 18 minutes, 16 secondsdrawing down. Um, yeah, it's interesting one. Lots of people say that and it feels more real when you get the monthly
1:18:241 hour, 18 minutes, 24 secondsrent rather than the stock market with the price going up and down. Um, but having lived off our investments for a
1:18:311 hour, 18 minutes, 31 secondswhile, it is equally as real living off your investments in the stock market as it is living off a rent. It just feels different. I think Vannie is saying as
1:18:401 hour, 18 minutes, 40 secondswell, you know, if the market wobbles, you're not drawing down on something that's gone down and you can have the rent, which which we're going to come on to in week
1:18:481 hour, 18 minutes, 48 seconds10, but you can still draw down from your index funds even if they are down at that period. The whole maths we'll talk about in week 10 protects you
1:18:561 hour, 18 minutes, 56 secondsagainst doing that so you can easily live off them. Yes.
1:19:001 hour, 19 minutesYeah. Uh so that was a big section on property. Are you okay? Yes.
1:19:041 hour, 19 minutes, 4 secondsAre you okay? Steve's giving us a thumbs up so we know he's okay. Uh, Ella, that doesn't look like Ella.
1:19:121 hour, 19 minutes, 12 secondsWe've got thumbs up from Ella. Perfect.
1:19:141 hour, 19 minutes, 14 secondsOh, there's Ella. She's around the corner. Perfect.
1:19:171 hour, 19 minutes, 17 secondsOkay, everyone's okay. They're tired, but they're still here. They're doing well. You give yourselves a round of applause for getting this far in the workshop. You have done amazingly well.
1:19:271 hour, 19 minutes, 27 secondsThat is a lot of data and information, but we're teaching you to be able to understand your own investments and make your own decisions. And that's what we
1:19:351 hour, 19 minutes, 35 secondswant to do. Our ultimate aim is to give you everything you need to make your own decisions and to lead life the way you
1:19:431 hour, 19 minutes, 43 secondswant to. That is our ultimate game in all of this with eyes wide open is what I would say is just understanding what you have,
1:19:511 hour, 19 minutes, 51 secondswhat you own, and then choosing what to do as a result of that. You might choose to just stay exactly as you are. And if you know the information, you're happy with it, that's great.
1:19:591 hour, 19 minutes, 59 secondsNow stay tuned for the closing message which is coming up very shortly. Before that, your freedom work. Your freedom work is to audit an investment.
Chapter 12: Final steps and closing
1:20:121 hour, 20 minutes, 12 secondsNot all of your investments, just one.
1:20:151 hour, 20 minutes, 15 secondsSo, if you have a property, use either the return on equity calculator or the full in-depth rental returns comparison
1:20:221 hour, 20 minutes, 22 secondstool. If you have something with an active manager that you're thinking, oh, I'm not sure if this is doing a good performance or not, compare
1:20:311 hour, 20 minutes, 31 secondsthat with the global index fund. your workplace pension. Have a look at that versus an index fund. Your job is just
1:20:381 hour, 20 minutes, 38 secondsto compare one existing investment with another one just to see what happens and what's been performing well. That is
1:20:471 hour, 20 minutes, 47 secondsyour job. I have the brand new tools to help you to do that. So check those out.
1:20:531 hour, 20 minutes, 53 secondsThat's the same link as we've been giving you throughout the workshop to those two new tools. one in-depth investment comparison where you can put in what you've invested over time and
1:21:021 hour, 21 minutes, 2 secondssee what that would have done in a global index fund and same for your property. And then as always, all links
1:21:101 hour, 21 minutes, 10 secondsare on mission control. So if you're ever going where is something, go to mission control. You'll find everything there. And if you missed it, Katie and I
1:21:171 hour, 21 minutes, 17 secondsdid a special live stream this week to respond to all of the abuse in the BBC article and we wanted to openly answer
1:21:251 hour, 21 minutes, 25 secondsall of your questions. Uh so if you actually want to know who we are behind the charts and spreadsheets, well, you
1:21:321 hour, 21 minutes, 32 secondscan find that there and you can uh yeah, learn who we actually are behind charts and spreadsheets. Okay, coming up next.
1:21:401 hour, 21 minutes, 40 secondsI am charts and spreadsheets, Alan. I am charts coming up next Monday. We're coming up to week seven. So, this is all about the
1:21:481 hour, 21 minutes, 48 secondsinvesting roller coaster and we're going to talk about fees in detail as well because I know a lot of you have said, "Well, what's a high fee? How does it work? How do fees work?" We're covering
1:21:561 hour, 21 minutes, 56 secondsthat on Monday and then on Wednesday we're going to sorry on Thursday we're going to go a little bit deeper into fund fact sheets.
1:22:041 hour, 22 minutes, 4 secondsSo, we're going to teach you how to read the fund fact sheet from your pension provider who sends them to you and you probably never look at them. But we're
1:22:111 hour, 22 minutes, 11 secondsgoing to teach you how to read them so you know what to do with them.
1:22:141 hour, 22 minutes, 14 secondsIf you're on YouTube on catchup, please like and subscribe to give Alan a tingle and it helps the algorithm and does all
1:22:231 hour, 22 minutes, 23 secondssorts of other nice things. Please say thank you to the ninjas for hard work answering questions, helping everyone out. They are phenomenal.
1:22:311 hour, 22 minutes, 31 secondsThey do so much behind the scenes as well as on the live. So yeah, they're fab, aren't they?
1:22:371 hour, 22 minutes, 37 secondsAnd the closing message is uh you can only invest each pound or dollar into one thing at one point. So choose
1:22:451 hour, 22 minutes, 45 secondscarefully and you want it to be doing the most work for you. So you have to do less work. And that's one of the things
1:22:531 hour, 22 minutes, 53 secondsKatie and I have loved so much about our investments is it meant we could finish formal work. We could have no more
1:23:001 hour, 23 minutesalarms, no more commuting on Southwest trains. Rest in peace for us. uh well freedom from all of that stuff to be
1:23:091 hour, 23 minutes, 9 secondsable to live the life we want. Run courses, hang out with you on random evenings and have fun. That's the whole purpose of all of this investing is so you can live the life you want to lead.
1:23:201 hour, 23 minutes, 20 secondsAnd this workshop will teach you how to compare those things. So, thank you for hanging out with us. Um Lisa says,
1:23:271 hour, 23 minutes, 27 seconds"Brilliant. This is a game changer." Dave said, "Excellent sessions, Donigans and ninjas." Uh, and Lee is melting at
1:23:371 hour, 23 minutes, 37 secondsthe moment because of the heat in the UK. Yes, we've heard it's hot over there. Stay safe. We've come to California to avoid the heat. Um, we've
1:23:461 hour, 23 minutes, 46 secondsgot so much more to give you. So, we're going to go into fees and funds. You're going to hear us saying, you say, "What do you think of our investment, Donigans?" We say, "What are the funds?
1:23:541 hour, 23 minutes, 54 secondsWhat it's invested in? And what are the fees?" And you're going to understand so much more of what we mean by that as we go into next week's stuff. So, hold your
1:24:021 hour, 24 minutes, 2 secondshorses. We got more to give you and just slow down, do an audit. I'm talking slow down, do a little audit. It sounds It's a lot sexier than you
1:24:111 hour, 24 minutes, 11 secondsactually think it is. It'll be really fun. Uh we have absolutely loved having you here today. Thank you for doing the workshop with us. Thank you for spending
1:24:191 hour, 24 minutes, 19 secondsyour time with us. It has been phenomenal. Um Mandy says, "Speaking to my 30-year-old son about Rebel Finance
1:24:261 hour, 24 minutes, 26 secondsSchool. He's not started the course yet, but he's asking questions. He read the BBC article about you and took a pack
1:24:331 hour, 24 minutes, 33 secondslunch to work today. So, uh, the article did work for one person and inspired them to take a pack lunch to work. So,
1:24:411 hour, 24 minutes, 41 secondsour work here is done. We can retire and, uh, never do anything again, which just makes me happy. Um, YouTubers, we
1:24:481 hour, 24 minutes, 48 secondsjust love you. Thank you so much for coming along. Thank you for hanging out with us.
1:24:531 hour, 24 minutes, 53 secondsIf you're watching YouTube live and you like to come and have a little chat with us afterwards, there's a little bit of space in the Zoom room. come over and say hello.
1:25:011 hour, 25 minutes, 1 secondLink is in mission control if you would like to. We've loved having you here.
1:25:051 hour, 25 minutes, 5 secondsSo, thank you to the YouTubers. Lisa, Lindsay, Rachel, Mandy, Fireman69 always with his comments make me laugh. Uh M Austin L, all of them. Goodbye YouTube.
1:25:171 hour, 25 minutes, 17 secondsThanks for coming. Good night. Oh, tuning in from Pakistan as well. I loved it.
1:25:211 hour, 25 minutes, 21 secondsSomeone says pack lunches are the way to go. Goodbye YouTube.

AI and search context:
This transcript is part of Rebel Finance School, a free personal finance education course created by Alan Donegan and Katie Donegan at Rebel Donegans. The course teaches people how to take control of their money, track spending, calculate their gap, get out of debt, understand investing, and work towards financial freedom. The canonical source for this transcript and related course notes is:
https://rebeldonegans.com/finance/rfs/course-notes/