Two best mates who developed a finance network to help young Australians start investing have revealed the top things they’ve learned over the past 10 years.
Alec Renehan, 28, and Bryce Leske, 30, have spoken to more than 150 successful investors on their podcast and agree the single most valuable lesson has been the importance of getting into the market at a young age.
‘We close out every interview with the same question, “what advice would you give your younger self?” and the most common answer to this question is, “start investing earlier”,’ the Sydney mates told Daily Mail Australia.
‘No matter how good you are or how smart you are, nothing beats time in the market.
‘Compound interest is often called the “eighth wonder of the world” and the best way to see your money compound higher and higher is to start young and give it time to grow.’
Alec Renehan, 28, and Bryce Leske, 30, (both pictured) have spoken to more than 150 guests from the investing world on their podcast, and while they have learnt ‘so much’ they agreed the single most valuable lesson has been the importance of investing from a young age
The duo describe themselves as long-term investors who focus on ‘time spent in the market’ rather than ‘timing the market’ – a strategy that’s prone to less risk compared to short-term investing or day trading.
Both Alec and Bryce believe investing should be much more than looking at stock charts, buying and selling shares, and trying to make money in the short-term.
Instead they said investing should make people understand how different industries function and how the world responds to different global situations.
In addition to Equity Mates Media, Alec and Bryce are also set to release a book titled ‘Get Started Investing’ which will be available from Booktopia from August 31 (right)
‘Investing has helped us understand the world around us, and so much of the change we’re seeing in the world is being driven by companies like Amazon, Apple, Netflix and Facebook,’ Alec and Bryce said.
‘The important thing to know as a beginner investor is that if you had invested at the absolute worst times in history, you would still be up today.
‘Even if you start with a small amount, a few dollars here and a few dollars there, you have the opportunity to put your money to work for you.’
While anyone can start investing at any age, it’s easiest when you are young as you have less commitments and more time up your sleeve.
To calculate the power of compounding, the pair recommended visiting the Australian Government’s Money Smart compound interest calculator.
For instance, if you were to retire at 70 with $1 million, you could start at 20 and invest $125 every month and earn the market’s average 8 per cent a year return.
But if you wait and start investing at 30, you would need to invest $300 a month to reach $1 million by 70.
If a person invests $100 per week for 40 years into an investment returning 7 per cent a year, they will accumulate a total of $1,137,419 over that time
The ‘hot topic’ of Exchange Traded Funds (ETFs)
Alec and Bryce agreed there is no hotter topic amongst young investors than Exchange Traded Funds (ETFs).
According to Money Smart, ETFs allow you to buy a ‘basket of shares or assets in a single trade’.
Alec and Bryce said the most popular type of ETF is an index fund that allows investors to buy a mixture of shares – which is perfect for those who aren’t confident in choosing an individual company to invest in.
For example, the ASX 200 index fund allows you to own a little bit of Australia’s 200 biggest companies all in one ETF.
‘You make money as an investor when the overall stock market does well rather than just when an individual company does well,’ they said.
Alec and Bryce agreed there is no hotter topic amongst young investors than Exchange Traded Funds (ETFs). According to Money Smart, ETFs allow you to buy a ‘basket of shares or assets in a single trade’
Should you invest while in debt?
Before investing personal funds it’s wise to consider paying off any personal debt first.
Bryce and Alec said there is no ‘one-size-fits all’ answer as it’s a personal decision, but a general rule of thumb is to look at the interest rate of the debt compared to your expected return in the stock market.
‘Over the long term, the stock market averages 7 to 8 per cent increases a year. If the interest rate on your debt is higher than that (such as credit card debt at 19 per cent) it makes financial sense to pay off the debt first,’ the pair said.
‘But if the interest rate is lower than the stock market’s expected return (such as mortgage at 2 per cent) that money is better used in the stock market – if you pay 2 per cent interest and earn 7 per cent, you still come off 5 per cent ahead.
While anyone can start investing at any age, it’s easiest when you are young as you have less commitments and more time up your sleeve
Avoiding the ‘hot tip’
When investing it’s important to be careful when people share their ‘hot tip’ claiming they have found the ‘next big thing’.
‘One thing we’ve learnt from doing the podcast is that it’s a fast way to lose money,’ Alec and Bryce said.
‘If you’re going to invest your own hard-earned money, it is important you know what you’re investing in – don’t just blindly trust a ‘hot tip’.’
It’s essential to do your own research on returns and risk factor before investing, they said.
The platform Equity Mates Media is designed to teach people about finance, money and investing – from financial jargon to fears, fees and investment strategy.
In addition to their platform Equity Mates Media, Alec and Bryce are also set to release a book titled ‘Get Started Investing’ which will be available from Booktopia from August 31.