Is there just the smallest glimmer of hope that the Federal Government may reconsider the (frankly silly) way they plan to tax large Super balances?

There is, if a story in today’s Financial Review can be believed.

As a reminder, the government has previously announced a plan to increase the tax burden on particularly large Super accounts, which I think is a worthy aim. (I’ll go into why, in a minute.)

(I did a YouTube video on it, here, if that’s more your style.)

The problem is that their announced plan had three components which individually are bad policy and together are atrocious.

They intended to:

1. Tax unrealised gains. That is even if you hadn’t sold an asset, an increase in its market value would have incurred a tax obligation.

2. Not index the level at which it was to apply. Some calculations from AMP Ltd (ASX: AMP)’s Diana Mousina suggested that not indexing it would mean even the average worker in their early 20s today would pay the new tax when they retired.

3. It was retrospective. When legislated, it would apply to the current tax year, which is already 3 months old, hitting investment decisions already made.

As I said, each is bad. Together… frankly indefensible.

Now, before you decide I’m just here to look after the fat cats, let me return to the ‘worthy aim’ I mentioned, above.

See, here’s my take on tax policy:

The first step should be to work out how much tax to collect, based on a chosen level of spending (we can argue about how much we should spend, but that’s a whole other article).

The next step is to work out how the burden is most reasonably shared, based, in part, on the taxpayer’s capacity to pay.

Third, formulate the application based on two broad implementation issues: the efficiency of the tax, and the impact of the tax on behaviour (good and bad).

That’s exactly how we’d design a tax system, if starting from first principles, I reckon.

We don’t have that luxury of starting from scratch, of course, but it should still be the framework for all tax changes.

And Super?

Well, even before those proposed changes, a Superannuant can have $2m in ‘pension phase’, the income from which is entirely untaxed.

Now, the stock market tends to rise about 9% per annum, on average. If a hypothetical Superannuant had their $2m in an ASX ETF that delivered that result, they could essentially draw a $180,000 income, entirely tax free.

Now let’s say their account balance was $4m, instead. The first $2m is tax-free, as I said, above.

Earnings from the next $2m are taxed at 15%. Again assuming the same return, they’d earn another $180,000 and pay only $27,000 in tax.

Which would work out to an average tax rate of 7.5% on a $360,000 income.

By contrast, according to the ATO’s simple tax calculator, a nurse or copper earning $100,000 would pay $20,788; an average tax rate of almost 21%.

Is there anyone, other than the ideologues or the aforementioned Superannuant, who reckon that’s a reasonable sharing of the tax burden?

(And to their credit, almost every Superannuant I’ve spoken to in that sort of situation agrees that they’re getting it too good, and don’t mind a change to the system.)

Now, before some people tell me that Super should be incentivised, I agree.

And before you tell me that it saves money for the Federal Budget, I agree with that, too.

But we’re talking about amounts and degrees, here.

I am a huge proponent of Superannuation. I just reckon we’ve made it too generous.

There is more incentive than required. And the savings to the Budget are less than the value of the tax concessions. In short, we’ve got the idea right, but the settings wrong.

Is it fair and reasonable that someone with more than $3m in Super pays more tax? You bet it is.

If you think ‘they don’t spend it well’ or ‘it’s yet another tax’, I hear you. Government should absolutely be more efficient.

But this, for me at least, is a question of how the tax burden is shared, not one of how much should be raised.

Right now, we have a big and growing Federal Government debt. So I’d be happy to see any additional funds raised go toward paying that off.

After that? I’d love to see taxes reduced for the nurse on $100,000 if we’ve got excess tax revenue.

Both are more justifiable than a sub-10% average tax rate for someone drawing an average income of more than $350,000 annually.

Okay…so that’s a lot.

Unfortunately, because of ideology and self-interest, much of the above has to be communicated each time we talk tax, and I think it’s worth doing so.

Back to Super, then.

If we are to ask wealthy Superannuants to pay more tax, it should be applied reasonably.

That means the threshold should be indexed, to avoid more and more people being caught by it.

It means not sending someone a tax bill just because the price of their (unsold) house, shares or other assets go up.

And it means starting the new regime in a new tax year, so that people don’t get caught out having made decisions about their current arrangements before the law changes.

I don’t think that’s an unreasonable ask. And makes the implementation better, and more reasonable.

(As to why they structured it that way, I don’t want to get too deep into the electoral and political machinations, but I suspect they tried to be tricky and tripped on their own cleverness. I suspect the unindexed threshold was designed to catch more people over time, while starting from a level – $3m – that seemed ‘very high’, trying to make it politically palatable. And I suspect that the unrealised gains thing was intended as a de facto cap on Super, designed to incentivise people to cash out some of their Super, rather than have a tax bill to pay without the associated cashflow. Pure speculation, of course, but if so, they should have just made the appropriate changes, rather than getting too clever by half. They’ve kinda brought this on themselves, I reckon.)

Bottom line? I didn’t expect the government to listen – they’d repeatedly said they’d push ahead – but if the report in the Fin is correct, then good on them for actually considering the feedback.

But so far it’s just that – a report. So I’m adding my voice, once again, to the argument.

It’s not unreasonable to consider asking wealthy Superannuants to shoulder a little more of the tax burden. But Treasurer, please do it in the right way.

Fool on!

The ASX hit an all-time closing high on Thursday.

You might have seen that news. Or not.

See when the market does well, it might make the headline, or a sub-heading, of those ‘Markets Live’-style blogs on the major mastheads.

Which is in stark contrast to the large and loud headlines, when the market falls:

(The subeditors really need to find something other than ‘wiped off’, huh?)

We know why, of course.

Bad news sells.

Fear sells.

We react more viscerally to losses than we do to gains.

None of that is new. But it’s worth pointing out, again, I think.

And it’s worth, now, thinking back to early April 2025, from whence those headlines come.

You might remember it was in the midst of the early tariff dramas.

Donald Trump was threatening to whack a tariff on everything that wasn’t nailed down (and much that actually was), and China threatened to retaliate.

The stock market, well, freaked out.

Which isn’t a new thing.

‘The stock market hates uncertainty’ is one of those cliches that rings very true.

When traders aren’t sure what to think, or what’s coming next, they sell.

Now, fast forward 4.5 months.

That $160bn ‘wiped off’?

In its aftermath, the S&P/ASX 200 Index (ASX: XJO) had fallen to 7,343 points.

And since then?

Well, as of Friday afternoon, that same index was at 8,967.

That’s a… 22.1% increase!

Am I cherry-picking the bottom?

You bet. To make a very important point.

See… there were traders and investors selling on that day. They were getting out of Dodge.

Maybe they thought they could see an ugly future? Maybe they couldn’t stand the pain? Maybe they were going to get back in when the coast was clear?

Newsflash: The coast still isn’t clear.

Here’s the other thing. Let’s say they decided to sit out a month while they waited for things to settle?

Seems sensible, right?

Except that, over the month from the April lows, the ASX 200 gained 11.4%. That’s more than half of the increase between April 7 and today.

Ah, but it’s easy to say that now, right?

At the time it was scary… and anything could have happened, right?

Two things.

First, I wrote in this space on that very day, April 7.

In that article, I said:

“None of those things was enough to stop progress. To stop improvement. To stop long term success.

That’s why I invest.

That’s why I remain invested.

That’s why I’ll be buying more shares, soon.

Because I think the future is just as bright as it’s ever been.

Not in the absence of black clouds, but despite those clouds.”

and:

“We’ve been here before. No, not exactly here. But essentially the same place.

Fear. Uncertainty. Doubt.

And we’ve gone on to better things, long-term, despite that.

Will it be different this time?

Maybe. But I doubt it.

Because we’ve got 100-plus years of history to show us.”

And the second thing?

I’ve been writing similar sentiments in this space for well over a decade now.

Every time, it felt scary. Every time, there have been very good reasons to worry about the economy or the market, or both.

Every time, the market has bounced back to new highs – the latest of which was this week.

My guess?

We’ll have more big falls in future.

And we’ll set new record highs, too.

A promise? No. But that’s my best guess.

Because that’s what the past tells us.

Lest this seem like a victory lap, though, I want to reinforce two things:

One: falls happen and the market has always recovered.

Two: highs happen, and the market has always had falls.

The same thing? Yes, but from two different perspectives.

I want you to reflect on the last 4.5 months next time the market has a big drop. I want you to keep the faith, if you have a well-chosen, sensibly diversified portfolio of quality companies.

But I also want to remind you that, while we’re all feeling good about that high, there will be falls ahead. The time to mentally and emotionally (and financially!) prepare for that is now: while the air is clear and fear isn’t clouding your thoughts.

Sure, enjoy the gains, but be ready for the losses that will come, at some point. And make your peace with them, now.

I’m pretty sure we’ll have more ‘April 7’s. Just as I’m pretty sure that the ASX will set more record highs, both before, and after, the next big drop.

The lesson, I hope, is clear:

Work hard.

Save diligently.

Invest regularly.

Choose your companies wisely.

Diversify your portfolio sensibly.

Ride the waves dispassionately.

Because the ASX has never yet failed to regain, then surpass, a previous high.

If that remains true, and I expect it will, time is the investor’s best friend.

All we have to do is stay the course, and let time do its thing.

…

Or, for a giggle on a Sunday – and if The Force is more compelling than I am – tell ‘em, Yoda (with thanks to ChatGPT):

Clear, the lesson is, I hope.

Work hard, you must.

Save diligently, you should.

Invest, regularly you will.

Wisely, choose your companies.

Sensibly, diversify your portfolio.

Dispassionately, ride the waves.

Failed to regain and surpass a high, the ASX has not.

True, if that remains — and expect it, I do — time, the investor’s best friend is.

Do its thing, let time.

Stay the course, we must. 

On Fool, we must! Hmmm?

The Treasurer’s economic roundtable that concluded yesterday?

It’s… complicated.

First, I want you to put aside your political cheerleading. You can have your favourite team, but good policy is colour-blind.

Next, I want you to put away self-interest. If that’s the only lens we use, nothing gets done. And, frankly, this government has been timid at the best of times… which means any potential policy changes could be shelved in the face of any significant pushback.

Or, in the words of economist Chris Richardson, who attended the summit:

“… the potential for progress is stunningly fragile – and especially so in tax, our most poisoned well.”

The good news? I reckon most of my readers can do both of the things I mentioned above, in the national interest.

The bad news? I’m not sure that the majority of Australians will, especially if whipped up by scare campaigns by our politicians, vested interests, and/or media.

We have got to move away from pretending we can’t have any ‘losers’ when policies change.

Which is not to say I think everything Jim Chalmers announced is the right way to go.

In fact, I’m about to agree with some and disagree with others.

So I’m not asking you to give the Treasurer a blank slate; rather to consider any policies on their national-interest merits.

Speaking of which, here’s my go at doing just that.

There was a lot of stuff that was essentially pre-announced before the roundtable, that were then re-announced at the end. Largely, some very ‘low hanging fruit’ that frankly should have been done already, but is welcome. As the AFR put it:

“…abolishing hundreds more so-called nuisance tariffs, fast-tracking the reform of the Environment Protection and Biodiversity Conservation Act to speed up approvals while safeguarding habitats, the Coalition’s policy of simplifying the National Construction Code to speed up housing construction and introducing a road-user charge for electric and hybrid vehicles.”

Hard to argue too strongly with much of that. I would worry about what it means to ‘reform’ environmental approvals if it means fewer protections, but it’s welcome if it makes it simpler and clearer for us to know what will and won’t be approved, and for those decisions to be made more clearly.

Ditto the Construction Code.

A road user charge for EVs? We know fuel excise revenue will fall as people swap their petrol and diesel cars for EVs over the next decade or two. So the Treasurer is right to see and try to fix the looming revenue shortfall. And I have no strong objection over replacing it with a road user charge. But it does feel pretty lazy to just replace one tax with a similar tax without considering other options that might be better (more efficient, less distortionary, more appropriate).

They were, believe it or not, the easier ones to consider.

The real bombshell came yesterday, when the Treasurer announced three ‘principles’ for tax reform. Again, per the AFR:

A fair go for working people, including in intergenerational equity terms

An affordable, responsible way to incentivise business investment

A simpler, more sustainable tax system to fund the services people need

Now, the problem is that there is absolutely no detail on any of those. Yet, at least.

But a few pre-roundtable submissions might give us some clues.

The Grattan Institute highlighted the increasing reliance, now and in future, on income taxes as part of the tax mix, and that that burden would be increasingly on younger people, given the tax-advantaged status of Superannuation income streams.

And the Productivity Commission has suggested a reduction in business taxes for small business, plus the addition of a ‘cashflow’ tax, aimed at incentivising business investment. (The net result would be that small business would pay a lower tax rate than at present, while larger businesses would pay a higher one.)

What we don’t know is whether those recommendations will be picked up, in whole or part, by the government.

And as to what ‘simpler, more sustainable’ might mean… that’s anyone’s guess, so far!

So… the devil is in the detail. My hope is that we’ll hear more of said detail in the coming months. I also hope that the ‘national interest’ test is applied, first and foremost.

Me?

I have a laundry list of things I’d have liked to see.

Payroll tax, a tax on employment, should be the first to go. It disadvantages Australian workers, making both offshoring and automation relatively more attractive. It’s madness.

I’d like to see a fairer tax applied to Superannuation incomes. It makes no sense for a Superannuant to get a six-figure income, income-tax free, while someone who works for the very same income gets slugged with a five-figure tax bill, for example. (I wrote more about my suggested changes, here.)

I’d abolish (but grandfather) negative gearing on all residential properties.

I’d return capital gains tax to the original ‘indexation’ method, rather than providing an arbitrary 50% discount for any holding period longer than 365 days. 

I’d remove 95% of personal income tax deductions (maybe even 100%, but there might, perhaps, be justification for retaining a small number of them), and lower tax thresholds with the savings.

Ready for the big one that proves I’d never be elected? I’d institute an inheritance tax on large estates.

I wouldn’t, however, be in favour of a wealth tax. And as I’ve written before, the government’s wrong-headed tax on $3m Super balances – retrospective, unindexed and on unrealised gains – is awfully constructed policy.

There are also some policy changes that aren’t strictly ‘tax’ policies, but are related, too:

Excessive population growth is putting undue pressure on housing affordability for young people (not to mention the environment and infrastructure). Early childhood education funding is a mess, and should be absorbed into the public education system. The NDIS is out of control: We must look after those with disability, but the structure – a three-cornered market where the payer, provider and recipient are three different parties – is how you’d design a scheme to maximise overspending, overcharging and straight-out rorts.

And lest I finish these thoughts without mentioning it, we still have no commitment from either major party to return the Federal Budget to structural balance. We’re still living on the national credit card, so some of the above – and/or other taxes or spending cuts – must not simply be redirected to other programs, but instead banked to return the national accounts to balance over the economic cycle, and pay down the Federal debt.

Now, I suspect that you nodded your head at a few of the proposals, above. I suspect you shook it violently, too. 

Good. That means we’re all thinking independently.

But I’m going to go back to what I said at the start. If you really, truly, think the suggestions are bad for the national interest, then object strongly. But if it’s because you might be disadvantaged, I’m going to appeal to the better angels of your nature.

We simply have some national issues that don’t get solved by appealing to self-interest. And without some ‘losers’. If that sounds jarring, that’s because we’ve spent decades pretending otherwise – and that’s how we got into this mess.

We need a strong, structurally balanced Budget. We need to make sure the tax burden falls on those who can most reasonably afford it. We need to remove distortions that retard productivity growth (while ensuring there are appropriate protections). We need to make sure our young people can afford housing.

Frankly, on balance, I’d be worse off, under my suggestions, above. But my two young blokes – one a uni graduate now working, and the other in high school – will be better off than they’d otherwise be. 

That seems pretty fair, to me. But it means I have to put my self-interest away for the good of the nation.

Don’t get me wrong, I’m no martyr – I’ll be completely fine if we made those changes.

But I think Australia would be better off. Both now and, crucially, in future.

Need just a little self-interest, both as a citizen and an investor, to go with that? My simple take is that I’d rather be a little less wealthy in a more functional society, than slightly richer in a dysfunctional one!

So… there you go. My colours, nailed to the mast. 

But not political colours. Or, maybe, lots of different political colours.

Because while politics might be a team sport, good policy isn’t.

And the latter is what we should be aiming for.

Fool on!

It’s the most wonderful time of the (investing) year.

No, not earnings season (though that’s always interesting).

No, not dividend season (though I’m looking forward to that).

No, not tax time (obviously).

Instead, it’s the time of year when fund manager, Vanguard, releases its updated Index Chart, showing the return of various asset classes over the previous thirty years.

Yes, Happy Vanguard Index Chart Day, to all who celebrate!

Now, it’s true that I’m an investing nerd. So the things that excite me might not always excite you. That’s my cross to bear.

But I hope this isn’t one of those times.

See, in my humble opinion the Vanguard Index Chart is the single most powerful image in investing.

And in a coincidence of timing, it was released yesterday, the same day as AMP Ltd (ASX: AMP) released some research showing that ‘more than half of Australians under 40 don’t understand the concept of compounding’.

Now, I hope that if you’re reading this, you’re not one of those people.

But I don’t want to assume.

And, even if you do understand compounding, nothing quite brings it home like looking at the latest Vanguard Index Chart.

Also, if you do get it, please, please do me a favour and share this article – or at least the chart itself – with friends and family who could benefit.

(A little… strange, but true: I have a copy of the 2022 Index Chart on my wall at home. It has started conversations with family, friends and tradies. It really, really works No, I’m not suggesting you do that – though I’m not saying you shouldn’t – but please do your loved ones a favour and at least send them a digital copy.)

Anyway, back to the chart. Here it is: 

And what does it tell us?

That a hypothetical $10,000 invested in the ASX in 1995 would have compounded by 9.3% per year since then, to be worth $143,786 thirty years later.

That is, you would have been $133,786 richer without lifting a finger!

I hope that blows your mind, even if you’ve heard similar things before.

And by the way, that’s without a single extra dollar saved and invested!

That… that… is compounding.

For some people, 9.3% annual returns don’t sound like much, and fair enough.

“You mean, I put $1,000 away and at the end of the year, I’ve only made $93? That’s better than nothing, but hardly worth it.” might be the instinctive reaction.

And fair enough, in the first year.

If they don’t understand compounding, that’s where most people get bored and wander away from the passionate finance guy in the corner (or so I’m told).

Even 30 years of 9.3% doesn’t exactly sound exciting. 30 times 9.3% is 279%, and that’s better than a kick in the teeth, but a long time to wait for a 300% return.

Except, as I’m sure you know, that’s now how compounding works.

It’s not 30 x 9.3%. It’s 9.3% on an ever increasing base (no, it won’t grow every year, but that’s the average).

You’re walking up a(n imperfect) staircase. Each step from an ever (on average) higher base.

Yes, a lot of brackets there. Because the journey won’t be smooth.

But again, that’s also what the Vanguard chart shows.

You can see the dot.com crash. The GFC. The COVID crash.

It doesn’t pretend every day, week, month or year has been either rosy or easy.

But what it shows is that the journey is well and truly worth it.

By a factor of about 14 times, if you don’t mind!

So, when you feel like you’re not getting anywhere, take another look at the chart.

When your shares have fallen, take another look at the chart.

When you wonder whether to invest, or why you bother investing, take another look at the chart.

When the economic future feels bleak, take another look at the chart.

When your least favourite party or president is in power, take another look at the chart.

When someone tells you that ‘this time it’s different’, take another look at the chart.

And when you try to make a quick buck, rather than letting slow and steady win the race… yes, take a look at the chart.

I can’t tell you what the future will look like. I’m not allowed to make those promises (and anyway, I don’t do predictions).

But the thought I want to leave you with, as you take that chart with you, is that the ~9% return over that 30 year period is pretty close to the long term annual gain over more than a century, too, according to Credit Suisse.

And, unless democratic capitalism has peaked, innovation is dead and incentives no longer incentivise, my strong suspicion is that the future will be bright.

There will be very good years. And some rough ones. There will be good news and bad. Scary headlines will proliferate and fears will come and go.

Thing is, I would have said that in 1995, as well.

Maybe that’s the key lesson from the chart.

Happy Vanguard Index Chart Day! 

Fool on! 

The RBA’s rates decision this afternoon?

No idea.

That’s… kind of an unusual answer.

Most talking heads have a view, a forecast or a prediction.

Not me.

Oh, I could give an educated guess. I could convince myself I know what I think it’ll do, probably based on the wisdom of crowds, and ‘interpretation’ of RBA statements, and… I might even be right. Or not. The folly would be in letting myself think I know.

Why? Because it’s a parlour game.

No-one knows what the RBA will do. Where’s the value in trying to guess?

Sure, bragging rights, if you guess correctly. And you never mention it again if you get it wrong.

But to what end?

“Pundits,” as John Kenneth Galbraith once said, “forecast not because they know, but because they are asked”.

Yes. Quite.

I am asked. A lot.

Each time I grin sheepishly and say ‘I don’t know’.

Not every interviewer loves that answer. But they know it’s what I’m going to say.

I then explain why I don’t give forecasts, but also talk about the inputs into the RBA’s decision so that the audience is at least a little more informed.

I figure that’s the role of what I might unkindly call ‘the punditry’ (and yes, I’m putting myself in that uncomfortable camp).

Economics is at its best when it explains. It is at its worst when it tries to pretend it can predict.

Speaking of which, though, the bond market essentially makes predictions all the time.

Well, more ‘educated speculation’, to be honest.

See, if you’re in the business of investing in fixed interest on a wholesale level (by buying or selling bonds), you’re choosing between Australian government bonds, international government bonds, corporate bonds (lending to large companies) and the like.

If you’re going to buy a bond today, you’re going to want a certain interest rate.

You’ll weigh up the risk of default by the issuer (the company or country), the duration for which your money is locked away, and the rate on offer.

Generally, the longer the term and the greater the risk, the higher the required return.

(For example, the Financial Review reported a while back that Star Entertainment was paying its lenders 13.5%. You can draw your own conclusions on whether that’s an appropriate rate – and the risk the lenders think they’re taking!)

Now, if the market thinks rates are going to be lower in future, that’ll impact the pricing of the bonds on offer. 

And by reverse-engineering the maths, we can calculate the market’s implied probability of a rate cut.

Recently? 

Well, last time, the market thought the odds were 95%-plus that we’d get a rate cut.

And what did the RBA do? It held rates steady.

Oops.

And today? The implied odds are essentially 100%.

Now, the market might be right. We’ll find out at 2.30pm today.

But also… the RBA has said essentially nothing new about interest rates for a couple of months.

During that time, we’ve seen weak GDP, strong employment (and blessedly low unemployment) and falling inflation.

So, the market has decided it’s almost certain that rates will be cut today.

But think about that for a second.

What, in life, has a 96% probability? Especially after last month’s ‘surprise’!

Death, sure. Taxes? Absolutely. Also, the sun rising in the East.

But much else? 

Especially things that are uncertain, are forward-looking, have both costs and benefits, and that involve decisions made by imperfect people using imperfect information?

I’m not saying the market will be wrong about today’s rates call.

But I’m not saying that it’ll be right.

What I am saying is that prediction is hard.

Worse, it’s kinda useless, in any practical sense.

See, if everyone ‘knows’ the RBA is going to cut, and it cuts, where’s the value of the forecast?

And if everyone ‘knows’ the RBA is going to cut and it doesn’t (like last month), then the forecast is worth less than nothing!

Why do people forecast? In part because there’s an audience for it.

We hate uncertainty. Even though we know the market and the pundits were wrong last time, we still read the forecasts for today.

Because, deep down, having something to hold onto is better than nothing.

Yes, even if the thing we’re holding onto is worse than useless!

Now, I don’t mean that as a criticism. We’re basically just decently-evolved animals, and our subconscious and emotional selves still drive much of our behaviour, and most of our discomfort or contentment.

But I do want you to think about that for a minute.

I want you to become a little more comfortable with uncertainty and a little less reliant on the forecasts of (necessarily) uncertain forecasters, even if they project confidence.

(They’re not necessarily lying. As George Costanza said, ‘it’s not a lie if you believe it’.)

Ego makes us want to believe we can forecast with accuracy. And discomfort makes us want to believe that others can, too.

Here’s the other thing: if rate forecasts are just parlour games (and I think they are), it’s also worth asking ourselves whether they’re just distractions.

Yes, it matters when it comes to the mortgage payment. And yes, we’d rather they be lower than higher. But once we have a mortgage, it’s only the RBA’s decision – not others’ guesses – that matters.

Worse, it can seem like, as investors, we should pay extra attention. That’s because all of the other serious people are talking about it, we should have a view, too.

That we should put it in our mental models, building up a sophisticated assessment of investment potential and market pricing.

The truth? I’ve almost never considered the official cash rate in any personal investment, or professional investment recommendation.

I absolutely do consider the amount of debt a company has, and whether the repayments are affordable if rates increase. But I don’t sweat a 25 basis point move, either way.

Frankly, if an investment’s potential returns swings on whether or when rates might fall, I’m too close to the line, and I’ll give it a wide berth.

By all means, have some fun guessing what the RBA might do.

But, if you’re right, don’t believe your own press. And don’t believe the press of those who managed to guess, either.

(And remember, most of the people who said the RBA was ‘wrong’ last time are just justifying getting their forecasts wrong!)

Hubris is too high a price to pay for ‘winning’ a parlour game.

Knowing what you don’t know – particularly about the future – is far better than falling for the trap of giving yourself credit and letting your ego off the leash.

There’s a reason they say pride cometh before a fall.

Fool on!

We had to put our 11-year old German Shepherd, Abby, down on Wednesday afternoon.

A combination of lymphoma and joint problems (probably arthritis) meant she could no longer get around. The kindest thing we could do was let her go.

It wasn’t the easiest. But it was the kindest. And best.

We’re obviously gutted. She was the best dog.

Sometimes, I take investing lessons from, or share investing parallels with, my experiences.

Not today. Though there is an investing link of sorts.

We all invest for different reasons.

Some invest to retire early. Some to have a more comfortable retirement when they eventually get there.

Some people want to look after the kids. Others to support charities.

Some invest to give them choice: flexibility, based on what life throws at them.

A few, though, do it to see the portfolio number go up – an external scorecard providing some validation or a measure of success.

Now, I don’t mean to be too critical of that group, but there’s a parallel with those people who work hard, and long hours, ostensibly to ‘provide’ for themselves and their families, and miss the opportunity to actually have a life on the way though.

Again, I’m not throwing shade here.

But I do want to make the point that we should work to live, rather than live to work.

We should invest to give us choices in life, not just to have the biggest ‘number’.

Because, as they say, no-one on their deathbed wishes they’d spent more time at the office.

And I would suggest that no-one, on their deathbed, is glad they have a larger portfolio, but fewer friends and fewer experiences.

In other words, I hope you’re not putting the cart before the horse.

I hope your pursuit of professional- or investing success isn’t getting in the way of you getting the most out of your life.

Yes, these are the reflections of someone who has just lost a loved one.

But I suspect it’s in these moments that what really matters comes into stark focus.

I was lucky.

In life, Abby was a very good girl. She died on her favourite bed, with her family around her. We gave her lots of treats, and pats, and hugs in her final hours.

Of course, I’m going to continue to give my all, at work. I’m going to continue to invest as well as I can, too.

But I’m going to do both of those things as part of my intention to live my life consciously, and fully.

To remember the things that matter most, and to put them first.

I won’t always get it right, but, as they say ‘the race is long and, in the end, it’s only with yourself’.

Do me a favour: hug your loved ones (including the furry ones), call your friends, and ask yourself what really matters in life. Then don’t let busyness or distraction push you off course.

Oh, and one more, given the circumstances: Be the person your dog thinks you are. If we all did that, the world would be a much better place.

Fool on!

Regular readers will know that I’m coming to the end of an extended mid-year holiday – a road trip to Darwin and back.

Actually ‘regular’ might be overdoing it… I’ve been too busy with family and friends to sit down and type anything for about three weeks!

(I am on holidays, though, so I reckon that’s a reasonable excuse!)

Anyway… other than being recognised a couple of times (including while swimming about 10 feet from the waterfall at Wangi Falls in Litchfield National Park!), and being kept informed by my team of the goings on of our recommendations, I haven’t spent much time on official Motley Fool business while I’ve been away.

With a couple of exceptions.

First, the next Motley Fool Share Advisor Buy recommendation comes out on Thursday, and I’ve been discussing it with the team.

Second, well, my mind is never far from investing. (The abovementioned regular readers often remark, when I start my pieces with a story, ‘I wonder how he’ll tie that in with investing…’).

Which is how I find myself sitting in the bar of the Hotel Corones in Charleville, Queensland, on a Tuesday afternoon typing this.

The trip has been in five rough parts: a week getting to Darwin, a week in Kakadu, a week in Arnhem Land, a week in Litchfield National Park, and a week getting home.

I’m halfway through the latter.

I was going to say ‘unfortunately’, because I love the Australian bush. But I’m also lucky to love my home and my job, so it’s ‘fortunately’, as well.

Anyway, as I was driving into Charleville, I was thinking back to some of the many, many highlights of the trip. (As I’ve written before… please, please do yourself a favour and see more of Australia… we’re bloody lucky to live here!)

I was thinking of one particular day, up in Arnhem Land. We were driving out to a spectacular part of the coastline; a place called Cape Arnhem.

The drive out to the beach was enjoyable, and the views when we got there were spectacular. We had lunch, then decided to drive a little further along the beach itself (yes, we were allowed to be on the beach in the 4WD).

I figured the safest way to navigate the soft sand was to follow in the tracks of the vehicle in front. If they made it through, then there was a good chance we would, too. If they didn’t… well, we’d learn from their mistakes.

Whether or not that was the best course of action, the former happened… until the latter struck.

Going around a particularly soft and off-camber section of beach, the Hilux in front of us went down.

We stopped, of course, glad it wasn’t us. But then we waited.

The family jumped out of their car to survey the damage… and I had a hunch they’d struggle to get themselves out.

I was right.

Now, I’m not suggesting that they couldn’t or wouldn’t have eventually dug themselves out, but it was going to be a decent effort. They were high up the beach, in soft sand. There was no obvious or easy path out.

So, we did what any decent people would do, and offered to give them a hand.

It turned out that they were a really lovely Swiss family, who’d hired a 4WD for the trip. The vehicle was decently equipped, but it was their first time driving on sand, and they weren’t experienced four-wheel drivers.

I should stress at this point that neither am I.

I’ve done a decent amount of sand driving, water crossings and dirt roads, but I am far from an expert.

My approach then, is best described as ‘all the gear, and little-to-no idea’ – a phrase I picked up when preparing for my Kokoda trek back in 2018.

The view I took, and take, is that if I can’t rely on my skill alone, the second best approach is to make sure I have the appropriate equipment. It gives me the best chance of a good outcome. That, and making sure I was as educated as I could be, in using said gear.

So I was able to use the winch on the front of my 4WD, the UHF radio in the car, some recovery gear in the back, 4 ‘Maxtrax’ recovery boards and the help of my mate who was spotting.

In truth, it wasn’t a difficult recovery. It did take a bit of digging, and we took it slowly to avoid overheating the winch (including changing the recovery angle), but we got them out.

They were appreciative, we got a photo, and I hope it left them with a positive view of Australians.

Okay, so now the question: ‘I wonder how he’ll tie that in with investing…’.

As I was thinking about that experience this morning on the drive, it occurred to me that there were, indeed, some investing parallels.

The first is the usually-derisively-intended label ‘all gear and no idea’. True, having all of the best gear can lead to overconfidence and can lead to trouble.

In that sense, it can apply to investors. Those who do a course, buy some software, open a brokerage account, and think they’re instantly super-traders. Those people could do with a pinch (or a pound) of humility and some patience.

But it can be too binary. After all, how do you get an idea? And should you really have no gear until you do? Of course not.

In my case, I try to keep that humility front and centre. It wasn’t my first time using a winch, or doing a recovery. But I’ve only done it a handful of times.

I’ve also watched and read a lot of four-wheel driving content. I’ve taken the time to understand the theory, and do some practice. I’ve learned from others, and I’ve learned from doing.

I also kept it simple.

We stopped. We thought. We evaluated. And we discussed.

We tried digging, first.

When that was no good, we went to Plan B.

We took it slow and steady.

We didn’t try any heroics. We didn’t rush. We were careful, and safe.

As I said, we kept it simple.

And I think that’s the investing analogy.

Investing well isn’t about black boxes. It’s not about sophisticated ‘trading strategies’. It’s not about getting rich quick.

But nor is it doing nothing until you’re a qualified black belt.

It is, I think, about understanding the basics – reading, listening, learning and thinking.

Then it’s about the slow, deliberate, thoughtful application of those basics.

That’s… kind of it.

No, that doesn’t turn you into Warren Buffett.

And it doesn’t mean you’ll never make a mistake or have an investing regret.

But I think it maximises your chances of modest, ongoing, long-term success, overall.

We could have helped our new friends out of their situation more quickly, if we’d rushed.

We could have had even better, more expensive gear.

But then, we could have had no gear, either, on the basis that we weren’t card-carrying experts yet.

Instead?

We took the middle road.

We’d learned what we could, in advance. We’d prepared ourselves and our equipment, just in case.

And then, taking it slow and steady, we put our best foot forward.

When the first effort faltered we stopped, re-evaluated, and tried again.

What does it mean for investors?

To learn in advance. To prepare appropriately.

What does it mean to be slow and steady, in investing?

Those questions could take a book – or a series of them – to answer in absolute totality.

But in a line or two, it’s taking the time to understand what successful investing looks like, and how it’s achieved.

It’s having a realistic and achievable plan.

It’s thinking probabalistically about what course of action is likely to deliver the best long term results (or, if you like, causing the least regret).

For me, that’s the ‘get rich slowly’ approach.

Work diligently. Save religiously. Invest regularly. Diversity sensibly. Wait patiently.

Don’t want to do that?

That’s your choice. I mean, it might work out fine.

Or, like our Swiss friends, you could end up bogged to the axles, spinning your wheels as the tide comes in.

Choose carefully.

Fool on!

I’m sending you this missive from the middle of nowhere. Well, that’s not strictly true – it’s the middle of somewhere, just likely nowhere near you.

I’m 13km east of the Queensland / Northern Territory border at a place called Camooweal. Slim Dusty fans will know it well. The rest of you… maybe not.

I’m a few days into my annual winter road trip, this time to the Top End, where we’ll be checking out Kakadu, Arnhem Land and Litchfield National Park.

(For Motley Fool members, please be assured that the rest of the team are chained to their desks while I’m away, and you’re in very good hands!)

Now, being only a few days in, I have no blinding new insights for you, either about investing, or the beautiful country we’re bloody lucky to call home.

A couple of thoughts, though:

Did I mention Australia is sensational?

We’ve driven from the NSW Southern Highlands up through central NSW, and central and northern Queensland, thus far.

Some of the places I’ve seen before. Others were brand new to me. But all sensational. From wide plains to red dirt, to the proverbial ragged mountain ranges, and more.

Get out there. Seriously.

And the people have been unfailingly welcoming – locals and backpacking bar staff alike.

Not to mention the incredible birdlife – flocks of galahs, finches, corellas and the majestic birds of prey.

Plus, big sky country. If you know, you know.

(I won’t bombard you with photos, here, but feel free to follow me on Facebook, Twitter or Instagram if you want to follow along!)

Now, while I said there were no blinding investing insights – and that remains true – some general thoughts:

First, getting out of our usual lives is a reminder of the depth and breadth of businesses operating in Australia. I do live in a regional area, but it’s not particularly rural or remote. So the companies and businesses I’ve come across are quite often new and different.

The lesson? It’s sometimes useful to reference our own experience when considering investment opportunities, but don’t forget that the investing world is bigger than that.

Second, it’s incredible how much more expensive diesel fuel isn’t, out here. There was a time when you could almost feel the price rise as you left metropolitan Australia. But most of the fuel I’ve bought so far was either no dearer, or only slightly dearer than at home. The world really is shrinking.

‘Build it and they will come’ is real. Yes, I know that Field Of Dreams didn’t work out that way, but there are some wonderful businesses – tourism and otherwise – that have managed to build large and loyal audiences by doing the common things uncommonly well. Don’t count that out as a potentially very successful business – and investing – strategy.

Lastly, and this is a theme I have – and will – return to, your portfolio really doesn’t need you around. ‘Trading’ might, but ‘investing’ doesn’t.

How did I prepare my portfolio for my holiday?

I didn’t. At least, I didn’t do anything differently, or new.

I’m investing over a 5-plus year time horizon. The next 5 weeks are immaterial. I haven’t checked my portfolio. From experience, I might do it maybe two or three times while I’m away. I can almost guarantee that I won’t buy or sell anything during that time, though.

Meanwhile? Meanwhile, the companies I own shares in will continue trading. Their CEOs and management will be doing their best to create value for shareholders. They’ll buy from suppliers and sell to customers. I hope this is obvious, but I really don’t need to be around for that to happen.

What would be different, if I was at my desk, instead? Nothing.

Well, nothing other than the human instinct to ‘don’t just sit there, do something’ would be nagging at me.

It might just be the case that the best thing for most investors is to be separated from their brokerage accounts for long periods!

And, well, they’ll probably live better lives, too!

Fool on!

A couple of weekends ago, I spent two days in the bush with my boys: learning how to properly use a bushcraft knife, make fire without matches, and treat water so it wouldn’t make me crook. We learned to navigate by the sun… and the stars. And we slept under tarps in sleeping bags.

We had a ball, and it was one of the most enjoyable and rewarding things I’ve done in yonks.

And it won’t surprise you that somewhere between carving tent pegs from tree branches and lighting fires from sparks, it struck me: this is what investing should feel like.

Simple. Practical. Grounded.

That might sound strange to some, given the buzzwords and palaver flying around the investing world: trading ‘systems’, AI, biotech, rotation, positioning, ETF, ESG, DCF, and every other acronym you can think of. And all of the ‘news’ that traders are trying to react to in real time.

But strip it all back, and successful investing is, if not bushcraft, pretty close to it. It’s about understanding the fundamentals, preparing well, and not panicking when the wind changes direction.

So, in that spirit, here are a few things a weekend in the bush taught me about how to think – and act – like a smart(er) investor.

The first thing we learned? Don’t obsess over gear.

Sure, the right knife helps, and yes, having a decent tarp beats weaving your own shelter from sticks, bracken and leaves – but no fancy kit makes up for knowing how to use it. Indeed, without the knowledge, a tool can go from helpful to harmful, very quickly.

It’s the same in investing. People chase the perfect trade, the perfect strategy, the next big thing. But the investor who understands how businesses work, who thinks long-term and avoids emotional decisions? She’ll very likely do better, perhaps much better, than someone with a dozen ‘hot’ investments and no clue why they own any of them. And better than that? She’ll have the tools and knowledge that make it possible to not just survive, but prosper, through quality selection of the best investments.

Next, in the bush, energy is currency and resources can be scarce. You don’t waste either. You do it once, and you do it well.

Too many investors fall into the trap of fiddling. Buy. Sell. Switch strategies. Tweak portfolios. Chase ‘hot’ stocks. It’s exhausting, and worse, it’s usually counterproductive.

Some of the very best investors own a relatively small number of great businesses and barely touch their portfolios. They’re not lazy. They’re efficient. They know the real work is in choosing well – and then letting time do the heavy lifting.

If you’re always “doing” something in your portfolio, ask yourself whether you’re building a better shelter – or just pulling down and rebuilding the one you already have.

And then? There are no tricks in bushcraft. No shortcuts. Fire needs heat, fuel, and oxygen. Miss one and you just get smoke (and frustration). Every time.

Investing’s the same. You need to spend less than you earn, put money to work in well-diversified, productive investments, and stay the course when it gets tough. Miss one and you’re likely to go nowhere– or worse, get burnt.

The good news? The basics work. Really, really well.

A diversified portfolio. Regular contributions. Reinvested dividends. Decades of patience. You won’t read about that in the “Top 3 Stocks to Buy Before Friday” article, or “Strategies the pros are following this month”, but that’s because it’s not exciting. It’s just effective.

So, choose carefully.

Speaking of the basics, we learned to work with nature. Not against it. You can’t stop the rain, but you can waterproof your shelter. You can’t summon heat, but you can build a shelter to reflect the heat of your campfire to make the most of what you’ve got.

Investors often try to speculate about things they can’t control – markets, interest rates, elections, global trade, and geopolitics. But investing is about positioning yourself so that the things you can’t control don’t derail your future.

In other words, it’s about preparing, not predicting. And building a portfolio that doesn’t rely on being right all the time, but rather being right over the long term.

Turns out, you don’t need a lot of ‘stuff’ to survive and thrive in the bush. Just the right stuff and the right approach.

Investing should be the same. Buy quality businesses. Ignore the noise. Let time do its thing. It’s not easy – because your emotions, the media, and your mates at the pub will tell you to do otherwise – but it is simple.

And it works.

The last thing? None of what I said, above, was gleaned from my own trial and error in the scrub. I mean, it’s possible that months and years of failure, with the occasional success, might have led me to some of that knowledge.

But better than that is standing on the shoulders of giants. The company behind the course I did is run by a bloke with decades of experience in the army and who trains soldiers in bushcraft. (Even then, this bloke isn’t some macho Rambo. Sure, he’s no-nonsense. And he’s disciplined. But not arrogant or over-confident. He works with the environment, not against it, and he’s thoughtful and considered, not ‘crash or crash through’). One of our instructors has spent years as a ranger in Arnhem Land and as a high school educator. Another had been on many such courses as the one we were on, and had honed his skills.

In other words? In other words, I looked for and found the best from whom I could learn, and as a result I learned a lot. No, I’m no Bush Tucker Man or Alby Mangels. (I might just be Russell Coight, but hopefully not!) But I learned the basics. Enough to give me a starting point. And then, with more learning and repeated practice, I hope to slowly but consistently improve.

That’s where the value is.

Investors spend way too much time looking for the next big idea, the silver bullet, the clever hack. But when it comes to building wealth, just like surviving (and thriving) in the bush, the best outcomes come from mastering the basics, preparing thoughtfully, and not trying to be too clever.

The best way to prosper in a survival situation is also the best way to do it, as an investor: the people who thrive are those who stay calm, trust the process, and know what matters most.

By the way, that’s not just investing advice. That’s life advice, too.

Fool on!

So, it’s a public holiday across most of Australia, today. And the ASX is closed.

Which is… all to the good.

It’s a reminder that commerce – and life – continues, even when the ASX isn’t open.

You can hit ‘refresh’ on your broker’s website as often as you like, today, and the numbers won’t change.

But Woolworths Group Ltd (ASX: WOW) will still sell groceries. BHP Group Ltd (ASX: BHP) will mine iron ore. CSL Ltd (ASX: CSL) will provide vaccines and our banks will process millions of transactions.

It may sound strange to say, but the ASX itself is a distraction.

Being a shareholder – an investor – is to be a part-owner in a real business, as that business creates value for its customers, suppliers and staff.

Oh sure, the ‘casino’ element of the ASX is the hyperactive buying and selling of three-letter codes on a computer screen – the sort of thing depicted in the movies.

Somehow, a large chunk of the country has come to believe that’s what investing is.

Maybe because we instinctively prefer action over inaction.

Maybe because it seems glamorous or it appeals to our egos.

Maybe it’s just because it’s easier to make a movie about that sort of thing than about the investor who buys shares from time to time, but spends 99.99% of their time doing other things.

And yet, long term compounding relies far, far more on the latter than the former.

Frankly, ‘trading’ is hard, stressful, and too-often leads to sub-optimal returns… or worse.

Investing, on the other hand, isn’t the stuff of action, or of headlines.

But sensible, regular, diversified investing has created extraordinary wealth.

I wonder if sometimes we crave complexity, or our biology drives us to believe that ease and simplicity are too good to be true.

So let me state, clearly: historically, at least, it’s not. And I suspect that it’ll remain the case.

As I’ve told you regularly in this space, according to Vanguard, a hypothetical $10,000 invested in the ASX in 1994 became $130,000 thirty years later.

And what did you have to do for that return? Nothing.

Literally, nothing.

But what you did have to do is resist the urge to do something, and that can be one of the hardest things to do: to buy, but not sell.

To ignore the hot tip of your Uber driver or brother-in-law.

To ignore the ups and downs of share prices.

To ignore the urge that makes us wonder if we should sell this and buy that, instead.

In that, I think we should learn from nature.

I’m an occasional vegetable gardener. And we all know that just because a tomato plant hasn’t produced a crop in a month doesn’t mean we should pull it out and plant another one.

We know that waiting (and watering and fertilising) is the key. That time is the key.

We also know that a tomato plant stays small for a long time. And then the growth seems astonishing.

First, a little at a time. Then a little more. In enough time, it is many multiples of its initial size. And each fruit is larger than the plant itself was in its first weeks.

I hope you’re ahead of me on the compounding analogy.

The dollar saved today is just a dollar. Even in the first few years, you’re only earning a few cents in returns – a trifling gain that can make you wonder if it’s really worth it, and to wonder whether you should sell and buy something else that might grow more quickly.

But in time, that return grows. In enough time, you’re earning more every year than your initial investment. Eventually much more.

And this is where the analogy breaks down – in a very good way.

See, the tomato plant eventually hits its maximum size. Then it fruits (hopefully prolifically), and eventually dies.

But our portfolios don’t. Invested well, they can essentially compound endlessly.

It is here that our analogy switches from nature to fable. Our portfolio becomes – if we let it – the goose that lays the golden eggs.

All we have to do is keep the goose alive – and that’s not hard, as long as we act sensibly. We simply need to invest well, diversify appropriately, and spend the earnings, not the capital.

None of which requires the ASX to be open, by the way. Indeed, the lack of temptation is probably a good thing.

As Warren Buffett says, “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years”.

There are people who want equity markets to be open 24/7. Why? Presumably so they can ‘do something’; as if more trading hours means more value will be created.

I wish them luck.

No, there’s no reason the markets couldn’t be open 24/7 – it’s just folly to believe that it’d make investing returns any better (and plenty of reason to believe it’d make them worse through overtrading).

If I wanted to improve returns for investors, I’d reduce, not increase, the number of days the ASX was open.

But, for better or worse, that’s not my call.

All I can do is remind you of a poster that was up in my Year 7 woodwork classroom:

“Don’t be like a rocking horse; plenty of action, but no progress.”

They are investing words to live by, too.

Fool on!