Dr James, 9s:

All righty, welcome to another live on the Dentistry Invest Facebook group with returning face. Look, we're here today to talk about investing in 2024. Spoiler alert not so much with plot twists it's the same as investing was in 2023, but guess what? We're going to give you a really nice formula that you can apply going forwards and continuously, in order to do that. Before we do that, look how it was this evening. Yeah, very well.

Luke, 34s:

Thank you, James. Have a good day Despite the cold Smashing.

Dr James, 40s:

What is good to hear and happen. New year, of course, I think it's still just about acceptable to wish other people happy new year, but I'm officially going to call this as the cutoff point right now, because it is the 19th January. Look, there'll be loads of people on the group. We know you, but some people on the group who have yet to meet you. Maybe, matt, you might have nicely did a little bit of an intro about yourself before we proceed.

Luke, 57s:

Yeah sure, I started in financial services just over 10 years ago, or 11 years in fact, working as a financial advisor specializing in helping dentists and doctors make smart financial decisions and plan their finances, and more recently I've been doing some financial coaching.

Dr James, 1m 26s:

What we're going to do in just a minute is discuss that little formula that we talked about that anybody can apply to their investment portfolio. This is the most logical and sensible methodology I've ever seen to be able to break down from top to bottom. Or you're making the right decision when we're to number one allocate your capital in the right place. Number two using the right account. Number three well, there's more in there. You're going to see in just a second. Before we do that, it's always super interesting to know how many people are live in the house watching, watching, watching, watching, watching this live with us here this evening. Go ahead and throw live in the comment section so we know how many people are here watching this live with us and we can get to you when the opportunity arises later on to answer, to ask some questions. We can, of course, get to you For people who are watching this on follow up. Feel free to throw a replay in the comment section. We've got a really good idea of the mix of the split and then we can tailor this content going forward. Also, we have got something really cool that we're going to drop at the end of this 20 minute webinar this evening and you're going to want to hang around for that. It's a special gift for those of you watching the webinar tonight, so feel free to hang on to the end, where we're going to let everybody know what that is. Big clue, big hint it's got something to do with investing for dentists and it's a really useful and valuable methodology piece of content that you can use whenever it comes to your investing journey. More on that in just a moment. But before we do that, look, I alluded to what we were going to talk about tonight, which is the four layers, or the four decision making steps that have whenever it comes to our investing strategy. And you know what I'm going to do I'm going to pass the microphone to you right now, because this is, of course, your foretelling If you're listening, you're going to want to listen now to this webinar. This is super valuable. This is one of the coolest methodos Brilliant. Did you cast the look at the way? It might have been my connection? All I said was the mic is yours, the stage is yours, my friend.

Luke, 3m 30s:

Great, let's go. So for me, the first step is to have a plan. That plan can be quite straightforward, but really it's breaking down what you're actually looking to achieve by investing your money. So what are your investment goals? Calculate how much you're looking to invest and what the primarily, what the time horizon is that you're looking to invest over, and what is the money for, because that's going to drive a lot of the future decisions and really dictate what you decide to do in the other layers or other steps to building your portfolio. So, first step have a plan. I always suggest people to write that down so it's very clear, so you can earmark different pots of money to different investment goals. But having a plan should proceed any investment decisions. As far as I'm concerned, step two is to determine and it's probably the most important decision that you'll make when it comes to investing, because it dictates the majority of your investment returns it's deciding what your asset mix is, so what we would commonly describe as your asset allocation, which is, quite simply, it's the mix of assets that you're going to put in your portfolio. Now, for most people, in a traditional investment portfolio, that's going to comprise largely of shares, ie equities and bonds. Lots of people have property exposure through other investments directly. Some people will choose to diversify that further across other asset classes, but most people will primarily focus on shares and bonds equities and bonds and the difference between them primarily is bonds are defensive and shares are more for growth. So your asset mix is really deciding. The split between defensive assets and growth assets and you're waiting between the two will ultimately determine two things. It will determine what you'll get in relation to your returns, or what you should expect to see in terms of returns over a long time period, and also what level of volatility you can expect to see in your portfolio.

Dr James, 5m 38s:

Top stuff and for everybody who is listening out there Do not be really curious to know, because the number of people who I see who launch into investing, who launch in the person Within accounts without actually really having an overall strategy, which is actually the main factor that determines what assets we should be putting in those counts. The number of people who do that is the vast majority in my experience. So what I love to know is, as everybody out there in the audience, from everybody out there is listening in the audience tonight, do you feel like you've made that strategy before, before you have made your investments? Do you feel like there's a game pan on that front? Or do you feel like you need a strategy? And I would posit that that's the majority people, but I'd be interested to know how many people in the audience feel like new strategy Ever comes to their investment night. Feel free to pop strategy in the comment section, be interested to see and remember this is a safe space. Everybody here is cool. Everybody just wants to see you do well. It's completely fine to say that you've yet to develop a strategy. Never comes to investors, in fact, with anything. That's one of the main reasons that I made Dennis to invest and look and I created all the cool stuff we have created together. More on that later. Feel free to throw strategy in the comments and you know what? Just another reminder. If you feel free to hang around to the end of this webinar, I can tell you a little bit more about that bonus gift For people who have watched the whole entirety of this 20-minute live presentation. Look back to you.

Luke, 7m 2s:

Yeah. So the three main factors that we consider when determining an asset mix is one what's your attitude to risk, or your risk tolerance? I? Are you going to be scared out of your investments if you encounter a period of high volatility? So how are you going to react to that volatility? Because you're your natural tendencies, your natural tolerance towards risk To is your capacity for risk, which is really based on your Circumstances in your situation and your objectives. How much volatility are you able to endure in your portfolio? Now, somebody with a longer investment time horizon has a higher capacity for risk, for example, because they're able to see out the short-term volatility in in able to get longer, higher, long-term returns. So capacity for risk is one of the most crucial elements. And then the third is what's your required risk? Because If you, based on your, your plan and the levels of growth you need to achieve, you may need to factor that in in terms of them, how much you? You know you focus on growth assets rather than defensive assets. So when you answer those three questions, it steers you Towards your split between growth assets and defensive assets. Now somebody with a short time, shorter time horizon, is going to clearly focus more towards defensive assets. Somebody that's relying on a portfolio for income, for example, is going to have to factor that in that to turn. Also, fact plays a big role in Deciding their capacity for risk. So really answering those three questions is really going to help Drill down and and and give you some clarity over what your asset mix should be.

Dr James, 8m 40s:

Cool, amazing. And there's one more layer from correct. Is that right look?

Luke, 8m 45s:

We've got more layers, so we've got the asset mix. We then moved out. We've been good fun selection. So fun selection is, ultimately, what funds are you going to use? You don't have to use funds, but I recommend it for most people. What funds are you going to use to deliver your chosen mix of assets? So that's the vehicles that you're going to use. The collective investment funds that you're going to use where money is pulled together with other investors. What funds are you going to use to actually achieve that asset allocation that you've decided on? Involved in that is the big debate between should you go into active funds or passive funds, or possibly a hybrid approach where you blend the two together, and that's fine. But deciding on your funds is where lots of people put all of their attention, when actually more of their attention should go on the asset allocation decision, but lots of energy goes into the fund selection decision. You can be as hands-on or as hands-off of as you like. There are many great off-the-shelf solutions now available to most people. You can keep things very simple or you can make things slightly more complicated. The most important thing, though, for me when selecting funds is one, that you're ensuring that you've got global diversification and two, that you're trying to buy those funds for as low across as possible. Fees are absolutely vital. So yeah, step three is fund selection. Step one planning. Step two asset mix. Step three fund selection and then step four is account selection.

Dr James, 10m 11s:

Lovely. And do you know what? Every time I listen to you talk, look, and every time you have somebody who is off a financial background in Denyssey Invest podcast, what always strikes me is just how much there is methodologies and protocols to this stuff that you wouldn't otherwise necessarily realise. And dentistry is exactly the image of protocol, and doing a film is protocol, doing a root canal, and this is a protocol of the treatment plan for your investing strategy, which is just a really neat way of looking at it. Back to you, look.

Luke, 10m 38s:

Yeah, absolutely. There's a clear formula that you can follow when it comes to portfolio construction that will ensure that you have you know, you make smart decisions and have positive investment outcomes. The next step, step four account selection. Really, that's deciding which type of account you're going to use to invest through. So where are you going to hold these funds? Are you going to hold them into an ISA? Are you going to hold them in a general investment account? Are you going to hold them in a pension or maybe some other tax wrapper? Now, as the clue there, tax wrapper a lot of these accounts vary based on their tax treatment and the criteria that we would tend to use, or the key factors. There's three of them. One tax efficiency what's going to be the most tax efficient way to invest the money based on your goals and objectives? Two, ease of access when and how can you access that money A pension versus an ISA, for example? They have very different rules around when you can access them. And three, what are the contribution limits, because the government applies certain limits on what you can pay into these different types of accounts. So, the three main ones ISAs, pensions some people call those SIPs, that's just the type of pension and general investment accounts would suit most people generally. There are some more complex structures out there that people may consider further down the line, but for most people those three accounts are key Awesome stuff.

Dr James, 11m 58s:

So super high level. There's four levels in the strategy. Maybe if we could just have a nice was that, did you do the final one?

Luke, 12m 7s:

then the final one is platform selection. So step five, right at the very top, we've got platform selection. So, to run through, you've got your plan. You've decided your asset mix. You choose which funds you're going to use to achieve your desired asset mix. Where are you going to put those funds, what type of account are you going to use, and then what platform are you going to use to bring it all together and hold those accounts? So your platform really is just an admin system. It enables you to consolidate multiple accounts in one place. You can have an ISA, a general investment account, a pension, all on the same platform enables really quite easy access and easy admin. They do all of the back trading and everything else in terms of buying and selling the funds. They enable you to set up direct debits if you're going to do what we call pound cost averaging and pay in on a monthly basis or a different time horizon, time breakdown. So a platform is right at the top and for me, there's two things really to consider on that front, two main things anyway fees and functionality. How much are you going to pay and what functionality do you need from your platform? And that's going to be determined by everything that we've just discussed, because if you need something that's quite straightforward, based on your fund selection, if you're just going for one type of fund let's say it's passive funds then there might be a provider that's better suited to deliver that. So once you've done everything, then it's deciding what's the best platform to achieve your desired outcomes.

Dr James, 13m 36s:

And do you know what I love about this little methodology the four steps, so to speak is that you can literally write them down when you've got the answer to everything you want of an investment strategy right there. Here we're flipping ready, because I've used this in the past. It was really cool and you know what, when someone elucidates these formulas to you, it actually just makes so much sense, like it's so logical and it's so simplistic, but it's just having somebody break it down, like what we're doing tonight. If we could summarize that, that would be extremely powerful for everybody.

Luke, 14m 9s:

Yeah. So quite simply, decide your plan, decide your asset mix, your split between defensive assets and growth assets, decide the right funds for you, what's your philosophy around active versus passive, et cetera and then, once you've decided your funds, decide what type of account you want to hold them on, based on tax efficiency, ease of access, contribution limits. And then, once you've decided the type of account you're gonna use, decide the platform that you want to adopt in order to put all of that in action. Where we find people going wrong, he's getting really hung up on fund selection, when actually asset allocation based on research accounts for depends on which research paper you look at, but between 80 and 90%, typically, most white papers would suggest. In terms of what your long-term investment outcomes, your long-term investment returns, your asset mix is really key in determining what you're gonna get out in terms of returns and also what level of volatility you're gonna experience along the way. So put as much attention as possible towards your asset mix and then move on to fund selection Tax wrapper accounts are obviously very, very important and then platform selection. At the end there Beautiful thanks for that look.

Dr James, 15m 23s:

Luke, we've just about got time for one question and I would love to get your take on something that people frequently ask me, and I know that we've talked about this before and people used to ask this to you frequently in your days as an independent financial advisor what is your take on using ISAs or passive income, cause everybody wants to invest in their ISAs for inverted commas passive income how do we define passive income? And that's probably another webinar in itself. I know I'm putting you on a spotlight here a little bit, because it's actually quite hard to. There's almost like there's so many things to unravel with that statement and unpack that it probably is gonna take a little bit more time than what we've got this evening. Perhaps that's gonna be another life that we can do at some point. What is your take on that super high level? What do I need to be aware of? I mean?

Luke, 16m 14s:

you absolutely can use an ISA for passive income, but you have to have a lot of money in there, because if we just take a very simple formula and there's plenty of flaws in this but we talked about the 4% rule, which just really suggests that if you've got a lump sum of money in an account, you can take 4% without running out of money in terms of a sustainable withdrawal. Right now there are caveats to that, plenty of caveats to that, but if we're using that as a benchmark, you have to have quite a sizable portfolio to generate the level of passive income that most people will be looking to achieve. So simply putting 20,000 pounds in an ISA is not gonna suddenly give you the passive income that's gonna enable you to have financial freedom anytime soon. Really, it's a long-term strategy. So you and I talk about build wealth and create wealth. Really, if you're looking to put money in an ISA, it's a long-term growth asset that's going to sit there, compound, build up over time and then in the future, you'll be able to draw an income from it. But it's not going to get you to financial freedom overnight. It is really a set and forget and it's a strategy to adopt over many, many years to to build up the pot that you need in order to To give you that income, and so it really Isis are brilliant, but no, they're not going to give you passive income overnight.

Dr James, 17m 32s:

There's other ways possibly to achieve that, where you can get things going a bit quicker and just to give an idea, just to give everybody an idea in terms of time frames or which they can Expect this in vertical most passive income and the reason I'm saying a very calm passive income. It's because how we define passive income again is probably a debate for another night, but let's just use a commonly accepted definition for the moment, which is continuous income. Coming to a back Can't the issue is. The issue is that when Luke was talking about time just then, what Luke was referring to was not just flipping weeks or months or maybe even years. We were actually literally talking about decades. And there may be other methods that are a little bit more outside the box. I can achieve that in the short term. Of course, it's not easy. It was easy, everybody would do it but it's important to know this stuff and be able to understand that actually, that methodology may not be the best way. Would you agree with that, look?

Luke, 18m 27s:

Yeah, I agree with that. So, for me, all these these Investing in this way, we talk about four different types of assets. You've got your growth assets, which is for long-term growth. It's a it's where you store your money in order to benefit from Compound growth, where your your money rolls up and compounds over time. You've got cash flow assets, which put puts money in your pocket straight away. You've got business assets, which is obvious. And then you've got lifestyle assets, which are things that you own that necessarily might not be the most financially smart Purchases that you've made, but from a lifestyle perspective, you choose to own them, and so for, for for me, ice is very much falling to the long-term growth section.

Dr James, 19m 10s:

Cool the morning. You know, guys, we're gonna go ahead and wrap up around about now. Like to keep these webinars short, powerful, impactful and punchy, and around about the 20 minutes. Mark seems to be the sweet spot for anybody who is listening. Tonight it feels like you need a little bit of help with this stuff coming into 2024, a little bit of help Implementing the stuff that we mentioned tonight. Go ahead and throw game plan in the comment section below. Feel free to do that and we can connect after this webinar is over. We can reach out to you, you can reach out to us, however the heck that looks. Throw game plan in the comment section if you feel like you need a little bit of assistance Implementing the things we talked about using loose expertise. That is totally possible. And also one quick thing before we go. I know that I promised at the very start there was going to be a gift for everybody who continued To the webinar, continued throughout the course of this live tonight to watch until the very end. And what the drop that right now We've got an ebook which explains a lot of this stuff in even more detail, of seven costing, potentially disastrous mistakes the dentist make whenever it comes to finances. These are seven most frequent things that we observe in dentists and their habits that could be improved upon in order to improve. And then this Financial outlook and also key clause it also shows you how to fix them as well, and it certainly helps on that front. So if you want the ebook, feel free to comment ebook in the comment section and we're gonna go ahead and round up around about now. We can reach out to you about the ebook afterwards.

Luke, 20m 38s:

Look at anything like say just to wrap up no, enjoy, enjoy tonight. Um yeah, have a, have a good evening.

Dr James, 20m 48s:

Oh, good in the hood good to see you, my friend good to see everybody on dentistry invest everybody who came to watch webinar tonight. We will see you all next week, same time, same place for another webinar on the topic of finance for dentists much love and see you all soon.