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Fans of the Dennis who Invests podcast. If you feel like there was one particular episode in the back catalogue in the anthology of Dennis who Invests podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who's in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach, so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome, welcome to the Dentists who Invest podcast. Hey everybody, what's up? Welcome to this webinar by myself, dr James Martin, and we are here today to talk about the basics of investing. Anybody watching this webinar will have found it on the Dentistry Invest platform, and it is my pleasure to bring this information to you today so that you can begin your investing journey. So let's go ahead and jump straight in. This is, of course, not financial, financial advice. I want everybody to be super conscious of that as we progress through the webinar. There's a few things that we talk about which may be construed to be financial information. Anything that you find on this webinar is, of course, purely, purely, purely purely information that you can use to understand the financial world to a greater level. It is not, in itself, actionable information for you to go and utilize in your investment portfolio. I just want you to be conscious of that. You would, of course, have to consult a financial advisor in order to do that. So why are we here to talk about investing? Is this so important? Why does everybody place such an onus on undertaking this action? The main reason is that we can grow our wealth. The thing about it is, unless we understand how we can invest, we'll only ever be exchanging time for money. Therefore, we'll have to continuously work. We'll have to continuously get up every day and go to work so that we can obtain some cash. Now, that's all well and good when we're of working age, but what about when we get a little older and we're not able to do so anymore? The second reason is so that we can avoid something called inflation. We're going to be talking about that later. And the third one the pie in the sky, the thing that we all want, which is financial freedom, the ability to only work should we feel like it, the ability to have the option to work or not. So how do we invest? We invest by purchasing assets. So we invest by taking some of the cash that we earn in our jobs. At least, it's how most people invest taking some of the cash that we earn through working in our jobs. At least it's how most people invest, taking some of the cash that we earn through working in our jobs and exchanging it for something called assets. Now, what are assets? Assets are anything which hold value or increase in value over time. They are said to be something that is inherently valuable and therefore they are an asset that is inherently valuable and therefore they are an asset. If we want to get technical, the definition is an item of property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies. So just to clarify, it doesn't have to be a property, it's just a piece of property, something that you own. So not a property in a residential or a housing sense, just a property as in an object. There are 10 main assets one can commonly buy here. They are cash, property, bonds, shares, commodities, funds, insurance products, foreign exchange, derivatives and crypto assets, and we don't need to understand what every single one of those is. It's just showing us what is out there. What are the 10 ways that we can obtain something that will retain or contain some value? And these would be the 10 ways. Now people always say to me isn't investing risky? And what I would say in return is it depends on our perspective. The most pivotal thing to understand is that when you hold your money in cash, when you hold your wealth in cash, when cash is your primary asset in which you hold your wealth, you are still not safe. Your cash constantly goes down in value due to inflation. Now, what does that mean? You'll still see the same number on the bank screen. You'll still see the same number when you look in your bank account. However, what you can purchase with that number, that amount of money decreases. You can obtain less stuff inverted commas for the same amount of cash. How does that work? We're going to talk about that in just a minute, but that is an important thing to understand. Even if we do nothing, we're still at risk of losing our wealth. Investing in the correct asset will allow our wealth to grow and, at the very least, retain its value over the correct periods of time, over certain time frames, and we must understand what those correct periods of time are. But how do we do that? Of course, that is the question. Here's a great quote. There is a short term risk to invest in, but there's also a long-term risk to not being involved in investing, so we've got to do something. Even if we don't do anything, then we're still in trouble. That is the key thing to understand, because everybody thinks that if we just hold a huge sum of cash in our bank account, that we are good to go, and actually the issue with that is that we can spend as much time as we like earning that money, its value is going to be degraded over time, which effectively means that you might as well have not bothered to work those days if we didn't take the cash and transfer it into something else which appreciates in value. Here's another perspective. How about this? How about, instead of an asset, that that consistently goes down in value, like cash? How about if we held our wealth in assets that consistently go up in value? And actually these exist, these things are out there. And why does this happen. This happens for two reasons. Why do these assets consistently appreciate the correct ones? They happen because there's only ever more people on the earth, and that's a trend that's been in continuation since day one, and also ever since 1971, when currency, all currencies across the world became freely floated. Money printing is something that has continuously occurred. There's only ever been more cash and more people. What does that mean? Global population increase. You can see here, this is number one, the principle, the first principle of investing there's only ever been more people. What happens when there's more people? There's only ever more demand. Right, think about it. If a thousand people want to purchase a stock or a house or some gold, then if there's 10,000 people who want to purchase that same asset, the value of the asset then goes up because there's more people who want to purchase it. Supply and demand. Now, if there's more people on this earth successively, year on year, then that is happening. That principle is being observed. Yet on a macro scale, money printing. Now, as we may or may not know, all currencies in the world are not pegged to anything real. They are not exchangeable for anything which is material in any way. The only reason that a currency has any value is because the government says that we can pay our taxes in it. So basically because Simon says now, once upon a time a certain amount of gold, a certain amount of certain number of pounds or a certain number of dollars was exchangeable for a fixed amount of gold or silver. That is no longer the case. The reason why a pound is called a pound is because once upon a time it was exchangeable for a pound, an LB, as in pounds and stones a pound of something called sterling silver, which was a particular purity of silver, and we're not going to get into that too much today, but suffice to say that's where it came from. Now, how many pounds would it take nowadays to obtain a pound of high quality silver? It would take many more than one. Once upon a time it was one. Now it is many. And the reason that that has happened is because it is no longer pegged to a certain amount of silver or gold or anything and it's freely floating, and that means that the government can create it arbitrarily. So money is a fixed, fixed. Money is a social construct. It is a fixed social construct in our head. The only reason it has any value is because everybody believes that it does effectively. Now think about it like this the more money we create, the more money we print. If the amount of gold in the world stays roughly the same yeah, I get that more gold is mined every year, but certainly not at the same rate as money is created then, because there's more cash and less gold, then what it means is that the value of that cash will go down because it is being created at a faster rate than we can create gold and therefore it will outpace the supply of gold and hence it will cost more. It will take more of our dollars and pounds to obtain that same unit of gold over time. And if that didn't quite make sense to you, think about it like this imagine there are 10 people and they want to buy a house and the house is 100,000 pounds. Now let's say that each one of those 10 people have a budget of 100,000 pounds, so they're going to bid, they're going to bid and bid, and bid, and bid and bid. They'll bid the house up to maybe like 80 grand, 90 grand, whatever, but they can never exceed 100,000 pounds because in this very simple demonstration or story, that is the maximum amount of money that they have Now in reality, we've got lending, we've got all sorts of other things that we can use, all sorts of other levers and instruments that we can take advantage of in order to obtain that house. But let's just keep it simple for today. So the very most that someone can bid is £100,000. But in this situation, if they did bid £100,000, they'd have nothing left over to sustain themselves and feed their families. Now let's imagine five of those people suddenly get £200,000. Can you see how that money has become worth much less than it was before? Because all of a sudden, these people can bid the price of that house, the people that have the 200 000 pounds. There's five people that have the 200 000 pounds. It means much less to them to be able to bid the value of that house up over 100 000 pounds, because even if the price of the house goes 100 to 150 000 pounds, they'll still have 50 000 pounds left over. So effectively, they've bid the price up. It's pretty much what inflation is as more money gets circulated into the economy. There's no controlled mechanism via how this happens. It's just sheerly the fact that there's more money around and these people are using their additional wealth to bid the price of assets and goods and services upwards. So as these themes continue, you can see here that over many years, certain things will only ever go up in price. Now what these are. You can see the trend here like this Now what these particular assets are requires more of an understanding of how the world works. But effectively, if we talk about the housing market, let's look at the housing market specifically. There's more cash and more people and they're all continuously bidding these assets up. Then you can see how this drives the price up over many decades. And this also applies to other assets such as the stock market and bonds. But we need to be really careful. There's more information that I need to give you in order to utilize this information. So if you can take advantage of this, then what this means is that you can hijack this effect and appreciate your wealth, and this is actually the techniques that financial advisors use to grow your money over time. And if we understand these, we become extremely powerful. Now here's the thing we know that long-term trend is bottom left to top right. Like I say, we don't want to just jump the gun quite yet and go out and begin to use that information. There's more I need to teach you in order to take advantage of that. However, let's have a look at this. Let's say that, as we've seen recently, as of November 2022, when I'm creating this video we've been in a correction, in a downturn in the market for quite some time, and you can see this graph was actually taken in about January time. This only shows up to about January 2022. So this graph was created around about then and you can see this looks pretty bleak. So this is 4,000, let's call it 4,800 of these arbitrary units, all the way down to 4,400. So we've pretty much lost about 10% of the value of this asset in a very short space of time. So this is the point where most people are acting scared and selling their stocks, or certainly not buying more 10% retracement. So here's what we're going to do let's draw a rectangle around this area on this graph, and let's imagine that this rectangle contains all of the information we've just shown you right here, right now. Well, it does. It does contain that. What I want you to do is understand that, as I zoom out and show you the bigger picture, this rectangle shows the same area the whole time. Can you see how minuscule these declines are in the grander scheme of things, can you see how, actually, if we're a long term investor, things like this are totally irrelevant. This is what we've got to understand. This is the principle via which financial advisors invest your wealth. Now, really, this is over quite long periods of time we may be talking five to 10 years and that's what I want everybody to understand who's watching this webinar. However, when you understand how to do this, you can grow your wealth just like somebody who's in a financial advisor can. You just got to understand more about this principle, not financial advice, of course. I have to be very careful to say this is the principle behind which these people invest your money. The huge advantage is that, when you do it, there is more of a return, given that we do not have to pay management fees for the other, for the advisor who manages our account. We get to be able to keep all of our money rather than just a portion of it, and you'll also see how their fees significantly impact your long-term wealth when you're appreciating it via this method, as we continue in this webinar. And so, in essence, long story short, the declines are temporary and the advance is permanent, and I'm not sure who that quote by. I'm not sure who that quote is by I don't think anybody knows who that quote is by but it just so beautifully and neatly summarizes what I'm talking about. So the best way to look at investing is as a superior place to store our wealth. Wouldn't we rather store it in something that constantly appreciates rather than something that constantly depreciates and becomes worth less and less as time goes on? But before we all rush off to buy these assets, there's more to it than what I've just said. This is the basic premise. These are the principles that people use to grow your wealth over time. I need to give you more knowledge first in order to execute this. How your investment path will typically look. You'll basically start out with no investments whatsoever. You'll grow your cash over time. There may be a little bit of a downturn here and there. You'll hit this point called the pinnacle point. And what will happen on the pinnacle point is you will have enough wealth to sustain yourself in theory to the point where we pass along from this world to the next, and at that point what we will do is we'll begin to enter, drawdown and extract our wealth from our portfolio. So the point is to be able to get to this pinnacle point as soon as possible, because then we have the option to work. So, in essence, your goal is to appreciate your wealth as much as possible. This means we get freedom as soon as possible. And you know what? How many people do you know have reached retirement age and continue to work? Most people do right, but the point is that they have the option at that stage. And you know what? Even if you got 50 million tomorrow because you won the lottery, you still might continue to work. But the point is that you now have the option to continue working or not. This is known as financial freedom, and when you understand how you can do this on your own, you can bring the pinnacle point as close to today, closer, closer and closer and closer and closer, close as possible to today as you can. And what that means for you is freedom is on your terms and not someone else's terms. So let's compare. An average for an FAA to manage a savings account is 2%. Let's do a comparison. If it's a savings account which has £20,000 deposited into it every single year at the start of the year, then it will grow. It will grow and grow and grow and grow. Let's imagine we put £20,000 in every single year for 20 years. Let's also imagine that it's appreciating at a rate of 12%. Now, if that happens by the end of 20 years, we'll be continuously contributing to our ISA and it will also be growing at the same time. At the end of those 20 years, we'll have 1.8 million. Now, if we do exactly the same thing, if we invest every single year for 20 years, 20,000 pounds every single year for 20 years however, the key thing that is different this time is that instead of appreciating at a rate of 12%, it's appreciating at a rate of 10%, and at the end of those 20 years we'll have 1.2 million. The difference between those two figures is 600,000 pounds. That is, one third of our final pot. What we've just effectively replicated is somebody's pension pot. The difference between the rate of appreciation, the percentage gain per year or the interest all different names for the same thing in this scenario is only 2%. Yet 2% cost us way more than 2% of our final portfolio. It cost us one third of our final portfolio. What I want you to know now is that the average fee for an FA, roughly in the UK, is about 2%. Can we see how such a seemingly small fee actually massively impacts our wealth creation journey. The good news is, when you can do it yourself, you save that money and you are able to appreciate your wealth at a much greater rate. And the reason that happens is due to something called compounding. Compounding is the principle that as our money grows, it doesn't actually grow linearly, it actually grows exponentially. And here's a beautiful chart that I've seen, that I've seen just on the, I've seen on the internet, and you can see here that in this scenario, if we would have a starting balance of ten thousand dollars and allow it to appreciate every year by these given percentages, you can see that the difference between ten percent and the difference between nine percent and eight% is absolutely massive. So over a 40-year time frame, it actually becomes as much as half of our portfolio 2%. 2% subtracted from 10%. That is a huge difference, right? And the longer the time frame, the longer the investment period and the more money we invest, the more significant. The longer the investment period and the more money we invest, the more significant the effect is, and that's why it's so important. So what we've just done, we've just created a six-figure gift for ourselves all because we learned how to invest all because we took our time to educate ourselves and some simple principles, not least the principles that I've just included in this webinar. There's more to it. There's way more to it. However, the journey has just began. So, in summary, investing is pretty straightforward when you're in the accumulation phase. The accumulation phase is the principle that you want to grow your wealth as much as you possibly can before you hit the pinnacle point. So remember when we talked about our chart at the start and our chart somewhere in the middle actually, rather and it showed our typical path to wealth, and it said that at the very beginning, we grow our wealth as much as we can. We hit the pinnacle point and then we start to spend it. We hit the pinnacle point and then we start to spend it. When you're in that accumulation phase, when you're in that first part of the graph, basically, the idea is that you grow your wealth by as much as you can and you pick the most robust, proven assets that are able to achieve that. What are those assets? I need to give you more knowledge, but that is the principle behind investing during the vast majority of our investment journey. Our goal is capital appreciation. With some knowledge you can do this on your own. You actually can do it much faster on your own than anybody else can because you're not paying any fees. You're keeping the entire amount of your investment for yourself and the rewards for this are quite literally massive. Congratulations on listening. I know that the information in that webinar tonight will help anybody who listens massively. Feel free to reach out to me. Dr James Martin, on the Dentist who Invests group. There's a ton more content that I have that I can give you that you can use to progress your investment journey even further and have those gifts that we were talking about. They really are attainable by everybody. Hope everybody watching has an amazing day and we will catch up very, very, very soon. If you enjoyed this podcast, please hit follow or subscribe so you can stay up to date with information on new podcasts which are released weekly. Please also feel free to leave a positive review so others can learn about this podcast and benefit from it. I would also encourage any fans of the podcast to sign up to the free Facebook community from which the podcast originated. Please search Dentists who Invest on Facebook and hit join to become part of a community of thousands of other dentists interested in improving their finances, well-being and investing knowledge. Looking forward to seeing you on there.