Investopoly

Most people struggle with knowing how to invest their money. Do they upgrade their home, contribute more into super, buy an investment property, invest in the share market, or something else? In fact, this common challenge was the reason that I decided to write my book, Investopoly. I knew that if people understood the fundamental financial planning concepts (i.e., the 8 rules outlined in Investopoly), they might be able to figure out the answer themselves. Whilst everyone’s situation is different, this blog sets out some common steps that people take at different stages in life. Starting out…The first thing you must master, is cash flow management. Once people have their first full-time job, they must learn how to effectively manage their money to create good saving habits. I recommend paying all discretionary expenses from a separate account so that you can track your total spend every week, fortnight or month, as discussed in this blog.   The goal with establishing good cash flow habits is twofold. Firstly, good cash flow habits will serve you very well for the rest of your life. Secondly, if you can save regularly, it proves that you have surplus cash flow which you can use to service a mortgage i.e., you are ready to buy a property. Once you have mastered your cash flow management, your next most important goal is to buy your first property. Buying property is the best thing to do because of the leverage it allows (i.e., borrowing). People starting out may have a decent income but few assets. Therefore, their main goal should be to accumulate a stronger asset base. Borrowing allows you to use a relatively small deposit to increase the amount you invest. It’s not about property per se, it’s all about gearing, as explained in this blog. If you have demonstrated that you have surplus cash flow but don’t have enough deposit, you should investigate whether you are able to use a family guarantee to allow you to get into the property market sooner. Before you start a family Typically, people in most occupations enjoy relatively regular promotions and higher incomes after they have more than 5 years of work experience. And if they areDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

Every few months, there’s a story online about an investor in their 30’s that has amassed a property portfolio of 12 properties…and how you can do it too. Firstly, we shouldn’t be impressed by the number of properties that someone owns, as it doesn’t tell us anything about their wealth (equity). Boasting about the number of properties you own is like a business boasting about the number of employees it has. It’s often an ego trip. Secondly, there’s nothing impressive about borrowing huge amounts of money i.e., more than what is sensible – that is a recipe for disaster. The definition of successful investing is achieving the highest return for the lowest risk. There aren’t any shortcuts. Building wealth takes time. A perfect example of this is that Warren Buffett accumulated more than 96% of his wealth after his 60th birthday. How do people buy 10+ properties?It might sound impressive that an investor has amassed a larger portfolio of 10+ properties in a short time, but you can’t do that without taking risks. They probably have a lot of borrowings and dealing with 10+ properties would be time consuming (e.g., administration, maintenance requests, and so on). There’s only two ways that someone can buy so many properties in a short space of time. Either they have a business that is generating a large amount of profit and cash flow, or they have a unethical mortgage broker or lender that has helped them borrow more than a sensible amount. Obviously, the former explanation is legitimate. But the latter is a recipe for disaster. Mortgages are wonderful servants but terrible masters. Borrow carefully. Building wealth is a marathon, not a sprint.  Property was more affordable 40 years agoIn 1980, the median house price was only $200,000 in Melbourne and $315,000 in Sydney in today’s dollars. For example, 40 years ago, a single-fronted, investment-grade, Victorian cottage in a nice street in Prahran (blue-chip suburb in Melbourne) would have cost you about $300,000 in today’s dollars. The same property today would cost circa $1.5 million.Of course, borrowing capacities and incomes were a lot lower back then (as I discussed in January). However, arguably an investor didn’t have to be as picky as they need to be today because they could buy 2 or 3 (or more) properties in blue-chip suburbs. However, toDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

Everything you must know before you refinance: https://www.prosolution.com.au/ebook/===================Share markets have been highly volatile over the past couple of years. Markets fell by circa 30% when Covid hit in March 2020 and then proceeded to boom until the end of 2021, fuelled by government stimulus and zero interest rates. However, markets fell by circa 20% in 2022 after central banks aggressively hiked rates. It’s been a wild ride. Arguably, these large volatility events should have made it a lot easier for active fund managers to beat the index. Share market mispricing, overreactions and volatility should create profitable opportunities for active managers. I wanted to investigate whether this was the case. What is an active manager?An active manager picks a basket of stocks that they believe will generate high investment returns. Active managers can achieve that using two primary methodologies. They can try to identify undervalued stocks on the hope that their market value eventually rises to what they believe is fair value (that is called a value manager). Alternatively, they can identify companies that are likely to generate a lot of growth in the future, with less focus on whether they are fairly valued (that is called a growth manager). The truth is that there are lots of different strategies that active managers use, and it could be a combination of value and growth. Because active fund managers need to employ a portfolio management team, they typically charge management fees of around 1% p.a. What is an index fund? Traditionally, an index fund invests in an index of the most valuable companies. For example, A200 is the lowest-cost Australian market index fund – it charges an investment fee of only 0.04% p.a. (e.g., fee on $100k invested is only $40 p.a.). It invests in the ASX 200 index which is the most valuable 200 companies listed on the ASX. For example, the total value of the largest 200 companies is $2.1 trillion. BHP’s value (market capitalisation) is circa $240 billion, being approximately 11% of the total index – Australia’s most valuable company. Therefore, if you invest in A200, 11% of your money will be invested in BHP. 7.8% in CBA. 6.5% in CSL and so on. An index fund is simply a managed fund that invests in a very broad basket of companies. The manager uses a rules-based approach foDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

Typically, you need a budget of circa $1.5 million to purchase an investment grade house (investment property) in Melbourne, less in Brisbane, and a lot more than $1.5 million in Sydney. Of course, not everyone can afford this budget, so I wanted to discuss how to buy the highest quality property possible within your budget. This blog will still be useful even if you do have a budget of $1.5+ million, as it will help you understand what “investment-grade” property means. What makes a property investable?Regular readers of this blog will know that I always adopt an evidence-based approach when making investment decisions. An evidence-based approach typically means adopting a rule-based approach. That is, apply a set of objective rules to identify the asset/s that are most likely to generate the future investment returns that you desire. The rules-based approach for investing in residential property involves ensuring a property has three important attributes. Properties that have these three attributes are typically considered investment-grade. Attribute 1: A persistent imbalance between supply and demand ‘Supply and demand’ is a basic economic concept that explains how many investments work. The goal with investing is to invest in assets that will generate good returns over very long periods of time. For example, an 8% p.a. return means your investment will be worth 10x in 30 years. Obviously, a 10x return will help you generate a huge amount of wealth. The most likely way to generate strong capital growth over very long periods of time is to invest in properties that are in finite supply and benefit from growing and excessive demand. When the number of buyers exceeds sellers, prices will rise. Finite supply means that there is no vacant land within close proximity, which is why well-established, blue-chip suburbs are typically great locations to invest in. A dwelling’s attributes can increase a property’s scarcity too. For example, no one is building art-deco properties anymore. Apartments blocks constructed in the 1960’s that only include 6 apartments are also very scarce – developers would probably build 20+ apartments on these blocks today.  Excessive demand can be achieved by investing in property that the wealthiest 20% of Australians desire, as their incomes and wealth position (and future Do you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

eBook Download: https://www.prosolution.com.au/ebook/We are all aware that central banks around the world have been hiking interest rates to reduce inflation back to normal levels. The US economy, and particularly the labour market, have been more resilient than most expected. This means the US central bank might have to hike interest rates higher than in other jurisdictions to tame inflation. A consequence of this is that it will probably send the US economy into recession. And if history repeats itself, stock markets will fall. If this scenario plays out, what actions should you take now?  There are three economic scenariosShare markets have been wrestling with three possible economic scenarios as follows: §  Hard landing: this means that the Federal Reserve’s interest rate hikes achieve their aim of curtailing inflation but at the cost of sending the US economy into recession.    §  Soft landing: this is a Goldilocks scenario where the Federal Reserve hikes rates just enough to cool inflation, but not too high that it causes a recession (or it is able to cut rates in time to avoid a recession). §  No landing: it is possible that the US economy continues to be resilient, and inflation remains stubbornly high which means the Federal Reserve must hike rates higher for longer.US labour market is stubbornly robust The problem that the US central bank has (that the RBA doesn’t) is wage inflation is high at 4.6% over the year ended 28 February 2023. If it cannot cool the labour market and stop incomes rising, it probably won’t be able to return inflation to normal levels. The US labour market is proving to be very robust and although there are some signs that it is starting to slow, data is somewhat mixed. As reported late last week, the US unemployment rate did rise in February from 3.4% to 3.6% p.a., not because there were fewer jobs but because the participation rate increased (i.e., more people are attracted to return to the labour market and look for jobs). This helped the three-month annualised wage inflation rate slow to 3.6% (compared to the 12-month reading at 4.6%), so there are signs that wage growth is slowing. This is the most important issue that markets are watching. If we see more data that confirms wage inflation is slowing, a soft-landing scenario might be considered more likely. The other noteworthy difference in the US (compared to Australia) is that most mortDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

Ensuring your accountant collaborates with your financial advisor is important, as they will be able to discuss and workshop ideas to improve your financial position. However, in my 20+ years of experience, this collaboration almost never occurs, unless they work in the same firm. Theoretically, there shouldn’t be any impediments to these two professionals working together. Practically, it doesn’t happen and depending on the complexity of your situation, it could be costing you. Accountants and financial planners are different beastsIt is a common misconception that accounting and financial planning roles are similar. They are not. The roles are about as similar as dentist and doctors (general practitioners). Apart from knowledge and experience which can be vastly different, the next biggest difference is that accountants spend most of their time focusing on what happened over the past 12 months and sometimes on what might happen over the next 12 months. However, financial advisors are more focused on what will happen over the next 10+ years i.e., the medium to long term. This distinction is very important because the focus is habitual. That is, it’s not a natural tendency for accountants to think about what a client’s financial position might be 5 years from now. The truth is both approaches are complimentary. People would greatly benefit from both an accountants and financial advisors’ perspective. Be careful asking your accountant for financial advice It is natural to ask your accountant for financial advice. But there are a few important limitations to consider. Firstly, their advice will be shaped by their own experiences, which are likely to be limited, as they are not financial advisors. Accountants will often advise their clients to do what they have done for themselves such as simplistic advice like “if you are going to invest in shares, buy the big banks and miners”. But what might be appropriate for them won’t necessarily be appropriate for all their clients. Secondly, to give financial advice, you must be authorised under an Australian Financial Services license. Most accountants are not. Similarly, to provide tax advice you must be a Registered Tax Agent which most financial advisors are not. Why don’t financial advisors and accountants typically work well together? Of course, the reasons may be different in every situation, but I discuss some of the common reasons that I have observed over the past two decades that impede theseDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

It is stating the obvious that private school education is expensive. If you are uncertain whether you would like to send your kids to a private school, I thought it would be interesting to consider some alternatives and put the costs into perspective. The public versus private school decision is a very personal one influenced by many considerations, including financial. I acknowledge that many factors may be more important than financial consideration. However, in this blog I would like to focus solely on the financial implications whilst acknowledging that despite the costs and alternatives, many people will still choose to send their children to a private school. How much will private school fees cost in the future?Of course, private school fees can vary significantly in different capital cities and regional centres. As an example, secondary tuition fees for many private schools in Melbourne range between $30,000 and $40,000 p.a. There are two noteworthy factors that must be considered. Firstly, on average, fees tend to increase at a rate that exceeds inflation. When planning for clients, we assume that fees increase at a rate of 5% p.a. As such, 10 years from now, school fees are probably likely to cost between $45,000 and $60,000. Secondly, these fees do not include additional items such as uniforms, books/computer, excursions/camps and so on. It is prudent to allow an additional 5-10% for these costs. The cost in today’s dollarsAssuming you have a child today and you want to send them to a private secondary school that currently costs $30,000 + 5% for other costs, I project the total cost of secondary school will be $400,000 in future dollars, or $270,000 in today’s dollars. Of course, if you have more than one child and/or send your kids to a private primary school as well as secondary, your total cost will be a multiple of $270,000.That’s a lot of money and a big drain on your retirement savings. Let’s consider some alternatives.Buy a home in a good public-school zone If you don’t have access to a good public school, you could buy a home in a good public-school zone and avoid having to pay for private school fees. According to this research by Domain, property prices can grow at a much higher rate than locations that don’t offer a highly regarded public school. Of course, it is going to depend on the location and school, but I do not consider it unreasonable to expecDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

It has certainly been a wild ride for property investors over the past 6 years. In 2017 and 2018, the banking regulator demanded banks reduce the volume of interest only loans, particularly to investors. The media called this the “interest only cliff” and predicted that many borrowers would face financial stress when loan repayments switched to principal and interest resulting is higher arrears and default rates. It didn’t. Then in 2018-2019, Bill Shorten (you will recall that everyone was expecting him to win the 2019 federal election) promised to ban negative gearing and increase capital gains tax which unsettled property investors. Of course, he didn’t win, and the ALP abandoned this policy. Of course, the Covid years (2020 and 2021) were very kind to property owners. But aggressive interest rate hikes over the second half of 2022 have ruined the party and property prices have retreated to pre-Covid levels in many locations. Despite a relatively volatile period, it is important to note that property fundamentals remain very robust. In fact, it is vital that investors remain solely focused on these long-term fundamentals and not get distracted by these temporary volatility events. Rental crisis will only get worse There is a shortage of rental properties in Australia and as a result, rents are rising quickly. According to Domain, the national vacancy rate was a mere 0.8% with Perth, Adelaide and Hobart essentially reporting close to zero vacancy. Melbourne and Sydney’s vacancy rate has fallen from 2.7% and 1.9% respective to only 1.0% over the year to January 2023. Over the 2022 calendar year, rents have risen by almost 20% nationally. Of course, these rises are coming off a lower base, due to rental reductions during Covid, but the trend is strong and doesn’t look like it will abate anytime soon. The chronic shortage of rental properties will continue to put upward pressure on rents. You should expect to see a lot of media coverage this year about the growing rental crisis. Tighter rental laws could be to blame… Tighter rental laws certainly do dissuade people from investing in property. One of the most attractive advantages of being a property investor is control – you have full control over how you use and improve the asset. Tighter rental laws (that favour tenants) reduces the amount of control investorsDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

It is often debated which is a better investment, property or shares. It is my thesis that property is an okay investment, but not as good as shares. However, when you factor in gearing (the ability to borrow to invest), property becomes a wonderful investment – better than shares. Property versus sharesThe main advantages of shares (compared to property) include: §  You can outsource the management of a share portfolio to an advisor. However, as a property investor, you may need to spend time to work with your managing agent to deal with tenant issues and/or property maintenance/repairs. §  Shares can generate a stable level of income with no (or few) related expenses. For example, the ASX200 index has yielded circa 4.5% p.a. for a long time. §  Shares are liquid and have low entry and exit costs e.g., no stamp duty, real estate agent fees, etc. This means you can invest and divest in small increments. The main advantages of property include: §  Most investors feel comfortable borrowing to invest in property, which means you don’t need to make a large upfront cash contribution to be able to invest. §  The assets tangibility can make investors feel more comfortable. §  You don’t need ongoing financial advice after you have purchased the property. §  Investment-grade property provides most of its return in capital growth in return for less income, which is tax effective. We can debate the pros and cons of shares and property until we are blue in the face, but I think it’s a meaningless debate. It’s like debating which golf club is better. They are all different and you need more than one club to play well. How do returns compare? My thesis is that it’s not property that makes property investing so effective. It’s the gearing that does a lot of the heavy lifting. Therefore, an investors decision is not whether to invest in property or shares. Their decision is whether to borrow to invest or not. If it is appropriate to borrow, and they can do so safely, then borrowing to invest in property will likely generate the highest return.  I financially modelled borrowing to invest in a property, holding the property for 25 years, and selling it to realise the cash proceeds after repaying the loan and paying for capital gains tax (my assumptions are in the footnote[1]). Whilst the investor doesn’t need to make a cash contribution (as they borrow the entire cost of the property), they do have to pay for the holding cosDo you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

I’m a big advocate of value investing. If you buy high a quality investment for fair price and hold it for the long run, you can’t help but make a lot of money. But if you can buy the same quality asset cheaply (below its intrinsic value), then it’s likely that you will make even more money. This is what value investors attempt to do.  You can adopt a value investing approach with many asset classes, which I’ll discuss later. However, for most of this blog, I’ll use shares as an example because there’s a lot more data available. How does value investing reduce your risk?When investing in an asset, you can derive an investment return in two ways; by receiving income and/or the value of the asset appreciates i.e., capital growth. Often, assets provide a combination of both income plus growth. Receiving income is less risky because you ‘bank’ the return each year. That is, you are less reliant on capital growth to generate an acceptable overall return. Your capital return will depend on two factors. Firstly, what you paid for the asset (to purchase it). And secondly, the assets future value. Of course, overpaying for the asset initially will diminish future capital returns. Overpaying slightly for a high-quality asset probably won’t have a material impact on future returns, as a quality assets growth with quickly make up for any small overpayment. But a material overpayment and/or buying a poor-quality asset is a big problem that will cost you dearly.  Conversely, if you buy a quality asset for a cheap price, you are less reliant on the overall market organically driving prices higher to generate quality returns. In fact, in this situation, your future capital growth will come from two sources: the appreciation to fair market value, plus organic growth. A quick history lesson… The chart below compares how value has performed compared to growth in the US share market since 1979 (using the Russell 1000 indexes). They have performed similarly over the long run i.e., growth has returned 11.3% p.a. and value 11.6% p.a. However, recent performance has been a lot different. Between 2018 and 2021, growth substantially outperformed value as it returned 24.1% p.a. versus 10.5%. Consequently, by historic standards, value is now relatively cheap.  CHARTWhy do I think value is likely to outperform over the medium term?There Do you have a question? Email: questions@investopoly.com.au or for a faster response, post a comment on the episode's video over on YouTube: https://www.youtube.com/@investopolypodcast/podcasts If you're interested in working with my team and me, discover how we can work together here: https://prosolution.com.au/prospective-client/If this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://www.prosolution.com.au/stay-connected/ Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog: https://prosolution.com.au/books/DOWNLOAD our 97-point financial health checklist here: https://prosolution.com.au/download-checklist/IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.