In this session, we’re shaking things up a bit from our usual fare. We’ve hinted at this in recent episodes, and true to our word, we're finally revealing our personal investment choices.

Below we detail exactly where we put our cash, and why these investments resonate with our Financial Independence goals. We even explore some thoughts on how we might adjust our portfolios and wealth strategies moving forward.

With that said, we know money is a touchy subject. Not all folks are going to like our investment choices and what we have to say about them. (This brings us to an important point: investing should align with your individual circumstances, timeline, and tolerance for risk. Just because something works for us doesn’t mean it will automatically work for you.) On that note, we are only sharing our own experience, and not providing any personal advice. If you need support in figuring out your own investment strategy, it may be wise to talk to a financial adviser.

Yet, we firmly believe that a more open dialogue about money is a cultural shift that’s long overdue. Much of what we've learned comes from others who have walked this path before us and shared their perspectives. So, our hope is that by sharing our investment decisions, we’ll spark a bit of curiosity and perhaps encourage you to make your own.

Let’s start with Hayden first…

“What’s your portfolio breakdown?”

As of now, Hayden is holding about 50% of his portfolio in cash. That's quite a significant portion. And it's clear he's positioned himself to be highly liquid for a big purchase.

At the same time, the returns from high-yield savings accounts have become more attractive at around 5% since late 2023 . For Hayden, it seems a prudent move to leverage these rates while planning for that big expense.

But that's not the whole picture. Besides cash, about 35% of his investments are tied up in exchange-traded funds (ETFs) . The remaining 15% is tucked away in superannuation, where Hayden has opted for a higher risk, higher growth strategy. He says it's likely that this segment also includes some ETFs, but it’s more broadly focused.

“Are you buying a home with that cash? What are your long-term plans?”

When we look at our investment portfolios, the amount of cash we hold says a lot about our current strategies and future intentions. In Hayden’s case, it looks like a house purchase is on the horizon.

For Australians who are fortunate enough to afford it, buying a property can feel like a rite of passage. On the other hand, Hayden believes it’s not for everyone. Even so, he’d like to own a home at some point in his life. With interest rates where they are, and a solid savings in place, he feels now is the time (especially after the market frenzy during early COVID).

Another thing that really tipped the scales for him was the stamp duty exemption back home in New South Wales . This little financial perk means lower initial costs, which, in his book, is always welcome.

If he picks a spot and decides it’s not for him in a year or two, he’s not up to his neck in losses. Just a few fees paid here and there – a small price for a potentially great fit.

So, where’s he looking? Well, if you’ve been listening to Hayden for a while now, you’d know it’s nothing over the top. He’s eyeing a two-bedroom in Sydney, somewhere between Merrickville and Bankstown.

Prices there swing widely, but he's eyeing something between $450,000 and $850,000. Not too shabby, not too flashy, just right for a first-time buyer.

And while he feels this could be a long-term spot for him, selling later isn’t entirely off the table. Because as much as we plan, life loves throwing curveballs. For now, though, he’s planning to make this place his own for a good while.

“What’s your primary investing strategy?”

For a while, treating a house as an investment felt right for Hayden. So, as mentioned earlier, he parked a lot of his money in cash in high-interest savings accounts. Then, there’s a mortgage offset account too. It essentially made his cash work a bit harder than if it was just sitting in the bank.

However, Hayden started to question this property-as-investment angle after seeing the potential returns. They just weren't as high as he'd hoped, particularly with apartments. So, at the moment, Hayden is circling back to a focus on equities while still aiming to save for a home.

Now, this is not to suggest that investing in property shouldn’t be part of anyone’s investing strategy. Property has its place, to be sure. And whether it can give you positive returns depends on what property you’re looking at, along with many other variables.

Personally, though, Hayden prefers to save for a home while building a sizable ETF portfolio. This way, he's not just relying on the potential value of real estate in the future to fund his retirement. Plus, he figured it just makes more sense to him to invest in ETFs if their historical returns exceed the offset account interest.

It’s also worth mentioning that, like Hayden, some folks may not even see it as either/or situation. If you’d seen the recent ASX survey, it seems many Australians are actually investing in BOTH shares/ETF and property (as primary residence).

Now, we always caution our community to NOT follow the herd in any investing decisions. On the other hand, it’s entirely possible to own a home and live off your dividends – if that’s what retirement looks like to you.

In that case, there are several ways you can go about investing in both property and ETFs . And you can evolve your strategy anytime as your priorities change.

“What ETFs are you investing in and why?”

Hayden began with an investing mantra that has served the Pearler community well: just start somewhere, and adjust as you learn more.

So, initially, Hayden threw his hat into the ring with a mix of index ETFs like VAS , VGS , IVV , and more. He aimed for a diversified approach that gave him broad exposure to the ASX, international markets, and the U.S. market.

But, as he later found, there were overlaps in his portfolio that he hadn’t planned on. Obviously, Hayden’s investment strategy only evolved from here.

And, while dividends were great, Hayden realised they increased his tax as his income grew. Plus, he’s still young and building something in his life. So, he pivoted towards growth ETFs that focus more on capital appreciation rather than dividends. Even then, he’s considering going back to dividend ETFs when he needs the cash flow for retirement.

“You’re buying a home soon, so what will your portfolio breakdown look like in the future?”

First, Hayden is aiming for simplicity in his portfolio. At the moment, he's managing five different ETFs, which he feels is a bit excessive. For him, fewer holdings mean less hassle and a better focus on what really works for his financial goals.

Second, he’s thinking of diversifying his investments geographically. With the new home property, his exposure to the Australian market will grow significantly. So, he's thinking about reallocating some of his investments in ETFs to international markets.

Lastly, Hayden is earning around $100k from Pearler. But, as mentioned earlier, if he combined that with dividends, it also nudges him into a higher tax bracket. So, he's considering a shift towards high-growth, low-dividend investments. This could potentially reduce his tax bill while aiming for larger capital gains down the road.

Let’s ask Dave this time…

“What’s your portfolio breakdown?”

Other than ETFs, about half of Dave’s assets are diversified across traditional holdings with potential for growth and income. He holds about 20-25% in investment properties and roughly 24% split between superannuation and home equity. Then, there’s an amount kept in cash within an offset account.

Interestingly, Dave also holds a minor stake in Pearler. His involvement from the company's early days offered him an investment opportunity, which he accepted.

“Any plans to adjust the ETF part of your portfolio?”

Looking ahead, Dave is continuing his transition from property towards shares. He’s choosing his moment to sell a couple of properties in Perth and redirect those funds into ETFs. Personally, he’s committing to two index funds: the Vanguard Australian Shares Index ETF (VAS) and the Vanguard MSCI Index International Shares ETF (VGS).

Besides the mainstays, Dave’s portfolio includes a couple of Real Estate Investment Trusts, or REITs (which he bought after the market crash during COVID). But unlike residential properties, his REITs invest in commercial spaces like office buildings and shopping centres.

However, Dave is thinking of selling his REITs in the future. He’s doing it for a feeling that many of us can relate to: the clearer our investment path, the less cluttered our minds.

Side note: if you’ve occasionally wondered about REITs, we’ve rounded the articles that might just put some pieces back in place:

• “ETFs vs REITs: how to choose the right investment for you”
• “Are Real Estate Investment Trusts (REITs) a worthwhile investment?”

“Ever thought of trimming your portfolio down to one or two ETFs?”

Now, you might ask, if Dave’s planning to trim his portfolio, why not go all the way to a single fund? While a single ETF seems less stressful to manage, having two or three different ETFs actually gives Dave an advantage.

When Dave splits his investments between, say, Australian and global ETFs, he’s not just spreading risk. He’s giving himself the ability to rebalance an investment portfolio periodically into the future. It’s just something you can’t do if you’re holding a single fund.

When markets fluctuate, and they always do, the value of different ETFs can diverge significantly. Let's say, as a hypothetical, that Australian ETFs are lagging while international ETFs go up. Over time, the latter starts to weigh more in our portfolio.

Suddenly, you have one ETF with an outsized risk of pulling down your portfolio’s value. Because, unfortunately, past performance does not guarantee future returns. (So…if you’re holding a single fund, your portfolio is at the mercy of the volatility of the index it’s mirroring.)

However, if you rebalance, your portfolio’s value is less likely to take as much of a hit when any of the ETFs you hold declines in value. Conversely, if the underdog in your ETF portfolio starts performing well, you’re positioned to catch the uptrend.

But, as with everything, Dave’s personal investing strategy comes with a caveat: it’s not the same as buying too many sector-specific or thematic ETFs and trying to time the market.

The more you tinker, the more you risk second-guessing your choices at exactly the wrong time. We might think we’re being clever, “hacking” the market, or seizing control. But what we’re really doing is opening the door to potential missteps.

So, for most of us, simply getting our feet wet and adjusting our strategy might work best. That means doing your research, experimenting with a single index ETF and adding another as we become more confident.

“Would you lean more towards your divided-paying ETF (VAS) after selling your properties?”

For Dave, property has always been a mixed bag. Yes, it generates rent income. But, in his experience, the ongoing expenses and mortgage eat into that income.

So, when he started his transition to shares, Dave leaned heavily towards the dividend-focused VAS ETF to fund his retirement. Over time, though, he relied less on dividends as he managed to earn additional income elsewhere. Hence, as his circumstances evolved, so did his investment strategy.

While he still appreciates the dividends, keeping VAS the biggest part of his portfolio isn’t as essential as before. Currently, he holds 30% of the growth-focused VGS ETF while the rest of his investments is in VAS. He now plans to add more shares to his growth ETF until it’s evenly balanced with VAS.

All together now…

Why we’ve always chosen the boring investing strategy

We get it: the companies behind our favourite products or services seem like sure bets. We know them, so we trust them. However, even sectors and companies we believe we understand deeply can blindside us with unexpected crises.

For instance, as an aviation buff, Hayden felt a strong pull towards companies like Boeing. The company seemed grounded deeply in global infrastructure with lucrative defense contracts. Similarly, Qantas appeared as a strong contender with robust management and a sturdy business model.

But reality hit hard and fast. Boeing faced safety crises with its 737 Max , and Qantas grounded its fleet due to COVID-19 . These events turned what Hayden thought were sure stock winners into potential financial disasters overnight.

This is why we do our best to stay away from stock-picking and stick to investing in the market as a whole. When it comes to investing, excitement over one thing often masquerades as opportunity. But, despite the noise, we’ve found in our experience that the boring path is the fastest way to wealth . In contrast, taking wild speculative risks based on luck and hope can be a fast way to lose it.

Second, as Dave noted, the sharemarket is intensely competitive. There are countless analysts better connected and more deeply entrenched in this world. Thinking we can consistently do better than these professionals is just unrealistic. And even with all the information in the world, certain events are simply beyond anyone’s control.

To Dave’s last point: while it's tempting to chase “hot stocks”, the reality is that most shares don’t outperform the market over time.

Dave explains this through the lens of the Pareto principle, where 20% of stocks account for 80% of the market's long-term gains. In other words, only a small fraction out of thousands drive significant market returns. If you happen to miss that tiny number, you're likely to lag behind the market average.

In the end, picking stocks is rarely good for everyone. Even our investing hero Warren Buffet thinks picking stocks is hard . Because, frankly, it’s nearly impossible to predict which companies will continue to perform well over the long haul.

Final thoughts

Obviously, like what’s going to happen between now and the future, we'll likely have tweaked our investment portfolios in some way. We are sure things will change over time because it tends to for everyone, regardless of how long they’ve been investing.

With that said, one key takeaway for us all is that what we invest in (and why) is never set in stone. As much as we'd like to set and forget our investments, it’s rare for anyone to have the perfect, unchangeable portfolio. Instead, we learn, we adjust, and we adapt. Not just to the markets, but to our understanding of our financial goals.

Even so, we believe it’s best to let the market do its thing after doing our part to manage risk. It's easy to get swayed by market ups and downs, but our goal is to stay the course and keep our emotions in check. That’s what sets long-term investing apart from mere speculation.

Finally, we're excited about continuing this conversation and evolving our strategies as time goes on. We’ll keep sharing our experiences, the good, the bad, and the boring…because that’s where the real lessons are. We hope our insights help you as much as they help us.

And remember, we're here to answer your questions. Drop us a line at hello@aussiefirepod.com or follow our socials at Strong Money Australia and @pearlerhq .

Until next time, happy investing!

Dave and Hayden