Aussie Firebug

Financial Independence Retire Early

Ask Firebug Fridays 37 feat. Terry W

Ask Firebug Fridays 37 feat. Terry W

Nothing written below is financial advice. The questions and answers below are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.


Question (03:39)

My partner and I have two joint ventures with another married couple.


This is our primary business. Our family trust owns 50% of the company’s shares and the other couple’s trust owns the other half.

The business has been growing well ever since we purchased it in 2019. To purchase this business, the company itself took out a substantial loan – using its own assets as security. This is a loan that the business owes.

Separate to this, each couple contributed a small ‘buy-in’ sum of money through our respective family trusts. My husband and I took out a personal loan (within our trust) for our ‘buy-in’ contribution. The other couple had the cash to contribute through their family trust.

These ‘buy-in’ amounts are recorded as a ‘loan’ to the company. Because they exist, we have not been taking a dividend when there is surplus cash flow. Instead, when the business can afford to pay an amount to each family, it has been treated as a ‘loan-repayment’ for the ‘buy-in’ money that was contributed at the start.

This business has two directors – one person from each family unit. These directors take a regular PAYG wage.


This company was created as the entity to purchase a block of commercial property. Our lawyers had much deliberation whether to purchase the property via a tax partnership between the trusts or purchase it in a company. A company was chosen in the end for the added asset protection.

We have purchased this land with the same couple with whom we own our primary business. This block of land will become the business premises for our primary business.

This company exists outside of our family trusts for asset protection. As with the first venture, the company is owned 50/50 between the families and has the same two Directors.


INTENTIONS FOR THESE JOINT VENTURES: Who knows what the future will bring. At the moment, collectively, we would love to continue to build these businesses up and eventually, we would like to sell them together for a comfortable profit.



Our PPOR has been moved into the name of the spouse that does not act as a Director – for asset protection.

My partner and I have our own share trading portfolio inside of our family trust.

Personally, I work very little in our existing businesses at present. I am primarily a stay-at-home parent. When my kids are bigger, I would like to start my own side business doing web development from home. I would start this venture as a sole trader – unless advised otherwise.


Questions for Terry:

1) Is it a good idea to have our share-trading portfolio inside the same family trust as our main business? I’m not sure if this is a mistake or whether it’s okay because the trust only owns half shares in the main business.

2) Was a separate company the best way to purchase the block of commercial land?

3) Currently, I invest small amounts of money regularly into the stock market (ETFs). This money is taken from our everyday personal account and deposited directly into our brokerage account (SelfWealth). Any money that the share portfolio makes is deposited directly into the brokerage trading account and re-invested with the next purchase parcel. Money that goes to the brokerage account – and money that is received as distributions – never flows through the trust account at all. Is this a problem when the share trading account is held in the name of the family trust?

4) Within the main business, each director takes a PAYG wage. Is this the optimal way for them to be receiving a salary? Or should they be taking remuneration as a dividend? What’s the tipping point between taking a wage (which is a business expense for tax) becoming outweighed by the benefit of dividends (which have franking credits)?

5) My partner and I took out a small loan within our family trust as our ‘buy-in amount’ for our primary business. When this business has surplus cash flow, we take money out as a ‘repayment’. However, we redirect this money into our home loan offset rather than paying down the tax-deductible bank-loan debt in our family trust. Is this allowed, or are we doing something wrong here?

6) Down the track, when I start my own web-dev business as a side hustle from home, is there anything to watch out for and is sole-trader the best way to begin?

I hope this all makes sense! …I know we have a lot going on!!

I can clarify anything that is not clear. I understand if it’s not podcast material!!

All the best, and keep up the fantastic work,


Firebug’s Answer


Question (35:36)

Hey AFB!
Thanks for the recent Pod with Terry on trusts! It was very heavy but very insightful, I’ve always found similar pods/articles to be too broad-brushed or high level to be as actionable.

I just have a question regarding the actual distribution of income in a discretionary trust. Let’s use yours, for example.

You mentioned your retired parents are beneficiaries of your discretionary trust – how then do you make sure that the $18K (or whatever the tax-free threshold worth of income is) can still be used by you when it is “distributed” to them? (quotation because Terry mentioned that the transaction doesn’t necessarily have to be made).

In other words, how do I distribute it to the beneficiary on a tax level, but keep the money for me to use/spend?

Sorry for the long paragraph, but really hope you can help out on this one. Thanks!


Firebug’s Answer


Question (41:36)

Can you ask Terry about the consequence of buying an LIC in an individual name vs. trust and then distributing income via the trust, i.e can we give each kid 416$ but no attached franking and instead give the franking to the higher income earner?

If the portfolio generates $3,500 worth of fully franked income with franking credits, can we give child 1 $416 and child 2 another $416 while spouse gets the remaining 2668 plus all the franking credits?? or better still 2668 to the spouse and only the 1500$ franking credit to the husband higher income earner??


Firebug’s Answer


Question (43:36)

I am currently in the highest marginal tax bracket 47% and working as a sole trader/contractor.

My wife works part-time as she has to take care of our child. I understand as a sole trader/contractor, I am under PSI rules for tax purposes and I cannot contribute my income to my wife and child via family trust because of PSI rule.

I was wondering with my current situation, are there any rules that can be bent to be under PSB so that I can open a discretionary family trust and distribute my income to my wife. Many thanks for your both time.

Kind Regards


Firebug’s Answer


Question (45:11)

I would love to hear about Estate planning/Will process for families with international assets to ensure that global assets pass on to the kids. Also, what’s the best way to nominate an international guardian for minors to cater for the unfortunate scenario of both the parents passing away.



Firebug’s Answer


Ask Firebug Fridays 37 feat. Terry W

Ask Firebug Fridays 36 feat. The Happy Saver

Nothing written below is financial advice. The questions and answers below are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.


Question (05:53)

Hey! Love these updates.

While I’ve been following you for a year it seems like you are always winning at this FIRE game. (which is great!)

Do you have any stories of how you royally screwed up, and how that made you learn something with which you used to do something awesome?

Those stories are a bit more relatable as I’ve personally screwed up a few things financially (taking investment risks that went the wrong way, etc.) and I’m learning as I go.


Firebug’s Answer

Hi Daren,

I’m glad you’re enjoying the updates mate!

I’ve had a few people send me similar messages over the years and I must admit that I’ve been extremely fortunate when it comes to my FIRE journey.

I haven’t really had any huge ‘stuff ups’ when it comes to money and investing (I’ve actually been quite lucky in some instances), but I have screwed up in general for sure.

One of my biggest royal screw-ups is nearly getting kicked out of Uni when I was 19. I’d just finished year 12 and got accepted to study at Monash University. I really thought I could just roll in and breeze through the units without putting in the work. I did more study in year 12 than I had done my entire life and I was a bit burnt out (school was never my thing and I loathed studying).
Well, long story short. I ended up failing 3 out of 4 subjects in my first semester and I received a letter from Monash warning me that I was about to be booted!

I cleaned up my act and graduated from Monash but I ended up having to do an extra 12 months in order to finish and those units that I failed cost me around $5K extra!

The worst part is that I was on the cusp of passing all three units. I really only needed to put in a tiny bit of extra effort and I would have passed. I felt really disappointed in myself for a long time after that.

The lesson I learnt was failing is much easy to live with if you have given yourself the best chance at success. Not everyone can be the best, but if you try your best and still come up short, so be it.


Question (28:34)


What will you change in your portfolio as you move from the accumulation phase to the pension phase?

Will you transition your growth shares to dividend shares? And if you don’t how will you make up any shortfall in dividends (or to get to 4%)?



Firebug’s Answer

Hi Edmond,

There’s no current plan to change the portfolio once we move to the pension phase atm. However, I may feel a bit differently about this when the time comes and as I get older.

I think there really comes a time when the mind shifts to wealth preservation mode. There’s something really comforting about a regular paycheck rolling in and I believe that may have a psychological effect on a lot of young peoples risk tolerance. When that regular paycheck isn’t there, I could see us shifting the portfolio to be more defensive but as of right now, no, we don’t plan to change the portfolio at all.

Our dividends most likely won’t cover our lifestyle completely once we have hit FIRE but they don’t too. Selling units in order to fill the gap is perfectly fine and is actually what the bulk of US FIRE chasers do. There’s a great article on Passive Investing Australia’s website that covers this. It’s called Dividends are not safer than selling stocks.

In a nutshell, a dividend from a company is actually a withdrawal and if you look closely at the stock market on the Ex-dividend date, you’ll see that the price of the company will drop by usually the same amount of however much the dividend payout was.

The biggest advantage I see of using a pure dividends strategy is the psychological benefits of not having to think about it. You just get 4 magical payments each year without thinking. But the big risk with this approach is concentrating too much on only investing in companies that pay good dividends. You definitely want to have some diversification in your portfolio.



Question (43:37)

G’Day mate,

Love the podcast and absolutely respect what you have created for so many Aussies.

I have recently joined interest in FIRE and in the process of setting this up; sorting out our investments/wealth.

My question for you and apologies if it has already been discussed (as I am still getting through all previous podcasts):

  • Do you rate the share apps Raiz (Acorn) or Spaceship?
  • Have you ever used these?
  • Do you reckon they are good or a waste of time?



Firebug’s Answer

Hi Stuart,

I’m glad you’re enjoying the content mate 🙂

I’ve never used any micro-investing apps before but I think they could be useful for people who want to dip their toes in the market.

Of course, you’re going to be charged extra for the features they are offering and the smooth barrier to entry software they are providing but paying a bit extra and getting started is way better than shoving it to the ‘too hard basket.

I like to think of these sorts of companies and services as training wheels on a bike. I wouldn’t be using them forever and paying the unnecessary fees. But They can serve a purpose IMO and the rates aren’t really that bad if we compared them to what some managed funds have been charging clients over the years.

I crunched the numbers on one of the most popular micro-investing apps in Australia atm called Raiz (formerly Acorns which was such a better name lol).

If you have under $15K invested with them you will be paying $42 a year or 0.28% to use their platform. It’s important to remember that any underlying management fee that an ETF provider may charge is added on top of Raiz’s fee. So if you choose a portfolio that has Vanguard ETFs within it, Raiz will charge you their fee on top of the underlying fund providers’ fees.

So the question becomes, is 0.28% too much? IMO, for people looking to get started… no it’s not.
BUT! They become unnecessary once you get the hang of it and eventually you’ll want to take the training wheels off and go direct.



Ask Firebug Fridays 37 feat. Terry W

Ask Firebug Fridays 35 feat. Mrs Money Flamingo

Nothing written below is financial advice. The questions and answers below are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.


Question (04:41)


How many ETF’s are too many?

I am trying to build a portfolio of ETF’s. I have a few that I like for various reasons but am finding there is an overlap of the holdings across several. I am currently at 7 ETF’s and am looking into an 8th but again there is overlap so not sure it is worth adding?

I currently hold NDQ, VAS, VGS, ASIA, IVV, VDHG & ROBO. The 8th one I’m looking into is VHY, it focuses on high yield dividend-paying companies but I note there is overlap here as well so not sure how much benefit it will bring.

I think I need to do more research!

Cheers Scott

Firebug’s Answer

Hi Scott,

Unfortunately, this type of question falls under the ‘it depends’ basket. There isn’t such a thing as a perfect portfolio mix but I can give you an example of the way we do it and justify each product.

We run a simple diversified portfolio that focuses on the biggest businesses within Australia, the USA and the rest of the world minus the USA. To achieve this diversification, we invest in the following products

  • USA – VTS
  • World ex USA – VEU
  • Australia – VAS/A200

A common question we get asked all the time is why do we have two products in our portfolio that are really similar (A200 and VAS). The answer to that is we started investing in VAS before A200 was even invented. We made the switch to A200 because the management fees were 1/3 of the price of VAS. And recently we have started investing back into VAS to balance the management risk between Vanguard and Betashares. That’s it!

I’m a huge believer in the psychological side of investing and am convinced that you need to have strong conviction with your investments in order for you to hold them for the long term and let the magic of compounding do the heavy lifting. There’s no right or wrong answer but I will say that it’s probably a good idea to have a diversified portfolio that has low management fees (anything under 0.3% is ok IMO). If you’re covering the diversification and management fees side of things, then the only real burden of adding extra EFT’s is the administration costs and time. There’s something to be said about a simple portfolio after all.

Here’s a great article from PIA that’s worth a read 🙂


Question (15:53)


I am 46 years old (so not that young) and have two small children that I care for with joint custody arrangements. I have approx 250k in a pension and after my house sale this month I would expect approx 150k cash. I live in Sydney where house prices are increasing rapidly at the moment.

My question is: do I buy a house using the 150k as a deposit or do I invest the 150k and increase savings?

Should I give up on property ownership?


Firebug’s Answer

Hi Simon,

Firstly, the older I get these days, the more I like to extend the definitely of what’s considered young lol and I definitely wouldn’t consider 46 as old mate 😅.

With that being said, if I were in your situation I would probably opt for the security of a home because you’re caring for children. But I’m not really sure what $750K in Sydney (20% deposit = $150K) can buy you these days. How important is homeownership to you?

I’m assuming your pension is money in a Superfund too. This means you’ll be able to access these funds once you’re 60… so only 14 years away.



Question (23:14)

*This question was asked in OCT 2019

Hi Aussie Firebug,

I’ve been listening to your podcasts for a while now, and I am looking into beginning a financial investment journey. To give you some context of my financial situation, I am 22 years old with about $80,000 in savings with a low cost of living. I do want to make the best use of these savings and that is why I am seeking out information about the world of finance from people like yourself.

My question for you is:
Most financial bloggers/investors that I have listened to say that it is inevitable that there will be a recession in my lifetime – with some even predicting that this will happen in the next 3-5 years. If it is almost certain that there will be a recession, wouldn’t it be best that I wait until the recession to start investing? In this instance, I would be able to buy shares/property cheaply and my money would go a lot further than if I was to buy those shares/property today. A lot of investors say that you should NOT try to time the market, but why not?



Firebug’s Answer

*I answer this question in the podcast at (23:14)

Meet Bob, the world worst market timer.

“If you understand the math behind compounding, you realize the most important question is not, ‘How can I earn the highest returns?’ It’s, ‘What are the best returns I can sustain for the longest period of time?'” – Morgan Housel


Ask Firebug Fridays 37 feat. Terry W

Ask Firebug Fridays 34 feat. Dave from Strong Money Australia

Nothing written below is financial advice. The questions and answers below are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.

Question (06:50)


If you had to employ any hedging strategies against your investments, what would you go with? I recognise your strategy is long-term share investing, which understandably will go through up and downs, but keen to understand if you think about how ways to minimise the downside (besides just buying more when the market is down).

Thanks and keep up the good work!


Firebug’s Answer

Hi Jeff,

Short answer, not really. Long…er answer is we invest in two unhedged ETFs (VTS, VEU) so that provides some form of hedging against the AUD but we never choose this intentionally, it’s just that those two funds happen to trade in USD, but I like the fact that they do.

I would never pay extra to buy the hedged version of an ETF either but that’s just me. I’m pretty comfortable with the ups and downs and only really rely on our dry powder store (cash) to fall back on in turbulent times.

I understand that a lot of portfolio managers allocate some gold and other classic hedging asset classes to portfolio’s to smooth out the peaks and troughs but I’d rather go for bigger returns atm and just stomach to big falls (like last year).

I’ll also add that I like to have a little bit of debt on our books to hedge against inflation. We have a PPoR now and I don’t think we’ll ever pay off the loan completely. We plan to debt recycle the loan and pour it into the markets. Having this tax-deductible loan is actually comforting to me in the event of inflation going crazy.

And that’s about all I can think of atm mate. I’m sure there are other hedging strategies I don’t know of (see futures and derivatives) but I’m happy with how we’re currently investing.


Question (13:49)


I’m in the process of selling my investment property (still keeping my PPoR)

Capital growth has actually gone backwards (however recent post covid boom is softening the blow) but after the tax benefits, I’m not really taking too much of a loss.

Anyway, my main question is… Do you personally have less stress and enjoy investing in ETF/stock portfolios instead of having a property portfolio? I’m talking about the entire picture, what is more stressful? And what has provided the best returns in your situation?



Firebug’s Answer

Hi Harley,

Thankfully you got a little back with the Covid boom. Who would have thought a global pandemic would send house prices soaring right?! Crazy times.

To your questions…


Shares have been basically stress-free. I think you’d have to be dead not to have a slight concern during the COVID drop last year but that’s about as bad as it’s been for us during the last 5+ years investing in shares.

There are just so many issues/problems that came up with our properties that made them a lot more work. In fact, the more I think about shares vs property, the more I think you can’t really compare them at all. They’re just too different.

Property is more similar to running a small business. Shares on the other hand are 99% hands-off. Returns are a bit tricky to calculate too. I’ve had better after-tax annualised returns with our properties but they’ve been a lot more work. I’d say there’s more opportunity with property than there is with shares. As retail investors, we would be hard-pressed to outperform institutional investors (and even they get it wrong more often than not) because they have a whole bunch of fancy tools, experts and massive budgets to get the edge. But a multi-million dollar real estate conglomerate is never going to bother buying a run down $650K two bedder in the outskirts of Syndey and doing a reno… but plenty of tradeis/mum and dad investors would, not to mention Australia’s favourable tax breaks for PPoR’s.

But again, the work involved with real estate almost makes this incomparable.


Shares = Hands off passive investing with a decent return
Real Estate = Greater risk but greater reward with a lot more work thrown in



Question (33:27)

*Harley’s second question

Also, do you re-invest dividends immediately? Or sit on them to buy in larger parcels to avoid some extra commissions?

Firebug’s Answer

We don’t. It’s a psychological reason though. We like seeing the dividends hit our account. Stupid I know lol. We add those to our savings and try to invest around $5K each month.

Question (37:33)

*Harley’s third question

Do you have an exit strategy with your ETF’s or plan on living off dividends? Do you plan on selling them to realise capital gains?

Firebug’s Answer

No exit strategy. We plan to hold the portfolio forever and live off a combination of dividends/sell-offs.



Ask Firebug Fridays 37 feat. Terry W

Ask Firebug Fridays 33

Nothing written below is financial advice. The questions and answers below are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.

Question (01:30)


I would like to know what you have sacrificed at a young age to achieve your current Net Worth?


Firebug’s Answer

Great question Kate!

I’d love to say that I haven’t sacrificed anything because you really shouldn’t give up all of life’s pleasures just to reach financial independence but there were a few sacrifices along the journey.

These are the main ones:

  • I never lashed out on really nice things (clothes, shoes, cars) but tbh, I didn’t (and still don’t) really crave those things anyway so not really a sacrifice.
  • Some social events. Things like going to the pub every week got old really quick and I always hated burning so much cash drinking out and about anyway. But there were other social events that I regret not attending. I hate to admit it, but sometimes I would say no to a trip to Melbourne with the boys, or an overseas trip because I was thinking of how much it was going to cost. In hindsight, this was a mistake and wouldn’t have moved the needle much anyway.
  • My independence because I stayed at home until I was 26. There’s pros and cons with this one but the last few years at home were a bit of a drag and I was well and truly ready to get a place of my own. I almost bought a house back in 2012 because I really wanted my own pad but the deal fell through, and that ironically turned out to be one of the best outcomes for our wealth due to what happened over the next 7 years. But those 3-4 years at home working full-time leapfrogged my savings a lot! So I’ll always consider this worth it, plus I get along with my parents so it wasn’t really that bad.
I honestly don’t even consider most of the above as real sacrifices.
The truth is I was extremely fortunate that a lot of dominos fell into place. But the most important one was discovering the concept of FIRE in 2013 and the philosophy of how to live a good and simple life. The next few years after that I became laser focussed on investing as much money as possible and probably went a bit overboard.

But the life philosophy of meaningful consumption, optimising waste/expenses and sustainable living has never left me. So people might look at how little we spend and think we’re depriving ourselves, but I can honestly say with hand over heart that we’re living an abundant (in my definition) lifestyle that makes us extremely happy. And that’s the most important thing IMO 🙂



Question (11:12)

Hi Matt,

What are the reasons/perks of living in country Australia (outside of the relatively low cost of housing)?



Firebug’s Answer

Hi Cityslicker,

This is a timely question as the wife and I were just talking about this on our walk the other day.

I won’t try to list all pros and cons but I’ll just talk about why we decided to move back to the country after a two-year stint in one of the biggest cities in the world… London.

First and foremost, we moved back to the country and bought a house to be close to our family. Mrs Firebug’s entire family (parents + 3 siblings + all the nieces and nephews) live in our hometown. Words cannot describe how great this is. The support network with kids is next level, family events are only ever 10 or so minutes away and most of us live within walking distance which means we can walk back home if we’ve had a few too many drinks 🍻😅

My parents also live in the town which makes everything so much easier in general.

My two older sisters however do not live here. We make the effort to see them and their children but it’s obviously nowhere near as convenient as having everyone in the one spot.

This isn’t necessarily specific to the country but I just thought I’d mention the main driver for us moving back and buying a house.

Other than that, here are some pros I love about living in the country:

  • House prices… I really can’t emphasise this bad boy enough. I see the prices of houses in Sydney and Melbourne and remind myself how lucky we are to be from a low-cost area. I know everyone is free to move but relationships you build whilst growing up with family, friends and the community cannot be understated.
  • I can ride my bike from one end of town to the other in less than 20 minutes. There’s nowhere in my hometown that I can’t get to within a reasonable timeframe on my bike 🚲
  • Access to the great outdoors. I have the beach, rainforests, snowfields and national parks all within a 1.5-hour drive (some being a lot quicker than that).
  • The more relaxed pace of living. Jesus Christ was everyone in a hurry in London! It has been nice not having to rush here and rush there since we’ve been back.
  • Greater sense of community. This might not be for everyone but I like running into someone I know when going for a walk down the street. I like meeting someone for the first time at work and realising that I use to play footy with their cousin. I like the idea of knowing a lot of families and people in my community. I feel like that tight-knit sense of community has sorta been lost somewhere along the way in modern cities. This is so strange to think about because you’re living in a big concrete jungle with millions of people but somehow it can feel more lonely compared to a small country town of five thousand. Building cities to accommodate cars surely has been a big reason for this. One of my favourite things about the old European cities is how friendly they are to pedestrians because cars weren’t invented yet. The tiny winding streets of Old Town in Trapani, Italy is a perfect example of this. Walking through the cobblestones streets, marvelling at the church architecture, grabbing a bite to eat in one of the restaurants in the middle of the path… magical! I’ve come to despise big roads and noisy cars. We need to start designing cities/towns with a lot more focus on walkways and not accommodating everything for bloody cars and trucks.

But there are also many things I miss dearly about London that you can’t get in the country. Here are some cons about country living:

  • Unlimited access to world-class concerts, festivals and sporting events. We are blessed to have Melbourne just up the road but it’s still a bit of a mission to attend these events. Living in London was truly epic in this regard. We could jump on the tube and pop down to the West End to see some of the greatest performers in the world. Spotify notified me one day that a John Mayer concert was coming up in London so I jumped online and bought tickets that night. Wimbledon was just down the road and on and on I could go but I think you get the idea.
  • In my experience, less desire to think outside the box, especially when it comes to working. I’m sure plenty of cities are like this too but London was simply overflowing with ambitious entrepreneurs and people on a mission to make real changes in a raft of different areas. And ambition is very contagious! I work with wonderful people now but there’s simply not the same vibe in the office compared to when I was working in the WeWorks building at a startup. It’s hard to describe if you haven’t experienced it first hand but there’s really something special when you’re given creative control over something and no one at the company does something just because that’s always how it’s been done. Things are changing though! Covid has made it very interesting and I think a lot of city talent is starting to trickle out of Sydney/Melbourne so this is one area to watch out for. Having my own freelance business these days, I long for the announcement of a WeWork style office set up in my hometown. I would definitely pay for an office space a few days a week if that meant I could be surrounded by other freelancers in the tech industry. I really miss this part of London.
  • Public transport! OMG, I did not realise how much of a difference good public transport makes, especially if you want to have beers on a Friday night!

I could have probably added a few more but honestly, home is where the heart is. And if I’d had grown in Sydney or Melbourne, there’s a very good chance I would have stayed there and just delayed my financial independence goal by a few years with the higher house prices.



Question (24:56)

Hey Firebug,

Thanks for all your great content. My partner and I love your work!

Have you covered in a blog or podcast why you’ve sold/selling your investment properties? I’m keen to know as I’ve recently purchased two properties that are doing well for me and considering whether I buy a 3rd. Keen to know your reasons why you’re moving away from property.

Many thanks,


Firebug’s Answer

Hi Chelsea,

In a nutshell, I can’t be bothered managing the properties anymore and I’m very comfortable with the returns I’m expecting from shares. I’m not making this move because I think it’s going to make me more money (although I don’t think the share returns will be too shabby either), it’s simply moving away from a more active style of investing (property) and becoming 100% passive (shares) to free up more of my time and energy so I can use it elsewhere. I used to be really into property investing, but I’m more focused on my business these days and thinking of ways to grow/improve that.

And for the record, I’m not against property investing in any way shape or form, I’ve just reached a point in my life where passive investing is a better approach for my wife and I’s lifestyle.

Hope that helps 🙂



Ask Firebug Fridays 37 feat. Terry W

Ask Firebug Fridays 32

Nothing written below is financial advice. The questions and answers below are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.

Question (01:42)

Hi Aussie Firebug

I have 3 kids aging from 21 to 14 who are great savers and want to invest in ETFs and LiCs.

I’m educating them financially by teaching them everything from Rich Dad Poor Dad but don’t know much about share investing. Do you have any guides for investing in shares?


Firebug’s Answer

Hi Tina,

I’m going to suggest three books.

  1. The Bogleheads’ Guide to Investing by Taylor Larimore
    An excellent book that provides a practical real-life understanding of how to become a passive investor through low-cost index funds and ETFs. It explains how the stock market works and why tracking the index makes sense for most people when it comes to investing. Skip the US chapters
  2. Money School by Lacey Filipich
    A great practical book written for Aussies but also has timeless wisdom that is applicable anywhere in the world. Lacey is someone who has walked the walk and reached financial independence in her 30’s so she knows what she’s talking about. My favourite thing about this book is that it’s very direct. You’ll learn practical skills on how to actually execute a plan. Sometimes financial books can either be too anecdotal, or way too dry and boring. Lacey strikes a fine balance of good-humoured relatable stories that emphasise the importance of peer-reviewed investing strategies.
  3. The Psychology of Money by Morgan Housel
    The older I get, the more I realise it’s mostly our behaviours that determine if we’ll succeed with money/investing. I always thought that it’s how much you know, that the really smart guys and gals would be the ones with superior returns but Morgan shatters this myth in ‘The Psychology of Money’ with fantastic examples of why even some of the most brilliant minds suck at managing their money and investing. I really liked this book because it focuses on the most neglected part of investing… mindset! Life happens outside of spreadsheets and we’re often our own worst enemy when it comes to building wealth.

Blogs and podcasts are a bit like junk food really. Nothing beats a well-written book!

I’d also like to give a shoutout to Passive Investing Australia. It’s a blog that you’ll probably be able to read in one or two nights but it answers a lot of the most commonly asked questions in a really clear and succinct manner.

I hope that helps 🙂


Question (09:21)

Hi Aussie Firebug,

Thank you for all the sensational and user-friendly content to date!

I’m a newly inspired millennial seeking FIRE (thanks to your podcast) and was curious to get your views on investing in high dividend-yielding ETFs (Australian and global) vs your current strategy of Aus ETFs/LICS, VTS and VEU. I get that the former typically produces lower capital growth and has higher MER, but wondering if you have ever considered the strategy given the potential for higher dividend income?

Keep up the awesome work!


Firebug’s Answer

Hi Reg,

Thanks for your kind words about the content mate 🙂

There’s a misconception when it comes to chasing high yielding shares called the dividend yield trap.
I’m a fan of receiving dividends because they’re tied more to the fundamentals of the business than the share price which can largely be influenced by the behaviour of the market even if the cash flow of the business hasn’t changed one bit.

Let’s take Commonwealth bank for example. On the 14th of Feb 2020, CBA closed at ~$91 bucks.

Just over a month later it closed at ~$58 bucks during the COVID crash. That’s a drop of 36%. Did anyone actually think Commonwealth bank lost 36% of its value in a month? Probably not. Were people running for the hills and acting irrationally? More likely.

But the interesting thing is that the CBA August dividend didn’t drop that much compared to the previous year (as a percentage).

For the majority of businesses, dividends go down less (as a percentage) than the share price in a crash and can be more reliable in retirement. But whilst I do like dividends, the total return on investment is ultimately the most important number when judging how well an asset performs.

Let’s imagine two scenarios when evaluating how two investments have performed.

  1. Company AAA is currently trading for $100 per share and pays $3.5 per share once a year. Dividend yield = 3.5%
  2. Company BBB is currently trading for $100 per share and pays $3 per share once a year. Dividend yield = 3%

Let’s pretend that we buy 1 share in both companies and after 1 year these are the results:

  1. Company AAA is now trading at $90 per share and pays $4. per share once a year. Dividend yield = 4.4%
  2. Company BBB  is now trading at $110 per share and pays $2.5 per share once a year. Dividend yield = 2.3%

The dividend yield for company AAA has gone up! But the total return is actually a net loss of $6.5 whereas company BBB’s dividend yield has gone down but the total return is $13!

Growth is really important which is why focusing on the dividend yield can be a bit of a trap sometimes.

Diversification and low management fees are within our controls (to an extent) as investors which is ultimately why we invest how we do. I hope that answers your question Reg 🙂



Question (14:20)

Hey dude,

I just wondered whether an episode of the podcast addressing patience might be coming up in the future. It’s a massive part of FIRE I think. Waiting each month for net worth’s to rise, checking markets too often, waiting for dividends, waiting to get paid, waiting even though goals can seem so far away.

Keen to hear your thoughts.


Firebug’s Answer

Hi Dave,

This is an interesting topic and one that I struggled with at the start of my FIRE journey.

If I could go back in time, I would explain to my younger self that financial independence doesn’t make you happy. It’s what you can do with the extra time you’ve bought back that really makes you happy. I’d also explain the concept of coast/flamingo FIRE where you can really start to control your time years before you reach your FIRE number. You’ll be surprised what an extra 10 or so thousand dollars a year of passive income can do to your psyche.

And I know it sounds corny but you’ve really got to enjoy the journey and make sure you’re living a fantastic life along the way. FIRE is more of a life philosophy for me as opposed to a destination I need to reach in order to be happy.

Breaking things up helps a lot too. The first $100K is often the hardest. Once you pass that, compound interest really starts to kick in.

I hope that helps mate 🙂


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