A painful GFC loss convinced Duncan to take control of his investments

TCI community member Duncan Owen thought his inheritance would be best in the hands of a fund manager. Then the GFC happened.

Duncan is well known to TCI members who watch Alan Kohler’s Facebook livestream. His regular questions are part of a policy to understand his investments more thoroughly. A policy he put in place after his managed money halved in 2008.

Duncan Owen tells James Brandis that it hasn’t all been bad and his investing has enabled him to leave work and pursue a dream of setting up his own business.

Tell us about yourself Duncan, how do you spend most of your days?

Thanks James for having me on. At the moment I am in an interesting part of my life. I am in my mid 30’s and just finished up my employment at the end of last year to focus on starting a business. So at the moment my days consist mostly of being at home trying to find a way to get out there and make some money before I run out of my savings. So that is effectively where I am at, at the moment.

Can you tell us a bit about your business? What are you setting up?

It is a little bit of a tangent from my background which is in marketing and more recently in fundraising for the not for profit sector. It’s a food business that I am working on and it’s basically trying to do the opposite of what Uber Eats is doing with restaurants. I am trying to make it really easy to get a healthy meal delivered. So basically limiting options down and producing really healthy meals and making it really easy to choose and to pick it up after you finish work on a busy night or when you have got some other plans on.

How far in are you?

It’s an idea that I have been working on for probably a year and a bit and I am getting to the point now where it is coming down to crunch time. I think now that I have finished up making an income, I really need to start making money soon so I am hoping to be in a position where we can start offering it to the public before the end of June.

Wow. And is it basically the healthy option of a home delivered meal.

This is the difficulty, trying to make it clear what the difference is to what is already out there. So you have a whole bunch of options for healthy meals, obviously a lot are being promoted pretty heavily at the moment. Ours are really designed for people who are time poor and aren’t planners. You have got a lot of things where you can get it delivered in 2 days’ time, you have a minimum order and that type of thing. Ours are really designed where you walk out the door and your plans have changed for the night but you don’t really want something unhealthy. It is a bit of a trick to try and get that right, but effectively it could be something that is home delivered in 30 minutes or we are looking at different options where you might be able to pick up the meal from a specific location. So that might be if you play basketball at a basketball stadium, or if you are coming home by train at a train station, something like that.

I hope it goes well for you. Has your investing helped prepare you for taking that leap?

I think so. I think it has always good from my perspective that I have got a bit of a safety net. If something happens and my partner can’t work anymore, whatever it might be, there is always just that little bit of a backup if I need to pay the bills. I try and keep my investing separate so that I am never dipping into that. It is always just that safety net that is sitting there.

And what does your investment portfolio look like?

At the moment it consists mostly of residential property and equities as well, which has changed over time. But for the most part it is probably about 50% equities I think, at this point.

Do you prefer equities over real estate or do you feel balanced when you have both of them in your portfolio?

To be honest I actually really hate real estate. It probably has some benefits in that it is illiquid. I am probably a bit impatient in a number of ways which can be to my detriment, but on saying that, I am relatively new to investing in property and it hasn’t been the greatest period of time for returns for me specifically and also I have found it to be a lot more work than I anticipated. I guess I was probably looking for something to diversify into that wasn’t as time consuming as my share portfolio is, but mind you I make my share portfolio pretty time intensive just because I am interested in the companies that I invest in and in different strategies and trying to get it right, so I do spend a lot of time thinking about that.

What is taking the extra time in real estate, is it managing the property? Is it that sort of stuff that you don’t hear about that takes up the extra time and cost?

Actually it is. It is everything from dealing with body corporates to going through tax returns every year, I mean it sort of multiplies the amount of work that you have to do at the end of each year for each property that you have and then going through refinancing and those different things seem to take up a lot of time when they come up and I guess it just seems possibly like a lot of time because I am not passionate about real estate, but for me it’s just a bit of a distraction.

Do you think that the rewards are going to be there or are you yet to see them?

From property I am yet to see them and also another challenge for me is that having finished up working for the time being makes the cash flow equation a bit different as well. So things start to become a bit trickier. Obviously you don’t necessarily get the benefits of negatively gearing if you are not making an income, so changing things when my situation changes is more difficult than jumping on to CommSec and selling a share.

What sort of shares are you in?

I am in a variety of different things at the moment. I think traditionally I have probably held far too many stocks. 30-50 at various different points. Most of those have been individual companies that I have held as opposed to ETF’s or LICs or managed funds so I guess for the last couple of years it has been about paring down what I have been invested in to mainly companies that I am interested in that obviously have potential. Hopefully. And then also taking a bit of Alan’s advice actually and investing in some funds that seem like they have good potential and good historical returns. All up I would like to have 30 holdings into the next financial year. 10 being ones that companies that I am really interested in, 10 being international equities and 10 being managed funds or LICs.

Speaking of LICs you mentioned on the Facebook live stream with Alan that you were looking in to LICs like Blue Sky. How is that going? Have you put some money in to LICs now?

I have, just a few. Just Blue Sky at the moment and I just bought one of the Magellan funds yesterday actually, which I think is the future fund, possibly.

And how do you go about weighing up a new investment like that. What is your criteria?

This is a bit where I have tried to improve compared to my efforts in the past. Historically most of my research has been around articles, around a particular company and trying to figure out where it’s at at the moment and what the future looks like. I think more recently it is more about thinking about looking through the annual reports and actually making my own judgement on the company itself. So that is what I am doing a bit more of now, is trying to resist my impatience to jump in straight away or what seems like a good time when the excitement around the stock is there. I think that’s something a lot of people face difficulty with. I’m trying to start to just put it on the radar but then really do research in to it. Give it a green light at some point and then wait for what seems to be a good entry point. Unless, obviously, something changes with the fundamentals. That has been a tricky thing for me over the last 18 months or so is to try and change my natural behaviour to picking stocks.

So when did you start investing? What got you started?

I was in my early 20s and fortunately and unfortunately I had had an incident about 10 years before that where I had an injury to my finger due to a company that was negligent and it just happened that I managed to get a relatively small settlement come through. I think that at the time I seem to remember just wanting a brand new computer and then I have no idea why, but obviously I had come across something at the time and was just interested in stocks, so put a bit of money into I think it was Billabong shares at the time and I think also BHP as well. Ultimately what kept my interest from then on was it was a particularly good time for those stocks that I had bought and I probably held on to them for a few years, sold them and bought a second hand car and was pretty happy and then from then on, saved a bit of money each month or each pay into a Colonial First State managed fund. That added up over time, again did particularly well before the GFC and I managed to take that money and go travelling, which was good. That was my introduction into the stock market and I was still a relatively beginner at the time. Probably even after the end of that period as well. It wasn’t too sophisticated. It was just that the returns made me interested. Not losing money always helps and I like the companies that I bought at the time.

It sounds like you were learning by doing. Did you have a mentor or any books that guided you on your way?

No… actually, you know what. The only book that I can think of was probably a number of years before I entered or started buying stocks which was Rich Dad, Poor Dad.

That comes up a lot in these conversations.

Yeah, I can’t remember, I think my mum might have given that to me. I read a lot and always have, but never really read any kind of investment type books, but I think that was definitely the one that piqued my interest.

Do you ever give advice to other people about investing?

I try to sit on the fence to a degree. I certainly don’t like to give people ideas, but by the same token, I like to think that people should be a bit more involved in the companies that they are interested in. My circle of friends and family is not particularly interested in investment, apart from buying their house or an investment property. So it is difficult, although I do have one friend who is going through a trading course at the moment, so it’s nice to be able to talk to him about different things, but other than that, not really.

How do you think your business is going to go. Will we be looking for you on the share market in the next couple of years? Can we invest in you, Duncan?

Definitely not at the moment, maybe one day. I don’t have dreams to be on the stock market, so to speak. I think it’s more about just getting out of working the 9-5 for somebody else and taking the initiative and making something that is a success and using that in turn to open more doors down the track and opportunities that I am interested in rather than just needing to pay the bills.

That sounds great and it sounds like your investments have played a big part in making that possible for you.

Yeah, definitely. Look, there is probably another big piece that I have missed out along this chat so far which was just before the GFC. Unfortunately I had to inherit some money which has been where my real focus has been on for the last little while. Unfortunately, considering it was a bit more money than just this payout for my finger, I thought that it would be wise to get some external help to manage, to help invest that in particular funds at the time. That was actually probably one of the worst times to consider that because it was just before the GFC. I think it was November 2007 when I invested those funds and thought we were doing the right thing, obviously the share market went down a good chunk and I invested some more and managed to have a pretty significant lesson during that time. I think at one point I was about 56% down overall. It can be a bit stressful. So ever since then it has been all about recovering those losses and setting up for the future.

A tough lesson to learn.

Yeah, a really tough lesson. So I think it is kind of the opposite of the early days that I invested, I stuck with this investment manager for 4 or 5 years and then thought well maybe it was time to go out and take the time to become educated on the whole process and start looking after my own investments.

Well Duncan, I hope it continues on an upward trend for you. Thanks for sharing your story with us on The Constant Investor.

Not a problem. Thanks for your time.