This week on Equity Mates

Hey there Equity Mate,

Normally we use the top of this email to share updates on what’s happening at Equity Mates or across financial and business news. Today we wanted to share two pieces of content that are a little outside our norm.

Firstly, the world has watched as the tragedy of the Francis Scott Key Bridge collapse in Baltimore has unfolded. And while US government officials have started planning the rebuild, others in the US government have jumped deep into the conspiracy theory waters.

WIRED have been watching how quickly notable politicians and media figures pushed conspiracies about what happened, and how quickly those conspiracies spread online. Everything from Israel, to Diversity, Equity and Inclusion programs to COVID vaccines have been blamed.

The information environment is at an all time low and this is a case study of how bad it has become. We all rely on the internet to get most of our information, and this is an important reminder to tread carefully and read discerningly.

The second non-finance piece of content we wanted to share relates to the recent Australian government policy of a curfew for young people in Alice Springs.

Online personality Spanian has been producing a YouTube series where he visits different towns and cities across Australia. His episode visiting Alice Springs published 4 weeks ago gives a pretty good insight into the town.

For those of us who read articles but struggle to understand the situation on the ground, this more gonzo-style reporting is helpful.

Now back to business and markets.

To keep up with everything happening in markets, make sure you’re listening to Equity Mates Investing and Get Started Investing. Here’s what we’ve released this week:

Equity Mates Investing (Spotify | Apple | YouTube)

• Monday - Lump sum or DCA, the latest on Ozempic, & a baby Berkshire?

• Tuesday - Expert: Sam Gordon - Rentvesting, Equity Recycling & what is going on with Aussie property?

• Thursday - A Truth Social conspiracy, Pimp my Portfolio & the business of Champagne

Get Started Investing (Spotify | Apple | YouTube)

• Tuesday - $100 Challenge: How we save money on our energy bills

Your questions, answered

Claudia asked via email:

Can you discuss some strategies for creating multiple income streams?

We put Claudia’s question to Glen Hare, co-founder of Fox & Hare. Glen is one of the trusted advisors in the Equity Mates network.

To book a call with Glen and the team, click here.

[This is an excerpt from our latest podcast with Glen] Great question. In short, you can do both, but you've got to have a plan.

The first is turning skills into a side hustle. So for those that are potentially writers, content creators, photographers, etc could go out there and earn a little bit of extra cash on the side, through freelancing or consulting type work. And that can be a really powerful way to build wealth beyond the day job. And often it's work that people tend to typically enjoy more than the day job.

Think about the sharing economy. So an example of that would be an AirBnb or car share. If you're living in a city and you've got a car and you're not using it Monday to Friday, rent it out. The Airbnb one is something that I personally use. So my partner and I, a number of years ago now, live in Coogee, in the eastern suburbs of Sydney. We had a two bedroom apartment, and we rented out the spare bedroom. Did we want randoms living in our bedroom? Not really, but for 300 bucks a night, I was willing to put up with it. So, you know, if you've got some space that you can rent out $300 a night, renting out two, three nights a week quite quickly adds up to tens of thousands of dollars over the course of the year.

And then there’s building out a really healthy stock portfolio so that we're seeing growth and dividends (passive income) from those investments. We're also seeing dividends or distributions off the back of those portfolios. If you're in your 20s and you're putting away a couple of hundred bucks a week or a couple of hundred bucks a month, the compounding impact driving towards that financial freedom in your 50s is going to be massive.

If you have a question you’d like answered, hit us up at [email protected] or if you’d like to chat with Glen and the team, click here

This email is thanks to Australian Property Scout

The Scouting Australia Podcast is your go to platform for all the latest strategies and information for your success in property investing.

Hosted by Equity Mates regular property expert Sam Gordon, he unpacks everything from Real Life Investor Stories, Weekly Property News Bulletins, Investing Strategies and much more.

Listen in to The Scouting Australia Podcast  on all your favourite listening platforms and start your property education journey. 

What we’ve been reading

Investment Principles & Checklists

This is a resource that you’re going to want to save for later.

At 148 pages, it is basically a book. And it is chock full of great investing information.

Something that is common amongst many of the world’s greatest investors is a repeatable process. For many it is a checklist that they work through when considering any potential investment.

This document has aggregated the investment processes and checklists of many of history’s great investors. It features thoughts from Seth Klarman, Warren Buffett, Charlie Munger, Phil Fisher, Howard Marks and Joel Greenblatt amongst many others.

It is written like a set of study notes rather than a book (which makes it even more impressive at 148 pages) and discusses the ways that these great investors look for opportunities and then consider whether they will invest.

It is also a reminder of the level of work that should go into investing in individual stocks. If you find it overwhelming, that’s okay. There’s plenty of great investing products for you - namely index funds and active managers. But for those who want to get better at investing in individual stocks - happy reading. We hope this document helps.

 How can Robinhood afford 3% cash back on its new credit card?

It seems to be a rite of passage for many companies once they reach a certain size - get into financial services.

What do Apple, Coles, Costco, the National Rifle Association and Disney all have in common? They’ve all gone into financial services by issuing or branding a credit card.

The latest company to walk down the financial services road is Robinhood. And the American discount broker has entered the market with a bang, offering 3% cash back on all purchases. They’ve also announced that certain applicants will receive a card made of real gold weighing 36 grams (which would be worth more than $2,500 based on the current gold price).

This article takes a look at the business strategy behind Robinhood’s push into financial services. And importantly, asks how the discount broker that is yet to turn a profit can afford to offer 3% cash back on all purchases.

In summary, this is part of Robinhood’s ‘land and expand’ strategy. They have built a large customer base offering free stock trading, now they are working to grow their Average Revenue Per User (ARPU) by cross-selling them into other products. That includes Robinhood Gold, a subscription offering, and now into other financial services products, starting with their credit card.

Robinhood shared early data that shows an ARPU of $300 on this credit card alone, which it says is nearly 4x their current share trading user.

This ‘land and expand’ logic is exactly the same as Apple’s as it also pushes further into financial services. The challenge for many of these companies is that their strategies start to come into conflict. Many Americans will have an Apple phone, use Robinhood for their stock trading and shop at Costco. All three of these companies now offer a credit card and are competing for the same customers.

Financial services is a lucrative industry. The challenge for these companies is that it is ultra-competitive. We’ll be interested to see how Robinhood goes. And if they’re successful, we wouldn’t be surprised if online brokers in Australia follow with a similar playbook in years to come.