This week on Equity Mates

Hey there Equity Mate,

Happy Thursday - we’re back in the office this week after holidays and it’s good to have the weekend just around the corner - still dusting off those cobwebs!

We hope you’ve been enjoying our Summer Series across Equity Mates Investing podcast and Get Started Investing podcast.

Here’s a reminder of this week’s content:

• Monday: Equity Mates (Apple | Spotify): Does Google have any growth left? - Alphabet

• Tuesday: Get Started Investing (Apple | Spotify): From debt ridden to debt free

• Thursday: Equity Mates (Apple | Spotify): Australia: the land of the packaging giant - Orora

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Your questions, answered

Anonymous asked via email:

I want to buy a house within the next 7 years. What should I do with the savings? Keep it in cash or invest it?

We put this question to Patrick Malcolm, from GFM Wealth Advisory:

This is an excerpt from the Ask An Advisor episode with Patrick Malcolm.

It’s a really tricky question because time horizons, when it comes to investing, there's nothing more important.

So with superannuation, if you're investing for 30 years, you can take on some risk and say ‘I'm prepared to ride that volatility’. But if you're saving for that house deposit and before you want to sell those investments, the market falls 10%, then you've suddenly got 10% less purchasing power for the house. Probably not a great thing.

So as well as being a quintessentially stingy financial planner, I'm pretty conservative as well. If you can see your time horizon for buying a house in the next three years, I would not be taking any risk with that money. I wouldn't. That's a very short space of time, and markets can do a lot in three years.

Five years I find a really awkward one. It's that sort of in-between where it's not quite long-term. I'd probably be drawn to being conservatively invested.

I think if you're sort of saying I view my investment time horizon for owning a house as beyond seven years, maybe a portion of what you're saving, you could direct towards some market-linked investments. But my view is that when you're saving for a specific purpose where you need a lump sum of capital, I probably wouldn't be taking a risk with it. 

If you have a question you’d like answered, hit us up at ask@equitymates.com

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What we’ve been reading

The cocoa question

Bad news: your chocolate is about to get more expensive. In the past year, heavy rains in West Africa has destroyed cocoa crops. And West Africa is the heart of the global chocolate trade - responsible for three-quarters of the world’s cocoa. Just two countries - Ghana and Côte d'Ivoire - are responsible for more than 60%.

Prices are now roughly double where they were in 2017. And according to this article, that doesn’t look like it’ll change any time soon.

This article takes a deep dive into the global cocoa industry and some of the key companies through the value chain. Unsurprisingly, the industry is massive: the world consumes 3 million tonnes of cocoa beans each year and the chocolate industry is worth $47 billion USD.

Now, as cocoa reaches record highs, the question is, who will be the biggest beneficiaries?

The Duolingo effect: How keeping the ‘streak’ is changing people’s behavior

App developers in industries from education to fitness are working on ways to gamify their products. Essentially, if a user feels like they are competing against themselves or other users, it is likely to increase engagement and retention. One of the most effective ways to gamify an app is ‘streaks’ which this article labels ‘The Duolingo Effect’.

Duolingo, the language learning app, has been very effective at using streaks - celebrating users that day-after-day spend time learning another language. But it’s not just Duolingo. Snapchat has been an early and very effective users of streaks - with users not wanting to break the number of consecutive days they’ve messaged friends. Even Wordle, the once a day guessing game, records users streaks with the number of consecutive days played.

The author of this article, Danny Weathers is a Professor of Marketing at Clemson University and recently published an article in the Journal of the Academy of Marketing Science on the phenomenon. This article is a distillation of his key findings.

As we get into the new year and reach the time that many new year’s resolutions start to waver, gamifying your resolution and finding a way to track it might be the way to keep you on course. As Weathers finishes the article:

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