This week on Equity Mates

Hey there Equity Mate,

We’re getting towards the end of our Summer Series on both Equity Mates and Get Started Investing. We hope you’ve been enjoying the content and are feeling ready for a big 2024.

As we gear up for a big year across Equity Mates, we would love your help. We want to answer your questions, unpack your ideas and review your portfolio (yes, more on that in the coming weeks!)

We’ve built a new page on our website that will hopefully make it easier to ask your questions, share your ideas and leave your feedback. 

Check out the page here and leave us a question!

In the meantime, here’s a look back at the content we’ve released this week on Equity Mates and Get Started Investing.

• Equity Mates Investing (Apple | Spotify)

  • It's all in the name - Corporate Travel Management

  • Averaging 26% a year for 17 years, what next? - Mineral Resources

• Get Started Investing (Apple | Spotify)

  • Boost your income: Side hustles that paid off big time

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Your questions, answered

Reece asked via email:

What are the best ways to minimise interest payments on my home loan?

We put Reece’s question to Jacob McCudden, from Back to Back Financial Planners.

Easy.

Borrow the least amount you can and repay it as fast as you can.

That’s it.

In practice there are many ways this can be achieved:

• Don’t overspend why buying a home – that is, don’t just borrow what the bank will lend, remember, it’s in their interest to lend you as much as they can, only the government is the one holding them back to “lend responsibility”. They are not your friend, they are not helping you out, they are selling you a financial product (i.e. a mortgage) and will be paid handsomely for it in the form of interest at your expense (literally). As an anecdote, they say when you buy a house you pay for it twice, once for the purchase price, and again on the interest you will pay to the bank over the life of the mortgage

  
  Don’t believe me?

  
  Average mortgage debt of about $600k, interest rate of 5%, loan term of 30 years… total repayments to the bank = $1,159,535 ($600k in principal, $559,535 in interest).
  

• Start by understanding how much of your household budget can be allocated to “housing”, ideally under 30%, but no more than 40%. Then you can easily work out what repayments you can afford and thus how much you can borrow, but also when you want to be “debt free”, ideally before retirement but potentially even earlier (so whilst it may be a 30-year mortgage, that doesn’t necessarily mean you should be taking 30 years to pay it off)

• Don’t fall into the pressure of the bank/broker/real estate agent who all profit from the more you borrow and spend (easier said than done, I know, but this is most likely the biggest expense of your life, so it pays to take it extremely seriously and to do your homework)

• Then, once we’ve actually got the house and loan, you need to think about things like perhaps using offset accounts (if and when they make sense and they may not for everyone as loans with offsets generally come with a higher effective interest cost)

• More technical strategies could include debt recycling, which is where you leverage investment assets as a tool to slowly replace your “bad debt” (aka non-deductible debt like your mortgage) with “good debt” (aka deductible or investment debt), but these should be “advisable” before you embark on one.

• Seek advice! As really the only way to put together a strategy for your individual situation and help you decide what’s right for you is to speak with a financial planner who can develop a plan to help you achieve your financial goals (e.g. pay less interest over life of loan, pay of loan faster, be debt free, retire early, etc.)

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

How Spotify helped turn Afrobeats into a global phenomenon

Afrobeats is an umbrella term for music coming out of of West Africa, in particular Nigeria and Ghana. It has exploded in popularity in the past few years. Even if you don’t recognise the term, you’ve likely heard it - notably with Rema and Selena Gomez’s song Calm Down. And it is a classic example of the global power of Spotify of surfacing new music and defining culture.

Between 2017 and 2022, there was a 550% growth in Afrobeats streams on Spotify. In 2023 alone, Afrobeats was streamed more than 14 billion times on the music streaming giant.

But this hasn’t been an accident. Nor has it been organic growth as the West African music scene has found its way to the world. Spotify has invested in the Nigerian music scene. And in doing so it has helped shape the future of music.

In West Africa, particularly in Nigeria, Spotify has invested on-the-ground in building a local team and hosting a number of local events including workshops for creators, album launches for artists, and parties for music industry figures.

Globally, it has pushed this genre to the world. In June 2023, Spotify launched the website Afrobeats: Journey of a Billion Streams. And in September 2023 then Roma’s ‘Calm Down’ joined the less than 600 songs on Spotify with over 1 billion streams, the company celebrated the “first time an African artist-led track has racked up a billion streams on Spotify.” 

This article from Rest of World charts Spotify’s efforts in West Africa and to promote their music around the world. In doing so, it demonstrates Spotify’s cultural power and their ability to not just make-or-break individual artists but to make-or-break whole genres of music. 

How McDonald’s powers America's economy

McDonald’s is ubiquitous. The world’s largest fast food chain serves over 69 million customers daily across 40,000 outlets in more than 100 countries.

A new report from Oxford Economics has examined the impact of McDonald’s on the American economy and the numbers are staggering. The report estimates that the fast food giant adds $108 billion to the US gross domestic product each year. To put that in context, the US GDP is around $23 trillion, meaning McDonald’s alone adds ~0.5 percentage points to GDP each year.

The report found that McDonald’s spent more than $5.5 billion worth of raw ingredients in 2021, which included 1.3 billion kilograms of potatoes and 360 million kilograms of chicken.

The staggering numbers don’t stop there. Globally, McDonald’s is the world’s second largest private employer with 1.7 million employees (trailing only Walmart with 2.3 million). And according to the Oxford Economics report, one-in-eight Americans have worked at McDonald’s at some point in their lives.

There are plenty that wonder whether McDonald’s days of growth are behind it. With a heavily-saturated market and fast-growing competitors, it is fair to ask where to next for the $200 billion fast food giant. But these numbers are a reminder of just how entrenched McDonald’s is. It’s not going anywhere.

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