Meet Russ (and his 9 lessons for building wealth)

A few weeks ago, Russ reached out with a story to tell. 

He's worked in funds management for most of his life, has been investing for 30 years, and has a few financial wins and battle scars to show from it. 

Russ has cut his wallet to the bone catching falling knives, but he's learnt that hope is not an investment strategy in the process. He's learning from his mistakes, now knows how to be patient and not complacent, and is backing his knowledge of markets to help build his wealth for the future.  

"My life situation sees me in a different space from many people my age. Post-divorce, the capital I have isn’t enough to purchase my own home, or at least not without taking a very large mortgage," he says.  

"I could either take on substantial debt, grind out the rest of my career just to meet repayments and leave my wealth destiny in the hands of the expensive Sydney property market... Or I could back my knowledge of markets and financial products, embrace my high-risk tolerance, have the freedom to make my own decisions, stay nimble and keep learning." 

In this Meet the Investor profile, Russ shares what inspired his investing journey in the first place, opens up about some of the challenges he's faced along the way - and shares some of the satellite investments he's using to spice up his portfolio. 

Plus, he also shares nine lessons that he's learnt in three decades in markets - and reveals the stocks that have kept him up at night over that time. 

Want to be featured in Livewire's Meet the Investor series?

If you would like to share your story like Russ and tens of investors like you, send us a message at the email below:

content@livewiremarkets.com

Livewire Investor Profile 

• Name: Russ Edwards
• Job: Funds Management Marketing
• Age: 53
• Years spent investing: 30
• Biggest investment: ETFs
• Secret talent: My investor’s poker face. Walking into the office hiding my wrenching gut when I’m down big on a leveraged US play overnight. Mornin’ all! But equally, hiding my glee when I’m up the same. Mornin’ all!

How long have you been investing and what got you started in the first place?

I’m 53. I had no real exposure to investing until I started working in the investment division of Mercantile Mutual in the mid-1990s. From here, I learnt the basics about markets, products and wealth generation. An embarrassing example of how poor my grasp of concepts were, I remember saying to my boss and mentor I was thinking about investing a chunk of my margin loan in a mortgage trust with a fixed unit price, thinking it would help preserve capital and cover the interest obligation. He sternly said, “Don’t do anything without me looking at it first”. I took out no such loan, flirted with a few stocks then invested in a one-bedroom unit fairly early off the back of some savings and a small inheritance.

What is your objective from investing and how would you describe your strategy?

My life situation sees me in a different space from many people my age. Post-divorce, the capital I have isn’t enough to purchase my own home, or at least not without taking a very large mortgage. I could either take on substantial debt, grind out the rest of my career just to meet repayments and leave my wealth destiny in the hands of the expensive Sydney property market or I could back my knowledge of markets and financial products, embrace my high-risk tolerance, have the freedom to make my own decisions, stay nimble and keep learning. It also means I can manage my non-super portfolio alongside my SMSF and employ sensible gearing in both portfolios.

The aim is capital growth as I have a medium-term outlook on the rump of my portfolio, realised capital losses to absorb and no real need for yield given my reasonable income. For me right now, yield comes in non-financial forms, such as buying an old car that will hold or grow its value, the divvi being nods of approval from enthusiasts or a rip through a South Coast National Park back road.

Can you share your top 5 holdings in % terms and why you hold these positions?

I take a core-satellite approach, with broad-based ETFs forming a permanent nucleus. These include the Vanguard Australia Shares Index ETF (ASX: VAS), Vanguard All-Word Ex-US Shares Index ETF (ASX: VEU), Betashares Global Shares ETF (ASX: BGBL), Betashares Geared Australian Equity Hedge Fund (ASX: GEAR) and the iShares S&P 500 ETF (ASX: IVV). I’ve chosen these so I can adjust overall allocations based on my views, particularly the direction of the US economy.

Current satellites include:

• Active Aussie small-cap funds and active emerging market funds
• US tech and BTC ETFs. This absorbs most of my research time right now with a view to being active over the next 12-18 months.
• A few Australian shares – medium-long term buy and holds where I understand the industry. No real stars here.
• A few shares to complement the tech and crypto themes including MicroStrategy (NASDAQ: MSTR) and Block (ASX: SQ2).
• A fair allocation to cash right now given I believe markets will come off at some point this year (just like I did last year!)
• An old BMW e30.
• A pile of mostly old surfboards.

Beyond the satellites, I sometimes have shorter-term positions depending on what might be going on, particularly in the US.

Are there any investments on your watchlist?

Many – they are a mess! Thematically I am watching the momentum of Bitcoin-related stocks and ETFs as it’s an enticing time of the (to this point) quite predictable four-year price cycle and an important point of the adoption curve. I’m also looking for a bottom in China and lithium plays to set long-term holdings, and watching various US ETFs and stocks.

What was your worst investment and what has been your best?

Worst investment? A tiny stock I bought not long after IPO, which I won't reveal. I went from checking the price multiple times daily, attending their AGM, meeting the CEO, and then not checking for about 18 months while I went through a divorce during COVID. I invested too much, it was too illiquid, I didn’t really understand the company or the market, I doubled down, I forgot about it. This cost me a fortune; a fortune which would make a big difference to life today.

A second one would be Afterpay (APT). This is a great example of a good investment that demands a good buy decision and a good sell decision. I took a deep breath and bought a solid five-figure amount in APT under $10 as the pandemic turned the world black. I was lucky enough to time the exact bottom. I made a 75% gain in a day and sold. The next day it went up another 30%, and I thought it would retrace. The rest is history. Amazing buy decision; rubbish sell decision which cost me another fortune; a fortune which would make a big difference to life today.

Best investment? My best is yet to come. I invest time raising three great kids and time maintaining good health. These investments will serve me well. For financial bragging rights, my best stock picks would be IPH (ASX: IPH), Ardent Leisure (ASX: ALG), and Qantas Airways (ASX: QAN) at its 2012 nadir. Best funds: getting my super into geared share funds at an early age and choosing good active Aussie small/micro-cap managers.

Is there a lesson you’ve learnt as an investor that could potentially help others?

Many lessons:

1. Hope is not an investment strategy. Employ stop-losses.
2. Marry the right person. If you get that decision wrong, it will cost you in many ways.
3. Don’t try and catch falling knives. I’ve cut my wallet to the bone!
4. Know when to build expertise, and when to buy it. In my professional travels, I’ve seen some of the best investment teams at work, first-hand. It’s a true privilege to sit in on a Monday morning investment meeting to hear how the best cut through the noise. You will NEVER be able to compete with professional active managers, so buy their wares for a fair chunk of your portfolio.
5. The worst investors try and time the market – but so do the best.
6. Think of the upside, but don’t get swept away with it. Imagine what you would do if your investment doubled. But also make sure you can take your mind to what you would do if your money halved. My failing is I would lie awake thinking only of the upside outcome, but I couldn’t take my mind to the downside.
7. Choose a good accountant. If you can’t hear his spurs jangling as he walks in the room, you’ll pay too much tax.
   
8. Be patient. If you’re hunting for big opportunities and move large percentages to 1-2 major themes, then be patient waiting for them to come, and for them to play out. But, don’t be complacent and if the core thesis changes, get out.
9. Learn from your mistakes. Keep going. You won’t win the fight if you step out of the ring.

Can you share a personal passion or ambition you have for the future?

I don’t have a clear retirement plan just yet. As my kids’ lives evolve that will impact where I work and live. With that in mind, my main ambition for the future is to have optionality, which is quite limited right now. With investing as a genuine interest and non-property investments being my main source of wealth generation, it makes sense to, in time, work less and focus on investing more – plus make time for travel, surfing and even a bit of golf.

Want to be featured in Livewire's Meet the Investor series?

If you would like to share your story like Russ and tens of investors like you, send us a message at the email below:

content@livewiremarkets.com