Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. Whenever we talk about investing in shares, I usually mention how important it is to get some professional advice. It's one of the best ways to ensure you're making good decisions. But you also need to have a plan, more than just a loose goal of maximising returns. I'm talking about a written plan, setting out goals, and the strategies to achieve them. Rachel Waterhouse is the Chief Executive of the Australian Shareholders' Association. Rachel, welcome to Fear and Greed.

Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. Whenever we talk about investing in shares, I usually mention how important it is to get some professional advice. It's one of the best ways to ensure you're making good decisions. But you also need to have a plan, more than just a loose goal of maximising returns. I'm talking about a written plan, setting out goals, and the strategies to achieve them. Rachel Waterhouse is the Chief Executive of the Australian Shareholders' Association. Rachel, welcome to Fear and Greed.

Thank you very much.

Thank you very much.

So why is an investment plan so important?

So why is an investment plan so important?

Well, diving into investing in shares without a plan can be a very expensive way to learn. Successful investors know that having a written investment plan is essential. Clearly defining your strategy will put your investment on a solid footing and ensure you have a good understanding. So you really need to think about the objectives of your investing activities, the strategies or actions that will determine how you reach your objectives, the tactics that you will employ to implement them. Having a plan provides you with rational decision- making. It stops you from making emotional investment decisions and not to let fear push you to sell. The share market goes up and down, as we know, and that's why having a plan is good.

Well, diving into investing in shares without a plan can be a very expensive way to learn. Successful investors know that having a written investment plan is essential. Clearly defining your strategy will put your investment on a solid footing and ensure you have a good understanding. So you really need to think about the objectives of your investing activities, the strategies or actions that will determine how you reach your objectives, the tactics that you will employ to implement them. Having a plan provides you with rational decision- making. It stops you from making emotional investment decisions and not to let fear push you to sell. The share market goes up and down, as we know, and that's why having a plan is good.

So do many people actually have a plan, do you reckon?

So do many people actually have a plan, do you reckon?

There has been an influx of first- time investors into the Australian market, and it's important that first time investors also create an investment plan to support their decision making. We know that 900,000 new investors were thinking of purchasing shares over the next 12 months, and what we do know is that one in two investors, they don't have a written plan. Or they have a vague plan floating around in their head.

There has been an influx of first- time investors into the Australian market, and it's important that first time investors also create an investment plan to support their decision making. We know that 900,000 new investors were thinking of purchasing shares over the next 12 months, and what we do know is that one in two investors, they don't have a written plan. Or they have a vague plan floating around in their head.

Okay. So the sort of thing we're talking about is that on that plan, you should include the sorts of sectors that you're interested in. It should include a timeframe. It should include a benchmark return. Is that the sort of thing we're talking about?

Okay. So the sort of thing we're talking about is that on that plan, you should include the sorts of sectors that you're interested in. It should include a timeframe. It should include a benchmark return. Is that the sort of thing we're talking about?

Absolutely. So you should really start with understanding your current situation. So what assets do you have? How much do you want to invest? What sectors should you be considering? And then you should consider your strategies. So your share investing plan should identify strategies to make your investments aligned with your objectives, and that's really thinking about things such as how much capital are you going to use for your share investing activities? How will you allocate this capital to different asset classes? And what risks could you face with your investments, and how will you manage them?

Absolutely. So you should really start with understanding your current situation. So what assets do you have? How much do you want to invest? What sectors should you be considering? And then you should consider your strategies. So your share investing plan should identify strategies to make your investments aligned with your objectives, and that's really thinking about things such as how much capital are you going to use for your share investing activities? How will you allocate this capital to different asset classes? And what risks could you face with your investments, and how will you manage them?

Okay, so when you talk about different risks, explain that to me.

Okay, so when you talk about different risks, explain that to me.

Yeah, so as far as risk, you need to consider the risks you're prepared to take. So there will be different risks, depending on who you are. A young investor who's earning a salary, they might take on more risk and have a higher exposure to shares. An investor who is a year out from retirement may want to keep more cash on hand and expose less capital to share investing. So when developing your investment plan, you will need to consider a variety of risks and their implications for your strategy and the risks you are personally willing to take.

Yeah, so as far as risk, you need to consider the risks you're prepared to take. So there will be different risks, depending on who you are. A young investor who's earning a salary, they might take on more risk and have a higher exposure to shares. An investor who is a year out from retirement may want to keep more cash on hand and expose less capital to share investing. So when developing your investment plan, you will need to consider a variety of risks and their implications for your strategy and the risks you are personally willing to take.

Do you think people do that?

Do you think people do that?

People should be thinking about that. As far as my own plan, I've identified a risk, and that risk is that I don't have enough global shares. So for me, one of my tactics is to think about how do I access global shares? And the decision that I have made is to purchase exchange traded funds, to get that access to the global market.

People should be thinking about that. As far as my own plan, I've identified a risk, and that risk is that I don't have enough global shares. So for me, one of my tactics is to think about how do I access global shares? And the decision that I have made is to purchase exchange traded funds, to get that access to the global market.

Okay. So you've mentioned 900,000 retail investors are thinking about coming into the market in the next 12 months. We've seen an influx during COVID. I mean, do you get a sense that people understand what you're saying here, Rachel? Because I must say I've never had a plan investing, and I know I should have, and I just haven't done it. I like the idea of a certain stock, but there's not much discipline. It seems to me that many shareholders, they don't have discipline, because they don't have a plan.

Okay. So you've mentioned 900,000 retail investors are thinking about coming into the market in the next 12 months. We've seen an influx during COVID. I mean, do you get a sense that people understand what you're saying here, Rachel? Because I must say I've never had a plan investing, and I know I should have, and I just haven't done it. I like the idea of a certain stock, but there's not much discipline. It seems to me that many shareholders, they don't have discipline, because they don't have a plan.

Well, it is important to put that plan, and it can be as simple as putting it down on a page. And the importance of a plan is it's there, and it directs your thinking. And as you learn and learn more about the share market, you can update your plan, and you should be constantly reviewing it.

Well, it is important to put that plan, and it can be as simple as putting it down on a page. And the importance of a plan is it's there, and it directs your thinking. And as you learn and learn more about the share market, you can update your plan, and you should be constantly reviewing it.

Stay with me, Rachel. We'll be back in a minute.

Stay with me, Rachel. We'll be back in a minute.

My guest this morning is Rachel Waterhouse, Chief Executive of the Australian Shareholders' Association. Okay, Rachel, now you've just taken this job in the last couple of months. Congratulations on getting it, but what a time to get it. AGM season's coming up, and that must be one of the busiest times for the Australian Shareholders' Association.

My guest this morning is Rachel Waterhouse, Chief Executive of the Australian Shareholders' Association. Okay, Rachel, now you've just taken this job in the last couple of months. Congratulations on getting it, but what a time to get it. AGM season's coming up, and that must be one of the busiest times for the Australian Shareholders' Association.

Absolutely. ASA monitors most ASX 200 companies, and we're heading into the main AGM season. We have monitors who are volunteers, who meet with companies ahead of the AGM and represent retail shareholders at AGMs. The ASA monitors review a company's performance, and they provide voting intentions that reflect how ASA intends to vote proxies on resolutions at AGNs and the rationale. These voting intentions are made available to our members online, and then following the AGM, a report is also made available.

Absolutely. ASA monitors most ASX 200 companies, and we're heading into the main AGM season. We have monitors who are volunteers, who meet with companies ahead of the AGM and represent retail shareholders at AGMs. The ASA monitors review a company's performance, and they provide voting intentions that reflect how ASA intends to vote proxies on resolutions at AGNs and the rationale. These voting intentions are made available to our members online, and then following the AGM, a report is also made available.

Now, how many members do you have?

Now, how many members do you have?

We have 5,000 members.

We have 5,000 members.

Okay, and are they particularly active?

Okay, and are they particularly active?

Yes, they are. We have 800 to 1,000 members who meet monthly in local groups.

Yes, they are. We have 800 to 1,000 members who meet monthly in local groups.

Wow.

Wow.

So that's pretty impressive, when you think 20% of our membership are meeting regularly. And they're sharing ideas, and they're sharing their learning, some of them over 30 to 40 years, on what they've learned around the stock market.

So that's pretty impressive, when you think 20% of our membership are meeting regularly. And they're sharing ideas, and they're sharing their learning, some of them over 30 to 40 years, on what they've learned around the stock market.

I think it is interesting. The Shareholders' Association always played a role, but increasingly, sort of proxy advisors and Shareholder Association, they seem to have a bigger role at AGM time than previous years.

I think it is interesting. The Shareholders' Association always played a role, but increasingly, sort of proxy advisors and Shareholder Association, they seem to have a bigger role at AGM time than previous years.

Absolutely. So Australian Shareholders' Association, we're the voice of retail investors, and we do encourage all shareholders to provide their proxies to ASA, even if they're not a member yet. And they can do this as a starting proxy or provide it directly within the AGM platform.

Absolutely. So Australian Shareholders' Association, we're the voice of retail investors, and we do encourage all shareholders to provide their proxies to ASA, even if they're not a member yet. And they can do this as a starting proxy or provide it directly within the AGM platform.

Okay, so what are some of the key issues you expect to be providing guidance on this year?

Okay, so what are some of the key issues you expect to be providing guidance on this year?

Yeah, so because we're a not-for-profit, we are focused on educating investors and advocating for their needs. Our members are very interested in learning about exchange traded funds and listed investment companies, and we have a virtual event coming up in November. And on the advocacy front, we have four key issues we are focused on, one of them being directors and boards: that a board should be made up of directors with diverse skills, including at least one with direct experience in the relevant industry. There should also be a skills matrix, including director skills required in the strategic plan. So that's really as a retail shareholder, making sure that the board is well run, and that each director's workload should allow the director to devote adequate time and attention to the role and company. We're also looking at remuneration and performance, particularly if companies should consider repaying JobKeeper before rewarding executives or paying dividends. So there's a focus there on looking at the company: if it has received JobKeeper, and whether that money has been directed towards incentives or pay. And we are asking companies to pay that back, if they have not paid that back yet.

Yeah, so because we're a not-for-profit, we are focused on educating investors and advocating for their needs. Our members are very interested in learning about exchange traded funds and listed investment companies, and we have a virtual event coming up in November. And on the advocacy front, we have four key issues we are focused on, one of them being directors and boards: that a board should be made up of directors with diverse skills, including at least one with direct experience in the relevant industry. There should also be a skills matrix, including director skills required in the strategic plan. So that's really as a retail shareholder, making sure that the board is well run, and that each director's workload should allow the director to devote adequate time and attention to the role and company. We're also looking at remuneration and performance, particularly if companies should consider repaying JobKeeper before rewarding executives or paying dividends. So there's a focus there on looking at the company: if it has received JobKeeper, and whether that money has been directed towards incentives or pay. And we are asking companies to pay that back, if they have not paid that back yet.

Are you seeing much of director pay increases while still keeping JobKeeper? Is that actually happening?

Are you seeing much of director pay increases while still keeping JobKeeper? Is that actually happening?

Oh, it is something that we are monitoring. As far as JobKeeper, we're looking at it on a company basis.

Oh, it is something that we are monitoring. As far as JobKeeper, we're looking at it on a company basis.

Yeah, okay. So directors and boards, remuneration and performance.

Yeah, okay. So directors and boards, remuneration and performance.

The other one is risk management. We expect directors to identify, manage, and communicate financial cyber security and non-financial risks, including ESG (Environmental Social Governance), and the implications for financing capital requirements. So ESG is an increased focus for retail shareholders and also companies. And the importance of ESG is increasing, and it can impact the cost of capital and the reputation for companies. And we see the role of the board and executive to identify, manage, and communicate ESG strategy, opportunities, and risks to shareholders. And what good ESG looks like will depend on each company and sector. There are no final reporting standards yet, and companies are working out how to advance their ESG status. So it's tough for retail shareholders to be able to say, "This is how it should be done." but we can let companies know whether their reports and progress is up to the mark.

The other one is risk management. We expect directors to identify, manage, and communicate financial cyber security and non-financial risks, including ESG (Environmental Social Governance), and the implications for financing capital requirements. So ESG is an increased focus for retail shareholders and also companies. And the importance of ESG is increasing, and it can impact the cost of capital and the reputation for companies. And we see the role of the board and executive to identify, manage, and communicate ESG strategy, opportunities, and risks to shareholders. And what good ESG looks like will depend on each company and sector. There are no final reporting standards yet, and companies are working out how to advance their ESG status. So it's tough for retail shareholders to be able to say, "This is how it should be done." but we can let companies know whether their reports and progress is up to the mark.

Are companies making adequate moves in the ESG area, do you think?

Are companies making adequate moves in the ESG area, do you think?

We are seeing that companies are focusing more on ESG, but as far as the consistency of reporting, that's what we are looking at. And we are looking at how they identify the risks, but also the opportunities, because opportunities do come out of ESG.

We are seeing that companies are focusing more on ESG, but as far as the consistency of reporting, that's what we are looking at. And we are looking at how they identify the risks, but also the opportunities, because opportunities do come out of ESG.

How are you enjoying the new job, Rachel? You've been in it for a couple of months.

How are you enjoying the new job, Rachel? You've been in it for a couple of months.

I'm really enjoying it; it's great. We have a fantastic group of members that are highly engaged. Our organisation has over 200 members that are involved in organising meetings and also monitoring of companies. So loving it. The team are great, and we have a really good purpose of what we're hoping to achieve.

I'm really enjoying it; it's great. We have a fantastic group of members that are highly engaged. Our organisation has over 200 members that are involved in organising meetings and also monitoring of companies. So loving it. The team are great, and we have a really good purpose of what we're hoping to achieve.

Fantastic. Good luck with it, Rachel. Thank you for talking to Fear and Greed.

Fantastic. Good luck with it, Rachel. Thank you for talking to Fear and Greed.

Thank you, Sean.

Thank you, Sean.

That was Rachel Waterhouse, Chief Executive of the Australian Shareholders' Association. This is the Fear and Greed Daily Interview. Join me every morning for the full Fear and Greed Podcast, with all the business news you need to know. I'm Sean Aylmer. Enjoy your day.

That was Rachel Waterhouse, Chief Executive of the Australian Shareholders' Association. This is the Fear and Greed Daily Interview. Join me every morning for the full Fear and Greed Podcast, with all the business news you need to know. I'm Sean Aylmer. Enjoy your day.