NICK RADGE | The Chartist

In this episode I welcome Nick Radge from The Chartist and Harbourside Capital to discuss technical analysis and momentum trading. Nick's journey into financial markets began accidentally 38 years ago. He shares how his passion for charting and understanding market movements grew over the years, leading him to develop a systematic approach to investing by measuring relative momentum.

Nick explained the importance of understanding how much you can gain when you win while limiting the downside when you lose. Successful investing isn't about getting every investment right, but about managing your risk and maximising your profits when you do make successful trades. This is a crucial mindset shift for many investors who may focus too heavily on their losing picks/

We talked about the concept of relative momentum and how it can inform your investment decisions. He explains how analyzing market trends through technical analysis can provide investors with valuable insights into when to buy or sell assets. The discussion touches on the foundational elements of technical analysis, such as the open, high, low, and close prices, and how these data points can signal market strength and volatility.

At Harbourside Capital, Nick’s All-Weather Fund uses this approach across assets like equities, gold, and bonds to keep volatility low at 6%. It’s built for retirees or anyone dodging big market drops. By using ETFs, he cuts individual stock risk, dynamically shifting to what’s trending up.

Nick warns new investors about get-rich-quick schemes flooding the internet. Stick to ASIC-licensed advice, he says. His son Zach, now running The Chartist, learned to build quantitative models and is crushing it with a 60% return this year. Nick’s other kids? Less interested, but he’s growing their wealth with the All-Weather Fund.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

Level up your investing with Sharesight, Investopedia’s #1 portfolio tracker for DIY investors. Track 240,000+ global stocks, crypto, ETFs and funds. Add cash accounts and property to get the full picture of your portfolio – all in one place. Ditch the chaos, track like a pro! Sharesight makes investing easy. Save 4 months on an annual paid plan at THIS LINK

Portfolio tracker Sharesight tracks your trades, shows your true performance, and saves you time and money at tax time. Save 4 months on an annual paid plan at this link

Disclosure: The links provided are affiliate links. I will be paid a commission if you use this link to make a purchase. You will receive a discount by using these links/coupon codes. I only recommend products and services that I use and trust myself or where I have interviewed and/or met the founders and have assured myself that they’re offering something of value.

EPISODE TRANSCRIPT

Phil: G'day and welcome back to Shares for Beginners. I'm Phil Muscatello. What is relative momentum and what does it mean for your investment plans? How do red and green lines on a screen relate to decisions on when and what to buy? Joining me today is investment manager and the chartist Nick Radge. G'day Nick.

Nick Radge: G'day Phil. Thanks for having me and it's good to be here.

Phil: Nick Radge is a seasoned investment professional with over 30 years of trading experience at top international investment banks in Sydney, London and Singapore. He's an alumni of top tier firms bzw, HSBC and Macquarie Bank. As investment manager at Harboursside Capital, Nick leads the multi strategy and all weather investment programs, leveraging systematic momentum driven and technical strategies to deliver solid returns with low coration to traditional assets. And we're going to break all of that down in the next 45 minutes or so because it does sound quite complex. But Nick, tell us about when you first started working in financial management and markets.

Nick Radge: So yeah, a long time ago now, 38 years. So pretty much straight out of school. I finished school in 1984, went to work for the Commonwealth bank just as a regular punter in one of their uh, Shopro fronts. And then uh, late 1985 I fell into a job in the financial market at stock brooking firm back then Potter Partners which was one of the blue ribbon companies and that's where it all started. It certainly wasn't planned in any way, shape or form. It's not something IY planned to do or wanted to do. It just happened and here we are 38 years later.

Phil: So it was an accident was it? You weren't sort of driven from an early age to get into financial markets. I mean a lot of people that I speak to, you know, they first started investing when they like 8 years old or something. But that wasn't your plan?

Nick Radge: No. Not all, no. I had no idea. My father, you know, he was a Qantas captain and he was a very passive investor, uh, or the standard blue chip kind of stuff. But he never talked about that. We never talked about that. Even as my career progressed in the financial markets, we never actually spoke about it. So no, it was all by accident. It certainly wasn't by plan. The actual trading that developed from that initial move into the stockbroking firm and let me just say the stock broing firm, all I was doing is pushing paper. I had no market forward facing job at all. The trading side came about accidentally. I just happened to be walking past the private client desk and one of the guys had some graph paper or some chart paper and he was plotting a 5 and 10 day moving average crossover, uh, of the share price index futures. And so this is back in the 80s, before the crash. Back then the share price index futures were about $100 a tick. And I could actually see the trends on the paper and I sort of, I don't know, something just clicked and I could see the trends, I could see how he was making money. He just said when the, I mean you mentioned green and red lines before. That's precisely what it was. Literally I would do it on paper. That day I went downstairs to the stationery shop, picked myself up some graph paper, uh, three colored pens came back. And each day I just get the open, high, low, close out of the Financial review and do my own plotting. And after a week or so I went into the office manager who was a wily old guide, seen it all. And here's this young idiot 18 year old who says, can I open a, uh, futures trading account and start trading futures? So that's how it all began. And he said yes. And away I went. I had no idea what I was doing. No risk management, no experience, no history, no nothing. So very, very, I was very lucky. It was a rampaging bull market and as we say now, don't confuse brilliance with the bull market. But uh, I was a little bit lucky.

Phil: It's interesting though that you mention ohlc, open, high, low, close, because that's one of the

00:05:00

Phil: basics, isn't it, what you're plotting on? Well, in those days, the graph, I think it's great to even reflect that this was used to be done by hand in the old days as well. But just dig in a little bit deeper about what those particular four things represent.

Nick Radge: That's a daily trading range, if you like, of every single financial instrument on the planet, regardless whether it's stocks, whether it's share price, index, futures, foreign exchange, Bitcoin, everything has an opening price, it has a low of the day, it has a high of the day and it has a close of the day. And we can use those points as reference points and to provide us uh, some kind of clue as to market strength. We can combine that with volume as an example, to also give us an idea of buying and selling pressure in the market. And we can also gauge the volatility of the market as well by the ranges that those give us. So it's very important information. It's very, a basic information, but it's the foundation of, well, it's the foundation of technical analysis. They can be expressed as bar charts, which is that what that is open, high, low, close. And of course you've got the extension of that, just a different format which we call candle charts these days. They provide the same information. Some argue that candlestick charts, uh, provide a little bit more information. I don't personally think so. It's all one and the same. It's just graphically presented a little bit differently.

Phil: So what's your basic definition then of technical analysis? Because it's something that many people look at in so many different ways and from many different angles. But for you personally, what is technical analysis?

Nick Radge: Technical analysis I guess for the average person in the street is probably thinking, okay, charts, those kinds of things. Chart patterns such as head and shoulders and consolidations, those kinds of things. That's one part of technical analysis. I guess our business started back the chartist, which is as it is today, started back in the late 90s. I used to work for a lot of big investment banks and they had a lot of fundamental analysts working for them, but none of them had any technical analysts, at least not here in Australia. Technical analysis overseas, especially in the US is still today very, very big. You know, I went to, I spoke at a conference in New York a few years ago and there was three or 400 participants there. And a lot of those participants were institutional users of uh, technical analysis. And that's just not something you find here in Australia. I guess here in Australia it's not really an institutional tool and in a way, shape or form, but many, many years ago I was able to build a good sized business off the back of my knowledge of technical analysis when I was working at Macquarie bank. And as a result we almost launched this current product within Macquarie Bank. That was the original plan, but it didn't go through. So my wife and Iricish, we launched it ourselves. And the whole idea was to bring technical analysis to the forefront as a proper, uh, sort of tool that investors can use. So many investors would have their fundamental analysis, their broker research, that kind of stuff, and that gives them sort of a bigger picture view. But the technical analysis overlaid on top of that allows you to time entries and exits somewhat a little bit better. So that's where we kind of slott it in into that. We have morphed over the years to the other side of technical analysis, which is more quantitative in nature. So pure technical analysis, old school, is looking at the charts, making a discretionary decision based on chart patterns or whatever you can see on the charts, quantitative technical analysis if you like, or quantitative analysis is. We're not looking at the charts per se, which we're looking at the data within the charts. So we're looking at those open high, lowbe closes, we're looking at the volatility, and we're creating mathematical algorithms to then make buy and sell decisions. So we don't even look at the charts today. Literally we have mathematical algorithms. We put our account balance into the software, push the button, and it tells us what to buy and sell.

Phil: And I believe that technical analysis is not completely predictive. It might weight the favor into your odds a little bit more rather than giving a clear signal saying, okay, if you buy now, you're going to be making money out of this particular stock. Am I right in characterizing it that way?

Nick Radge: I don't believe there's any predictive value in any kind of analysis net alone technical analysis. I don't think there's any predictive value in fundamental analysis. You only have to go and have a look at broker, uh, broker reviews of stocks and their valuations and that kind of stuff. They tend to follow price action. So no, I don't believe there's any predictive value in technical analysis, and there's certainly no predictive value in quantitative analysis, which is predominantly what we do now. However, prediction is not necessary to make money in the market. Okay? It's just not necessary. So let me give you a very basic example. If I go and do 100 trades, for example, I only may get 50 of them right. I only make money on 50% of them, which would suggest to an average person that I'm not very good at what I do if I only get 50% right. That's not the point. It's not how often you get it right. It's how much you make when you get it right compared to how much you lose when you get it wrong. So If I make 100 trades and I only get 50 of them, right, but if I make $3 on those 50 and I only lose $1 on they losing 50, mathematically I'm ahead. So mathematically, that is the game I'm actually playing. How much I win when I win compared to how much I lose when I lose. And so long as I keep that gap open, then I can't really fail. And that's what it comes down to. Every investor has the same numbers. Warren Buffett, everybody. You can't not have those numbers. That is not to suggest people believe that those numbers are what makes the money. They have a story unto themselves that I do have the ability to predict the market. I do have the ability to predict really, really good stocks, so on and so forth. Maybe they can, maybe they can't. I don't believe they can. But at the end of the day, everybody has this mathematical equation. And regardless of how you get to your end result, you need to have that same mathematical equation. How much you win when you win, how much you lose when you lose. That's it.

Phil: Bottom line, track your investments like a pro. Shareight is Investopedia's number one portfolio tracker for DIY investors. Simplifying your finances. Get four months free on an annual premium plan at sharesite.com sharesforbeginners. A lot of people who become interested in trading on stock markets are, uh, inundated with many, many offers of trading strategies and trading systems. And some, you would say are like get rich quick schemes. What kind of warning would you give to listeners who may be presented with this kind of advertising and marketing?

Nick Radge: It's very difficult these days, Phil. When I started trading back in the 80s, there was nothing. I mean, there was no Internet. In order for me to read anything about the financial markets, I had to walk down to the ASX trading floor, where there was a little bookshop, or to the futures trading floor, where there was another bookshop and I could buy books there, or alternately, I could subscribe or buy books from America. But, you know, they would send me a leaflet, if you like, of all the books available. I would decide which one I want. I'PUT a check in there, send it overseas, and eight weeks later I'd get a book back. And it was very slow. And that helped me a lot because it made me have to do a lot of the work which I was passionate about today. Uh, and dare I say, unfortunately, not only is there an incredible amount of information out there from all sorts of different sources. But there's also a lot of very bad information out there as well, a lot of misleading information. And obviously a lot of people are playing on not only the greed, but in this day and age where no one has an attention span to give it much time, everyone's looking for uh, the quick buck, the easy buck. And look, people get lucky. You buy Bitcoin and it might go from $20,000 to $40,000. That might be a one off thing. But I think after doing this successfully for 38 years, I think the formula I have is a little bit better than just relying on a bit of luck here and there kind of thing. And I think that's a big difference. So yes, in this day and age you've just got to be careful. You need to ensure that any information you're getting is ideally from someone who is licensed by asic. ASIC have very stringent rules and regulations as to who

00:15:00

Nick Radge: can give advice, who can't give advice, and there are a lot of hoops to jump through. You can't just fill out a form and get licensed by assic. It doesn't work like that. You need a lot of experience in the market to be able to give certain kind of advice and do certain kind of things. So people that don't have that licensing you, they might be knowledgeable but uh, there is no fallback if something goes wrong with all of that. And like I like to say, everyone's friends when people are making money. But as soon as you start to lose money, the game changes very, very quickly.

Phil: So tell us about founding the Chartist. Um, what was your thinking at the time and how was it getting your first customers on this and the information that you were providing?

Nick Radge: So the Chartist was founded by myself and my wife. The businesses as it is today was founded in 2005 but it really extends back to the late 90s. I'd been overseas in London and Singapore with HSBC. I'd come back, I'd set up my own Commodity Trading Advisor which is uh, uh, a fund that trades futures. And we had launched that with a business partner of mine in, back in Sydney. And that was a very hands off type of strategy. So we were working from home, I was a little bit bored. I got on to a trading forum back then, just happened to answer a few questions and then all of a sudden someone had said to me, oh gosh, you obviously know what you're talking about. Do you teach people how to trade? And it's like oh, uh, yeah, why not? And that guy Flew from Canirns to Sydney that weekend and paid me a thousand dollars to teach them how to trade. So you know, back then a lot of the information like fixed fractional position sizing and a lot of the stuff that we take for granted these days wasn't really well known. So I had a little bit of an edge in that. I had that experience already and it wasn't really in the public arena and that's kind of where it started. And as I said earlier on with my time at Macquarie Bank I built quite a decent business based on these tenants of technical analysis and quantitative investing. And that was actually a business model that we were going to launch within Macquarie Bank. It did not get off the ground. So Trish and I decided well let's do it for ourselves. So we went and got our own afsl, started our business and never looked back.

Phil: And um, just describe the trading style for me, just a few more details like position, size, time in the market, time of trades and so forth.

Nick Radge: So the trading I do and have really always done is not necessarily based on traditional technical analysis. Yes, that's part of what the chartist actually does but it's a small part of what we do. That was the original business but now it's morphed into more my style of trading which is quantitative investing and trad trad. So with the quantitative side of things as I said we are mainly looking at trend following and momentum. That is the easiest way to exploit a mathematical edge in the market Markets trend, they will always trend, they have always trended in the past. They can't not trend to suggest a market won't trend suggests two things. One it's valued fairly and two, human emotion isn't playing a role and we both know that those are incorrect. You just have to look at analysts valuations and see you can have 20 analysts and 25 different valuations. That's the way it works because the inputs that go into their models are all a little bit different. If analyst A has a target for the Australian dollar at $0.70 and analyst B has a target for the Australian dollar at 60 cents, well their valuation into their model is going to be different and that's why that happens. So they're predicting what certain aspects usually in evaluation there's 8 to 10, 12 metrics that go into it and 6 or 7 of those are ah, future forecasts and being human we're going to get those wrong. So with the kind of strategies we use we're using what's called quantitative momentum and that's across all the different strategies that we put into place. And that basically means what we're doing is we're looking at the market. We have a on off switch, if you like. So if the markets are, uh, strong, which they are at the moment as we speak, then we want to be fully invested. But when the markets are weak or at a bear market, such as we saw in 2008, we don't want to be invested. To give you an idea, in 2008, 95.6% of all stocks that survive the GFC were actually lower during 2008. So even though you might have a diversified portfolio, at the end of the day a rising tide lifts or boats are falling, tide drops, all boats. So we don't want to be involved in the market when it's falling.

00:20:00

Nick Radge: We want to be out of the market sitting in cash. And that does two very important things. Firstly, financially, obviously you save a lot of money. It's not painless. Don't get me wrong. Back in the GFC I think I lost about 12 or 13%, but that's a lot better than losing 50% or so that the broader market lost during that period of time. So financially that's very, very important. Another very important aspect of that on off switch is the psychological side of it all. I today still know people that lost so much money in the GFC that they would never investigate in the stock market. And you never want to be in that position. So a good defense is half the battle. So that's the first thing we do. We decide whether the broad the market up is trending up or trending down. And that gives us the go ahead to get involved in the market. If it's trending up, then what we do is we look at all the different stocks in the particular universe. So for example, let's say we're investing in the Australian market. We would look at all the stocks and their, what's called relative momentum. That means how strong they are, uh, trending compared to all the other constituents in that particular instance or index. And we would simply buy the strongest ones. So what that does for us is we don't need to predict what the next best sector is going to be. We automatically get pulled into the strength. So at the moment, for example, gold miners are very, very strong and, and some of those silver stocks, that kind of stuff. So that's where we're invested. If gold is to go to say $10,000, we don't want to look back and say, gee, it'll be great to own Some banking stocks and some airline stocks and some pharmaceutical stocks. As opposed to saying, gold's going to go to $10,000, I want to be loaded up on gold and gold stocks. So we naturally get pulled into those performing sectors that are going very, very well. And by the same token, we remove ourselves from those sectors that are not performing very well and are doing very, very badly. If you have a look at most fund managers out there, their mandate means that they really have to track the index, give or take, because they have career risk. So they will remain invested in those poorly perform sectors and those poorly performing stocks simply because they are a part of the benchmark index that they're tracking. We don't do that at all. So that puts us out on a little bit of a limb, if you like. And that allows us to differentiate ourselves from, you know, every fund manager out there. So it really doesn't take a great deal to make outstanding returns. And in some circumstances that only maybe position a year. For example, back in 2020, one of our portfolios made a 98% return, and it was solely due to Tesla. We bought Tesla at 36 or $37, and we sold it at about $340. Now, there was no prediction involved in that. I had no idea Tesla could go that far. I just wrote it. And that's the whole idea of kind of what we're doing. I guess the analogy I like to use for new participants in the market with what I do is like hitchhiking. So let's say, for example, we're up here in nusa. Let's say we want to hitchhike to Sydney. What we're going to do to start with is we're going to go out to the highway and we're going to stand in the southbound lane. Now, the reason why we stand in the southbound lane is the chances are, uh, that a car going to Sydney is going to be in the southbound lane as opposed to standing in the northbound lane. The chances of a cargo to Sydney virtually zero. So what that means in our trading analogy is we want to stand on the right side of the market. We want to buy stocks that are going up. Because last time I checked, you can't make money when stocks are going down. So we want to stand on the right side of the market. The next part of that analogy with the hitchhiking is we don't know what car is going to stop. We put our thumb out, but we know if we stand there long enough, a car will stop. And that's the same with the stock market. We don't know what stock is going to come past and keep going higher and higher and higher. We can't know that. What we do know is if we jump on one going in the right direction, it may keep going. So that leads to the next. Part of the analogy is we don't know how far ah, that ride will take us. We don't put a valuation on a stock. I don't believe in that in any way, shape or form. And we do know stocks go much further than what valuations sometimes suggest. So with our car analogy, we can get a ride maybe down to Brisbane, we might get a ride to Byron,

00:25:00

Nick Radge: Heck, we might get a ride all the way to Sydney. We don't know. What we do know is when that ride stops, we hop off. And that's exactly the same with uh, our stocks. We don't know how far a stock can go. What we can do is when it turns the corner and starts trending down again, we simply hop off the ride. So that's how we can buy a stock such as Tesla at 36, right it all the way up to $340 and other stocks, so 2021, it was Moderna last year, app loving was the big standout stock. So these rides come along and so long as you ride them for as much as they have to offer, then our mathematical edge that we spoke about earlier, how much we win when we win far outweighs how much we lose when we lose. So sometimes we can get on a ride we might make 4 times, 5 times, 12 times, sometimes 15 times the amount we lose if we have a losing trade. And that puts us well ahead of the game.

Phil: So it sounds like we're moving on to the Harbourside All Weather Whole wholesale investment fund. But before we start talking about that momentum, what are the numbers that go into the momentum that you're measuring?

Nick Radge: So momentum in its basic format is simply price persistence. That's all it is that price persistence can be up or can be down, but it's price persistence. And the way that can be measured is simply how far uh, price has moved percentage wise over the last three months, six months, 12 months, whatever it may be. So stock ABC may have advanced 25%, stock XYZ made advanced only 20%. So ABC is a stronger stock than XYZ. And all we're doing is going through the whole market and we're looking for those stronger stocks because momentum persists until it doesn't. And we just want to ride those ones. So we'll go and pick the strongest ones. We'll buy those at the end of the M month, will run the exercise again. The ones that have not got the strongest price persistence or the strongest momentum, we will exit those and then hop on to the ones that do have the strongest price persistence at that particular point of time. And that's the revolving circular chore that we do each month.

Phil: And it's not just stocks that you're looking at, it's also other asset classes as well, isn't it?

Nick Radge: Yes, we run quite a number of different models. We've spent most of my career doing equities, long only equities. And that's great. They are higher growth products. They are, um, designed for higher growth. However, as I get older and as my super fund over the last 25 years has grown using those growth type of strategies, what I wanted to do is not go into retirement in the next five, six, seven years whenever it may be, and have a big volatility in my super fund anymore. So this is where our, uh, all weather strategy has come into play. It's relatively new in the scope of things, of what I do anyway, but it takes the same concepts. But rather than buying all equities, what we're actually doing is buying different asset classes. And your basic example would be buying equities and buying some gold because they tend to work opposite to each other. So when equities fall, gold goes up. When gold goes down, equities tend to rise. Then we can expand that out into commodities, into, uh, Bitcoin, even into bonds, that kind of stuff. So what's very important as you come into retirement and for early retirees is what's called sequence risk. Sequence risk is where you need to start drawing from your superannuation. But you don't want to have a big loss at the same time. So having high growth assets are always going to be at risk at some stage of a market fall. And you don't want to be coming into retirement or early retirement with a big fall in the stock market right at your doorstep. So sequence risk means you, uh, if there's a big fall in the stock market as you retire, your retirement funds will be greatly depreciated in due course, as opposed to somewhere where that doesn't happen to. So after building our super fund for 25 years, I did not want that risk or that sequence risk coming into play. So I built the all weather strategy. Now the all weather strategy is very, very low volatility. That means the equity drops

00:30:00

Nick Radge: and ups and downs are very, very Small compared to the broader market. So the broader market, when we talk about volatility, you know it's about 15, 16% most of the time. What that means 15, 16%. At some stage your equity will decline by about double that. So let's call it 30, 32%. That's not something that I wish to occur at this stage in my life with my super fund. So by using a multi asset type of strategy, such as our all weather strategy, that volatility is dropped off quite considerably. So at the moment, for example, the volatility is running at about 6%. So what that means is in a worst case scenario, a maximum decline in my capital would be around 10 to 12%, about that which I'm more than happy with at this stage of my life. So you're not at risk of having a big decline in your super funds. And the way we get that volatility very very low is by holding different assets, ie assets that are not ceial correlated like all the stocks are. So if gold, uh, if you're holding some stocks for example, and you also hold gold, well, your risk decreases considerably just by doing that. The same with bonds, the same with commodities, so on and so forth. So very low volatility is what we're after. That's the name of the game. Now obviously there's a payoff to that. Low volatility means lower returns. But using our quantitative momentum, we sort of take a tactical approach with this. So we are still able to get reasonably okay returns with what we're doing. So the last two years has been exceptionally well above the average. That is not expected to happen over the longer term. The last two years we're averaging about 22% return. That is not the way it's supposed to be, but we are looking at around 12 to 14% return. Over the last two years the biggest decline has been just 5% whereas in April this year the markets fell quite dramatically. In 2020 they fel 35%. So those kind of falls really are not going to impact us. So we can still get our moderate growth with that low volatility.

Phil Muscatello: Super is one of the most important investments you'll ever make. But how do you know if you're in the best fund for your situation? Head to lifeshherrpa.com.au to find out more. Life Sherpa, uh, Australia's most affordable online financial advice.

Phil: So we've moved on to Harboicide Capital. How long has Harbicide Capital been around for?

Nick Radge: So Harbourside Capital itself has actually Been around a long time, but me as a consulting portfolio manager, it's only been two years. So we manage money for wholesale investors at the moment. We will be creating a retail side of that very, very shortly. Hopefully in the coming months, a retail product will be available. And I look after two particular two programs there. One is the Multi strategy, which is, uh, my stock Higher Growth momentum. That's the one I've built my wealth on over the years. And the other one is the All Weather. So the difference between the two, the All Weather is really good for conservative investors, for people coming into retirement or people in retirement that don't want to go through big equity drawdowns, they don't want the volatility. It's nice and stable. In 38 years of doing this field, I've met a lot of people that like making money, and I've not met one person that likes losing money. So to take the heat out of the equation and still get a reasonably good return is kind of the holy grail. And I think we're reasonably close, dare I say use the term holy grail, but I think we're reasonably close to succeeding in doing that. And that's just using quantitative momentum across different asset classes that are, uh, negatively or lowly correlated.

Phil: And I believe it's ETFs that the fund uses to invest in. Is that correct?

Nick Radge: That's correct, yes. So we remove individual company risk by using ETFs. So, for example, we would use the gold ETF listed here in the ASX or the gold ETF listed in the U.S. instead of using individual stocks, we would use index ETFs, such as the STW here in Australia, which is the ASX 200. And that would give us exposure to the broader market without the risk of, uh, individual company risk.

Phil: And it's really worthwhile pointing out and emphasizising how serious it is for people to understand that. I mean, yeah, we all do a risk analysis with a financial advisor, but that's got nothing to do with the real of the situation when your portfolio goes down by 20, 30, 40%, does it?

00:35:00

Phil: And that is exactly the point where mistakes can be made.

Nick Radge: Yeah, you know, it's. There's the old school that, you know, you hold on and things will come good. That's ignorant, in my view. We don't have to go too far back to see lost decades. For example, between 2000 and 2012, the US stock market basically went sideways for 12 years. A lot of financial planners will cite that over the long term. The S&P 500 returns 8 or 9%. Okay, well that's over the long term, where we're talking 50, 60, 70 years. But rarely people have that kind of mental fortitude to stick around that long. And they certainly don't have the mental fortitude, psychological fortitude, to stick around for 10 years. And their return is 1% before inflation and they probably have a negative return. We can then go back to 1968 to 1972, same kind of thing. The S&P 500 had a 1% annualized return for 14 years. So we want to avoid those kind of situations as much as possible. And the reality is, where we stand right now is that valuations, especially in the US are at the very, very upper levels. And what that suggests is there's a higher than normal probability that the next 10 years will be considerably lower performance than what the last 15 years have been. The last 15 years. Since 2009, the US has absolutely gone gangbusters. Prior to 2009, the Australian market was outperformed. So with valuations where they are right now, chances are of having the returns of the last 15 years in the next 15 years or even the next 10 years are highly unlikely. So putting strategies into place that can overcome that, that is, such as an All Weather type portfolio, in my view, very, very good way to diversify some of that risk away.

Phil: I'm just going to quote something from a piece from the description of the All Weather portfolio. It's designed to outperform traditional benchmarks by dynamically adjusting its asset mix based on market conditions. How does that, uh, dynamic adjustment occur?

Nick Radge: Yeah, so what we're doing there is we're using quantitative momentum to ensure that we only invest in assets that are going up. And this comes back to what we've been talking about this whole time. You can only make money in those assets when they're going up. Now, very good example. And some of your viewers and listeners may have heard of Ray Dalio, who has run Bridgewater, the biggest hedge fund in the world. And since 1990 he has used this all weather approach. He was the creator of this all weather approach. And it was going swimmingly up until 2022. And when I say swimmingly, they were making 6 or 7% returns. Very, very low volatility, very minimal drawdowns until 2022 when we saw bond prices absolutely collapse and we saw share prices absolutely collapse. Now they normally should work inverse to each other. And that was the first time fore ever that that wasn't the case. So that cracked Open that strategy quite considerably. So what we do slightly differently is we. And, uh, I should just say that the dalio all weather fund is always invested. It always keeps a balance of those different markets, those different assets. Whereas what we do, we will move in and out of those assets. So we bought bitcoin two and a half years ago. We bought gold to a half years ago. But if bitcoin turns the corner and starts going down, we will not hesitate to get out of that. We don't want to ride bitcoin all the way back to $20,000. I'm, uh, not suggesting it's going to go there. I will write it to 150,000 if it keeps going up. But if it turns and starts to go down, we're out of that. And then I will get back in if and when it starts to turn up. The same with gold. As I said, we bought gold two and a half years ago, not because I predicted it was going to go higher. It simply was going higher. So we hopped on board that ride, and we're still riditing it today. And if gold goes to $10,000, well, we'll still write it. I'm not making a prediction. I'm just saying the trend is up. We'll stay on it. But if gold turns and go starts going lower, we will hop off that. So what that does for our tactical approach in our all weather is again, we're just riding those assets that are going up in time, and then we will revert to cash when those assets turn down, and we'll earn interest on our

00:40:00

Nick Radge: cash and we'll wait patiently. So it may be a period of time where equity prices go down for a year or 2, such as 20, 22. And gold keeps going up. So we'll be out of equities, but in gold, we won't have 100% of the fund in gold, we'll have 30% of the fund in gold, and the rest will be sitting in cash. There might be some bonds there, depends what bond trends are doing, so on and so forth. So we're simply moving in and out of asset classes based on their quantitative momentum.

Phil: So you didn't have much, uh, training or education from your parents as you were growing up. What about with your own kids? What are some of the first things that you started teaching them about money and investing?

Nick Radge: Not so much my kids, actually, they never really had an interest in it. That said, you know, the charist is now in its second generation. Our son Zach now runs that business. He, uh, looks after all the clients and the portfolios on the charter side, I just simply look after the managing the money on, on the harvest side side. And yeah, so with Zach, I guess if we use an example there, when he joined the business he never wanted to join the business. He's a computer engineer by trade by a university degree and he was working for a mining consulting company at that particular point of time. But he did ask to come and join our company and the first thing we had him do was our high end mentoring where we teach people how to build their own quantitative vesting models. So his first job was to learn how to build his own, which he did do and then we funded him and the deal is that we gave him money to trade his own strategy and then at the end of each year he was entitled to 50% of the profits as a bonus. So he's had a bit of an outstanding run. I think his portfolio is up over 60% this year. He's outdoing his old man. I think he's only had one losing year which was 2022 and I think he was down less than 1%. So he's going very, very well. So if you give the right tools to the right people, including the right mindset, then anybody can make a go of this. But you need the right tools and the right mindset and the confidence to go ahead and do that kind of stuff. The other kids, my daughter, she missed out on sort of. My youngest daughter missed out on um, investing in property. My two oldest kids uh, were able to buy their own properties. So what I did with her is I've ah, put some funds aside for her and the old weather and then when she's ready to buy a property, at least those funds are growing for her. And when she's ready we can take those out and she can then go and buy a property with that if that's what she wants to do. I've also got the all weather set up for my grandkids. I've got three grandchildren, youngest is four, eldest is nine. So they all have an all weather going. Probably too conservative for their ages. They should probably be something a little bit more aggressive. But I just figure slowly but surely we'll just keep growing it out and when their grandparents and anyone else pops the money into their birthday cards, they can put it in there and, and keep growing. So that's kind of what I'm doing with them.

Phil: So Nick, how can people find out more about you and Harbourside Capital and the Chartist?

Nick Radge: So yeah, Simply go to thechartist.com.au that will lead you on to, uh, all that do it yourself type stuff. Or you can go to nickradge.com if you're interested in the investing in the harbouride strategies. So yeah, we're pretty open to discussing this kind of stuff with clients. We're a local family business and we're reasonably independent, so feel free to reach out if you need any more information.

Phil: Nick Radge thank you very much for joining me today.

Nick Radge: Thanks Phil. It's great to be here.

Phil Muscatello: Thanks for listening to Shares for Beginners. You can find more at chesforbeginners.com. if you enjoy listening, please take a moment to rate or review in your podcast player. Or tell a friend who might want to learn more about investing for their future.

00:44:08

Any advice in this blog post is general financial advice only and does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs before acting on the information. If you do choose to buy a financial product read the PDS and TMD and obtain appropriate financial advice tailored to your needs. Finpods Pty Ltd & Philip Muscatello are authorised representatives of MoneySherpa Pty Ltd which holds financial services licence 451289. Here's a link to our Financial Services Guide.